Tag: Research Centers

Koch Center for Family Business Associate Director Alex Haimann was recently published in the Harvard Business Review. His article, “How to Design a Better Hiring Process,” suggests a number of innovative alternatives to the standard “What are your strengths and weaknesses?” approach to evaluating prospective hires.

Better methods, he says, might be to “immerse job candidates in unconventional scenarios to gather the most useful insights about their critical-thinking abilities, tech savviness, and interpersonal skills,” for example, testing technical skills by observing the candidate’s real-time problem-solving process.

Haimann reports success since implementing this approach in his own business, seeing significant increases in retention and quality of new hires.

In addition to his work with the Koch Center, Alex is a partner and the head of business development at Less Annoying CRM, a simple CRM built from the ground up for small businesses. More than 10,000 small businesses worldwide use LACRM to manage contacts, track leads, and stay on top of follow-ups. LACRM continues to grow by engaging customers and finding new opportunities for mutually beneficial partnerships.

Family members who are CEOs of their family business remain in the role longer and are rarely forced out. That’s one finding in a newly released research brief from the Koch Center for Family Business, “Family CEOs, Turnover, and Firm Performance.”

The brief was co-written by Koch Center Director Barton H. Hamilton, Professor Andres Hincapie (UNC), and research fellows Simone Hanna and Noah Lyman.

The brief details the following findings regarding the turnover and performance of CEOs in family businesses:

• CEO performance has a signicant impact on the likelihood of forced turnover.
• Family CEO successors remain CEO for longer and are almost never forced out.
• Insiders (both family and non-family) tend to be appointed in more profitable companies than outsiders. Insider CEOs appear to outperform outsiders as a result.
• Family insiders are younger and have more experience in the firm at time of appointment than unrelated insiders.
• Founders are more likely to be forcibly removed from office by year two than any other CEO type.

Find more research and resources on family business and succession at the Koch Center site.

Olin Blog post by Spencer Burke, Koch Center Eugene F. Williams Jr. Executive in Residence. See more of his reviews and articles on his page at the St. Louis Trust. Burke takes another look at this 2018 book—a tutorial on the exercise of corporate control of both private and public companies—a week after Sumner Redstone’s death on August 11, 2020.

Keach Hagey’s book, The King of Content—Sumner Redstone’s Battle for Viacom, CBS, and Everlasting Control of His Media Empire (2018), tells the story of how Sumner Redstone parlayed National Amusements, Inc., the movie theater business (initially, drive-in movie theatres) developed by his father, into a multi-billion dollar media empire controlling Viacom, Paramount and CBS.

Along the way, Redstone became known as one of the wiliest dealmakers in Hollywood and a feared adversary in the world of corporate take-overs. It is quite a tale of corporate and family intrigue and perfect for Wall Street “deal” junkies and family business owners.

The book is very well researched and contains a lot of new information and insights not covered in the previous accounts of this saga in Vanity Fair and The Wall Street Journal. Redstone was hardly “self-made” (as he often suggested), but his career trajectory is still extraordinary and entertaining to read about.

Wresting ownership from family

He spent a lifetime wresting ownership of his family’s business away from his brother and his kids, his own grandchildren, his several wives and from any other family member who exhibited weakness, including his own son, Brent.

He ignored his father’s wish that the business he built would remain a family business. In the process of accumulating 80% control of the business, he faced years of litigation to resolve accusations of self-dealing, conflicts of interest, fraud and even tax evasion.

Family business owners can learn a lot from this book about good corporate “hygiene,” i.e., the mechanisms needed to avoid loss of control of a family business from death, disability or divorce.

Sumner faced all these threats and still managed to come out on top. Along the way, you will learn about the importance of trusts, pre-nup agreements, health care powers of attorney, incapacity clauses and voting trusts to retaining control of your business. An important lesson of this book is that every control mechanism has its limits and why just owning the majority of stock in a company may not be sufficient protection from the risk of loss of control.

Outflanking Redstone’s paramours

Sumner’s ultimate weapon to maintain control of his empire was an Irrevocable Voting Trust that vested perpetual control of National Amusements in the hands of a few of his trusted business advisors in the event of his death or incapacity. 

His daughter, Shari, ultimately, was able to take control of (or “defang”) the voting powers in the trust and prevent the loss of control to those non-family outsiders. To do this, she also needed to outflank the two paramours of her father who had become agents on his healthcare power of attorney and reigned supreme over Sumner for several years. How Shari ultimately accomplished all this is quite a tale and the highlight of the book.

Sumner’s control of National Amusements enabled him to take enormous financial risks to stalk his “content” prey in the public markets. Viacom, Paramount and CBS were his most visible conquests but there were many others along the way. There also were some major (and costly) failures (Midway Gaming which resulted in a $500 million loss) and a few significant missed opportunities, including a failed attempt acquire Facebook in its early days.

For three decades, National Amusements has had just under 80% of the voting interest in Viacom and CBS through its ownership of most of their super-voting stock, despite “only” having an 8% or so economic interest in either company. 

‘A veritable dictator’

The control of those super voting shares by National Amusements made Sumner a veritable dictator over the governance and strategic direction of both companies. National Amusements’ roughly 8% economic interest in Viacom today has a market value of around $1.2 billion, a fraction of what it was worth at its peak.

Despite his business success, Redstone will never be anyone’s role model for best CEO or father; he is sui generis—an extremely cunning, ruthless and self-centered individual with boundless energy, grit, determination and sexual appetite. He is wickedly smart, well-educated (Harvard and Harvard law) and motivated to succeed, but what he sought most of all throughout his career was “control” of everything he touched, including family, business, mistresses and all the attendant personal relationships arising therefrom. 

The “empire” he still controlled is, contrary to all he set out to do, led by his daughter Shari and not doing particularly well (and this was the case before the COVID-19 pandemic).

Scandal emerges from fire

Redstone’s earned his reputation for grit and determination by surviving the 1979 Copley Hotel fire in Boston. There, to save himself, he climbed out of his third-floor hotel room window, held onto the window frame and sustained burns over 45% of his body before eventually being rescued by the fire department. 

It was widely reported at the time that he was sharing the same hotel room with a woman (not his wife) with whom he was having an extra-marital relationship. She also escaped from the same window and was completely nude (and suffered only minor injuries) at the time of her rescue.

As his relevance has faded with his age, Redstone may best be known today as the main character reference for Logan Roy, the dark and controlling CEO of Waystar Royco, a fictitious publicly traded media company, and patriarch of the Roy family media empire featured in HBO’s award winning TV series, Succession. 

Roy’s character is, in fact, an amalgam of several public personalities, including Rupert Murdoch, Robert Maxwell and Donald Trump, but the Redstone family story line dominates this popular series. If you are a fan of Succession, you will enjoy this book. 

Value destruction

My only disappointment with Hagey’s account of Redstone’s career is its failure to quantify the value destruction over the years that this man’s leadership visited on his other family members and the public shareholders of both Viacom and CBS. 

Redstone and his minions, led by his long-time lawyer pal, Philippe Dauman, the former CEO of Viacom, cost his family and the public shareholders of these companies a fortune by extracting excessive “rents” in the form of inflated executive compensation and missed opportunities for both companies in the capital markets. It is remarkable that he has not been held to account for this.

Today, Viacom and CBS, one company once again, are shadows of their former selves in terms of valuation and have lost the competitive advantages they enjoyed in the 1990s and early 2000s. Sumner may have been the “King of Content,” but he failed to exploit fully the two biggest media trends of this century—social media and the digital delivery of content.  The moral of this story is that Sumner Redstone is no Rupert Murdoc. He simply stayed at the gaming table too long and lost his edge.

Sumner’s widely proclaimed grand scheme was “to live forever” and, at all costs, prevent his daughter Shari, owner of 20% of National Amusements, from ever becoming CEO of his companies. This is how the book ends:

‘Total control’

“Unable to eat or talk, he communicates via buttons on a table loaded with recordings of his voice from stronger days—’yes,’ ‘no,’ and his favorite, ‘f**k you.’ The man who always wanted total control, who believed in his own abilities above those of anyone else, who vowed to never sell Viacom, who swore he would never die—as of this writing, this man, Sumner Redstone, still draws breath, thanks, perhaps, to a lifetime of healthy eating and, even more likely, his own iron will.

“It is he, not Shari, that owns the majority of the controlling shares in the companies, and so long as he is not declared incompetent, it will be he who must technically decide the increasingly urgent question of whether to merge or sell Viacom or CBS. Because while content may still be king, kings, it turns out, can be bought just like anybody else.” (p. 306)

We can only imagine what Sumner’s father would say today if he knew how his dream for the family business he created had turned out.

When recently asked about what being part of the Redstone family business was like, Shari responded “It’s a dream life, except when it is not a dream life.” What more can be said?

Olin Blog post by Spencer Burke, Koch Center Eugene F. Williams Jr. Executive in Residence. See more of his reviews and articles on his page at the St. Louis Trust.

Samsung Rising is the remarkable story of how a family-owned vegetable and dried fish shop established in 1938 has grown to become one of the largest and most valuable technology companies in the world.

It is part of Samsung Group, a Korean chaebol (a family group of companies or “wealth clan”) and is best known for Samsung Electronics, which is a global leader in the smartphone market and semiconductor manufacturing. The group is controlled by five separate branches of the founder’s (B.C. Lee) family; the family is one of the wealthiest in the world with an estimated net worth of over $40 billion.

The group is made up today of over 60 independent companies, many of them publicly listed, which, in the aggregate, account for approximately 20% of the GDP of South Korea and employ over 310,000. The family control is achieved through an opaque web of cross-shareholdings and inter-marriages among the Lee family and other owners of the constituent companies.

The current (de facto) head of Samsung is its Vice Chairman Jay Y. Lee, the son of Lee Kun-hee (Lee II). Lee II became chairman of Samsung in 1987 when his father, B.C. Lee, died. He retains the title of chairman despite having been incapacitated and non-functioning since May 2014 when he had a heart attack and a stroke.

Samsung Rising is subtitled “The Inside Story of the South Korean Giant that Set Out to Beat Apple and Conquer Tech” and reads like a Hollywood movie script. The author, Geoffrey Cain, a journalist with The Economist and The Wall Street Journal, has spent much of his career reporting on Samsung. The book is a compilation, more or less in chronological order, of hundreds of interviews, many of them anonymous, with key Samsung employees, competitors and suppliers.

The ‘exploding phone’

This “unauthorized” biography is undoubtedly the tip of the iceberg when it comes to the intrigue, family in-fighting, corruption and government entanglements with and support of this important company. As you will learn from reading this book, Korea’s success as a nation is intimately tied to the success of Samsung and vice versa.

The starting point of the story is the recent spectacular failure of the Samsung Galaxy Note 7 smartphone (the “exploding phone”). The author then takes the reader back in time to explain how this modest family vegetable shop transitioned its business to become the global leader in inexpensive and second rate consumer products, such as microwave ovens and TV sets, then on to challenge Apple’s domination in the global smartphone market and Sony’s domination in consumer electronics and, from there, to become a leading supplier of advanced semiconductors to the tech industry.

To my surprise, Steve Jobs and Ellen DeGeneres each play a significant role in helping Samsung make these leaps, as do many U.S. based technology and marketing experts and advisors. Legions of patent lawyers also play their part in this story as Apple and Samsung have spent a fortune over the years battling in courts around the world over the ownership of the intellectual property that has made all their technology advances possible.

Samsung Rising is also a book about family business in Korea. The Lee family control of Samsung is in its third generation and faces many of the same challenges faced by many successful multi-generational family businesses.

There are disputes and jealousies among the different branches of the family over ownership and wealth, there are on-going leadership succession issues at the company and there is a massive estate tax liability lurking that may result in the Lee family’s loss of control of some or all of the Group. There is also the issue that the third-generation leader of the company, hand-picked by his father, may not be of the same caliber of his two predecessors.

This all sounds familiar, but there is a lot more to learn from the story because of the vast differences between the cultural and business environments in Korea and the US. Through the lens of the Samsung success story, it is fascinating to see how these differences are playing out in real time. So far, the Lee family and Samsung have benefited tremendously from them.

However, darker clouds are on the horizon. The most prominent differences include:

Business purpose

B.C. was a patriot and had immense pride in his home country. While working in Japan before WWII, he was a skilled observer of the Japanese economy and the companies that made Japan so successful. He dreamed of doing the same for his homeland and that is what he set out to do when he returned home in the late 1930s. B.C. Lee’s perspective on this is best illustrated by this quotation from a plaque in the miniature shrine that marks the company’s first place of business:

“I think people are most happy when they know what gives their life purpose. I am unshakeable in my faith that strengthening the nation through business is the path I must walk” (p. 32)

The motto on the Lee family crest also emphasized this: “First, serving the nation through business. Second, people and talent come first. Third, the pursuit of the reasonable.” (p. 41)

The shared identity of Samsung’s success with that of Korea has taken on an almost militaristic tone. The author notes:

“The odd similarities between the traditional culture of Samsung (and other South Korean companies) and the totalitarian dictatorship of North Korea are no coincidence. The Korea scholar B.R. Meyers has written about North and South Koreans’ belief in a shared, ancient bloodline that informs their politics and societies today. South Koreans, he argues have identified strongly with the Korean race that transcends a border with North Korea, a far stronger identification than with their democratic system of government.

“The result, he says, is that North Korea is the world’s most nationalistic country, while ‘the second most nationalistic country, in my view, is South Korea, which is completely open and completely wired, and still dominated by a very paranoid way of looking at the outside world’.” (p. 65)

The book makes many references to the “cult-like” environment and behavior at Samsung. Other successful companies have this as well, but this one is particularly focused on the company’s identity with the success of South Korea as a nation. This clearly has been a major contributor to Samsung’s success.

Chaebol business structure

B.C. was also a big fan of the success of leading Japanese companies, such as Sony, Toyota and Honda. These companies are called keiretsu and, unlike the traditional Japanese zaibatsu structure, are not always run by families but by “shareholding collectives, centered around a private bank, marking a break in Japanese tradition.” (p. 36) The keiretsu form of organizational structure arose in Japan because the U.S. military banned the formation of holding companies after WW II in an effort to reduce the economic power of the zaibatsu families. The author goes on to explain:

“South Korea followed with its own ban on holding companies. But its business leaders were determined to keep the zaibatsu practice of top-down family rule. So they embraced the cross-shareholding practices similar to Japan’s newer keiretsu companies, and found loopholes to pass those cross-shareholdings to their children, through charitable donations and mergers within their business empires.” (p. 36)

The Korean form of the keiretsu is the chaebol and here is what the author had to say about it:

“Pointing to the similarities between Samsung and other companies doesn’t dismiss the common culture and heritage between North and South Korea and, to some extent, Japan and China. The fact is that the South Korean chaebol have little in common with the more entrepreneurial and shareholder-driven firms in the United States.

“Even the biggest companies in the United States do not enjoy the privileges of companies in South Korea today. More than half of the family leaders of the ten biggest chaebol groups are convicted criminals. All have been pardoned by the president, often without serving prison time. Three of them, including Samsung chairman Lee II, have been pardoned twice.

From January 2015 to February 2016, the outside members of Samsung Electronics’ board of directors—who were supposed to be independent, as a check on corporate governance—unanimously approved every proposal put forward by the company, except the two times a director was absent.

“Imagine the heirs of the Carnegies and Rockefellers being so powerful and revered that The New York Times would self-censor its coverage out of deference. Imagine a White House pardoning the heirs of Sam Walton or Ray Kroc, as they ran the operations of Walmart or McDonald’s from their prison cells. Or seasoned journalists turning their eyes away when confronted with Donald Trump’s conflicts of interest between his presidential duties and his businesses.

“Because of the outsized privileges of Samsung and the Lee family, South Koreans tell me that Samsung has grown too big to fail”. (p.71-72)

Collective Harmony family culture

The dominant cultural style in East Asia is referred to as the Collective Harmony culture and the Lee family is a great example of it. Here are a few useful descriptions of its primary characteristics:

“[This culture is] premised on Confucian principles elevating loyalty and obligation to family, respect for parents and other authorities, knowing one’s place, and supporting the whole group rather than one’s individual position…..

“The concept of ‘face’ is central to Collective Harmony culture….The term has no exact counterpart in Western language. It contains elements of prestige, honor, respect, reputation and influence. However, it is much more socially-derived and -connected…

“In Collective Harmony, the web of social relationships is much more influential in maintaining individuals’ esteem. This is important because direct assertive communication may tear all too easily at the bonds between individuals and their social network if not handled carefully, especially in families.” Jaffe and Grubman, Cross Cultures (2016) (p. 37-38)

By contrast, US and other western countries typically are guided by an individualistic family culture. There, the purpose of larger organizations, such as family and businesses, is to support the independence and self-worth of each individual.

Cain emphasizes the important role of this family culture at various points in the story. He quotes a noted historian on Korea who said, “It’s a very basic Korean trait that trust rarely extends beyond one’s family, and that includes the Samsung family”. He goes on to say that Samsung’s and Korea’s common heritage evidences itself in five traditions:

“The extreme reverence for family dynasties; the belief that their strength is derived from an ethnic bloodline; the promulgation of military-like rituals, ceremonies, and slogans; nationalistic paranoia and distrust of outsiders; and the veneration of a supposedly wise, paternalistic emperor-like leader.” (p. 67)

This culture has served Samsung well through its first two generation of leadership. As it moves fully into the third generation and must compete with the largest and best run tech companies in the world, one must wonder if it will continue to do so. Command and control management and dynastic succession are not likely recipes for success in this competitive world.

Estate taxation/regulatory environment

It was fascinating to learn from this book about the rejection of the zaibutsu and holding company corporate structure in South Korea as a means to grow the economy after the devastation of the Korean War. Another key feature of the post war regulatory regime in Korea was the imposition of a 50% inheritance tax on the inter-generational transfer of wealth; in the case of an inheritance of a “controlling stake” in a company, the tax rate rises to 65%. As in the U.S., there is a correlative gift tax regime with the same tax rates for life-time asset transfers.

The chaebol corporate structure and this inheritance tax regime turn out to be a very toxic combination. Most of the ownership stakes in the chaebol are minority positions—it is the aggregation of these ownership stakes which give families the ability to “control” the entities but not necessarily the ability to monetize those stakes or use company assets to pay their taxes.

Family leaders need to transfer assets downstream very early in their careers when asset values are low to minimize the inheritance tax, but this endangers their ability to “indirectly” control the corporate entities in the group. If they wait too long and asset values have risen dramatically, as is the case with most of the chaebols, the tax obligations at death likely will force the sale of a substantial part of the ownership in the group and may lead to a loss of control. This is exactly the predicament that the Lee’s find themselves in today and it has caused no end of controversy.

The taxable estate of Lee II is estimated to be about $17 billion, meaning that a tax bill of roughly $8.5 billion in taxes will be due at his death, which could be at any time now. This is a problem shared by many of the large family-controlled companies in Korea. A recent Financial Times article estimates that the aggregate estate taxes owing by the largest 25 Korean companies now exceeds $21 billion. That liability grows daily.

Efforts by families to minimize the impact of this tax have ensnared many chaebol leaders and Jay Lee is prominent among them. In fact, Jay Lee is currently being dogged by prosecutors who have alleged that he engaged in a fraudulent merger transaction among two Samsung affiliates for the purpose of shoring up his ownership stake in Samsung Electronics so the Lee family would have a funding source to pay the inheritance tax. Approval of this merger also led the Lee’s to manipulate the accounting records of yet another company in the Samsung Group to inflate the stated value of the acquiring company in the proposed merger transaction.

Coincident with all this, Jay Lee made a $38 million dollar “contribution” to a close friend of the former Korean President so she could finance her family’s efforts to compete in the equestrian events at the up-coming Summer Olympic Games. Prosecutors have alleged that this payment was in fact a bribe for approval of the merger transaction. If convicted of any of these charges, Samsung’s Chairman in waiting will be waiting in prison for a long, long time.

Jay Lee may have gotten away with all this but for the watchful eye of Paul Elliott Singer, the founder of US-based hedge fund Elliott Management. Singer, described by some as “The World’s Most Feared Investor,” owned a minority stake in the company that the Lee family was attempting to swallow-up in the merger for a price far below its fair market value. 

Singer sued to block the proposed merger but his claim was denied; a civil fraud suit is still pending. Despite obvious breaches of fiduciary duty and fraud, the transaction garnered close to 70% shareholder approval, including approval by the National Pension Fund of Korea that lost millions of dollars for pensioners on the transaction.

Behavior like this gets much greater scrutiny in the US and is a cautionary tale for those investing in the equity of non-US companies subject to different legal systems and cultural norms. The legal standards of fiduciary duty, anti-trust and corporate law are often very different there.

The story of the Lee family’s desperate efforts to address its looming estate tax liability is a highlight of the book. This story had gotten very little public attention outside of Korea considering the size and importance of the Samsung Group and the prominence of the Lee family. It also lays bare the difficult challenges faced by chaebol owners to remain in control of their companies in the future. Add to this a growing clamor in Korean politics over income inequality and the need to rein in the power (and wealth) of the chaebols. Clearly, the family owners have many challenges ahead.

Samsung Rising is well worth a read for those interested in the global technology market and Korea’s (aka Samsung’s) remarkable rise to prominence in recent years. It is especially interesting right at this time, since Samsung Electronics has become a key ally of the U.S. in its attempt to slow down the domination of Huawei in the 5G market.

For those interested in family business, this is a must read. It is an exciting growth story and highlights the prominent role of purpose, family culture and government regulation and support to Samsung’s success.

In a recent operations management research productivity study published in Decision Sciences, Panos Kouvelis was ranked among the top three in several significant categories. Kouvelis is WashU Olin’s director of The Boeing Center for Supply Chain Innovation and Emerson Distinguished Professor of Operations and Manufacturing Management.

The study includes the “most-published OM authors from across the world based on total number of papers on which the individual is included as author from across all four [major] journals [of the field: Management Science, MSOM, POM, and JOM] over the 15-year period of 2001-2015.”

Here are a few ranking highlights for Professor Kouvelis:

• No. 3: Total number of papers
• No. 1: Publications in MSOM
• No. 3: Total number of papers, weighted for co-authorship (Management Science publications counted only in the OM department)
• No. 2: Total number of papers, weighted for co-authorship (Management Science publications included in all departments, with some OM linkage)

Fuqiang Zhang, the Dan Broida Professor of Operations & Manufacturing Management, ranked No. 39 for total number of papers and No. 36 in papers weighted for co-authorship.

Additionally, Washington University’s Olin OMM department ranked No. 18 for total number of papers carrying an institution’s affiliation in authorship, No. 9 for publications in MSOM, and No. 12 for publications in Management Science.

We congratulate profs. Kouvelis and Zhang, and the Olin Business School OMM department, on these impressive achievements, and wish them the best in continuing their incredibly productive careers in OM research!

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.

Thakor is coauthor of the book The Economics of Higher Purpose: Eight Counterintuitive Steps for Creating a Purpose-Driven Organization, director of Olin’s doctoral programs and the Center for Finance & Accounting Research, and the John E. Simon Professor of Finance.

Conference leads to curiosity

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.

A presentation by Vic Strecher of the University of Michigan particularly struck Bunderson and Thakor, they write in their report June 2020 report “Personal and Organizational Higher Purpose: Survey Results.”

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.

Learn more

To explore more about the concept of a higher purpose, you may want to read these blog posts:

• Elevating higher purpose: Meaning in work from the scholarship of two Olin professors
• A higher purpose as ‘arbiter of all business decisions’
• Creating a purpose-driven organization
• A practical approach to purpose: Anjan Thakor featured in Harvard Business Review