Why Companies Should Care About Purpose (i4cp login required)

Productivity

Companies have good reason to care about sense of purpose. Not
surprisingly, organizations that look beyond profit to the greater good they
create reap the benefits of a more engaged workforce. When employees can link
their goals to that of the company’s and see how their role contributes to the
team or organization’s larger success, they are 3.5 times more likely to be
engaged.

For Millennials in particular, feeling a sense of purpose in the
work they do is among the strongest drivers of retention.

Building a business with a sense of purpose pays off for the bottom line.

In their study, Firms of Endearment, researchers Raj
Sisodia, David Wolfe and Jag Sheth examined a group of thirty companies
characterized by their dedication to a revenue-transcending purpose. These
companies included familiar names such as REI, Trader Joe’s, JetBlue and
Patagonia. They compared these companies’ financial performance over time to a
group of companies from Jim Collins’ book Good to Great—companies
selected for their managerial and financial prowess.

Over a ten year period, the Good to Great companies outperformed
the market by 331%—but the Firms of Endearment companies shot ahead
still further, beating the market by a whopping 1,026%. Similarly, researchers
Millward Brown and Jim Stengel identified the Stengel 50, a group of
fast-growing brands such as Zappos, Starbucks and Luis Vuitton, that beat the
S&P 500 by 400% over a ten-year period.

What characterized these firms was an ideal of making lives
better, and that ideal served as an inspiration for customers and a
decision-making compass for employees. Harvard researchers
John Kotter and James Heskett provide yet more evidence that purpose leads to
long term financial success, showing that over a ten year period, the stock
prices of purposeful companies outperformed those of their less purpose-driven
counterparts by a factor of 12.

In the words of Vic Strecher, author of Life on Purpose,
“If you transcend revenue, you make more revenue.

The level and quality of interpersonal connection drives purpose, too

A sense of
revenue-transcending purpose lies not just in the company’s stated mission,
however, but in the level and quality of interpersonal connection that people
experience at work. Some leaders are better at creating purposeful connections
around them than others.

In one study described
by Rob Cross and Amy Edmondson,
the top 600 leaders in a
large investment bank were asked, “Who leaves you feeling a greater sense of
purpose in your work after an interaction?” The results showed a strong span of
purposeful influence for the top quartile of leaders, who imparted a sense of
purpose to 16 people on average. The bottom quartile was less effective, giving
a sense of purpose to less than one person on average.

But purpose-generating
behaviors are eminently teachable.

For instance, leaders
can highlight the “why” of an assignment—the impact or importance of the
work—before moving on the “what” or the “how” of accomplishing it. And they can ensure that each employee sees how their
contribution makes a difference in the collective efforts of the organization.
For example, one of the managers we spoke to at a leading research institute
makes sure her employees in the contracts department know that they save the
day every time they remove a logistical blockage and science can move on.
Making this connection between their role and the progress of research helps to
fuel purpose.

This
article is an excerpt from the Connected Commons white paper
Finding Purpose: How Connections with Others
Create Meaning in Our Everyday Work and Life
.

The Connected Commons, a consortium of major employers
and people leaders co-managed by i4cp and renowned thought leader Rob Cross,
applies organizational network research to impact business performance,
workforce collaboration, and individual well-being.

The
research references here will also be explored in
Rob Cross’s upcoming book Beyond
Collaboration Overload
, available now for
pre-order.