A company’s agility in responding to changing customer needs depends on releasing the creativity and energy of all its employees. The millennials – who are right now building our future – are not inspired by simply making money; they look for higher motives in corporate activities.
In my career as an investor over the course of a decade, I’ve attended many growth companies’ board meetings where, together with the management, we addressed the challenges posed by the scalability of operations. We considered the ARM model, bookings to revenue conversion, LTV/CAC ratio, ARR run rate, churn percentage, gross margin and cash flow. Examined pageloads of tables and graphs. At the end of the meeting, we were often left gasping for air. Did we talk about what we should have? Did we find a clear direction, or get the energy to last the course?
Because at the end of the day, it’s all about energy. Not about CO2 neutral energy, but an energy that releases creativity and drives people to make the world a better place.
A reason for the company’s existence
A growing number of studies indicate – rather paradoxically, perhaps – that the companies performing best at their business are those that pursue not just profit alone. These companies have instead also created a wider sense of purpose for their existence – a story they project to customers, employees, owners and the society around them. A company guided by purpose is inspired by its clear role in the world. The purpose describes the basis for the company’s existence, defines its objectives, values, and strategy, is embedded in its culture and modus operandi, and acts as a compass in a rapidly changing world.
Walk the talk
In the EY Beacon Institute’s The Business Case for Purpose global study conducted with the Harvard Business Review, altogether 89% of the 474 corporate leaders interviewed reported that a strong shared sense of purpose seemed to improve employee satisfaction, 84% said it enhanced the organisation’s ability to change, 81% believed that a company guided by purpose produces better products and services, while 80% claimed it boosted customer loyalty.
Even the best-defined purpose shrinks to just hope, however, if it does not guide the company’s operations, and if progress along the path of the purpose cannot be measured. The greatest obstacles for a company guided by purpose were shareholders’ short-term profit targets, misaligned systems and personnel incentives, inadequate methods for measuring long-term value creation, and a lack in management’s communication of the purpose.
Even though the benefits of purpose are clearly visible, only 43% of the executives interviewed reported that their company has a strong shared sense of purpose, while only 37% claimed that its business model and operative actions support the specified purpose. Some 44% reported that their company was only just starting to create a purpose for itself.
The builders of future competitiveness
Sustainable business is based on a persistent ability to serve customers’ needs. But the battle for future customer relationships will be won ahead of that – by whoever draws the longest straw in the draw for the most skilled and talented employees. That, however, is still not enough. A company must be able to release and channel their employees’ ideologies, creativity, and energy in order to identify and solve the increasingly complex and more rapidly changing needs of customers. This will not succeed with just operative targets imposed from the top downwards, but rather by inspiring people with a shared goal.
The recently published Deloitte Millennial Survey 2018 highlights a dramatic negative change in the opinions of 12,300 millennials and Gen Z respondents concerning businesses’ motivations and ethics. Of these future employees, only 48% think that businesses operate ethically and 47% believe corporate leaders are committed to enhancing society. Three out of four feel that companies focus on their own goals without thinking of the wider impacts on society, and two out of three do not perceive companies having any ambitions other than making money.
Money alone will not be sufficient to motivate our employees of the future. Of the millennials, over 80% believe a company’s success must also be measured by other indicators than just financial performance. The best builders of future competitiveness channel their energies into those companies that address social impacts in addition to financial metrics, and that act flexibly, caringly and rewardingly towards their employees while also respecting diversity.
“This is generally never, ever, ever done,” comments Lex Kressemakers, Senior Vice President of Volvo Cars’ Europe, Middle East and Africa (EMEA) region, in the Finnish newspaper Helsingin Sanomat’s article about the company’s overhaul. He adds “We have lived for years in a culture that counts the profitability of everything over and over again. The Chinese (the new owners) say that if you believe in your plans, just do them. Otherwise, you count yourself to death.” Chinese billionaire Li Shufu, who bought Volvo Cars, compares Volvo to a tiger that must be released from its cage and show its claws to the whole world. Volvo is also being guided by a more lasting purpose in its turnaround. “We will never relinquish the reputation of being the safest car in the world,” emphasizes Kressemakers.
Let’s take a leaf from Mr. Li’s book! Let’s step out of our cages! The next time we sit at a management or board meeting, or even at a coffee break with our colleagues, let’s forget our Excel spreadsheets and quarterly reports for a while. Let’s ask ourselves: ‘To be or not to be?’ – in all seriousness. Let’s talk about our company’s deeper sense of purpose, about the wider meaning of our existence and of our work. Let’s tell each other an inspiring story, clarify our direction, energized by having a common goal – and about the value we create in the way that is so much greater than EBITDA%!
- Director, Venture Capital Investments at Tesi. Has been working at Tesi since 2008.
- Education: MSc. Tech, MBA.
- Previously: Director at the Finnish Funding Agency for Innovations, Tekes. Development Manager at Sonera.
Photo: Junnu Lusa