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The last post discussed Ernst and Young and Harvard Business School’s survey of executives on the importance of organizational “purpose” – “an aspirational reason for being which inspires and provides a call to action for an organization and its partners and stakeholders and provides beneft to local and global society”. The focus was on the role of purpose in driving performance, including financial performance. Importantly for management control practitioners, students and researchers, it argued that in the absence of a purpose to give meaning to employees’ actions, “metrics fill the vacuum”, leading to the well-known dysfunctional effect of a myopic focus on the measured aspects and on “hitting the numbers”, rather than attempting to meet the organizational purpose.

 

This post further explores the issue. “Prioritizers” (i.e., organizations already with a clearly understood purpose) have advantages over “developers” (those trying to achieve that, but without having achieved it yet) and “laggards” (those not having begun to develop or even think about purpose). Advantages span across improving satisfaction, customer loyalty and the ability to transform. In particular, innovation is more prevalent in areas such as strategy development, business or operating model, branding, product/service development and leadership development and training.

 

However, while most executives believe purpose matters, less than half of the organizations were purpose-driven, clearly indicating a gap between theory and practice. Why? The reason lies in the failure to embed the purpose in organizational key areas: in addition to performance metrics and rewards, mentioned above, operations and leadership development and training were also failing to achieve that. In turn, these difficulties may be traced to key differences in communication within laggard organizations, where poor communication from top leadership was identified as the most significant barrier to develop purpose.

 

We can finish with the final inspirational quote from an interviewed senior manager: “Organizations do better when everyone is rowing in the same direction. A well-integrated, shared purpose casts that direction. Without the shared purpose, organizations tend to run in circles, never making forward progress but always rehashing the same discussions.” Indeed, a worthwhile effort and path ahead for all organizations.