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An ‘authentic’ organisational purpose creates competitive advantage

Leadership accounts for nearly 50 per cent of the variance in perceptions of authenticity, research finds

20 April 2015

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By Manju Manglani, Editor (@ManjuManglani)

Having a well-communicated organisational purpose is not enough to improve a firm's reputation, research has found.

The firm's purpose also needs to be real and authentic, as well as embedded in its organisational strategy.

"The best conditions for an authentic corporate purpose occur when identity and image are aligned," said Jeremy Galbraith, global chief strategy officer at Burson-Marsteller, in its research report Keeping it Real.

"This means that the way the organisation projects itself to its external constituencies, including customers, regulators and media, has to fit with the way it internally defines its central and enduring mission."

Living an authentic corporate purpose can be a challenge as firms seek to balance short-term financial considerations with their long-term values and identity.

However, it is critical for firms to align their perceived and stated purpose with their strategic decisions and actions, Galbraith said.

"An authentic corporate purpose guides business decisions and is central to developing strategy. It also plays a key role in guiding and motivating employees. Communicating it internally and externally is critical. But the purpose comes first - it is not a communications tool."

The research found that leadership accounts for almost 50 per cent of the variance in perceptions of authenticity.

"Leadership emerged as a strong and consistent driver of authentic corporate purpose. Leaders need relentless commitment to embedding the purpose throughout the organisation," commented Galbraith.

Research has found that firms that are true to their organisational purpose beyond short-term financial considerations, and communicate to stakeholders how those guiding principles underlie their business activities, have a competitive advantage.

A strong and well-communicated corporate purpose can impact financial performance by up to 17 per cent, according to the report. It can also strengthen a firm at times of change and crisis by providing a common vision around which to rally key stakeholders and engage employees.

The research identified 12 drivers of authenticity, divided into those that relate to identity and those that relate to image. Drivers range from how transparent and open to self-regulation a firm is to its long-term orientation and consistency. They also take into consideration differentiating factors such as passion and originality.

"Together with strong leadership, our research shows that awareness is the top dimension that drives authenticity - meaning that a company has an understanding of its own strengths and weaknesses, what drives or motives its actions and how this affects key stakeholders and the environment," commented Daina Mazutis, professor of strategy and ethics at IMD business school.

"But all drivers are critical to overcoming the scepticism of internal and external audiences and must be managed in a comprehensive way."

The research findings are based on a survey of more than 200 executives and interviews with 12 executives from organisations perceived as having an authentic corporate purpose.



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