For CEOs in Asia, purpose matters now, more than ever

ANY CEO worth their salt can tell you that purpose lies at the core of their business. Running a successful business goes beyond generating the most quarterly profits; it's also about intentionally leaving a positive environmental, social, and corporate governance (ESG) impact. This notion is uncontroversial, but it takes a crisis the scale of a global pandemic to test how far it is true.

As business leaders from around the world meet in Singapore this week for the Bloomberg New Economy Forum, a renewed sense of purpose will underpin discussions.

During the Covid-19 pandemic, we interviewed more than a dozen CEOs captaining some of the most successful corporations in Asia. They shared with us two defining characteristics of effective leadership: speed and decisiveness.

In the face of great unpredictability, leaders and senior executives have had to quickly devise and implement solutions to keep operations running smoothly while protecting the physical and mental health of their employees. What came through in many interviews is that a strong sense of purpose anchored CEOs' decisions by informing what their priorities should be.

Now, as business leaders in Singapore and Asia start to look beyond the pandemic, they are faced with short-term performance pressures. Many are eager to recoup the losses incurred over the past year and financial market realities may cause them to over-prioritise bottom lines.

After all, recent trends for the average stock-holding times paint a ruthless landscape. And while financial markets have cut business leaders some slack during the worst times in the Covid-19 crisis, investor trends are towards short-termism. The average time investors hold shares has been shrinking for decades and in the United States was down to just 51/2 months by June 2020, according to Reuters.

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Balancing short-term performance with long-term purpose

In a world where investors often seem to be thinking about the 'here and now', business leaders shoulder the responsibility of taking a longer view. The CEOs we spoke to said a clearly defined purpose will continue to matter as companies pick up the pieces left by the pandemic.

Piyush Gupta, CEO of the Singapore bank DBS, pointed to the bank's early years when stakeholders prioritised "contributing to Singapore's development" over profits, observing that today's unpredictable times call for a deeper sense of mission. "Being very clear about why you exist - the constructive role you play in society, in the community - is going to be extremely important for companies," he said.

Purpose fuels business success as capitalism evolves

Capitalism is undergoing a fundamental adaptation. Customers in Singapore, Asia, and around the world are demanding more from businesses, expecting greater accountability to the wider community. This shift requires different types of leaders from what we've had before.

Leadership attributes like integrity, intelligence and hard work will always be relevant. But other traits are becoming more important, such as the ability to focus on the long-term while keeping their ears close to real-time developments on the ground. Leaders who are purpose-driven have a framework to think systematically (and swiftly). They are also more able to collaborate effectively in partnerships - another ingredient for success in today's business landscape.

Long-termism results in stronger business fundamentals and resilience during times of crisis. A 2017 McKinsey Global Institute report Measuring the economic impact of short-termism found short-termism to be costly for companies, investors and society, while long-term-focused companies generated more stable revenues and consistently more economic profit.

Even when most companies flounder during economic downturns (such as the pandemic), purpose-driven companies are able to double down on their investments in areas that matter, such as their technological stacks and human capital.

Purpose also helps foster a stronger emotional connection between employees and their organisation. The leadership expert Simon Sinek explains that what sets successful corporations apart is not "what" they do or "how" they do it but "why" they do it. Inspiring companies tend to have inspired workforces. Sinek believes Apple's success is closely tied to the conviction that whatever the company does, it has to challenge the status quo. If you ask employees about why they do what they do, they sincerely believe they're making a dent in the universe.

Three questions to kick-start thinking about purpose

Borrowing from Sinek is a good place to start for any CEO thinking about their company's purpose. Here are three key questions for CEOs to ask themselves.

• First, what is the company's overall purpose? Is it about narrow economic success, impact for a group of people, or changing the state of the world?
• Second, who are a company's stakeholders and what are the company's commitments to them?
• Third, who should share in the company's economic success and how? How can that be measured and accountability mechanisms put in place?

As leaders grapple with these questions, it's worth remembering that the highest ranks of leadership determine whether purpose takes root in a company. Walking the talk may be challenging, but the best business leaders see opportunities where others see obstacles and are able to unlock greater value for all stakeholders.

• Gautam Kumra is chairman, Asia for McKinsey & Company, where Joydeep Sengupta is a senior partner based in Singapore.