Why Are We in Business?

Why Are We in Business?

March / April 2009 BY MATTHEW BUDMAN | PHOTOGRAPHY BY ED LALLO

Ad man Roy Spence wants to know what your purpose is.

MATTHEW BUDMAN is editor-in-chief of TCB Review.

Some people can’t help rolling their eyes when they hear about something that Roy M. Spence Jr. said or did or plans to say or do. After all, he’s in advertising—he’s supposed to be in the business of selling things, not of making the world better, or whatever. Exhibit A: “Walking With Roy,” a wide-eyed, open-hearted 2007 blog in which Spence chronicled a monthlong hike through the northeast United States.

But at a time when companies, industries, and even entire national econ­omies are being forced to rethink why they’re in business, the questions Spence asks are critically important and less ethereal than they may seem. He traces successful companies’ winning strategies to knowing and sticking to their sense of purpose—their reason for being—and urges CEOs and boards to identify and build on their company’s own purpose.

Spence is chairman and CEO of GSD&M Idea City, an Austin, Texas-based ad firm with a long roster of A-list corporate clients over the years and Lyle Lovett (“a good friend of mine”) as its hold music. Spence’s philosophy is implicit in many of his epigrammatic ad slogans (e.g., “Don’t Mess with Texas”), which, he explains with a drawl, go to the heart of a given company or program or agency. And he has spoken out for years about “purpose-driven” management. But now he has laid out, with passion and in loving detail, a path for everyone to follow, in It’s Not What You Sell, It’s What You Stand For: Why Every Extraordinary Business Is Driven by Purpose (Portfolio), written with Haley Rushing.

A major Democratic Party donor over the years and an official Friend of Bill and Hillary, Spence spoke from his Austin offices a few days after Barack Obama’s inauguration.

Were you in Washington earlier this week?
No, I wasn’t. But I was there with the Clintons in 1992 and 1996, and when Bill got sworn in the second time, I was sitting behind them on that stage. It was pretty amazing. Now, this week was a historic moment in which everybody said, OK, we’ve kind of gotten off on the wrong track, and now it’s time to get on a new track, and we’ve hired a young person to do it. It’s just unbelievable. And now there’s work to do.

You had to mention that.
Yeah, damn it.

I was a little surprised that your book makes only a single reference to Hillary Clinton.
Well, we started writing the book five and a half years ago, and Hillary embarked on the campaign around the time we were finishing up. We didn’t know the outcome. And I couldn’t put much in there on the record.

I’ve known the Clintons since 1972, and I’m really close to Hillary. She’s like a sister. We e-mailed a couple of times last night; she’s keeping her BlackBerry as long as she can. It’s a real tribute to President Obama that he reached out to her to serve as secretary of state, because there is an Armageddon out there, both economically and in foreign affairs, and the job needed two competent leaders. It was a tough primary, but I think they’re going to do great things together.

In January 2008, the Clinton campaign flew you out to Chappaqua, New York, to work on strategy. Do you feel you had the impact that you wanted to?
Well, I wasn’t the person running the whole deal. Frankly, I felt like I could have done more, but looking back, I don’t know if I could have with the time that I had. Anyway, obviously we didn’t come out on top, but I think Hillary Clinton emerged as a woman greatly respected here and around the world.

Do you look for the same elements in a political campaign as in a corporate campaign?
Yes, if they’ll listen to me. Democrats have a problem: We’re always trying to sell policies, and at some point people want to know what you stand for. President Reagan had 68 percent of the people disagreeing with everything he was trying to pass—and about a 72 percent approval. People believed in “Morning in America”; they believed in optimism and determination.

It’s the same thing in business. In the coming years, millennials are not going to buy into what you’re selling—they’re going to buy into what you stand for. They’re going to want to know, both from a product and a political standpoint: Is what you’re selling supporting what you stand for?

Your book, of course emphasizes “what you stand for,” to the extent that it overshadows competent leadership and a solid business plan. What do you mean by purpose?
Purpose is a definitive statement of the difference you’re trying to make in the marketplace and the world. Purpose trumps everything else.

We got involved with Southwest Airlines almost thirty years ago. They were doing well, but Herb Kelleher looked at me and said, “What do we do?” And we looked and said, “Herb, if you look at the purpose of your organization—not the soft, chewy, gooey things but your hard-nosed business model—you are in the business of allowing more people to go and see and do things they’ve never dreamed of. So you’re not in the airline business—you’re in the freedom business.” And he said, “Oh, my God—I knew we were doing this, but I didn’t know that’s what we were doing.” So Southwest goes into Philadelphia to liberate the market; the employees are freedom fighters. And every decision tries to keep costs down, to focus precious dollars on what’s necessary rather than what is nice, because then they can keep fares down and uphold their purpose of freedom. That’s the power of purpose.

But Southwest was successful before you had that conversation. Did it make a difference to identify freedom as the company’s purpose?
I’ll tell you what purpose does: It accelerates performance. We represented Wal-Mart for seventeen years. I was at a stockholders’ meeting when Sam Walton was alive, and he said, “I think our business model is real simple: We’ve got to save people money, and if we do that, I think they can live better.” That core business model guides every discussion, through good times and bad times. Southwest’s purpose accelerated performance because we weren’t debating what business we were in or what our mission statement was. It’s OK to change advertising, packaging, slogans, and operations—everything but the purpose.

Do you ever have to overcome skepticism about these statements of purpose?
Yes.

Because of companies’ failure to live up to their mission statements?
They just make them up. Every new CEO says, “Let’s do a new mission statement,” and no one remembers them. You know, “improve shareholder value” and whatever. That’s why people are cynical: Mission statements don’t help you in tough times. They don’t keep you on track. Purpose anchors you. The purpose of the PGA Tour is to be the exception in sports, in every way; the purpose of Southwest Airlines is to democratize the skies; the purpose of Wal-Mart is to save money so people can live better; the purpose of Disney is to use imagination to bring happiness to millions; the purpose of the United States Air Force is to keep us safe from air and space and cyberspace attacks.

I think that, especially during this Armageddon, there’s going to be a renaissance of purpose; people are going to ask, “What is my company about?” Millennials are not going to work for organizations that aren’t in the make-a-difference business. Consumers are going to be looking for both values and value.

And yes, the cynics will be there. And if they don’t buy into all this, it’s OK. But I think the long-term way is to win on purpose. Then, the mission of a company is how you do it, and the vision statement is how do you see the world after you’ve done your purpose and mission.

Not to sound cynical, but don’t plenty of companies renege on their stated purpose?
Yes. Look at the Chuck Schwab story. He was in the business of democratizing the accumulation of wealth, and he made it simple: no commissions. His purpose was to be on the side of the ordinary investor. And then another leader came in, and they started putting in commissions, and asterisks. They started building bricks and mortar and jacking up the costs, and Chuck almost lost his company. When he came back, he stripped it all back down to the purpose of the organization.

Of course, companies never issue press releases announcing, “We’re going back on everything we’ve ever stood for.” What are the signs?
It’s the smell of the place. A new CEO or a new CMO or whomever comes into an organization and says, “You know all that stuff that we were doing in the past that didn’t work? We’re dumping it all, and here’s our new vision, and blah blah blah.” And the first thing that happens is the fan base inside the company—the true believers—can’t stand the smell of the place. Harley-Davidson lost its way in the 1980s and quit making quality products, and the fan base bailed out on the company. You see that base starting to leave—retiring early, moving on—and so do old customers. The bottom of the boat is leaking. You see retention starting to fall, and you start chasing new employees and new customers, and that’s not good.

Executives make bad decisions for all kinds of reasons. Do you see a lack of purpose behind some of the recent flameouts?
Look, I don’t know what happened to Circuit City. I don’t know what happened to Linens ‘n Things. But I will tell you this: No one is missing them. Do you miss Sharper Image?

Not as long as Brookstone is still in business.
Companies with no purpose go away, and no one misses them. I think that the biggest question is: If you go out of business, would anybody miss you? You look on television right now and see all the companies that are having 70 percent-off sales, and if you took off the logos, you wouldn’t be able to tell what companies they are.

So purpose both keeps a company on track and sets it apart?
Here’s the thing: In every corporation and every politician, in every university, in every country, sooner or later, you get envy. Wal-Mart gets Target envy; Home Depot gets Lowe’s envy. You’re struggling, and you see another organization in your space. And the tendency—if you don’t have a purpose that you can articulate—is to strike out on a mission to become a worse them. So Wal-Mart introduces sushi, and it goes to New York and does fashion shows, just like Target. Purpose says: “Wait a minute; stop it; if we try to be like them, the best we’ll ever be is a worse them. It’s the best we’ll ever be. So instead of being a worse them, let’s become a better us.” Well, you can’t become a better us unless you know what us is.

If you have purpose after the dust of this financial Armageddon settles, you will begin to thrive just at the moment that others are still grasping for straws: Oh, I’ve got to hire a new CEO; oh, I’ve got to have a new logo; oh, I’ve got to have new products; oh, I’ve got to have new packaging. As Johnny Lee sang, you’re looking for love in all the wrong places. You’ve got to look for love in the difference and the purpose of an organization.

And if your policies or your products or the way you treat people inside your organization do not support your purpose, people see it. I remember a day when Sam Walton walked in and said, “We’re going to overtake Sears.” We were in folding chairs eating ham sandwiches; Wal-Mart had $20 billion less in sales than Sears. And he said, “You know what happened today? Sears just reneged on their satisfaction-guarantee policy.” Well, that satisfaction guarantee was the core of the company; it dated back to when it was a catalog company. And Sears never recovered.

Your book strongly links a company’s heritage—“the fundamental motivation that set the organization in motion”—and its purpose. Why does it matter so much to look backward?
When you’re in doubt about why you’re doing what you’re doing, it can help to go back to find out why you started doing it in the first place. Any organization that’s survived and thrived for years has a purpose, and we have a process that allows you to do go back and rediscover it. In fact, in 2002 we started a think tank called the Purpose Institute, solely focused on helping universities and nonprofits and leaders to go back and rediscover the purpose of their being—what difference are they trying to make?

I’m going to work really hard this year to create a renaissance of purpose in this country. I think that’s the path to reinvigorating and reigniting: to sell products and services that improve people’s lives, making money by making a difference.

Sounds awfully ambitious.
I don’t know if I’m just going to jump off the building and have to build the wings on the way down, but it’s worth the flight.

Speaking of lofty goals: You advise companies and leaders to aim high in developing and naming a purpose because if you shoot too low, it will be dismissed as an unworthy purpose.
Well, I also say in the book not to aim too high or you’ll be left up in the air. You have to find the middle: If you aim too low, it becomes just a tactic; if you aim too high, the B.S. buzzer goes off. If someone comes in and says, “Why don’t we be in the save-humanity business?”, everybody will say, “Oh, I’ve got to go to lunch.” You want it to be authentic and real.

But high is better than low. Years ago, Jim Collins and I did our first purpose work with the University of Texas, and we interviewed everyone: faculty, deans, alumni. At the end, we presented it to this huge, diverse, opinion-rich audience, and we said, “This university has a purpose. We’re not in the teaching business; we’re not in the tenure business; we’re not in the research business; we’re not in the fund­raising business; we’re not in the endowment business; we’re not in the bricks-and-mortar business. We are in the business of transforming lives for the benefit of society.” The room was quiet, and this one old, cynical, hard-nosed teacher—a guy with a flattop who never said anything at big meetings and was retiring that year—had tears coming down his face. And he stood up and said, “I wish I had known that was the business we were in. I thought I was just here to teach math.”

Great story. But doesn’t that kind of connection between employee and organization require loyalty and shared goals—in other words, the social contract that’s been fading away in recent years?
I think there’s going to be a renewal of the social contract, and it might not be as financially lucrative as it used to be—like with guaranteed pensions—but it’ll be a partnership. Companies will be able to say: “We’re going out there in the marketplace, and we’re going to spend our entire lives building products and services that improve people’s lives. You want to join us.” There will be a new covenant between employees of great purpose and companies of great purpose.

If a company’s purpose is clear, does it still need performance incentives? You write, “If you are trying to motivate them through revenue goals and market share gains, good luck!” A few years ago, wasn’t everyone pushing profit-sharing as the key to employee engagement?
Well, that can be important too, because people want to get ahead financially. But the number-one driver of great happiness within the organization is: Am I doing something worthwhile, and do people think I’m important? Now, you make people important in lots of ways: profit-sharing, matching 401(k), giving them a title or a bonus.

For the company, you cannot get away from benchmarking, and you’ve got to get market share. But if you start with purpose, it will accelerate performance. In other words, if you’re in the market-share game rather than in, as with Southwest, the freedom business, then you’re just doing tactical things to gain market share. But if you’re in the business of opening up markets and getting more people to fly, it accelerates the performance of the organization because the people know why they go to work. And the byproducts of that are bonuses and revenue goals and profit-sharing.

So you have to manage both high aims and low aims?
There’s a balance. The companies that are going to win in this marketplace will have a combination—what Jim Collins called “the Genius of the And”—of value and of purpose. But you’re either going to be trying to find the anchor of purpose or you’re going to be grasping for straws. There’s not going to be anybody in between.

Last: In fall 2007, you began a long-term trek around the country, on foot, which, you wrote, would “make me a better marketer and a better person.” How’s that going?
It’s really amazing. I’ll tell you the genesis of the whole plan. I was in New York and flipping channels late at night, and on all the cable channels, every priest was harming a kid, every athlete was hurting a dog, every mom was a killer of babies. I was going, “My God. Is this America? I don’t buy it.” So immediately—not exactly logical, I know—I decided to walk across America and take a picture of something good every mile. And I did. I started in Conway, New Hampshire, walked an average of eighteen miles a day, and ended up in Scranton, Pennsylvania.

You’re walking one month a year?
It’s going to take me nine years to do it.

The first thing that came to mind when I read about this was your Southwest slogan, “You are now free to move about the country.”
That’s exactly right! And what I’m hoping to do is be on the road to goodness, with friends and love and hope and truth. I’m looking for good everywhere. You become what you look for. And I’m going back on the road in June, walking on Route 6 from Scranton to Akron, Ohio.

And will you be resuming your “Walking With Roy” blog?
I took it offline because I got involved with Hillary, but I’ll put it back up this summer.

What do you expect to learn along the way, apart from goodness?
During that first month on the road, I decided that small is going to be the new big. I was walking through all these little towns and met people living their dream: Two retired teachers were opening up a tea and tart shop, and two lawyers—a couple that dropped out of New York—had opened up an amazing ice-cream shop in Conway. It is the best time in the world to start a small business, especially if your competitors have a high cost structure. I’ll give you an example: One of my daughters would like to open up a yoga studio, and what does she need? A room, a mat, candles, and music. By comparison, what do you have to have to open up a gym? Millions of dollars worth of Bowflex machines. So if you have an idea and you have passion, there’s a great opportunity to walk into the marketplace. I think the banks are going to have to start lending again, not on big stuff but on small stuff, and it’s an awesome time to start something that you love right this second.

For someone who thinks we’re in the middle of Armageddon, your optimism seems boundless.
I feel it. I feel it. You’ve got a choice: You can wake up on the road of, “Oh, woe is me,” or wake up on the road of, “I think I’ll take a walk.”

I believe that as we move forward out of this uncertainty—and this is why I think President Obama has got a chance, along with Hillary Clinton and the team he’s put together—the companies, organizations, and people with purpose are going to rebirth what it is that America is. We’re not going to be out there trying to sell our policies. We’re going to be trying out there to communicate our purpose again. And I think the world likes our purpose when we’re at our best. I just don’t think people have liked our policies.