I’ve come across some interesting work at education publishing giant Pearson, which places a social purpose at the heart of the business. Pearson has decided that its future lies in “efficacy”, a word it’s consciously taken from the pharmaceutical world, where it means the positive effect of a drug on overall health. In Pearson’s educational context efficacy means the effect its products have on “learning outcomes” (as the jargon has it). This is deliberately ambitious. A good learning outcome, in Pearson’s view, is not the ability to pass an exam, but the ability to take the knowledge you’ve gained and put it to good use.
Pearson has decided this purpose – the promotion of educational efficacy – is fundamentally what its business is about. Former CEO Marjorie Scardino (who launched the work) is very clear what this means. Profit, she says, is necessary to sustain the business, but making profit is not the goal. Pearson has developed a framework to ensure its products (old and new) can be assessed against efficacy. Efficacy will guide those products’ marketing, as well as corporate acquisitions and strategy. The company is now working to ensure the goal reshapes core activities including recruitment, staff development and assessment.
The great thing about the efficacy goal is that it’s quite real. There’s some room to argue about what it means and how you measure it (Pearson is working with educationalists on that too) but broadly speaking it’s not difficult to see the link between whatever Pearson does, and the effects it might have in the world. It’s not difficult to see that this commitment to efficacy demands real and practical changes in the way the business works. It’s also clear that if you can commit to so real and potent a corporate purpose, you no longer need to insert a supporting infrastructure around brand or corporate “values”: because educational efficacy is in itself easily inspiring and motivating, all you need to ask of your staff is that they understand it and let it guide their work. Pretty much everything else in terms of desirable behaviour and culture should follow. Anybody who doesn’t feel inspired by the efficacy goal should not be working for the company.
I don’t know anything about Pearson’s existing culture, or past brand work. Its corporate website carries the strapline Always learning. It’s a nice phrase in itself, simultaneously indicating a market focus and an open, modest disposition, but I don’t know whether or not it reflects anything real about Pearson’s culture. You could relate it easily enough to efficacy, but I wonder whether at this point, as a supplementary thought, it’s both redundant and potentially confusing.
With efficacy I think we can see Pearson has defined a potent and convincing corporate purpose which goes far deeper and further than the usual vacuities of brand-driven vision, mission and value statements.
Significantly too, it’s not fundamentally about marketing. It’s not about how Pearson could distinguish itself from other businesses working in the same market, not about that kind of brand-filtered advantage. It’s about shaping how Pearson works and what it does. Like profits, market perceptions of Pearson’s brand (and brands) will follow from and reflect how the company behaves.
You might say Pearson is in an unusual position, large enough to make a difference, and working in a market where there is inherent social good. Other companies might not be able to help themselves so easily to such a potent idea.
I wonder. Every business has a social impact, be it small or large. Even a small company is presumably making someone’s life better, whether through its products or its place in the community. Identifying a social impact which can be real for the business (and which will also support its continuing profitability) is an exercise that probably requires some imagination, and certainly requires absolute commitment from senior management. It needs to be scaled to reflect a feasible social impact for the size of the business: it will be motivating for staff because it’s something they can relate to the work they do.
What about businesses whose social impact is often perceived to be negative? Could McDonald’s for instance feasibly operate in these terms? You could put the question the other way round and ask whether it can afford to ignore these terms? In the past the answer has obviously been “yes”: the company built an empire offering apparently cheap unhealthy predictable food. But times and social pressures are changing. From all I’ve heard McDonald’s is actually a well-managed company, and has already shown it’s aware of the threat. Perhaps this focus on social impact as a corporate purpose might help it find a more convincing way of marrying its populism with wholesome food.
Or it might have to sideline the nature of its products, accept that they are always going to be on the margins of social acceptability, and focus instead on some other aspect of its business, for instance bringing employment and training to people who have come to the jobs market with few formal qualifications.
In this light, defining corporate purpose means finding the best, sustainable source of pride in the business, because pride is a ready source of meaning, and meaning is the key to employee engagement.
It’s not something you can fake. It has to be something which changes how you behave. If you’re an oil company and you want to say that your purpose is to create sustainable clean energy for future generations then like Pearson you need to develop a method of looking at everything you do through the lens of that purpose, abandoning the activities that don’t stand up to that scrutiny. If you can’t do this you need to think again about your purpose.
It will also place you in a very different position with financial markets. For the last twenty or thirty years practically all publicly quoted companies have happily avowed their primary purpose is to create shareholder value. I’ve heard it said that even Jack Welch, who coined the phrase, now believes this is dumb but it still guides most corporate boardrooms. It’s dumb because “value” here has generally been understood as short term financial returns, usually bought at the expense of longer term thinking. Putting social impact at the heart of a business insists on a redefinition of shareholder value. Shareholders can still expect to make money from their investments, but their relationship to the business has been redefined. This itself is an intrusion of reality, a necessary refinement in our understanding of how capitalism can work in current conditions.
Shareholders cannot own a business in the sense that you can own a car or a computer, because a business is not reducible to a balance sheet. It is the sum of everything it does, which is quite a different concept. Investors can take a stake in a business’ success, but this is more like betting on a race than buying a horse. Putting social impact at the heart of a business brings this reality into focus.