Putting Purpose Into Your Leadership Pipeline

Stacia Garr
Co-founder & Principal Analyst
RedThread Research
Putting Purpose in Your
Leadership Pipeline

©2022 RedThread Research. All Rights Reserved.
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focused on the practices and technologies of:
• People Strategy
• People Analytics
• Learning & Skills
• Performance
• Employee Experience
• Diversity, Equity, Inclusion & Belonging
• HR Technology

What is purpose?

Purpose vs. Everything Else
Source: RedThread Research, 2022.

Organizational purpose – A clear and
concise statement that inspires people to
deliver value to multiple stakeholders:
• Employees
• Customers
• Suppliers
• Communities
• Shareholders

52% question the purpose
of their day-to-day job
56% want to contribute
more to society
65%
are rethinking the
place work should
have in their life
The pandemic changed people’s perspectives
Source: Gartner, 2022, n = 3,515

Why purpose really matters

Global challenges for CEOs
36%
Think income inequality is a global challenge
33%
Say climate change is a major threat to growth
41%
Believe there is lack of trust around DEI in their orgs
Source: Deloitte 2022, PWC 2022, EY 2019.

People worldwide who
trust their government
to address global
challenges
47%
Source: , 2022.
47%

People who believe current
form of capitalism is NOT
working for average
Americans
Source: Just Capital, 2021, n = 3,000
58%

Large businesses exert greater economic influence
1955 2016
% of US GDP from Fortune 500 companies
35%
72%
Source: EY CEO Imperative Report, 2021.

People trust companies more than government
50%
52%
59%
61%
Business
NGOs
Government
Media
Source: Edelman Trust Barometer, 2022, n=31,050
Business is the most trusted institution

People expect CEOs to act
Only if the
issues are
related to
their business,
39%
No matter
what the
issue, 61%
CEOs Should Take a Stand on
Important Societal Issues…*
63%
59%
68%
63%
2018 2019 2020 2021
CEOs Should Take a Stand on Important
Societal Issues
Source: Just Capital, 2021.
*Among those say CEOs have a responsibility to take a stand

Nearly half of all Americans believe companies
are going in the wrong direction
52%
47%
38% 40%
43%
47%
26%
27%
30% 28%
22% 22%
22% 25%
32% 31%
35%
31%
2016 2017 2018 2019 2020 2021
Wrong Direction Right Direction Don't Know
Is the behavior of companies going in the right or wrong direction?

78%
65%
61%
57%
49%
49%
48%
48%
39%
36%
Shareholders
Customers
The health and safety of their workforce
The well-being of local communities
Society overall
Helping overcome systemic racial injustice
The qualtiy of jobs in the U.S.
The work-life balance of their employees
The environment
The financial well-being of its lowest-paid workers
Companies not seen as contributing to their
communities and society
In 2018, 58% of
respondents said that
companies are having
a positive impact on
society overall.
% who say companies have a positive impact on

Biz leaders must see the importance of focusing on
purpose and long-term value creation
80% CEOs
believe
companies will be
rewarded for
acting on global
challenges
60% investors
support long-term
investments to address
global challenges even if
near-term performance
is diminished
Source: EY 2019
58% board
directors
say that big companies
should be involved in
solving global
challenges

Yet, there is optimism about what can be
71%
79% 82%
87% 86%
28%
21% 17% 13% 14%
2017 2018 2019 2020 2021
How effective can people be when they act together to
change companies’ behaviors?
Very, Somewhat effective Not very, Not at all effective

Helping leaders see
the importance of purpose

Making purpose matter
Rethink what
purpose means
Integrate purpose
into long-term
strategy
Build purpose into
organizational
culture and
practices

10 years ago: Profit or purpose
Charity or
Pure NGO
Social
Enterprise
Impact
Business
Sustainable
Business
Traditional
Business
Deliberate
Impact
Market
Forces
Non-
Profit
For-Profit
Holistic
Business
Note: This is an evolution of “The Force for Good
Spectrum,” from INSEAD Responsibility

10 years ago: Purpose was an expense
Purpose-related expenses:
• Corporate social
responsibility
• Community events
• Diversity and inclusion
Source: Corporate Finance Institute, 2022
RedThread Research, 2022.

Now: Profits with purpose
Purpose-related expense cost-
savings:
• Talent attraction
• Talent retention
Purpose-related COGS cost-savings:
• Reduction in resources used
• Alternative supply chains

10 years from now: Profits via purpose
Purpose-related expense cost-
savings:
• Talent attraction
• Talent retention
Purpose-related COGS cost-savings:
• Reduction in resources used
• Alternative supply chains
Purpose-related revenue growth:
• New lines of business
• New innovations to expand
existing businesses

PepsiCo:
Performance with
Purpose
• Launched 2006
• A response to mega-trends
• Secured investor and Board
support before launch
Source: PepsiCo (2017), Harvard Business Review (2020), Indra Nooyi / My Life in Full (2021).

Source: Fortune Magazine, 2011 via YouTube.
https://www.youtube.com/watch?v=BDTVdX-enr4

PepsiCo’s Financial Performance
Source: Harvard Business Review, 2020.
PepsiCo
Consumer Staples Select Sector Index
S&P 500
13.5%
10.3
13.2
PepsiCo
Consumer Staples Select Sector Index
S&P 500
11.5%
5.5
9.1
5-year
TSR
10-year
TSR

“The first thing I would tell any CEO is to find the things that align
to your strategy and stick to them. I think sustainability is a lot
more genuine and it carries a lot more weight when it's tied to
your strategy, your business, your mission, your investments,
your M&A strategy.”
– Michael Lamach, CEO, Ingersoll Rand

EY: Putting purpose
at the center of
everything
• Launched moniker in 2013
• The power equation =
Purpose + Vision + Long-
term value
• Connection to historical
values
• Commercial and internal
focus
Source: EY.

Source: The Assembly Network 2015 via YouTube.
https://www.youtube.com/watch?v=x8lx-9vycIA&t=60s

Source: EY

A guide to setting a purpose-led strategy
-- What is our impact
outside our org?
-- Which stakeholders
do we impact most?
-- Where are our
biggest opportunities?
-- How might we
respond in the short-
term and long-term?
Identify challenges
and responses
--Which stakeholders
will care most about
this change?
-- How much are
stakeholders
pressuring us today,
tomorrow?
-- What investor
concerns exist today
and how might they be
mitigated?
Align C-suite, Board
& investors
-- How can senior
leaders model the
changes?
-- What changes do we
need to make to
internal practices and
culture?
--What changes do we
need to make to
governance
approaches and
metrics?
Transform
internally
-- How can we share
our learnings more
broadly?
-- How can we partner
with others to expand
our impact?
-- How can we expand
our leadership in these
areas?
Extend changes
externally

84%
Americans agree
that companies
“Often hide behind
public declarations
of support for
stakeholders but
don’t walk the walk.”
Source: Just Capital, 2021.

Integrate purpose
into org culture &
practices
Employees working at a
company with purpose are…
• 92% more likely to
recommend their employer
• 90% more inspired
• 89% more loyal
• 85% more motivated
Source: Porter Novelli, 2020.

Purpose as a Self-Reinforcing System

What that Means for HR

The Home Depot:
Using a purposeful
culture to make decisions
• Inverted pyramid re-
introduced in 2007 after
ouster of CEO Robert
Nardelli
• Integration of stakeholders
throughout company
decisions
Inverted Pyramid
Values Wheel
Source: The Home Depot 2020 Proxy Statement,
https://ir.homedepot.com/~/media/Files/H/HomeDepot-
IR/2020/HD%20-%202020%20Proxy%20Statement.pdf

©2022 RedThread Research. All Rights Reserved. Source: The Home Depot 2021 Sustainability Report.
https://corporate.homedepot.com/sites/default/files/THD_2021ES
GReport_singlepages_1.pdf

Source: Georgia Tech Scheller School of Business, 2021 via YouTube.
https://www.youtube.com/watch?v=QJ8Qzu_3V2Y

Home Depot’s financial performance
5-Year Total Share Holder
Return:
• Home Depot = $350.29
• Lowes’ = $225.91
• Best Buy = $100.57
Source: Ycharts, 2022.
https://ycharts.com/companies/HD/total_return_price

Nested purpose at EY
“If you want to be an organization
that claims to be purpose- and
vision-led, you need to be led by
leaders who themselves are
purpose- and vision-led, which
means developing a platform and
program around personal
purpose and vision.”
--Jeff Stier, EY Americas
Consulting Purpose & Vision
Realized Leader
Individual
Team /
functional
Org-wide
Levels at which
purpose operates
Source: EY.
https://www.newrealityblog.com/2020/09/30/inspiring-ey-leaders-to-be-
accountable-for-creating-an-inclusive-culture/
RedThread Workplace Stories blog
https://redthreadresearch.com/turning-purpose-and-vision-into-value-is-
purpose-working-podcast-episode-10/

EY financial performance
$25.8
$27.4
$28.7
$29.6
$31.4
$34.8
$36.4 $37.2
$40.0
2013 2014 2015 2016 2017 2018 2019 2020 2021
Revenue in Billions
Source: Statista:
https://www.statista.com/statistics/189213/global-revenues-of-ernst-young-by-area/

Source: Medtronic, https://global.medtronic.com/xg-en/about/mission.html
“It’s not about them,
it’s about us.”

Source: https://global.medtronic.com/xg-en/about/mission.html

Medtronic’s financial performance
5-Year Total Share Holder
Return:
• Medtronic = $102.59
• Abbott Labs = $125.49
• Merck = $76.64
Source: Ycharts, 2022.
https://ycharts.com/companies/MDT/total_return_price

“People can say, ‘Hey, wait a second. Does this decision align with our
intent in our mission?’ …Almost always our business leaders, our
people leaders are making decisions with those thoughts in minds,
like anything written on paper there is interpretation. And people will
interpret it in different ways… anytime you have these kinds of
revered documents, they'll be that risk of misinterpretation. And
sometimes it requires a level of explanation, but I mean, from my
lens, it's worth it for that trade off because it at least forces that kind
of organizational conversation and understanding.”
– Jeff Orlando, Vice President, Global Learning & Leadership
Development, Medtronic

Looking inward and forward

If you remember nothing else…
• Purpose is not a fad or simply a response to “The Great
Resignation”
• Purpose – and serving a broader set of stakeholders – is
fundamental to orgs’ continued ability to operate in
societies
• To get purpose into our leadership pipeline, we need
leaders to:
• Understand that purpose will help, not distract, from
their businesses
• Integrate purpose into their long-term strategy
• Bake purpose into org practices and culture
• Identify their own purpose and connect it to their
teams’ and orgs’ purpose

Reflecting on What You Can Do
HR Practitioners
• Develop an understanding of your
company’s and team/dept/function’s
purpose
• Figure out how a focus on purpose can
add value, not just cost, to every single
people practice you touch
• Hold the line on authenticity
• Leverage technology that aligns and
reinforces purpose and critical purpose
decisions

HR Tech Providers
• Begin your sales and customer
implementation processes with
understanding the company’s purpose
• Determine how your tech can integrate
purpose into its offerings
• Integrate purpose into your organization’s
psyche
• Walk the purpose walk

Understand your purpose, the purpose of each member
of your team, and connect it to the work

Check out our
resources on
purpose-driven orgs

• Aaron Hurst, Author, The Purpose Economy
• Dr. Rachel Fitcher, Global Head of Talent and
Leadership, S&P Global
• Jeff Orlando, Chief Learning Officer, Medtronic
• Don Pontefract, Founder & CEO, The Pontefract Group
• Clint Koffard, Global Head of Talent Development,
Johnson & Johnson
• Celia Berenguer, Chief Learning Officer, Sanofi
• Deborah Quazzo, Managing Partner, GSV Ventures
• Suzanne Howard, Partner, Dean & Managing Director,
IDEO's Learning Platform, IDEO U
• Tal Goldhamer, Chief Learning Officer & Jeff Stier, Lead
of Purpose & Realize, EY
https://redthreadresearch.com/podcast-is-
purpose-working/

Thank you and get
in touch!
Stacia Garr
Co-Founder & Principal Analyst
stacia@redthreadresearch.com
https://www.linkedin.com/in/staciashermangarr
@StaciaGarr | @redthreadre

Source: EY
“Today, we are facing a whole series of global challenges: the
fight against climate change and social injustice is at the top of
the agenda. The challenges must first be recognized and
named openly. This is the central prerequisite for us being able
to find the right answers and define long-term goals.”
- Oliver Blume, CEO of Porsche AG

“It will increasingly become apparent that companies need to be
stewards for future generations, and that boards and senior
leadership, C-suite, have the responsibility of thinking hard
about those issues, and then framing a set of actions that allow
companies as entities and the employees as individuals to
engage with them. Corporations are meaningful actors, and
they can actually make a difference.”
-Piyush Gupta, CEO of DBS Group

Putting Purpose Into Your Leadership Pipeline

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