It’s impossible to miss the simultaneous occurrence of two corporate trends. The first is the rise of the idea that to motivate employees you need to supply them with a “corporate purpose.” The second is the astronomical rise in CEO and senior executive pay.
But can leaders credibly talk “purpose” in an organization that pays its chiefs a fortune and treats its staff or other stakeholders badly?
Let’s start with the meaning of purpose.
Most directional statements — like mission, vision, and values — have the organization as their focus. Mission (what business are we in?), vision (where do we see ourselves in a few years’ time?) and values (what do we stand for?) are all about the organization and its inhabitants.
However, a description of corporate purpose turns an organization inside-out. Purpose looks at the organization from the outside to consider the difference that a business makes in people’s lives.
It’s conventional for a corporate purpose statement to focus on customers. As an example, consider this one from the IAG Group: “We make your world a safer place.” (IAG is the parent company of a general insurance group with operations in Australia, New Zealand, Thailand, Vietnam and Indonesia.)
The goal of a purpose statement is to add another dimension to an organization, changing it from a purely transactional system to a relationship. It personalizes the products and services produced. You can see why, in some organizations, this might ignite staff passion and engage employees.
But I suggest that to avoid a corporate-purpose exercise being viewed by employees as a cynical joke there are certain pre-conditions that must be met. The major ones are addressing excessive CEO and senior executive pay, and treating employees and other stakeholders fairly.
As a recent example take the announcement that the CEO of Australia’s Domino’s Pizza has become the country’s highest paid executive, receiving a whopping pay packet of $AU36.84 million last year. This included base pay of $AU4.7 million and profit from the sale of shares acquired as part of an incentive scheme. This is the same organization where some franchisees got caught systematically underpaying vulnerable staffers, and charging for visa sponsorships, in order to meet their financial goals. The head office was accused of turning a blind eye to the problem.
While Domino’s Pizza details its mission, vision, and values on its website (one of its values is “treat people as you’d like to be treated”), it stops short of a purpose statement for good reason. It would seem incongruous to espouse “purpose” in a situation where the law is allegedly being broken and there are accusations of fraud.
The pattern at Domino’s Pizza has a precursor in 7-Eleven. A couple of years ago some of its franchisees were caught underpaying staff while its owner and then-board chairman was worth $AU750 million. The pattern has again been discovered at several expensive Australian restaurants operated by high-profile and well-off chefs. They’ve been caught short-changing their employees.
It’s pretty hard for senior management in these businesses to espouse “higher purpose” to improve customers’ lives when the very people who put in to make this happen are not meeting their “basic purpose.” In the case of employees this is receiving the wage they’re entitled to —or with franchisees, operating within a franchise agreement which is viable.
It’s also difficult to espouse corporate purpose if you’re cheating customers.
In Australia, where I live, we have been watching a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. This is a public enquiry with a retired High Court judge presiding. What has astonished and appalled the Australian public is the way in which the staff at the “big-four banks” — Commonwealth, Westpac, ANZ and NAB — have behaved. The inquiry has seen bank staff put customer interests well behind their own. Among the results that have gobsmacked the Australian public is the revelation that Commonwealth Bank staff knowingly charged clients for financial advice for years after the clients had died.
It’s clear from the findings of the Commission that the banks have created a “culture,” and that has become a much-used word in the inquiry, which has induced staff to view their dealings with their customers as purely transactional: I’ll sell you this, I’ll get that as a bonus. (It’s not unlike the recent scandals at Wells Fargo or Volkswagen.)
Cultures like this come from the top. It works just fine for the bank CEOs, making them among Australia’s highest-paid executives, but not so well for bank customers, as Australians have discovered. (The CEO of the Commonwealth Bank, who recently stepped down, walked away with a handy $AU12.3 million and other senior executives were also paid in the millions.)
You can imagine the optics if any of these organizations were to begin a discussion of “purpose” with their staff, while the existing transactional culture pervades. They would be, at best, greeted with eye-rolling, if not a collective middle finger.
Articulating corporate purpose is a great idea. Knowing how a product or service impacts customers’ lives is touching for staff.
But here’s my challenge to you — boards, CEOs and senior executives — when it comes to crafting corporate purpose: Before you launch your purpose campaign, put your house in order. Fairness-check your senior-executive pay and employee wages and working conditions. Otherwise your efforts might just be met with a collective “you-must-be-joking” response.