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Purpose-Driven Leadership: Definition, Example & Benefits

Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Purpose-driven leadership aligns business decisions with core principles and values. In this lesson, you'll learn more about this approach to leading and how it can be beneficial to an organization who employs it.

Purpose In Action

In 2014, when CVS Health announced it was going to stop selling tobacco products in its 7,000-plus drug stores, it made the headlines in every news outlet from Seattle to New York City. Surely, this business decision must be a mistake. Why would a company willingly give up $2 billion annually in revenue?

At the head of that decision was CEO Larry J. Merlo who, along with other CVS stakeholders, made the decision to remove the tobacco products because it didn't fit with the company's purpose. As the company transitioned from one known for its drugstores to one known for making health care more affordable and accessible, selling products that carry a health warning just didn't jive with the company's mission of helping people reduce their risks of high blood pressure, cholesterol, and diabetes.

At the heart of the company's decision was its recognition that selling tobacco products to the very customers they're trying to make more healthful just didn't add up. Merlo said of the decision, ''Sometimes, we all need to dust off our values and ask ourselves if we're truly living in concert with them.''

Merlo and CVS made a business decision backed by purpose-driven leadership.

Explaining Purpose-Driven Leadership

Purpose-driven leadership is a model that some businesses follow where they align the aspects of running their organization with their core values and beliefs. For CVS, its decision to stop selling tobacco products aligned with its mission to make people more health-conscious. It is a leadership model that places priority on purpose, character, and integrity.

In today's marketplace, consumers and employees alike expect companies to be more than just a place to fill prescriptions, buy coffee, or find the latest fashions. They want companies that make decisions not just good for the company, but good for someone else.

Leaders who follow the model of purpose-driven leadership believe deeply in a cause, which motivates their decision-making. Business activities are seen as more than simple bottom-line decisions and are guided by values that are important not only to the company and its employees, but its customers and a larger community.

Benefits of Purpose-Driven Leadership

Purpose-driven leadership is about more than just the leader, and its benefits extend far and wide. Let's look at a few.

Better Business Outcomes

Customers like to support businesses that know their purpose and act accordingly. TOM's Shoes follows its purpose of providing shoes to children in third-world countries, which has resonated with its shoppers to the tune of 60 million pairs of shoes. The company was recently estimated at more than $600 million.

Stronger Competitive Advantage

Research shows that companies managed by purpose-driven leaders gain nearly 50 percent more market share than their competition. Purpose-driven leadership unites not only business objectives with core values but business practices and processes as well. And, because everyone is focused on the same goal, purpose-driven organizations are better able to adapt in a changing market in order to stay competitive.

Finding the Best Workers

As they flood the workforce, millenials in particular are placing high value on working for a company that has a purpose and integrates it into its day-to-day operations. Household goods company Seventh Generation has become a top employer for millennials because of its focus on green initiatives and environmental protection.

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