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Studies show that when companies have statements of higher purpose, employees have more trust that the leaders will make socially responsible and better business decisions. — Getty Images/Cecilie_Arcurs

Employees at companies with a statement of higher purpose are happier, prouder of their company and have greater trust in its leaders, new research reveals, and small businesses are best positioned to leverage the concept. Meanwhile, focusing on a higher purpose that informs all decision-making can be part of a strategy to inspire and motivate all employees, increase retention and improve profits, multiple studies show.

“We as human beings need and want to know that our lives have purpose and meaning—both as individuals and as contributing members of the work organizations where we spend a significant portion of our lives,” researchers concluded in a new report based on a survey of 1,109 employed Americans.

When companies have written statements of higher purpose, employees have more trust that the leaders will make socially responsible decisions and better business decisions, the researchers found.

No business is too small to benefit from the strategy.

“Many entrepreneurs are highly purpose-driven, and build purpose into their companies from day one,” study co-author Stuart Bunderson, a professor of ethics and leadership at the Olin School of Business at Washington University in St. Louis, told CO— in an interview. “Purpose-driven decisions and actions by top leaders can have a much larger impact when a company is small.”

Indeed, it can be easier for smaller businesses and startups to find their higher purpose and articulate it, said study co-author Anjan Thakor, a professor of finance at the Olin School of Business. The trick is to sustain the effort.

“Many small companies start out with a clear sense of purpose that gets lost over time as the company gets bigger,” Thakor told CO—.

We are wired for purpose—to know why, to seek meaning in the things we do.

Stuart Bunderson, professor of ethics and leadership, Washington University

Why it works

A statement of higher purpose speaks to core human values.

“We are wired for purpose—to know why, to seek meaning in the things we do,” Bunderson said. “When we have clarity on what our purpose is, we are happier and more fulfilled.”

Only about a third of U.S. employees feel actively engaged and enthusiastic about their jobs, according to an analysis by LinkedIn. Companies that lead with an inspiring purpose, articulating it and focusing on it when making decisions, have more engaged and innovative employees, customers who are more loyal, and the companies make more money, according to research by the EY Beacon Institute published in the Harvard Business Review.

“Once they’re past a certain financial threshold, many people are as motivated by intrinsic meaning and the sense that they are contributing to something worthwhile as much as they are by financial returns or status,” said Rebecca Henderson, a professor at Harvard Business School.

A purpose statement that speaks to more than profits is crucial for retention, other research finds. For example, more than 70% of millennials, now ages 22 to 38, expect employees to focus on societal or mission-driven problems, Deloitte research found, and purpose-driven companies retain employees 40% better and have 30% higher levels of innovation.

Consumers care about a company’s purpose, too, according to a new study from Brandwatch. More than half of consumers say it’s very important that a company proactively makes the world a better place and operates according to its values or principles. Nearly three-fourths of consumers want to know a company treats its employees well.

How to get started

A statement of higher purpose must be aspirational, getting beyond the company’s mission, which might focus on markets and operations and profits.

It can’t be invented, Thakor and Bunderson caution. It should already exist, but whether it does or not, the task is to discover it by asking provocative questions of employees, listening and reflecting. Then it must be written down and shared widely and consistently—many companies fail at this step.

At USAA, the company that insures active military personnel and veterans, every new employee goes through an immersive four-day cultural orientation, Thakor and a colleague explain in an article in Harvard Business Review. The new employees are asked to make a promise to provide extraordinary service to people who’ve done the same for their country.

The company owner or CEO should take the lead in articulating the written statement of higher purpose and connecting each employee to it. “Do it personally if the organization is small enough,” Thakor said. Ideally, employees should be encouraged to craft their own personal higher-purpose statements, too. Those who do tend to be happier and experience less stress.

“This does not replace strategy, production, marketing and all the other business issues the owner must tend to,” Thakor said. “But connecting your employees to a higher purpose makes all those tasks easier as it increases employee engagement and energy.”

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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