Creating A Purpose-Driven Organization — Like KPMG

Harvard Business Review:  Creating a Purpose-Driven Organization, by Robert E. Quinn (Michigan) & Anjan V. Thakor (Washington U.):

When Gerry Anderson first became the president of DTE Energy, he did not believe in the power of higher organizational purpose.

We’re not talking about having a clear mission that focuses largely on how a business will generate economic value. DTE had one that set out the goal of creating long-term gains for shareholders, and Anderson understood its importance.

A higher purpose is not about economic exchanges. It reflects something more aspirational. It explains how the people involved with an organization are making a difference, gives them a sense of meaning, and draws their support. But like many of the leaders we’ve interviewed in our research, Anderson started his tenure as president skeptical about how much it mattered. The concept of higher purpose didn’t fit into his mostly economic understanding of the firm.

But then the Great Recession of 2008 hit, and he knew he had to get his people to devote more of themselves to work. Even before the financial crisis, surveys had demonstrated that DTE employees were not very engaged. It was a classic quandary: Employees couldn’t seem to break free of old, tired behaviors. They weren’t bringing their smarts and creativity to their jobs. They weren’t performing up to their potential. Anderson knew that he needed a more committed workforce but did not know how to get one.

That was when retired army major general Joe Robles, then the CEO of USAA and a DTE board member, invited Anderson to visit some USAA call centers. Familiar with the culture of most call centers, Anderson expected to see people going through the motions. Instead he watched positive, fully engaged employees collaborate and go the extra mile for customers. When Anderson asked how this could be, Robles answered that a leader’s most important job is “to connect the people to their purpose.”

At USAA, he explained, every employee underwent an immersive four-day cultural orientation and made a promise to provide extraordinary service to people who had done the same for their country—members of the military and their families. That training was no small investment, since the company had more than 20,000 employees. Its lessons were continually reinforced through town hall meetings and other forums where people at all levels asked questions and shared ideas about how to fulfill their purpose.

Before the recession, Anderson would have rejected Robles’s statement about purpose as empty, simplistic rhetoric. But having run into a dead end in figuring out how to make his own organization thrive, Anderson was reexamining some of his basic assumptions about management, and he was open to what Robles was saying.

When Anderson returned to DTE’s Detroit headquarters, he made a video that articulated his employees’ higher purpose. (He got that idea from Robles, too.) It showed DTE’s truck drivers, plant operators, corporate leaders, and many others on the job and described the impact of their work on the well-being of the community—the factory workers, teachers, and doctors who needed the energy DTE generated. The first group of professional employees to see the video gave it a standing ovation. When union members viewed it, some were moved to tears. Never before had their work been framed as a meaningful contribution to the greater good. The video brought to life DTE’s new statement of purpose: “We serve with our energy, the lifeblood of communities and the engine of progress.”

What happened next was even more important: The company’s leaders dedicated themselves to supporting that purpose and wove it into onboarding and training programs, corporate meetings, and culture-building activities such as film festivals and sing-alongs. As people judged the purpose to be authentic, a transformation began to take place. Engagement scores climbed. The company received a Gallup Great Workplace Award for five years in a row. And financial performance responded in kind: DTE’s stock price more than tripled from the end of 2008 to the end of 2017.

Why did purpose work so well after other interventions had failed? Anderson had previously tried to shake things up by providing training, altering incentives, and increasing managerial oversight, with disappointing results. It turned out that his approach was to blame—not his people.

That’s a hard truth to recognize. If, like many executives, you’re applying conventional economic logic, you view your employees as self-interested agents and design your organizational practices and culture accordingly, and that hasn’t paid off as you’d hoped.

So you now face a choice: You can double down on that approach, on the assumption that you just need more or stricter controls to achieve the desired impact. Or you can align the organization with an authentic higher purpose that intersects with your business interests and helps guide your decisions. If you succeed in doing the latter, your people will try new things, move into deep learning, take risks, and make surprising contributions. ...

In this article we provide a framework that can help managers break out of this vicious cycle. In our consulting work with hundreds of organizations and in our research—which includes extensive interviews with dozens of leaders and the development of a theoretical model [The Economics of Higher Purpose]—we have come to see that when an authentic purpose permeates business strategy and decision making, the personal good and the collective good become one. Positive peer pressure kicks in, and employees are reenergized. Collaboration increases, learning accelerates, and performance climbs. We’ll look at how you can set off a similar chain of events in your organization, drawing on examples from a range of companies. ...

1. Envision an inspired workforce. ...
2. Discover the purpose. ...
3. Recognize the need for authenticity. ...
4. Turn the authentic message into a constant message. ...
5. Stimulate individual learning. ...
6. Turn midlevel managers into purpose-driven leaders. ...

To build an inspired, committed workforce, you’ll need middle managers who not only know the organization’s purpose but also deeply connect with it and lead with moral power. That goes way beyond what most companies ask of their midlevel people.

Consider KPMG, a Big Four accounting cooperative with thousands of partners. For decades those partners approached leadership like accounting. They were careful in their observations, exact in their assessments, and cautious about their decisions, because that was the cultural tone set at the top. Senior leaders were not inclined to get emotional about ideals, and neither were the partners. As a result, employees at all levels tended to make only safe, incremental improvements.

But then KPMG went through a transformation. The company began to explore the notion of purpose. Searching its history, its leaders were surprised to find that it had made many significant contributions to major world events. After conducting and analyzing hundreds of employee interviews, they concluded that KPMG’s purpose was to help clients “inspire confidence and empower change.”

These five words evoked a sense of awe in the firm, but KPMG’s top executives avoided the temptation to turn them into a marketing slogan. Instead, they set out to connect every leader and manager to the purpose. They began by talking openly about their own sense of purpose and meaning. When this had an impact, they recognized that the partners needed to do the same with their teams. When senior management shared these expectations, the partners were open to them but did not feel equipped to meet them. So the accounting firm invested in a new kind of training, in which the partners learned how to tell compelling stories that conveyed their sense of personal identity and professional purpose.

Though applying that training was difficult—it was a real stretch for experts in investment, real estate, tax, risk consulting, and so on—the culture did change. Today the partners communicate their personal purpose to their teams and discuss how it links to their professional lives and the organization’s reason for being. In doing so, they are modeling a vulnerability and authenticity that no one had previously expected to see at the middle levels of this accounting firm.

     7. Connect the people to the purpose.

Once leaders at the top and in the middle have internalized the organization’s purpose, they must help frontline employees see how it connects with their day-to-day tasks. But a top-down mandate does not work. Employees need to help drive this process, because then the purpose is more likely to permeate the culture, shaping behavior even when managers aren’t right there to watch how people are handling things.

Our best illustration again comes from KPMG, where employees were encouraged to share their own accounts of how they were making a difference. This evolved into a remarkable program called the 10,000 Stories Challenge. It gave employees access to a user-friendly design program and invited them to create posters that would answer the question “What do you do at KPMG?” while capturing their passion and connecting it to the organization’s purpose.

Each participating employee created a purpose-driven headline, such as “I Combat Terrorism,” and under it wrote a clarifying statement, such as “KPMG helps scores of financial institutions prevent money laundering, keeping financial resources out of the hands of terrorists and criminals.” Beneath the statement, the employee would insert his or her picture. Each poster carried the tagline “Inspire Confidence. Empower Change.”

In June company leaders announced that if the staff could create 10,000 posters by Thanksgiving, two extra days would be added to the holiday break. Employees hit that benchmark within a month. But then the process went viral—after the reward had already been earned. Twenty-seven thousand people produced 42,000 posters (some individuals made multiple submissions, and teams produced them as well). KPMG had found a brilliant way to help employees personally identify with its collective purpose.

Once the firm’s overall transformation had taken root, surveys showed that employees’ pride in their work had increased, and engagement scores reached record levels. The firm eventually climbed 31 places, to the number 12 spot, on Fortune’s 100 Best Companies to Work For list, making it the highest ranked of the Big Four. Recruiting improved, and as turnover decreased, costs dropped.

     8. Unleash the positive energizers. ...

CONCLUSION
Although a higher purpose does not guarantee economic benefits, we have seen impressive results in many organizations. And other research—particularly the Gartenberg study, which included 500,000 people across 429 firms and involved 917 firm-year observations from 2006 to 2011—suggests a positive impact on both operating financial performance (return on assets) and forward-looking measures of performance (Tobin’s Q and stock returns) when the purpose is communicated with clarity.

So purpose is not just a lofty ideal; it has practical implications for your company’s financial health and competitiveness. People who find meaning in their work don’t hoard their energy and dedication. They give them freely, defying conventional economic assumptions about self-interest. They grow rather than stagnate. They do more—and they do it better.

By tapping into that power, you can transform an entire organization.