Why Your Company Needs a Purpose
Business is about making profit and creating shareholder value.
Though there is nothing wrong with this statement, it does not cause conflict when companies put some profit toward charitable causes and social impact. But today, capitalism is having a mid-life crisis. Where do we go from here? Forbes proclaims its belief in “the unmatched power of capitalism to improve human life.” I am a big believer that capitalism provides motivation for making improvements and economic advancements; however, we are currently seeing an extreme state of this combined with a winner-takes-all mentality.
Business should never be just about business; business is about people. People do not exist to serve businesses, but rather businesses serve people by creating jobs and economic exchange. There should be no lines between people (society) and business. One way of better connecting the two is through a social mission: a powerful way of creating purpose within an organization. To be successful, purpose should be deeply embedded in a company’s business strategy.
Look to the Young
One group advocating for a stronger sense of purpose in business are millennials. As they gain a louder voice in the future of work, their search for meaning in their own lives also reverberates. Given the amount of time people spend at work, it makes sense that the workplace is becoming one such source of meaning – a place for collective ambition. Large companies today, however, are struggling with attracting and keeping millennials because their expectations vary so much.
According to Deloitte’s 2015 Millennial Survey, more than half of millennials aspire to become leaders within an organization, with the majority believing that businesses must be driven by more than profit alone. Research by the Center for American Progress indicates that 77% of millennials choose their place of work because their employers’ purpose aligns with their own. When given a choice though, millennials don’t gravitate toward corporations created by previous generations. It’s not that they don’t want to work for corporations at all; it’s just that they don’t want to work for the kind of places those corporations have become. This is an existential threat to some of the world’s greatest companies.
What Do You Stand For?
Almost every startup today has a deep sense of purpose – and that purpose extends to customers as well. They acknowledge that there is a growing trend for customer engagement that is far more purpose driven, with customers constantly asking, “What does your brand stand for?” In short, every company, brand, and startup needs a purpose.
What are the main themes in an effective purpose-driven organization? These need to go beyond the obvious, such as eco-friendliness, conscious consumerism, socially responsible investing, and triple-bottom-line businesses. What every business actually needs is to have purpose at its core. Purpose powers your strategy; purpose creates the human energy needed to achieve goals; purpose reflects the collective human ambition.
Now That There’s a Purpose, What Do You Do With It?
The secret to sustaining corporate performance is having a powerful and well-socialized purpose. This purpose needs to be supported by a business model that informs capability development. Many consider these “softer” qualities of management as not being vital to organizational success. Think about an organization’s system and structures as the hardware of a business, while purpose and culture are the software that glue everything together. Leaders need to build a system that keeps the machine running, and purpose is the algorithm that forms the key differentiator that powers companies when they go through ups and downs in their lifecycles or are faced with disruptions.
Consider the logic espoused by historians such as Alfred D. Chandler Jr., who wrote classics like Scale and Scope: The Dynamics of Industrial Capitalism, and you will find that companies exist to exploit the benefits of being big. They exist, in other words, to maximize efficiency at scale, but not to maximize the human imagination and creativity that is largely responsible for the success of today’s startups – the companies that will become enterprises tomorrow.
Purpose needs to embody big ambitions. By having these lofty goals, companies can establish a connection between employees, customers, and organizational values. A collective, aspirational, and meaningful ambition that makes individuals part of something bigger than themselves and goes beyond making a salary can lead to shared meaning – and, as a result, effective commitment or emotional attachment. Purpose also builds culture, the vehicle into which purpose is embedded. This is the context for employee engagement and the footing needed to establish meaningfulness for both employees and managers.
When thinking about purpose-led organizational design, there are three common questions to ask:
/ What role does purpose play in your business?
This should not be centered on how you make money. It is the collective ambition and associated values that align shareholders, employees, and managers. Your organization’s core purpose is its fundamental reason for being. An effective purpose reflects the importance people attach to the company’s work. It taps into their idealistic motivations and gets at the deeper reasons for the organization’s existence beyond making money. It does not mean profit becomes a second priority, but instead focuses on how profits are made.
/ How will purpose evolve?
A company’s purpose can evolve over time, but it must not be used as a positioning tool. A growing company’s purpose could broaden, while a shrinking company requires a more focused purpose. Take Google, for example. Since their early days, Google’s purpose has been to “organize the world’s information and make it universally accessible and useful.” Surely, this has helped them evolve. Disney’s purpose, meanwhile, has always been to spread happiness, whatever the job function.
/ How is “purpose” different from “mission”?
Traditionally, a mission statement is intended to clarify the “what” and “who” of a company, while a purpose statement also adds the “why” and “how.” As mentioned above, as a company grows, its objectives and goals will evolve. Its purpose needs to be revised as needed to better reflect the changing environment and competitive landscape. Meanwhile, the mission statement’s intent should be the first thing an employee considers when evaluating a strategic decision. This statement can range from a very simple to very complex set of ideas. Today, many mission statements are far too complicated and fail to resonate with employees. Whether you label it as mission or purpose, the goal is to connect people’s jobs to this statement – and it needs to be deeply anchored into corporate culture.
Take Patagonia’s statement, for example: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Patagonia’s mission statement combines both the values that bring them market success (creating high-quality products) and the values that contribute to a better world (environmental philanthropy). To do it differently, Patagonia’s purpose could be stated as, “To bring together people who love wild and beautiful places, and help them do their part in saving and protecting these places.” This purpose goes beyond the company’s policy to donate time, services, and at least 1% of its sales to hundreds of grassroots environmental groups around the world. It becomes part of the reason that people show up to work – and these are the people that a company wants to attract. The key is for the purpose to feel more emotive and personal.
Check Your Purpose
Before you go to your big executive offsite to discuss your next strategy, remember that having a purpose is what your organization needs most. Do you have a good one? Is it properly embedded into your company’s culture? Is it even defined? If you can’t answer these questions with confidence, stop and go back to the drawing board. You won’t get very far without it.