In today’s challenging world, driving corporate purpose leadership at all levels of an organization is imperative. This blog introduces business purpose and AI ethics, and presents the challenges needed to ensure new operational frameworks connect business purpose with ethical AI and happiness economics as human happiness declines and the importance of increasing risk management functions.
What is corporate purpose?
Corporate purpose is the overarching purpose of a company that goes beyond pure profit orientation. The aim is to define and deliver a long-term value proposition either in the company’s local environment or in the global market environment that is directly related to the value creation of the company.
Leading management thinkers agree that ideas about business purpose and what it means are changing rapidly. “Business purpose encompasses more than shareholder value, and this is not something that will cost your business, but something that will improve your business.” said Michael Beer, Cahners-Rabb professor emeritus of business administration at Harvard Business School and director of the Center for Higher Ambition Leadership.
Harvard Research on Purpose, sponsored by Ernst & Young, found that companies make more money, have more engaged employees, more loyal customers, and are even better at innovation and transformation when they have a clearly defined and aligned purpose. It seems easier to win the game if you take care of the game. This point underscores the importance of bringing more humanity to business and all operational practices.
“The feeling of being part of something bigger than yourself can lead to a high level of commitment, a high level of creativity and a willingness to collaborate across functional and product boundaries within an organization which is tremendously powerful.said Rebecca Henderson, a John and Natty McArthur University professor at Harvard Business School. “Once past a certain financial threshold, many people are just as motivated by inner meaning and a sense of contributing to something worthwhile as they are by financial returns or status.”
For example, more than eight in ten executives agree that a strong sense of shared purpose drives employee satisfaction, facilitates business transformation, and fosters customer loyalty. Most leaders also understand that purpose helps organizations navigate volatile and unpredictable environments and achieve higher and more sustainable performance.
These perspectives are fundamental to align all stakeholders. Also interesting is that McKinsey research found that about 85 percent of people feel they have a purpose. But only about 65 percent of them believe they can actually articulate that purpose, which is one reason for leadership and risk management’s concern that people are restless, stressed, and not anchored to where they are and where they’re going.
McKinsey also found that nearly seven out of 10 employees are reconsidering their job because of COVID-19. Those employees who say they live their purpose at work are six and a half times more likely to report greater resilience.
This research should spur all board members and executives to ensure they have a clear understanding of what corporate purpose means and use that basis in their decisions. It also means providing opportunities for employees to understand their desired employee purpose in the context of their life goals, to align visions to create a stronger shared purpose, to successfully navigate an increasingly unpredictable world, is crucial. Striving to accelerate sustainable performance with the energy of resilience, inspiring all to gather around a unified vision of why the organization exists and how it contributes to the achievement of a common good.
In my company’s case, we strive to end revenue uncertainty with more humanity. We solve diverse AI use cases ranging from predicting forecasts and profits more accurately to integrating permission to feel and correlating human (happiness) moods with productivity and health risks. More humanity is how our culture operates and interacts with our positive leadership orientation, but also in our software design practices where complexity is also hidden by simplicity.
I truly believe that more humanity in business practices is key and the decline in human happiness is one of the reasons. I’m so passionate about adding humanity to all business interactions and AI impacting decisions to ensure their AI forever.
Looking at research on the economics of happiness, Martin Seligman, a world-leading expert on the science of happiness, has said: “Although economic output has risen sharply in recent decades, life satisfaction has not increased. . . and there is a significant increase depression and mistrust.“Year after year, satisfaction levels are declining around the world, increasing the importance of employees having a clear sense of their own personal purpose.
According to the World’s Happiness Report in 2022, stress is higher today in all regions of the world than it was ten years ago, partly due to Covid-19, but there are many other factors increasing stress levels, rising inflation, bank rates, climate change, etc – but no one can argue that overall happiness is declining in every country, as found in the World’s Gallup Happiness Poll. Some highlights from their research report:
- In 2021, people around the world felt more worried, stressed and sad than at any time in the past 16 years. They have also had less positive experiences than in 2020.
- 28% of people said they felt very sad the day before, the highest percentage on record.
- 42% of people said they were very worried the day before, up from 40% in 2020.
So let’s step back and think about these perspectives:
1.) Purpose is fundamental to aligning shareholders and maximizing shareholder value.
2.) Employees and people in general are less happy (See World’s Happiness Reports)
Now let’s estimate more facts about my specialty AI:
The UBS report on AI coming of age predicts 20% annual growth for AI
The rise of AI is accelerating opportunities for employees to improve their digital skills and focus on creative aspects. With the emergence of other disruptive business models such as apps or sharing economy in a post-AI era, there will very likely be many changes.
UBS reports that AI as a standalone industry could be worth $100 billion by 2030 and $500 billion by 2050. Investments made today are likely to bear tremendous fruit in the decades to come. UBS’s long-term investment themes of robotics and automation, digital data and e-commerce would benefit directly from such high growth rates.
The next 30 years will look like the 1930s and 1940s as each business model will evolve with more intelligence, which will impact many routine jobs to be gradually replaced by new jobs that require more creative thinking skills.
This means that the business purpose needs to examine the role that AI will play in its business, as AI will be embedded in most investments. Therefore, the risk of not ensuring that there is an ethical basis for AI is a major risk given that the majority of corporate boards do not have an AI risk officer on their audit committees. Looking beyond this point, very few companies also have a clearly defined AI ethics and governance policy to govern all procurement practices, as well as new software projects that use AI to ensure they have a formal underwriting to Ensure business purpose and AI for good are front and center.
In summary, the increased focus on human needs and not products and services is key to building a strong business purpose and protecting people. We must ensure that the data used for AI is used to advance society and protect people. In Simon Sinek’s words, this is what separates the why from the what and how.
Brian Chesky, Airbnb co-founder and CEO, says: “This idea that a stakeholder has to lose in order for a stakeholder to win is bad design to me. I always think like a designer. Design is not how something looks; Design is how something works, and something works best when it works for as many people as possible.”
Other companies such as: PepsiCo and Johnson & Johnson have set out how they intend to benefit each group of stakeholders in the context of their overall purpose. Apple’s goal is “empower creative exploration and self-expression.”
Questions from Board Directors and CEOs to think more about shaping your company’s purpose:
1.) Relevance: Does your company have a purpose that is clearly defined and life-changing for everyone involved?
2.) Credible: Can your business purpose be credible? Can it be translated into actionable behaviors?
3.) Authentic: Does it align with what your employees truly care about and align with your company values?
4.) Inspirational: Does it have reach and impact and is it compelling to motivate and mobilize your employees to take action and get the message across?
My next blog will link business purpose to AI ethics and share ethical guidelines that can be incorporated into your company’s vision of business purpose, as data is the stuff of modernization and few board members and CEOs are investing in AI data modernization practices that affect the risk to the company long-term survival.
As a teaser, you can read our company’s AI Ethics Policy. You can also find the perspectives of CEO leadership in one of our latest books, The AI Dilemma.