THINKING

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

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.

Jaimie Ratten
Posted by Jaimie Ratten
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