News and Views
November 25, 2019
Posted in: WATSON Views
The relationship between business purpose and social purpose is getting serious. The traditional focus on shareholder profit is broadening to include a more complex stakeholder landscape – from employees, consumers, and communities, to the planet itself.
Although the law still places the best interests of the company as paramount for public companies, that doesn’t mean that other complementary interests cannot be considered. While shareholder value is still critical, profit versus purpose is not a zero-sum game. Strategies that maximize revenue can also benefit employees. Prudent business decisions can also minimize environmental harm. Clear signals that businesses are using their resources and influence to help solve social problems can drastically widen their consumer base.
With the marriage of purpose and profit, comes a fundamental shift in how organizations talk about and connect their work with their broader social purpose. From the frontlines to the boardroom, purpose drives practice.
Enter the purpose-driven director. The purpose-driven director understands the organization’s purpose and keep this purpose front and centre in boardroom conversations and decision-making. The purpose-driven director:
- Is motivated by their organization’s purpose and brings focus and commitment to their director role
- Sees the marriage of purpose and profit as a strategic opportunity
- Applies a broad, long-term view to their work and decision-making
- Asks the right questions, grounded in purpose, to guide what the organization does and what it doesn’t do
- Understands the relationship between purpose and profit and considers the broader context when making decisions
- Broadens board conversations to look at both intended and unintended impacts of decisions and consider the long-term consequences on the environment, the economy, and society
- Challenges self, board, and management to make the right decisions with purpose in mind when the organization is truly tested and the stakes are high
- Helps ensure the organization’s work contributes to its social purpose in the intended way
- Keeps up to date on issues related to their organization’s purpose and shares their insights with the board
- Helps sharpen the board’s focus on purpose and helps management articulate purpose in a way that flows through the organization
These qualities and perspectives are layered on top of what we already look for in a strong director – they raise the bar. As a result, the purpose-driven director needs to bring the following:
- Some existing alignment, even if somewhat unformed or unspecific, to the purpose and impact the organization wishes to achieve
- A readiness to internalize the purpose and commit to it; a heartfelt interest in seeing the purpose achieved
- A track record of credibility and integrity; a sense that their commitment to purpose will be genuine and that they will follow through
- Openness to progressive practices; a readiness to evolve governance as the playing field changes
- A long-term lens focused on a broad range of outcomes, and an understanding of how to monitor short-term progress without creating short-term mindsets
Purpose-driven directors benefit from a strong sense of achievement, impact, and legacy – beyond traditional stewardship. Many in the governance field say that the era of directors serving primarily for status or compensation is ending due to the increased complexity, effort, and risk of serving; we believe it is also because there is a more rewarding opportunity for skilled directors. Purpose-driven directors have a unique opportunity to make our boardrooms and our communities stronger, with lasting impact.