BM_IMD_REPORT-How-Authentic-is-your-Corporate-Purpose

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1. Defining The Business Challenge: Why Does An Authentic Corporate Purpose Matter? Many management scholars have tried to articulate what exactly corporate purpose means. For example, almost 80 years ago, Chester Barnard (1938: 82) stated that a company comes together when the following three things occur concurrently: (1) there are people who communicate with each other; (2) there is an action/task to be completed; and (3) there is a common purpose. He saw defining this common purpose as a core task of leadership. Yet, success in both defining and implementing a common purpose is of necessity based on the willingness of individuals in organizations to cooperate. According to Barnard, individuals will usually act un-cooperatively unless there is an objective that unites them. However, simply having a defined purpose does not mean that people relinquish their individual self-interests: A purpose does not incite co-operative activity unless it’s accepted by those whose efforts will constitute the organization (Barnard, 1938: 86). More recently, scholars such as Collins and Porras (1994), Ellsworth (2002) and Binney (2006) have built on Barnard’s initial ideas about corporate purpose. Collins and Porras (1996: 68) stated: Core purpose is the organization’s reason for being. It does not just describe the organization’s output or target customers; it captures the soul of the organization. A primary role of core purpose is to guide and inspire. Ellsworth (2002: 4) defined corporate purpose as follows: Corporate purpose sits at the confluence of strategy and values. It expresses the company’s fundamental value — the raison d’être or overriding reason for existing. It is the end to which the strategy is directed. Binney (2006) defined corporate purpose as: A shared sense of “Why do we exist?” and “What is the essence of how we do things around here?” It was what gave exceptional companies a compass to steer by, and enabled them to adapt and thrive in periods of great economic and social change. We integrate the above, and define corporate purpose as follows: Corporate purpose is a company’s core "reason for being.” It is the organization’s single underlying objective that unifies all stakeholders and embodies its ultimate role in the broader economic, societal and environmental context. Corporate purpose is often communicated through a company's mission or vision statements, but it may also remain informal and unarticulated. Through this study, we are interested in understanding what determines the authenticity of a firm’s corporate purpose. Since “authenticity” is generally defined as being “true to oneself,” we further define authenticity of corporate purpose, as the alignment between a firm’s perceived corporate purpose and the actual strategic decisions and actions that a firm takes. 8
Research by Burson-Marsteller and IMD’s Center for Corporate Sustainability in 2010 validated the importance that corporate purpose plays in firm performance. 1 In particular, the study found that: • A well-executed corporate purpose communication strategy enhances the financial performance of leading European companies; • A well-executed corporate purpose communication strategy is more important than company size in terms of its effect on financial performance; • Corporate purpose enhances not only economy-wide financial performance of leading European companies but also relative financial performance within industries. 2 Unfortunately, corporate purpose can act as a double-edged sword. On the one hand, a corporate purpose that is consistent with related and relevant strategic corporate actions can build, sustain and increase trust. On the other hand, a corporate purpose that is inconsistent with corporate actions, will lead stakeholders to view the corporate purpose and the company with mistrust and skepticism. The research described in this report revealed once again that companies absolutely need to “walk the talk” in order to be credible and authentic with regard to their corporate purpose statements. However, it also revealed that “talking the walk” was an equally important part of the paradigm. Since perception – built on awareness and knowledge gained through experience, learning and communication – is often reality, corporate purpose messages must be carefully tuned to indicators that demonstrate that the organization effectively “walks its talk.” For organizations to overcome this double-edged sword and build trust with stakeholders, their corporate purposes must be aligned with their strategic decisions and actions in order to be perceived as “authentic.” Understanding how to manage the authenticity of their corporate purpose successfully is a challenge for many organizations’ leaders and managers. The goal of this report is to put forth a model for authentic corporate purpose. Our hope is that this model will help business leaders effectively manage their firm’s authenticity into the future. 2. Methodology Similar to procedures followed in previous research on authenticity in different domains, we began with an item development and validation process that followed several steps. First, we compiled a list of possible authenticity dimensions based on an extensive literature review of empirical research conducted in other relevant domains, including psychology, philosophy, leadership, strategy and marketing. Next, we generated a pool of items from the literature based on these dimensions, identifying items that have empirically been shown to capture the different dimensions of authenticity in these various disciplines. Based on this literature review, twelve initial dimensions and forty eight items were identified that related to the construct of authenticity of corporate purpose with scales adopted from the following research: continuity/consistency, originality, naturalness and reliability 1 “ Communicating Corporate Purpose,” IMD and Burson-Marsteller, 2010 Link: http://bursonmarsteller.eu/wp-content/uploads/2011/10/IMD-B-M-Corporate-Purpose-Impact-Study-2010.pdf 2 “ Communicating Corporate Purpose”, page 26 9
Page 1 and 2: How Authentic is your Corporate Pur
Page 3 and 4: Contents Executive summary ........
Page 5 and 6: Executive summary Introduction Over
Page 7: although awareness is critical to a
Page 11 and 12: To validate the dimensional structu
Page 13 and 14: Leading Image: In contrast, researc
Page 15 and 16: 4. Survey Results and Key Findings
Page 17 and 18: Figure 4: Top Five Companies with a
Page 19 and 20: We then asked more specifically for
Page 21 and 22: 6. Leadership and Authentic Corpora
Page 23 and 24: 7. Qualitative Research Findings In
Page 25 and 26: One executive described the “doub
Page 27 and 28: companies as members. Other such fo
Page 29 and 30: - Is the organization aware of the
Page 31 and 32: 1) Seeking feedback from stakeholde
Page 33 and 34: knowledge for the broader good. Tha
Page 35 and 36: - Does the organization openly shar
Page 37 and 38: • Strategy has to illustrate purp
Page 39 and 40: making process. If managers are not
Page 41 and 42: De Hoogh, A. H., Den Hartog, D. N.,
Page 43 and 44: Leading 13. Appendices Appendix I:
Page 45 and 46: Appendix II: Qualitative Interview
Page 47 and 48: Appendix III: Qualitative Interview
Page 49 and 50: Appendix V: Characteristics of Surv
Page 51 and 52: Appendix VII: Industry Demographics
Page 53 and 54: Appendix IX: Companies Identified a
Page 55 and 56: Appendix XI: Ranking of Full List o
Page 57 and 58: Appendix XIII: Status of Authentic
Page 59 and 60:
Appendix XV: Standardized item fact
Page 61:
Appendix XVII: Confirmatory Factor
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BM_IMD_REPORT-How-Authentic-is-your-Corporate-Purpose

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