5 Guiding Principles for Purpose-Driven Leadership

Kiersten Rippeteau | Consultant | Palmer OSG

Recent research tells us that purpose-driven organizations are among the most successful today—and that they are likely the only sustainable organizations of the future. Purpose-driven organizations (PDOs) are those that exist to serve a purpose beyond profit, beyond the shareholder. Purpose in this context serves something greater; a shared, meaningful goal among leadership and employees. A goal that everyone in the organization is aware of, cares about, and is willing to work for.

All sounds well and good, but perhaps a little pie-in-the-sky, right? Here are some numbers that bring organizational purpose back down to earth:

+ Purpose-driven companies outperformed companies that were only financially “great” at a ratio of 3:1 (Sisodia, Wolfe, & Sheth, 2014)

+ 73% of leaders surveyed in an Ernst & Young survey say that purpose will help the company navigate disruption (see full report here)

+ 40% of companies from the same survey report having a purpose beyond serving a singular stakeholder group—in other words, a higher purpose

There are many more numbers in recent works to confirm the trend toward PDOs as the companies of the future. What we don’t fully understand yet is how to lead them. Conventional leadership training and theories don’t equip leaders for the complexity, emotion, and relative autonomy of the masses that inevitably come with PDOs. We have explored much of the current research and thought leadership in this area, and have come up with these five guiding principles for leading them.

Principle 1: Articulate a Higher Purpose

Most change initiatives start with a purpose. Most effective teams start with a defining purpose. It can be done at the organizational level, too.

Don’t simply declare the purpose; discover and serve it. This way, the leader ensures a shared purpose, creating a critical mass who can support it and permeate it further into the organization than could the leader alone.

Know your own purpose. Your own purpose may not be the shared purpose, but if the two are aligned, you are well-equipped to authentically lead the organization.

Use the shared purpose to ensure fit from the very beginning of the employee lifecycle. Use the shared purpose to guide interviewing and hiring practices, performance evaluations, career pathing, development, and so on.

Principle 2: Motivate & Empower the Right People

Purpose-driven leadership, as we’re defining it, operates with the assumption that people are intrinsically motivated. Purpose-driven leadership also assumes that the onus is on the leader to empower motivated employees.

Design goals around the higher purpose. Designing employees’ goals around the higher purpose engages them, further drives the purpose through the organization, and creates accountability to the system, not just to a single manager.

Ensure systems, constructs, and policies are in place that properly empower employees. Managed well and used only when necessary and helpful, systems, constructs, and policies can actually remove the red tape that stops employees from making decisions and serving the organization’s higher purpose.

Principle 3: Simplifying Complex Organizations

Purpose without structure can be very elusive. While organizational complexity is inevitable today, structures do not have to be complicated. Complicated structures create confusion and frustration that will cloud purpose. Complex structures, on the other hand, can be healthy—an effective tool for innovation and agility.

Implement flat organizational structures. Flat structures facilitate easy communications between individuals and groups, and provide easy access to necessary information. Perhaps more importantly, flat organizations almost force themselves into management by goals aligned to the shared higher purpose.

Govern by values, not by rules. With less managerial oversight in a flat organization, the inclination may be to create a list of rules. Rules are cumbersome and unwieldy, though; new situations demand new rules and eventually there are so many rules that holding people accountable to them is nearly impossible anyway. Organizational values, on the other hand, apply to and can guide any situation faced by an employee.

Principle 4: Earning Social Capital

PDOs demand more emotional energy from their people, and while PDOs are among the most effective organizations, they are not immune to stress and hard work. Purpose-driven leaders will inevitably need to cash in some social capital for the stressful times and harder work.

Take time to earn it. As the leader of a PDO, if you have the above elements in place (an articulated purpose, motivated and empowered people, and a simplified organization), you are more likely to have the time to spend getting to know and understand your people.

Ensure other leaders throughout the organization also have the time to do it. Most leaders don’t have time to build social capital with everyone. Talk to your other leaders about the importance of social capital in serving the shared higher purpose. Make sure they have structures and resources in place to allow for the time to earn it.

Principle 5: Sustaining the Organization

Finally, it’s important that we recognize that a PDO needs more than a purpose and motivated employees. The organization needs to be financially viable so employees can trust their livelihood, vendors feel confident in continued business, and customers continue to find value in products or services.

Take the long-view. If you find yourself considering an opportunity misaligned with your purpose (or even if it just doesn’t “feel” right), take the time to discover why you’re considering a tempting yet misaligned opportunity. Jumping on an opportunity that solves a problem temporarily while ignoring misalignment robs your group of the more valuable exercise of realigning for long-term success.

Take time to understand the financial return behind purpose-driven organizations. Authors Sisodia, Wolfe, and Sheth wrote the book Firms of Endearment after researching 72 public and privately-held organizations (both U.S.-based and abroad). The research presented in the book helps leaders understand the importance of the long-view and purpose.

An Exciting Future Awaits

Research and thought leadership tell us that purpose-driven organizations are the organizations of the future. They are the ones who will withstand financial crises; who will outperform their non-purpose-driven competitors. Leaders need to prepare for the new skills and attitudes this will require. As McGregor predicted in his 1975 article, Human Side of Enterprise, “Chang in the direction of Theory Y will be slow, and it will require extensive modification of the attitudes of managements and workers alike.” We believe we are seeing this come to fruition today—and it’s very exciting.