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A Study In Building A Purpose-Driven Business

How you can balance your desire to do good with the necessity to run a successful business.

A Study In Building A Purpose-Driven Business
[Photo: Flickr user ms.akr]

How do you create a successful business with social good in mind?

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The answer used to be simple. Companies held an annual campaign for the United Way or sponsored a local charity, but there was no doubt that any purpose beyond profit was secondary.

What may have been an afterthought in the past is the entire reason to start a business today. A purpose extending beyond profit is more than a marketing tool. It guides every choice and decision. It’s a valuable tool for attracting and engaging employees, customers, and communities who value a company that does good while also being successful.

A Lesson In Purpose

Leaders who yearn to create a purpose-driven company could learn a thing or two from Bridgeway Capital Management. Founded in 1993, Barron’s called the quantitative investment management firm one of the best quantitative investment operations, and Morningstar awarded five stars to their Bridgeway Social Responsibility Portfolio. Yet the headline of their website asks, “Can your investments change the world?”

Bridgeway’s purpose permeates every aspect of how they run their business: changing the world through delivering innovative investment solutions. Talk to founder John Montgomery and you will learn that he is most proud of two things: that the company gives away 50% of its after-tax profits through its Bridgeway Foundation; and that Bridgeway has grown into an employer that enjoys immense loyalty from its staff because of the way it treats people.

That’s the hard part about being purpose-driven on purpose: balancing a desire to do good with the necessity to run a successful business. Few will accept poor performance simply because you are a purpose-driven business even if they are interested in your cause.

Today’s leaders can utilize a few lessons from Bridgeway.

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You Can’t Just Say You’re A Different Kind Of Company

The customers and employees you want to attract are wary of platitudes unsupported by action. Giving away profits is only half of the equation. Prospective and current employees must also experience how you are a different kind of company.

Like Bridgeway, many companies call employees “partners.” Unfortunately, most then demonstrate inequality with how employees and managers are paid and treated. Instead you could follow Bridgeway’s example and cap the highest salaries at seven times that of the lowest-paid partner.

Most leaders speak of empowerment and staff involvement. Bridgeway’s nonhierarchical culture gives people at every level the ability to influence decisions typically reserved for management. And while doing so can appear inefficient, it’s a trade-off Bridgeway willingly embraces to protect its culture.

A Truly Meaningful Purpose Is A Strong Motivator

Research done by BNET shows that today’s best employees are motivated by the opportunity to do something meaningful more than by money. They won’t work for free. But the smart, creative, nimble, and passionate people you want will give their best to do work that is important.

For Bridgeway, the meaningful purpose is doing philanthropic work around the core issues of human rights, eliminating genocide, and peace and reconciliation. It doesn’t have to be that grand, however. The size of the imprint is less important than its positive meaning for those invested to help you.
PepsiCo CEO Indra Nooyi says: “Performance with a purpose is based on the belief that companies can–and must–achieve business success while also achieving a lasting and positive imprint on society.”

Need proof that it works? Amazingly, only one person has voluntarily left the portfolio and research team since the firm’s inception. Overall, the firm’s historic turnover rate is 3%. Partners repeatedly site their commitment to the mission as the reason they stay with the firm.

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Who You Hire Is Important

“Hiring for fit” must be taken to a completely new level if you are giving away 50% of your profits. Bridgeway takes extra steps in the interview process to ensure that new partners are aligned with the company’s purpose of giving.

Plan Ahead

It’s easy to be purpose-driven and create a different type of organizational culture when things are going well. The true test of commitment is when trouble hits. Bridgeway’s assets plummeted from $6.3 billion to $1.7 billion during the financial turmoil of 2008-2009. So how do you donate your profits when there are none to share?

In the very earliest stages of the company’s history, Bridgeway thought ahead about maintaining its purpose and culture in the face of an economic downturn. This allowed the company to make decisions based on what was best rather than what was easy in the face of a challenge. It restructured and redefined giving, allowing philanthropy to continue. Involving employees in decision-making didn’t make many of its choices any less painful, but it built support throughout the company.

Be Willing To Go All In To Show You Really Believe In The Purpose

Real leaders place the needs of the organization ahead of their own. Despite everything it tried, Bridgeway had to shed salaries during the Great Recession: For the first time in its history it had to lay people off. One of them was Montgomery, who stopped paying himself and volunteered until the company could pay his salary again.

On the surface, purpose-driven leaders who engage the next level of talent look familiar, but they aren’t. Their difference emanates from the cellular level. It’s not a matter of creating a new statement to hang on the wall or corporate initiative. It’s about thinking, acting, and being a different type of leader for a different type of organization.

–Randy Pennington is the author of the book MAKE CHANGE WORK: Staying Nimble, Relevant, and Engaged in a World of Constant Change and is the founder of Pennington Performance Group.