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Purpose is meaningless unless it is translated into measures. So let's examine five channels through which the purpose can be embedded in a company – strategy, operational model, culture, internal reporting and governance.

let us start with strategy. The purpose of a company should determine the activities in which it is involved. The purpose of Patagonia, the outdoor clothing company, is to renew the environment, as highlighted in the statement “Patagonia is in business to save our home planet”. These are not just ambitious words. On Black Friday – the largest day of shopping – in 2011, a full-page ad appeared in the New York Times, featuring a Patagonia fleece with the heading "Don & # 39; t Buy This Jacket". The ad highlighted the Common Threads initiative, which encouraged customers to fix and reuse their clothes instead of buying new ones. The initiative repaired over 30,000 items in eighteen months – and ultimately did not come at the expense of sales, which increased by 30% in 2012. In 2017, Patagonia created its online marketplace for used clothing for worn clothing, although this would reduce sales of new items. Similarly, CVS did not simply rename itself CVS Health, but made the strategic decision to stop selling cigarettes while Barclays closed its tax avoidance department.

The potential to build credibility through strategy is another benefit of the focused purpose. It is easier for stakeholders to check whether a targeted statement of purpose is being put into practice than a vague one that tries to do everything. Therefore almost any strategy could be compatible with it.

A second way to embed the purpose is to Align the operational model – how a company does its core business – with it. For example, when the UK supermarket Tesco defined its primary purpose as "adding value to customers to earn their lifelong loyalty", they had to ensure that their processes were uncompromisingly customer-centric. For example, it was already over 90% efficient to get products on the shelves, but this was not enough for a purpose like "lifelong loyalty". As a result, the processes have been redesigned to ensure that customers can buy the products they want whenever they want them. It was also promised that all stores would have a manager who helped me but didn't have a management or training system to deliver on that promise. As a result, business routines have been simplified and hierarchies have been shifted to give managers the freedom to serve customers rather than spending time on unnecessary upward reports. An extensive executive development program has also been launched.

You might think that an operating model with efficient processes and management training should be a characteristic of a good company, not just a targeted one. Any organization would certainly advocate process improvement and manager qualification if the benefits could be roughly estimated. But all companies face compromises. Even in the best companies, many dimensions of their operating model can be improved. When aligning the operating model, the dimensions that need to be improved most urgently in order to put the purpose into practice must be prioritized. This again emphasizes the need to focus on the purpose.

Third, a CEO Make sure that integrated reporting takes place both inside and outside the company. This includes collecting a lot of information about how employees, teams and projects work in purpose-related dimensions. One use for this information is the performance evaluation. Sometimes a CEO gives a general speech about the purpose, just so that the management directly under the C-Suite tells their team to ignore them and focus on their division's financial goals. A manager described this layer of management to me as “clay,” which prevents the purpose from flowing throughout the company, just like clay blocks the flow of water. Such a blockade is not an intentional sabotage, but results from the reality of the evaluation of managers. A company invited me to speak outside of the company for a purpose, but admitted in their briefing that their most important measure was short-term profit per partner. In contrast, Marks & Spencer evaluated the divisional and business managers using a "balanced scorecard" when implementing Plan A. This combined traditional financial metrics with several non-financial measures tailored to the most controlled Plan A goals.

Integrated internal reporting not only enables managers to evaluate them, it also enables employees to evaluate themselves so they know how to behave and make more informed decisions. This requires dividing company-wide goals into sufficient granularity so that employees can influence them. Marks & Spencer reports total greenhouse gas emissions and divides them by region, activity (e.g. cooling versus heating) and department (e.g. food versus clothing). However, even that is not detailed enough to lead a single colleague who may be managing a single business rather than a region. Therefore, Marks & Spencer tracks information internally at a single store level. It also measures emissions activity (e.g. electricity, gas and cooling) and not the emissions generated because the employees have direct control over the former.

A fourth way to embed the purpose is through Alignment of corporate culture in order to. While the purpose is why a company exists and who it serves, culture captures how it works – in simple terms, it's "the way we do things here". Culture is critical to ensure that a purpose is pervasive across the organization. Recall the study by Claudia Gartenberg, Andrea Prat and George Serafeim, which documents the strong performance of companies that their employees classify as clear. This connection has been driven by the perception of middle managers rather than managers, probably because the former are particularly important to ensure that this purpose is translated into everyday actions. This underlines another advantage of a targeted statement of purpose – the simpler it is, the less likely it will be lost in translation if it is passed on to the company.

In order to live in the company, the right culture must be promoted. For example, a purpose that prioritizes innovation, such as that of Reckitt Benckiser (“creating a healthier life and a happier home through our product innovations”), is best supported by a culture that emphasizes autonomy, rewards risk taking, and tolerates constructive failure. In contrast, a purpose that focuses on costs (like Wal-Mart's "saving people money so they can live better") should be accompanied by a culture that emphasizes efficiency and professional roles clearly defined.

Executives shape the culture through their strategic decisions and their own behavior, but they cannot do everything themselves. Some companies therefore commission selected employees with a cultural change from the ground up. Danish biotech company Novo Nordisk has developed a set of cultural principles known as the "Novo Nordisk Way" to support its purpose of "driving change to overcome diabetes and other serious chronic diseases". It has a team of “moderators” who visit business units to help them implement the Novo Nordisk Way. The team observes a unit in action, interviews managers and employees, reviews their policies, and then reports general results and trends to management. French personal care company L’Oréal has developed four ethical principles to support its purpose of “cosmetic innovation for everyone” and has a network of 75 ethics correspondents to embed across the company and in every country. They adapt these principles to local practice, ensure that employees are trained in ethical behavior and know how to raise ethical concerns, and act as a sounding board for ethical issues.

Another way to shape culture is to hire colleagues with a strong cultural fit. Remember Patagonia's goal is to "save our home planet". As founder and CEO Yvon Chouinard explains: "If we have a vacancy, you will, on equal terms, hire the person who is committed to saving the planet, regardless of the position." Shoe maker Zappos offers new hires a one-month training program that includes an introduction to company values, and offers them $ 2,000 to leave if they don't share them. (A similar program has since been taken over by Amazon, which Zappos bought in 2009.) Herb Kelleher, the co-founder of Southwest, emphasized cultural fit and experience when hiring – like his motto "hire, train for skill & # 39 ;.

After all, the embedding purpose often requires changes not only among the CEO, but also on the board above her. A 2014 Harvard Business Review article reported that only 10% of U.S. public corporations had a board committee dedicated to corporate responsibility, and advocated that this practice be more widely used. But Purpose should be a formal duty of the entire board – It is fundamental to a company's core business and not to an ancillary activity that can be delegated to a subcommittee. The Board of Directors should not approve an M&A deal, strategic initiative or investment proposal without first verifying that it is in line with the company's purpose. Similarly, a board typically spends two days a year discussing and agreeing on a strategy. These meetings should be anchored appropriately. The Board of Directors may also ensure that the Company's non-financial goals are appropriate and targeted in light of its purpose, and monitor whether those goals are achieved.

Since the purpose can not only be assessed on the basis of quantitative indicators, the British Financial Reporting Council recommends that non-executive directors "go through the workshop" to really understand a company. There are currently proposals in the UK and US to send workers to the boardroom, and some European countries are already doing so. However, a more effective approach is to involve the boardroom in the workforce – so that they can spend time in the company and hear from colleagues firsthand through structured site visits. I am a member of the board of directors of the London Business School (the equivalent of our board) as the elected representative of the faculty – analogous to an employment director. Although I try to speak to non-financial faculties and non-academic staff, I cannot express their views as accurately as those of other financial faculties. On a day when the Board of Directors was absent, a colleague asked the outside governors to spend time on campus and understand the "smell" of the London Business School to hear the voice of the wider workforce.

While the purpose should be the responsibility of the board as a whole, committees can be useful to monitor certain dimensions of the purpose. Most board structures focus solely on shareholder value and therefore have committees that deal with remuneration, appointment of board members, risk and audit. The last two are geared towards downward protection. Pieconomics, however, emphasizes the importance of positive added value, which is why an innovation committee can be valuable for some companies. Once a company has decided who it is, it can also set up committees that are responsible for key stakeholders, such as: B. a human capital committee or an environmental committee. Alternatively, these topics should be important agenda items for the entire board. Setting the tone above ensures that the purpose flows throughout the company.

Contribution to the Branding Strategy Insider by: Alex Edmans. Excerpt from his book Grow the Pie, How great companies deliver both purpose and profit.

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