The purpose-driven organisation: Five things purpose pundits may be getting wrong
If you’ve been hearing the word "purpose" in corporate lexicon more often recently, you are not alone. Terms like "purpose-driven organisation" and "from profit to purpose" are everywhere. Every other company wants to transform itself into a purpose-driven company these days as it’s become the management trend of the 2020s. Quick to respond, many consulting firms and business schools around the world have set up purpose practices and curricula headed by self-styled purpose pundits who charge mega bucks for their advice. Books and articles on purpose are flying off the shelves like hotcakes. Google the phrase “purpose-driven” and you will immediately know how powerful this trend is.
Isn’t it great news that companies want to be purpose-driven? The customer, consumer and society at large will benefit, will it not? Yes and NO. I write the "NO" in uppercase because more organisations are getting it wrong than getting it right. And the purpose pundits are not helping. I have nothing against the trend because it is much needed in today’s context, but if you really want your organisation to be purpose-driven, let’s get a few things straight:
1. Purpose is not new: For CEOs trying to transform their companies into purpose-driven organisations, I have a basic question – why now? Did your organisation not have a purpose all along? One CEO I asked was quick to respond with, “No, until now we only worked to maximise profit, now we must maximise purpose.” While this CEO spoke with good intentions to make a positive difference for society, like many others, he misunderstands the meaning of the word "purpose." According to the Merriam Webster dictionary, purpose is the reason why something is done or used; the aim or intention of something. By this definition, his company always had a purpose – to maximise profit. What the CEO was really trying to say is that he wants his company to consider the needs of society while establishing business strategy. In other words, he wants the company to pursue a higher purpose, one that goes beyond just shareholder returns and is pursued with high ethical standards.
2. Purpose is not necessarily positive: I recently listened to a purpose pundit from a leading business school speak about the benefits of purpose in organisations. Purpose is motivational, purpose is inspirational, purpose is the glue that enables a higher level of collaboration… He went on and on about how an organisation that articulates purpose attracts better talent and serves society better. Again, it made me question: since when did purpose become a positive word in itself? If the dictionary definition is to be believed, purpose can be positive or negative. As I listened to the list of advantages of having a clearly defined purpose, I could not help but think about the Mafia. They have very clear purpose and meet all the criteria this pundit was talking about – motivational, inspirational, common glue etc.
For purpose to be positive, it must be a high purpose as described in point 1 above. It must be based on the right values – something that ought to, but is not, getting enough attention in the current purpose mania. More on this in point 5 below.
3. Purpose statements alone are not enough: Many organisations spend millions crafting and socialising new purpose statements, and think their job is done. Simply having a lofty statement like, "To give people the power to build community and bring the world closer together," does not make the company a high-purpose ethical organisation. If you had not already guessed, the above is Facebook’s purpose or mission statement. Similarly, Boeing flaunts this statement: "To connect, protect, explore, and inspire the world through aerospace innovation." If indeed these companies believed in higher purpose, would they have sold our data or compromised our safety respectively?
4. Profit is not the enemy of purpose: Another CEO I listened to recently said, “We are undergoing two transformations, one from profit to purpose, and the other from value to values.” Lofty words indeed. Here are my questions: are you saying you will not look to make or maximise profits anymore? And what do you even mean by “from value to values?” What does a commercial organisation exist for, if not to provide value to society with its goods and services in exchange for profit? Let’s be clear, higher purpose need not be at the cost of profit. If anything, the reverse is proving to be true. In today’s totally transparent age where ordinary people have extraordinary access to information, customers and consumers are demanding high-purpose behaviour from companies and will shun products (if they have an alternative available) of those that don’t comply.
5. Purpose AND values; not just purpose: Finally, before an organisation can realise its high-purpose dreams, it must honestly ask itself which values it holds most important, and ensure two things:
a. The purpose it articulates is based on interdependent values. Interdependent values are those that are rooted in the belief that success and well-being are interdependent and cannot be maximised in isolation. In corporate parlance, this means believing that for the company to maximise shareholder returns over the long term, it must pursue strategies that create societal benefit.
b. The values are lived and applied in everything the organisation does, not just when it is convenient.
Another purpose pundit recently said that while values and behaviours form the culture of the organisation, its purpose is the reason for why it exists. He drew a pyramid in which strategy and execution plans formed the base, values and behaviours formed the middle, and purpose capped the top. By showing purpose at the top, he suggested that purpose was most important — the “why” of a company’s existence. I strongly disagree, because a) purpose without the right values may not be the higher purpose that many CEOs today are hoping for, and b) whether the spirit of higher purpose is followed or not depends on the extent to which the right values are applied while making tough decisions. So, if you want to create a high-purpose organisation, first clearly articulate the values that will drive behaviour, then make sure the values are lived and always applied. In this sense, purpose and values must have equal standing.
In summary, while I welcome and applaud all the efforts, CEOs should aspire towards transforming their companies into High Purpose Organisations (HPOs), not just Purpose-driven Organisations. The following figure summarises the essence of an HPO:
1. What is the purpose of your power if there is no power in your purpose?
2. The power comes from the nature of your values, and the consistency with which they are applied.
This article first appeared on Forbes (2 Nov 2021).