It seems obvious that organizations who best understand their purpose perform better in the marketplace. But can that correlation be quantified?

Blue Monarch Management recently put that question to the Simon Sinek organization, which has for several years run ‘WHY Workshops’ for firms seeking to live in the phrase “people don’t do business with what you do they do business with why you do it.”

To begin the conversation with The Optimism Company’s Shannon Lord, Blue Monarch’s David Ruhlen asked if hard data exists to support the notion that organizations that better understand themselves actually perform at a higher level than otherwise would be the case. Shannon responded, “What we’ve seen is that the value is very personal to each organization – what the why statement looks like, what it means, how it is rolled out. We’ve found that in small and mid-size firms, especially, performance tends to rise following the why exercise because everyone in the organization can be quickly brought on board.”

The evidence is mostly anecdotal, noted Shannon, through follow-up interviews with their clients. And it shouldn’t be surprising that data points are difficult to come by when trying to demonstrate how an increase in revenue can be tied to employees who are newly inspired. As Shannon said, “What we do know, through the feedback from mostly small and medium sized firms, is that months after the why exercise it still has impact. When people from all levels of an organization are part of creating the final WHY statement for a company, it is easier and more natural to express why ‘the why’ matters and what it means to them personally.”

Blue Monarch’s organizational development specialist, Carol Markusse, echoed those thoughts: “From an OD perspective, involving team members in the creative process of the why statement generates a real sense of ownership and investment in the outcome. That sense of ownership leads to a deeper understanding of and enthusiasm for the organizational why. As a field of practice, OD seeks to enhance organizational effectiveness and well-being through change and development; such a goal is certainly enhanced through the open format for communication, active engagement and meaningful participation practiced by The Optimism Company in its ‘WHY Workshop’, exactly how we structure our own facilitation sessions”.

Shannon suggested the why exercise can at times seem less amenable to large organizations, particularly if the messaging that emerges becomes diluted. As she says, “the messaging and the experience of discovery may have no impact the organization’s most important employees, the front-line workers. If the why statement is simply presented as a line in a pamphlet, without any personal connection to what the why is and how it was arrived at, it’s just more corporate-speak employees are required to believe. You have to allow everyone to form their own personal connection to the why, and the rollout needs to be completed with care and understanding for everyone in the organization.”

That’s not to say large organizations don’t benefit greatly from a purposeful approach to their markets and clients. In fact, as the authors of the book Firms of Endearment have written, the so-called “FoE” companies exceed substantially the S&P 500 averages by delivering the emotional, experiential and social value stakeholders are increasingly demanding. Additional research further confirms that the correlation between purpose and performance can be quantified, as these few examples illustrate:

1. According to a study by the EY Beacon Institute, purpose-driven companies have a higher revenue growth rate than their peers. Companies with a strong sense of purpose grew three times faster than their counterparts over a 10-year period.
2. In addition to higher revenue growth, purpose-driven organizations also tend to be more profitable. According to a report by the Harvard Business Review, such firms outperformed their counterparts in return on assets and return on equity.
3. Purpose-driven companies are more likely to attract and retain top talent. According to a study by LinkedIn, employees who believe in their organization’s mission are 57% more likely to stay for five years or more.
4. Purpose-driven organizations are also more likely to benefit from long-lasting customer relationships. As a study by the Reputation Institute noted, such organizations had a 2.5 times higher reputation score than their peers and were 6.6 times more likely to be recommended by their customers.

As we concluded our conversation with Shannon, we touched on how the why statement can be applied in decision-making. As Shannon said, “On our team, we will literally pull out our why statement and line it up against the issues we are discussing to ensure we’re living up to the company’s core purpose. It really does provide a reliable compass for our decision-making.”

The value of the why exercise clearly does extend beyond the intuitive. There are clear quantitative markers that substantiate the correlation between purpose and profit. In future posts we will expand on this discussion and speak to the powerful link between purpose, brand and culture for organizations of all sizes.