Enabling Success Through Soft Factors, Purpose And Agility

Most family businesses measure and track performance against a set of rather generic KPIs, such as profit, volume, turnover, etc. Although it makes sense to maintain these indicators in any company scorecard, it must be considered that many of the generic measures are merely outcomes and not enablers of performance. Many family businesses do consider both lead indicators and lag indicators, but these are generally the ‘hard’ indicators, with too little emphasis on the softer, less quantifiable factors that play a significant role in enabling strong performance and building a winning culture over a sustained period. Two key performance enablers that demand attention are agility and purpose, both proving to be highly effective ingredients of successful businesses and therefore making a clear business purpose and agile business strategy something of importance in todays business realm.

Purpose-driven Companies Deliver Superior Performance

If employees believe that their business purpose is to make a profit, innovation and customer-focus often suffer to the detriment of company performance. When companies have an articulated purpose that transcends their products and services and is more significant than just money, customer loyalty and employee engagement is superior, ultimately leading to improved long-term financial performance. Moreover, purpose-driven businesses attract and keep the best talent. Daniel Pink, the author of Drive, states that “most deeply motivated people, not to mention those who are most productive and satisfied, hitch their desires to a cause larger than themselves.” When that cause or  business purpose becomes embedded into the culture and strategy of a company, it tends to unify a leadership team and resonate throughout the organization and beyond. Peter Drucker, commenting on the importance of shared intention, once observed, “The most successful company is not the one with the most brains, but the most brains acting in concert.” The evidence supporting the benefits of business purpose is compelling: Purpose consultant Aaron Hurst, the founder of Imperative, found that 42% of companies that were not considered “purpose- driven” experienced a decline in year-on-year revenue. In contrast, 85% of purpose-led companies enjoyed positive growth. UBS & Campden Wealth 2018 Global Family Office Report indicates that only a third of Family Offices have a clearly defined business purpose statement, which is evidence of the work required to address this gap.

How To Define Your Purpose Statement

As Simon Sinek says in his book, Start with Why, it’s the idea of who you are as a company and why you exist. Some questions you need to ask that can assist in defining a purpose statement:

  • Why does our organization’s existence matter?
  • What is our most important reason for being here?
  • What would be lost if this organization ceased to exist?
  • Why are we relevant to the people we serve?
  • Why would anyone dedicate their precious time, energy, and passion for our company?
  • Defining your core purpose is all about clarity, authenticity, and alignment.

Agility Is Essential

Aaron De Smet, leader of organization design at Mckinsey, defines agility as the ability of an organization to renew itself, adapt, change quickly and succeed in a rapidly changing, ambiguous, turbulent environment. Wouter Aghina, principal at Mckinsey, when commenting on the agility challenge within established businesses, claims that “most of them have been successful by actually using what we call a managerial hierarchy, a classical way of managing from the top down, with jobs, boxes, lines, structures and process descriptions, running and controlling the company from the top.” This is true for the majority of family businesses who revert to rules and processes and structures that have worked in the past when confronted with change and uncertainty. Instead, they should be looking at reducing structures and processes to promote flexibility, creativity and swift decision-making – a agile business strategy. Michael Hugos, principal at Centre for Systems Innovation, estimates that companies who achieve effective levels of agility can grow profit by an additional 2%-4% per annum.

Three Tips To Become More Agile

Governance enables fast decision-making. Ensure that employees at all levels are empowered to make decisions according to a clear mandate.
Primary organizational structures can remain consistent, but there need to be mechanisms in place to quickly assemble teams to address challenges and opportunities that arise.
Establish a winning culture of high energy, trust and innovation.
Hugos provides us with a formula for building agility: Agility = (Visibility + Motivation) x Training. To translate this somewhat technical view on agile business strategy into practical application, Hugo explains that agility is achieved “If people can see what’s going on in their area of operation and if they have the motivation to respond appropriately. The effect of this visibility and motivation will be multiplied and magnified by the training people get.”

This post originally appeared on Forbes.com

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