What Harvard doesn’t get about purpose
During my time as a graduate student at Harvard’s Kennedy School of Government, there was always a not-so-subtle criticism about our business school friends across the river. Business per se was not the problem. Instead, it was business at what cost? Analyst Ray Soifer (Harvard MBA, 1965) has tracked the career paths of HBS alumni for decades, and what he reveals confirms our lurking suspicions: the more HBS grads on Wall Street, the worse it is for the economy.
Why? Because HBS grads, like most business people, are myopically focused on short-term gains rather than long-term successes. Maximizing shareholder value — the mantra of every HBS student later turned exec — may be great for shareholders and C-suites paid in stock options, but terrible for everyone else.
The statistics speak for themselves. Today’s workforce is the most disengaged it has ever been. Indeed, upwards of 65% of North Americans are disconnected from their work. This has profound consequences not just on employees morale, but on the very shareholder value CEOs are desperately trying to protect. Gallup concluded in a 2014 study that disengagement is expensive — as much as $3,400 per $10,000 in salary. Per employee!
Maximizing shareholder value at all costs has other profound consequences, too. As Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, notes, ‘without a large and growing middle class, [North] Americans won’t have the purchasing power to keep corporations profitable. Instead of profits, companies will generate political and social instability.’
With profits and global stability at stake, what can responsible companies do? First, start with purpose. Seth Godin, Daniel Pink and lists of other business strategists agree: having a clearly articulated (and lived) purpose is the best way to scale both shareholder and social value. Its that je ne sais quoi element that not only drives an organization but is a strategic starting point, a product differentiator, and an attractor of loyal talent and customers.
But do companies really need another statement? If articulated and lived correctly, they most certainly do. Purpose statements are fundamentally different from vision, mission and values. A vision statement is a declaration of what a company would like to to become, something that will never be attained but perennially strived for. Mission statements describe how a company will accomplish its vision, usually including a summary of core competencies and competitive differentiation. Value statements list the principles and ethics by which a company’s mission will be accomplished. Purpose statements, however, explain why a company exists — the problem that it is solving and why that is important in today’s world. And as Simon Sinek, the famed market consultant and TED talk speaker, frequently notes, customers and employees are loyal not because of what a company does, but because of why it does it.
A 2015 survey published by Harvard Business Review entitled ‘The Business Case for Purpose’ agrees, declaring that ‘those companies able to harness the power of purpose to drive performance and profitability enjoy a distinct competitive advantage in strategy, operations, business development, talent management, and branding.’
HBS seems to be finally catching on. Is your company?