Defining Corporate Purpose

Defining Corporate Purpose

We are witnessing a generational realignment of the employer-employee relationship and one of the critical leadership decisions in this seismic shift is defining the organization’s purpose. Although fundamentally different, the idea of purpose seems to have replaced (or, in some cases, combined) two longstanding words in the strategic playbook: vision and mission. It’s a confusing topic for many leaders, especially those who articulate a purpose more for convenience than deep commitment.

A primary cause of the confusion is that the word is used in many different ways: as a visionary statement (such as Patagonia’s “to save our home planet” or Apple’s “we educate the world”), or as a value proposition (such as Southwest’s “we’re in the freedom business” or E&Y’s “we give you peace of mind”), or as a definition of the desired cultural norm (such as Zappos’s “we deliver WOW”). Moreover, the concept of purpose is often falsely employed by many to serve a multitude of different priorities, ranging from marketing and branding to recruitment and retention.

The latter is understandable. The pandemic has elevated the status of purpose for recruiting and keeping talent. Record numbers of employees are quitting their jobs to demonstrate a growing conviction that life is too short to waste on tedious, demoralizing work that in their judgement doesn’t serve a higher purpose. The word resonates more with younger workers who tend to abhor corporate speak. But the reasons go beyond that. Those striving for purpose in their lives are proven to be mentally healthier, more resilient, more highly motivated and engaged. And that’s the energy and commitment smart leaders seek in their workforce.

Surveys consistently show generations Y and Z value purpose in their work. They also demand follow-through and consistency and will loudly protest when they perceive company actions to belie its claims or inappropriate. The evidence does suggest that many declared purpose-driven companies revert to a profit-first strategy when the going gets tough. In one LinkedIn survey, 86% of young employees reported they were willing to give ground on their job title and compensation in order to work for a business aligned with their values. Only 9% of Boomers were so motivated.

Marcus Buckingham, author of 28 books on executive performance and a Gallup executive for 20 years, reports that 80% of employees have no “sense of purpose” in what they do. And they’re no longer persuaded by the traditional corporate obsession with proclaiming the importance of core values in driving desired behaviours. In a Gartner study reported in the Harvard Business Review two years ago, 69% of employees don’t believe the values espoused by their employers, 87% don’t understand them and 90% don’t practice them. In other words, as presently proclaimed, they’re increasingly meaningless as a motivator of stellar performance.

Some executives as well as some employees believe purpose should mean taking a stand on compelling societal issues, like Black Lives Matter or climate change. But what if they disagree on how that position is framed or how forcefully those ends should be pursued? About two-thirds of companies today have adopted this notion of corporate purpose but less than one-third of their employees agree with either the scope or the resources applied to the initiatives undertaken.

Fundamentally, purpose should define the essence of the enterprise rather than attempting to be all things to all people. It must be unambiguous, credible, make an emotional connection and be widely discussed. Trying to have it serve too many agendas erodes its power and value. Mission is about what, vision is about where and purpose is about why. It becomes meaningful to stakeholders when strategic actions, to the greatest extent possible, are aligned with and embedded in the claim. While leaders must be mindful that trade-offs will sometimes be necessary, when they trade profitability for workforce flexibility, the organization perishes and workers are the first casualty.

So, how should you embrace the concept of purpose for your business if you haven’t yet declared one? While it’s nice to have an inspiring social reason for your existence, if your purpose is simply to be profitable, don’t invent or adopt a cause that has no established foundation or strategic imperative for your business. Trying to conflate marketing with purpose leads to hypocritical, nonsensical posturing. British American Tobacco claims, without apparent irony, that its purpose is to “build a better tomorrow.” Yet the mission is clearly not to reduce consumption of an addictive substance but to promote the next generation of their products.

If the primary aspiration of the enterprise is not to have a broader impact on current societal issues, then clearly and succinctly state what your business is really all about and what it’s like to work there. If, for example, your success is a consequence of high levels of employee engagement and collaboration or is assiduously disciplined and ethical, then say that rather than engaging in fiction. A purpose anchored in and authenticated by a high-performance culture is a powerful motivational and retention tool.

Companies that do have a bonafide purpose don’t focus on it in their advertising because they understand the risk of trivializing or over-hyping something they deem sacred. Never delegate purpose to your marketing team; the primary audience is your employees. Never talk about purpose then act on it in superficial ways. Very few companies can credibly claim to be agents of positive social change. There are some but don’t rally around a cause unless you actually have one. That’s what credibility means.

The ultimate test of purpose is whether it improves the way the business operates. To work, it must be deeply embedded in everyday behaviors. This happens when leaders and senior managers consciously role model it and insist upon it in performance reviews and promotions, in important business decisions and in personal interactions. Executives must demonstrate purpose as a top-down, culture-building tool and stakeholders must experience it every day from the bottom up.

The full and enormous potential of purpose is achieved only when it’s aligned with a company’s fundamental value proposition and, with consistent and reliable performance, fuels positive shared behaviours. Once determined and accurately phrased, it can become a powerful mechanism for generating buy-in across all stakeholder groups – employees, suppliers and customers. If enacted poorly or manipulatively, it produces an opposite effect. With so much at stake, getting your purpose right should be one of your most pressing leadership responsibilities.