For decades, maximising shareholder value has been the raison d’etre of commercially driven organisations, and a ‘profits above all’ approach was critical to fulfilling this mandate.
Increasingly, though, companies are looking beyond quarter-by-quarter results for something more meaningful.
For many, ‘purpose’ has become the key element that defines the rationale for a company’s existence beyond money – which, in turn, is helping to drive innovation, performance and change resilience.
Unlike Corporate Social Responsibility (CSR), which is historically how businesses have shown their concern for and interest in society, but is all too often a box-ticking exercise, a clearly articulated purpose demonstrates why a company serves society and why it strives to enhance the communities and ecosystems in which it operates.
With an increased focus on environmental, social and governance (ESG) factors from both consumers and investors, a business’ stakeholder set now extends far beyond solely its predominantly profit-focused shareholders.
Reason for being
A successful business needs a North Star on which to focus as it progresses and plans for the future, so it never loses sight of why it exists and does what it does.
Fundamentally different to a goal, which defines what a business is trying to achieve, a purpose speaks to the heart of the business’ reason for being.
A purpose also has great potential to inspire belief, motivating employees to get up and give their best every day, because they know why it is important and understand that they can make a meaningful difference far beyond simply business operations.
According to a report by global consulting firm Deloitte, entitled ‘Purpose is Everything’, purpose- driven companies have higher productivity and growth rates, along with a more engaged workforce.
The research also highlights that purpose-led companies report significantly higher levels of innovation and workforce retention than their competitors, at 30 per cent and 40 per cent respectively.
Moreover, purpose over profits can improve profitability.
A McKinsey report, titled ‘Profits with Purpose’, demonstrates that purposeful companies reap rewards in terms of an improved bottom line, with such companies outperforming the stock market by 42 per cent.
While many companies are in the early stages of articulating their why, Al Ghurair Investment has remained steadfast in its reason for being for more than six decades: ‘facilitating meaningful and sustainable change for all’ – or, to speak to our newly articulated purpose statement: ‘Enhancing Life’.
Since the business was founded, before the UAE was even formed, it has witnessed – and been part of – enormous social and economic changes. Yet our purpose has never altered, which has served us well.
Our commitment to enhancing life is evident from the industry sectors we have chosen to invest and operate in, such as food, education, energy, transportation, construction and properties – each serving a role in the advancement of society.
Having a solid sense of purpose has been critical to our business’ success. With this ‘North Star’ and a genuine belief in why we are doing what we do, we have brought meaning to our work, embedded a common direction and vision, and built unity across our workforce.
As we enter an era where issues such as climate change, sustainability, income inequality, and the implications of increased digitalisation and artificial intelligence will dominate boardroom conversations, aligning stakeholders to the company’s fundamental purpose will support agreement as to how to address these challenging topics.
There are signs that more firms are putting purpose first. According to McKinsey’s Quarterly review, only 7 per cent of Fortune 500 CEOs now believe their companies should focus on profit, without considering social goals. This view is supported by Deloitte’s Millennial Survey, which found that 79 per cent of ‘millennials’ – the future generation of leaders – consider a firm’s purpose, and its philosophies towards social and environmental factors, when deciding where to work.
With purposeful companies demonstrating the multi-faceted benefits of this approach, which includes increased employee engagement, better brand equity and customer loyalty, alongside more demonstrable progress towards innovation and transformational change, the need to adopt a purpose-led methodology is evident.
An EY report found that companies with a well-articulated purpose outperformed the S&P 500 index by a factor of 14, demonstrating that the upside for a business with a clear sense of purpose goes beyond social altruism and corporate moral responsibilities. Being purpose led has a tangible impact on business viability and sustainability.
Rethinking purpose is not only a worthwhile consideration – it is an essential one. Purpose is already immeasurably beneficial for the synergistic goals of strategic clarity, employee motivation, ‘top talent’ acquisition, consumer loyalty – and this will only increase in future, as having a clear purpose becomes an expectation, not a ‘nice to have’.
More from MEED's leadership library
> UK-Gulf relations ripe for green tech collaboration
Simon Penney, Her Majesty’s Trade Commissioner for the Middle East
> Levelling the financial playing field
Anouar Bourakkadi Idrissi, CEO of Edenred UAE
> The GCC's green hydrogen opportunity
Ulrich Koegler and James Thomas, partners, and Susie Almasi, executive advisor, at Strategy& Middle East
> The myth of the cashless economy
Samer Srouji, director at Tanmia Capital
You might also like...
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.