How to Evaluate the Impact of Corporate Purpose

Companies must develop the capacity to accurately assess whether they are making progress toward social and environmental goals.

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Confronted by employees seeking meaningful work, customers demanding sustainable and traceable products, and investors who want companies to do both well and good — while inequality is rising and climate change is an increasingly dire threat — business leaders are redefining the purpose of their organizations. These days, one is hard-pressed to find a major company that has not incorporated the greater good into a statement that lays out the organization’s reason for existing.

But if corporate purpose is to be more than window dressing and deliver on the promise of an engaged, motivated workforce and more loyal customers, companies must develop a capacity that is still lagging for most: They must be able to accurately assess the results of executing their purpose-driven strategy, particularly when that strategy extends to making a positive social and environmental impact. If companies measure this at all, they often outsource it to consultants, silo it in a corporate social responsibility function, or even delegate it to an intern. This attitude has led to suboptimal approaches that fail to look holistically at the core business, are not taken seriously by key stakeholders, or produce poor data that is not actionable.

Even companies that are making a sincere effort to implement purpose often focus largely on aligning employees with the organization’s raison d’être. Consequently, their efforts to track the impact of purpose may lean toward measuring employees’ understanding of purpose and its effect on engagement and retention. But for an organization’s stated purpose to be sustainable, companies must begin to engage in the hard work of assessing how it is made manifest (or not) in all business activities in terms of specific objectives, outputs, and outcomes. At truly purpose-driven companies, managing purpose is inseparable from managing the business.1 They evolve into what we call impact organizations that strategically define, measure, and manage their financial, social, and environmental objectives.

Start by Understanding Current Impact

As companies define specific, purpose-driven objectives and the ways in which they will manifest their purpose, it is tempting to focus attention on new initiatives and to track the impact of only those activities. However, it is important to consider the whole organization and uncover potentially negative effects of current operations.

Topics

Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
More in this series

References

1. V.K. Rangan, L. Chase, and S. Karim, “The Truth About CSR,” Harvard Business Review 93, no. 1-2 (January-February 2015): 41-49.

2. L. Hehenberger, A. Harling, and P. Scholten, “A Practical Guide to Measuring and Managing Impact” PDF file (Brussels: European Venture Philanthropy Association, April 2013), www.evpa.ngo; also see C. Busch and H.G. Barkema, “Align or Perish: Dynamic Social Enterprise Network Orchestration in Sub-Saharan Africa,” Journal of Business Venturing 37, no. 2 (March 2022): 1-26.

3. M.K. Gugerty and D. Karlan, “Ten Reasons Not to Measure Impact — and What to Do Instead,” Stanford Social Innovation Review 16, no. 3 (summer 2018): 41-47.

4. J. Mair and C. Seelos, “Organizations, Social Problems, and System Change: Invigorating the Third Mandate of Organizational Research,” Organization Theory 2, no. 4 (October 2021): 1-22.

5. C. Busch, “The Serendipity Mindset: The Art and Science of Creating Good Luck” (New York: Penguin Random House, 2020).

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