This week’s conversation is with Dr. Ranjay Gulati, the Paul R. Lawrence MBA Class of 1942 Professor and the former Unit Head of the Organizational Behavior Unit at Harvard Business School.
Until recently, he chaired the Advanced Management Program, the flagship senior leader executive program, at the school.
Ranjay studies how “resilient” organizations—those that prosper when it’s smooth sailing – and when the seas are wild —drive growth and profitability.
His work bridges strategy (establishing clear strategic pillars for growth), organizational design (reimagining purposeful and collaborative organizational systems), and leadership (fostering inspired, courageous and caring execution).
The Economist, Financial Times, and the Economist Intelligence Unit have listed him as among the top handful of business school scholars whose work is most relevant to management practice.
I’ve known Ranjay for a few years, and I’m thrilled to introduce you to him. He’s got a deep understanding of how great companies work. We dive into the ongoing process that leaders drive to ensure that purpose is at the foundation of the entire organization – as well as – it being a strategic compass for decision making.
“Having a deep purpose is not a tax on business. It’s generative. It expands your production frontier. Just like for human beings, it unlocks human potential.”
In This Episode:
Learnings from his mother
She was successful because she’s not selling clothes. Her thing was, “I’m not selling you a design. I’m not selling you clothes. I’m selling you an idea, and the idea I want to sell you on is people in countries like India that are underdeveloped have beautiful for things, that these people who live in these rural villages create beauty, that vegetable dyes and colors and hand prints are something you may want to consider putting onto your garments.”
Purpose within organizations
Answering a very simple question can be such a powerful unlock, and it’s simple, yet it’s so incredibly hard. We do it for individuals. I found that when you transpose this to an organization, it got a whole lot more complicated because you are dealing with an aggregation of people who have to buy into this thing you might call, and that was where I found, I thought it was hard enough to find my purpose, but now to talk about it at an organization level was a whole different level of complexity in and of itself.
Discovering “Deep Purpose”
To really get to understanding purpose, I had to go through a lot of … You have to go through a lot of confusion, darkness before you get to light. I had to go through a lot of darkness around purpose confusion, purpose posturing, purpose as disguise, so much that I was forced to create a taxonomy of shallow purpose. That’s how much I encountered, right? There are many shades of it. They were calling themselves purpose, but they were what I would call superficial or convenient purpose. Then I really wanted to call my book one word. I wanted a one word title. I wanted to call it Purpose. I couldn’t because I had to call it Deep Purpose because there were so few. To understand purpose as an unlock, you have to really go deep with it.
The four components of successful purpose for an organization
What is purpose after all? It’s about having intention. I found that the ones who went after deep purpose did four things really well. The first one was really purpose as a compass, which is the image I have on the title cover of my book, by the way. So they use it for directional clarity, which means decision making, resource allocation, strategy setting, setting your vision or to what degree are you looking at it through the prism of your purpose, right? Then you discover that there are other elements of this as well, motivational. To what degree do employees really buy into it? Is it real or is it fake? Is it posturing? The next one, which I found fascinating, was understanding how it plays into your customers, reputational. To what degree do your customers really believe that you’re doing that? The last one is relational with your partners.
Purpose can be confusing
The first thing you understand is when you come from a place of purpose, you are inherently thinking longer, right? What does purpose force you to confront? “Why am I here?” means it forces me to think about, “As long as I’m on this planet, why am I here?” So it forces my lens, camera lens, to be looking out there, not narrow focused in the immediate term. The moment you start to ask those questions, anyone with a long-term lens is going to tell you that you have to think about different stakeholders in addition to shareholders. Yes, shareholders are primary and you need to serve them. Otherwise, you’re in trouble. Yes, you need to deliver short-term results. Otherwise, you’re in trouble, but having an eye in the future forces you to say, “But I can’t ignore other stakeholders.” Think about it. Can I ignore customers or maybe in the short-term I’ll get away with it? Can I ignore my employees? In the short-term, you can get away with it, right? Can you ignore other community and the community around which you work? In the short-term you can, but you won’t get away with it. Can you ignore the planet? In the short-term you can. In today’s world, you can’t get away with it.
The first thing to understand is just like for individuals, there is something I call purpose drift. It drifts away from us. It’s not something you remember. If you don’t remember it every day and remind yourself every day, it drifts away from us, and then we wake up one day saying, “Where am I and why am I here? How did I get here?” I think that’s what happens in organizations. It’s incremental. It’s small steps. It’s not big leaps.
The definition of purpose and applying it to organizations
William Damon, a Stanford psychologist, calls purpose is a stable and generalized intention to accomplish something that is at the same time meaningful to the self and consequential for the world beyond the self. So there are many words in there, stable, generalized intention, accomplish something meaningful to the self, and consequential for the world beyond the self. I think you can take those ideas and apply it to organizations because it forces you to think about your ambitions, which are your goals. It also gives it an idealistic cost, which are your duties, right? It gets you to think a little longer term. When you think longer term, it gets you to think about the array of stakeholders who you must serve.
Connecting individual purpose and organizational purpose
I found an interesting correlation that companies like Microsoft that were working on organizational purpose were also working on employee purpose like, “What’s your personal life purpose?” and I also saw this in my students. So I was sharing our advanced management program, these senior executives who come on campus, and I was giving them each a coach and they were working on their personal purpose, but they also wanted to talk about organizational purpose. So I said it’s coincidental that once they hear the word purpose, they want to apply it everywhere. It’s like a hammer. You don’t bang any way. I didn’t connect that the two are connected. Actually, my conversations with you and Pete were among the first clarifications to me that you can’t get somebody buying into a company or an organizational slogan if they are not in that zone of purpose themselves.
Purpose allows you to show up differently
It unlocks a new you. I’ll just speak for myself. It took me a long time in my own personal life journey to really figure out what was my purpose in life, and if I have one regret in my life is I wish I had done it sooner. It would’ve clarified so many things for me, and I think I would’ve shown up differently. It’s not that I would’ve done anything differently. It would’ve been how I did those things differently, even the how and the what would’ve changed somewhat because I knew the why. Without the why, we are reactive people. We are reacting to situations, and the same is true for organizations.
The zone of purpose
An organization can only really have a purpose when it connects it to the people also bringing everybody into the zone of purpose. It’s only when everybody is in the zone of purpose or most of them are in the zone of purpose that they can be more receptive to receiving an organization’s purpose. Otherwise, it’s corporate slogans, right?” We see so many of them. There’s so much posturing and slogan, and they’re like, “Oh, my God! Another one of those inspirational speeches to work harder and to spend longer time at work.”
What is the “soul” of a company?
When Howard Schultz left Starbucks and came back, his first observation was Starbucks has lost its soul. When Steve Jobs left Apple and came back, his first observation was, “Oh, Apple has lost its soul.” Somehow they talk in soulful terms about this thing that has been lost. So my question for that one year project was it was a precursor to this book was, “So what’s in the soul?” I want to know what’s this thing, and that time I discovered three things. One of them was the purpose. The first one was this loss of what I call going from big ideas to grand ideals, that we had a grand ideal about changing the world in some way, and now we are just about big ideas. We lost the ideal.
Founder-led to founder-inspired
In a founder-led enterprise, it typically is very top down, right? The founder, in fact, has to manifest and embody the purpose itself. They become the very embodiment. In fact, that’s why when they leave, it leaves this massive vacuum, right? So when I interviewed the CEO of Starbucks, Kevin Johnson, he said, “We had to go from founder-led to founder-inspired,” because we had this larger than life founder, right? They had to carry the purpose of the company.
Who cares? And Why?
If you are a young entrepreneur, I think it is so easy to get caught up in, “What are we going to do and how are we going to do it?” The pitch, making the pitch deck and you’re talking about, “What are we going to do and how are we going to do it?” You don’t talk about the why. I’ve talked now to seasoned investors who know the smell test, the sniff test about what’s going to really work and the ability to talk in a little more expansive terms about the ideal, “We are here to solve what? What is our larger purpose? We are here to address what in the world today,” or another way, I have a colleague of mine who loves to say it in a very eloquent way, which she says is, “If you disappear tomorrow, who would care and why?”
Buying into purpose
If people buy into your purpose, you can then create a culture where responsibility is a central piece of the puzzle. You can then start to empower people more because they understand the purpose so you’re able to create a much more decentralized organization, right? The ability to create collaboration across the organization is also enabled because people understand a shared purpose. So there are all these consequences. We are teaching all this stuff now about agile organizations. I have a course I’m teaching on agile organizations. You can’t build an agile organization when people don’t have some alignment with each other. You can’t measure it and force ram, and we’ve tried that before.
“The Great Rethink”
We talk about the great resignation or the great free shuffle or the great upgrade or the great rethink, right? I think there’s a labor market sorting going on right now, where people are recalibrating. First of all, they’re thinking hard about what they want to do with their lives. My hypothesis, I don’t have data on it, is that they’re looking for more meaning in their lives. And if they don’t find it at work, they’re going to check out. Either they’re going to disengage completely or they’re going to look. So if you are a company, ask yourself, “Is having a purpose a source of competitive advantage in the talent space or not?”
It’s not solely about raising wages
There are sectors of the economy where people are not earning a fair living wage. They couldn’t even survive on one job. I think they needed to get paid more, and that is happening, thankfully so, sooner, better late than never, but the idea that everybody’s saying, “Oh, I just got to pay people more. It’s a demand and supply calibration issue. The demand exceeds the supply. I need to raise the wages because that’s what economists always teach us,” and so raise wages, and you’re going to get some people, but are they the people you really want? Right? So is it a wage story? Is it an interesting work and flexible work story? Is it a meaning story or is it all of the above? I think we have to be asking ourselves that in today’s world, if you’re going to be the magnet for the best talent, what’s your distinctive proposition for somebody who may want to choose to come and work for you? What would they say? “Why do you come to work? Why do you choose to work here?” What do you want them to say?