Business with Purpose - Worth the Effort?

The following article on organizational purpose is taken from research by ABA in December of 2020, following the height of the COVID pandemic. More recent articles, including ones from Marketing on Purpose, EarthShare, and CNA, affirm the positive aspects of being a purpose-driven business now and in the future, and why SMEs benefit from this approach.

We are living in the age of purpose. Purpose has increasingly driven consumer preference, influences jobseekers’ choices, and gets the credit for business growth. But then came COVID-19 and the economic fallout. What impact has the crisis had on organizational purpose? Have SMEs (small and medium-sized enterprises) continued to embrace it, or do they consider it a luxury they can no longer afford?

Research with 250+ business leaders, entrepreneurs, and influencers aimed to uncover the answers. Some findings were as follows:

1. Small and medium-sized enterprises have bought into purpose in a big way.

Whether by means of their size or origins as owner-led or family-run, a common view emerged that SMEs are often more inherently ‘purposeful’ than their larger, corporate counterparts. A surprisingly high number of survey respondents were willing to refer to their business as ‘purpose-led’ - with an even higher number (86%) confirming their own understanding of organizational purpose to be in line with the definition that was shared. What’s more, it appears that it pays to be purposeful - with 2 out of 3 respondents agreeing that their purpose gave them a competitive advantage in the market.

© olm26250 from Getty Images via Canva.com

2. When it comes to purpose, there are ‘creationists’ and ‘evolutionists’. 

There appears to be two distinct ‘camps’ when it comes to the origins of purpose; Evolutionists - purpose that evolved over time; and Creationists - which had a purpose from the beginning. With the numbers fairly even, there should be room for both - as long as the end result is a purpose that is both sincerely held and authentically lived.

3. Purpose-led businesses are more profitable than their counterparts. 

While this research may not be the first to draw correlations between purpose and profitability/growth, it serves as another reminder that the two appear to be good bedfellows. Of the survey respondents who were willing to disclose their pre-tax profit margin (at the end of the last financial year), a clear picture emerged; businesses that claimed to be purpose-led were, on average, 23% more profitable than their counterparts (be they non purpose-led or ‘unsure’ businesses). 

4. The COVID crisis was a ‘wake up call’ for businesses to seize the m0ment. 

Leaders were challenged to their core about the impact that their businesses could – and should – be having on workers, customers, and the wider world. The COVID crisis – in particular the early months – prompted much soul searching amongst business leaders when it came to their purpose and the impact they could have on the world.

5. Businesses of all shapes and sizes see purpose as key to future growth. 

When it comes to the question of whether business leaders will hit the accelerator or the brakes on purpose, the answer is clear: they’re looking to floor it. Across every forward-looking survey question, and throughout the interviews conducted, the overwhelming majority of respondents were clear about this: ‘Now is not the time to be dialing back on purpose’.  Not only was there a 50% increase in the number of leaders viewing purpose as ‘very important’ to the future of the business, this same audience was nearly three times more likely to feel confident about the future (compared to those who didn’t see purpose as ‘very important’ moving forward).

6. Leaders are prepared to sacrifice profit to stay true to their purpose. 

It seems the old adage of ‘put your money where your mouth is’ cannot be held against businesses who claim to care about purpose. A remarkable 52% of all leaders are prepared to sacrifice profit to stay true to their purpose – rising to 70% amongst the purpose-led crowd.

7. Those who haven’t yet bought into purpose are the ones most eager to play catch-up.

Perhaps the most interesting finding of our research was that businesses who have not been overtly purpose-led in the past are the ones most eager to increase their focus on purpose in the future. It would seem that a purpose ‘leveling up’ is underway. The research provides a whole bunch of reasons for hope. In years to come, we could well look back on this period as a time when purpose exploded amongst SMEs - becoming the defining idea for modern-day business.

According to Proaction International, a purpose-driven company "operates with a deeper sense of meaning than just generating profits. These businesses are committed to making a positive impact on society by aligning the company's purpose and values with its operations."

If every cloud has a silver lining, then part of the bright spot around the COVID cloud is that it made businesses evaluate how and why they were doing business. While there are many challenges around changing the current mode of capitalism in the US and the world, it is thrilling to see both the interest in and effort towards becoming purpose driven in both small- and medium-sized businesses.

One of the goals of Better Capitalism is to support businesses with defining and implementing ways of achieving their desired purpose. While our book and blog offer curated wisdom, thoughtful guidance, and relevant success stories, we can also be contacted for further discussion that is specific to your situation. If you would like to speak with us, please send an email to info@bettercapitalism.org. We look forward to hearing from you!

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