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The point of purpose

I am a member of a big and active WhatsApp group that was created to as a forum to discuss things loosely related to communication, marketing, and politics. The membership is global, many members are very experienced, and discussion is wide-ranging. Everyone is respectful, without holding back their thoughts and opinions. Anyone who has been part of a social media or chat group online will recognise that this is a rare beast; I’m lucky to be part of it.

One of the topics that comes up often in our discussion is the idea of corporate purpose. That’s partly because it’s topical in many of our lives right now, and partly because the group’s founder, David Gallagher, is passionate about this topic. It’s also a fast moving and fluid topic in the corporate landscape, and many companies are trying to figure out what it is, and what, if anything, to do about it.

In a recent exchange, the question, “what is purpose (and is it important)?” came up. There were many views expressed, but my favourite came from Ricki Unger, a UK-based consultant and strategist. She said:

“I personally define [purpose] as the reason why a business exists (making money is table stakes). It should be the north star across every part of the business. But it doesn’t need to be a social or sustainability thing.”

David added:

“Truly purpose-driven organisations arguably make better decisions; manage risk more responsibly; attract more committed talent and get more out of them; cultivate more loyal customers and ultimately yield better returns.”

Suddenly the penny dropped for me.

I’ve never considered myself a purpose guy. Perhaps it would be more to the point to say I’ve been agnostic on purpose, or at reserving judgment until I can see where (if anywhere) it was headed. There is good reason for this: in 25 years of professional experience, I’ve seen a lot of new ideas and concepts purport to be “the next thing.” Some, like social media, turned out to be here to stay, evolving constantly to meet the changing needs of their users. Many more have just faded away: it has been a while since I've seen people with job titles like "Futurist" or "Chief Imagination Officer." I think my ‘wait and see’ approach to anything heralded as a game-changer – be it a product, an idea or philosophy, or a technology – has served me well.

In order for a new way of thinking to sustain itself in the business world, it has to offer advantages over the traditionally dominant way of doing things. Milton Friedman’s trope that “the only responsibility of the business is to maximise returns to the shareholder” has enormous sticking power: it’s easy to remember, easy to enact as a point of focus, and easy to measure. It also typically satisfies at last one influential stakeholder in the organisation. But easy isn’t always good, and in a world where governments are failing to meet significant needs of their citizens; where rapid change has people feeling on edge; and where citizens in countries around the world are tiring of the broken social contract between societies and the companies that operate amongst them, we need a more comprehensive and resilient approach.

This is not to say that shareholder returns are not important or that Friedman was wrong: shareholder returns are and should be important, an

d as David points out, they’re not inconsistent with a strong purpose orientation – it can and should help you perform better financially. The issue is one of focus: your stakeholders, including many of the largest shareholders, are looking for more than just the ability to generate short-term financial results. Never mind the Culture Wars nonsense: if you want to strengthen your reputation; attract high-quality investors; have a credible voice in shaping your regulatory framework; or sell your products to new markets; you need to stand for something. Strong financial performance should be the result of a thoughtful strategy well-executed.

Purpose lets people know how you make decisions, what they can expect from you, and what drives you. That’s incredibly useful. It sends a signal to your customers about your integrity. It motivates employees to work towards a shared goal, and helps potential new talent decide that they can build a future here. Done well, purpose forms a core part of the decision-making process in an organisation, driving better choices; a stronger, more credible reputation; and ultimately, strategic advantage.

What purpose is emphatically not, is a marketing strapline. It’s not a communication nicety or a throw-away line for the CEO's press statement. It’s not a thing to say to critics so they leave you alone. Purpose is too often lumped in with CSR, ESG and sustainability as well, and in the process (like these other things) misused as lipstick on the organisational pig. Trying to do any of these things exposes your stated purpose as inconsistent with your actions, and creates more problems than it solves.

What if you are in an organisation that does things that many find controversial (think defence or tobacco)? Is purpose still strategically useful? In my WhatsApp group, the consensus was yes. In fact, it may be even more important: he strategic value of purpose is to make it clear to shareholders, customers and other stakeholders what’s important to you, in the context of what you do. Whatever your does, it will have stakeholders, and it will need to engage with those groups credibly and meaningfully.

The misuse of purpose then, is not only pointless; it can be an active danger to your organisation. Just one action that seems contrary to your purpose can damage your reputation and your most important relationships. On the other hand, if you use purpose strategically – choosing something that is relevant to your business and resonates with customers and other stakeholders – that danger turns into power. You can use it as a filter to answer Michael Porter’s important strategic question “what will – and what won’t – we do with the limited resources available to us?” The decisions that are made off the back of a purpose-driven strategy will drive better product choices, greater brand loyalty and better financial outcomes for longer. These are all things that a myopic focus on short-term shareholder returns fails to deliver. Sorry Friedman, but the world is complicated.

Moving forward with purpose is rarely easy. Developing it as a strategic imperative can be time-consuming, difficult and mind-bending. It means listening to understand your audiences and their needs (including – especially – your customer base). It means putting in effort to explain to all of them what you’re doing and why, and what you don't yet know. You will probably need to make changes to product, operations and culture. You’ll need to be creative, practical and realistic, and very disciplined to make a lot of tough choices.

Is it worth it? Honestly, this area of practice is still quite new and we don’t really have conclusive data. When you separate the bad examples from the good, however, early evidence suggests that whether you’re looking for stronger financial performance, a more loyal customer base, a great way attract investment, or better recruitment and retention of talent, purpose delivers.

Give some thought to your purpose. If you’re looking for a way to give your organisation an edge, it might just be what you’re looking for. And if you want to talk it through, give me a call: my WhatsApp friends and I will be happy to help you find and stress-test your purpose.


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