FIRS is a global society of research scholars dedicated to stimulating, promoting and disseminating research on topics relating to financial intermediation. The main goal of the society is to provide a worldwide forum for those interested in financial intermediation and related topics.
FIRS seeks to bridge the gaps that exist in the flow of ideas across the different continents. It encourages bringing scholars in emerging markets into the mainstream of financial research.
Thakor delivered the keynote address at the 15th annual FIRS Conference this month.
Do you believe the company you work for cares about you? Do you feel you have a purpose at work?
“Sixty percent of employees express a need for purpose at work,” Anjan Thakor, Olin’s John E. Simon Professor of Finance, said during a recent Business Research Series event. “But they don’t get it at work.”
In addition, “88% of employees in US companies feel that the company they work for does not care for them,” Thakor said in his March 3 virtual presentation titled “How Can You Create a Purpose-Driven Organization?”
“Everybody hungers for purpose.”
The answer lies in organizations’ embracing an authentic higher purpose, he said, with the higher purpose as the “arbiter of all decisions.”
Employees with a higher purpose have more well-being, more happiness and even lower stress from the COVID-19 pandemic, according to findings from a new survey by two WashU Olin professors.
And the effects were more substantial when they had written down their purpose statements.
Also, employees of organizations with higher-purpose statements are happier and prouder of their organizations than are employees at workplaces without such a statement, the results show. Again, the effects were stronger when the purpose statement was written—and tied to society, employees and customers, rather than shareholders.
The findings echo the August 2019 announcement by the powerful corporate lobby group of U.S. leaders called the Business Roundtable, focusing the future on purpose. Such evidence of a national shift dovetails nicely with one of Olin’s key strategic pillars: values-based, data driven decision making.
“As human beings, we are wired for purpose—to know why, to seek meaning in the things we do,” said Stuart Bunderson, director of the Bauer Leadership Center and the George & Carol Bauer Professor of Organizational Ethics & Governance. “When we have clarity on what our purpose is, we are happier and more fulfilled.”
Bunderson and Anjan Thakor surveyed 1,109 people in May to learn about their commitment to and perceived worth of a personal and organizational higher purpose.
The professors’ curiosity was piqued during a fall 2019 conference they organized on WashU’s campus about personal and organizational higher purpose. Academic researchers, consultants and corporate leaders came together to share findings and experiences.
Strecher noted that workers’ stress levels and dissatisfaction were rising, even as economic conditions were improving. As for the next group entering the workforce, he also mentioned that suicidal ideation had doubled on US college campuses in the past decade. Stretcher stressed the importance of a personal higher purpose in coping with the stresses, noting that someone who does not “repurpose their life” at retirement is 2.4 times more likely to have Alzheimer’s than someone who adopts an authentic higher purpose.
Speaker Bob Chapman, CEO of Barry Wehmiller, emphasized the importance of organizational higher purpose. Some 65% of people would give up a raise if they could fire their own boss, he said. He also noted that an employee’s boss is more critical to that employee’s health than the family doctor.
“These remarks and other discussions at the conference made us curious to know more,” Bunderson and Thakor say in their report on their survey.
“What does personal higher purpose really do for people? How do individuals perceive the value of personal purpose in their lives? What is the role of an organization’s higher purpose in the lives of its employees? Are there any connections between personal and organizational higher purpose?”
Write it down
The 1,019 individuals they surveyed in May were employed and chosen as representative of the American population’s gender, racial and geographic diversity.
“I was most surprised by the fact that when companies have written statements of higher purpose,” Thakor said, “not only do the employees trust its leaders to make socially responsible decisions, but also better business decisions.”
Bunderson said he was “very surprised at how much more powerful these effects are when the purpose statement is written down. It’s like that old saying that a goal you don’t write down is just a wish.”
Additional findings included:
A majority of respondents had a personal higher purpose, but most had not written it down;
Having a written personal statement of purpose helped people in various ways, including coping with stress and finding happiness;
Curiously, those with a written higher purpose also reported higher levels of anxiety;
The incidence of written statements of higher purpose was higher among organizations than among individuals;
Employees at organizations with higher purpose statements were prouder of working for their organizations and happier than other employees;
Organizational higher purpose statements were more effective when written down and when they emphasized society, customers, employees and stakeholders other than shareholders;
Employees of organizations with higher purpose statements are more likely to have personal statements of higher purpose.
“We aren’t exactly sure why that is the case, but it may be that employees who work for organizations with a higher purpose statement are inspired to develop one for their lives,” Bunderson said. “This may be one way that good work practices can positively impact employees’ personal lives.”
The finding about higher levels of anxiety, he said, is “generally consistent with research suggesting that a sense of duty or stewardship toward something or someone can be both a burden and an important source of meaning.”
Using the survey findings, Bunderson and Thakor have built a personal higher purpose index and an organizational higher purpose index.
“These will enable us to examine how personal and organizational higher purpose and their perceived outcomes change over time,” Bunderson said.
Capitalizing on purpose
Businesses have risen from ruins because of their ability to recognize and capitalize on purpose, Thakor emphasizes in presentations. Those businesses have excelled and grown. But they don’t do it at the expense of making a buck.
Thakor cites a couple of examples of organizational higher purpose in his working paper “Higher Purpose, Incentives and Economic Performance.”
Detroit-based DTE Energy clarifies its higher purpose as being “a force for growth and prosperity.” The company names four pillars through which its social impact is to manifest: people (“improving lives and creating opportunity”), places (“partners with communities for growth”), planet (“leadership toward cleaner energy and environmental stewardship”) and progress (“powering a brighter tomorrow”).
Tree T-PEE, based in Arcadia, Florida, offers water-containment systems for agribusiness. It articulates its higher purpose as helping farmers conserve water and energy in farming.
To explore more about the concept of a higher purpose, you may want to read these blog posts:
president of an energy company was not a believer in a business entity being
able to have a higher organizational purpose … until he saw it work for others.
So he went back to his company and launched the initiative. It all started with
a video that described the higher purpose of the company.
company’s new video showed its people — from truck drivers to corporate
officers — and described how their daily work affected the everyday life and
well-being of their community, at every level.
first workers to watch the video stood and applauded. The video captured the
company’s new statement of purpose: “We serve with our energy, the lifeblood of
communities and the engine of progress.”
can have a higher purpose. More than that, they should, finds research by WashU Olin’s Anjan
Thakor and the University of Michigan’s Robert E.
An organization of higher
purpose is a social system in which the greater good has been envisioned,
articulated and authenticated, they write in their just-released book “The
Economics of Higher Purpose: Eight Counterintuitive Steps for Creating a
Published August 20, the book expands on the authors’ 2018 Harvard Business Review article. For that piece, they interviewed more than 35
CEOs and other leaders over two years. And they talked with many more for the
“The Economics of Higher Purpose,” from Berrett-Koehler Publishers,
is organized into two parts. The first examines theories that govern
organizational behavior. The second shifts from theory to practice: It offers eight
steps drawn from the authors’ research and interviews with leaders of
“The steps are to help leaders discover their organizations’
purpose and imbue the organization with it”, said Thakor, the John E. Simon
Professor of Finance, director of the PhD Program, and director of the WFA
Center for Finance and Accounting Research at Olin.
Purpose has practical implications for a company’s financial
health and competitiveness, Thakor and Quinn report. People who find meaning in
their work give it their energy and dedication. They grow rather than stagnate.
They do more, and they do it better.
“We like to emphasize that a higher purpose is something that
transcends your usual business goals, but it also intersects with those goals,”
“The higher purpose becomes the arbiter of all business decisions,”
he said. “It has to become the lens through which every decision is viewed.”
Like all organizations, an
organization of higher purpose is a cauldron of conflict. Yet people find
meaning in their work and in their relationships despite the conflicts, Thakor
said. They share a vision and are fully engaged.
In an organization of higher purpose, people interact with one another with respect and engage in constructive confrontation. Trust is continually repaired, and conversations are authentic. The people have a win-win mentality, and positive peer pressure emerges to support high levels of collaboration, the authors discovered. Leadership not only flows from the top down, but it also emerges from the bottom up. Employees believe they work in an organization of excellence.
a consequence of adopting a higher purpose, the organization often makes
short-term economic sacrifices but benefits from long-term economic gains.
paradox of organizational higher purpose is that it actually does improve
financial and economic performance but only
if you don’t do it primarily for that reason,” Thakor said. If purpose is
undertaken solely for economic gain, it loses authenticity and credibility, and
fails to produce positive economic outcomes.
Perhaps the most important finding of the authors’ research is the
importance of the authenticity. If the purpose is just a PR gimmick, like a
slogan printed on posters and plastered on walls, employees will see right
through it, Thakor said. “Everybody will look at it and say, ‘OK. Fine.’
“That’s very different from what we’re talking about,” he said. “This
is about values you truly believe in and practice.”
and Quinn have been scholars of higher-purpose firms for a long time, and they
set out to write the definitive book on it. They examined the theories that
govern organizational behavior, some of which also are formally articulated in
believe these conventional assumptions of economics are valid but incomplete,”
Thakor said. “We offer a new logic that transcends the conventional assumptions
and includes them.”
show that higher purpose helps to resolve the classic principal-agent problem at
the heart of microeconomics. They also explain why numerous books and articles
on higher purpose have failed to gain traction in the workplace.
From theory to practice
to bring this theory to practice? Here are eight counterintuitive guidelines,
which are drawn from their research and interviews with leaders of
Envision a purpose-driven organization
Discover the purpose
Meet the need for authenticity
Turn the higher purpose into a constant arbiter of all business
Turn mid-level managers into purpose-driven leaders
Connect the people to the purpose
Unleash the positive energizers
a higher purpose does not guarantee economic benefits, we have seen impressive
results in many organizations,” Thakor said. “Our study and other research
suggest positive results, both in operating financial performance and
purpose is not just a lofty ideal. It has practical implications for a
company’s financial health and competitiveness, according to the book. Allowing
people to find meaning in their work means they can grow, do more, do better.
Tap into that employee empowerment, and you can transform an entire
This article is partially
excerpted from the book “The Economics of Higher Purpose.”
New research reveals the dynamics that influence how bank capital structure affects credit monitoring. The study titled, “Who Monitors the Monitor: Bank Capital Structure and Borrower Monitoring,” details how researchers measure the effects of a bank’s capital structure on its credit monitoring, and delivers new evidence explaining how government safety nets that enhance banking protections affect bank capital structure, and, in turn, influence bank monitoring and risk-taking behavior.
The research co-authors are Olin’s Anjan Thakor, and Sudarshan Jayaraman, associate professor of accounting at Simon Business School at the University of Rochester .
The research highlights four main findings:
* Banks take on less equity and more debt when creditor rights increase and the reverse when creditor rights decrease.
* This indicates that bank equity appears to provide stronger monitoring incentives to banks and that they need less of this mechanism when there is a lower need for monitoring.
* These effects are not driven by the supply side (i.e., bank creditors are more willing to lend to the bank when creditor rights increase).
* The increase in bank leverage increases the bank’s risk-taking appetite, especially when government guarantees are in place.
The co-authors studied legal reforms in 14 countries across Europe and Asia during the 1990s and early 2000s.
The researchers conclude that stronger creditor rights tend to increase the bank’s cost of debt, particularly when governments offer a strong guarantee to banks. These results indicate that stronger banking rights needs are not always better and that legal remedies that strengthen banking rights can bring about unintended consequences as banks incur higher debt and assume greater risks.