By Coro Strandberg and Sandra Waddock
Too many companies still understand their purpose — or fundamental reason for existence — as maximizing profits or shareholder wealth. How can they move beyond that narrow definition of purpose, towards defining how their businesses help address society’s challenges?
Shifting to social purpose requires a transformation process that is not easy to accomplish. In addition to defining a social purpose, those who lead such a transformation must change their paradigms or perspectives (view of the world), so that they can understand both the changed purpose and the reasons for it. Then, companies need to implement performance metrics that support the full transformation.
Purpose, paradigms, and performance metrics are three of five core dimensions of any system —including any organization — that need to change for that system to transform. In a paper titled Five Core Dimensions of Purposeful System Transformation, co-author Sandra Waddock and her colleague Steve Waddell argue that addressing these five core dimensions, the “5Ps,” can be a way to make a complex and difficult task more doable.
The three Ps of purpose, paradigms (or perspectives), and performance metrics are the overarching framework that helps define a system and its relationship to stakeholders and the world. Then, these three collectively influence the other two Ps: practices (how work gets done) and power relations (how a company handles its stakeholder relationships).
Sound complicated? It’s actually about the fundamentals:
- A company defines its social purpose as the reason it exists.
- Leaders embed their purpose in their culture or paradigm.
- They pursue a business strategy designed to achieve the purpose. The strategy gets turned into goals, targets, and performance metrics that fold into incentive systems and governance and management practices.
- The company collaborates with stakeholders on mutually beneficial purpose-driven goals, affecting their power relations.
Let’s see how one company uses these dimensions to change.
