PURPOSE Is Essential For Your Scale-Up Success. Read This To Find Out Why.
Purpose is an important concept that I want to discuss. In this blog post, we are going to explore the importance of purpose for business owners.
Purpose is an important concept that I want to discuss. The word has become popular in recent years and it's a topic of much debate. In this blog post, we are going to explore the importance of purpose for business owners.
At Scale Up Your Business we define purpose as developing a clear vision that is essential to relieve overwhelm and spark unprecedented growth. You need to know where you’re going, why it matters, and who you most want to serve. This is your ultimate brand promise. It is one of the five components we use in our Predictable Growth Framework. The other four are a unique and remarkable value proposition- outstanding, committed people- intentional and aligned operational processes and granular focus on performance. But in this article I am focusing on Purpose.
Why does Purpose Matter?
Purpose is important for every business owner. It's the reason why they started their business in the first place, and it should be what drives them to scale it further. But what happens when the business for some reason becomes disconnected from the founder’s purpose?
The business will no longer be aligned with the founder's dominant intention, and this can cause a number of problems.
This is sometimes evident when I have a first meeting with new customers, who are founders of businesses going through scale-up . They feel as if they are serving their businesses, where instead, to stay truly aligned the business should be serving them and their goals for wealth creation, personal success and achievement.
This situation happens when an organisation strategy and business plan is defined without being fully aligned to the founders vision and what the founder is required to give in return. This can happen as a result of two things. Not consciously doing this exercise or neglecting to regularly revisit the founders vision and business plan, like an old fashioned radio it veers off signal and needs to be retuned periodically.
This situation of misalignment is serious. It creates friction in other areas of their lives- with this additional pressure leading to four in five small business owners experiencing poor mental health. The definition of a “lack of purpose in your life”, is you may experience feelings of constant boredom, dissatisfaction or emptiness, like life has no meaning. ... Feeling a lack of purpose can also contribute to depression and anxiety, especially when you feel unable to see a way out of your empty feelings. Is a “lack of purpose in your business” any different?
The symptoms most commonly reported by business owners were inability to focus (66%) is most commonly reported , followed by anxiety (64%) and disrupted sleep (63%). Almost a quarter (24%) have panic attacks and 37% experience symptoms of depression. Three factors which contribute to the cause of this problem.
- Founders are not able to fulfil their stated purpose and need more meaning in life
- Losing a sense of control over decisions that affect them
- Not being given adequate time for rest.
Defining the Dream Goal
You cannot expect to have an aligned purpose between founder, business and employees unless the founder is clear that the business is a critical component in achieving their Dream Goal.
In Performance Consultants International's book Coaching For Performance it references a need to be reminded or to remind yourself of what inspired you to start or continue what you are doing. A Dream Goal. The Desired future or vision, The Big Why?
Your purpose is directly connected to this. Not just yours but your organisations and your employees. This is a combination of your big picture, your own personal definition of success that could have come from numerous drivers. It could be the desire to leave a legacy, the need for financial security, wanting to make an impact on society or just simply because you love what you do.
It is important to ensure that this purpose aligns with your business goals and objectives. I have seen it on many occasions when I go into a deep coaching session with my clients that the business they are working in no longer has the substance of a pathway to their big picture. This big reveal can lead to devastation and a feeling of worthlessness. The only outcome for a high achiever to consider is recalibration. We achieve this through:
- Identifying an inspiring and energising dream goal that keeps motivation and desire high
- A clear target of the end result, concrete definition of what you are aiming to achieve
- Tangible milestones of delivery, performance goals
- Actions that need to be undertaken to reach those performance goals that are under your control
When your business and personal purpose aligns you are able to give everything of yourself - energy, passion, belief in the future- into that one goal which drives success for everyone involved. Without alignment it can lead to stress on both sides with feelings of being trapped or potentially even worse feeling helpless. This type of performance framework links a clear vision and reason for why you do what you do (purpose) into a framework of structures, roles, systems and processes that are calibrated to deliver.
This is also where purpose is considered alongside culture and values. "Purpose Inspires, Values Guide, Habits Define."
Some people confuse the ideas of purpose, values and culture. They are three similar but distinct concepts.
Purpose is about the direction your company wants to go, while values serve as a roadmap that will get you there. Habits, on the other hand, are the regular repeatable actions that happen with absolute consistency and lead to predictable outcomes.
Fractures can still remain between a founder with a clear purpose and how this is leveraged through the organisation. We know organisations with a clear purpose are statistically likely to grow over 10% each year. In our scale-up stage we are looking at revenue or people growth of 20% so it is a marginal gain worth careful attention.
A sense of purpose should be at the centre of a company's strategy. It defines where the company wants to go and why it exists. It's how you connect with your audience, be authentic as a business owner, follow your passion and avoid taking risks that might put you in an uncomfortable space.
Do companies with a strong purpose perform better?
58% who have a clearly articulated business purpose are growing at 10% plus . Companies with a purpose are able to transform and innovate better.
What do scale-up companies with a strong purpose have that others don’t?
- Linear direction, without distraction or friction. Velocity in moving progressively to a fixed target
- A strong leadership voice- passion behind the proposition and the culture that is being created
- Provides early stage employees with meaning in their work which is then translated into higher levels of motivation and commitment than just focusing on financial goals alone
- Unique differentiation and more powerful branding- a promise to customers which creates high levels of loyalty and grows lifetime customer value
How does your approach to purpose rank?
The first step in understanding the purpose potential of a company is to understand what it does now so that you can make sure it's not working against your desired result .
Most entrepreneurs start a business with an inkling of the brand they wish to build, even if it only exists in their head and extends no further than a name and set of personal beliefs. These early stage businesses mean most to those that feel a sense of ownership over it. These individuals can more easily translate this into an organisational purpose and clear vision, with greater intention and propensity for action.
There is a significant gap between the belief that purpose should be integrated into an organization and their ability to actually do so.
As they continue to grow and scale it becomes less straightforward to articulate what you do and what you stand for to an increasing number of customers and employees. A compelling and consistent message is a good start.
Purpose in the context of accelerated scaling
Purpose becomes even more important as scale-ups grow. Real acceleration will come through investment and M&A. Scale-ups who see the best growth will typically receive over £1 Million of investor money, and actively seek the opportunity to make acquisitions.
Gaps in your vision to grow organically will quickly become apparent when looking at the base economics of the business; customer volumes, average spend per customer, cost of customer acquisition retention, marginal costs, fixed overheads and lifetime customer value. As you scale these units there will be a time they just do not add up. This is where other options need to be considered such as scaling through investment and M&A bringing more stakeholders into the equation.
The recent view from investment firms on the subject of purpose is that it is not only a driver of employee satisfaction and retention, but also an intangible asset to be leveraged in the valuation of the organisation. As we have heard, companies with a clearly defined and communicated purpose that can be evidenced in the application of branding, communications, processes and policies are more likely to grow at a faster rate than those that don't. Purpose is an important factor in the type of acquisition you will consider too. What size, shape, stage, structure and sector of business serves your vision. Getting this right can reduce your timeline to achievement aims significantly- growing company value exponentially.
There are other factors today that are as important to investors as profit and growth. ESG investment is on the rise for this reason. ESG and impact investment have gained traction as investors want to see more than just a strong financial return. ESG investing is about influencing positive changes in society by being a better investor, not just a better profit seeker.
A founder who wants to build a business because they are making a difference to the world is more likely to be successful than one who wants status and money. Harnessing this purpose will create growth stimulating synergies with the employees, customers and partners who are all passionate about the same cause.
According to Deloitte, “Young workers are eager for business leaders to be proactive about making a positive impact in society—and to be responsive to employees’ needs.” Among their top goals: Making a positive impact on society and the environment, creating innovative products, ideas and services, job creation and improving people’s lives.
Research by McKinsey found that companies with a social or environmental purpose are 60% more likely to have an above-average profitability. The top three drivers of performance within these companies is Purpose; Strategy and Leadership. They also found that people who work for these organizations where they feel passionate about achieved these benefits: 87% higher job satisfaction, 60% more likely to recommend their company as a good place to work and 14 points higher in levels of engagement.
Corporate Enterprise - The State of Purpose
In an EY article on purpose in business they state:
“Despite its many successes, the corporation itself is in a state of crisis, struggling to get beyond ways of thinking and acting that seem increasingly out of sync with the times.”
What do modern corporate organisations gain from investing time and resources into purpose initiatives? It is clear that in these times purpose has become more than just a vision and an identity and it is part of a much deeper analysis into the development of an organisation. Including preferences and values of the latest generation, digital change, the increased risk of disruption from alternative business models.
The time has come to take deep reflection on corporate identity—what you really stand for—which may well lead to a change in strategy. The reflection, investigation, debate, and action planning in the business core. Here are some suggestions on where the reflection should centre.
Strategic clarity delivered through the organisation speaking its true value, ensuring that structure, systems, and resourcing equip employees to perform at high levels.
Uniquely meeting customer needs. Businesses succeed and grow when purpose remains fresh and when connected to their employees’ work. Bland statements that are overly corporate lack meaning and cut-through to value. How is the stated purpose relevant to customers who buy products or services? Is it clear whose lives or businesses we are improving in some way, large or small?
Innovation eliminates short term thinking. With a clear vision it becomes easier to see the problems and solve them with creativity. This follows the factors that lead to successful ideation and implementation such as sensitivity to the market, dissatisfaction with the status quo, persistence, willingness to take risks, a focus on shared goals, trust and cohesion that facilitate the free flow of ideas. Purpose, I will argue, strengthens all of these.
Transformation; amid a number of projects competing for priority purpose provides the balance, guidance, coordination and energy. The energy provides an emotional fuel for greater commitment
Human Instincts; being part of something bigger than ourselves, feeling we have a role in achieving a bigger goal . Integration of cross border teams to achieve one vision.
Better partnerships; how we select and collaborate with suppliers, relationships that have less friction, as with teams a shared goal collectively harnesses creativity, commitment, trust and rapport. Delivery of outcomes becomes more important than profit margins or inflexible agreements.
Purpose is the driver of a company's existence, it is what keeps employees motivated and engaged. It is how we identify with our work and project ourselves to others. Key principles to remember for our scale up community are:
- Start-up and Scale-up business founders must make sure that purpose starts with their own pathway and dreams or they can feel overwhelmed and at risk of poor mental health
- Articulating purpose clearly will enhance how the market understands your proposition and brand promise
- A performance framework starts with purpose. We build back from the desires and vision, into the defined goals and activities that managers and employees feel our necessary to deliver the outcomes the business has defined as targets.
- Articulating and defining purpose will drive the creation of culture, values and habits
- A purpose that is understood and applied through the organisation is a predictable driver of growth
- Purpose is strengthened when there is a feeling of a bigger mission to make the world a better place
- You never stop reassessing your business plan against your own purpose and the areas where growth is disproportionately impacted by a lack thereof.