ARTICLES

3. Purpose + clarity is the key driver of financial performance

By Jaimie Ratten
Founder & Managing Director

The third finding from the largest study into corporate purpose and financial performance is that there is one component that’s absolutely critical for success:

Clarity.

First and foremost is management’s ability to provide clarity of purpose, “… a clear view of where the organisation is going and how to get there”, which is fundamental in creating a strong sense of meaning, setting direction and ensuring everyone is on the same page.1

The bottom line is that a high level of Purpose-Clarity leads to economically significant financial success and that an investment portfolio of such companies “earns significant positive risk-adjusted share returns in the future, up to 7.6% annually.”1

Furthermore, unlike Purpose-Camaraderie, this study finds that Purpose-Clarity significantly reduces voluntary employee turnover: “employees voluntarily leave when Purpose-Clarity is low and stay when it is high”.1

[1] Gartenberg, Claudine M., Andrea Prat, & George Serafeim. (2016). Corporate Purpose and Financial Performance. Columbia Business School Research Paper No. 16-69. Retrieved from https://repository.upenn.edu/mgmt_papers/274.