06 November 2023
By Cherie Mylordis
In the wake of recent corporate scandals and social media firestorms, today’s progressive leaders are reevaluating their approach to success.
This article uncovers the purpose-driven strategies that leaders are adopting to remain impactful in the evolving landscape of work.
If you’re a leader aiming to avoid becoming the next headline for all the wrong reasons, these insights offer a roadmap for creating a resilient, impactful, and sustainable organisation.
Just as people cannot live without eating, so a business cannot live without profits. But most people don’t live to eat, and neither must businesses live just to make profits.
John Mackey, Former CEO, Whole Foods Market
Undoing a legacy driven by corporate greed
In the 1970s, economist Milton Friedman proposed a controversial idea: that the sole purpose of a business was to generate profit for its shareholders.
This model, known as Shareholder Primacy, has guided the strategies of countless corporations for decades.
But the world has changed.
Society’s growing demands for greater corporate responsibility are not just challenging this outdated focus; they're rendering it obsolete. We now live in an increasingly transparent world that values social and environmental impact as much as the bottom line.
Purpose is the cornerstone of modern business, setting the direction for everything from corporate strategy to employee engagement.
Why the shift is necessary
While the conversation about the future of work is often dominated by technology and flexible work practices, there’s a human and ethical purpose that can’t be ignored.
Here in Australia in recent years, we've seen organisations like Rio Tinto destroying sacred lands at Juukan Gorge.
We’ve witnessed the questionable ethics in the financial sector uncovered by the Hayne Royal Commission.
And more recently, we’ve watched Qantas dropping the ball on customer care, and PwC Australia embroiled in a tax leak scandal.
But these ethical lapses certainly aren’t confined to Australia.
You only need to look to examples like Volkswagen’s emission scandal and Facebook’s data privacy issues to see how an exclusive focus on shareholder returns can lead to ethical lapses, legal troubles, and a tarnished brand image.
These examples all make it clear: an exclusive focus on shareholders is no longer viable.
One reason that it’s difficult to understand is that twentieth-century managers had learned to parrot phrases like 'The customer is number one!' while continuing to run the organization as an internally focused, top-down bureaucracy interested in delivering value to shareholders.
Stephen Denning, author of The Age of Agile
Purpose-driven leadership is already happening, but you need to know where to look
Rethinking leadership for a balanced scorecard
Most modern leaders and executives aren't inherently 'bad'; they're simply products of a system that has prioritised shareholder returns.
The challenge now lies in broadening the definition of success to include social, environmental, and governance factors.
The good news is that there are already examples of progressive companies and future-fit leadership in action that we can look towards and learn from.
Here are just a few:
- Patagonia: Patagonia has a clear purpose-driven mission, prioritising purpose over profit to protect the planet, stating, 'we're in business to save our home planet'.
- Intrepid Travel: Intrepid's mission is to ‘create positive change through the joy of travel’ and be the best travel company not just in the world, but for the world with verifiable science-based targets.
- Mirvac: Mirvac's purpose it to 'reimagine how people live their urban lives', and to leave the world a better place than they found it.
Want to discover more about aligning personal and organisational purpose? Read our latest whitepaper here.
ESG and the social licence to operate
According to McKinsey, over 90% of the major U.S. companies listed in the Standard & Poor’s stock index now publish Environmental, Social, and Governance (ESG) reports.
But what is a ‘social licence to operate’? In essence, it’s the unwritten contract between a business and its stakeholders, including customers, employees and the communities they operate in.
The rise of ESG reporting reveals a crucial shift: companies are beginning to understand that addressing their impact on society and the environment is essential for maintaining their social license to operate.
It's about working on something that is so purposeful and where I can apply my strengths so that we're all rowing in the same direction as a team who are all fully applying themselves and their experiences, skills and capabilities.
CEO, Not-for-profit, Rethinking the Future of Work in a Fragile World
Employee factor: A part of the bigger picture
The drive toward a more balanced approach to business success doesn't just benefit shareholders and communities—it directly impacts employee engagement and productivity.
Studies have shown that employees in purpose-driven organizations are more engaged, and high levels of engagement have been linked to increased profitability.
Simply put, purpose is the cornerstone of that sets the scene and direction for everything else, from its operational strategy to its employee value proposition.
So, what's next?
Companies are being held accountable for their wider impact. This isn't a passing trend but a structural change in measuring success.
Purpose-driven leadership is a business imperative for the modern world. As we move towards a balanced scorecard approach, businesses have the opportunity to bring meaningful change to shareholders, employees, and society at large.
So ask yourself, are you ready to be part of this new era?
If your organisation doesn’t have a clear and compelling purpose, contact me to find out how to create one through three guided sessions.
For more insights and practical steps on purpose-driven success, check out our comprehensive whitepaper, Rethinking the Future of Work in a Fragile World.