In February, CVS announced it would stop selling tobacco products, and take a $2 billion hit to the bottom line, because they were starkly at odds with the company’s core purpose of promoting customer health. Larry Merlo, president and CEO of CVS Caremark, said in a news release, “Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do … to help people on their path to better health. Put simply, the sale of tobacco products is inconsistent with our purpose.”

More recently, Starbucks unveiled the College Achievement Plan for any Starbucks employee that will cover some or all of the tuition for Arizona State University’s online degree programs. If only 3% of its workforce takes advantage of the program, then it could cost Starbucks $50 million annually. That may sound like a lot of money. But, Howard Schultz, the founder and CEO of Starbucks, told the press that the program would not only lower attrition, increase performance, and attract and retain talent, but it is also in alignment with Starbucks’ mission: to “inspire and nurture the human spirit — one person, one cup and one neighborhood at a time.” What inspires and nurtures the human spirit more than getting a good education?

Both Merlo and Schultz made headlines because their announcements seemed to run counter to business norms. Give up short-term revenue to do the right thing in the long term? Has the world turned upside down? The answer is no, not exactly. The world is simply changing and beginning to value different things.

Increasingly, visionary CEOs are recognizing that the short-term revenue streams gained from activities that work against a company’s higher purpose are toxic in the long term. Furthermore, this kind of purpose-driven decision-making is being rewarded by investors; stock prices of both CVS and Starbucks went up after their respective announcements.

When a CEO clearly defines the higher purpose of the organization―who the organization is and what it stands for―that purpose can be used to see toxic revenue more clearly. To clarify, toxic revenue isn’t necessarily earnings that come from products or services that are inconsistent with a corporate strategy; rather, it is derived from activities that directly conflict with the organization’s purpose.

Although the two examples outlined above are from large enterprises, defining purpose and eradicating toxic revenue can be even more important for CEO’s of small to mid-sized companies. The CEO’s of these companies have less room to make mistakes and fewer places to hide when there are bumps in the road. By clearly defining purpose when an organization is smaller, a CEO can avoid toxic revenue mistakes and position the company to scale in an advantageous, purpose-driven way.

How purpose-driven CEOs can align purpose with revenue

There are four factors that differentiate problem solving with a purpose mindset from conventional decision making:

  • Make purpose your personal and organizational mission: Leaders guiding discussion based on a purpose mindset need to first examine their own purpose. Ultimately, your personal and organizational purposes need to line up; otherwise, you will find your work untenable.
  • Avoid temptations: When new growth opportunities get on a CEO’s radar — new offerings to launch, new markets to pursue, new partnerships to explore, etc.―they all look bright and enticing. While they all offer short-term gain, savvy CEO’s need to evaluate each opportunity through a purpose-driven framework to ensure that toxic revenue doesn’t creep in.
  • Think above the box: Everyone has heard of thinking outside the box, but thinking above the box is most critical for a CEO. Considering a high-level, purpose-driven framework to guide decision making will help leaders put temptations into context and place the right “bets” on the business.
  • Inspire and inform: In these cynical times, inspiration may seem like an archaic leadership concept. But appealing to people’s hunger to be raised to a higher level distinguishes those leaders solving problems with a purpose mindset. Engaging people’s emotions is a prerequisite; the head and the heart have to work together to change the conversation.

By being clear about purpose, using it as a guidepost along the path of decision making, and engaging their company intellectually and emotionally, CEO’s can stay true to themselves and, ultimately, build a company designed for healthy, long-term growth.

David Dotlich is the chairman and CEO of Pivot Leadership, a leadership consulting firm that designs and delivers corporate strategy and executive development programs for Fortune 500 companies such as Wal-Mart, Johnson & Johnson, GSK, Nike, Microsoft, KKR, Aetna, Best Buy, DPDHL, AbbVie, Ericsson, and many others. A successful entrepreneur who was named one of the Top 50 coaches in the United States, he advises CEOs and boards on issues of talent, leadership, and strategy. Dotlich is former executive vice president of Honeywell International, founder and former president of CDR International and Delta Executive Learning Center, and former president of Mercer Delta Consulting. Find him on Twitter and read his book, “The Unfinished Leader.”

Related Posts

Comments are closed.