Beyond Leadership

There’s a growing sense that corporations need to be focused more on long-term sustainability and less on short-term profitability. However, it’s difficult for well-established companies to make that shift, because it requires that well-entrenched organizational routines change. Most of them are not start-ups that began with a social purpose. At companies that have performed well, sometimes for decades, it’s natural for employees to continue the behaviors that have led to strong results. Success, more than failure, prevents a company’s transformation.

Researchers studied the transformation journey of Pepsi and its Performance with Purpose (PwP) and provide some guidance for CEOs seeking to implement a purpose-driven strategy at their own companies:

• Anchor your transformation in a view of the future: Leaders should consider setting up a team that reports directly to the CEO and scouts out the megatrends that will affect the organization. Members of the team should be carefully selected so that they are not wedded to the status quo and can think outside-in.

• Ensure that the board is your ally: Such a strategy requires the support of the board of directors. Therefore, you need to show the board how the megatrends analysis should shape its strategy and how PwP would be beneficial for the company in the long-term.

• Be thoughtful about the language you use to communicate your transformation: global companies must communicate its purpose-driven strategy in a way that everyone everywhere can understand it. But it should not trivialize the message.

• Model the necessary behaviors with early actions: Taking bold actions early is critical for showing the organization that the purpose-driven strategy is not just the flavor of the day. Three things will send a clear message: creating high-profile leadership positions and filling many of them with outsiders, overturning decisions that would have made it through in the “old days”, and letting some people go.

• Develop the capabilities that advance the purpose-driven strategy: To execute the newly promoted strategy, a company has to build fresh capabilities in different fields. Such a change consists of a talent pool, cultural background, gender, ethnicity, and location.

• Localize the execution of strategy: In the example of a company that operates in several markets, each market should have the freedom to tailor the approach to its needs: freedom within a frame.

• Find support outside the company: CEOs within a company cannot execute a purpose-driven strategy without building coalitions of support and finding ways to respond to external critics.

• Embed purpose in the organizational DNA: A purpose-driven transformation may start out as the CEO’s passion, but it will not survive unless it is embedded in the organizational DNA. That requires several kinds of reinforcement, through communication, resource allocation, goal setting, and recognition and rewards.

Conclusion: How important is corporate social responsibility for our future generations? Do you consider this aspect when thinking about different purchasing options?

Nooyi, I. K. & Govindarajan, V. (2020). Becoming a Better Corporate Citizen. Harvard Business Review, 98(2), 94-103.

*Slovenian Research Agency, Program P5-0364 – The Impact of Corporate Governance, Organizational Learning, University of Ljubljana, School of Economics and Business, Slovenia.