meaningful purpose to drive lasting cultures of improvement iverson and ben...mckinsey & company...

Ted Iverson and Ben Pasquier | November 7, 2018

Meaningful Purpose to Drive Lasting

Cultures of Improvement

RESULTS WASHINGTON CONFERENCE

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited

2McKinsey & Company

Summary

▪ Developing Meaningful Purpose - how to get started, how to scale in your teams

▪ Meaningful Purpose in your Organization - a quick survey and discussion about

current MP in your organizations

▪ Actionable Meaningful Purpose - how do we move from words to something that

inspires greatness at each level of the organization

▪ Evidence of Meaningful Purpose - across many industries meaningful purpose is

becoming more common and for good reasons

▪ Meaningful Purpose that Drives Strategy - examples of how meaningful purpose

can guide not only improvement but strategy

3McKinsey & Company

Something is happening related to purpose . . .

Evidences

4McKinsey & Company


Evidences

SOURCE: McKinsey Organization Practice; Lievegoed, Greiner; Glaszl, Barefoot,

Features

$

Crises that push people to new model

chaos, arbitrariness,

dependence of core

staff, new generation

owner, employees want

more professionalism

over-organization, silo,

bureaucracy, fragmenting

sense of purpose, process

over impact

Too much performance yet

not engagement, short

termism, people feeling

underutilized and

overstretched,

▪ Founder has an idea

▪ Pioneer shapes ways

of working

▪ Charismatic and

authoritarian

leadership

▪ Highly personalized

functions organized

around the leader

▪ Formalized structures

and roles

▪ Guided by policies

▪ Division of labor

▪ Staff fit into

organizational

requirements

▪ Compliance focus

▪ Drive financial value

and free cash flow

▪ Management by clear

targets

▪ Flatter structure

▪ Integrated functions

▪ Customer focus

▪ Leadership

Development

▪ Diversity

▪ Strength-based

▪ Purpose driven, accepting

responsibility for society

▪ Processes and speed

▪ Hierarchy melts, agile team

of teams

▪ Interdependency with

ecosystem

▪ Digitally infused

▪ Competition to cooperation

Optimization for own

company, missing talent, not

tapping into ecosystems,

missed opportunities, public

critique

Organizations are evolving

6McKinsey & Company


https://www.youtube.com/watch?v=wJJqGh2HLM8

Evidences

https://www.youtube.com/watch?v=wJJqGh2HLM8

7McKinsey & Company


https://www.youtube.com/watch?v=CxGUmtRLm5g

Evidences

https://www.youtube.com/watch?v=CxGUmtRLm5g

Customers

Partners

Government

Umfelt

Capital

providers

Shared

Aspiration

Shared Aspiration will bind the network

Talent

9McKinsey & Company

Others working with Meaningful Purpose . .

Simon Sinek –The Golden Circle

Lisa Earle McLeod – Selling with Noble Purpose

Dr. Kim CameronCenter for Positive OrganizationsRoss School of BusinessUniversity of Michigan

Meaningful Purpose in your organization

Our organization

has a meaningful

purpose that is . . .

Susan Cranston and Scott KellerMcKinsey Quarterly 2013

Others working with Meaningful Purpose . . Others working with Meaningful Purpose . .

McKinsey and Meaningful Purpose . . .

10McKinsey & Company

▪ Story telling/teaching/sharing – leaders, customers, team members, partners,

with dedicated time sharing moments of greatness

▪ Find alignment of those moments to process sequences, steps and actions

▪ Ensure pure intent the purpose must adopted as the leading driver of the

organization to have long term impact

▪ Searching and Gathering method for moments and further sharing

Discovering Meaningful Purpose


Meaningful Purpose Pieces



Meaningful Purpose – is not enough

Is having a meaningful purpose enough to insure that your organization will achieve

greatness over time?


Meaningful Purpose within Lean principles systems and toolsActionable Meaningful Purpose

Connecting

strategy, goals,

and meaningful

purpose

Discovering

better ways

of working

Delivering

value efficiently

to the customer

Enabling

people to lead

and contribute

to their fullest

potential


Strategy and Goals

Lean Management Systems

Mindsets and Behaviors(feedback loop)

Meaningful Purpose

Connecting

Systems

Enabling

Systems

Discovering

Systems

Delivering

(value)

Systems

Actionable Meaningful Purpose


Strategy & financials linked

▪ Translates strategy into

quantifiable metrics that bridge to

budget / investment case

▪ Engage field in budget process to

align on financial targets

Strategy scorecard

▪ Measures and tracks

performance on a periodic

basis to “keep score”

against strategy

Alignment & accountability

▪ Focuses organization on

what moves the needle

▪ Assigns owners at all

levels down to the point

of execution

Control tower

▪ X-Matrix: strategy on a page

▪ Allows senior executives to easily

see who is driving the strategy and

how it will impact financials

1 2

3

Prioritization of the “list”4

5

▪ Filter all initiatives and

projects and execute against

those that will drive performance

the most

Unique

Elements

Actionable Meaningful Purpose – Strategy Deployment


Top Level X Matrix 2015

Optimize capital expenditure

Reduce costsCreate performance management culture

Improve marketing ROIOptimize guest spend

Improve guest experience

Achie

ve 4

-wall

EB

ITD

A m

arg

in o

f x%

Achie

ve a

4-w

all

EB

ITD

A o

f $X

mill

ion,

(YoY

x%

gro

wth

)

Achie

ve a

vera

ge w

eekly

sale

s o

f $X

(Y

oY

x%

gro

wth

)

Sponsor

1

Sponsor

2

Sponsor

3

Sponsor

4

Sponsor

5

Ow

ner 10

Ow

ner 11

Ow

ner 12

Primary Responsibility

Secondary Responsibility

Ow

ner 13

Ow

ner 9

Ow

ner 1

Ow

ner 2

Ow

ner 3

Ow

ner 7

Ow

ner 8

Ow

ner 6

Ow

ner 4

Ow

ner 5

Top strategic

priorities

A

B

C

E

How to accomplish?

▪ Translates financial goals into 6-8 areas of focus for the year

▪ Rule of thumb: 2 priorities per financial objective

▪ Aligns senior management on the priorities of the organization

How much and when?

▪ Support strategic priorities with strategic initiatives

▪ Rule of thumb: 2-3 initiatives per priority

▪ Breaks down into monthly progress increments

▪ Measures results, rather than action plan milestones

▪ Easy to calculate and communicate

▪ Assigns accountability of who is ultimately responsible for

achieving the strategic initiative (usually VP or Director level)

Incre

ase a

vera

ge g

ratu

ity s

ize f

rom

x%

(2014)

to y

% b

y

12/3

1; in

cre

ase inte

nt to

recom

mend u

s fro

m x

to y

by

12/3

1

Intr

oduce 1

0+

new

menu ite

ms that either

exceed c

ate

gory

avera

ge in

sale

s v

olu

me, or

incre

ase tota

l cate

gory

sale

s

Com

ple

te K

aiz

ens

on a

ll re

levant part

s o

f th

e b

usin

ess a

nd

subsequently s

chedule

all

rollo

uts

by 1

2/3

1; have e

mplo

yees

subm

it their x

kill

er

ideas, adopt th

em

by 1

2/3

1

Incre

ase w

ebsite tra

ffic

fro

m x

-y m

illio

n s

essio

ns; book x

%

incr

reserv

ations thro

ugh w

ebsite; im

pro

ve a

vera

ge tic

ket siz

e

for

ord

ers

pla

ced o

nlin

e b

y x

%; in

cre

ase g

ift card

sale

s f

rom

$X

-$Y

mill

ion -

-all

by 1

2/3

1

Imple

ment new

regio

nal pricin

g a

rchitectu

re (desig

n a

nd

pricin

g)

in a

ll sto

res b

y Q

3, deliv

ering e

xit r

un r

ate

x%

uplif

t per

avera

ge c

heck

By 1

2/3

1, in

cre

ase b

rand h

ealth tra

cker score

for

bra

nd

com

munic

ation a

ware

ness b

y x

% a

nd c

onsid

era

tion b

y

x%

vs. a)

baselin

e a

nd b

) com

posite o

f our

polis

hed

casual com

petito

rs

Reach x

mill

ion e

nro

llments

in the loyalty p

rogra

m b

y 1

2/3

1

By 1

2/3

1, in

cre

ase b

rand h

ealth tra

cker score

for

bra

nd

com

munic

ation a

ware

ness b

y x

% a

nd c

onsid

era

tion b

y

x%

in x

media

mix

test m

ark

ets

. F

or LT

O e

vents

,

outp

erf

orm

the a

vera

ge o

f la

st 5 s

easonal LT

O e

ntr

ies in

avera

ge s

ale

s p

er

sto

re p

er

week d

uring the p

rom

otion

period b

y x

% o

r m

ore

Reduce 1

2-m

onth

rolli

ng e

mplo

yee turn

over

at m

anager

level fr

om

x-t

o-y

managers

; re

duce 1

2 m

onth

rolli

ng

em

plo

yee turn

over at hourly level fo

r hosts

/hoste

sses

from

x to y

, and s

erv

ers

fro

m x

to y

, all

by 1

2/3

1

Net of in

flation, decre

ase p

rocure

ment cost to

genera

te

$x m

illio

n s

avin

gs b

y 1

2/3

1

Exit 2

015 w

ith a

nnualiz

ed o

pex

savin

gs o

f $X

mill

ion

Reduce identified T

FC

gap b

y x

bps b

y 1

2/3

1

Reduce a

vera

ge c

ost to

build

new

Sm

all

Box s

tore

to

$x m

illio

n o

n a

bid

basis

by 1

2/3

1Targets

to improve

3-year

financial breakthrough

objectives

2015

annual

financial

objectives

What?

▪ Key value generation metrics that require

the organization to stretch itself

A

Achieve average weekly sales of $X (3-yr CAGR of x% growth)

Achieve a 4-wall EBITDA of $X million (3-yr CAGR of x%)

Achieve 4-wall EBITDA margin of x%

E

C

How far do you need to improve…?

▪ …in the 1st year to meet the 3-year breakthrough objective?

▪ Rule of thumb: 30-50% of 3-year target; breakthroughs exceed budget targets

B

D

Who?

▪ Assigns accountability of who is ultimately responsible

for achieving the strategic priority (usually C-suite level)

D

▪ The closer a financial objective, strategic priority or strategic initiative is to the center of the X-Matrix, the higher priority it is for the organization

▪ One senior executive should own SDP (e.g., CFO, CSO) and reinforce accountability

Actionable Meaningful Purpose – Strategy Deployment


Company

Shareholder

Value

Team

Organizational

Health

Society

Social Impact

Me

Personal

Growth

Customer

Customer

Experience

▪ Improving society

▪ Building the nation

▪ Stewarding resources

▪ Share price targets

▪ Industry leadership

▪ Beating the competition

▪ High performing teams

▪ Sense of belonging

▪ Caring/humane environment

▪ Personal development, learning

▪ Paycheck / big bonus

▪ Empowerment

▪ Making it easy for the customer

▪ Superior service

▪ The work

Companies connect strategy to 5 areas of meaning

“We save lives”

▪ Seat belts

▪ Air bags

▪ Automated braking and

steering systems

“Appreciate”

▪ Bulk pins and jewelry

▪ Customized individual

awards

▪ Appreciation systems


SOURCE: 1 HBR/The Energy Project, Human era at work (2014); 2 Gallup - State of the global workplace (2013); 3 Imperative and New York University, Workforce Purpose Index (2015); 4 HBR/EY, The

business case for purpose (2015); 5 Deloitte, Core beliefs culture survey (2013); 6 Raj Sisodia, Firms of Endearment (2013); 7 Havas, Meaningful Brands Index (2013); 8 Edelman, Trust Barometer

Global (2016); 8 B Corporations, B Corp Index (2012).

Attract and retain talent within

the organisation...

50% People that see work as a

calling are 50% more likely

to have a top position in

the firm.3

Organizations at which

employees experience

purpose at work deliver

employees to society that

are 2.2 times as likely to

be satisfied at work.1

2.2x

People with purpose at

work are 2.8 times as

likely to stay.1

2.8x

People who experience

purpose at work are 2.3

times as likely to be

engaged.1

2.3x

...serve clients better...

Executives believe that

purpose-driven companies

will deliver higher quality of

products and services for

their clients.4

81%

Executives believing that an

organisation with shared

purpose will have greater

customer loyalty.4

80%

Executives of purpose-driven

companies say their

company has strong

customer satisfaction5

94%

Executives that are more

likely to recommend a

company with purpose to

others.4

85%

...while increasing returns for

shareholders & partners…

Of purpose-prioritizing

firms showing a >10%

growth rate in the past 3

years (vs 42% in the non-

prioritizers).4

58%

Meaningful brands related

to human well-being

outperform the stock

market by 120% between

2005 and 2012.7

120%

14x Outperformance of

S&P500 by purpose-led

companies between 1998

and 2013.6

84% Executives believing that

their internal

transformation will be

more effective if integrated

with purpose.4

...and having a positive impact

on society & government

Of people believe that

CEO’s should be

personally visible in

discussing societal

issues.8

80%

Higher score of B

Corporations versus

other sustainable

businesses. B Corps

use their strengths to

address social and

ecological challenges

and formulate their

goals with this mindset9

25%

Some hard facts on purpose

21McKinsey & CompanySOURCE: interviews,press clippings

Context

▪ Leading European

fashion e-commerce

▪ 14,000 countries in 15

countries

▪ Sense of plateauing

after Unicorn IPO

What is your purpose?Why did you start thinking about purpose?

What is the business impact of purpose?How did you develop your purpose?

Example <client> case:“Purpose is something you surface, not something you create”

“Reimagine fashion for the good of all”

▪ Reimagine: Employees that come to work to

experiment, create and rethink. Employees that ask

the right questions when things get more complex.

▪ Fashion: From celebrating your personal style to

earning money with your outfits

▪ Good for all: Best results for people–customers,

producers, trendsetters or brands

▪ Arrived at the company’s turning point – successful IPO, crossed the EUR1bil

revenue mark, recognized as the European unicorn

▪ Talent: Employees were leaving more often than ever–due to the lack of

established culture. “No longer a startup, but not established either”

▪ Leadership: Even the founding employees echoed the sentiments – “I wouldn’t

like to work here, as it is now. We had built a house we didn’t like living in.”

▪ Viewed purpose as a “ product” – it needed to be designed, prototype and made

useful for people

▪ Started ideation with executive teams

▪ Engaged 5,000 employees (about 70% of company then) in coffee/ lunch

conversations to share “why do you work at <client> ”, “what is your proudest

<client> moment?”

▪ Engaged its partners and customers in ideation workshops (over six months)

▪ Prototyped the purpose in 20 teams (totaling 200 people) for six months –

“Can the purpose be used for decision making”

▪ Developed a purpose toolkit (e.g. discussion cards on how to make this

meeting serve our purpose, branding guidelines for product and recruitment and

a game for new joiners)

Improved employee retention after a year and attracted

US talent to work for <client> in Germany

▪ Purpose-centered conversations amongst employees

▪ Introduced employee-centric initiatives (e.g. daycare

shifts to support its logistics employees)

▪ Accelerated its platform strategy by helping the

team think about the customer needs it wanted to fulfill,

rather than the product. For e.g., <client> launched

new products such as individual stylists.

▪ Accelerated sustainable supply chain initiative

▪ Purpose also helped decision making; products were

not launched if it didn’t fulfill the purpose

BACKUP


Others working with Meaningful Purpose . . .

Simon Sinek –The Golden Circle

@VG: Can you please

combine these next 4

slide



Lisa Earle McLeod – Selling with Noble Purpose


Dr. Kim CameronCenter for Positive OrganizationsRoss School of BusinessUniversity of Michigan



McKinsey and Meaningful Purpose . . .

Susan Cranstonand

Scott KellerMcKinsey Quarterly

2013


Audience poll

Poll anywhere with

audience

Our organization has a

meaningful purpose that is . . .



Organizational affinity toward Meaningful Purpose follows Maslow’s Hierarch . . .

Abraham Maslow

Organizational actualization:

Achievement and increasing potential,

creativity, ingenuity, authenticity

EsteemRespect and recognition

Contributions beyond the

organizational walls

Sense of belongingSocial connectedness, part of a

community or tribe,

SecurityStable work environment (benefits,

clear job duties and responsibilities)

Physiological needsSurvival issues (salary, stable

employment)

Meaningful Purpose is

not visible or within the

current dialog

Meaningful purpose

discussions become

increasingly organic

Intentional and

systemic



Meaningful Purpose at an Organizational Level - sources

▪ Specific workshop activities with

leadership

▪ Interviews with customers, partners

and suppliers

▪ Panel interviews with associates at

each level of the organization

▪ Legacy of the founder

▪ Diligent observation, constant

searching and discovery


meaningful purpose to drive lasting cultures of improvement iverson and ben...mckinsey & company...

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