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Imbue the Organization with a Higher Purpose
Many organizations perform below their potential. They are composed of self-interested people playing zero-sum games, pursuing external rewards, engaging in conflicts, and living in alienated relationships. Yet it is possible for those same people to willingly pursue the common good, to value intrinsic rewards, and to live in trust and experience high collaboration. This transformation occurs when a leader helps to imbue the organization with a higher purpose. Yet few executives understand how to do so. In this chapter we explain the barriers that block them from imbuing their organizations with a higher purpose, and we offer three strategies to help you do so.
A Higher Purpose
So what is a higher purpose, and why is it important? According to modern microeconomics, managers running organizations seek to solve the “principal-agent problem.”1 This problem occurs when a manager (principal) seeks to motivate an employee (agent) to work hard in the best interests of the manager.
This perspective assumes that if managers cannot continuously monitor their employees’ activities, employees will behave in a purely self-interested manner. The manager will need to compensate the employee in a way to elicit the desired effort. The performance measurement and compensation packages, widely used in organizations, are based on this premise. Although these systems provide positive employee incentives to work hard, they are limited in their effectiveness and often fail to produce flourishing organizations.
In our own exploration of positive leadership, we began to question the logic of the principal-agent problem. Is there no alternative, other than to assume agents will only act in pure self-interest? We created a mathematical framework, extending the principal-agent model, introducing the notion of a higher purpose in a way that positively affects the behavior of both the manager and employee.2
Our definition of higher purpose is intent, perceived as producing a social benefit over and above the monetary payoff shared by the employer (principal) and employee (agent). It may be increased quality of life for some customer population, the preservation of some aspect of the environment, or some other commonly desired, collective good.
When the members of an organization sincerely pursue such a purpose, it produces increased meaning. Having a higher purpose makes the pursuit of profit more rewarding than just obtaining profit. The work begins to matter more to everyone.
An Economic Logic for Positive Leadership
Our analysis suggests managers that pursue higher purpose invest more capital, take greater risks, and incur lower costs of compensating their employees. When a leader commits to a higher purpose and inspires others to follow, the principal-agent problem is altered. Employees, embracing the higher purpose, are transformed: they derive positive value from their effort and act more like principals.
These effects imply that shirking can be overcome by the alignment of the employee with a higher purpose, providing incentives for the employee to work harder for the same compensation. However, authenticity is essential. A manager simply paying lip service to a higher purpose in order to “motivate” agents to work harder is unlikely to succeed. The lack of authenticity is likely to become apparent in subtle ways.
The economics of higher purpose do not negate the normal assumptions of economics. The model shows the pursuit of a higher purpose can be joined with the pursuit of wealth maximization, and they can each enhance the other. The main point is that the pursuit of a higher purpose generates positive energy in leaders and employees—a sort of off-balance-sheet asset. It substitutes for direct monetary incentives, increasing overall wealth, even when profit/wealth is not the object of pursuit. The reason is that the pursuit of a higher purpose generates additional satisfaction for those engaged in the effort, which makes it more enjoyable for all.
Why Pursue a Higher Purpose?
Our model is valuable, producing an economic logic for the pursuit of a higher purpose. Although our analysis does not provide large-sample empirical evidence, we have gathered anecdotal evidence from dozens of personal interviews with senior leaders supporting the theoretical model’s findings. Moreover, much empirical evidence complements the model, making the case for the power of a higher purpose more convincing. But if you do not believe in the power of a higher purpose, you will not act with authenticity, and you will fail. We consider two core reasons that pursuit of a higher purpose is important: purpose and meaning, and purpose and emergent change.
Reason One: Purpose and Meaning
Purpose has value at the individual level. The literature suggests that a higher purpose leads to increased meaning and many benefits follow.
People who dedicate themselves to the realization of a higher purpose report higher levels of meaning in life and have higher scores on happiness, well-being, life satisfaction, life control, and work engagement; and lower scores on negative affect, depression, anxiety, being a workaholic, suicidal ideation, substance abuse, and the need for therapy.3
If the pursuit of a higher purpose produces benefits, why do not all leaders pursue it? The reason is that not all people are oriented to the articulation of collective purpose and creation of shared meaning. Only some people are “transformational leaders” likely to create organizations of higher purpose.4
Instead of relying on technical expertise, authority, and trans-actional power, transformational leaders operate from moral power. They move agents to a more intrinsic orientation, increased awareness of a higher purpose, and willingness to sacrifice for the common good.5 Transformational leaders increase collective performance by creating congruence between the agent’s and the organization’s values.6 In transforming people and organizations, leaders engage in four kinds of behavior:7
1. Inspirational Motivation. They articulate a higher purpose or vision, communicating the expectations that people can accomplish the purpose. They focus attention and motivate people to become engaged in purposeful action.
2. Intellectual Stimulation. They challenge existing assumptions, opening their followers’ minds to new possibilities, purposes, and paths.
3. Individualized Consideration. They coach and mentor followers as valued people, giving attention, support, and encouragement. They build trust and belief.
4. Idealized Influence. They live with personal purpose, regulating by modeling integrity or inspiring values and beliefs. They attract the loyalty and commitment of followers.
Reason Two: Purpose and Emergent Change
Leaders who engage in these four behaviors are people of integrity. They articulate vision, stimulate learning, and build trust. Relational dynamics become more positive and animated, and new forms of organizing emerge.
Leaders who pursue a higher purpose achieve results following similar paths. Agents become empowered as they gain an increased sense of autonomy, competence, impact, and meaning.8 As leaders elevate and develop more authentic and empowered agents, the inspirational process becomes reciprocal. The development of followers begins to reinforce the leader’s development. The relationships of increased authenticity are more dynamic. They become self-reinforcing upward spirals.9
In the pursuit of a higher purpose, people may engage in the subordination of self-interest and willingly make spontaneous contributions to the whole. They are more likely to step away from their normal assumptions of hierarchy and limited contribution. They may begin to transcend job descriptions, share tacit information, create novel interpretations, and actively listen to one another.10
In the dynamics of transformative cooperation, the ratio of positive to negative thoughts and feelings may increase. The natural, downward spirals that normally turn organizations rigid may become upward spirals that promote learning, resilience, and the creation of new resources. The process may give rise to new and renewed relationships, further facilitating positive change.
Organizations of higher purpose benefit from many of these synergies and ones between stakeholders. An analysis of thirty Fortune 500 companies, identified as organizations having a higher purpose, demonstrated that these companies outperformed the market average by a ratio of 8 to 1.11
A Surprising Discovery
After building our higher-purpose model, we wondered how the heads of organizations work the process. We conducted thirty interviews, but with an incorrect assumption that all organization leaders would value having a higher purpose. The majority told us this assumption was not true. When they first took over, many did not see the value of having a higher purpose, some even belittling the notion.
This kind of behavior is predicted in the work of Peter Vaill, who points out that higher purpose must be “discovered, articulated, acted upon, and continually clarified.” It is an ongoing process, requiring continual attention. Vaill writes, “In my own experience with management groups, I frequently encounter impatience, even exasperation, with discussions of basic purposes.” He explains that managers wish to absolve themselves of the “responsibility to creatively revivify purposes.”12
Our experience is consistent with Vaill’s claim. Executives tend to be steeped in the assumptions of microeconomics: they are busy and hunger for task completion. The belief in the normal assumptions of microeconomics may lead to a focus on motivation, through the manipulation of external rewards. Creating meaning may seem like a waste of time. Pressure may lead to the search for easy tasks with high payoffs, not the grueling task of understanding the deep needs of stakeholders and articulating a vision. The need for task completion may work against the notion of continually monitoring and reformulating the meaning system. There is a natural pull for executives, even CEOs, to be managers rather than leaders.
This blindness is your opportunity. By understanding the logic of having a higher purpose and learning to pursue it, you can do things others cannot do.
Strategies for Imbuing Organizations with a Higher Purpose
Learning how to execute these strategies for becoming a positive leader who can imbue an organization with higher purpose will give you unique value. There are three key strategies to achieve this:
Strategy 1: Become a Person of Higher Purpose
It is common to find strategies in the management literature that leaders are supposed to impose on others. Because authenticity is critical to leadership, the first step in learning to create organizations of higher purpose is to become a person of higher purpose, which involves choosing your own higher purpose. A strategy for doing this revolves around a concept known as fundamental state of leadership (FSL),13 which suggests leadership is not a function of position. Leadership is influence, and everyone has the potential for influence. How much influence is wielded at any given time varies, so leadership is not a set of traits. Leadership is influence, peaking when entering a more dynamic and elevated state, tied to a higher purpose.
People normally tend to be comfort-centered, externally directed, self-focused, and internally closed. The questions in Table 1 can be used to change those tendencies. By reaching this elevated state, one begins to find and pursue higher purposes (see the elevated consciousness associated with question three in Table 1).
One can learn and repeat the concepts in Table 1 in a matter of minutes, but this does not mean they can be applied. We have discovered people need assistance in internalizing them.
TABLE 1 The fundamental state of leadership as a path to higher purpose
We invite people to anticipate coming events, ask the four questions, and envision possible positive self-variations. We have them act on their anticipated strategies, documenting the experiences that occur. The written accounts are called fundamental state of leadership best practices (FSLBPs).
Finally, we set up communities of learning. Participants agree to write one FSLBP each week. Each day, the community receives one or more of the written practices—which can be practical and inspiring. At the end of the week, each person submits a new FSLBP, and the process repeats. Over time, individuals learn to embrace higher purpose through a series of individual acts, and the sharing teaches the community to be more open to collectively pursuing higher purpose.
Strategy 2: Learn Vision Formulation
A key step in imbuing an organization with purpose is the creation of a meaningful vision, capturing and conveying higher intent.14 These visions capture what is most important about the organization: how it relates to customers, employees, and others.15 Visions are more influential if they are simple, idealistic, visual, long-term, challenging, and realistic. They should provide a sense of direction, related to the higher purpose of the organization. But they should be ambiguous enough to insure freedom and initiative.16
Developing such a vision is not a mechanical process, but requires a deep understanding of the organization, its culture, and people. The vision is likely to be more influential if the developers do the following:17
• Listen deeply to a wide array of stakeholders.
• Identify the most salient values and desires of stakeholders.
• Identify high-level strategic objectives with wide appeal.
• Understand, honor, and articulate the essence of the higher purpose.
• Show a link of the higher purpose to past achievements and current capacities.
• Continually monitor and refine the vision.
Strategy 3: Learn Vision Implementation
Formulating a meaningful vision is a difficult task, but it is only one step in the creation of organizations having a higher purpose. In implementing the vision,18 leaders are more likely to succeed if they do the following:
• Hire and empower innovative people to pursue the higher purpose of the organization.
• Emphasize positivity and appreciation for flexibility and change.
• Encourage and reward learning.
• Update and develop the organization’s mental models.
• Test proposed innovations with small-scale experiments.
• Monitor, examine, and learn from unexpected successes and failures.
• Emphasize and facilitate information sharing.
• Value and preserve past learning.
• Set objectives for innovative activities.
• Reward initiative and innovation.
Putting It All Together
Because normal economic assumptions often ignore higher purpose, we encourage positive leaders to develop a new logic. Most executives flee from their responsibility to lead their organizations with a higher purpose. Our strategies provide you with a way to be a positive leader, imbuing your organization with a higher purpose. Not only will you achieve the satisfaction of leading with character and values, but your company will likely also enjoy greater employee commitment and perform better financially.
THE BIRTH OF A HIGHER PURPOSE
A CEO at a large investment firm remembered being a young member of the company’s executive team. They had a meeting with Peter Drucker, the famous theorist and consultant.
Drucker pushed the group to clarify the organization’s purpose. The initial reaction was, “to make profits.” Drucker would not accept this, pushing them to dig deeper. There was a politically correct conversation following his pushing, with the team growing impatient to move on. Drucker persisted. The former CEO finally grew angry, asking, “What else was the purpose of the corporation, other than to pursue profits?” Drucker was not intimidated, continuing to push.
Eventually, they articulated the company’s purpose: something quite different from the pursuit of profit. They defined the purpose as helping to serve the needs of their clients and taking care of their families and loved ones. Clients are interested in tax planning and investment advice, to preserve and grow their wealth so they can care for and educate their families. Clients do not pursue wealth just for the sake of it—they want to help their families lead more fulfilling lives.
This new perspective on their purpose meant the organization had to reorient itself. It first had to understand client needs and then tailor financial advice to serve those needs—instead of trying to sell financial products to maximize profits. The use of the word “profit” is no longer part of the organization’s lexicon.
The company’s positive culture and unusual success today is attributed to defining the organization’s higher purpose. Clarifying the purpose transformed the principal-agent problem. The employees of the company do not have to receive special financial incentives to have this client orientation. It has become part of the culture, the natural thing to do.
TWEETS
Creating an organizational purpose that is higher than profit makes the pursuit of profit more rewarding and transforms the meaning of work.
In organizations of higher purpose, people transcend job descriptions, share information, have unique insights, and carefully listen to one another.
Imbuing an organization with a higher purpose requires discovering, articulating, acting upon, and continually clarifying the purpose.