How Does Purpose Drive Performance? Hello, and welcome to this seventh Reskill Masterclass from the HEC studios on the school's campus. Today we have the pleasure of welcoming Professor Rudolphe Durand, director of HEC’s Purpose Center. He is also the founder and academic Director of Sustainability and Organizations (S&O) and holds the chair for the Jo Family Leadership in Purposeful Leadership. Professor Han will present a masterclass answering the question: how does purpose drive performance? After his 20-minute presentation, we will field questions from our live audience on LinkedIn. The replay of this masterclass is immediately available on LinkedIn and the Knowledge at HEC webpages. Defining Corporate Purpose To start, let’s define purpose. Purpose is the reason for being of an organization—the “why” behind its existence. Many companies have defined and communicated their purpose to employees and the public, but the key question is how purpose connects to organizational performance. A purpose statement can articulate the firm’s history and aspirations for customers and employees. However, to influence performance, purpose must be experienced authentically by employees. Studies from HEC Paris, Wharton, and Harvard Business School show that the mere existence of a purpose statement does not significantly correlate with performance. What matters is how employees perceive and experience it in their everyday work. Purpose Statement vs. Purpose Experience Simply having a written purpose is not enough. The impact on performance comes from employees clearly understanding and feeling the purpose in their daily tasks, from top to bottom of the organization. Purpose clarity and authenticity positively influence engagement, decision-making, and operational efficiency. Three Factors for a Purpose-Driven Culture To transform purpose into performance, Professor Han identifies three key factors: Leaders Embody Purpose Leaders at all levels must genuinely embody the organization’s purpose. While senior management often knows and articulates the purpose, it frequently fails to cascade down the hierarchy. Surveys show that 60–80% of employees are unaware of their organization’s purpose, despite communication efforts. Leaders must align their actions with the purpose, even when it requires sacrifices, such as Lush avoiding animal testing despite limiting access to certain markets or CVS stopping tobacco sales for public health reasons. Leaders must face challenges that test the purpose, like Airbnb addressing discriminatory practices by hosts. Make Purpose Tangible and Aspirational Purpose should be actively practiced and discussed through workshops, trainings, and open forums. It should guide decision-making, promote autonomy, and encourage innovation while accepting calculated risks. Examples include Best Buy, which introduced a program allowing employees to pursue one personal project per year, fostering creativity and ownership. Effective implementation requires a culture of feedback that guides individuals and teams toward purpose-aligned outcomes. Recognition and Incentives Purpose-driven organizations recognize and reward employees who contribute to achieving the purpose. This includes highlighting employee stories, celebrating successes, and providing both intrinsic and monetary incentives. Companies like Lush and Salesforce showcase employees’ contributions as part of their purpose-driven initiatives. Incentives should encourage alignment with organizational purpose without undermining intrinsic motivation. Activating all three factors—leadership embodiment, tangibility, and recognition—produces positive outcomes in commitment, innovation, efficiency, and eventually financial performance. Summary and Conclusion Research at HEC’s Purpose Center shows that effective purpose implementation improves team engagement, decision-making, innovation, and financial performance. Purpose is not just a statement—it must be lived and experienced across the organization. Q&A Highlights Research Challenges Studying purpose is challenging because it requires connecting qualitative experiences to measurable outcomes. Researchers use various data sources like engagement surveys, Glassdoor, and proprietary databases to study purpose at team and firm levels. Ethics vs. Rhetoric The gap between stated purpose and actual behavior can generate disengagement or cynicism. Authentic purpose requires aligning rhetoric with action. Companies must sometimes divest or refocus activities that conflict with purpose to maintain credibility. Attracting and Retaining Talent Purposeful organizations attract and retain employees more effectively. Authentic purpose can even allow firms to pay slightly below market rates while maintaining engagement and reducing turnover. Leadership Optimism and Governance The feasibility of purpose-driven strategies depends on the governance and ownership structure. Private firms with long-term perspectives may have more flexibility than publicly listed firms subject to shareholder pressures. Synchronizing Purpose Across Teams High-performing organizations maintain low variance in purpose clarity across teams, rather than just high average clarity. Reducing disparities ensures consistent engagement and performance throughout the organization. Teaching Purpose-Driven Culture Purpose is taught experientially through games, workshops, and peer interaction rather than lectures. Employees learn to embody authenticity, navigate peer effects, and balance personal incentives with collective purpose. Closing Remarks Professor Han emphasized that embedding purpose in an organization is a continual journey requiring engagement, experimentation, and reflection. He invited participants to read his co-authored paper, How Leaders Can Create a Purpose-Driven Culture, for further insights. The next HEC Masterclass will feature Professor Lina Neva on women in leadership and the factors hindering women’s aspirations.