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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD
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Edited by Rama Ramaswami Senior Editor, New York
It may be tempting to dismiss corporate purpose as a ‘soft’ concern in a world teeming with political and social upheavals. Yet a sense of purpose may be the very thing that can help in overcoming those upheavals. Far from being less important than financial goals, purpose can strengthen the balance sheet by improving employee, customer, and investor satisfaction, which in turn contribute to better performance and greater societal impact; for example, many developing economies have benefited from the initiatives of purpose-driven organizations. As 2022 winds down, now may be the time to reflect on your organization’s purpose and how to strengthen it in the year ahead.
AN IDEA
The answer to that question is important because it may reveal insights into how you think about and experience purpose. In this McKinsey Quarterly article, we identify nine types of individual purpose—activities and beliefs that people find meaningful, such as achievement, caring, tradition, and stability. These elements fit into three ways in which people approach purpose: free spirits find meaning in situations that they can control, achievers gravitate toward self-improvement, and caregivers find most meaning in caring for others. By understanding these distinctions, leaders can help themselves and their teams develop activities tailored to different personalities and situations. “Be transparent, be open, and give people the chance to be supportive,” counsels McKinsey senior partner Acha Leke in this discussion on the importance of individual purpose.
A BIG NUMBER
82%
That’s the number of employees who feel that organizational purpose is important, according to research by McKinsey senior partner Bill Schaninger and others. But only about half that number—42 percent—believe that their companies’ purpose statements have much impact. To bridge this gap, “embed your reflection, exploration, discussion, and action in the heart of your business and your organization,” say the authors. For example, leaders could start by evaluating whether the relationships among their organizations’ social and environmental impact, strategy, and purpose are aligned.
A QUOTE
That’s McKinsey’s Olivia Loadwick, Robin Nuttall, Matt Stone, and others in this article on embedding purpose in organizations to deliver value. Leaders have more freedom than they think to reshape their businesses in a purposeful way. Five elements that can elevate purpose in the long term include portfolio strategy and products; people and culture; processes and systems; performance metrics; and positions and engagement. “Purpose is a source of competitive advantage, but it must be genuine and infused in your organization’s business model,” the authors say. “The 5Ps provide a framework to help companies embed purpose in a systematic, holistic way.”
A SPOTLIGHT INTERVIEW
Purpose-driven organizations can have a tangible effect on society, as the example of mobile money service provider M-Pesa Africa shows. In this McKinsey Talking Banking Matters podcast, M-Pesa managing director Sitoyo Lopokoiyit discusses how the fintech’s mission of reinventing financial services in Africa has lifted many households out of poverty since its launch in Kenya in 2007. “It has had a major impact on the Kenyan economy, including helping increase the country’s financial inclusion from only 26 percent in 2006 to 84 percent in 2021,” says Lopokoiyit. Although M-Pesa has now expanded into several other markets in Africa, it hasn’t strayed from its original goal of improving people’s lives, he says: “In terms of success, one of the key things is a deep commitment by the management to see it work. Purpose and people first; profits will follow.”
HYPED UP
‘Paying lip service to social purpose does not cut it with today’s consumers.’ That’s according to an Economist Group survey on how brands can enhance both business and social health through purpose. Your company’s reputation can plummet if its purpose comes across as ethically questionable or just a marketing gimmick. A common mistake among many organizations is a failure to measure purpose-related efforts with the same seriousness given to metrics such as revenue and profit, according to a Harvard Business Review study. Whether you track customer feedback, referrals, or adoption of your product or service, “identifying one simple metric, even if it’s an imperfect measure, will help keep your purpose at the center of daily operations,” the author says.
Lead purposefully.
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