HBR & Great Place to Work: The Type of Purpose That Makes Companies More Profitable

HBR & Great Place to Work: The Type of Purpose That Makes Companies More Profitable

In last month’s newsletter, Great Place to Work CEO Michael Bush talked about purpose, saying, “For me, purpose transcends P&Ls, balance sheets and EBITDA calculations. It allows us to accomplish something important that will positively affect many lives. Purpose takes collective effort: It cannot be achieved alone. It’s the reason why we spend so much time away from our families to do this thing called work.”

But does purpose create better business results? Yes, if it’s done right.

Using Great Place to Work’s extensive database on employee experiences in the U.S., Harvard Business School (HBS) researchers tried to determine if all the resources companies put towards purpose are, in fact, driving better business results. In the initial analysis, HBS found that a sense of purpose alone wasn’t correlated with firm financial performance. (Gasp.) But going a step deeper, they found the key to unlocking purpose’s potential: Clarity.

When employees experience a sense of purpose at their company and they believe their leaders set a clear direction and expectations (purpose + clarity), companies outperformed the stock market, achieving returns 6.9% higher than the market.

Furthermore, the research found that it wasn’t top executives that played the largest role here, but rather middle managers and professional workers. When those two groups experienced purpose and clarity, companies’ financial performance jumped even higher. The report explains, “This last finding underscores the absolute importance of fostering an effective middle manager layer within firms: managers who buy into the vision of the company and can make daily decisions that guide the firm in the right direction.”

What is the takeaway of this study for you? Thankfully, purpose does matter. Employees do want to believe they’re making a difference in some way and will work harder when they believe in the purpose of the company. But a company’s purpose needs to be carefully implemented to ensure that middle managers within the organization are clear: fully bought-in and on board. Otherwise, financial results won’t be impacted and time will be wasted coming up with words that just don’t matter.

What are your employees experiencing? Are your frontline leaders experiencing a sense of clarity and purpose? To learn more about how we can help you understand if your leaders are creating a consistently positive experience of purpose and clarity that resonates with your employees, contact us today.

For the full story, read the full HBR report here.

Marcus Erb