February 11, 2022 8:58 AM EST

Workers are attracted to companies and stay at them when they feel like they’re connected to a motivating purpose, surveys have shown. And so managers have turned to “purpose” as a tool to deploy amid challenges recruiting and retaining talent over the past year.

But what does it really mean for a company to have a purpose? And what are the best kinds of purpose to have?

In his new book Deep Purpose, Harvard Business School professor Ranjay Gulati argues that “convenient purpose” isn’t enough. That’s when organizations talk about making the world better because it makes it easier to recruit, retain, and motivate employees or market to customers, but their practices are detached from that rhetoric. (He cites Facebook and Boeing as extreme examples of what not to do.)

Intriguingly, Gulati is also wary of “win-win” approaches that claim to maximize both profit and social good, warning that it often isn’t possible. “Forced to choose between financial performance and social good, leaders at these firms usually wind up operating the enterprise for shareholders’ primary benefit.” (p. 6)

What Gulati prescribes is—you guessed it—”deep purpose.” When pursuing deep purpose, “leaders orient their organizations existentially around the ‘North Star’ of purpose, articulating a conscious intent to conduct their business in a more elevated way.” He continues, “Purpose in their minds is a unifying statement of the commercial and social problems a business intends to profitably solve for its stakeholders.” (p. 11)

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At such organizations, purpose is not just a tool but is the underlying logic used for decision making at all levels, creating “moral communities” of workers and partners drawn to and motivated by it. Gulati points to Microsoft’s Satya Nadella, PepsiCo’s Indra Nooyi, Gotham Greens’ Viraj Puri, LEGO’s Jørgen Vig Knudstorp, Etsy’s Josh Silverman as exemplars.

What Gulati qualifies as “deep purpose” can feel somewhat hard to pin down. That’s not helped by his tendency to describe it in spiritual terms, comparing successful practitioners to prophets “beaming divine revelation.” (p. 12) But Deep Purpose directly addresses many of the pressing leadership questions of our time—including how to weigh financial performance and societal impact, how to talk about purpose most effectively, how to establish a strong culture, and how to successfully have individualist and inclusive workplaces. It draws on Gulati’s research involving hundreds of executives at 18 companies to provide specific case studies and advice.

He holds up Gotham Greens, which grows produce in urban greenhouses, and describes its focus as creating “new ways to farm, produce local food, revitalize communities, and innovate for a sustainable future.” (p. 13) The company has impressive sustainability credentials and operates profitably. But it distributes lettuce in single-use plastic containers, seemingly in conflict with its eco-friendly purpose.

Gulati argues for “practical idealism” and argues that companies can use purpose—such as sustainability—to navigate such tradeoffs. He chronicles how the company tried compostable packaging and other alternative options. But they all had major drawbacks, including leading the produce to spoil more quickly, which wasn’t exactly sustainable.

“Gotham Greens’ struggle with packaging illustrates how hard companies and leaders embracing practical idealism must work to arrive at meaningful Purpose with Profit solutions, and the imperfect nature of many of these arrangements,” Gulati writes, noting that Gotham Greens has a sustainable packaging team that continues to look for better options. (p. 42) “We must roll up our sleeves and navigate vexing tradeoffs as best as we can, pushing meaningfully if incompletely toward win-win.” (p. 32)

The right approach, Gulati contends, is to avoid profit-first approaches if they don’t deliver social value and steer clear of purpose-driven solutions if they can’t one day be profitable as well.

The most compelling purpose statements “delineate an ambitious, longer-term goal for the company,” Gulati writes. They also “give this goal an idealistic cast, committing the firm to fulfillment of broader social duties.” (p. 2) The Swiss food-processing equipment maker Bühler’s is: “Innovations for a better world.” Tech retailer Best Buy’s is “enrich lives through technology.”

Gulati identifies four ways that purpose delivers superior business performance:

  • Directional—Purpose guides the company’s growth. Bühler, for example, proactively sought to slash waste and energy and water usage at its customers’ plants, which unlocked deeper partnerships and focused its innovation efforts.
  • Relational and Reputational—Having a long-term purpose fosters trust with clients and partners and boosts the reputation of firms.
  • Motivational—Research shows that when companies take meaningful actions in line with purpose, employee engagement climbs. “Members of an organization who deeply ponder its purpose, posing and answering the question, ‘Why are we here?’ will often feel a sense of uniqueness and perceive themselves as part of something larger, enduring, and distinct,” Gulati writes. (p. 82)

 

Deep Purpose proposes several approaches for leaders:

  • Rooting purpose in the past—Knudstorp discovered a mantra carved in wood during Lego’s early days, “Only the best is good enough,” and used the phrase to evoke the continuous improvement needed to turn the company around. Gulati argues that a forward-looking purpose rooted in an organization’s history carries extra weight.
  • Moving beyond slogans to stories—A fundamental task of leadership is telling a “Big Story” or “master narrative” that critiques the status quo and issues a rallying cry toward a desired future. One narrative model is to interweave “self, us, and now.” That involves telling stories of defining moral decisions in your life, defining “choice points” for the organization, and highlighting a current challenge and a strategy for addressing it. “Big Stories” are powerful for building culture, as Nooyi did successfully at PepsiCo. In addition, such narratives help clarify the societal purpose that leaders can focus on speaking out about publicly–something most employees now expect.
  • Unleashing individuals—Individuals thrive when they can identify their own personal purpose and express it through their work. Seattle Seahawks coach Pete Carroll is known for welcoming nonconformity among players, focusing on their individual performance, and forging trusting relationships with them.
  • Flattening organizations and unlocking collaboration—With an organization unified around purpose, there is greater trust and momentum. That allows for increased employee autonomy and focus on loosening tight bureaucratic structures to allow for collaboration across the company.

Gulati outlines four phenomena that can derail purpose:

  • Personification—The departure of a founder—such as Howard Schultz of Starbucks for the first time in 2000—can leave a company adrift if the new leadership doesn’t succeed in looking both back and forward.
  • Death by inadequate measurement—Gulati acknowledges that it’s often hard to measure execution against long-term societal purpose. That means leaders need to work harder to manage them. “You must measure purpose, even if doing so requires some acceptance of subjectivity and imperfection,” he writes. (p. 203)
  • “Do-gooder’s dilemma”—Investors can have higher expectations of purpose-driven companies and hold them to account for financial performance—as Danone’s Emmanuel Faber discovered when he was ousted by activist shareholders in 2021.
  • A purpose-strategy divergence—If leaders don’t start with purpose when discussing strategy, they often pursue opportunities that aren’t aligned.

 

To be sure:

  • Gulati argues that sometimes when societal purpose and financial performance diverge in the short-term, leaders need to pursue profits in order to ensure a business’s long-term viability and impact. That’s logical, but it can also be used to justify expedient decisions—involving laying off workers or abandoning sustainability commitments, for example.
  • It can be hard to pin down what “deep purpose” really means and how it differs from standard corporate purpose, partly because Gulati in places frames it using spiritual references, referring to the “soul” of a business, a “sacred mission,” and leaders as prophets “beaming divine revelation.”
  • Gulati implies that any business can have a deep purpose if it really wants to. But does every business have a societal purpose it can legitimately claim?

Choice quotes:

  • “Most leaders think of purpose functionally or instrumentally, regarding it as a tool they can wield. Deep purpose leaders think of it as something more fundamental: an existential statement that expresses the firm’s very reason for being.” (p. 1)
  • “Companies can deliver exceptional value to stakeholders and elevate themselves beyond a merely commercial logic by energetically and inconveniently pursuing a reason for being.” (p. 9)
  • “Take powerful stands that matter given the purpose you and your company are pursuing. Be disciplined about avoiding the rest.” (p. 71)
  • “Instead of just running the typical interviews, focus groups, or town hall meetings, deep purpose leaders immersed themselves in the intentions of founders and early employees, scouring for themes that captured the firm’s ineffable soul or essence.” (p. 78)
  • “Leaders must make rational, economic decisions in running their businesses day-to-day to achieve efficiency and optimal performance—that’s the ‘plumbing,’ the technical or operational side of business. But they must also attend to meaning, values, and purpose—the ‘poetry’ of business.” (p. 115)
  • “The best way to activate deep purpose is to increase the care you show to individual employees.” (p. 140)
  • “Fidelity to deep purpose and to a moral community will impel you to approach organizational change not as an abstract intellectual exercise, something you’re doing because all of your competitors are, but rather as an urgent and necessary imperative established by your existential intent.” (p. 166)

 

The bottom line is that Deep Purpose offers a compelling structure for thinking about how to pursue business performance and societal good. Gulati acknowledges that corporate leaders too often talk about purpose while still treating it as a very peripheral consideration. But he offers case studies of those who go beyond that approach, and details the benefits from doing so. And Gulati’s instructions in Chapter 5 for how leaders can craft and effectively deploy narratives about an organization’s purpose are especially useful.

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