What is the purpose of an organization? Well, if you read the classic management books they will tell you that the most important purpose is to generate revenue and profit. That’s certainly important, since no company can survive without it. On the contrast, if you read any book of Peter Drucker, he will tell you that the most important purpose is to generate value for the customer. I agree with Drucker once more, since creating value for the customer is the first and foremost prerequisite for generating profit. So far, so good. But inspired by two books I read recently (“Start with why” and “Drive”, see the library for more information), I wanted to dig a little bit deeper into topics like value, purpose and motivation. The post might seem a little bit off topic at first glance, but stick with me, I’ll explain why these topics are so immensely important, especially for Entrepreneuers.
Why are you getting up in the morning?
Have you ever thought about why you get up in morning? Getting dressed, having breakfast, driving to the office and spending most of the day there? Tough questions indeed. The first thing that comes to mind is that you want to make a living. You have a wife, kids and a house, and all that demands for some sort of financial security. You don’t want to think about where the money comes from every week , and thus enjoy the paycheck that arrives reliably at the end of the month. If you do have a job that allows you to make a living out of it, the first two layers of Maslow’s pyramid are already covered (“Physiological needs” and “Safety”). Are you happy now? Not quite. The pyramid has another three levels, “Love/Belonging”, “Esteem” and “Self-actualization”. If these needs are not met, you will still have a hard time motivating yourself to get to work every morning. See, studies have shown that money and the security that comes with it is only able to make you happy to a certain degree. Depending on the study you read, a salary of 45K – 60K is enough to cover your need for security. Above this level, a higher salary does not make you happier in any way. The reason is that people quickly adapt to new situations, which means that you will quickly adapt to your new salary, take it for granted and still question the purpose of your job.
Drive and the golden circle
Both books I’ve mentioned address the question on what motivates us beyond financial security, but from slightly different angles. Daniel Pink, the author of “Drive“, states that there are basically three kinds of motivation, which he calls Motivation 1.0, 2.0 and 3.0. Motivation 1.0 is rooted in the first level of Maslow’s pyramid. You need to eat, drink, have sex and remain bodily unharmed. This is already the case in most developed countries in the world. If you don’t have any income, you still won’t starve. Motivation 2.0 points at the second (and probably third) layer of the pyramid: Having a job and a good income makes sure that you can feed your family, stay healthy and keep good relationships with other people. You can invite friends to dinner or spend an evening at the cinema with your loved ones.The logical conclusion would be to assume that a higher income produces more security and freedom, and thus makes you happier and motivates you. Not quite. As I said before, anything above 45K – 60K won’t make you happier, nor does it generate purpose.
This is where Motivation 3.0 kicks in, and according to the author this means autonomy, independence, freedom and, ultimately, the absence of management. He cites several case studies where companies willingly increased the autonomy of the employees to a degree that other companies may find ridiculous. Giving your employees free time to work on any project they want is already old news (what I did not know is that it was 3M, not Google, to first implement such a program). But giving your employees total freedom about when and where they work while explicitely not monitoring their progress in any kind is a new level. However, the outcome of these experiments is surprisingly positive. People are happier, more motivated and do more work in less time. They didn’t accept job offers from other companies which indeed paid a significantly higher salary, but did not provide the same level of autonomy. This leads to the conclusion that you cannot motivate people any longer by just increasing their payroll or providing them with fancy titles.
Simon Sinek has a different angle on the topic. In his book “Start with why” he introduces the concept of the golden circle (there is also a good clip on TED on this topic). According to him there are three questions to answer: What, how and why. And while many companies and individuals can answer the first two questions quickly, few have really thought about the latter. The author provides many examples of companies that know their “why” and companies that don’t. According to him, only the first are able to make a difference and gain leadership. And yes, of course, he brings the mandatory Apple showcase to the table: Apple challenges the status quo in everything they do. Apple thinks differently in everything they do. Apple provides superior user experience in everything they do. And that’s their “why”. Only then comes the question what they do exactly (e.g. manufacturing computers) and how they do it (e.g. strong hardware/software coupling, elegant design). And by focusing on the “why” and not on “how” and “what”, Apple was also able to penetrate markets other than computers. They even removed the word “computer” from the company name. Why are we so comfortable buying any sort of products from them – computers, phones, MP3 players and even TV? Even if the products might be technically inferior to those of the competitors? Because Apple communicates with us by focusing on their “why”. And if their “why” is our “why”, it does not matter which product they produce. We will buy it.
The author contrasts this with Dell. Did you know they once manufactured their own MP3-players? Frankly I didn’t and the product line also does not exist anymore. But back then, the question was: Why should I buy an MP3-player from Dell? Why from them and not from any other company? While Dell was probably good at communicating what they do (“We manufacture superior MP3-players”) and how they do it (“They have plenty of RAM, a nice user interface and superior battery lifetime”) they could not answer the most important question: Why precisely is Dell doing it? Well, one quick answer is always “to make tons of money”, but that is irrelevant to the customer. Even if you look at Dells website now you will not find any answer to “why”. Interestingly they have a page called “Why buy Dell”, but it only points out the “how”: Free and speedy shipping, customizable components, latest technology, bla, bla.
Why is this relevant?
After reading the books I thought: OK, understood, but what are the practical consequences for me as an Entrepreneur? Here are my thoughts:
Defining the purpose of your company
I think that the question “why are we doing what we do” is indeed one of most important questions for every Entrepreneur (and individual as well). And that the answer cannot simply be “to make a living” – we’re past that. If you answer the “why” question, and I mean really answer it, many things suddenly become easier and more fruitful.
- Motivation: You clearly know if the purpose of your company is in line with your own personal goals and values. If it is, this is a strong motivator and will keep you going even if things are getting tough from time to time. If you find out it isn’t, sell or leave the company and invest your energy and creativity in something more meaningful to you. Life’s too short.
- Focus: Which tasks do you have on your to-do list today? Are they supporting your “why” in any kind? If they don’t, screw them, they will not benefit you. Some people also keep a “not-to-do” list to explicitely avoid those tasks. At the end of each work day, ask yourself: “Which tasks did I work on today that did not support my why”. And then never do them again.
- Strategy: What are the next strategic decisions you’ll have to make? Are these decision in line with the purpose of your company, or are you just trying to hit that damn revenue target in Q3? Yes, yes, bottom line is important, but judging every decision by the “why” tremendously helps to steer your company in the right direction. Don’t get lost in your short-term goals, otherwise the purpose of your company becomes blurred and at some point you become irrelevant.
- New markets: With the arrival of modern air traffic, the old railroad companies suffered a great deal. Why didn’t these companies invest in air traffic themselves? Because they focused on “what”: Providing railroads, trains and transporting passengers. If they would have focused on a “why” (e.g. “bringing people safely, cheaply, comfortably and quickly from A to B”) they would have seen air traffic as an opportunity, not as a thread. Focusing on why fosters out-of-the-box thinking, seeing opportunities and taking chances.
- Brand integrity: If you focus on why, it becomes far easier to remain integrity. The integrity of Apple stems from their “why”, and people rightly expect to see this “why” manifested in all their products. And Apple delivers. Few people actually care about the nitty-gritty technical details of their products, but they shure know what they get for their money.
- Partnerships: Do you know other companies that share your “why”? Even if they operate in a completely different domain, think about partnering.
No more sticks and carrots
As Herb Kelleher, Co-founder of Southwest Airlines once said: Hire for attitude, train for skill. Knowing the “why” is the corner stone for hiring the right people.
- Hire for attitude: Do your employees or candidates share the same beliefs as you and your company? Do they share your “why”? If not, don’t hire them, regardless how skilled they might be. Skill is something you can learn, but changing an attitude is merely impossible.
- Motivation: Forget the old way of motivating people by providing sticks and carrots. It won’t work. Or work only for a small amount of time. If you just motivate people by providing titles, a higher salary and a bonus you will end up with a team that does not know why they are doing what they are doing. Motivation hits rock-bottom. According to some studies, only 20% of American employees feel motivated on their job. And the rest? Nine-to-five employees that do what you tell them, but not a single bit more. Think about it.
- Autonomy: If your employees share your beliefs and whys, you can grant them a great deal of autonomy. Communicate the why, and leave the how to the employees. Reduce management to the minimum. Don’t be a control freak. And welcome Motivation 3.0.
Be purposeful to your customers
Finally – communicate your “why” clearly to your customers.
- Customer segments: Many companies aim to sell their products and services to as many customers as possible. But it is also very important to know which kind of customers you don’t want to have. Everybody’s darling is everybody’s fool. Don’t try to sell your products to someone that does not share your beliefs.
- Loyalty: Having said that, look for people that share your “why” and you will have the most loyal customers ever. They will buy your products and services not because of the superior quality (which certainly helps), but because they can identify with your company. Take that one step further and you have evangelists that promote your company out of intrinsic motivation.
- Value proposition: Is your product or service valuable to your customers? Will they pay you for it? While this questions is certainly not easy to answer, knowing why you are doing what you are doing and matching it with customers needs and expectations helps to shed some light on this topic.
I think it is time to deeply think about what motivates us in life – as an individual, an employee or a CEO. If you cannot answer the simple and at the same time tough question “why”, things become fuzzy. It becomes hard to define and set clear goals. There are no landmarks for orientation if things get tough. You go to the office or run your company every day, always thinking that there must be something mor purposeful to do. You end up becoming an automaton. Start to think about your personal “why”. You are on this adventurous journey called “Life” only once. Don’t waste it.