Show me the purpose

Setting out the agenda, founder Klaus Schwab said the mountain top get-together would be based on the premise that the purpose of a company is to engage all of its stakeholders in shared and sustained value creation. As he told CNBC: “finally, stakeholder capitalism has become, or is becoming, mainstream.”

 

As social purpose rockets up the agenda in boardrooms globally, Mr Schwab appears to be correct that the tide is turning against the pursuit of profit above all else.

 

Last year the chiefs of 181 major US corporations publicly committed to leading their companies for the benefit of all stakeholders: customers, employees, suppliers, communities and (significantly placed last on the list) shareholders. The iconic investor Larry Fink has also long been an advocate of embracing purpose beyond profit.

 

But here at the bottom of the mountain, in the actual mainstream, it can still appear that there’s some way to go. Organisations still have to be mindful of shareholder returns, and the sentiment “show me the money” often trumps social conscience in business decisions.

 

Certainly, purpose – the reason a company exists, beyond just making money – is now a thing. Where values statements once abounded on office walls and corporate brochures, now purpose hogs the limelight. More than one CEO told me recently, “we don’t really talk about values now – it’s all about purpose.”

 

So is purpose the new values? Let’s hope not if Schwab’s vision for stakeholder capitalism is ever to become a reality. It is pretty much impossible to capture a company’s commitments to all its stakeholders in a purpose statement alone.  We need both purpose and values.

 

Take as an example an asset management company that defines its purpose as “helping people to achieve financial security.” It might also have a deep commitment to diversity and inclusion, and be passionate about sustainability. But these are not the company’s work. It does not devote the majority of its resources to campaigning for minority rights, nor does it run water projects in sub-Saharan Africa. But it may champion inclusion, choose only ESG investments, and support those who do this work. These are powerful guiding principles about how the asset management company goes about its work, but not its raison d’être. In other words, these are values.

 

By contrast, the company’s purpose – the answer to the question: “why does this organisation exist?” – is still about improving its customers’ returns.

 

Many companies struggle to articulate their purpose – possibly because they are trying to shoehorn values into it, or beefing up a ‘social’ angle that isn’t really plausible. Many settle for confusing, clumsy or, at times, simply inauthentic statements of purpose that fail to engage anyone. This is a missed opportunity, because when you get purpose right, it can be a powerful motivator and driver of performance.

 

So as the delegates come back down the mountain, committed to embracing purpose beyond profit, let’s hope that, first of all, they don’t forget about values. Let’s hope they will be able to cut through the management speak and create clear, authentic statements of purpose and values that inspire and engage all their stakeholders. And then let’s hope their purpose and values guide their decisions and behaviour every day in their organisations.

 

We will all have to make difficult changes in the move towards the more inclusive economic model that stakeholder capitalism promises.

 

Something for Davos delegates to ponder as they fly home in first class.