Of late, the term “Purpose” is making a comeback of sorts in the boardrooms. For the past few years, as the world grappled with the pandemic, survival became the primary objective — a sort of Darwinian society. Yet, even in those uncertain times, there were calls emanating, calling for collaboration and for the society to “Build Back Better”. In this entire melee, many corporates aligned themselves to the brass-tacks of saving business and aiding the community — missing on the bearings that rooted them. Why are they in business in the first place?
While researching on the etymology of the term corporate, I discovered its root in a 15th Century Latin term – corporacioun, meaning “persons united in a body for some purpose”. Over the decades and centuries, the very notion of corporation shifted from its rootedness in purpose to a more legalese and business-like version. The primary aim became profit — in a Machiavellian way — the ends justified the means. Fortunately, the tide seems to be changing now. As the world revisits some of the primary notions on capitalism, the notion of purpose is back in circulation. Rethinking the purpose of business will be crucial shift in that direction.
The global trustworthiness ranking 2022[1] shows doctors, scientists, teachers, armed forces and ordinary men/women as the top five most trusted professions in the world with bankers, business leaders, advertising executives, government ministers and politicians trailing in the bottom. In this index, over the past four years, the position of business leaders has not shifted. The reason, I refer to this study because you can easily articulate the purpose of the top professions (except ordinary men/women). That clarity in purpose is what makes these professions (more) trustworthy. Even a child can tell you what is the purpose of a doctor, scientist, teacher and army men. I doubt you will get that clear an answer when asked about a banker, business leader or a politician.
The mistrust of business and business leaders became pervasive with the functioning of the business aligned to the Milton Friedman doctrine – “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.” As neo-capitalism took over the world, the distrust only increased.
Yet, there was a breakthrough in 2018, someone with the power to influence the top CEOs told them that every business needs a purpose, not a tagline, or a marketing campaign but a statement of its fundamental reason for being, what it does on the daily basis[2]. This was followed by an event on August 19, 2019 wherein nearly 200 CEOs of America’s largest companies adopted a new Statement on the Purpose of a Corporation declaring that companies should deliver long-term value to all of their stakeholders – customers, employees, suppliers, the communities in which they operate, and shareholders[3]. The campaign on Build Back Better during the pandemic strengthened the whole purpose narrative for the business.
In all this, the role of the board is essential to help a company articulate and pursue its purpose. But how should one go about articulating the purpose? The first step is to clearly distinguish between Purpose, Mission and Vison. Here is how it works:
Purpose: What is the company’s core reason of existence? A difference the company is or intends to make in the world.
Mission: This is the core strategy that is required to fulfill the purpose.
Vision: Is the view once the purpose has been largely realized.
The right kind of purpose can help the employees to make a better emotional connect to their work. It is a tragic waste of human potential if employees do not feel that emotional connect.
There are many ways the company can narrow down on its purpose, but one which I found simple and useful is the intersection of these 4 circles. I would have preferred the bottom circle to be – How the company can create sustainable value?
The purpose statement can be a bold one like Patagonia’s “We are in the business to save our home planet”, or an inspirational one like Unilever’s “To make sustainable living commonplace”, or it can be a statement of truth like Google’s “To organize the world’s information and make it universally accessible and useful” or consumer oriented like Microsoft’s “To empower every person and every organization on the planet to achieve more”.
The board should evaluate how authentic and compelling the purpose statement is. Authentic because, the purpose statement should reflect the company values and what the people in the company deeply care for. It should be authentic to reflect the core competency the company brings to the world. It should be compelling in the sense that it is aspirational enough to make the real difference in the world.
The board should also ensure that the purpose statement is not merely a fancy tagline. A good governance structure is critical to review the progress on purpose. A monitoring system needs to be devised to correlate performance with purpose. This should not just be based on outcomes and results, but also the enablers. Measurement and evaluation on the quantum of purpose that inspires employees will be an enabling metric. Whereas a result-oriented metric can be the number of stakeholders impacted and the significance of the impact.
The board should visit the purpose statement frequently and review its relevance not just from the business environment, but also in the way the global challenges are evolving. The statement should be the guiding light for the corporate decisions. It is time to warrant that the “Purpose of Governance “is actually, the governance of purpose itself.
Very well written article. The explanation of vision may be articulated a little more clearly or maybe I was not able to understand due to my limitations.
Excellent peice, Santosh. Very relevant and timely.