Culture: Key To Understanding The ROI Of A Purpose-Driven Business

Scott Pezza

If a business has the opportunity to make a positive impact on the world, should it? From a personal perspective, the answer seems easy. Yet when we begin to factor in public versus private ownership, the question of whether corporate officers owe a duty to only shareholders or all stakeholders, and the ever-present requirement of positive return on investment for business decisions, the conclusion gets a bit murkier. But it doesn’t have to.

The challenge

Let’s take a step back and put this in context. The question of whether a business should pursue an opportunity that can positively impact the world – say, by eliminating suppliers that exploit forced labor in their operations – is typically evaluated based on a set of common criteria, including:

  • Regulatory risk: Does supporting the conduct at issue expose us to penalties for violating certain laws?
  • Reputational risk: Does being publicly tied to the conduct expose us to loss of customer support and thereby decreased revenues?
  • Cost concerns: Is this supplier the lowest-cost alternative, and will eliminating it from our supply chain increase our costs and decrease our margins?

What these example criteria all have in common is that they evaluate the monetary impact of an ethical decision. If there is no law prohibiting working with the supplier, if the chance of discovery (or the subsequent impact) is deemed low, or if the alternatives are more costly, the business may decide not to move forward with the change. Similarly, if there is an existing law, there is a high likelihood of exposure and negative attention, or there are cheaper sources available, the business-impact equation may call for making a change.

If this is the true mechanism for making purpose-related decisions, then we would all be worthy of being labeled with claims of “greenwashing,” and cynics would win the day. But this is not the only way.

The answer

Interestingly, the solution to the problem of finding a business justification for ethical decision-making is, quite simply, people. When we examine the common denominator of all purpose-related discussions and measures, we find that the true focus is the impact on peoples’ lives. Taking a quick look at the United Nations’ 17 Global Goals for Sustainable Development immediately hammers this point home. And what do we get when we focus on people and their role in the business environment? Culture.

As Peter Drucker may – or may not – have said, “Culture eats strategy for breakfast.” The quote might initially have been intended to signal that unless your workforce buys into your strategy and has it embedded in their culture, your initiative will fail. But I think it applies even more strongly to the idea of culture as a representation of shared values between the business and its people. This is the key element that underlies discussions of employee engagement. It is a measure of how invested your people are in your business and how motivated they are to push forward together.

And here is where we can make the most important connection: the tie between purpose and employee engagement. Take a look at Glassdoor’s 2019 Best Places to Work results and see if there is a common theme among the top companies. How often do the words “value,” “culture,” and “support” pop up? If you haven’t clicked over yet, I’ll share a spoiler: almost every time.

The takeaway

Why does this matter? If we understand that the best places to work – as chosen by the employees who work there – are those that value and support their people, we can see the potential impact that purpose-driven business decisions can have. These businesses that employees love are employers of choice; they are the businesses that current employees want to stay with and that future employees long to join. They attract the best talent.

So let’s turn back to our original question. If a business has an opportunity to make a positive impact on the world, should it? If we accept that business decisions, especially in public companies, must be justified based on the expected return they’ll deliver, what should it do? If we focus on the impact that the decision can have on people and culture, I suggest a new list of criteria to consider:

  • Innovation opportunity: What more could we do if we became an employer of choice where the best talent wanted to work?
  • Growth opportunity: How much more could we accomplish if our people were personally invested in our mission and personally motivated to see us succeed?
  • Cost-containment opportunity: How much would we save if people were here for the long term and we could reduce employee turnover and associated training costs for replacements?

Final thoughts on purpose

I don’t think we need another acronym or metric, though if you are looking for one, I think “cultural ROI” (cROI) would do nicely. It is an acknowledgment that in the corporate context, decisions require justifications, and sometimes simply doing something ethical for its own sake isn’t enough. Rather than try to change the entire paradigm of business decision-making, considering the impact that culture can make on the motivation of current employees can quantify the benefit of purpose-driven choices. And that’s how the argument can win over the cynics and prove that it deserves a true seat at the corporate decision-making table.

If you’re interested in learning more about purpose-driven business, check out our latest paper that takes a look at the intersection between purpose and innovative technologies in the procurement and source-to-pay space. There is a tremendous opportunity to leverage technology to drive change both inside and outside the four walls of your business. Click here to download Purpose-Driven Innovation: Using Technology to Drive Positive Change to learn more.

Scott Pezza

About Scott Pezza

As part of SAP Ariba's Digital Transformation Organization's Center of Excellence, Scott researches, compiles, and shares best-practice information to help SAP Ariba's customers get the most out of their investments. He has a dual focus on the emerging technologies (AI/ML, IoT, Blockchain, etc.) across the source-to-settle cycle, as well as a specific interest in the financial supply chain (invoice management, payments, discounting, and supply chain finance). His research helps inform strategic planning, performance measurement, and program execution. He has spent the past 17 years in the B2B technology space, in roles ranging from software development and support to research and consulting. Scott earned his BA in English and Philosophy from Clark University, his MBA from Boston University Graduate School of Management, and his JD from Boston University School of Law, where he served on the Executive Board of the Annual Review of Banking and Financial Law.