Nous clients are increasingly interested in and challenged by the pursuit of purpose with profit. In the past, the two have been perceived as quite distinct objectives, occasionally even in conflict. Purpose was seen as the domain of not-for-profit organisations (which aimed to achieve something positive for others), while profit was the objective of businesses (which aimed to benefit shareholders).
But as big-name for-profit organisations like Tesla, Google and Wholefoods have started to reap the benefits of purpose-led strategy and initiatives, many leaders are asking themselves how bringing purpose to the fore could positively impact the performance of their organisation.
Nous Group was founded with purpose at the core of its reasons for being; positive influence, intellectual stimulation, energy and growth, care and connection, and revenue and profit. This foundation has remained strong as the business has grown over the past 19 years, to now include more than 270 people, across 6 locations.
I recently interviewed Nous’ Managing Director Tim Orton, to discuss how the purpose and performance balance plays out at Nous, and his observations from working with a broad range of clients on the purpose with performance challenge.
PC: How do you lead a for-profit business that is also for-purpose?
TO: Successfully balancing purpose and performance is a complex challenge. There is no one-size-fits-all approach, as different organisations’ contexts differ widely. At Nous, we’re lucky, because our purpose has been part of us from the start. The challenge is significantly greater for organisations trying to shift long‑held paradigms to bring purpose to the fore.
There are four lenses through which organisations should consider purpose, if performance is of equal priority. In my experience, these are worthwhile prompts for leaders regardless of whether the exercise is about positioning or re-positioning purpose in an organisation.
- Value over profit – Unlike profit, value is a long-term idea. Being for-purpose might well mean less profit now, because of the need to make investments that contribute to the generation of increased long-term value. Shifting your view of performance from profit to value is necessary to prioritise purpose.
- Timeline – In considering value over profit, truly for-purpose organisations are courageous in their timeframes for success. Five to ten-year horizons provide a better indication of value (or performance) than quarterly or yearly profit measures.
- Resilience – Being for-purpose means having a focus on people or outcomes beyond profit. Intrinsically, this provides a resilience or risk absorption that is not afforded to organisations that are solely profit‑driven. A focus on long-term value is therefore a buffer to the inevitable vicissitudes that may hinder short-term performance.
- ‘Reasons for being’ over ‘values’ – How organisational drivers are defined has a direct impact on the way they are perceived and applied. ‘Values’ are seen as the icing on the cake, which can be spread more thinly or sacrificed altogether for the sake of profit. ‘Reasons for being’ are the cake – essential to why the organisation exists and how decisions are made at every level.
PC: What are the implications of being purpose-driven for organisations with shareholders?
TO: The idea of value over profit makes for-purpose organisations a different proposition for shareholders. Most shareholders are betters not investors – meaning they don’t see themselves as owners but are seeking ROI from the eventual sale of their shares. Intrinsically, investors like this may not have the long‑term interests of company at heart and may therefore not be the right fit for a for-purpose investment.
Externally, for-purpose organisations need to be clear in their messaging to market so that people looking to invest understand the long-term value proposition. Internally, they need to explicitly define the primacy of outcomes over short-term shareholder profit so that the delivering on purpose remains the priority.
An important founding principle of Nous is that you can’t have shares in the organisation if you don’t work here. This has aligned the interests of capital and labour from the outset.
PC: How do organisations go from simply having purpose, to living and breathing it?
TO: Having a well-articulated set of reasons for being has been critical to Nous’ success in embedding purpose alongside performance. Very early in the piece, we undertook an exercise (involving the whole organisation) that decided what we wanted to achieve collectively and what would make working at Nous a high point in our individual professional lives. We found that what matters to us is our effect on society, the character of our company, and achieving financial stability – and so became our reasons for being.
With a relatively small number of employees – about 30 at the time of the exercise – this was reasonably simple for Nous. Larger, more established organisations need to think more creatively about how to define reasons for being that have depth, and avoid reducing the initiative to a simple values exercise. Engaging customers, staff and institutional shareholders in a 360-style process would provide a more meaningful indication of what the future orientation of a large organisation should be – or, why the organisation exists.
Once reasons for being are in place, it’s critical that they are referenced in decision-making at every level. The leadership team obviously needs to be seen to manifest the purpose, but the purpose must also make sense in the operating unit. For Nous the core operating unit is the project. If people make good decisions at the project level, with the reasons for being clearly in mind, then the company and our purpose are reasonably safe. If all of our people recognise the need to test their decisions against our reasons for being, we overcome the issue of scale.
PC: What’s your advice for organisations looking to find or rediscover their purpose?
TO: Unfortunately, many organisations find their purpose, or recognise the need to, through trauma. Something goes wrong and the organisation is forced to look inwardly and question why it really exists. Often at the core of this is a disjuncture between the way the organisation sees the world and the way society sees it and its function.
This context can make it difficult to establish your purpose, and even more difficult to get people on board with, and accountable for it. Nous’ experience in purpose, and our work with clients in change and transformation more broadly, offers some valuable lessons:
- People will be sceptical at first, so over-deliver in the early stages and make sure your objective is clear at every level of your organisation
- Once you have your reasons for being articulated, constantly re-tell the story of them and why they are important. Make sure that they manifest at the operating unit level, and thus resonate in what people do every day
- Don’t tolerate instances or individuals (even if they’re superstars) that conflict with or disregard your reasons for being. People are sensitised to inconsistencies around what you claim to be most important, so wear the short-term pain to realise long-term success.
Most importantly, continually remind your people of the upside of getting purpose right and the potential societal value that the organisation can deliver. This should be the driving force behind any genuine pursuit of purpose.
The pursuit of purpose in for-profit businesses can be a courageous endeavour, particularly for those who have not always had it. Where purpose-led businesses or leaders stray from their purpose, the backlash is severe as expectations are naturally higher. It can be hard to convince employees (who are used to transformations and changing direction with each CEO) that purpose is real and enduring; and there are likely to be some painful decisions and trade-offs that need to be made along the way.
The high stakes and distinct nature of the challenge means that many businesses progress their purpose journey somewhat tentatively and very differently from their familiar transformation and change initiatives. However, among the ‘purpose pioneers’ we’ve spoken to – organisations who are more advanced on their purpose/profit journey – there is a sense of breaking new ground. These organisations are wary of “playbooks” but are keen to understand the anatomy of successes in order to deliver on their purpose promise. In this context, Nous is happy to share its own experiences and collaborate with those pursuing purpose (with or without profit).
Get in touch for more information on Nous’ expertise.