South Africa

The power of purpose to create value

The power of purpose to create value
Chief Executive Officer
Adcorp Group
6 mins

As Adcorp’s CEO, I believe that my single most important job is to connect our teams to our company’s purpose. This is how we build and maintain a strong culture.

While conducting research for their book, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, Raj Sisodia, David Wolfe and Jagdish Sheth found that companies that operate with a clear and driving sense of purpose beyond the goal of just making money, outperform the S&P500 by a factor of 14. 

In a study published for Harvard Business School, Gartenberg et all found that businesses that have a high purpose and clarity have systematically higher future accounting and stock market performance, even after controlling for current performance.

In a 2019 article, Purpose is Everything, Deloitte confirmed that authentic, purpose-driven companies witness higher market share gains and grow three times faster on average than their competitors – all while achieving higher workforce satisfaction and customer satisfaction. 

There is an immense body of research that links business outperformance to having and living an authentic purpose. But how does this link take place? Authentic purpose and ensuring the company lives it is found in the link between a company’s purpose and strategy, so much so that I believe it should be at the very centre of a business’s strategy – after all, without purpose, it’s hard to see how a strategy can make sense. 

Understanding purpose

The definition for purpose that I use simply states that purpose is an intention or aim. It is a reason for doing something or for allowing something to happen. There are similar definitions everywhere, but at their core, purpose is about intention, action and outcome. 

Most of us place purpose at the centre of everything we do and we don’t even think about it. For example, we attended school, college or university with the intention of getting a better education. The action we took was attending classes, handing in assignments and writing exams. The outcome was a qualification, certificate or further advancements in knowledge.

Intention, action, outcome: we take having a personal purpose as a given. But what about a company’s purpose? For some organisations this is easy to see. A hospital exists to save lives. A police force exists to protect citizens. But what about other businesses?

Purpose in the context of a company is its primary reason for being and its impact on the world. It’s the difference that it wants to make. This requires the ability to ascribe meaning to the work that you do. If you are a company, you have to ask: what is our reason for existing? What value do we provide our customers? Why is our firm uniquely capable of providing it? What difference do we want to make and what legacy do we want to leave?

The concept of trying to think critically about the purpose of an organisation is not a new one, but it has gained a lot more relevance over the last decade, particularly as the definition of purpose that was popularised in the 1970s has increasingly lost relevancy.

Profit and purpose

Milton Friedman was an American economist and statistician who believed that the sole purpose of a business was to generate profits for its shareholders. This ideal came to dominate the business world for decades. For a long time, you could ask a manager what the purpose of their organization was, and they would all same the same thing, regardless of sector or industry: We exist to maximise shareholder value. 

The late Peter Drucker – one of my favourite management theorists – had, I believe, a much better definition. According to Drucker, there is only one valid purpose for a business, and that is to create a customer.

In his book, The Practice of Management, he states: “The customer is the foundation of the business and keeps it in existence. He alone gives employment. To supply the wants and needs of a consumer, society entrusts wealth producing resources to the business enterprise.”

This is my preferred general definition for an organisation – it exists because it has a customer – but it is not a new definition. Drucker wrote The Practice of Management in 1954. So, what has changed since Friedman’s theory gained such popularity?

The financial crisis of 2007/8 brought into sharp focus the one-dimensional view of business that Friedman’s model supported. Millions of people lost their jobs and ordinary people faced real and long-lasting damage to their wellbeing. People began to see that focusing on profit maximisation as the single metric for business success had been hugely destructive to the many and only enriched the few. 

The demand grew for companies to be more responsible, and it soon became clear that focusing only on profits without regard for the broader impact of corporate actions was no longer good enough. 

In 2019, Larry Fink, the CEO and founder of BlackRock, a firm with USD 9.5 trillion in assets under management, sent a letter to the CEOs of companies that BlackRock invests in outlining his view on purpose and profit. This is what he had to say:

“Every company needs a framework to navigate this difficult landscape, and that it must begin with a clear embodiment of your company’s purpose in your business model and corporate strategy. Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them.

“Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked. Profits are essential if a company is to effectively serve all of its stakeholders over time – not only shareholders, but also employees, customers, and communities. Similarly, when a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability. Purpose unifies management, employees, and communities. It drives ethical behavior and creates an essential check on actions that go against the best interests of stakeholders. Purpose guides culture, provides a framework for consistent decision-making, and, ultimately, helps sustain long-term financial returns for the shareholders of your company.”

Living a purpose

I have had the privilege to teach strategy at business schools in both South Africa and India. A strategy is a plan. It takes you from point A to point B. We spend far too much time making strategy sound complex and important when in fact it’s just a roadmap to get you to a destination. If you don’t know why you are on the road in the first place, how can you calculate where you want to go? 

There’s an old saying that goes, ‘If you don’t know where you want to go, any road will take you there.’ Purpose must inform your strategy, or your business will never know where it’s going, and nor will your people. 

At Adcorp, we relaunched our purpose on the 22nd of September 2021. We always had a purpose, but we didn’t make it highly visible to our clients, staff or investors. We never spoke about it as central to what we do. It wasn’t deep in our DNA.

To change this, I began by asking our exco and business unit leaders to share what they believed our purpose was and what it should be. The answers were incredibly consistent across the organisation, and the most powerful themes that emerged were all around people, connecting and contributing. It was clear that our leaders and employees believed that we were enabling a better future for our clients, employees, investors and for society at large. We just needed to bring these ideas front and centre so that we always have a clear roadmap to follow.

This is our purpose: Adcorp enables agile, focused and skilled workforces for the future.

I believe this decisively answers the question as to why Adcorp is here, the difference we make and the legacy we leave. But beyond that, purpose guides our choices. It defines which clients we will and won’t accept to work with, the things we will and won’t tolerate, and the contributions we seek to make.

It has also shaped and evolved Adcorp’s tagline, which is Connecting Human Potential. 

Because our tagline is aligned to our purpose, this is not just a marketing exercise. Instead, it gives every single employee across the organisation a focal point to base their decisions on. It also makes it the responsibility of every one of us to ensure our purpose is a living and breathing thing. We must embed purpose in how we manage and measure success, recruit people and operate. Every employee should be asking: what role do I play? What contribution do I make? How can I link my day-to-day living with purpose?

To paraphrase Larry Fink again: When a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drives long-term profitability.

This is our north star. This is how we show up as Adcorp.

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Chief Executive Officer
Adcorp Group

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