In the face of adversity—when pressure mounts or calamity seems imminent—an organization’s purpose is put to the ultimate test. Every organization faces one or multiple forms of stress at some point in its existence. An organization that endures any form of financial hardship or business loss will regularly be forced to test its purpose, to test its standing in society.
What is organizational purpose? I define it as an organization’s responsibility to provide service that benefits all stakeholders. The key is that an organization’s purpose is not to increase shareholder value through increased dividends or share buybacks. An organization’s purpose is not to uphold power or bureaucracy. Stakeholders—customers, employees, communities, society, and those due a fair share of the profit—are those an organization ought to be serving as it delivers said service.
But if often goes awry, particularly when pressure and stress hits senior leaders who believe profit ought to be trumping its purpose.
Since inception in 1945, Johnsonville Sausage LLC has believed in delivering sound business results. Profit is important, otherwise there would be no business. It does so, however, within an organizational purpose that indeed serves all stakeholders. This company of 1,500 employees produces all sorts of sausages, meatballs, and bratwurst from various facilities, including its headquarters in Sheboygan Falls, Wisconsin. Ralph C. Stayer, who has been the visionary and owner for the past 40 years, has taken the company from a regional sausage supplier within Wisconsin to the global player it is today. The company has sales in excess of $1 billion annually.
In the spring of 2015, Johnsonville Sausage suffered a disastrous situation in which it was forced to test its organizational purpose. On May 11 of that year, a freak incident of physics and biology occurred at one of the company’s largest facilities where it produces sausages. At this particular location in Watertown, Wisconsin, a combination of oil, pressure and heat mixed up with a pair of gloves that were inadvertently put in the wrong place, at the wrong time.
This freakish combination of the gloves and materials led to a spontaneous combustion, and the result was an explosion and resulting fire that decimated the plant. Investigators immediately ruled out foul play. It was merely bad luck. The incident occurred in the middle of the night, so luckily there were no deaths or injuries. However, the facility employed 100 Johnsonville members, and come the next day, there was nothing to work on. After all, there was no longer a facility to make sausages. What to do?
The first order of business company executives decided was to keep all of its members “whole.” They continued to pay their wages despite an obvious lack of sausage to produce. All of the equipment had to be thrown away as everything was affected by the fire. The company also quickly realized it was not going to be a one-week job.
The Johnsonville members in Watertown helped with the facility clean-up. But after a week or so, there was nothing more for them to do at the plant. In fact, the location where the fire occurred had to be permanently closed. Executives made another decision. While arranging to purchase a new property and build a new facility, the company asked everyone to remain on staff to do two things.
First, Johnsonville arranged for each member to dedicate 20 hours per week volunteering time in the community. Second, the members were asked to spend the other 20 hours of the work week developing, learning and educating themselves at various Johnsonville Sausage sites as well as local education institutions.
While the fire was not the fault of any individual, the company felt compelled to treat its members as decently as it could. No one was terminated during the months when there was no sausage to be made. After all, their team members were an important stakeholder in the Johnsonville way of doing business. Its members had always demonstrated a commitment to the manner in which the company had operated, and the organization was not about to hang them out to dry.
The new facility did become operational again but not until April, 2016. After almost a year without producing a single sausage at this location, the 100 team members affected by the fire remained on the company payroll. Their “job” through this time period? They were asked to give back to the community in which they lived, while developing themselves through various forms of education.
What did Johsonville Sausage do when it experienced an event that could have ruined their entire culture, and perhaps their financial stability? Did the company ignore the organizational purpose it had worked hard to inculcate across its business? Did it neglect the employees who had committed to working with a higher meaning, and to the organization’s declaration of purpose which was “To become the best company in the world”?
Martin Winterkorn, former CEO of Volkswagen
More recently, the exit of CEO Martin Winterkorn from Volkswagen in the wake of a scandal related to the rigging of emission tests on diesel engines provides an example of an organization and its senior leaders consciously deciding to forego purpose. Volkswagen leaders deliberately decided to place software—called a “defeat device”—on over eleven million of its diesel-powered vehicles. The “defeat device” was a sophisticated piece of software that could predict when an automobile would be put through an emissions test. Ultimately, this made the vehicle seem more environmentally-friendly than it actually was. It didn’t take long for Volkswagen to get caught.
The actions of a few—shifting the company into a myopic, ‘increase our profits at whatever cost’ mindset—has caused untold effects on employees, customers, society and the organization’s future. The U.S. government, for example, has sued the company for up to $46 billion for violating various environmental rules. It has also extended its case to include bank fraud.
How does this myopic mindset affect its employees? Real people? Wolfsburg is a perfect example. This German town of 125,000 people employs roughly 60,000 at a Volkswagen automobile factory. The mayor of the town, Klaus Mohrs, predicted city taxes would decrease by 147 million euros in 2016 as a direct result of the fiasco. He believes the impacts will be felt hard and wide in this one-industry town of Wolfsburg, something that will undoubtedly affect many of its citizens. It all could have been avoided if Volkswagen’s organizational purpose was to seek something more than profit (to serve all stakeholders) which ultimately resulted in its senior leaders approving the plan to rig various environmental tests and regulations.
Purpose is not an exercise in lip service. Organizational purpose is the opportunity for a firm to define its principles, ethics, leadership and culture. It is the chance to establish who its stakeholders really are. But it is imperative for the organization to act on this definition, too. Otherwise, the organization remains in jeopardy of becoming fixated on profit and/or power as its sole purpose. If it remains locked into such behavior, not only is society being defrauded, employees might never demonstrate a sense of purpose in their role at work.
Johnsonville Sausage defined, followed and acted upon its organizational purpose. Its mission is to make sausages for its customers, but not at the expense of disenfranchising Johnsonville employees or the communities it serves. Volkswagen is but one example that demonstrates how important it is to not only establish a higher purpose as an organization, but to remain ethical as it strives to achieve a balance between purpose and profit.
There is a fairly easy way to summarize all of the stakeholders the organization ought to be serving. If it is putting its customers first, it does so through an engaged workforce (who are ideally demonstrating personal and role-based purpose) who also aim to assist the community in which they live and the society they are a part of. As a result, the organization will provide a return to owners and/or shareholders where applicable. That is, profits and reasonable returns are an outcome of an organization that serves all stakeholders. Again, the stakeholders of an organization ought to be its customers, team members, community, society and owners/shareholders. Volkswagen chose to serve the latter only. Johnsonville Sausage has always aimed to serve all of its stakeholders.
Lynn Stout argues in her book, The Shareholder Value Myth, “Many people are ‘prosocial,’ meaning they are willing to sacrifice at least some profits to allow the company to act in an ethical and socially responsible fashion.” She adds, “Others care only about their own material returns.” It is going to take some serious courage and gumption on the part of senior leaders to eliminate the latter, and improve the former. It is going to take far more Johnsonville Sausage examples and far less Volkswagen ones if business is truly going to balance purpose with profit.
Photos: Johnonsville Sausage by Royalbroil via Wikimedia. Martin Winterkorn by Volkswagen via Wikimedia.
Dan Pontefract is the author of the recently published book, THE PURPOSE EFFECT: Building Meaning in Yourself, Your Role and Your Organization, and Chief Envisioner at TELUS, a telecommunications firm based in Canada. He can be reached at www.danpontefract.com
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