One of the key things we help our clients with is aligning their business plans with their business purpose. We go so far as to say that if there’s “stuff” going on in the business that doesn’t clearly link to, and help fulfill, its purpose then quite probably it’s a waste of time and resources.
The benefits of a clear and embedded business purpose (beyond commercial interests) are real, and businesses that embrace purpose as their framework for decision-making report:
higher levels of customer engagement. they attract more of the right customers who buy the right products/services at the right price. And they enjoy more repeat business;
improvements in employee engagement, with employees more motivated and willing to provide discretionary effort;
an ability to design processes that truly support the customer experience and are easy for employees to use; and,
business growth that is more sustainable over time with improved financial outcomes as a result.
Even with all that evidence, there are still pockets of resistance to the fact that if you’re looking for that thing you can rely on as validation for everything you do in your business, then purpose is it.
Slightly more understandable is a reluctance to accept the fact that financial outcomes are merely the result of everything else that goes on in a business. It’s more understandable because this is the mindset most business owners and leaders have been trained (either formally or by experience) to adopt.
While it may be more understandable, it’s also incredibly frustrating to watch a business fall short of its potential because of an unrelenting focus on financial results.
That's a comment that might sit uncomfortably with some people.So, if you sit in the “profit mindset” camp, we’d like to pose a couple of questions:
Does your focus on bottom line outcomes attract the right customers buying the right products/services at the right price?
Does that focus help you retain those customers as repeat purchasers?
Did your employees join your business, do they stay with you becoming advocates for your business and go "above and beyond" because of your focus on financial outcomes?
Does your vice-like grip on expenses result in customer and employee friendly systems and processes?
We didn’t think so.
Change your mindset
To answer yes to the questions just posed, a shift in mindset may be just what the doctor ordered. The graphic and commentary below captures what we mean:
In the profit mindset, we think of customers in a transactional sense, dealing only with their immediate requirements. Having done that, we send them on their way so we can seek out the next sales opportunity (oh, sorry…customer). We think only in terms of volume.
When we view customers through our purpose lens, we take a much broader view. We try to understand more about them, why they have the needs and issues they do and, armed with that knowledge, offer a range of solutions rather than one-off product sales. Our communications with customers are also purpose-driven aiming to create a deep connection with them which enhances engagement.
The reality is customers are not economically rational beings. They don’t make purchasing decisions based purely on “utility”. If they did, there’d be no market for things like BMWs (given they do the same thing as a Kia does), high-end leather sofas, 65-inch TV sets or any other luxury products and services.
It’s also why a profit-driven customer acquisition strategy won’t result in growth that’s sustainable over the long term.
Thinking of employees only in terms of how they can contribute to our bottom line means we see them in the same light as the physical assets of the business. Just as we might look at our fleet of delivery vehicles and work out they can travel 100,000km a year for 3 years before they need to be replaced, our view of employees will be output driven. We’ll express their value in terms of how many widgets they can produce in a day, week or month and pay little attention to them until something goes wrong. Again, we’re focused on volume.
When we take the time to involve employees in the purpose of our business, something interesting happens. They tend to become more invested in the work they do because it’s more meaningful to them. If they produce widgets and understand how important those widgets are to customers and why, they’re likely to want to produce more. And research even suggests that people would do the same job for less money in a business that is clearly purpose-driven and provides meaningful work.
Taking a profit-driven approach to acquiring, engaging and retaining high quality employees simply won’t deliver sustainable growth outcomes.
Processes need to be efficient. They also need to be effective. With a profit mindset, we focus too much on the former and nowhere near enough on the latter. We want processes that provide maximum throughput for minimum investment. “How much will it cost?” is the default position on any process/operational improvement. Once again, volume rules.
Creating processes driven by purpose places us in a mindset of thinking about effectiveness first…effectiveness in terms of how each process helps us fulfill our service promise to customers. “How will this improve the customer experience?” becomes the first question we ask about processes/operations. We take the view that making it easy for customers to deal with us will strengthen engagement and lead to high levels of repeat business and loyalty. And it works.
Customers love businesses that are easy to deal with and where processes are clearly “purpose-designed” around them to help them satisfy a range of needs. They won’t put up with aggravation and will simply stop dealing with businesses that cause them grief.
By now, it’s probably clear. Profit-driven leadership thinks only (or primarily) in terms of financials first. Daylight is second, with everything else a distant third.
Those who think in terms of purpose have customer outcomes and employee engagement as their priorities. For them it’s obvious….get those two things right and financial success will follow, creating sustainable growth.
If any further convincing is required, look no further than research conducted jointly by the Harvard Business Review and EY that showed over a three year period to the end of 2017, almost 60% of businesses that prioritise purpose achieved revenue growth in excess of 10%. And 42% of businesses that don't focus on purpose had flat or declining revenue over the same period.
What does all this have to do with business planning?
Glad you asked…
First up, your business plan gives life to your strategy (at least it should do that). If your strategy is a set of long-term goals and objectives you want to achieve in the business, then your business plan is the shorter-term action plans you need to complete to meet your strategy objectives.
But…where do those strategic goals and objectives come from? What drives them?
In some businesses they’re simply a laundry list of unrelated “great ideas”. In others, they may be related ideas but may not necessarily take the business in the right direction. In still others, it’s quite possible there’s no strategy at all which makes business planning a totally hit and miss affair.
We’ve worked with businesses that were in each of these categories when we first met them.
For a strategy to be truly meaningful and focused, it should be driven by your busines purpose. It follows, then, that business plans should identify actions and priorities that are also purpose-driven.
Following this logic and thinking about our profit/purpose mindsets, here’s why purpose-driven business planning is a driver of success:
It drives effective project prioritisation. Most business planning sessions result in multiple new projects, adjustments to existing ones and a whole range of supporting tasks. Without a sense of why your business exists you’ll most likely make go/no go decisions about projects bases solely on financial considerations.
It enables more informed decisions about resource allocation. There’s only so many people and physical resources and competition for them is usually fierce. Linking the planning process to purpose injects objectivity and transparency into the resource allocation process (provided of course, your purpose is well communicated and understood across the business).
A purpose-driven business plan makes it so much simpler to build the right operational structure and recruit the right talent. Clarity of purpose is a fundamental element of an attractive employee value proposition.
It also gives team members permission to be creative and innovative (even if those words are a tad over-used these days). Purpose provides clear direction which helps everyone understand the parameters within which measured risk taking is ok. You don't get innovation without some degree of risk taking. And you don't get sustainable growth without innovation.
Business growth that’s sustainable over time is a result of having your customer, employee and operational ducks in a row. That’s difficult to do unless purpose, strategy and business plans are firmly aligned.
You’d think that with these pretty obvious links that everyone would be on board – especially businesses struggling to achieve sustainable growth. Seems that’s not true though.
A study conducted by EY found that while 90% of executives polled believed their company understood the importance of purpose, only 46% used purpose to drive business planning. Which is a shame, because other studies have found, as we pointed out earlier, that purposeful businesses outperform those with little or no focus on purpose.
We believe a purpose-driven business plan is an incredibly powerful tool in the pursuit sustainable growth. In any business. The evidence is pretty hard to ignore.
Is your business plan purpose-driven?
If this Insight has given you food for thought, you're probably interested in creating sustainable growth through focused business planning. That's where GrowthCatalyst can help.
We invite you to contact us to arrange a conversation, face-to-face or virtual.
Alternatively, you can book a time for an initial discussion here.
How sustainable is your business growth?
If you're keen for some immediate feedback on how sustainable your business growth might be over the longer term, please follow the link to our "Sustainable Business Growth Health Check".
It'll take you no longer than three minutes to complete and you'll get your results instantly.
Why not subscribe?
If you want to make sure you never miss an update from us, please provide your details on our Insights page. We'll add you to our list!