One of the paradoxes of business is that the most profitable companies are not those that are most profit-focused.
In a survey titled “The Business Case for Purpose”, a team from Harvard Business Review Analytics and professional services firm EY’s Beacon institute declares “a new leading edge: those companies able to harness the power of purpose to drive performance and profitability enjoy a distinct competitive advantage”. This is a reprise of the findings of Jim Collins and Jerry Porras, who in 1994’s Built to Last found that between 1926 and 1990 a group of “visionary” companies — those guided by a purpose beyond making money — returned six times more to shareholders than explicitly profit-driven rivals.
While 90 per cent of respondents in the new study said their company understood the importance of purpose, less than half thought it ran in a purpose-driven way. Why the discrepancy? One reason may be that to many, “purpose” looks like a “black box”, its workings hidden from view. While noting the impact on the bottom line, commentators tend to assume the performance jolt comes from hard-to-pin-down qualities such as inspiration, leadership or the motivational effect of working for a good cause.