#9 Purpose and the Pareto Principle

You'll be familiar with the 80/20 rule already...

What if 80% of the problems that arise in your company and 80% of the value it creates are driven by the same underlying factor?

2 min read

Think of a recent problem that suddenly required a huge amount of C-suite time to resolve.

A PR disaster, an unhappy customer, a product failure, production outage...

What was the root cause of that problem?

When you peel back the layers it usually comes down to a failure in decision-making somewhere in the chain - or in multiple places.

How could better decisions have been made?

Major decisions rightly require approval from higher levels.

But this is not practical for everyday decisions: people need to be given autonomy, especially in high-growth companies - otherwise innovation and dynamism will be stifled by bureaucracy.

An Operating System for Decision Making

There are thousands of micro-decisions that your people need to make every single day.

A clear sense of purpose and shared values act as an operating system that guides their actions and behaviours - whilst providing them with the autonomy to use their own judgement and expertise.

Purpose and Performance

It is no surprise that purpose-led companies perform more strongly than their peers across a whole range of metrics (as other editions of this newsletter have detailed).

At the heart of this is the impact of a clear sense of purpose on the motivation of a company's staff.

According to McKinsey, purpose-led companies have four times higher levels of employee engagement.

And companies with highly-engaged staff are 23% more profitable on average, according to a meta analysis by Gallup totalling more than 3 million employees.

Applying the Pareto Principle

It does take some effort to get this right, although certainly less time than dealing with all of the resulting problems.

And the value that can be created by getting it right far outweighs the time and cost required.

Finding the Links

The issue is that most businesses do not see the links between purpose and problems, or purpose and performance.

That's because it is difficult to quantify these things, but not impossible.

The key to this lies in a better understanding of Opportunity Costs, which is what next week's edition will focus on.

I'll share some step-by-step methods that any company can follow to calculate opportunity costs and inform better decision making.

The journey towards a better way of doing business

We are on the cusp of a new paradigm of responsible business, and helping impactful companies pair purpose with profit will accelerate the shift.

I believe this holds the key to solving many of our greatest challenges and inspiring positive change throughout society.

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