This study Corporate Purpose and Financial Performance "focused on publicly listed companies and calculate measures of purpose for 456,666 employees within 429 firms and six years across a broad range of industries.” The sample in this study is from “The Great Places to Work® Institute administers Fortune Magazine’s annual “100 Best Companies to Work For” list.”
It should be noted that this study is not representative of all firms, due to the costs associated with conducting the research. Consequently, Burwick Consulting predicts that firms at a different lifecycle than firms in this study could experience positive stock returns that exceed those reported in this study due to organizational maturity, and growth potential.
To determine how employees rate their firms sense of purpose and clarity, which equates to meaningful work, the GPTW study uses the following prompts:
- “My work has special meaning: this is not just a job”
- “I feel good about the ways we contribute to the community”
- “When I look at what we accomplish, I feel a sense of pride”
- “I am proud to tell others I work here”
- “Management makes its expectations clear”
- “Management has a clear view of where the organization is going and how to get there”
- “I am given the resources and equipment to do my job”
The study demonstrates that when firms score highly both in purpose and clarity there is the relationship to positive stock performance noted above. It is also important to note that not all employee ratings had significant impact on financial performance. Mid- Level managers ratings of purpose and clarity have the strongest correlation with positive stock prices. Further, this study finds that there is no clear relation between compensation and meaningful work.
Although this study confirms that corporate purpose and clarity promote abnormally positive stock performance, many organizational leaders dismiss this approach. It is likely that corporate leadership that dismisses the value or purpose and clarity in light current research operates under different economic assumptions regarding the purpose of an organization. Specifically “That a corporation’s sole purpose is to maximize profits and as a result shareholder value”.
Conceptually this philosophical approach to Corporate Purpose is correct, it is a matter of how a corporation maximizes it’s profitability which is up for debate. Market pressures and managerial monetary incentives often create short term strategic decisions that may maximize short term profits, but do not promote long term profitability for a firm.
Burwick Consulting, and the authors of this study suggest that firms which focus on how their firm tangible impacts their clients have stronger long term financial performance, and better retention rates.
This study validates assumptions regarding the importance of clarity and purpose as it relates to positive financial performance. And it suggests several factors possibly responsible as causes for the employees feelings towards their firm. These examples including Novo Nordisk, Virgin Group, and Unilever suggest that positive correlations in purpose and clarity begin with organizational leadership and policy makers defining a corporate mission which has a sense of purpose beyond profit maximization, which inherently maximizes profits by creating the sense of purpose and clarity for their employees.
Organizational leaders should be asking themselves about the purpose of their firm in order to improve financial performance.