The ESG Initiative at the Wharton School
The Value of Corporate Purpose
Outlet: Harvard Business Review
Instead of conceiving of the firm as a collection of managers writing contracts specifying roles and tasks and then struggling to get workers to comply, we need to develop theories that better match the organizations we lead, study, advise, and report on, argues Witold J. Henisz, Vice Dean of the ESG Initiative at the Wharton School.
Competing in today’s global digital economy requires increasingly complex contributions, Witold J. Henisz argues. Employees need to be motivated to go above and beyond; customers need to be inspired, and their feedback needs to be incorporated; and the demands, opinions, and goals of civil society and government are also critical. The value of organizational purpose is to help coordinate activity among stakeholders in this complex system.
Henisz’s research suggests that when a company and its management make it clear that their purpose is harmony in their stakeholder system — i.e., an intent to grow the pie for everyone — stakeholders make larger contributions and engage in less conflict. Firms are better able to weather crises, and total value created and distributed is enhanced — including to shareholders.