Five Mistakes Boards Make When Thinking About Purpose

PHOTO BY DAMIR KOPEZHANOV ON UNSPLASH

Written By Afdhel Aziz

When it comes to the topic of Purpose in business, Boards have a crucial role to play in unleashing its power. 

Boards need to rethink the social contract that exists between business and society for long-term survival. Adapting to the challenging needs of society and being interconnected with them, while balancing the needs of shareholders, to serve ALL stakeholders.

The best Boards operate in an ecosystem of trust and empathy. When dealing with multiple stakeholders, new skills are required of Board members, like empathy, trust, transparency, bravery, advocacy, etc. that should permeate the entire organization and set the standard.

However, there are some common mistakes that Boards make when considering this topic that are worth highlighting. I sat down with Denise Roberson, former Omnicom Chief Purpose Officer, who helps C-suites and Boards build their business case for Purpose, to get her experienced perspective on some pitfalls to avoid. She’s been serving on boards for ever a decade, and that combined with being a professor at Pepperdine Business School, puts her in a unique position to teach in the boardroom, conference room, and class room.  

Denise Roberson, Chief Purpose Officer at TBWA\Chiat\Day

MISTAKE NO 1: FOCUSING ON THE SHORT TERM VS LONG TERM 

Board must focus on value creation for all stakeholders, and they are best suited to identify external threats/risk in market shifts, along with global trends leading to opportunity. However, as guardians of the long-term view of a company they need to ensure that they don’t get caught up in the day-to-day.

“If anyone is thinking their Purpose is going to be done in five years, you’re thinking too small. It’s a decades-long sprint to actuate the full business case and tap into the extraordinary value and sustainability Purpose can provide,” said Roberson. “Boards and leaders will need to be in a constant state of test and learn with a growth mindset, with quarterly earnings being reframed as steppingstones to long-term growth, or planning scenarios to create stakeholder value.”

MISTAKE NO 2: NOT FRAMING THE RIGHT GROWTH OPPORTUNITY

The right Purpose framing can define what category the company is operating in - and radically reshape notions of what the future growth potential of the company can be. Consider Tesla: at inception, the company Purpose statement was ‘to accelerate the planet’s transition to sustainable transport’. But a few years ago, the company changed the last word to ‘energy’ -  signaling that it was not only interested in the automotive industry but expanding to set its sights on the multi-trillion dollar energy industry (with expansion into solar panels and Powerwall batteries).

“You are either disrupting or being disrupted and the Board should help set this agenda. Boards should be challenging management to be creative in their solutions and helping to set the purpose agenda to create 21st-Century growth and innovation, while protecting against risk” shared Roberson. “Let go of the historical expectation of a Board, and help companies reimagine and reconceive their role in society to ensure new value creation. But, to do so, you have use the cornerstones of Purpose at the Board level and create transparency with your management team and encourage candid conversation and feedback.”

MISTAKE NO 3: EXPECTING TOO FAST A FINANCIAL RETURN FROM PURPOSE

 “Purpose is a predecessor to increasing profitability in the early stages,” said Roberson. “Boards need to oversee the right conditions for Purpose to flourish first, ensuring a company’s Purpose shapes and influences the company’s strategy, policy, and investments,  then measure those milestones in the first couple of years. They need to track the powerful metrics that Purpose aligns to, for instance, how Purpose helps reduce churn, increase belonging and attract top talent; protect against reputational risk; enhance business performance and brand value; and approach new customer segments and pools of capital.” 

Those seemingly intangible elements like employee wellbeing and strong alignment with purpose, are crucial prerequisites for building a Purpose-driven culture and they are the key indicators Boards should focus on measuring and nurturing. 

MISTAKE No 4: BOARDS NOT REPRESENTATIVE OF THE COMMUNITIES THEY SERVE 

In an era of radical transparency, Board composition is one of the easiest ways for consumers to evaluate whether a company is truly fulfilling its promise of diversity and inclusion. Boards are a proof point for their stakeholder community and can cause damage to corporate reputation if they are not sufficiently representative.

“Technology has driven transparency and the blazing speed of information, so there is nowhere to hide, leaving vulnerabilities in light of Covid, social unrest, soaring resignations, climate change, activist investors, and political upheaval,” advised Roberson. “Purpose can play a crucial role in corporate governance, and affect key cultural elements of the organization, such as accountability, transparency, trust and collaboration. So, it is imperative for the Board to help apply company values and its Purpose in real decision making. The Board culture should be reflective of a healthy company culture, and that should all connect to represent the stakeholders they serve.”

MISTAKE No 5: NOT HAVING A PURPOSE COMMITTEE AND ASSUMING EVERYONE IS RESPONSIBLE

“Just as Boards have a dedicated Finance committee, they need to have a dedicated Purpose committee with people who have the passion, knowledge and aptitude for stewarding the topic.  Doing so shows that the board is prioritizing it and leading by example,” shared Roberson. “Including this Board committee in the strategic planning process allows it to assess shifting cultural trends on the horizon to mitigate risk and foster a holistic perspective on sustainable growth.”

In closing, she shared some overarching perspective. “Board members can be the keepers of long-term goals, while management contends with short-term pressures. They need to be more deeply embedded into society to create shared experiences and mutual understanding across stakeholder groups to proactively address today’s volatile and complex issues. Boards need to focus on agility and collaboration to create a strategy anchored in purpose, so you can pivot more easily, broaden scenario planning, and co-create to find transformational solutions across the stakeholder ecosystem.”