3 Reasons Why a Strong Purpose Is a Good Business Idea What does the future of entrepreneurship look like? To build a future-proof business, the key lies in your business purpose.
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Most entrepreneurs enter that space because they want to create a positive impact on the world. They have a purpose and a mission. They see a problem; they find a way to solve it. The reasons why we do the things that we do are everything.
However, it can be all too easy to lose sight of this as we go further down the road. As investors demand returns, or as revenue demands become more pressing. As we start to work longer hours, and as our own ego starts to get in the way.
However, purpose and profit are delicately intertwined. Perhaps, you can have one without the other, but as we move forward into a more millennial- and Generation Z-led workforce (those born between 1983 and 2003), the case for having both becomes far more compelling. And yes, profitable.
Related Link: 5 Ways Entrepreneurs Can Combine Purpose and Profit
1. It acts as a North Star
When you are clear on your own and your business's purpose and what you stand for (and don't stand for), it's easier to make decisions and assess opportunities. This could range from the employees that you bring into your team, to the partners you collaborate with, to the clients that you are trying to attract.
As a startup or small business, you cannot afford to explore every opportunity that presents itself and constantly after the shiny and new. Focusing your efforts on the right activities translates to streamlined costs and produces better results that are more aligned with the direction of the company. Obviously you might not always get it right, but you will have a focus for your decision-making. Then, it's about trial and error to truly be innovative.
Having that compass to guide you towards suitable opportunities you want to explore means that you have liberty to experiment, and through doing so find out what "dead avenues" to cut quickly and what core areas to focus on. Focusing on a few core areas impacts the bottom line.
Related Link: How 80% of Purpose-Led Brands Out-Perform the Market
2. More motivated employees
What employee is really drawn in and emotionally engaged by spreadsheets, data and KPIs? And what about money? Time and time again over the last decade, we see research that suggests money is not the main motivator for many people – in a meta analysis study by Tim Judge, "The authors reviewed 120 years of research to synthesize the findings from 92 quantitative studies. The combined dataset included over 15,000 individuals and 115 correlation coefficients.
The results indicate that the association between salary and job satisfaction is very weak. The reported correlation (r = .14) indicates that there is less than 2% overlap between pay and job satisfaction levels. Furthermore, the correlation between pay and pay satisfaction was only marginally higher (r = .22 or 4.8% overlap), indicating that people's satisfaction with their salary is mostly independent of their actual salary."
Although some might love data and some might love money, what really engages and motivates people is a story, a mission and a purpose. Purpose trumps motivation.
Having a strong company purpose — and clearly communicating that to your employees — creates a shared philosophy and culture. Everyone has a part to play in that culture and makes an impact in their individual and unique way. We become an impactful part of something bigger than ourselves.
Imperative, a U.S. consultancy firm, surveyed 2,000 LinkedIn employees and found 41 percent could be categorized as "purpose-oriented." Why should LinkedIn care? "According to Imperative's research, purpose-oriented employees are 54 percent more likely to stay at a company for five-plus years and 30 percent more likely to be high performers."
Low staff turnover and productive employees equals bottom line impact.
Related link: Communicating Purpose Can Create a Boom in Business
3. Customers love a purposeful company
Think of Airbnb, Nike or Apple. What do all of these companies share? Apart from being hugely successful, they all share a strong purpose.
They all have a narrative that is used to great effect in their marketing and branding. They all have created an emotional connection with their audience.
In these times of crisis, people instinctively want to be a part of companies that promise to change things for the better and have a positive impact on them and the world around them, but the reality is that many companies are falling short. In the Deloitte Millennial Survey 2018, 40 percent of respondents believed that the goal of businesses should be to "improve society." In the Deloitte Millennial Survey 2020, barely half of millennials felt that business was a force for good.
That, of course, means that there is a real opportunity for businesses to appeal to this younger, purpose-driven generation by actively showing their commitment to purpose. Doing so gives companies who do it well a competitive edge. Data actually shows that customers are more loyal to purpose-driven brands.
An example of purpose's increasing importance is the B-Corporation, started 14 years ago in the United States. B-corps are companies committed to balancing profit with purpose and considering all stakeholders in the business, including employees and the environment.
According to Reuters, there was a 25 percent increase in the number of businesses applying for B-corp status in 2019. Although companies that classify as B-Corps make up a very small portion of businesses overall, do B-corps represent the wave of the future?
As business owners and entrepreneurs, it's time that we stop seeing purpose as a "soft" concept with no impact on the bottom line and look at the pitfalls of not entrenching a strong purpose within our organizations. Having a purpose by itself is not enough; it needs to be entrenched into the culture and processes of the company. Taking the effort to do this is a long-term play. However, to not do so would be to ignore the signs that this is the direction business is moving.