Ranjay Gulati's Deep Purpose
Last week, I met with Ranjay Gulati, professor of business administration, Harvard Business School, to discuss his book Deep Purpose: The Heart and Soul of High-Performance Companies (Harper Business, February 2022). The book describes the kind of feeling and passion that I have seen in leaders who have inspired extraordinary performance.
Real leaders, instead of saying, “Well, I think we should give a little bit more emphasis to this dimension, or to that aspect,” in a hyper-intellectual way, put their heart and soul into what they say and do. They communicate the why. The book gets to what is missing in so many management and leadership tracts.
Ranjay Gulati: The book—my seventh—turned out to be my hardest book to write. The topic was outside my comfort zone. I am a left-brain thinker: econ, math, computer science—that’s my world. To do a book on purpose—a loosey-goosey, fuzzy topic—was not straightforward.
Academics aren’t used to bringing our personal story into our research. We're supposed to be dispassionate observers of business or whatever phenomenon we study.
The book also reflected my own growth as an individual. In one sense, the topic of the book was uncomfortable, but it was also exciting to be more open about myself.
Denning: Why is that important?
Gulati: Having clarity of intention just makes life simpler. It forces you to think about legacy and what you will leave behind. When you have clarity of purpose, you're no longer confused about yourself, the choices you're making or the decisions you make. You are not confused about career choices, spouse choices, family choices, or lifestyle choices. You may not have answers to all these questions, but you have a framework to think of the answers.
Denning: What does this mean for organizations?
Gulati: My definition of purpose comes from The Path to Purpose: Helping Our Children Find Their Calling in Life (Free Press, 2008) by William Damon, a psychologist and a professor at Stanford University. Damon said that purpose is the stable and enduring framework to think about what is meaningful to yourself and of consequence to the world beyond yourself. Deep down, we want to do something that's consequential to the world beyond the self. Whether it is to write, or to educate others, or to build a business.
I remember as a graduate student that we came from the tradition at Harvard Business School that was all about the what and the how. When I started unlocking business potential. I thought I had a great strategy and I began implementing the hell out of that strategy. I never thought about the why.
Denning: What changed your thinking?
Purpose At Microsoft
Gulati: I had several epiphanies. One was interviewing Satya Nadella, the Microsoft CEO. He said, “Listen, we have a great strategy, an implementation plan to turn around Microsoft. But we needed a purpose.”
And I'm like, “Really? Give me a break!”
And he's like, “No. Without a purpose, we couldn't develop a strategy or an implementation plan.”
Purpose At Lego
Then I went to Lego, where Jørgen Vig Knudstorp was leading a turnaround. And he said, “Look, Sanjay. We needed to have a strategy. We needed to have an implementation plan. We had to get out of the random businesses we were in. We were in theme parks and entertainment. But we couldn't sort that out without a purpose.”
I'm like, “Really?”
He says, “We had to go back to first principles. Foundational principles. Why does this enterprise exist?”
And when you ask that question, the strategy question and the implementation problem become easier to solve.
Purpose and Peter Drucker
Peter Drucker's notion of purpose was that every business purpose is to create a customer. This is natural for small companies to understand, but when they grow, they lose that purpose orientation and become less purposeful. And that is a huge scaling problem for many entrepreneurs. They cry, “Oh, we've lost our soul!” And that's the key: purpose is the aspect that they need to understand.
Denning: Yet, it isn’t an accident that they businesses lose sight of deep purpose when Milton Friedman and the Business Roundtable insisted that maximizing shareholder value was sole the purpose of a business.
Gulati: Now you get from “having a purpose” to “what's in your purpose?” The content of the purpose. Let's agree that having a purpose is better than not having a purpose. But right now, the question is: “purpose towards achieving what goal?”
The debate is: “Is the purpose of an enterprise maximizing shareholder value or something broader than shareholder value?” And this is where there's confusion.
So, how do we then create some set of guiding principles for ourselves? That's the selfish aspect. The other aspect is that society today expects more of business. The idea that a business can ignore the externalities of the business on the community is unacceptable anymore. Businesses get a license to operate and if they don't choose to partake in the community, employees and society are rebelling.
Satisfaction, Engagement, and Inspiration
Gulati: We talk about the emotional response that the firm wants to trigger from an employee. For the longest time, we talked about job satisfaction. Satisfaction came when you gave me a decent job. With decent pay, with decent benefits, with a decent work environment. That gave me satisfaction.
We then moved to engagement. Engagement comes when I feel empowered. I'm part of a team and part of a positive work culture. I feel I have a voice, and I have choice. That leads me to feel engaged.
There's a third level which is inspired. How do I make staff feel inspired to come to work. And that's the holy grail of understanding employee connection to the workplace.
Denning: Even getting to engagement is hard. Gallup says that globally, we're stuck at 20% engagement over the last 20 years. So, if we could get people engaged, even that would be a huge step forward.
How To Get Engagement
Gulati: I want to paint the picture for the next phase, even beyond engagement. Engagement comes from two things, giving people voice and choice. I wrote an article on this called “Structures That Don't Stifle.” (HBR, May-June 2018). When you want to give people voice and choice, the reason companies struggle with getting engagement, is they don't know how to delegate the control system, how to empower people.
Denning: If the purpose of a firm is a purpose like making money for the executives, there is no way you can have a lot of delegation and freedom because the employees don't agree with the goal.
Gulati: Exactly.
Denning: When you have a large number of big organizations with that purpose, it's not surprising that engagement in the workplace is generally so low.
Doing Good In The World: The Case Of Etsy
Denning: At the other extreme, is there a risk that aiming at an vast inspiring purpose may have such negative financial effects that it will prevent the firm from doing anything in the world? Can such goals be self-defeating?
Gulati: I hundred percent agree with that. I wrote a case on Etsy, a public company that was making no money, but claimed they were doing good in the world. The investors rebelled. The new CEO said, “We're going to redo this company: we have to make money for shareholders, too.”
The staff response was “What do you mean, make money for shareholders? We're not that kind of company.” The thinking had become so polarized they thought the company existed solely for themselves. They had yoga classes all day long. And fine dining. And there were also hundreds of social impact efforts going nowhere. So it had become a pipe dream, full of great ideas and but not really accomplishing anything.
Reworking capitalism gets to the heart of a firm. Creating a positive work environment is part of it. Deep purpose can help us do that in a way that unlocks value for shareholders, value for customers, value for employees, value for everybody.
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