Beyond profit: how purpose-driven planning creates reliable business growth (part one)

To achieve growth that's truly sustainable over time, planning must be purpose-driven

The environment for SMEs is right now more challenging than it's been for some time. With so many factors at play, including high interest rates, high and increasing power costs, general economic uncertainty and geopolitical issues, life in the SME world is tough. 

With this in mind, some business owners and leaders have recognised the need for a more robust approach to planning than "traditional" models offer. More robust, for example, than the idea that working backward from financial targets is a sustainable way to grow a business over the long term. They know that at the heart of truly sustainable, reliable growth is a simple yet critical (and often overlooked) concept: business purpose. 

As we've so often written in previous posts, purpose - the reason your business exists beyond the pursuit of revenue and profit - serves as the "north star" that drives decision-making, aligns teams and, as a result, delivers more predictable, sustainable growth and the financial outcomes that come with it.

In this, part one of a two-part Insight, we’ll explain what purpose-driven planning is, some of the high-level issues you need to think about before you take the plunge and move more towards this kind of planning in your business, and how doing so improves decision-making. In our second instalment, we’ll cover the essential steps you need to follow to successfully make the change.

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Key takeaways

• Your business purpose can be your business "super-power" in aligning teams and guiding decision-making

• The purpose-driven planning framework recognises that financial results are the outcome of what happens in a business...not the starting point

• Purpose-driven planning improves decision-making through closer internal alignment, a longer-term perspective, improved risk assessment and increased decision speed

As ever, if you enjoy this Insight, please feel free to share it with contacts, colleagues and clients

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Why purpose matters more than ever

Purpose – real business purpose rather than a commitment to a social cause - has become increasingly important, evolving from a "nice-to-have" into a business imperative. 

Research globally consistently shows that purpose-driven businesses outperform their peers across multiple dimensions.

For example:

• According to Deloitte, purpose-driven businesses enjoy higher market share gains and grow on average three times faster than their peers;

• Harvard Business Review reports that employees of purpose-driven businesses are more than three times as likely to stay with their employers. Many other studies point to higher employee engagement levels also;

• EY's research shows that 84% of leaders believe that business transformations will be more successful when driven by and integrated with purpose.

This is the tip of the iceberg...a quick Google search will deliver plenty more if needed.

Resources are never finite in any business - they're always limited. That's especially true in SMEs, so anchoring strategy (and planning in general) in purpose provides the clarity you need to effectively navigate the complex world we live in today.

Purpose as the foundation for planning in your business

As we pointed out earlier, planning in many businesses begins with a set of financial objectives. Targets are important, but they're outcomes rather than drivers. When financial objectives become the key focus and primary planning start point, businesses risk making short-term decisions that can compromise longer-term outcomes. We've witnessed this countless times.

Without purpose, what's actually driving your planning process?

Purpose-driven planning turns the financially-driven approach on its head. By clearly understanding why your business exists and who it primarily serves, you establish a point from which all subsequent decisions can be more effectively and impactfully made. In doing so, you create a logical planning approach where:

1. Purpose defines the "non-financial" reason you exist

2. Vision describes what success looks like at a point in future

3. Strategy sets out the plan for achieving that vision (while remaining true to purpose)

4. Business and action plans establish measurable milestones that keep strategy on track

5. Key performance indicators (KPIs) outline the part individual employees play in executing the plans

Here's the process summarised graphically:

The GrowthCatalyst purpose-driven planning framework used by our clients

With purpose as the starting point, this planning approach helps ensure alignment throughout the business, reducing the risk of embarking on disconnected initiatives and the ineffective use of finite resources. Importantly, it also creates higher levels of resilience in the business than might otherwise be the case - when market conditions change, your purpose remains unchanged, which underpins stability in the face of uncertainty.

The elements of purpose-driven planning

Several high-level characteristics are at the heart of a robust purpose-driven planning framework, distinguishing it from more traditional approaches.

i) (Re)Discover and articulate your purpose

The first thing that will set you up for success is to clearly define (or review and redefine, if appropriate) your business purpose. This isn't simply a case of coming up with a catchy statement...it requires a deep look into:

• Exactly why your business came into existence;

• The specific problem or problems your business solves; 

• Your "ideal client" and other stakeholders in your orbit;

• The real value you deliver;

• The values and behaviours that are core to your business "personality".

There's potentially quite a bit of work involved in this process but it's well worth doing. In many (maybe most) businesses, we find there are multiple versions of "a" purpose with no real understanding of or focus on "the" purpose. That's simply a result of how businesses evolve, with changing leadership, employees coming and going, and little time spent on getting purpose messaging consistent.

Usually, purpose evolves from the intentions of the founders of the business, regardless of how old or how big that business has become. So that’s a good place to start.

If you'd like more guidance on discovering or rediscovering your purpose, check out our previous Insight.

ii) Involve your stakeholders as necessary

A purpose-driven planning process considers the needs of all stakeholders - that is, not just shareholders. They include:

• Your clients whose challenges you address;

• Employees who, through their day-to-day activities, bring purpose to life;

• Members of your value chain;

• Communities in which you operate;

• Shareholders and investors.

Your key stakeholders should be involved as necessary in your purpose-driven planning

Think about the impact you'd like to make on each of these groups. This enables you to create a comprehensive foundation for your planning that helps you better deal with opportunities and tensions as they inevitably arise. 

iii) Decision-making: heavy on the values...

Establishing clarity of purpose is, as we've mentioned, just the first step. Next, it must translate into practical and workable decision-making “guardrails”. This means being clear on the principles and values that guide choices made by people in every nook and cranny of your business. The importance of this becomes highly evident when you're:

• evaluating new opportunities 

• deciding how to deploy your finite resources

• managing conflicting priorities

• determining and refining your ideal client profile

• navigating the inevitable ethical dilemmas that can crop up

Without purpose and clarity around values, these issues are often solved on a more subjective level than is ideal. With both in place, decisions become more objective and consistent and are far more likely to reinforce your efforts to achieve your growth aspirations.

iv) Target your measurement systems

With traditional planning processes, measurement is pretty straightforward and starts (and frequently ends) with one simple question: "What do the numbers say?"

Numbers alone don't tell the whole truth

Measuring the numbers is essential, of course, but in a purpose-driven planning process, it's one dimension of a performance management system that should be far more comprehensive. In other words, financial metrics aren't the place to start. That means measuring the following:

• Purpose fulfilment;

• Impact on clients (primarily measured by true engagement rather than satisfaction);

• Employee engagement and alignment;

• Long-term value creation (rather than short-term "sugar hit" financial outcomes).

This is a more "balanced" approach to measuring performance and encourages everyone to think at least in equal measure about longer-term outcomes that might otherwise be sacrificed in the name of short-term distractions.

How purpose-driven planning improves decision-making

How many times have you wondered why decisions in your business take so long to make? 

"It was easier," you say to yourself as a founder, "when it was just me and maybe one or two others." But as you've grown, it's become harder and harder to get to the point of an issue and consistently make rapid, effective decisions. 

Say hello to decisions powered by purpose-driven planning!

Here's how it works...

i) Alignment and consistency

Under "old school" thinking, there's a real danger that decisions will reflect the preferences of whoever holds the "power" in a situation. This can create inconsistency and unpredictability. In a purpose-driven planning context, we have a much more consistent decision-making framework that has little to do with personal opinions or preferences. So, choices made are more likely to align with and support what the business is trying to achieve.

It's also easier to give employees more autonomy, which in turn positively impacts engagement and productivity.

ii) Long-term thinking

Because of its forward-looking, long-term nature, your business purpose naturally encourages people to think long-term when making decisions. Financially-driven choices tend to focus on much shorter-term results to satisfy those with financial outcomes top of mind.

Short-term thinking too often drive business choices. Purpose helps you avoid that and think longer-term

What would you rather? An environment in which purpose-oriented choices facilitate a longer view of value creation or one where that's sacrificed in the name of short-term sugar hits?

iii) Improved risk assessment

Purpose is a wonderful lens through which to look at risk and risk management. Beyond financial issues, purpose-driven planning considers a broader range of potential risks, including:

• The quality of client relationships and ongoing value delivery;

• Employee engagement and productivity;

• Brand reputation;

• Long-term market position;

• Reliability and consistency of growth.

This multi-dimensional approach leads to decisions that balance long-term and short-term imperatives by focusing on tangible and intangible assets.

iv) Increased decision speed

This is something most SME leaders say they really value when they discuss the impact of the purpose-driven planning framework on their business.

By establishing clear guardrails and priorities around decision-making, purpose allows businesses to eliminate quite a bit of the deliberation that typically surrounds decisions (even sometimes relatively minor ones). So, the purpose framework helps accelerate decision-making without detracting from the quality of those decisions because of the guidance it provides.

That's a lot

It really is.

It's fair to say that the traditional planning method (let's call it "spreadsheet planning") has a few shortcomings in the modern world of business.

A purpose-driven approach provides the structure that every good story needs: a beginning (your purpose), a middle (vision and strategy) and an end (action plans and measurable outcomes). It's easier to get your team on board because they'll see it as more than just a numbers game.

Your stakeholders will see a difference, too because you'll naturally gravitate to more of a partnership way of working with them, rather than simply trying to get the best deal you possibly can from one another.

It might seem daunting at first but it's a transformation worth making.

Is spreadsheet planning still your preferred tool?

Want to change things up for a better result? 

A conversation with a GrowthCatalyst adviser could be just what you need. We'll walk you through our Business Profiler and discuss the benefits you can expect it to deliver as you work towards your long-term aspirations. 

Contact us to arrange a face-to-face or virtual conversation.

Alternatively, you can book a time for an initial discussion here.

In other news...

GrowthCatalyst has joined forces with several like-minded professionals to form the advisory group Konektis (check us out here). Collectively, the Konektis team provides integrated, multi-disciplinary advice to SMEs to deliver a "one strategy" outcome.