Is ‘purpose’ just strategy with a different name?

Sceptics will argue that purpose-led organisations are a myth – that purpose is just strategy with another name.

But as some of the world’s top business people are coming to understand, strategy and purpose are not the same. And there’s a big difference between having a purpose and being purpose-led.

Your strategy is your plan. You know where you’re headed but to stay on top of your game your strategy must change regularly to meet the market. You cannot ‘set and forget’.

Purpose, on the other hand, has a 50-100 year horizon. It’s your North Star – your guiding principle and the reason your business exists. Many companies come to grief because they have a strategy but without a North Star they find it hard to make good decisions. They have no compass.

Being purpose-led is different from having a mission statement. It’s longer term and less insular – it’s more like saying you’re going to “run the marathon of life”. It doesn’t mean you don’t want to be a $50 billion company by 2020; it means you can see a broader and bigger impact of what you’re doing that will inspire your customers, employees and outsiders and, as a result, make money.

How do you put this into action? First you must find your purpose and make sure it’s the ‘right’ one. This takes time and a lot of thought. It’s not just a case of getting the marketing team in a group hug and saying you’ve got it done and dusted. Some of the best examples of purpose-led organisations don’t share their purpose publicly. This avoids a misconception that it’s just a marketing slogan. It should always be led out by the Board and CEO. If they are not committed to leading their Purpose-led journey, then don't start.

Once you’ve found your purpose, you must measure all your operations, decision-making, policies, procedures, brands and KPIs against that purpose. It’s a long, hard slog and must be led from the top, working your way, top to bottom, through the organisation. Your purpose becomes the essence of what you do.

Few companies are getting it right. If you ask people whether their business has a purpose, probably 60-70% would say they do. But if you ask them whether they use their purpose as the basis for good decision-making, most will say no – it’s just a tagline.

That is the difference between a company saying ‘I’ve got a purpose’ and being purpose-led.

Starbucks is a great example of a purpose-led company. When accused of racial bias earlier this year - Starbucks was hit with millions of negative tweets. The company acknowledged it had a ‘runaway rig’, apologised to the customer and closed its 8,000 US stores for half a day, at a cost of US12.5M in lost sales, so staff could attend racial bias training. In effect, Starbucks was saying, ‘We’re not always perfect but we will work out a way to fix this’. They demonstrated commitment to their purpose "to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time".

Another purpose-led business is USAA, a financial services organisation that provides insurance to veterans. Its call centre staff receive a bonus every time they save a member money. This is rare in the banking sector. Their upselling and cross-selling levels are extremely high – four times that of any other bank. Why? Because they genuinely exhibit behaviour that supports their purpose “to facilitate the financial security of their members” and have their back at all times.

Tomorrow: Do employees care about purpose?