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2018-07-03 12:15:10
Robert E. Quinn Anjan V. Thakor
When Gerry Anderson first became the president of DTE Energy, he did not
believe in the power of higher organizational purpose.
We re not talking about having a clear mission that focuses largely on how a
business will generate economic value. DTE had one that set out the goal of
creating long-term gains for shareholders, and Anderson understood its
importance.
A higher purpose is not about economic exchanges. It reflects something more
aspirational. It explains how the people involved with an organization are
making a difference, gives them a sense of meaning, and draws their support.
But like many of the leaders we ve interviewed in our research, Anderson
started his tenure as president skeptical about how much it mattered. The
concept of higher purpose didn t fit into his mostly economic understanding of
the firm.
But then the Great Recession of 2008 hit, and he knew he had to get his people
to devote more of themselves to work. Even before the financial crisis, surveys
had demonstrated that DTE employees were not very engaged. It was a classic
quandary: Employees couldn t seem to break free of old, tired behaviors. They
weren t bringing their smarts and creativity to their jobs. They weren t
performing up to their potential. Anderson knew that he needed a more committed
workforce but did not know how to get one.
That was when retired army major general Joe Robles, then the CEO of USAA and a
DTE board member, invited Anderson to visit some USAA call centers. Familiar
with the culture of most call centers, Anderson expected to see people going
through the motions. Instead he watched positive, fully engaged employees
collaborate and go the extra mile for customers. When Anderson asked how this
could be, Robles answered that a leader s most important job is to connect the
people to their purpose.
At USAA, he explained, every employee underwent an immersive four-day cultural
orientation and made a promise to provide extraordinary service to people who
had done the same for their country members of the military and their families.
That training was no small investment, since the company had more than 20,000
employees. Its lessons were continually reinforced through town hall meetings
and other forums where people at all levels asked questions and shared ideas
about how to fulfill their purpose.
Before the recession, Anderson would have rejected Robles s statement about
purpose as empty, simplistic rhetoric. But having run into a dead end in
figuring out how to make his own organization thrive, Anderson was reexamining
some of his basic assumptions about management, and he was open to what Robles
was saying.
When Anderson returned to DTE s Detroit headquarters, he made a video that
articulated his employees higher purpose. (He got that idea from Robles, too.)
It showed DTE s truck drivers, plant operators, corporate leaders, and many
others on the job and described the impact of their work on the well-being of
the community the factory workers, teachers, and doctors who needed the energy
DTE generated. The first group of professional employees to see the video gave
it a standing ovation. When union members viewed it, some were moved to tears.
Never before had their work been framed as a meaningful contribution to the
greater good. The video brought to life DTE s new statement of purpose: We
serve with our energy, the lifeblood of communities and the engine of progress.
Every organization has a pool of change agents that usually goes untapped.
What happened next was even more important: The company s leaders dedicated
themselves to supporting that purpose and wove it into onboarding and training
programs, corporate meetings, and culture-building activities such as film
festivals and sing-alongs. As people judged the purpose to be authentic, a
transformation began to take place. Engagement scores climbed. The company
received a Gallup Great Workplace Award for five years in a row. And financial
performance responded in kind: DTE s stock price more than tripled from the end
of 2008 to the end of 2017.
Why did purpose work so well after other interventions had failed? Anderson had
previously tried to shake things up by providing training, altering incentives,
and increasing managerial oversight, with disappointing results. It turned out
that his approach was to blame not his people.
That s a hard truth to recognize. If, like many executives, you re applying
conventional economic logic, you view your employees as self-interested agents
and design your organizational practices and culture accordingly, and that hasn
t paid off as you d hoped.
So you now face a choice: You can double down on that approach, on the
assumption that you just need more or stricter controls to achieve the desired
impact. Or you can align the organization with an authentic higher purpose that
intersects with your business interests and helps guide your decisions. If you
succeed in doing the latter, your people will try new things, move into deep
learning, take risks, and make surprising contributions.
Many executives avoid working on their firms purpose. Why? Because it defies
what they have learned in business school and, perhaps, in subsequent
experience: that work is fundamentally contractual, and employees will seek to
minimize personal costs and effort.
Those are not necessarily faulty assumptions indeed, they describe the behavior
in many environments reasonably well. However, they also amount to a
self-fulfilling prophecy. When managers view employees this way, they create
the very problems they expect. Employees choose to respond primarily to the
incentives outlined in their contracts and the controls imposed on them.
Consequently, they not only fail to see opportunities but also experience
conflict, resist feedback, underperform, and personally stagnate. So managers,
believing that their assumptions about employees have been validated, exert
still more control and rely even more heavily on extrinsic incentives.
Employees then narrowly focus on achieving those rewards, typically at the
expense of activities that are hard to measure and often ignored, such as
mentoring subordinates and sharing best practices. Overarching values and goals
become empty words. People do only what they have to do. Results again fall
short of expectations, and managers clamp down further.
In this article we provide a framework that can help managers break out of this
vicious cycle. In our consulting work with hundreds of organizations and in our
research which includes extensive interviews with dozens of leaders and the
development of a theoretical model we have come to see that when an authentic
purpose permeates business strategy and decision making, the personal good and
the collective good become one. Positive peer pressure kicks in, and employees
are reenergized. Collaboration increases, learning accelerates, and performance
climbs. We ll look at how you can set off a similar chain of events in your
organization, drawing on examples from a range of companies.
How to Do It
When organizations embrace purpose, it s often because a crisis forces leaders
to challenge their assumptions about motivation and performance and to
experiment with new approaches. But you don t need to wait for a dire
situation. The framework we ve developed can help you build a purpose-driven
organization when you re not backed into a corner. It enables you to overcome
the largest barrier to embracing purpose the cynical transactional view of
employee motivation by following eight essential steps.
1. Envision an inspired workforce.
According to economists, every employer faces the principal-agent problem,
which is the standard economic model for describing an organization s
relationships with its workers. Here s the basic idea: The principal (the
employer) and the agent (the employee) form a work contract. The agent is
effort-averse. For a certain amount of money, he or she will deliver a certain
amount of labor, and no more. Since effort is personally costly, the agent
underperforms in providing it unless the principal puts contractual incentives
and control systems in place to counter that tendency.
This model precludes the notion of a fully engaged workforce. According to its
logic, what Anderson saw at USAA is not possible; it would be foolish to aspire
to such an outcome.
One way to change that perception is to expose leaders to positive exceptions
to the rule. Consider this July 2015 blog post by Mike Rowe, host of the
Discovery Channel show Dirty Jobs, about an experience he had at a Hampton Inn:
---
I left my hotel room this morning to jump out of a perfectly good airplane,
and saw part of a man standing in the hallway. His feet were on a ladder. The
rest of him was somewhere in the ceiling.
I introduced myself, and asked what he was doing. Along with satisfying my
natural curiosity, it seemed a good way to delay my appointment with gravity,
which I was in no hurry to keep. His name is Corey Mundle .We quickly got to
talking.
Well, Mike, here s the problem, he said. My pipe has a crack in it, and now
my hot water is leaking into my laundry room. I ve got to turn off my water,
replace my old pipe, and get my new one installed before my customers notice
there s a problem.
I asked if he needed a hand, and he told me the job wasn t dirty enough. We
laughed, and Corey asked if he could have a quick photo. I said sure, assuming
he d return the favor. He asked why I wanted a photo of him, and I said it was
because I liked his choice of pronouns.
I like the way you talk about your work, I said. It s not the hot water,
it s MY hot water. It s not the laundry room, it s MY laundry room. It s
not a new pipe, it s MY new pipe. Most people don t talk like that about
their work. Most people don t own it.
Corey shrugged and said, This is not a job; this is MY job. I m glad to
have it, and I take pride in everything I do.
He didn t know it, but Corey s words made my job a little easier that day.
Because three hours later, when I was trying to work up the courage to leap out
of a perfectly good airplane, I wasn t thinking about pulling the ripcord on
the parachute I was thinking about pulling MY ripcord. On MY parachute.
---
Corey Mundle is a purpose-driven employee. Instead of minimizing effort as a
typical agent would, he takes ownership. The fact that people like him exist
is important. When coaching executives on how to do purpose work in their
organizations, we often tell them, If it is real, it is possible. If you can
find one positive example a person, a team, a unit that exceeds the norms you
can inspire others. Look for excellence, examine the purpose that drives the
excellence, and then imagine it imbuing your entire workforce.
2. Discover the purpose.
At a global oil company, we once met with members of a task force asked by the
CEO to work on defining the organization s purpose. They handed us a document
representing months of work; it articulated a purpose, a mission, and a set of
values. We told them it had no power their analysis and debate had produced
only platitudes.
The members of the task force had used only their heads to invent a higher
purpose intended to capture employees hearts. But you do not invent a higher
purpose; it already exists. You can discover it through empathy by feeling and
understanding the deepest common needs of your workforce. That involves asking
provocative questions, listening, and reflecting.
Deborah Ball, a former dean of the School of Education at the University of
Michigan, provides a good example. Like most companies, professional schools
experience mission drift. As a new dean, Ball wanted to clarify her
organization s purpose so that she could increase employees focus, commitment,
and collaboration.
To learn and unlearn the organization, as she put it, she interviewed every
faculty member. She expected to find much diversity of opinion and she did. But
she also found surprising commonality, what she called an emerging story
about the faculty s strong desire to have a positive impact on society. Ball
wrote up what she heard and shared it with the people she interviewed. She
listened to their reactions and continued to refine their story.
This was not just a listening tour. It was an extended, disciplined, iterative
process. Ball says, You identify gold nuggets, work with them, clarify them,
integrate them, and continually feed them back. She refers to the process as
collective creation, borrowing a phrase from agile and design-thinking
methodologies.
As that work continued, it became clear that the school had strengths it could
use for social good. For example, it had the capacity to influence how other
institutions around the world trained teachers, addressed issues of educational
affordability, and served underrepresented populations. Ball concluded that
these foci had the greatest potential to integrate faculty members efforts,
draw impressive new hires, and attract funding for research. So she highlighted
them as crucial elements of the school s collective identity.
3. Recognize the need for authenticity.
Purpose has become a popular topic. Even leaders who don t believe in it face
pressure from board members, investors, employees, and other stakeholders to
articulate a higher purpose. This sometimes leads to statements like the one
produced by the task force at the oil company. When a company announces its
purpose and values but the words don t govern the behavior of senior
leadership, they ring hollow. Everyone recognizes the hypocrisy, and employees
become more cynical. The process does harm.
Some CEOs intuitively understand this danger. One actually told his senior
leadership team that he didn t want to do purpose work, because organizations
are political systems and hypocrisy is inevitable. His statement illustrates an
important point: The assumption that people act only out of self-interest also
gets applied to leaders, who are often seen as disingenuous if they claim other
motivations.
A member of the team responded, Why don t we change that? Let s identify a
purpose and a set of values, and live them with integrity. That earnest
comment punctured the existing skepticism, and the team moved ahead.
For an illustration of a purpose that does shape behavior, let s look at
Sandler O Neill and Partners, a midsize investment bank that helps financial
institutions raise capital. The company was successful in its niche and focused
on the usual goal of maximizing shareholder value. However, on September 11,
2001, disaster struck. Located in the Twin Towers in New York, the company felt
the full brunt of the terrorist attack. Jimmy Dunne, soon to lead the firm s
executive team, learned that over one-third of Sandler s people, including its
top two executives, were dead, and the company s physical infrastructure was
devastated. Many of its computers and customer records were gone.
As the crisis unfolded, despite the exceptionally heavy demands of attending to
business, Dunne made the decision that a Sandler partner would attend the
funeral of every fallen employee, which meant that he attended many funerals.
As a result of witnessing so much suffering, he began to realize that the
purpose of his firm was not only to satisfy customers and create shareholder
value but also to treat employees like valued human beings.
An organization often discovers its purpose when things are going badly.
That led to some sharp departures from protocol. For example, he asked his CFO
to pay the families of all the dead employees their salaries and bonuses
through December 31, 2001 and then asked if the company could do the same for
all of 2002. The CFO said the firm could survive, but doing this would be
inconsistent with its fiduciary responsibility to the partners. So the firm
offered to buy out the ownership stake of any partner at par. Not one accepted.
If your purpose is authentic, people know, because it drives every decision and
you do things other companies would not, like paying the families of dead
employees. Dunne told us that often an organization discovers its purpose and
values when things are going badly and that its true nature is revealed by what
its leaders do in difficult times. He said, You judge people not by how much
they give but by how much they have left after they give.
4. Turn the authentic message into a constant message.
When we spoke with the CEO of a global professional services company about how
to build a purpose-driven organization, his first question was When will I be
done?
We responded by telling a story about another CEO, who had been trying to
transform his construction company for a year. He showed us his plan and asked
our opinion. We told him he deserved an A . Why wasn t it an A? After giving
speeches for a year, he thought he was finished but his people were just
beginning to hear his message. He needed to keep clarifying the organization s
purpose for as long as he was CEO. When we told him that, he sank into his
chair.
In contrast, Tony Meola, the recently retired head of U.S. consumer operations
at Bank of America, is a leader who understands the ongoing nature of purpose
work. He says one thing that makes it relentlessly difficult is that it
involves getting institutions to shift direction and existing cultures tend to
impede movement. As extensions of the culture, managers, too, end up resisting
the change. Other impediments are organizational complexity and competing
demands.
Meola overcame those obstacles by clarifying the purpose of his division:
treating operational excellence as a destination and allowing no other
pressures to distract from it. He emphasized operational skills and leadership
in employee training and development, and he brought that focus to every
conversation, every decision, every problem his team faced, always asking,
Will this make us better operators? He says, When you hold it constant like
that, when you never waver, an amazing thing happens. The purpose sinks into
the collective conscience. The culture changes, and the organization begins to
perform at a higher level. Processes become simpler and easier to execute and
sustain. People start looking for permanent solutions rather than stop-gap
measures that create more inefficiencies through process variations.
Embracing this mindset meant saying no to anything that didn t reflect it. In
the division s call center, for example, there had been a proposal to invest
additional resources in technology and people so that the group could solve
customers problems faster and better. But the project was rejected because
when managers and employees used their stated purpose as a filter and asked
themselves whether that investment would make them better operators, the answer
was no. What the company really needed to do, they determined, was examine how
the operations themselves could be improved to eliminate failures that produced
call center inquiries in the first place.
When a leader communicates the purpose with authenticity and constancy, as
Meola did, employees recognize his or her commitment, begin to believe in the
purpose themselves, and reorient. The change is signaled from the top, and then
it unfolds from the bottom.
5. Stimulate individual learning.
Conventional economic logic tends to rely on external motivators. As leaders
embrace higher purpose, however, they recognize that learning and development
are powerful incentives. Employees actually want to think, learn, and grow.
At the St. Louis based not-for-profit The Mission Continues, whose purpose is
to rehabilitate and reintegrate into society wounded and disabled war veterans,
new hires are assigned a large amount of work. The underlying philosophy is
that when a leader gives someone a difficult challenge, it shows faith in that
person s potential. The job becomes an incubator for learning and development,
and along the way the employee gains confidence and becomes more committed to
the organization and the higher purpose that drives it.
By helping employees understand the relationship between the higher purpose and
the learning process, leaders can strengthen it. People at The Mission
Continues are required to reflect on that relationship often. Every two weeks
they produce a written document describing their purpose, their strengths, and
their development. The exercise is not repetitive, because the experiences
change, as do the lessons learned. This practice is consistent with research on
effective leadership development approaches. In modern organizations, new
experiences tend to come easily, but reflection does not.
At The Mission Continues, the employees have become adaptive and proactive.
There is less need for managerial control, because they know the purpose and
see how it has changed them for the better. You can liken this clear sense of
direction to commander s intent in the military. If soldiers know and
internalize a commander s strategic purpose, they can carry out the mission
even when the commander isn t there. This means, of course, that the leader
must communicate the organization s higher purpose with utter clarity so that
employees can make use of their local information and take initiative. Research
by business school professors Claudine Gartenberg, Andrea Prat, and George
Serafeim shows how critical this is in corporations, too it is not unique to
nonprofits.
6. Turn midlevel managers into purpose-driven leaders.
To build an inspired, committed workforce, you ll need middle managers who not
only know the organization s purpose but also deeply connect with it and lead
with moral power. That goes way beyond what most companies ask of their
midlevel people.
Consider KPMG, a Big Four accounting cooperative with thousands of partners.
For decades those partners approached leadership like accounting. They were
careful in their observations, exact in their assessments, and cautious about
their decisions, because that was the cultural tone set at the top. Senior
leaders were not inclined to get emotional about ideals, and neither were the
partners. As a result, employees at all levels tended to make only safe,
incremental improvements.
But then KPMG went through a transformation. The company began to explore the
notion of purpose. Searching its history, its leaders were surprised to find
that it had made many significant contributions to major world events. After
conducting and analyzing hundreds of employee interviews, they concluded that
KPMG s purpose was to help clients inspire confidence and empower change.
These five words evoked a sense of awe in the firm, but KPMG s top executives
avoided the temptation to turn them into a marketing slogan. Instead, they set
out to connect every leader and manager to the purpose. They began by talking
openly about their own sense of purpose and meaning. When this had an impact,
they recognized that the partners needed to do the same with their teams. When
senior management shared these expectations, the partners were open to them but
did not feel equipped to meet them. So the accounting firm invested in a new
kind of training, in which the partners learned how to tell compelling stories
that conveyed their sense of personal identity and professional purpose.
Though applying that training was difficult it was a real stretch for experts
in investment, real estate, tax, risk consulting, and so on the culture did
change. Today the partners communicate their personal purpose to their teams
and discuss how it links to their professional lives and the organization s
reason for being. In doing so, they are modeling a vulnerability and
authenticity that no one had previously expected to see at the middle levels of
this accounting firm.
7. Connect the people to the purpose.
Once leaders at the top and in the middle have internalized the organization s
purpose, they must help frontline employees see how it connects with their
day-to-day tasks. But a top-down mandate does not work. Employees need to help
drive this process, because then the purpose is more likely to permeate the
culture, shaping behavior even when managers aren t right there to watch how
people are handling things.
Our best illustration again comes from KPMG, where employees were encouraged to
share their own accounts of how they were making a difference. This evolved
into a remarkable program called the 10,000 Stories Challenge. It gave
employees access to a user-friendly design program and invited them to create
posters that would answer the question What do you do at KPMG? while
capturing their passion and connecting it to the organization s purpose.
Each participating employee created a purpose-driven headline, such as I
Combat Terrorism, and under it wrote a clarifying statement, such as KPMG
helps scores of financial institutions prevent money laundering, keeping
financial resources out of the hands of terrorists and criminals. Beneath the
statement, the employee would insert his or her picture. Each poster carried
the tagline Inspire Confidence. Empower Change.
In June company leaders announced that if the staff could create 10,000 posters
by Thanksgiving, two extra days would be added to the holiday break. Employees
hit that benchmark within a month. But then the process went viral after the
reward had already been earned. Twenty-seven thousand people produced 42,000
posters (some individuals made multiple submissions, and teams produced them as
well). KPMG had found a brilliant way to help employees personally identify
with its collective purpose.
Once the firm s overall transformation had taken root, surveys showed that
employees pride in their work had increased, and engagement scores reached
record levels. The firm eventually climbed 31 places, to the number 12 spot, on
Fortune s 100 Best Companies to Work For list, making it the highest ranked of
the Big Four. Recruiting improved, and as turnover decreased, costs dropped.
8. Unleash the positive energizers.
Every organization has a pool of change agents that usually goes untapped. We
refer to this pool as the network of positive energizers. Spread randomly
throughout the organization are mature, purpose-driven people with an
optimistic orientation, people like Corey Mundle at Hampton Inn. They naturally
inspire others. They re open and willing to take initiative. Once enlisted,
they can assist with every step of the cultural change. These people are easy
to identify, and others trust them.
We have helped launch such networks in numerous organizations, including
Prudential Retirement, Kelly Services, and DTE Energy. Typically, at an initial
meeting, senior leaders invite network members to become involved in the design
and execution of the change process. Within minutes, there is buy-in. Regular
meetings are scheduled. The energizers go out, share ideas, and return with
feedback and new ideas. They re willing to tell the truth and openly challenge
assumptions.
As employees judged the purpose to be authentic, engagement scores climbed.
There is often another benefit, as the experience of one human resources
director illustrates. After establishing a network of positive energizers in a
major professional services firm, she called us to report that she felt
overwhelmed in a good way by the interest and commitment of the people she had
assembled. They were an amazing resource that, until now, had gone completely
unrecognized. They cared as deeply as she did about the organization s purpose
and getting colleagues to embrace it. She said, I no longer feel alone.
CONCLUSION
Although a higher purpose does not guarantee economic benefits, we have seen
impressive results in many organizations. And other research particularly the
Gartenberg study, which included 500,000 people across 429 firms and involved
917 firm-year observations from 2006 to 2011 suggests a positive impact on both
operating financial performance (return on assets) and forward-looking measures
of performance (Tobin s Q and stock returns) when the purpose is communicated
with clarity.
So purpose is not just a lofty ideal; it has practical implications for your
company s financial health and competitiveness. People who find meaning in
their work don t hoard their energy and dedication. They give them freely,
defying conventional economic assumptions about self-interest. They grow rather
than stagnate. They do more and they do it better.
By tapping into that power, you can transform an entire organization.
A version of this article appeared in the July August 2018 issue (pp.78 85) of
Harvard Business Review.