Ranjay Gulati - Deep Purpose: The Heart and Soul of High-Performance Companies

Larry Fink, Founder, Chairman, and CEO of BlackRock

I was deeply honored when my friend Ranjay asked me to write the foreword to this book. Discovering the power of corporate purpose, learning how to pursue it, and working to evolve purpose over time has been one of the most challengingand fulfillingelements of my career. While we know a sense of purpose is often the driving force behind high-performance companies, its a very difficult concept to pin down. Theres no doubt it shows up in long-term financial results, but corporate purpose cant be captured in the P&L, stock price, or market cap. With this book Ranjay has done the hard work of describing what purpose is and, almost more crucially, what it isnt. His distinctions, case studies, and tools for how to drive change will be invaluable to any business leader working to drive purpose as well as profit.

My own journey to understand corporate purpose has been a long one. In 1988, a group of seven others and I founded BlackRock to use technology and data analytics more deeply to manage money for people who are saving for retirement or other long-term concerns. Our purpose is to help more and more people experience financial well-being. But toward the end of the last decade, I realized that as a fiduciary to our clients and an investor it was important to speak more openly about the crucial role purpose plays in driving long-term success.

Without a sense of purpose, no company, either public or private can achieve its full potential. Thats what I wrote in a letter in 2018 to CEOs of companies in which our firms clients were invested. I started writing letters to CEOs on behalf of our clients after becoming fed up with the obsession I saw day after day from the financial media and Wall Street about the markets daily ups and downs. I wanted to encourage more CEOs to take a longer-term view (as the best leaders already did) in order to create greater long-term value for our clients. Many people were surprised when I, the leader of a global investment firm, wrote in that same annual letter about the need for every company to focus not just on profit but also on purpose. Some people thought I was losing my edge and becoming a little new-agey. In fact, I was reflecting back what I had seen from years of talking to leaders of the best, most successful companies around the world. I was hardly the first person to observe the important role that purpose plays in building a company. Great business leaders as far back as Henry Ford built companies around compelling visions for what the company could contribute to all of its stakeholders, including shareholders. But in recent years, as society has raised its expectations for business, the importance of corporate purpose has grown dramatically.

During the 1980s and 1990s, many thought that a companys purpose was simply to turn a profit, sometimes without regard for the impact on the communities where it operated or even its own employees. In recent years, however, great companiesthose that create significant value over an extended period of timeincreasingly are guided by something much deeper, a purpose that extends beyond profit. Purpose creates a unifying vision for all of a companys stakeholders, including its employees, customers, partners, and shareholders. It drives ethical behavior and creates an essential check on actions that go against the best interests of stakeholders. Finally, its a powerful driver of culture, providing a framework for consistent decision-making throughout an organization, which ultimately helps sustain long-term financial returns for the companys shareholders.

Some believe that there is an inherent tension between purpose and profit, that they are located at opposing ends of a spectrum. But as I wrote in my letter, Purpose is not the sole pursuit of profits but the animating force for achieving them. I see this vividly when it comes to attracting and retaining the best talent and building relationships with partners and customers. Increasingly, employees and clients require a clear expression of purpose, and they want to see that purpose align with their values. This is clearest among younger people. We see in our own firm that the most talented young data scientists and software engineers want to work at a company whose purpose motivates and inspires them. In this book, Ranjay challenges the notion that purpose somehow exists in opposition to profit, or that it somehow entails building long-term value at the expense of short-term results.

Everything we dowhether its designing a new product or pursuing an acquisitionaids our purpose of helping more and more people experience financial well-being. Our work over many years on retirement and making investing easier and more accessible, and, more recently, advancing sustainable investing, all deliver on our purpose.

People deserve financial security across their lifetimes. We act as a fiduciary, investing on behalf of doctors, nurses, and firefighters so that they can experience financial well-being in retirement. Having a secure retirement is not a foregone conclusion, especially here in the US. To save adequately for retirement, individuals and fiduciaries like BlackRock that manage their assets need to think over a thirty- or forty-year time horizon. In short, preparing for retirement requires long-term planning, which is core to our purpose. Similarly, weve spent years working to make investing easier and more affordable by offering low-cost ways to invest, because we believe this is so fundamental to helping more people experience financial well-being.

Finally, our focus on advancing sustainable investing is deeply rooted in our conviction that it delivers better outcomes for investors. The climate crisis is having very real effects on the planet, generating increasingly severe weather events, flooding, and wildfires, and over time that will drive shifts in asset valuations. It is also creating opportunities as governments, investors, and consumers look for new technology that will power affordable, renewable energy sources. If we fail to take these realities into account, we will fail our investors, our clients, and our communities.

Articulating a clear purpose is the easy part. Its the how thats always the most challenging element for CEOs and other business leaders. Creating durable value for multiple stakeholders while also delivering for shareholders and clients is often a Herculean task. You need a framework for making difficult tradeoffs and the ability to mobilize people both inside and outside your company. All too often, well-intentioned leaders make short-term tradeoffs at the expense of embedding purpose deeply in the organization.

When I articulated the connection between sustainability and our purpose with my colleagues, a team from across the firm came together and said, We want to do this, and we need to move even faster. It was one of the proudest moments of my career. My colleagues mobilized our talent in a way that went far beyond my expectations. They created a clear strategy for how to deliver value for all of our stakeholders, including our shareholders, our clients, our employees, our communities, and the planet. Climate risk is investment risk has become something of a mantra at BlackRock, and our leaders are generating greater valueand reducing riskfor our clients as a result. Theyre building new models to help our clients and investors quantify the changes happening to asset valuations, theyre working with company boards on their long-term strategy to transition to a low-carbon economy, and theyre creating new funds to bring private capital into emerging markets to finance sustainable infrastructure. They are living our purpose.