Redesign Tools To Translate Purpose Into Action In Organizations
Purpose helps define what a company stands for in the context of the impact it has on society and the world at large. Today, companies overwhelmingly believe that they need Purpose to drive a cohesive strategy that addresses corporate profits and the need to be seen as responsible corporate citizens. The race towards Purpose has only accelerated as the world grapples with the multiple Environment, Social & Governance (ESG) issues of pandemic, climate risks, income inequality and racial inequities.
But, what happens after the Purpose has been stated?
Ongoing operations of companies are metrics driven. Whatever cannot be measured, or is not measured, generally gets quickly deprioritized. Without changes at the organizations core, Purpose can be reduced to a PR piece or a high decibel announcement at the investor conference, a 21 st century rehash of the mission and vision statements of yore. Purpose needs to be translated into the organization blueprint and impact the way decisions are regularly taken. This needs rethinking about how the company creates value across stakeholders and how its various departments function.
In the past, several tools have been used to design corporate strategy; but keeping in mind the need to build Purpose into everything, they need a modern context. For instance, Balanced Scorecards (BSC) have been utilized as an effective Strategy Deployment tool in many companies. A BSC has four strategic elements – Financial Performance, Customer Satisfaction, Process Excellence and Organizational Capacity. The logic flows as – a Capable Organization develops Effective Processes that ensure Customer Satisfaction, thereby leading to Financial Success. It then lays out these elements into Critical Success Factors, specific Metrics and finally the Goals and their Tracking. While the final Balanced Scorecard is very useful tool, the process of its implementation within the organization is equally (and sometime, even more) important. It helps build top level alignment so that the leaders are in sync (a herculean task in many companies!), brings clarity down the hierarchy and ensures transparency in measuring performance. But, the Balanced Scorecard needs a rejig to include external impacts that an organization may have, such as pollution, human rights and more.
The three key constituents that drive the actions of companies are investors, customers and employees. Updates to the Balanced Scorecard should address these, as well as two other key constituents - broader community as well as suppliers. With this intent, there are some metrics that could be considered for inclusion into the BSC of the companies to ensure that companies “walk the talk” when it comes to these broader, Purpose driven, objectives:
Capable Organization - consider metrics that track Thought Diversity. Often, companies have objectives related to Gender or Race based targets for recruitment. What would be also useful would be to ensure a broad base of experiences/backgrounds - whether they be racial, gender, cultural or nationality-based. Breadth of thought has been proven to drive increased innovation, better risk management and improved operational efficiencies so it would be a win-win for the company as well as the community. Compensation Equality is increasingly being viewed as a basic right of all employees - ensuring that gender/race don’t figure into the way employees are compensated should be overtly visible to all in the organization and inclusion of appropriate metrics in the balanced scorecard would certainly achieve that objective.
Efficient Processes - Environmental impact is an area where many companies have clearly defined goals. However, they seem to be generally the responsibility of the “Sustainability Group” and not cascaded deep into the organization. Including metrics such as total carbon footprint, share of energy through renewable sources, proximity between production and consumption etc. could be some of the metrics that could be used.
Customer Delight - include metrics that focus on the broader “customers” for the company – especially the community in which the company operates. These could include the number/type of interactions with broader community, specific community programs supported, number of information releases on non-critical issues etc.
Financial Success - This is the area where it would serve the companies better if they prioritised leading metrics rather than lagging indicators. Leading metrics are generally closer to the initiatives and easier for the team members to comprehend and align with. In this context, metrics such as % of NS (or EBIT) devoted to ESG initiatives or $ spend invested behind Sustainable Development Goals could be utilized.
The author would like to recognise the inputs from Murali Sivaraman, Kenneth Ng and Namrata Rana towards this article.
