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3 business benefits of establishing an organizational purpose

3 business benefits of establishing an organizational purpose

Purpose has become a popular discussion point in HR circles as of late, and for good reason – a well-defined and compelling purpose can bring about long-lasting, positive change to your organization and the people who engage with it.

In its simplest form, purpose is about identifying the core reason why your organization exists – why you do what you do - then finding an effective way of articulating and demonstrating that message to the world.

But unlike social responsibility, which in most cases is about checking a few boxes and then continuing with business as usual, an organization’s purpose is multifaceted. It incorporates and builds from all aspects of your organization, from corporate elements such as strategy and structure, through to personal factors such as individual fulfillment and employee development.

And while purpose comes with a number of enticing benefits, both from a corporate and personal perspective, here are some of the more compelling business benefits that can come alongside embedding a purpose:

Loyal and long-lasting customers.

At a time when customer review sites such as Yelp and TripAdvisor have become commonplace, people have access to more information about your organization than ever before – whether it be positive or negative.

Customers are far more likely to prefer organizations that have similar views or beliefs as their own, particularly younger consumers. According to the University of Southern California, 87 percent of millennials base their buying decisions on the positive social efforts of a company.

Another study by Gallup revealed that customers who are aligned with a brand promise give that brand twice as much share of their wallet (47 percent) as customers who aren't aligned with that same brand (23 percent).

To form a genuine connection with customers, organizations that can clearly define and express their purpose in a meaningful way will have the upper hand. Interestingly, 87 percent of customers said they want to establish a “meaningful relationship” with brands, according to Edelman’s Brandshare report, meaning the opportunity to form long-lasting customer relationships is ripe for the taking.

But actions speak louder than words. Organizations also need to demonstrate how they are making a difference in a meaningful way. For instance, Starbucks’ purpose is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” The coffee company backs up this statement by donating all unsold food in its US stores to food banks – a practical, emotional and relevant way to make a difference.

Attract and retain passionate people.

When people look for a new job, a number of factors come into the equation; work-life balance, salary and benefits, diversity, to name just a few. But a recent LinkedIn survey of 26,000 respondents revealed purpose is the number one factor people look at during their job search.

And employees who are more aligned with their company's identity perform higher on key business performance metrics than employees who are less aligned, according to Gallup.

Purpose is also useful for retaining key talent. When the purpose of an organization and its employees are aligned, employee satisfaction is significantly higher – that’s according to 89 percent of business executives interviewed by EY.

And these employees are also more likely to stick around for longer. Research from Deloitte found that the average millennial tenure at a company sits at two years, but that figure jumps to five when there is alignment with purpose.

One way to retain talent is by helping employees understand their own personal purpose, and then determining how their purpose fits within the organization as a whole. Unilever has incorporated purpose and social good into its employees’ performance reviews. They measure their employees’ impact on people and the planet as well as their financial performance.

Greater business performance.

With the support of loyal customers and engaged employees, it should come as no surprise that purpose-driven organizations are far more likely to outperform the competition.

In Corporate Culture and Performance, authors John Kotter and James Heskett measured stock prices over a decade-long period and found purposeful companies outperform their counterparts by a factor of 12.

And in another study, organizations that were dubbed best in class at embedding and exploiting purpose experienced promising results: 64 percent saw 10 percent-30 percent revenue growth over three years, 81 percent received top scores in customer satisfaction, and 67 percent were awarded top scores in employee satisfaction.

The majority of business leaders recognize the competitive advantage of purpose – a recent study by PwC found 79 percent of business leaders agreed that purpose is central to a business’s success.

So, as we can see, organizations with a purpose clearly have a competitive edge, but creating and embedding an organizational purpose can be an extremely complex process.

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