Purpose, purpose, purpose?

Globally, the ranks of firms with an explicit corporate purpose statement are quickly growing. Advice on how to “get purpose done” is proliferating. Should all firms join the bandwagon? What approach to purpose suits a firm? There are different suggestions as to how to set a firm’s purpose. In a recent paper in Strategy Science, Assistant Professor Bjoern Mitzinneck , together with Professor Marya Hill-Popper Besharov (University of Oxford), set out to bring structure into this wild-growth of recommendations.?

Social purpose

Pressure on companies is building to serve a larger purpose beyond maximizing profits for their owners. Among others, the World Economic Forum and Business Round Table see a turn to purpose beyond profit as a solution to today’s social and environmental crises. Lary Fink – chairman of the largest global asset manager BlackRock – wrote in an open letter to CEOs:?“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it contributes positively to society. […] Without a sense of purpose, no company, either public or private, can achieve its full potential.”

In tandem with these calls for purpose, recommendations on how to articulate and deliver on a corporate purpose statement are multiplying. While those offering up advice tend to agree that purpose is important and can offer strategic benefits to firms, their concrete advice on how to enact purpose diverges. In this cacophony of suggestions, it is hard to know what advice to follow.

Three ways

Mitzinneck and Besharov identify three primary ways in which firms are using purpose: to articulate their reason for being, as a corrective to one-sided profit maximization, or as a catalyst for systemic change. Mitzinneck explains: “Each use of purpose is associated with distinct implementation challenges and requirements. As such, clarity on what a firm wishes to achieve with purpose is essential. Our framework helps firms anticipate what obstacles to expect and what opportunities to look out for depending on the use of purpose.”

Purpose as raison d'être

The first approach to purpose is as a means to express the organization’s reason for being. Clear communication of a unifying purpose can have considerable benefits for motivation, commitment, and coordination among employees. It can inspire creativity at work and encourages individuals to contribute to something bigger.?

NASA offers a great example. This purpose-driven organization makes sure employees of all ranks are clear on its ultimate purpose. This imbues even seemingly menial tasks with meaning and leads to productivity increases and absenteeism reduction. Mitzinneck recalls a quote by a NASA janitor. Asked about his job, the janitor explained: “I am not mopping floors, I am putting a man on the moon”.?

According to Mitzinneck and Besharov, if approaching purpose as a reason for being, firms need to align the purpose claims with the legacy of the organization and continuously emphasize the purpose, to avoid mundane tasks crowding out its benefits. If the purpose is too disjointed from the organization’s past, it may appear hypocritical and backfire.

Purpose as corrective

A second use of purpose is as counterweight to shareholder value maximization. Purpose thus contributes to a firm’s embrace of stakeholders, rather than shareholder capitalism. This requires careful balancing and change management, to avoid the risk of resistance and tensions between supporters of conflicting priorities stifling the organization. When organizational structures, culture, and incentive plans are adapted, such an approach to purpose can stimulate considerable innovation and new strategy development.?

Sustainable apparel company Patagonia is a case in point. This company is driven by its purpose “to be in business to save our home planet”. It has disrupted the outdoor and active wear industry and its innovative approach has become the envy of industry competitors.

Purpose as catalyst

A third way is to regard purpose as a means to catalyze systemic change. European utility giant Engie is pursuing its purpose “to act to accelerate the transition towards a carbon-neutral economy, through reduced energy consumption and more environmentally-friendly solutions”. An inspiring purpose helps convene other industry stakeholders to affect systemic change. It supports the implementation and adoption of innovations, like renewable energy or green hydrogen. This requires coordination and insight into the leverage points to affect changes in a complex system. It also necessitates legitimacy as a change agent. Otherwise, this approach will seem insincere and infeasible to collaborators needed to affect systemic change.

Tool

The framework proposed by Mitzinneck and Besharov can serve as a tool to company executives as they contemplate embracing purpose. It allows executives to gain clarity on distinct uses of purpose and helps them anticipate differences in associated implications and requirements. For example, if you seek to boost employee commitment in your firm, you will want to focus on purpose as raison d'être and not as a catalyst for change. While the latter may also inspire employees, it raises external expectations and will demand capability development in stakeholder cooperation. Following recommendations for purpose as a catalyst for change may actually back-fire rather than kill two birds with one stone, risking failure in both catalyzing systemic change and in imbuing employees’ work with added meaning. Matching purpose aspirations to purpose use is thus of central importance. The framework, discussed in more detail in the article (reference below) can serve as a tool to navigate proliferating purpose suggestions and picking the advice suited to your company’s aspirations.

Reference:

Besharov, M. & Mitzinneck, B. (2023) “The Multiple Facets of Corporate Purpose: An Analytical Typology”?Strategy Science?, 8(2): 233-244.