EEA YouTube Show: CEO Egos Stand in the Way of Purpose Leadership

The former CEO of WD-40 and the founder of the PurposePoint community of leadership solution providers and the Purpose Summit April 29-May 1 in Charlotte believe that only a small percentage of CEOs have discovered the benefits of Purpose Leadership. It's due either to a lack of awareness or egos. Here’s a recap of the show, available now on the EEA Purpose Leadership and Stakeholder Management YouTube channel.

Definition of Purpose Leadership
Their Path to Purpose Leadership
Characteristics of a Purpose-Driven Organization
The Financial Benefits
On Tradeoffs
Implementation
Reducing Dysfunction
Why So Few Executives Practice Purpose Leadership
On Transparency

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By igniting the passion of employees in the purpose, goals, and objectives of an organization consistent with clear values, Purpose Leaders offer a more sustainable path to value creation than the traditional focus on quarterly results and task-focused management. Unfortunately, only a small percentage of executives are Purpose Leaders, either out of a lack of awareness or ego.

These are some of the insights from the recent EEA YouTube Show on Purpose Leadership, featuring Garry Ridge, Chairman Emeritus of WD-40 Company, and CEO for 25 years before recently retiring, or “refiring” as he calls it, and Davin Salvagno, Founder of the PurposePoint collaboration of leadership specialists and of the Purpose Summit of organizational leaders. The program is hosted by Bruce Bolger, Enterprise Engagement founder as part of a new series on Purpose Leaders. The first program features Joe Hinrichs, CSX CEO.

Over 25 years as WD-40 CEO, after several years of unimpressive financial and share price performance, the company’s fortunes and stock price dramatically revived, providing significant returns for investors and employees for the rest of his run as company CEO.

Click here to watch or listen to the one-hour show. Here are redacted insights on key topics related to Purpose Leadership and stakeholder management.

Definition of Purpose Leadership

According to Ridge, “Purpose has been around for a long time. Purpose is about making a contribution to something bigger than yourself. Imagine a place where you go to work and every day you make a contribution. You learn something new. You are protected, and you're set free by a compelling set of values. You go home happy. Happy people create happy families. Happy families create happy communities. Happy communities create a happy world.” Alluding to wisdom from Aristotle, he says, people happy at their work produce better work.

He continues, “If you think about the elements of a purpose-driven organization, it's people first. We're coaches, not managers. We have a clearly defined authentic purpose. We have a hierarchical set of values. We have transparency in a simple vision. We have learning moments that reduce fear. We have belonging, acceptance, connectedness, security, support, inclusion and identity. And we have four pillars: care, candor, accountability and responsibility. All of this comes together so that we are serving the communities that we have the privilege of operating in; the customers that we have the privilege of serving, the people whom we have the privilege of working with every day. It's not an either or, it's both.”

Salvagno says, “Every organization has a specific purpose to which leaders have a responsibility to call people to. To say, here is why we exist, here is where we are going. This is what you are contributing to. Often, we as leaders get so focused on what we need to get done, on all the processes, tasks, results, that we lose sight of the purpose of the organization that we’re leading. The purpose of every organization is to improve the quality of human life in some way. What is that impact you are making? To me, when CEOs or any leader is looking at Purpose Leadership, it starts by leading with purpose for themselves. How am I using everything in my head and in my heart to make a difference every day and how am I leading others?”

To skeptics, “I would challenge anyone who sees a discussion about purpose and caring for people merely as virtue signaling or as fluff that they are missing out big time on the most powerful resource--their people--to power their organizations to create results that are far greater than they would get based on traditional methods.”

Their Path to Purpose Leadership

When Ridge was given “the privilege of leading WD-40 company in 1997, I was looking to expand the company globally and identify how we could give people the freedom to do that.” He discovered a program on leadership at the University of San Diego, where he met Dr. Ken Blanchard, which whom he later co-authored the book, Helping People Win at Work, learning about servant leadership and being introduced to other executive coaches, such as Marshall Goldsmith and in later days Simon Sinek. “I listened to their theories and thought, why don’t I put them into practice?”

The logic to him was obvious. “You know, I can write a pretty good marketing plan. I can write a good strategic plan. Let's take that strategic plan or that marketing plan to some smart, professor and say, tell me how good this is. They say very good and give it a score of 60.” But, Ridge adds, “There’s a multiplier effective. If only 20% of my people go to work every day and are enthusiastically executing against that plan: that’s 20 times 60, or 1,200. But if 80% of my people go to work every day enthusiastically, that is 80 times 60, or 4,800. It's the will of the people times the strategy that equals the economic outcome. And that's why our shareholders at WD-40 did so well. It’s because we had 93% employee engagement and 98% of our people said they loved to work at the company because we had the good will of the people and a reasonable strategy.”

Salvagno’s path to Purpose Leadership began early in his career at a Costco store. One day, the CEO and co-Founder James Sinegal, on a store visit, walked up to him and at first asked, “’What is it that we're doing well and what could we be doing better?’ He was a walking and talking engagement survey, but then he asked, me ‘Tell me Davin, what are your goals and dreams and by working at Costco how will we help you fulfill them?’ That question blew my mind because I’m standing here and the CEO actually took the time to ask about what my personal goals and dreams were. I became a raving fan of Costco. Why? because he took a genuine interest in my purpose. That was when the seed was planted.”

Characteristics of a Purpose-Driven Organization

Ridge summarizes the characterisitcs of a Purpose Leader. “Do you have a set of values in the organization that protect people and set them free as leaders? Are you loving of your people? Enough to reward them and applaud them for doing great work. And are you brave enough to redirect them and not focus on protecting your own comfort zone at the expense of other peoples’ development? And, do you do it every minute of every day. If this was soft, a lot of people would be doing it. This is hard, particularly when you have people with short-term thinking saying you missed your quarterly results by a penny.”

The Financial Benefits

Ridge states: “You know, profit is not a sin...You must build an organization that creates an economic flow that allows you to support your people. You have the privilege to lead and to serve the investors who are trusting you with their investment. We had a return on invested capital of over 32%, which means that we were very efficient in making sure that the capital that we were privileged to have was well treated.” On the other hand, he adds, “There are many measures out there, it’s not just one thing but a combination of all to get to the end result that you want to get to.” As for stock price, a CEO, he says, has little control over it. “All we can do is help build organizations that live their values and as producers provide dependable results. At WD-40, we always paid dividends, which is important, but it is also about your capital structure. There are so many things that go into the business side, but if at the end of the day, your people go to work every day and are not just sitting there or quitting, you’ll not get the full result you want. Too many companies spend a disproportionate amount of their time on strategy and execution. Strategy is easy. The people stuff is hard because we’re dealing with the most complex thing in the world: ourselves and our people.”

On Tradeoffs

Leading with a clear sense of Purpose, Ridge points out, helps make it easier to make difficult decisions. When the great recession hit and its industrial business took a big hit, the company stood by its purpose and decided not to lay off one person. “We decided it was better for all of us to hurt a little than a few people to hurt a lot.” The company froze salaries but was able to maintain benefits. It also used the period to undertake a complete cost evaluation process to identify "stupid" policies and procedures. So, it was a very cleansing time as well.” When the economy recovered, “We came out of that thriving because we didn't have to go and restock the talent pool or the brain trust.”

To Salvagno, many a successful company has lost its way by making trade-offs contrary to their purpose; succumbing to short-term pressures, and sacrificing their values, their people, and giving up on the long-game. "There is going to be a point in time where it's going to get hard in any organization. There are going to be short-term pressures that you are going to be tested on as a leader. Are you going to sacrifice all the stuff that you've said and put up on walls and that you say are the values of the organization to meet short-term goals and objectives or to accomplish short-term gains? That's where most companies start to go down this downward spiral that they can't get out of because they lose the trust of their people. It's the companies that refuse to compromise on their values, that refuse to compromise on this mindset, that continue to play the long game that over time create these great sustainable profitable cultures that people want to be a part of. They have generic high engagement scores that are not falsified and that don't need to be. Every time they had to make a critical decision on whether or not they were going to stick with their values, people were watching. People saw what they did and that's why they're still around.”

Implementation

People Leadership is much simpler to explain than to implement, Ridge says. “You can't sprinkle fairy dust over a company and change the culture.” It starts with understanding the organization’s true purpose, where the organization wishes to go, “and then you have to stick with this, even if that means telling some potential investors don’t buy our stock because you’ll never be satisfied. But if you want to help build an enduring company that we’re going to be proud of and hand off to others in a better state, come join us.” It takes time, he says “to embed the values in the organization necessary to reduce fear, to take the word failure out and replace it with learning moments. All of that took time and several years before our financial performance and stock began to take off. And the only reason it did is that we started to perform above and beyond and then above and beyond what we had done in the past. Again, that is because we had such a high percentage of people going to work every day all in.”

He says: “Culture equals values plus behavior times consistency,” adding, “Our purpose at WD-40 was to create positive lasting memories, solving problems and creating opportunities in factories, homes, and workshops around the world. So, if you asked me what’s our business, I’d say we're in the memories business.”

Reducing Dysfunction

Having a clear organizational purpose not only makes it easier to make difficult decisions, it’s “also a No. 1 antidote to a lot of the dysfunction that you see in all types of organizations,” especially not-for-profits and faith-based organizations, says Salvagno. “One of the massive problems not just in business, but in society is that everyone's looking out for their own best interests. They're looking at how they can get the upper hand. They're always looking for more. I mean, this is ingrained in us at a young age. People often aren’t just looking to get their fair share, but how to get the upper hand.”

This, he explains, is “why we constantly come back to this focus on the purpose of the organization, the idea of contributing to something greater than ourselves. What is the purpose that we are here to achieve organizationally? What is my part in that individually? And what does that mean if I'm leading a department?”

Why So Few Executives Practice Purpose Leadership

Salvagno explains, “There's a lot of people that take this idea of purpose; this idea of caring for people; this idea of vulnerability; this idea of being transparent; this idea of being a servant leader, all these things, and just don’t think it’s something that's supposed to be a part of the business world. But realistically, if we embrace these ideas, it's more powerful than the traditional tactics of fear.”

The trouble is, he says, there are too many companies willing to go to the outside circle of what of they have decided is their purpose and values, especially when faced with adversity, and employees know it when they do that. Great companies are pushing toward the inner circle or what is closest to their purpose and values, and employees and other stakeholders know that too and are more likely in such organizations to feel inspired.

To Ridge, part of the problem is leadership ego. “We get to the top and we say it feels good to be here.” But that’s not the right attitude, he insists. “My personal list says, ‘I want to be grateful. I want to be caring. I want to be empathetic. I want to be reasonable. I want to be a listener. I want to be fact-based. I want to have a balanced opinion. I want to be curious. I want to be a learner and I want to spread sunshine, not cast shadows. It’s consistency for what you really stand for and being brave enough to stand up. At most organizations, the video doesn’t match the script.”

On Transparency

Ridge says that disclosing information purpose, goals, and objectives is critical and a competitive advantage. Of the new European Union Corporate Sustainability Reporting Directive, he says, “I’m glad they are doing something about greenwashing. Maybe they should come up with a law that requires the same reporting for government.”

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