The Economics of Higher Purpose Read online

  The Power of Personal Purpose

  To help people find their purpose, Nick says he helps them examine their “magical moments in childhood,” their “crucible stories,” and their “life passions.” As people share these, Nick listens deeply and helps them look for the threads.

  The moment someone finds their purpose, they pulse with excitement. They create a purpose statement that carries power. When they share it, everyone else lights up. “As they listen to the words, everyone in the room gets a tingling in their body,” Nick says. “The test is this question: ‘Does the curious little boy or girl in you suddenly show up; if not, you have not found your purpose.’”

  About purpose, discipline, and growth, Nick observed,

  I have studied every religion. I have a network of friends filled with people who are spiritually disciplined or military folks who are members of the Special Forces. I think spiritual discipline and military discipline produce people of higher purpose. Because they are pursuing something bigger than self, they are willing to do the hard, right thing rather than the easy, wrong thing. Purpose exposes your integrity gaps. It lets you know the score. Purpose does not let you take a vacation. It will not let you go. It pulls you into the next crucible. Eventually, you begin to see the next crucible as a gift.

  Personal Purpose to Organizational Purpose

  About organizational purpose, Nick told us, “Personal purpose is a litmus test for organizational purpose.” His point is that when we find our personal purpose, it transforms us. When the organizational purpose is articulated, it has the same transformational power. When people feel it at the personal level, they can begin to envision feeling something similar at the collective level. They know that the organizational purpose is something more than a set of PR words. Today, many organizations employ a marketing or a communications firm to come up with the company’s purpose. It is possible that they succeed, but it is not likely or probable. “People have to live in personal purpose in order to find collective purpose,” Nick says. “Madison Avenue is not likely to get you there.”

  Finding your organizational purpose is transformational. You gain the potential to make a unique shift that is not being made by competitors. Prior to having a purpose, you cannot see the shift. Even if you could, you would have no appetite for the shift.

  The Purpose Workshop

  People who are clear about their personal purpose are more able to turn conventional conversations into authentic dialogues. Nick often conducts a three-day workshop that consists of a cluster of genuine dialogues. In the first day and a half, he aims to bring everyone to their personal purpose. It is grueling work, but the people find it profoundly powerful.

  He then spends a day and a half helping them discover the organizational purpose. As the workshop unfolds, Nick creates partners and puts them into groups of four. He asks each group to imagine the collective purpose and to write a story about how that purpose might be manifested in three years. The two partners choose what they most value and then share that in the foursome. The four evaluate what they have shared. The process is repeated in a group of eight. In this complex undertaking, something unpredictable happens predictably. At some point, someone articulates a narrative so compelling that everyone recognizes the power.

  While the words in the narrative are important, they are not what matters most. What matters is the room, the sacred space, the authentic dialogue that emerges. In that dialogue, learning goes to an unconventional level. People begin to share and discover new things. The purpose begins to come out of the shadows.

  Nick described the process:

  I have a set of steps that I take them through, but I have to pay close attention and know when to stop following my own formula. When the magic shows up, I have to adapt and do what is necessary to keep the magic going. It is not easy because the process is not sustainable. Everything colludes to bring it down. I have to work hard to keep it flowing. I have to be in a higher state of influence. I have to be authentic, and I have to keep them authentic. I try to help them understand that the precious words they are producing are not as important as the collective, behavioral state in which they are producing them. I have to invite them to stay in this higher level of collective learning.

  Nick likened this elevated state to something from our own work. We call it “the fundamental state of leadership.”51 The concept, based on science, suggests that both individuals and groups can consciously choose to increase their sense of purpose, integrity, empathy, and humility. In this state, relationships change, and interactions give rise to new resources.

  Discovering the Organizational Purpose

  Nick provided some specific organizational examples. One of the most striking was the Development Bank of Singapore. Nick worked with the bank’s top management team, helping executives find their individual purpose and then turn their attention to the collective purpose. He did not want them to invent their purpose; he wanted them to discover it.

  Nick had the executives begin with childhood stories. Some of them spoke of visiting the bank as children, such as one woman who told of taking her piggy bank to her aunt who was a teller in the bank. Another executive spoke of customer appreciation letters that contained the word joy. Eventually, someone suggested that banking and joy were related. This suggestion brought a strong rebuke from the group. Over the next day, however, the word joy kept coming up.

  Eventually, a purpose statement emerged: “Making banking joyful.” Nick tested the validity by asking for stories that illustrated the statement. The executives shared many stories. The team began to realize that they were reconnecting to something that had once been a central aspect of the bank. In making the statement, they were articulating a purpose that had once led the bank.

  The notion that many on the team had earlier so strongly rejected now became a source of energy. Having articulated their personal purposes and their collective purpose, the team moved forward with a new vision. As they began to live it, signs could be seen by people at lower levels that an authentic change was occurring. The executive team dedicated funding to examining customer interactions and joy. They initiated 75 change projects related to joy. They redesigned the top floor of the bank to encourage and work on joyfulness. They reshaped marketing to accentuate the theme. They increased investments in customer-focused solutions and apps.

  The bank was transformed. Evidence of the transformation can be seen in a single conversation. In Singapore at Chinese New Year, it is a tradition to trade one’s old money for new money. This means long lines at banks. Driven by the notion of “joyful banking,” a lower-level employee decided to put out portable ATMs.

  The portable ATMs were a big success. On a TV show, the CEO was complimented for his foresight. He accepted the compliment even though he had no idea that the portable ATM program had been initiated. After the show, he called his CIO and asked about the ATMs and why he had not been informed. The CIO responded, “Well, if we are going to make banking joyful, we need to get you out of being involved in every decision.”52

  Think about the last sentence. What does it is say about the shift from the conventional to the inclusive perspective? What does it say about the emergence of a new culture, a culture of excellence?

  While this example may suggest that discovering an authentic higher purpose is easy and fun, in reality it is not. It is often quite difficult to convince leaders of the power of higher purpose. Sometimes leaders come up with a purpose not because it’s an authentic purpose but because an important investor or director suggested it or because they think they can fix a problem by motivating employees. So they come up with a purpose that will look good as a PR statement. Examples like that of the Singapore bank do not impress them because the purpose statements do not fit their preconceived notion of what good PR looks like. So they miss out on opportunities to organically discover their authentic purpose.

  For example, we spoke to a midlevel professional whose boss had directed her to lead a
project to develop a purpose statement for the organization. She had begun working on the project and found the task daunting. We shared examples of purpose statements from other organizations, and she grew excited. In the next meeting with her boss, she shared an example that she felt was particularly relevant. He rejected the example. The statement reflected a level of authenticity and commitment that would require change. This fell outside his expectations. He had expected an easy solution, some good PR words. He had no interest in doing the work of discovering an authentic purpose and aligning with it.

  Waking Up the Many

  Not all of Nick’s cases have had outcomes as impressive as that of the Development Bank of Singapore. Nick said,

  I have become a realist. The people who write business books make it look like their particular tool always works. Nothing always works. Organizations are at different levels of change readiness. When they tell me they already have a purpose statement, I cringe, but I do not challenge them. I accept where they are, and I begin working with them. Often when they find their individual purposes, they begin to see that their organizational purpose is not real.

  I often ask them, “If your organization disappeared tomorrow, how long would it take for others to replace what you were doing? How is your collective contribution unique? What are you doing that no one else is doing?”

  They sometimes realize there is something the organization is meant to do differently. There is an underlying ethos that needs to be tapped. Previously they failed to see this; they thought they were in the business of coming up with words. They begin to see it is not about the words; it is about profound power. If they can work harder and find their real purpose, they can pop the entire organization to a higher level.

  Nick told us that some people get this, so they begin to lead. They wake up others, who will wake up the many. When that happens, people’s lives are never the same, and the organization is never the same. Work becomes more sacred. Boredom disappears. Everyone has energy. You no longer have to police the people. Leadership becomes easy. You almost feel like you are somehow cheating. The people are doing what they are supposed to be doing without your trying to control them. Nick was describing the transformation of the principal–agent problem.

  Nick closed our conversation with a provocative thought: “Purpose is not necessarily happiness. Purpose is about intention and action, not happiness. It often produces happiness, but in the middle of the journey, it can be very taxing.”

  Nick said that purpose has implications for leadership. People who have a genuine purpose see the potential in others, and they seek to link the others to the collective higher purpose. In every interaction, they are linking the people to a higher image. As we would put it, they are all seeing the same “elephant,” and magic happens. The need for control declines because the people begin to lead themselves. The organization begins to learn and grow.

  Summary

  In the principal–agent model, people view the principal or CEO as the “leader” if they visualize a hierarchical relationship with the leader at the top. They assume that the task of a leader is to know and announce the purpose of the organization. Higher purpose is not invented by the CEO, it is collectively discovered. Finding higher purpose requires disciplined reflection, authentic dialogue, and hearing the emerging story of the organization. The scaling up of empathy means recognizing the suffering and the joys of the whole.

  When the organization discovers and articulates a higher purpose, that higher purpose provides meaning, gives rise to moral action, repels some and attracts others, gives rise to new practices, transforms peer pressure, gives rise to collaboration, drives renewal, and gives the organization access to previously latent resources. The second counterintuitive step in creating a purpose-driven organization is to discover the higher purpose.

  Getting Started: Tools and Exercises

  Phase 1. With your working group, watch the scene from Gandhi in which Gandhi is told to “go to find India.” He takes a train trip and returns to give a speech about bread and salt, a speech that has great impact. Discuss the learning process that gave rise to the insights about bread and salt, and discuss why people began to listen. Review the descriptions in this chapter, and discuss how your working group can go about the process of finding the India in your organization. Agree on the key steps you need to take to discover the purpose of your organization.

  Phase 2. Have your working group go out and do interviews with members of the organization and customers/clients. They can ask them these questions:

  If our organization disappeared tomorrow, how long would it take for another organization to do what we are doing?

  How is our collective contribution unique? What are we doing that no one else is doing?

  What contribution could we make that would increase your loyalty to this organization?

  Phase 3. In the working group, have people share their key insights from the interviews. Then review this chapter and formulate a strategy for discovering the purpose of the organization.

  CHAPTER FOUR

  Transforming Self-Interest

  Imagine a hot day, with the sun blazing brightly. A sharecropper is toiling in the field, working hard. He would love to take a breather and relax under the cool shade of a nearby tree, but he will be paid at the end of the day based on how much he harvests. He has a family to feed, and the more he harvests, the more wages he makes. He decides he can rest when he gets home in the evening. Now it is time to work hard and harvest as much as he can before dusk. This is, of course, precisely how the landowner would like the sharecropper to reason—work harder and get paid more; goof off and get paid less.

  This story illustrates the workhorse model in economics that describes the relationship between employers and employees. It is called the principal–agent model,16 and multiple Nobel Prizes in economics have been awarded for contributions to the development of it. It offers powerful insights.

  When a person is employed by an organization, the organization recognizes that the person is effort averse, that is, they prefer less work to more. All else being equal, the person will shirk when it comes to working for the organization. Because the organization wants the individual to work hard, it must make it in the best interest of that individual to do so. In other words, in the context of the assumptions we discussed in chapter 3, the individual maximizes expected utility (defined over their wealth or consumption) and minimizes the cost in terms of personal effort. Moreover, the organization is a hierarchy—the sharecropper has a boss, the landowner.

  To get the individual to work hard, the organization typically uses two practices: input monitoring and output incentives.17 It practices input monitoring by watching over the employees to see how hard they are working. Imagine the landowner patrolling the fields to see how hard the sharecropper is working. Analytical Alberto exercised this type of control over the organization. It also practices output incentives by giving the employee a compensation reward that increases as the observed output increases. Output incentives make it unnecessary for managers to watch the employee all the time to see how hard they are working.

  The principal–agent model is a workhorse model of employer-employee relationships in economics because it describes behavior well, it is elegant and tractable, and it provides valuable insights about how to design not only labor contracts but also a host of financial contracts. For example, it helps us understand why executives should be given bonuses and stock options, and why vesting schedules are often structured the way they are. It explains why insurance contracts have deductibles.

  An essential element of the model is moral hazard. Moral means “ethical,” “good,” “right,” “honorable,” or “principled.” Hazard means “danger,” “exposure,” “vulnerability,” “threat,” “risk,” or “peril.” Thus, moral hazard means that moral behavior is imperiled. A moral hazard arises when an individual chooses self-interest over the collective interest and acts in a manner that violates the s
pirit of the contractual relationship, although not necessarily the legal aspects of the contract itself.

  This selfishness is powerful and contagious. For example, when a boss chooses self-interest over the collective interest, the direct report reciprocates. The direct report pursues self-interest too, even if doing so sacrifices the common good. Over time, pursuing self-interest becomes the culture of the organization, its social contract. Unity is lost, and the social network is frayed. When this fraying occurs, the individual and the system become less productive. If the choice of self-interest spreads, the organization loses unified effort, and it becomes a collection of individuals all seeking their self-interest. Alberto came to realize the consequences of this loss of unity after his initial experience as a CEO.

  People who have a conventional mind-set pursue self-interest. Absent output-based rewards or input monitoring, the sharecropper goofs off. Absent deductibles, the insured will “overuse” insurance. The classic illustration of overuse is a person driving their car into a lake and then reporting it as stolen in order to collect the insurance money because the car was worth less than the insured value. Overuse is also observed in health insurance: absent copay provisions, people tend to overuse medical services.

  The principal–agent model says that the party in the contracting relationship that suffers due to the moral hazard—the employer or the insurance company—is “smart” enough to recognize the moral hazard and design input monitoring and output-based contracts to attenuate its effects. This attenuation leads to what is called a “non-cooperative Nash equilibrium” in which the employer anticipates the employee’s strategic behavior and then designs a contract to attenuate the effects of that behavior, and the employee behaves in exactly the manner the employer anticipated.