Identity: HR can clarify the meaning of purpose, value, and culture

Companies that execute with purpose have greater odds of creating significant long-term value generation, which can lead to stronger financial performance, increased employee engagement, and higher customer trust.

Home in on the organization’s purpose

What is your company’s core reason for being, and where can you have a unique, positive impact on society? Now more than ever, you need good answers to those questions—purpose is not a choice but a necessity.

CHROs play a vital role in making sure the organization is living its purpose and values. HR can articulate and role-model desired individual mindsets and behaviors linked to purpose by identifying “moments that matter” in the company’s culture and translating purpose into a set of leadership and employee norms and behaviors.

For instance, commercial-vehicle manufacturer Scania holds an annual “Climate Day,” during which the company stops operations for one hour to hold sustainability training, in line with its purpose to “drive the shift toward a sustainable transport system.” 2

HR can also ensure that clear changes are made to recruitment and capability-building processes by determining the characteristics of a “purpose driven” employee and embedding these attributes within recruitment, development, and succession planning.

HR can also incorporate purpose-driven metrics into compensation and performance decisions. Companies across industries have embarked on these metrics lately. For example, Seventh Generation, a maker of cleaning and personal-care products, recently built into its incentive system sustainability targets for the company’s entire workforce, in service of its goal of being a zero-waste company by 2025. Shell has plans to set short-term carbon-emissions targets and link executive compensation to performance against them.

Think deeply about talent

Organizations that can reallocate talent in step with their strategic plans are more than twice as likely to outperform their peers. To link talent to value, the best talent should be shifted into critical value-driving roles. That means moving away from a traditional approach, in which critical roles and talent are interchangeable and based on hierarchy.

Getting the best people into the most important roles requires a disciplined look at where the organization really creates value and how top talent contributes. Consider Tesla’s effort to create a culture of fast-moving innovation, or Apple’s obsessive focus on user experience. These cultural priorities are at the core of these companies’ value agendas. The roles needed to turn such priorities into value are often related to R&D and filled with talented, creative people.

To enable this shift, HR should manage talent rigorously by building an analytics capability to mine data to hire, develop, and retain the best employees. HR business partners, who articulate these staffing needs to the executive management team, should consider themselves internal service providers that ensure high returns on human-capital investments. For example, to engage business leaders in a regular review of talent, they can develop semiautomated data dashboards that track the most important metrics for critical roles.

Create the best employee experience possible

Companies know that a better employee experience means a better bottom line. Successful organizations work together with their people to create personalized, authentic, and motivating experiences that tap into purpose to strengthen individual, team, and company performance.

The HR team plays a crucial role in forming employee experience. Organizations in which HR facilitates a positive employee experience are 1.3 times more likely to report organizational outperformance, McKinsey research has shown. This has become even more important throughout the pandemic, as organizations work to build team morale and positive mindsets.

HR should facilitate and coordinate employee experience. Organizations can support this by helping HR evolve, strengthening the function’s capability so that it becomes the architect of the employee experience. Airbnb, for instance, rebranded the CHRO role as global head of employee experience. PayPal focused on HR’s capability and processes to create a better experience for employees, including coaching HR professionals on measuring and understanding that experience, and using technology more effectively.

Strengthen leadership and build capacity for change

Culture is the foundation on which exceptional financial performance is built. Companies with top-quartile cultures (as measured by McKinsey’s Organizational Health Index) post a return to shareholders 60 percent higher than median companies and 200 percent higher than those in the bottom quartile.

Culture change should be business-led, with clear and highly visible leadership from the top, and execution should be rigorous and consistent. Companies are more than five times more likely to have a successful transformation when leaders have role-modeled the behavior changes they were asking their employees to make.

To strengthen an organization’s identity, HR should ask the following questions:

  • How can we develop an energizing sense of purpose that has a tangible impact on our strategic choices and ways of working?
  • How can we identify key talent roles and focus them on creating value?
  • How can we build a data-driven, systemic understanding of our organizational health?

Source: McKinsey