Tag: Business Research Series



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.”

Thakor’s research shows employees of organizations with higher-purpose statements are happier and prouder of their organizations than are employees at workplaces without such a statement. The effects were stronger when the purpose statement was written—and tied to society, employees and customers, rather than shareholders.

From theory to practice

Here are eight guidelines, which are drawn from research and interviews with leaders of higher-purpose organization:

  • Envision a purpose-driven organization.
  • Discover the purpose.
  • Meet the need for authenticity.
  • Turn the higher purpose into a constant arbiter of all business decisions.
  • Stimulate learning.
  • Turn mid-level managers into purpose-driven leaders.
  • Connect the people to the purpose.
  • Unleash the positive energizers.

Thakor, along with University of Michigan colleague Robert Quinn, collaborated on the research, which culminated in a 2019 book entitled The Economics of Higher Purpose: Eight Counterintuitive Steps for Creating a Purpose-Driven Organization. The pair also collaborated on a 2018 cover story on the topic for the Harvard Business Review.


A central puzzle of corporate strategy is whether headquarters can add value to their business units beyond the burden of their own overhead. The record is bleak: On average, corporations trade at a 20% discount relative to their breakup value.

“This is the problem that we want to try fix,” said Anne Marie Knott, Olin’s Robert and Barbara Frick Professor of Business.

Anne Marie Knott

She proposed and tested a theory of how corporations could overcome that record. On November 10, she presented the findings as part of the Olin Business Research Series. More than 60 people tuned in for the virtual event.

The 20% discount could mean that multibusiness firms fundamentally destroy value or that they are poorly managed. Regardless, a whopping $5 trillion economic gain could be had from a better understanding of how headquarters add value in multibusiness firms, Knott says.

Bank One and its return on assets

Bank One, a bank holding company, motivated the theory. Knott and co-author Scott Turner, of the University of South Carolina, explain how in “An Innovation Theory of Headquarters Value in Multibusiness Firms” in Organization Science.

Bank One increased the return on assets of its target banks by 40-70%.

“This would be really easy if they were purchasing underperforming banks,” Knott said. But they weren’t. They were buying well-managed banks.

The theory relies upon dynamics between business units where laggard units improve their performance by imitating leaders. In turn, this “competition from below” stimulates leaders to innovate more.

Knott polls audience members during her Business Research Series presentation.

Beyond demonstrating that headquarters can add value through innovation and growth, the theory offers prescriptions on how to do that. For instance, they can establish systems that create norms for sharing, which eases innovation. They also can offer high-powered incentives to fuel innovation.

In general, Knott’s research examines the optimal environment and policies for innovation, which she summarizes in her book, “How Innovation Really Works” (March 2017). This interest stems from issues arising during an earlier career in defense electronics at Hughes Aircraft Company.

KEY TAKEAWAYS:

  • A $5 trillion economic gain could be had from a better understanding of how headquarters add value in multibusiness firms.
  • Bank One increased the return on assets of its target banks by 40-70%.
  • The theory relies upon dynamics between business units where laggard units improve their performance by imitating leaders.
  • In turn, this “competition from below” stimulates leaders to innovate more.