The Way of the Purpose Driven Company

LinkedIn: Love LönnrothTwitter: @lovelonnroth

Why purpose is essential. How to make purpose a driving force of the company.

Why Purpose Matters

1. A company today is a node in a network of stakeholders

2. Companies need to influence regulators

3. People want to make a difference in the world

Why # 1: A Network of Stakeholders Companies today are increasingly part of global value chains and are therefore corporate citizens of the world.A chain cannot be stronger than its weakest link.The company must lead with purpose in order to create trust and make the chain strong.Leading with purpose means to instill the purpose in the network partners so that they work toward the same purpose.

Why #1: Bad Cop, Good CopBP’s Deepwater Horizon disaster of 2010 involved not only BP, but also its partners Transocean and Halliburton. The US oil spill commission found that BP had prioritized cost cutting over safety, even though BP stated in their annual report that “safety is BP’s number one priority”.The apparel company H&M has an extensive supply chain in countries with lax labour laws and a track record of human rights violations. Since the end of the 1990’s, H&M has worked to create a sustainable supply chain and introduced management practices around core values that are transmitted in the value chain, that now constitute best practice for the entire industry.

Why # 2: Influence RegulatorsIn many industries, government regulation sets the playing field.Companies in these industries must fight against excessive regulation by earning the government’s trust.The solution is to self-regulate and to ensure that other industry players don’t mess up.For an industry leader, purpose is necessary to align the entire industry behind common principles.

Why # 2: Bad Cop, Good CopUber has been extremely successful with its ride sharing service that is rapidly expanding globally. The company has attracted a lot of negative publicity because of rapes taking place in Uber cars and unfair competition with taxi companies. Uber has been slow to respond to these charges and has been banned in France and is facing tough regulations in other countries.Unilever is a global giant in consumer goods, with brands like Surf, Lipton, Rexona and Lux. Unilever is one of the world’s biggest buyers of palm oil, the production of which is a major cause for deforestation. Unilever helped create the Roundtable on Sustainable Palm Oil in 2004 and has led an industry wide initiative to make palm oil sustainable. In the EU there is now a legal requirement to declare if palm oil is used in a product, but calls to more drastic legal action have been avoided.

Winning alone is not enough it's about winning with purpose

Paul Polman, CEO Unilever

Why # 3: Make a DifferenceYoung professionals are increasingly looking at how their employer strives to make a difference for themselves and for the world.Customers look for brands that have a value proposition that is greater than the product by itself.Current employees will walk the extra mile when they are aligned with the company’s purpose.A company that is committed to making a difference will attract talent, partners and customers that have higher aspirations and bring more value in the long run.

Why # 3: Bad Cop, Good CopRyanair is one of the most successful airlines, punctual and has never been involved in a major accident. But it has an extremely weak reputation because of its abusive behaviour towards its employees. Several Danish municipalities are reportedly boycotting Ryanair because of bad working conditions.Natura is a leading Brazilian cosmetics company. The company employs a direct sales model with home distribution that could have been considered ethically challenging. But Natura is actively working with the sales reps to develop their communities and to spread the message about social and environmental responsibility. Natura is considered to be a world leader in Corporate Social Responsibility.

How to Introduce Purpose

1. Find your spark

2. Set out to reach True North

3. Partner with your stakeholders

How # 1: Find Your SparkPurpose requires personal commitment and leadership from the senior executives. Purpose requires belief.Some spark of purpose probably exists within the company since its very conception, be it the entrepreneurial spirit, the passion for the customers or the drive for excellence.The purpose should be true to the foundation of the company. You may have to excavate the purpose by having extensive dialogue within the company and with your stakeholders.Ask: “What can we aspire to, what difference can we make for our customers, for our community and for the world?”

How # 1: ExampleSecuritas is an international security company that was founded in Sweden in the 1930’s. In the 1980’s Securitas was the industry leader in Sweden, but the numbers were in the red and leadership was lacking. A group of middle managers started to work with rejuvenating the company by asking what the customers really wanted and simplifying work procedures. Eventually their efforts were picked up by the new CEO who took the middle managers’ initiative into a company wide change agenda. During the 1990’s Securitas rapidly became the leading international security company leading the transformation of the entire industry. And it started by a group of discontent middle managers excavating the purpose of the company, reconnecting with customers.

How # 2: Set Out to Reach True NorthOnce you have excavated the spark and started to formulate your purpose, you should develop a bold plan to take your purpose to the world.The plan should start with what you want to accomplish for your customers, your employees and your community. What do you want them to say about your company in ten years from now?The plan should outline some core principles and some activities that will lead toward your purpose. You should not start with developing KPI’s and metrics. These will limit your purpose and should therefore come at a later stage.

How # 2: ExampleScandic Hotels is a Scandinavian hotel chain that once started as Esso Motor Hotels in Sweden. In 1993, a new CEO was brought to Scandic to turn the company around, since at the time it performed badly and did not have a clear strategic direction. The new CEO formulated the purpose “Care for customers and Care for the environment”. The purpose was disseminated to all leaders through inspirational seminars and through a short strategy document outlining the direction and setting some core activities. Scandic became very successful in the 1990’s by engaging all its employees in the purpose and to involve its customers in its environmental efforts.

A company has two choices, to become production oriented or to become customer centric. To be customer centric is the hardest route and the one we opted to follow.

Roland Nilsson, former CEO Scandic Hotels

How # 3: Partner With StakeholdersYour stakeholders are your customers, employees, shareholders, local community, political leaders, your suppliers and other parties that you impact through your operations and your products. The importance of your purpose is judged by the extent that it makes life better for your stakeholders.To bring your purpose to life, you need to partner with your stakeholders, beginning with your employees. Work with your employees to address the major issues concerning customers and other stakeholders.Once you are aligned with your employees, you must work with other stakeholders like key customers and representatives of the local community to find common ground, enrolling them into helping you fulfil your purpose.

How # 3: ExampleOnce Scandic Hotels had crafted their strategy, they developed a comprehensive project to enroll all employees. Using “Dialogue Mats” they involved all employees into coming up with ideas for working with the purpose and to develop action plans for each hotel. They partnered with an environmental NGO to deliver environmental training. Several hotel directors were invited to Rotary meetings and to participate in municipal activities for developing the environmental work at other local businesses. This communication had a tangible impact on the hotels’ business since they reached many prospective customers and developed a solid reputation for being a great corporate citizen.

Tools for Purpose Driven Companies

1. Strategy document

2. Dialogue Mats

3. KPI’s

4. Strategic projects

5. Leadership training

Tool # 1: Strategy DocumentThere are some important aspects of a strategy that is crafted for a purpose driven company:It must be crafted by the logic of the heart as much as the logic of the mind. The purpose is transcending the realm of here and now into the realm of what could be possible if we let our imagination run free. The strategy should convey the transcendent nature of purpose.The strategy is as much a basis for communication as a basis for setting priorities. It should contain a formulation of the purpose and of the strategic priorities given by the purpose. It should also give some direction towards True North by stating strategic long term objectives and possibly some strategic actions. But it must not contain detailed KPI’s or short term goals since this will diminish the purpose. The details should be left to local action plans.

Tool # 2: Dialogue MatsA dialogue mat is a simple and surprisingly efficient tool to have a company-wide dialogue on your purpose where everyone can participate. The tool consists of a poster with questions printed along the borders and is designed for having a group of 4 - 6 people sitting around a table and discuss around the questions in a preset order.The questions are open and typically starts with “Why is this purpose relevant for us?” and narrows down to actionable things like “Name three things we can start doing for our customers tomorrow”. A number of successive Dialogue Mats can be used to reach all the way to actionable goals that are set and executed by the employees.

Tool # 3: KPI’sA trap that can be experienced by some companies that try to become purpose-driven is that they end up with a bunch of words and little action. To really become a purpose-driven company requires action and action will eventually require KPI’s.The local action plan is a great tool that is used to collect local actions that are proposed by the employees in the Learning Mat sessions. Each action is ticked off when it’s done and this is a basis for measuring the activity level in the organization.Some key metrics should be used to track the progress on the 3 - 5 most important strategic objectives. These should be transparently communicated to all stakeholders on a regular basis.

Tool # 4: Strategic ProjectsStrategic projects are important vehicles for reaching strategic objectives. Especially in large organizations the inertia and the layers of decision making call for some top down strategic initiatives to drive change.It is important that the strategic projects are carefully selected and designed with the purpose in mind.Strategic projects create opportunities to collaborate with stakeholders such as suppliers, customers and NGO’s.Strategic projects should be measured on both the basis of business results and how they contribute to fulfilling the purpose. One is never enough, there must always be both business and purpose.

Tool # 5: Leadership TrainingPurpose driven companies require extraordinary leadership. A hero-CEO or an entire heroic leadership team will never make it by themselves. Leadership must be present at all levels of the organization.Purpose must be integrated in all leadership training. HR, leadership coaches and training partners must be completely aligned with the purpose. If they are not, leadership will not be effective.Using train-the-trainer concepts where employees can become champions for change is an excellent way to foster leaders at all levels. Seminars around Dialogue Mats should be led by internal trainers.

Some Purpose Driven Companies

UnileverNaturaPatagoniaIKEAH&MToyota

Max HamburgareSkandiaHandelsbankenGoogleNovo NordiskAtlas Copco

Contact informationPlease feel free to contact me, I would love to get your comments on this presentation. I am available for consulting assignments and hold presentations on the topics of Strategy, Sustainability and Change leadership.

LinkedIn: Love LönnrothEmail: Love@Lonnroth.comTwitter: @lovelonnrothWeb: www.karlofconsulting.se