What do businesses like Patagonia, Future Super and Zambrero have in common?
Well, apart from all being led by a clear higher purpose, they also have employees who are emotionally invested in their success.
Employee disengagement in Australia and New Zealand sits around 80 per cent, according to Gallup.
Purpose-led organisations are bucking the trend, attracting engaged employees who align with who they are. They share a common narrative that underpins their identity and how they see themselves in the world. This identity aligns with the organisation’s why – their higher purpose.
I believe that this strong identity alignment is the underlying reason that purpose-led organisations financially outperform their non-purpose counterparts and are more resilient in times of crisis.
The EI Value Theory
Last year while writing my book on social purpose-led business, I developed a conceptual theory as part of my work deconstructing why businesses with a social purpose are more agile, resilient and financially successful than their profit-led competitors. The theory is called Emotional Investment (EI) Value.
The EI Value theory is simple:
The more stakeholders you have that are invested in your business’s success . . .
And the more emotionally invested they are . . .
The more successful your business will be.
The theory applies across all stakeholders in a business: customers, employees, executives, suppliers, partners, shareholders and communities in which the business operates. But where it starts, always, is with the employees of a business.
I applied the theory to three types of organisations, mirroring the same types identified by one of the most expansive leadership research projects ever conducted, The Global Leadership Forecast 2018.
- Those without a purpose
- Those with a purpose statement
- Purposeful organisations where leaders bring the stated purpose to life through behaviours
The research project found that getting purpose right builds organisational resilience and improves long-term financial performance. Purposeful organisations enjoyed higher levels of engagement, agility and resilience, and benefited significantly from stronger culture than those without.
All these factors create purposeful organisations inspiring a high level of emotional investment.
In developing the EI Value model, I wanted to understand why this is the case.
What makes an employee in a purpose-led organisation more emotionally engaged and effective than a profit-led business and even a business with a purpose statement?
Identity alignment is the key
The answer lies in how employees identify with their employer organisation.
A profit-led business generally attracts people based on what they can earn. It has minimal alignment with a person’s identity.
A business with a purpose statement identifies with what the organisation does. Perhaps there’s some identity alignment there.
A social purpose-led business identifies with who you are. This has strong identity alignment based on a shared narrative or core belief about what is important to both parties.
Employees who have a strong identity alignment with the purpose of the organisation are emotionally invested. They care about the organisation’s success. That is why they’re more engaged, proactive, agile, and resilient.
Consider Patagonia, the poster child of purpose-led organisations. They are in business to save our planet.
Patagonia’s clarity of purpose drives action, activism and a culture that attracts people who love the great outdoors and are deeply invested in the fight for our planet.
For these employees, the company aligns with their own identity. It represents who they are, based on what they care about. This is singularly the most powerful driver of emotional investment that an employee can have for the business they work for.
It will come as no surprise to learn that Patagonia has high employee retention – at about four per cent compared to the 13 per cent retail industry average. The company has annual sales of approximately $US1 billion, around 2500 employees and more than fifty stores around the world.
Patagonia is one of a growing number of purpose-led organisations attracting people who are emotionally invested in their company’s success.
As the world faces one crisis after the next, it is these businesses that are best placed to weather the stormy seas and emerge resilient.
Carolyn Butler-Madden is a purpose specialist, speaker, and author of For Love and Money and Path to Purpose. As chief purpose activist of social purpose consultancy The Cause Effect, she helps leaders define and embed purpose into their brand to deliver meaningful impact – profit with purpose.