Do you want to lead an organization that is “purpose-driven”? Are you sure you’re ready?

A purpose-driven organization defines success based on its impact on people, the planet, and eternity – as well as financial return.  Whether you are a for-profit enterprise or a non-profit, a clear “WHY” can fuel people to accomplish great things, even in times of uncertainty.

But purpose is not a panacea.

According to Forbes, half of all nonprofits are destined to fail or stall within a few years due to leadership issues and the lack of a strategic plan. And  

research suggests there are personal consequences for leaders: big investments in corporate social responsibility efforts increase the likelihood of CEO dismissal when financial performance is poor.  

In my work to help organizations fast-track their strategy, I find leaders of purpose-driven organizations often get swept up with their inspiring purpose, but miss three fundamentals that are necessary if they are going to be successful:

o  A Purpose-Driven Organization Requires an Economic Engine

“Why are we getting so hung up on the numbers? This project will save lives! It’s the right thing to do!” exclaimed the eager new board member. The room got still, and the CEO of the purpose-led organization quietly offered, “Because if we don’t have funds to operate, no lives will be saved.”

In the excitement of creating a purpose-driven venture or launching a big initiative to make an impact, I see too many leaders underestimate what is needed to fuel their efforts. They jump in with both feet excited about the possibilities and figure “somehow” they’ll get the resources and funding they’ll need to make it work.

o  Purpose Makes Decision-Making More Complex

You learned it in algebra class. The more variables in an equation, the harder the problem is to solve.

When your organization commits to making a positive impact for people, for the planet, and for eternity (and delivering a positive financial return along the way), it gets complicated. For instance, B-Corp certification, a formal designation that a company is driven by both mission and profit, starts with a B-Impact Assessment comprised of 200 questions across governance and accountability, workers, community, environment, and customers.

 When you are truly purpose-led, decision-making goes from a game of checkers to five-dimensional chess with many more tradeoffs to be considered.

o  Purpose-driven Leaders are Held to a Higher Bar

University of Colorado professor Irina Kopaneva researched how purpose-driven organizations communicate. She found that once employees joined a purpose-driven enterprise, employees expected much more transparency. They wanted to know how decisions were made, were quick to call out inconsistencies, and were more likely to challenge decisions that weren’t aligned with the mission.

Even well-intended efforts to drive impact can be met with skepticism and perceived as virtue signaling or “green-washing” or “just marketing”.

If you are serious about leading a purpose-driven organization, you better be ready to address these fundamentals.

Here are three steps you can take right now to lead a purpose-driven organization more effectively:

1.   Define a Realistic Business Model

Creating an economic engine starts with a solid business model. You can think of your business model as your story, the way you achieve your mission by organizing all your resources to create and deliver value to those you serve. I’ve found a helpful way for everyone to “see” your business model is to use a simple tool called a Business Model Canvas (BMC) that shows all the moving parts on one page.

 The beauty of the Business Model Canvas is that it provides a common vocabulary for boards and leadership teams, and highlights processes across functional silos. It also forces clarity. You not only specify your mission and value proposition and who you want to serve, but you have to identify the key activities, resources, partnerships, and revenues you’ll need to keep the engine going.

When I’ve used the BMC with clients, I ask leadership teams and boards to take a pass at their own view of the business model first, and then come together to compare notes. It’s always a learning experience for everyone involved and a reality check for many about how naive they were about what’s involved. Next time someone comes up with a great idea for a new initiative, ask them to draft a quick Business Model Canvas first, and then come talk to you.

2.   Make Sure Purpose is Reflected in Your Performance Metrics

Platitudes about “doing good” don’t stand up over time. What gets measured gets managed.

Measuring profit is easy.  But how do you measure impact on “people, planet, and eternity”? It’s too often left up to people to fill in the blanks themselves.  This lack of clarity creates false expectations among employees and volunteers and funders and can damage trust when leaders make decisions that seem contrary to expectations.

Instead, take the time to define how your purpose will be reflected in your day-to-day operational metrics, incentives, and capital allocation criteria – and even what things you celebrate! It can help people translate lofty aspirations into concrete implications for what they do in their own roles. Communicating your progress regularly will build credibility.

This is not always easy. As McKinsey warns, “ Don’t kid yourself; there may be uncomfortable decisions to make and often hard tradeoffs as well.” But instead of meaningless posters on your conference room walls, doing this work will enable you and your team to translate your noble aspirations into how your organization works every day.

3.   Decide to Be Transparent Even When It’s Not Pretty

Marketing guru Deborah Malone CEO of The Internationalist, challenges: “Today’s social media environment with its constant sharing, commentary, advocacy, and criticism has dramatically shifted the rules of “doing good business.”. The assumption of responsibility and the adoption of greater transparency are now critical to how any brand or business plays its proper role in society.”

Transparency is easy when things are going great. It’s a lot harder when times are bumpy. I’ve had more than one CEO say to me right before a press conference or an all-hands meeting, “Don’t let them ask questions I can’t answer!”.

 I get it.  If you are early in your thinking about a hard issue, or have some difficult problems you are still wrestling with, communicating can be uncomfortable. You might even risk confusing people if your impromptu comments are interpreted as policies.

But staying silent is dangerous too. When you are silent, people fill in the blanks with their own ideas and make assumptions that may be entirely incorrect. Your silence can also set people up for shock and anger down the road when you have difficult news to deliver.  

 In my work with clients I’ve found there are a few things leaders can do to be transparent and navigate more successfully when things aren’t pretty:  

o  Give visibility to how the organization is performing, and what people can do to help. Share the areas you’re struggling with as well as the good news. Instead of keeping people in the dark about the issues that concern you, enlist them to be part of the solution.

o  Give a heads up to trade-offs you are going to have to make. For instance, there may be a situation where you have to make a trade-off between workforce benefits and customer benefits. Let people know that this decision is on the horizon and why it’s important. People don’t like trade-offs, but they really don’t like being surprised when unilateral decisions are made that seem to come out of the blue.

o  Explain the options you considered.  When you do announce a decision, share the options you considered so people understand your thinking. In doing so you are educating people about the real-world implications of leading a purpose-led organization and modeling how purpose-led decision-making can work.

Leading a purpose-driven organization can be energizing and fulfilling, but it is not without challenges. As you step up to lead, make sure you have considered these fundamentals and invite others to apply them with you. You will not only inspire others but also build a bench of strong leaders for the journey ahead.

I’d welcome your thoughts!

Susan

This article is part of my newsletter, which equips and energizes leaders with practical ways to move forward, whether leading a new strategy or getting one back on track. Subscribe if you’d like insights like this one or twice a month. 

Explore my website, www.gotomarketimpact.com, to learn more about my upcoming book, “FastTrack Your Big Idea!” as well as my offerings to help you and your team clarify your strategy and get results faster.  Or message me, and let’s connect! susan.Schramm@gotomarketimpact.com.