Corporate purpose needs asserting and defending as never before. In a world of scepticism, clarity of purpose and consistency in living that purpose
will powerfully differentiate a company from its competitors – in the market for customers and talent. More fundamentally, as organizations face stronger cross winds, with high levels of volatility in every area of corporate activity, the what and how will need to change frequently. This leaves purpose – the answer to the question why – as the primary compass for navigating key decisions.
Companies need to constantly ask themelves five key questions:
1: Is your purpose worth defending?
Not if it’s just a set of words. Statements of purpose often float upwards into fluffy, generic moral injunctions, or land heavily as marketing slogans and value propositions. The sweet spot is where a definition of purpose brings value and values together. It must be a business purpose – that is, built around what the organization can deliver – but its roots must be in morality, in the sense of being outward looking and being of service to others: consumers, society, and employees, not just shareholders.
Purpose is often buried in an organization’s history and the memories of its founders. Nestlé was founded to save the life of a baby. Soichiro Honda and his business partner Takeo Fujisawa founded their company to restore Japanese pride in engineering, rather than military achievement. Sam Walton looked to bring value to out-of-the-way places.
The stories that employees tell each other about their history – especially foundation stories – are potent carriers of the purpose that is worth defending: much more so than the products of corporate identity consultants.
A worthwhile purpose leads to action. Ove Arup, founder of the global engineering and architecture practice, wrote “The Key Speech”, which to this day is mandatory reading for all new employees. The speech sets out Arup’s purpose to advance excellence in engineering – and to turn down any project, however lucrative, which fails to advance that aim. Arup’s purpose is both bold and practical, organizational and personal. For example, it warns employees to expect only second quartile remuneration, but unparalleled access to knowledge for their own development. Arup’s governance lends steel to its purpose: Ove Arup gave all his equity to the Arup Foundation, which owns the firm and whose objective is the advancement of excellence.
Undoubtedly, a purpose worth defending brings dilemmas. A company for example, could set its core purpose as delivering fresh and nutritious food to enhance people’s health. Would the acquisition of a fast food burger business go beyond those boundaries? If the purpose is meaningful, consumers – and ultimately employees – will respond with anger or disengagement if top executives subvert it.
2: Are you communicating your purpose?
It’s not the words that count; it’s what they do. Far too much time, energy and money is devoted to word-smithing slogans. Slogans won’t carry a purpose, but stories will. The CEO needs to be the Chief Storytelling Officer, inspiring managers who retell the stories of foundation, hard choices, dilemmas, conflicts and victories that build the organization’s mythology.
This often requires skills which may be new to many corporate chiefs, but it is essential to develop them. The story need not be slick, and the telling doesn’t have to be charismatic. The point is that it is authentic, in the sense of belonging to the organization and those who have lived within it, rather than being just the property of the top team or, worse, their advisers.
Communication needs a good listener as well as a good story teller: can your organization listen? It’s hard to listen to a story told at the wrong organizational level. At Blue Circle Industries, a global construction materials business that is now part of Lafarge Holcim, top management struggled to communicate a purpose that could resonate across all parts of its highly diversified portfolio. The search for common ground led to a very generic statement of purpose. This focused on delivering shareholder value and was wrapped in the familiar moral grandstanding of prizing integrity, creativity and so on. The statement of purpose was relevant only at the level of the holding company. It failed to register in the ears of those delivering customer value across the range of different contexts in the company.
And the timing needs to be right. The organization needs to be ready to hear about purpose. When Harvey Golub was turning round American Express in the 1990s, he famously said that if he had tried to communicate a sense of purpose he would have seemed to have arrived from the planet Mars. Ultimately the company’s purpose was to become the world’s most respected service brand, but when AmEx was in deep trouble with a brand sinking rapidly what was needed was not so much a statement of purpose as a set of clear, concrete, credible priorities for action. In this case, introspection around purpose would have lacked any credibility, and execution around the basics of cost management and integration had to be at the top of the agenda, for at least Golub’s first two years.
3: What’s fixed and what’s up for grabs?
The definition of the business you are in can change over time, sometimes dramatically. Diageo, the global drinks company, had its roots in the Grand Met-Guinness merger. Grand Met – at the time of the merger already a prominent drinks business – had very different origins. Its founder, Maxwell Joseph, began in the hotels business in the 1940s, progressing through property trading into dairies, restaurants, pubs and so into liquor. Curiously, at the same time, the Bass Group evolved in the opposite direction: from brewing into hotels.
Within a business, the strategy can and will change – at an increasing velocity as we move further into a complex and uncertain future.
What does that mean for purpose? Purpose is not the same as business definition nor the same as strategy – but both of these are an expression of what the business stands for. So, as your company navigates changes in strategy and portfolio composition do not fail to re-examine your purpose: to what extent are you reaching its limits? A big mistake is to assume that purpose is fixed for all time: only a generic purpose can be unchanging.
When business environments change dramatically, or when organizations lose their way, studying and understanding the past can be very instructive. The twists and turns of strategy and business definition over the years prove excellent material for questioning and rediscovering what your purpose was in hindsight, and where you might have strayed from it. This, in turn, enables a corrective, future facing perspective on purpose.
Minding the past allows us to recall times of particularly strong (or weak) stakeholder engagement and what drove it. Considering key turning points in the organization’s history can expose deeply embedded patterns of behaviour. The early history of Honda, for example, is replete with stories of failure and the unexpected. Honda’s legendary US market entry in the late 1950s was not the result of a planned strategy but apparent accident. The preferred product category failed and small, lightweight motorbikes – that nobody at Honda intended to sell in the US, but which executives had kept for their personal use – were spotted by a Sears buyer. Those stories point to and bring to life a purpose of transformation through learning, persistence and a non-punitive culture.
4: Have you planned for your purpose being subverted?
Subversion typically comes from short term pressures. Fundamental commitments may well be jettisoned to address a crisis or make up for shortfalls against immediate performance promises. The price is a loss of credibility across key stakeholder groups. As those pressures will inevitably come, it is important to plan for them.
One key is to create watchdogs, who will bark loudly when purpose is violated. The Hershey Foundation, for example, recruited John Scharffenberger to act as the company’s guardian and ambassador to cocoa growers in West Africa. Scharffenberger had sold Hershey his eponymous boutique, ethical chocolate brand. As well as the product, Hershey sought to retain this distinctive voice as a forceful reminder to the company of what it stood for. Similarly, the accounting firm PwC retains the firm’s wisest elders after retirement on the firm’s supervisory boards, as custodians of purpose in the context of a partnerial culture.
Looking to past commitments can help to anchor your organization’s purpose: so can looking to the future, as emerging trends will reinforce or challenge it. Reverse mentoring from outsiders is also useful. Credible youngsters can hold your statement of purpose up to the scrutiny of stakeholders. Ask them to imagine and tell the story of your organization’s (hypothetical) “death”, and co-create the story of its “rebirth”.
5: Is the organization’s purpose connected to your own?
Buddhist tradition speaks of the Buddha’s teaching on rebirth. He compared this to a flame being passed from candle to candle. The flame is different, but also the same. So it is with purpose across the generations. As a leader, you are the channel for your organization’s purpose and if it fails to connect with you it can hardly connect with others.
The corporate purpose answers the organization’s “why?” question; but what about your own? What is the link between your personal story and the story told about your company? One key to ensuring connection is to focus on your legacy. The legacy of purpose bears your personal imprint as a leader. As you pass it on, it will change but retain its roots in what you contributed and in what earlier generations brought to you.
These measures for monitoring purpose have to be combined with strong governance processes to ensure that the company stays on track. In this context, an important point to be kept in mind is the gap which frequently appears between short and long-term strategy. Most companies are good at articulating a long-term vision and strategy, based on the company purpose, they are also good at developing robust processes to ensure that short term deliverables enable them to meet financial KPIs. Where companies tend to fall short is in the medium term strategy, to bridge the short term and the long term.
About the authors
Dominic Houlder is an Adjunct Professor of Strategic and International Management at London Business School.
Nandu Nandkishore is an Executive Fellow at London Business School. Previously he was an executive board director of Nestlé S.A.
This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond. This is an edited version of an article which first appeared in the online edition of the Harvard Business Review.