How corporate purpose inspires the world’s most valuable companies

The article “The Difference Between Successful Purpose Statements” by Darrell Rigby and colleagues, published in the latest issue of Harvard Business Reviews, explores how companies like Microsoft, Mastercard, and Marriott pursue a purpose that uplifts their employees. It reveals how it inspires people.

The HBR article describes how each of these companies, in their own way, has succeeded in combining the long-neglected human side of management with superior financial performance.

1.Microsoft

“When Satya Nadella became CEO of Microsoft in February 2014,… [he] Announcing a new mission. Microsoft’s purpose would be to “empower every person and every organization on the planet to achieve more.” He said his top priorities, in addition to empowerment, are to build new partnerships to better serve customers, drive innovation and execution, and improve productivity and economic growth for everyone. and made the purpose concrete. Achieving these goals required painful changes. … This philosophy was also applied to the senior leadership team, resulting in multiple turnovers. These executives will be replaced by insiders and outsiders who share Nadella’s worldview and vision of Microsoft’s broader, bolder purpose, as Nadella wrote in his 2017 book: has been appointed. hit refresh”

“He increased collaboration with new external partners and old adversaries such as Google (now Alphabet), Facebook (now Meta), Apple, Oracle, Red Hat, Salesforce, and SAP. It was a shock to our longtime employees and analysts, but it broadened and strengthened the company’s team.”

2. Mastercard

“At Mastercard, we have built that purpose into a consistent system of standard sales behaviors over the past decade. ‘The Mastercard Way’ is the company’s three recommendations for increasing innovation, collaboration, and agility. This is a concise summary of the nine actions within the three pillars. The “decency index” describes the level of respect, kindness, empathy, dignity, and understanding that people bring to their interactions with others. The company has developed a unique training program to help people recognize their own biases and build a more inclusive culture. These frequently repeated mantras remind employees that their behavior must exceed legal and generally acceptable standards. ”

The focus is on “mutually beneficial goals”. and “reviews and rewards tied to objectives.”

“As of 2022, Mastercard is on track to achieve its goals, adding 780 million people to the financial ecosystem, 35 million businesses to the digital economy, and 2 million more people than its goal. We help 27 million women entrepreneurs grow. -Achieve digital solutions. ”

3. Marriott

“Marriott International’s Statement of Purpose defines five core values: Putting People First, Pursuing Excellence for Our Customers, Embracing Change, Acting with Integrity, and Serving the World.” It emphasizes values.”

“Many companies say similar things, but in our research, Marriott was in the top 10% of companies where employees mentioned clarity of purpose and impact in open-ended responses about their experiences, without being told anything. Positive comments about the company outnumbered criticisms by a 3-to-1 ratio: “Marriott is a great organization that cares deeply about its people and its mission from top to bottom.” someone writes. “It’s a people-first mission statement and they support it,” said another.

Human aspects of management

What is impressive about these companies is “values”, “worldview”, “goals”, “philosophy”, “vision”, “respect”, “kindness”, “empathy”, “empathy”, “values”, “values”, “goals”, ” We emphasize the human aspects of management, such as our philosophy and vision. Dignity” and “understanding”. “Collaboration”, “Inclusion”, “Exchange”, “Putting People First”, “Excellence for Customers”, “Embracing Change”, “Acting with Integrity”, “Serving the World”, and “compassion”.

As the article points out, the mission statement itself is “not very important.” What matters is what the company considers important.

Ironically, companies like Microsoft, Mastercard, and Marriott that embrace and implement a human-centered purpose make more money and grow faster than the S&P 500. See Figure 1.

In fact, these three companies represent some of the most valuable and fastest-growing companies in the world, as shown in Figure 2 below.

A striking contrast to companies still practicing industrial-age management.

These three companies represent a striking contrast to companies that still practice industrial-age management (perhaps 80% of today’s public companies), where a large portion of management still consists of a set of processes, techniques, It is made up of structures. The saying of 1911 is: In the future, systems must come first. ” Human needs, desires, passions, ideas and interests are supposedly subordinated to a system of scientific processes and methods.

What is the purpose of these industrial-era companies? Many companies today have humanizing mission statements, but the reality is often not. Part of the reason is that for the past half century, most large companies have sought to maximize short-term profits and shareholder value (MSV), at the instigation of Nobel Prize-winning economist Milton Friedman and his colleagues. It is in. It’s no secret. MSV was the official gospel of the Business Roundtable (BRT) from 1997 to 2019. Support for this perspective was ostensibly withdrawn by the BRT in August 2019. Since the 2019 waiver was issued, Professor Lucien Bebchuk and his colleagues at Harvard Law School have made important changes. The 2019 announcement appears to have been a fake by politicians.

the need to tell the truth

As the HBR article points out, a key requirement for achieving corporate purpose is “telling the truth about purpose.”

“Statements that do not reflect reality can cause serious problems. It undermines the trust and respect of those who see through the travesty. It does more than strengthen people’s abilities or character. , encourages you to work hard at polishing your image. And a generic statement promising everyone in the open attracts stakeholders with conflicting objectives. Ultimately. will intensify competition over priorities and resource allocation, increasing the risk of strikes, boycotts, and proxy wars.”

The need to tell the truth can cause difficulties. CEOs of industrial-era companies often experience cognitive dissonance. They know that the company’s stated purpose of loving its customers does not reflect the reality of how the company operates. They may even like the sound of words that describe their purpose. But they also know that changing the organization to reflect those goals can take a long time (perhaps longer than their current tenure). They also know that jobs can be lost if profits decline. They know that very few CEOs are fired for inflating stock prices in the short term. they are not bad people. It’s not personal. It’s “just business.”

So while many industrial-age companies still focus their operations on maximizing shareholder value, they also have their communications teams create PR that shows they’re also doing good for society. There is. They collect and publish anecdotes. But the underlying reality is different. So telling the truth about your corporate purpose statement is about more than just changing the words. That’s a different ballgame.

Depending on the CEO, skills and background may be an issue. They may have gotten to that position not through customer value creation or innovation, but through their skills in learning methods and processes. The possibility of acquiring and implementing a completely different mindset is difficult to contemplate, let alone implement.

MSV goals can spread throughout an enterprise like a malicious virus. As long as MSV is the true goal of a company, it is difficult to move beyond a hierarchical management approach that emphasizes control. That’s because MSV is inherently uninspiring for staff. As a result, glowing statements about philanthropic corporate purposes sound bogus. Unsurprisingly, employee engagement levels are low and declining.

Thoughts drive methods and actions

What the three companies described here are doing is adopting human values ​​and mindsets that drive and inspire the implementation of their methods and processes. This is not to say that a company’s methods and processes are not important. they are. But unless they are driven by the right human values, they will remain lethargic and uninspired.

Also read:

The management paradigm that powers the world’s most valuable companies

How the world’s most valuable companies are redefining management