We are delighted to present the second exclusive article of Erik Korsvik Østergaard, the influential global thought-leader and speaker, author of the acclaimed book, The Responsive Leader. Enjoy the reading:

By Erik Korsvik Østergaard

Clearly, it’s harder to measure value-creation than counting money. This article guides you through the mechanism of setting goals and measuring the value-creation of your purpose-driven activities: Functional value, emotional value, and societal value, aiming the focus on the 17 Sustainable Development Goals by UN.

Your purpose, your dream, your vision – important but intangible?

For a company – and hence for the organization and the customers – the purpose is the gravity point that enables us to focus our engagement and understand our identity. This is even more important in a world that constantly evolves. We need to have our core mission statement and purpose behind every action and as a defining identity for the organization. What we are, what value we create, and what problems we solve are the non-changing gravity point for our organization.

However, it is hard to measure and to understand progress and success in something so intangible as a vision and a purpose. How can we measure this?

On the employee level, the everyday connection to the purpose can be difficult and short-lived. It can be hard, even impossible at times, to see how everyday mundane tasks help the company to achieve the purpose. This is where meaningfulness and sense-making play a vital role: From the employee level, sense-making and meaningfulness in tasks and interactions are motivators for engagement and for understanding that they provide value and contribute to the context they are in.

As such, it is the leaders’ responsibility to close the disconnect between the purpose and the employees. This is done through a focus on value-creation for each person and task; and this we can measure.

Purpose <-> meaningfulness <-> value-creation

Initiating the impact account

The process of describing your value-creation is as follows: Identify who you’re providing value to. An example could be your employees, your customers, or an identified societal group. Be as specific as you can, so that you avoid generalisations, assumptions, and fluffiness.

Next, describe what value you create for these personas. I’m inspired by the work of Bain & Company, who several times have published a value-creation pyramid. See for example the latest publication in Harvard Business Review, describing “The B2B Elements of Value” (https://hbr.org/2018/03/the-b2b-elements-of-value)

Lately and for simplification, I have used a three-group-classification of value, to get the debate going in the leadership teams I’m working with:

Functional value, emotional value, and societal value.

Ask yourself what functional value you are creating for that person or company? To simplify processes? Connect things? Avoid backflow? Reduce effort? Reduce cost? Save time? Transparency? Or something else?

Next, what emotional value do you provide? Reduce anxiety? Clarity? Inspiration? Support? A sense of belonging? Motivation? Loyalty? Pride? Hope? Courage? Meaningfulness? Engagement? More?

Then, what value are you providing to society? Do you support one of the 17 Sustainable Development Goals as described by UN, or one of the 12 Global Grand Challenges, as framed by Singularity University?

Finally, describe your aspiration and ambition level for each of these parts. Describe your success criteria, making sure that the value-creation is meaningful, and supports the purpose. In total you now have described WHO you provide value to, and WHAT kind of value. This is your impact account.

Making the purpose tangible – measuring the impact

It is the responsibility of the leaders to create the narrative and understanding between value-creation and meaningfulness. This starts with measuring the value and understanding how you help the employees and customers. Those problems that you are solving must directly support the purpose of your work.

As for any financial account statements or similar classical reporting, obtaining regular measurements is a part of it. To many, asking for this kind of feedback is new and rather intimidating, because you’re actually asking your employees or customers about the quality, usefulness, and applicability of your work. It’s a totally different mindset than handling revenue and financial transactions, and it takes time to get used to. Frequency and transparency seems to be the key to this, and it can be done by qualitative interviews or quantitative surveys.

The impact account and financial account must be seen as equal. They corelate and influence each other, and only by working on both parts you can maximize both parts. The modern, responsive leader focuses both on impact and social responsibility, and on making a sustainable business. The impact account is a part of this.