Linking Purpose And Profit In Private Equity

Linking Purpose And Profit In Private Equity

At the 2019 World Economic Forum in Davos, Larry Fink, Chairman
and CEO of BlackRock, published his annual letter to CEOs. The
letter was titled ‘Purpose & Profit’ and it reinforced the
idea that BlackRock are serious about changing the type of
businesses they invest in.

In this year’s letter,
Mr. Fink explains that purpose and profit are interlinked
, with

purpose being part of the longer-term strategy
and profit the
shorter-term outcome. Following last year’s letter on the same
topic, skeptical readers may have seen this focus on purpose as
hype, however this year’s letter reinforces its importance.

As I discussed earlier here on Branding Strategy Insider,

this focus on purpose is what we call a paradigm shift
. Let me
share my observations on this major shift – as well as its

Mr. Fink’s 2018 Letter Wasn’t A One-Off

For those within BlackRock and its investments, last year’s
letter from Mr Fink came as a surprise because it represented a
180-degree turn on BlackRock’s previous investment positions and

It triggered rumors as to whether Mr Fink was genuine about
making changes across the organization, or whether he was using the
letter simply to change
external perceptions of the business
. It wouldn’t have been
the first time that a leader has used external pressure to speak to
internal audiences and vice versa.

I was curious to see whether the intervening year has seen
BlackRock adopt policies in line with the letter’s promise to
change its behavior and direction at all levels. And I must say
that this year’s letter backs up its promises. In fact, there is
no doubt that BlackRock is leading the way in shifting the private
equity paradigm from short-term profit to long-term purpose.

Larry Fink Purpose Profit BlackRock

The Challenge Of Profit With A Purpose

A company’s purpose is its reason to exist beyond the profit it
. That purpose is challenging for stakeholders

  1. It needs to be relevant for all stakeholders
  2. Purpose must be built internally through company culture and
  3. Technology is disrupting how companies work – you can read
    more on this is my book Future-Proof Your Brand
  4. A cohesive brand ecosystem must be created, managed and
    measured to ensure coherency and consistency
  5. Solutions to these challenges must be leveraged for growth that
    makes a positive impact

Interesting Times Ahead

As an entrepreneur, I often hear that we have reached the
highest the economy is going to grow, with many analysts predicting
economic turmoil in 2020. Mr Fink confirms these predictions in his
letter – and he’s very open about it.

Turbulent economic conditions will present a huge challenge for
businesses of all shapes and sizes
when considering ‘profit with a purpose’
. Even in ideal
conditions, the pressure to deliver on short-term profit
expectations can be huge. But balancing short-term profit while
also planning the long-term aspect of your organization’s purpose
will further complicate the process.

This will be a key challenge for private equity over the next
few years: how to balance long- and short-term considerations when
your dashboard for short-term KPIs has red flashing lights?

The Growing Importance Of Corporate

Challenges around brand purpose, economic turbulence and
disruptive technologies all make it clear that corporate
communications will increase in importance, and that the role of
the Chief Communication Officer will also need to evolve.

Later this year, the Arthur W. Page Society will publish
findings from a new thought leadership project led by Jon Iwata,
IBM’s former CCO. Page is the world’s leading professional
association for senior public relations and corporate
communications professionals. It comes as no surprise that their
findings will focus on Corporate Character, which is at the heart
of thinking around purpose, and Communications Technology. I
recommend keeping an eye on the Page
to see the news when it comes out.

Mr Fink also addressed this thinking in his 2019 letter, looking
at how changes in our society are impacting demography. For
example, he highlighted behavior among younger generations.

Millennials and post-millennials will demand to understand the
‘why’ of an organization
before they are prepared to engage
either as a customer or an employee. Young people will vote with
their feet.

Likewise, those older generations heading toward retirement are
living longer than ever before, they are more active, and they have
greater financial and social influence than ever before. As the
population ages and wealth shifts towards millennials, both groups
will impact corporate behavior. The future success of organizations
will depend on their ability to gauge and communicate their raison
d’etre to all stakeholders.

Inspiration For 2019

In truth, I had expected Mr Fink to focus on a different topic
– but he continued to build a framework for profit with a
focusing on purpose-led thinking
and building on his original
proposal in last year’s letter.

This is an inspiring development and I’m excited to see what
happens next. The importance of purpose-led thinking has been
understood for many years by the World Economic Forum and corporate
communications stakeholders around the world, but we haven’t
always seen businesses put those ideas into action.

It’s brilliant to see the business community start to put more
emphasis on the subject, and I believe they can only benefit by
balancing short-term profit with long-term purpose.

Contributed to Branding Strategy Insider by: Marc Cloosterman,
CEO, VIM Group.

The Blake Project Can Help: Please for more about our
positioning, purpose, mission, vision and values workshops.

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Linking Purpose And Profit In Private Equity