Tag: Leadership

How CEOs can develop a Corporate Purpose that improves their Financial Performance.

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Recent Analysis finds that 2 components are critical for successful Corporate Purpose projects.

A new research study that has just been summarised in a recent issue of the Harvard Business Review analyses the power of Corporate Purpose to influence a company’s financial performance.

The study analysed 429 companies, carried out proprietary research among more than 450,000 employees, and their findings are fascinating.

Here are just three of their most significant conclusions:

  1. A strong sense of Corporate Purpose does not lead to any improvement in Financial Performance on its own

Companies with a strong Corporate Purpose were judged by their employees’ agreement with statements such as “My work has special meaning; this is not just a job”; “I feel good about the way we contribute to the community” and “I’m proud to tell others I work here”.

Although such companies generated a strong sense of purpose among their employees, and created a workforce that was motivated and engaged, the study found that such companies “weren’t correlated with firm financial performance in either direction”.

In short, strong Corporate Purpose on its own has no significant effect on a Company’s Financial Performance.

But when Corporate Purpose is combined with one other critical Corporate quality, the effect is transformational.

  1. When Corporate Purpose is combined with Management Clarity, however, it significantly improves both Financial Performance and Stock Returns

In companies where strong Corporate Purpose was combined with Clarity of Management Leadership, there was a significant financial impact.

Management clarity was measured by employee comments like: “Management makes its expectations clear” and “Management has a clear view of where the organisation is going”.

The report finds that Companies which combine these two dimensions – Corporate Purpose plus Management Clarity – “exhibit superior accounting and stock market performance”.

In fact, the report found that “a portfolio of high ‘Purpose-Clarity’ firms earn significant positive risk-adjusted stock returns in the future, up to 7.6% annually”.

But it is not simply the combination of Corporate Purpose and Management Clarity that drives this dramatic change.

There is one more critical ingredient that drives Corporate Performance.

  1. ‘Middle Management Engagement’ is the most critical influence in the successful conversion of Corporate Purpose into superior Financial and Stock Performance

Not surprisingly, the research found that “the more senior the employee, the stronger is the perceived purpose of the organisation”, because most senior employees are more involved in the development of Corporate Purpose – and are often incentivised according to its principles.

More significantly, however, the research also found that “it is solely the middle managers and salaried professionals that drive the relation between high ‘Purpose-Clarity’ organisations and financial performance.”

This is because middle management drive the day-to-day decision-making that enables Corporate Purpose to be put into Corporate Practice.

Or, as George Serafeim, one of the authors of the report summarised – middle managers can become:

“Managers who buy into the vision of the company and can make daily decisions that guide the firm in the right direction.”

They convert Management Clarity and Corporate Purpose into day-to-day decision-making:

“This clarity enables the translation of purpose from an abstract idea to specific actions that employees have confidence will be recognised (and rewarded) by their superiors”.

Like many similar analyses, we see that grand statements of Corporate Purpose are worthless without real Employee Engagement translated into daily actions.

At Reputation, we help listed Corporations to identify, define and implement a Corporate Purpose that defines their Corporate Culture and builds their Corporate Value.

If you are a CEO of a listed Corporation and you would like to discuss how we could help you to clarify your Corporate Purpose, please contact us via our website, or by email to Connect@TheReputationPartnership.com and we will reply – in strictest confidence – by return.

8 reasons why CEO Branding is not vanity – it’s a Corporate Necessity.

18kz0juaawir2jpgPerceptions of a Company’s CEO can add 35% to its Share Price. 

Many of the Asian CEOs that we work with feel uncomfortable spending time working on a strategy for their own Brand Positioning and Presentation.

Until we show them the data.

Here are just eight facts that will make any CEO think twice:

  1. ‘Management Credibility’ is the No.1 driver of Investment Decisions among the Buy-Side, and the No.1 influence on Recommendations for the Sell-Side.
  2. In a well-regarded research study, CEO Perception alone influenced, on average, 31.5% of every Analyst’s Investment Decision.
  3. Analysts say that their confidence in the effectiveness of a Corporation’s Leadership will justify them paying a Price Premium of 15.7% on the Company’s Stock.
  4. Equally, those same Analysts say that perceptions of Ineffective Leadership would lead to them Discount the Stock Price by 19.8%.
  5. Together, that Premium and that Discount mean that: perceptions of a Corporation’s Leadership will result in a 35% Variance in their Company’s Stock Price.
  6. Earlier research carried out by one of the world’s most respected specialists in CEO Value discovered through regression analysis that – on average – a 10% improvement in a CEO’s Reputation creates a 24% increase in Market Cap.
  7. Yet another recent Study found that ‘Positive CEO Media Coverage’ results in an additional 7-8% in their Corporation’s Stock Returns.
  8. In one more Global Research Study, Company Employees in 19 countries variously estimated that their CEO’s Reputation accounts for somewhere between 25-60% of their Corporation’s Market Value.

There are many, many more reasons for every CEO to think carefully about how they Position and Present themselves to all their Stakeholders.

But the most important is this:

If they don’t, they are failing their Shareholders.

At Reputation, we provide personal, confidential counsel to CEOs of listed Corporations, advising them how to Position and Present themselves to their most important Stakeholders.

If you are a CEO of a listed Company, and you would like a confidential discussion about how to manage your own Positioning and Presentation, please get in touch with us either via our website or by email to Contact@TheReputationPartnership.com – and we will reply to you by return, in total confidence.