Episode 19: Leveraging Purpose to Activate Performance

Transcript

0:00 – 0:0:33
Chris Thornton

Change@Work is a podcast about the ever-evolving world of work and the human behaviors that drive it. I’m Chris Thornton, Senior Principal here at Daggerwing Group. Together with partners, clients, and leading experts from a variety of industries, we’ll share what’s happening in the world of work, how leaders can prepare for the future, and how to engage employees along the way.

0:33 – 0:50
Chris Thornton

Joining me today is Ranjay Gulati, Professor of Business Administration at Harvard Business School, a best-selling author, and an organization & leadership expert. Ranjay released a new book on February 8th titled ‘Deep Purpose,’ which explores the heart and soul of high performing companies. Ranjay, welcome.

0:50 – 0:54
Ranjay Gulati

Thank you, Chris. My pleasure to be here with you, and always a pleasure to talk to you.

0:54 – 1:00
Chris Thornton

It is, it is a pleasure to talk with you as well. I appreciate that you’re making time for this. Congratulations on the book.

1:00 – 1:14
Ranjay Gulati

Thank you. You know, as they always say, you never finish a book, you abandon it. It was three years in the making, I thought I’d be done in a year, then I though two years, and then it didn’t take more than three – and I’m so glad to finally be able to share it with others.

1:14 – 1:33
Chris Thornton

We’re going to talk a little but more about that wonderful book in a few moments, but first, we’re just going to check in with you on what it’s like to be you. We’re going to try to get to know you a little bit better, just as a person and not only as an author, so we have a few questions for you. If you could be anywhere in the word right now, where would it be?

1:33 – 1:52
Ranjay Gulati

If I could be anywhere in the world right now – I’d actually like to be in New Delhi, India – which is my hometown, and I haven’t been able to go there in three years. The longest time that I actually haven’t gone there, even though I live in Boston now, but you know, New Delhi is my childhood home. So, I would love to be back there.

1:52 – 2:06
Chris Thornton

I love that. Alright, I have to dig in. And anybody whose listened to the podcast knows that I’m a tiny obsessed with food. Can you describe some of your favorite dishes growing up? Some things you loved to eat in your childhood?

2:06 – 2:57
Ranjay Gulati

Oh my god, that’s a lot of things. Most of them are unhealthy and I don’t eat them anymore. But there’s a huge rich tradition in India of street food. This is a very common concept across all of Asia. These are street vendors who sell basically snacks – it’s not a main course, it’s like tapas. And India has an array of these kinds of street food from all over India, different parts. So, you have Northern Indian, Southern Indian, Eastern and Western Indian, and so I really enjoy Indian street food. And it’s hard to get in the US. You can get regular Indian food but you can’t get that kind of street food so easily. And in India, when I go I can’t eat it because you’re going to get sick.

2:57 – 3:12
Chris Thornton

Alright. Well, it does have me thinking about all the wonderful things I could be having right now in India. Thank you for that. You’re a professor, so let’s turn the tables on you. What was the hardest class you ever took?

3:12 – 4:09
Ranjay Gulati

The hardest class I ever took – actually it’s interesting because I was always a math kid. I did math, economics, computer science. And then when I came to do my PhD, my first course was in sociology. And I was completely lost. I had never really been exposed to bodies of knowledge where it was not about numbers. And so, it was very confusing, I didn’t know much about it. It was one of my most intimidating experiences. Thankfully I had some great classmates who really helped me situate and orient myself in that class. So, for a numbers person, getting exposed to I would say the most subjective aspects of life was challenging.

4:09 – 4:15
Chris Thornton

When you think about your favorite age, what comes to mind? And then let us know why.

4:15 – 5:30
Ranjay Gulati

I’d say my favorite age (which at the time I wouldn’t have said that, I was like “let me get this over with”), was actually when I was in college. Because not only are you forming deep lifelong friendships (you don’t realize they’re going to be your lifelong friendships, but they are), it’s also an age where you start to ask questions about everything you’re doing. In some ways, getting to the theme of my book, you’re questioning your own purpose in this life – am I going to do A or B or C? In my case, my family had a thriving business. So was I going to be taking over the business and join them? Was I going to go and do something else? I wanted to be a merchant marine and travel the world – was I going to do that? I mean the possibility set was huge – but intimidating and confusing at the same time as well. But it was exciting. I felt like the fact that you are actually interrogating yourself to get to the bottom of life – ‘why am I here?’ – in hindsight was exciting (maybe not at the time, it wasn’t, it was “get me out of my misery”).

5:30 – 5:34
Chris Thornton

It’s not easy, those aren’t easy questions. But definitely exciting.

5:34 – 5:52
Ranjay Gulati

Well, Durkheim – this French sociologist said that when you have too many choices, you suffer from what he called ‘the malady of infinite aspirations,’ and so I think constraining my choices was one of the hardest things I had to do. But once I did it, then it was fine.

5:52 – 6:09
Chris Thornton

Let’s keep going – I’m on that path and let’s talk about your book. It’s titled ‘Deep Purpose,’ you’ve been exploring the idea that corporate purpose is bigger than just a purpose statement, more than just words. Can you start with telling us a bit about the book, and why did you name it ‘Deep Purpose’?

6:09 – 7:58

Ranjay Gulati

Well, Chris, five years ago – if you had told me “Ranjay, I’m telling you I have a crystal ball, you’re going to write a book about purpose” – I would have told you you’re crazy. No way, not a chance. Not a chance that I’m going to write a book on purpose. And here I am. And you know what is interesting, and what is amazing about this journey for me – a) I have to give my students a lot of credit. I was chairing an advanced management program, my students were pushing me. They were asking me these questions like “What is the role of business in society?” “How do we imagine our purpose?” “In my company we’re having this conversation, it’s confusing, I don’t understand.” “We’re getting investor pressure to have a state of purpose statement.” And I’ve discovered first thing – purpose is not a purpose statement. In fact, the Financial Times has a great article story called ‘The Baffling Search for Purpose and Purpose Statements.’ Or there was an academic article about ten odd years ago called ‘Sex, Lies, and Mission Statements.’ So, you know, all of us talk about this in very – and I think the world has become very cynical about this subject. Purpose has become yet another one of those things that academics and consultants, like us operating out there, and it’s smoke and mirrors. And the Theranos and Purdue Pharmaceuticals of the world who have purpose statements and use them to cloak themselves don’t make it any easier. So, my book was originally – I really wanted a one-word title – I mean I had seen so many hit books that just had one word in the title, so I wanted ‘Purpose.’ I said “Okay, I got it. It’s going to be called ‘Purpose’.” And I had to change it, I had to let go of my attachment to one-word titles and call it ‘Deep Purpose,’ because I encountered so much of what I came to call, ‘superficial purpose.’

7:58 – 8:15
Chris Thornton

So, when you look at superficial purpose versus deep purpose, how would you describe the differences? How would you know that you’re doing more than just words, or words that sound beautiful and that you aspire to, but that you’re actually living up to?

8:15 – 12:39
Ranjay Gulati

So, even superficial purpose – I’m an academic, so we always like to create taxonomies of things. So, when I was looking at superficial purpose, it came in multiple flavors. The first most obvious flavor is that purpose is a disguise, meaning it’s actually used to hide bad things. That’s what Theranos was doing, that’s what Purdue Pharmaceuticals was doing. Some even argue that’s what Facebook has been doing. And I’ll leave that to your judgement to decide, that some say even Spotify has been doing that, and I’ll leave that for your judgement, (I don’t want to take a stance on either one of those companies). Then there was purpose in the periphery – “Let’s have a purpose statement because society and stakeholders are asking for it” – but it’s like CSR. “Let’s have a department of CSR, we’ll have a little foundation, we’ll give away some money to charity.” Purpose is a hobby, if you will. “I got a hobby project going on the side.” It gives us some cover. Then I found purpose as a win-win. And this is kind of based on the premise that “Oh, you know what, you can do good and do well at the same time, so you know what? Only do good things if you can make money doing them.” I was like “that’s fascinating – you’re calling yourself a deep purpose company, but you limit yourself to doing anything good as long as there’s money in it. So, the primary mode over here is “what’s the return on invested capital and show me that short-term right away.” So, I found that was interesting – and I think deep purpose companies also care about making money. So let me be very clear – deep purpose is profit. But what you discover is purpose is not some kind of a little communication/PR tool. Purpose has two fundamental functions that I’ve discovered. One was purpose as a compass. So, you saw the title cover of my book, there’s a compass on it. By the way, I have to tell you – try the exercise of having to imagine a visual for purpose. It was nearly impossible. We tried every which way, putting up a star, putting up this, putting up that. I picked a compass, finally, because a compass is an orienting system that mariners have used from ancient times to navigate and chart their way through stormy waters. So, the first thing I discovered was that deep purpose companies use purpose as an orienting system. It was a way to filter their strategy, it was a way to filter what they were doing and how they were doing it, and all that other stuff. But I discovered a second way in which they used it – purpose as an operating system. And that’s where you connect it to, in your language, would be your culture, to your organization, to the metrics you put in place, to the processes you have in the organization. It’s the way employees engage with the company. It’s the way other stakeholders engage with the company. And so, I found that deep purpose companies – it wasn’t just what they thought about purpose (which is purpose is an existential statement of us), it’s something deeper than a mission statement. But beyond that, how they used it – they used it as a compass, they used it as an operating system. Now, if you want to unpack the content of what’s inside of purpose (I thought there were several elements of what’s in a purpose) – first, purpose is a statement of your goals. What do you want to get done? Purpose is also a statement of your duties and responsibilities. Who do we have to serve? Society, the planet, whatever. Purpose is a statement about all the stakeholders you want to encompass and decide how you’re going to do that. That’s another piece of the puzzle. And finally, purpose is about short-term and long-term. Purpose is fundamentally not a short-term construct, it’s also a long-term construct. There’s no “Why do I exist for the next six months/the next quarter?” It’s “Why do I exist at all?” Period. So, it changes your time horizon. I mean, if I ask myself, or I can ask you “Chris, what are your goals for the quarter?” You’d say, “I’m going to work out, I’m going to get in shape, I want to get this article written, do this, I want to do that.” I ask you “What’s your purpose?” Period. Not purpose in the quarter, but purpose. Or it’s a forcing mechanism to ask yourself short-term and long-term questions. When you understand deep purpose, it unlocks performance. And I actually looked at how purpose unlocks performance as well.

12:39 – 13:00
Chris Thornton

So let’s talk about that then. Let’s talking about unlocking performance because I know – because we’ve been in rooms with leaders who can nod at purpose and go “that would be nice, but it’s not an imperative.” How does, in your view and what you’ve uncovered, how does deep purpose translate into performance?

13:00 – 17:14
Ranjay Gulati

So, look, Chris, I think it’s…first of all the vast majority of the world is purpose skeptics. They’re just not convinced that purpose can drive performance. And so, we operate in a shallow way, and it’s a self-fulfilling prophecy – so let’s be very clear about that. Then let’s say you want to go deep on purpose and then the question you say, “Show me the money, Ranjay. Show me the data.” And then there’s an industry of academics and consultants who are now trying to measure purpose and correlate it to performance of companies. You can’t build causal models easily unless you have longitudinal data, and I’m on that journey too – in the midst of coming up with a reasonable way to measure purpose which can be a marker of purpose-driven companies (deep purpose companies). But I though “I’m not going to wait till I have the definitive empirical analysis of global companies and showing purpose index and performance,” because performance is affected by so many other variables also. So, it’s messy, it’s noisy, but I don’t want to apologize for that. I went into these companies, and all the companies I studied were high growth companies. So, my back way into purpose was I was studying high growth companies, and somehow in these growth enterprises I was repeatedly hearing this idea that “Oh we have a purpose.” And I was like “Okay fine.” But I just heard it once too often and then my students were also pushing me on it. I said, “I got to think about it,” and then I had Larry Fink of BlackRock writing these really influential letters, and so I said, “I’ve got to look at this some more.” So, I came at it from a perspective of “Successful companies seem to all have this idea – what is it?” And I think we need to understand that holding back empirical, definitive evidence – how can purpose activate performance? So, let’s think about that. There are four pathways to doing this that I outline in my book. The first pathway is purpose is directional. We talked about the compass, and what that does is it gives an organization directional clarity and consistency. Where are we going, how do we stay consistent to our purpose? It creates consistency and clarity for everybody involved and it can be, as I said, a compass. Of course, it’s a filter, it’s a marker, it’s how you allocate resources, it’s how you determine what your strategy should be, it decodes where you’re going to play and where not. So, all that stuff comes into play. The second one, though, is motivation – how people show up to work. And there’s a lot of interesting evidence now in the context of The Great Resignation and so forth around this topic but look – we all know that for the longest time we were studying job satisfaction. Then, we moved from satisfaction to engagement. From engagement, now we’re looking at inspiration, and how do you inspire workers. We all know that inspired workers show up to work differently, so we know that. So, how are you going to energize and activate employees to show up to work differently? How are you going to change the connection they feel to the organization? Now again, shallow purpose companies…people are too smart and cynical about this. Look at the employee revolt going on at Spotify. So, this idea you’re going to parade a purpose and not do anything with it – they’re going to penalize you for that action. So, employees – there’s a motivational benefit. This is the second one. The third one, which marketeers have studied for a long time now, is now called ‘Purpose Branding.’ So, it turns out this purpose branding is a huge deal, and customers are more trusting of companies that stand for something. And how do you manage the brand? So that’s third. The last one is relation. How you use purpose to connect to all your partners in the ecosystem. Your suppliers, your other entities you may be interacting with – purpose gives them a clarity on where are you coming from. And so, it changes the interaction with them from one of distrust and demands to one that is a more proactive, engaged, collaborative conversation. So, the four benefits…I don’t know definitive, empirical data yet, but I can tell you there are four positive benefits that accrue if you pursue your deep purpose.

17:14 – 17:24
Chris Thornton

So, let’s name names. Let’s talk about the companies that you see, that have deep purpose, that are living deep purpose, that are activating all four of those elements that you talked about – what companies come to mind?

17:24 – 19:20
Ranjay Gulati

So, Chris, first of all, that alone was a messy task for me. The first thing you find is everybody who talks about purpose parades it – the same five to six companies. They’ll all talk about it – Patagonia, Ben & Jerry’s, Unilever, they might talk about Salesforce, and a few others here and there. And basically saying purpose is tree hugging companies, you know? They care about the environment, they care about… (and I think those are great companies, by the way – I don’t want to take anything away from them, they’re amazing organizations), but I said “Come on, is this a broader concept, or just some kind of fringe idea that is sitting over there in one corner.” And I actually found some fascinating companies, small and large. So, the large ones that I looked at was Microsoft was one, I looked Etsy was another one, I looked at Bueller (this Swiss company that is a large food equipment manufacturer), I looked at a small company – I looked at Gotham Green. If you shop at Whole Foods, you’ll see their salads and their herbs. I looked at One Mighty Mill, which is a company here in Boston which is a baker, and how they source their wheat, how they grind it, and how they process it, and then how they engage with their community. I looked at Livongo, which is a healthcare company focused on diabetics (not diabetics, people with diabetes). So, you look at these companies that actually don’t just have an idea, but what I called in an article I wrote last year, they have an ideal. They’re not just about an idea, but also an ideal. And how they connect the two is what makes them extraordinary. And how they take it deep into their organization – that’s what makes them extraordinary.

19:20 – 19:46
Chris Thornton

One of the things that we also see with companies (and I’m wondering what you have found), is that they actually hold themselves accountable for it. Like those aren’t just ideals that we then toss out when times get tough, that tough decisions are made because of it. Does anything come to mind of a story or example of when a tough decision had to be made, that we had to live up to that ideal, that a company would hold that too highly?

19:46 – 24:10
Ranjay Gulati

Absolutely. And you know it can go both ways – when we think of what tough decision, we say “Oh god.” It’s when the economics were not great, but the positive social impact was great. It can go the other way also. Where companies have become so focused on social, they have started to forget the economics. So one example, actually I’ll just share with you is a case I wrote on Etsy. And Etsy had been founded on this ideal that “We are a market base to help sellers of crafts, and we want to make I easy for them.” It was all about the seller. And Robert Kalan, who founded it, was a carpenter himself. And it was based on this beautiful ideal and it took off. Now, this thing becomes a business, he then eventually steps aside because he can’t run this large organization, he doesn’t know how to do that, he’s an idealist. And then in comes the successor, Chad Dickerson, who successfully takes it public, and they keep saying “We’re a B-Corp, we believe that shareholder return may come one day, but we don’t know when.” And the social impact is all over the place – any employee with any idea can come in and present, and everyone is running around doing their thing. And what’s happening now? They’re becoming an economic failure. They’ve never made money, and there’s no sign of them making money. They have hundreds of projects going on at the company, it’s unclear where the company is going. Even the social impact is not being measured and is so diffused, no one even knows if they’re having a social impact. So, now it’s a public company, you can’t do that in a public company. So guess what happens – there’s risk of them going private, there are private equity investors who are hovering to say “We’re going to buy them out and get rid of management, and the board takes action, and they install one of the board members as CEO (his name is Josh Silverman), and the previous CEO is let go. On the first day that Josh comes in, they’re also going to have layoffs of about 100 people. The first time in the history they’ve had layoffs – one of the groups they’re going to shut down is the values and wellbeing division in the company. Now, Josh Silverman, the evening before, goes for a walk with his young teenage daughter. And he tells her, “You know what, a lot of people are going to say horrible things about me tomorrow, and I just want you to know, that’s not true. What I’m doing is for the benefit of this company, for its survival.” And he goes in there, and he has to read another round of layoffs, and he’s presented as the dark side of capitalism, the people who’ve been laid off from the values group and from other groups – they’re saying he’s killed the soul of the company, you’re looking at a horrible person. I actually went in there thinking I found a company that I can write a negative case on, and yet what did I find? Not only does he fix the economics of the business, first of all, you have to. Shareholders are giving you money and they expect return. But he then also said “I’m going to measure our social impact on three things – diversity, equity, and inclusion. We’re going to measure how many women engineers we have in the organization (women and minorities in the organization). Second, our sustainability and environmental impact – we’re going to measure ourselves on that, and third, we’re going to see how much economic benefit do we unlock for the sellers in our company. Really measure it. We keep saying we’re all for the sellers, well I want to show you measurable impact. And we’re going to measure this, and we’re going to report it every year, audit it, resolve it, results are going to be put out there with our financial statements.” And then they built a purpose along with this by saying “What was the purpose of Etsy? Making commerce human.” Now what does that mean? How they came up with that? How they rolled it out? So, sometimes this idea of difficult choices is how do you balance your economic objectives with your social and other objectives. And I like to believe that these people like Josh Silverman are what I call practical idealists – they’re very idealistic but also very practical about “Look, we’ve got to have a viable business model. We’re not a non-profit.” And so, this is where purpose is getting hijacked. One extreme saying purpose is anything but profit. Others are saying purpose is only profit. How do these practical idealists navigate their way through? I have an article coming out next week on the messiness of purpose.

24:10 – 24:29
Chris Thornton

I’m looking forward to reading that. Let’s leave folks with one place where they can start because I assume getting to deep purpose is not a quick journey or something that you should do in a day or two. How should people start within their companies, moving toward deep purpose?

24:29 – 25:23
Ranjay Gulati

So, the one thing I learned is purpose has to be personal. You can’t convince an employee to think about company purpose if they’re not thinking about their own purpose. So, part of what we had to do is help people think about their own purpose. And many companies I went to, they actually had their own initiatives to get everyone to think about their own purpose and life, and then saying in the context of your own life purpose, how does work purpose fit into that? How can we… the CHR of Microsoft Kathleen Hogan, said it beautifully – “You don’t really work for Microsoft until Microsoft works for you.” So, I think for all of us, my wish for all you listeners is you should expect more out of your life, you should expect more out of your work. And one way to get there is by interrogating yourself and your organization “What is your purpose?”

25:23 – 25:30
Chris Thornton

Ranjay, thank you so much for joining us today. Let’s tell our listeners where they can get your book, tell us all about it.

25:30 – 26:16
Ranjay Gulati

Well, it’s very easy. Of course you can go to Amazon, but if you want to read more about the book and see some excerpts of the book, interviews, summaries of the book, you can go to deeppurpose.net where it’s kind of a handy landing place and you can also see what are your options to buy it in different parts of the world. But my goal here is to share the message of purpose. So actually, what I’m doing now after this is I’m going to be starting next week a series of interviews with CEOs from every continent of the world to discuss purpose. And so my hope is the best way to get the message out is to share stories of other amazing leaders who really are doing it.

26:16 – 26:22
Chris Thornton

That’s fantastic. Ranjay Gulati, Professor at Harvard Business School and author of ‘Deep Purpose.’ Thank you so much for joining us.

26:22
Ranjay Gulati

Thank you very much. Pleasure to be here with you today, Chris.