Updated: Jun 23, 2020
The past months bear witness to the greatest shift in working conditions and business culture that any of us are likely to experience in our lifetime.
Organisations are redefining the way they work under extraordinary and unpredictable circumstances. Companies are forced to focus on survival and protecting shareholder interests and yet, at the same time, company purpose has been under the spotlight. When the very existence of the company is called into question, why should the purpose of a company matter more than ever?
Michela Ratti, a Branding and Communications expert with significant experience across FMCG, Luxury and Digital sectors, has very kindly agreed to give me her thoughts on this and other questions:
[LL] Michela, why has company purpose been highlighted during the corona virus crisis?
[MR] I think there are a number of reasons for this. The first is that this crisis represents the unknown, and during fear of the unknown people look for leadership. They also look for values. They want guidance, reassurance that they will be treated fairly. They want to know what to expect and have their fears acknowledged and addressed or at least be told that it is legitimate to have those fears. A company purpose, when it is well done and fully integrated will provide a framework of behaviours and values to live by that tend to involve a degree of unity with the workforce and customers. It inspires people to go to work in the morning with a mentality of service towards clients and customers, which then becomes solidarity during crisis.
Interestingly the advertising world was making noises of purpose fatigue at the end of last year due to the fact that many brands and companies had mistaken cause related marketing campaigns with having a true purpose, and amidst cries of "purpose-washing" being the new "greenwashing".
This crisis has very much shown that purpose driven companies have stood out - whether in supplying PPE, sharing R&D and supply chains to overcome barriers, or just in terms of how they have taken care of their employees.
Reputation is so hard to build and yet so easy to lose, and purpose driven companies have put their money where their mouth is in terms of reputation.
And in moments such as this, we can see that it is increasingly the case that company reputation can translate directly into shareholder valuations.
[LL] Do you think that the sense of company purpose and values are outweighing commercial decisions geared towards the bottom line?
[MR] The two are by no means mutually incompatible. If anything the converse is true. If you take care of your employees, they will take care of you - this might be through loyalty, trust, or engagement in going the extra mile - whether this is through pivoting to produce something entirely different or by being proud brand ambassadors - these are just a couple of many examples I could list that also have a financial value.
As mentioned above, more and more frequently reputation can equate shareholder value. The hospitality industry has been hit very hard by this crisis and yet CEOs of Marriott, of Agoda, and of Air B&B have shown empathy, authenticity and above all a sense of fairness. They have clarity, humility and courage. The facts are clearly laid out as to why change is necessary, albeit painful. They did not leave much room for misunderstanding in their communication yet the communications were handled with purpose and values. These CEOs showed leadership in a reaction to a business torture test. As the saying goes, you cannot tell what a teabag is made of until you put it in hot water!
Purpose driven companies and leaders also tend to have the type of leadership that thinks of continual evolution and adaptation whereby in any crisis they will look at it as an opportunity as to how to come out better than they went in, constantly looking for the "green shoots" or early wins for the business together with new approaches to serve their customers. They are visionary change managers. In terms of the impact on the bottom line, one more interesting thought is that for the stock market, and indeed for many, 2020 is already a lost year of exceptional circumstances, and the attention seems to be more on what the exit plan will be and how strongly companies will be prepared to address the future.
[LL] What do you think have been good and also bad examples of company purpose?
[MR] I spent more than 20 years in P&G so may be biased however I think P&G is remarkable. The P&G Purpose is as follows :-
“Our Purpose unifies us in a common cause and growth strategy of improving more consumers' lives in small but meaningful ways each day. It inspires P&G people to make a positive contribution every day.“
Or in its full version
"We will provide branded products and services of superior quality and value that improve the lives of the world's consumers. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper".
In the last 12 months P&G share price has gone up a staggering 70%, the company's brands have done a digital transformation up there along with the best, and they have walked the talk during the crisis by pivoting to provide PPE and essential products to those in need. L'Oreal delayed payments from hairdressing salons, announced that it would not be running layoffs, and pivoted to PPE production, Sainsbury's set aside a time slot for essential workers and the vulnerable, but also prioritised deliveries for the ultra vulnerable and partnered with W.H.Smiths to open food outlets in hospitals for NHS workers, Big Pharma companies are collaborating on vaccines, tech and exec education companies are running free classes for upskilling as well as working online. All of these are examples of activity that walks the talk on purpose and values but that ultimately will also be good for the company's bottom line. They are examples of companies that have developed products and services that reflect and embrace the current challenges, distributed them in a way that enables the market to benefit from them and priced them in a way to meet customer and their own needs during these times.
There have also been plenty of bad examples of CEOs or companies that have sadly behaved appallingly towards their staff, I don't need to call them out but one thing is sure - that they will be remembered long after the crisis has passed for all the wrong reasons.
[LL] There has been a lot of commentary on the leadership qualities required during a crisis – how important are these to company purpose?
[MR] Prof Scott Galloway when talking about his T algorithm for Trillion dollar brands talks about the importance of having likeable leaders. That translates into empathetic, human leaders. Just as we have personified organizations due to their product and actions (think Lego) then we also personify corporations and organizations through the actions of their leaders. Likeable organizations or leaders that are empathetic also are less prone to stakeholder scrutiny or criticism in the age of accountability - think Facebook vs Google, or Microsoft vs Apple. Of course, the music has to match the words and vice versa ie a likeable leader will only get you so far if a clear, compelling, purposeful vision is not backed up by a leader that walks the talk in their personal behaviours.
We have seen many, many examples of great leadership during this crisis, from very diverse industries.
Great leadership takes strong personal values, vision, communication skills, approachability and empathy. The ability to recognize what doing the right thing means, and the courage to see it through even if it is not an easy choice. The ability to form a vision, as well as the ability to communicate it and bring others along. These skills are also entrenched in the WHY of great company purposes.
[LL] Do you think that this heightened sense of company purpose will stay meaningful?
[MR] I would like to hope so. This crisis has cleared away a lot of everyday clutter in the business world, and also given us all time to reflect on what is really important for us, our families, and the planet.
It has also shown us that when we work together, incredible things can happen. People have made extraordinary sacrifices for others.
Weaknesses have been exposed, but then incredible progress has been made in critical sectors such as healthcare, supply chain management (especially food), and tech which would have been unimaginable 12 months ago. An underlying sense of purpose has been behind much of this progress, it would be a pity for this to be forgotten.
[LL] Michela, thank you so much for your time and all your thoughts. It was really a pleasure.
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The original version of this article can be found here.