The next recession will soon be upon us, likely within the next two years. That’s according to economists who point to a very reliable indicator… the inverted bond yield curve, which has occurred before every U.S. economic slowdown in the past 60 years and (except for one time) before a recession. If you haven’t yet heard, the U.S. bond market is experiencing an inverted yield curve now. So, if the past is a predictor of the future, there’s a strong possibility that we’re on the precipice of a recession. Pretty sobering.
What can we do to prepare? What’s the equivalent of boarding up the windows and putting out the sand bags in the face of an economic hurricane? If we look back at the global financial crisis that unfolded in 2008, we see that many of the actions organizations took to ride out the storm proved ineffective because they hadn’t entered the storm with the most important source of shelter… a strong culture. According to a study published in the Journal of Science and Development (2013), many of the problems that created the financial crisis originated from a lack of focus on corporate culture. “The lessons of this crisis have shown us that corporate culture offers a means of protection against many risk factors that increase the chance of survival.”
That’s why culture is now being viewed as a key driver that affects an organization’s ability to execute its long-term strategy while weathering today’s climate of unprecedented disruption.
And, as a result, culture is increasingly seen as a key component of market value. According to accounting firm EY, “intangible assets” such as culture average 52% of an organization’s market value (and in some sectors as much as 90%). That’s why State Street Global President and CEO Cyrus Taraporevala announced this January that culture will be a key indicator when assessing corporate performance and value. “We all know the old chestnut that culture eats strategy for breakfast, but studies show that intangibles such as corporate culture are driving a greater share of corporate value, precisely because the challenges of change and innovation are growing more acute.”
If culture is increasingly seen as a critical core asset and a leveling force in times of disruption, how do you go about building a strong one? It starts with purpose. Purpose articulates how the people in your organization are making a difference, gives them a sense of meaning, and connects their efforts and inspires their support. When an authentic purpose permeates business strategy and decision-making, personal effort and the collective effort become one. Collaboration increases, engagement accelerates, and performance climbs.
For most organizations, purpose isn’t about saving the world. Sure, there are some organizations that can authentically make the connection to affecting the greater good of mankind and the planet. And there are some organizations that stretch that connection to the point of disingenuousness. But for most of us, purpose is grounded in less lofty but equally worthy pursuits… like making things better in small and big ways that affect human advancement and progress. And I believe those aspirations are equally noble.
So how do you go about defining your organization’s purpose in an authentic way? I like the approach taken by Deborah Ball, a former dean of the University of Michigan who applied an approach to “learn and unlearn the organization.” Through an extensive listening tour of key stakeholders, she found both a diversity of opinion and a surprising level of commonality, which became an “emerging story” that knitted together the red thread of purpose across a diverse population of constituents. The lesson: your purpose is already resident in the hearts and minds of your people. You just have to tease it out.
What does a great purpose statement look like? I have four rules. It’s simple. It’s inspiring. It’s true. And it’s a clear compass for action. Here are some of my favorites:
To bring inspiration and innovation to every athlete in the world. (If you have a body, you are an athlete.) – (#Nike)
To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. – (#Starbucks)
To spread ideas. – (#TED)
To educate leaders who make a difference in the world. – (#HBS)
To inspire the world’s most important communities. – (#AugustJackson)
Simple, inspiring, true and actionable.
If we are, in fact, headed into a recession in the not-too-distant future, now is the time to work in earnest to shore up your culture. And defining your purpose is the starting point. I’d challenge you to ask your employees to articulate your purpose. If they can, good for you. According to Gallup, less than half of employees understand what their company stands for.
Even if we defy the odds and aren’t facing an economic downturn, the winds of disruption are still here and very real. By focusing your efforts on strengthening your intangible asset of culture, you will accelerate your ability to achieve your mission no matter the climate.
August Jackson is the agency that puts purpose into practice.