How to Evaluate the Impact of Corporate Purpose

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.

For example, a company that provides a platform for food delivery services and defines its purpose as feeding all communities might launch a program in which delivery personnel collect food that restaurants would otherwise throw away and deliver it to people in need. It would be disingenuous to measure the positive impact of that project and not consider the potential food insecurity of delivery workers earning minimum wage or the job insecurity of gig workers.

Identify Performance Indicators That Track Outcomes, Not Just Inputs

Many organizations are accustomed to quantifying their positive contributions to society in terms of the amount of money they invest in “good works.” Shifting from merely measuring inputs (resources invested) to outputs or outcomes is necessary but not easy to accomplish. The smaller and more focused the scope of an activity, the easier it tends to be to measure outputs and outcomes. Starting with outputs (such as the number of people fed) can be helpful, because they are often directly related to an organization’s efforts, and data is more readily available.2 Measuring outcomes, in turn, often requires outside information. For example, “improving food security” could be measured by polling community members.

Furthermore, an organization needs to identify to what extent its own efforts contributed to these results.3 Especially for longer-term outcomes, it can often be difficult to disentangle the causal relationship between an organization’s activity and the long-term effect. Understanding whether outcome changes were caused by the organization’s actions or someone/something else often requires a look at the counterfactual — what would have occurred had the organization not made that particular effort. Businesses can gain this insight by capturing the activities of other actors in the area, as well as those of partners who contributed to the organization’s efforts — measuring impact at the level of a system, such as a community.4

One indicator should be chosen that assesses scale and another that measures depth per outcome area. If an organization develops an educational program to prepare youths for jobs in its sector, for example, program leaders will likely want to understand both how many students completed the program (scale) and how the program helped them get jobs (depth).

Output measures under an organization’s direct control should be tracked at least quarterly. Outcomes — the changes the organization aims to achieve — might be tracked less frequently, given that change requires time.

Qualitative data that connects outputs to the lived reality of program participants adds depth and can inform the design of future activities. For example, students who successfully completed an apprenticeship program might report getting a job, but also describe how the program awakened broader interests and inspired them to begin a higher education course.

Systematize Data Collection and Analysis

As companies become serious about measuring the impact of purpose, they also need to develop formal systems for collecting and tracking impact data — and apply the same standards of data quality that they do to their financial information. Business leaders should integrate the data into the company’s reporting and governance systems such that it is transparent and accessible, and they should communicate results to key stakeholders. Senior leaders who are sincerely committed to purpose will demand no less — and data must withstand scrutiny from stakeholders who seek to hold the company accountable for living its purpose, such as activist employees and customers, and impact investors.

Good data on outputs and outcomes doesn’t just verify the value created by the organization; when it is fed into management analytics dashboards and decision support systems, it can reveal opportunities for iterating, learning, and improving upon execution of a purpose-based strategy. The right impact data will be relevant to daily activities. For instance, the data a company collects on the energy efficiency of its plants to track its progress toward sustainability commitments is material to decisions on how it manages its entire value chain.

Developing strategies and systems that track and report impact data, hold the organization accountable, and provide decision makers with actionable and timely operational data is paramount for making a purpose statement a mission rather than just a motto. In a fast-changing world, data can also offer up serendipitous associations that might lead to new solutions — especially welcome as businesses take on the more complex challenge of fulfilling a purpose that embraces multiple stakeholder needs.5 This can make companies into impact organizations and turn rhetoric into reality.