December 16, 2020
BlackRock is one of the largest asset management companies on the planet. Each year, at the start of January, the CEO Larry Fink writes a letter addressed to the other CEOs of the world. In his New Year’s letter for 2020, Fink appealed in particular to his fellow CEOs’ sense of social responsibility. In particular, he focused in on the risks faced by the climate. “Climate risk is an investment risk,” and he called on all companies, both public and private, to create greater societal added value. “Society is looking increasingly to companies to solve social and economic problems,” he concludes, so asset managers should be encouraged to invest in companies with a ‘purpose’.
Such focus on companies with a ‘purpose’ sends out a strong and positive signal, but the purpose movement has has faced limitations when it comes to marketing and HR. Purpose is one of the areas where customer engagement and employee engagement overlap, and consequently, marketeers and HR leaders in companies all over the world have spent countless hours in meetings trying to define just what that purpose should be.
The problem is that there is no clear definition for what the whole concept of company ‘purpose’ should be. One team might say it is about creating social added value, while another sees the purpose as solving problems for their customers. The founder of the company will might be stuck on the reason why they started it in the first place.
Here’s the thing – when you sit a group of employees down and ask them what the company does, you’ll probably get a pretty good consensus. Ask them how do you do it, different departments might vary slightly, but most companies can get a fairly clear answer. But ask them why do you do it, and it is a bit more of a puzzle.
This a big part of the problem with ‘purpose’ discussions – people across the company eventually agree on a stated purpose, but it is so bland it has absolutely no differentiating effect from competitors in the eyes of customers and employees alike.
A purpose can be effective, but only if it allows you to distinguish yourself and gives a clear direction to your strategy, resulting in concrete actions and behaviour. Sadly, in my experience the purpose of most companies fails to meet these criteria.
Could your company solve real problems?
One of the interesting developments that has come out of the coronavirus pandemic is the way many companies have responded. We have seen companies identify specific needs in society and then use their strengths to satisfy those needs, wholly or in part. Unlike woolly purpose statements, these were worthwhile actions in the short term, and they had immediate positive effects – as well as yielding huge amounts of positive PR to make both staff and customers proud to be associated with the company name.
Of course most of the actions taken in the crisis were of a temporary nature, but what was interesting was that the best examples were the ones where companies used their own particular strengths. My hope is that in years to come, once the crisis has past, companies will be able to maintain this same altruistic mindset. There aren’t many positives to take from the crisis, but hopefully one is that companies will seize the opportunity to think more deeply about their societal impact, first and foremost because it is the right thing to do, but also because it will help them to differentiate themselves from their competitors.
As a company, you don’t need to wait for the next world crisis before you start to consider what you can do to improve society. The crucial question is to decide which social problems the strengths of your company are best suited to help solve.
Tackling set problems in a concrete way brings clarity. It is not an everlasting mission; it is a specific challenge. Every employee and every customer will know exactly what problem you are trying to solve, which also makes your internal and external communications clear and transparent.