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Why Companies Should Care About Purpose

Companies have good reason to care about sense of purpose. Not surprisingly, organizations that look beyond profit to the greater good they create reap the benefits of a more engaged workforce. When employees can link their goals to that of the company’s and see how their role contributes to the team or organization’s larger success, they are 3.5 times more likely to be engaged.

For Millennials in particular, feeling a sense of purpose in the work they do is among the strongest drivers of retention.

Building a business with a sense of purpose pays off for the bottom line.

In their study, Firms of Endearment, researchers Raj Sisodia, David Wolfe and Jag Sheth examined a group of thirty companies characterized by their dedication to a revenue-transcending purpose. These companies included familiar names such as REI, Trader Joe’s, JetBlue and Patagonia. They compared these companies’ financial performance over time to a group of companies from Jim Collins’ book Good to Great—companies selected for their managerial and financial prowess.

Over a ten year period, the Good to Great companies outperformed the market by 331%—but the Firms of Endearment companies shot ahead still further, beating the market by a whopping 1,026%. Similarly, researchers Millward Brown and Jim Stengel identified the Stengel 50, a group of fast-growing brands such as Zappos, Starbucks and Luis Vuitton, that beat the S&P 500 by 400% over a ten-year period.

What characterized these firms was an ideal of making lives better, and that ideal served as an inspiration for customers and a decision-making compass for employees. Harvard researchers John Kotter and James Heskett provide yet more evidence that purpose leads to long term financial success, showing that over a ten year period, the stock prices of purposeful companies outperformed those of their less purpose-driven counterparts by a factor of 12.

In the words of Vic Strecher, author of Life on Purpose, “If you transcend revenue, you make more revenue.

The level and quality of interpersonal connection drives purpose, too

A sense of revenue-transcending purpose lies not just in the company’s stated mission, however, but in the level and quality of interpersonal connection that people experience at work. Some leaders are better at creating purposeful connections around them than others.

In one study described by Rob Cross and Amy Edmondson, the top 600 leaders in a large investment bank were asked, “Who leaves you feeling a greater sense of purpose in your work after an interaction?” The results showed a strong span of purposeful influence for the top quartile of leaders, who imparted a sense of purpose to 16 people on average. The bottom quartile was less effective, giving a sense of purpose to less than one person on average.

But purpose-generating behaviors are eminently teachable.

For instance, leaders can highlight the “why” of an assignment—the impact or importance of the work—before moving on the “what” or the “how” of accomplishing it. And they can ensure that each employee sees how their contribution makes a difference in the collective efforts of the organization. For example, one of the managers we spoke to at a leading research institute makes sure her employees in the contracts department know that they save the day every time they remove a logistical blockage and science can move on. Making this connection between their role and the progress of research helps to fuel purpose.

This article is an excerpt from the Connected Commons white paper Finding Purpose: How Connections with Others Create Meaning in Our Everyday Work and Life.

The Connected Commons, a consortium of major employers and people leaders co-managed by i4cp and renowned thought leader Rob Cross, applies organizational network research to impact business performance, workforce collaboration, and individual well-being.

The research references here will also be explored in Rob Cross’s upcoming book Beyond Collaboration Overload, available now for pre-order.