Everyone knows the hallmarks of a great company right?
Books, articles, blogs & famous quotes all highlight what is required. There is a multi-billion dollar industry that advises us how successful companies innovate faster, collaborate more, use agile techniques, have a customer first focus, utilise new technologies, allow autonomous decision making & promote subservient leadership.
What they neglect to mention is that the real hallmark of a great company is simply that it makes better decisions more often than its competitors.
In this article I argue that purposeful companies make better decisions more often and that by extension they are more likely to become great companies. Conversely, companies that focus on strategy, culture and organisational design before purpose are quite literally putting the cart before the horse and will make poorer decisions.
So let’s start by defining what exactly a purposeful company is.
“A purposeful organisation is an organisation whose primary or substantive objective is to benefit a section of society in some way.”
Examples include:
Tesla (accelerating the advent of sustainable transport)
Google (organising the world’s information and making it universally accessible and useful)
Discovery (making people healthier and enhancing and protecting their lives)
Each of these companies have outperformed their peers by designing products and services that support their humanitarian purpose.
It should not be a surprise that their profit-motivated competition who focused on delivering more efficient cars, advertising and insurance have been left well behind.
Each of these purpose driven companies ultimately succeeded as they made better decisions, more often than their competitors. But why?
Firstly, it is easier to employ amazing people.
Steve Jobs was able to employ John Scully by asking “do you want to sell sugar water for the rest of your life or do you want to come with me and change the world“. The point here is not whether this was a good or bad hire for Apple, but rather that when you offer the chance to be part of something more akin to a crusade, you are able to hire better staff, for less cost, in a quicker time period and they are more likely to stay longer and be more productive as they are emotionally, rather than financially, invested.
Secondly, aligning your investors purpose to your own allows you to make bolder decisions.
Jeff Bezos has been clear with his investors from day 1 that “Amazon may make decisions and weigh trade-offs differently than some companies“. Being transparent with his shareholders about the company’s purpose, has meant he has been able to take some bold decisions such as building AWS and acquiring whole foods. CVS health is another great example. Their decision to stop selling cigarettes in their stores was taken knowing they would lose ~$2bill of revenue. Taking this type of exit decision is far easier when your investors understand that it aligns to the company purpose of ‘helping people on their path to better health’!
Thirdly, when customers support your purpose, they become your advocates and help you make better decisions.
Salesforce is the market leader for client relationship management software and is Gartner’s favourite Platform and Software as a Service provider. Salesforce’s purpose is to ‘help their customers succeed‘ and it’s therefore not surprising that they were the first company to create a platform where their customers can build their own applications…for free!! The net result? A customer base that are evangelical in their support levels for Salesforce (link).
Fourthly, when your suppliers support you, they also become your advocates and help you make better decisions.
Aldi, the no frills supermarket aims to ‘provide value and quality to its customers by being fair and efficient in all it does’. Supermarkets have taken a fair amount of criticism over the years for squeezing their suppliers and delaying payment as they fight to offer the cheapest consumer prices. Suppliers prefer Aldi though, as invoices are paid quicker and the overall process is simpler. Further, Aldi do not charge for shelf space and do not ask their suppliers to support product discount campaigns. Despite not squeezing their suppliers Aldi are still recognised as one of the best supermarkets for cheap quality produce! Whole Foods ‘America’s healthiest grocery store goes a step further by offering local farmers and artisans that align to its purpose direct support. This includes $14mill of direct lending to date!
At the end of the day, an organisation’s success is solely dependant on its people’s ability to take better decisions. The cumulative impact of the millions of decisions a company’s staff take is what makes the difference. It does not matter whether you consider the decision a call centre operator takes when he decides to show empathy to the irate customer, the employee who decides to stay despite being able to earn more elsewhere or the board decision to sell a subsidiary…decisions count. So it makes sense to design an organisation where you encourage everyone to take better decisions?
The evidence suggests purpose driven organisation outperform their profit-driven peers and therefore by extension they must be making better decisions more often. The reason for this is I think simple. Binding everyone around a purpose that creates emotional resonance makes decision making easier.
This intuitively makes sense. When leaders and their teams emotionally support a cause, they are more likely to take decisions to act, to give their people more autonomy and latitude to make decisions, to make faster decisions and to support their people when they make poor decisions.
The net result? A company that innovates faster, collaborates more, uses agile techniques, has a customer first focus, utilises new technologies, allow autonomous decision making & promote subservient leadership!!
So before you start to splash out more money to fund the multi-billion dollar advisory industry, that wants to load your cart with strategy, culture and processes, take a step back and make sure you have a horse called purpose in place first.
With purpose, comes better decisions and the strategy, culture and profits will look after themselves.
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