Three Types of Corporate Purpose

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Three Types of Corporate Purpose

The purpose of any company affects its success in many crucial areas. To mention a few, think of demand generation (how customers see it, brand personality), HR (employee engagement), investor attractiveness (ESG Factors, corporate sustainability), strategy (stakeholder management, strategic growth opportunities for long-term), corporate valuation and risk reduction.

What is a Corporate Purpose for? Purposes

A well-formulated "corporate purpose" or "organizational purpose" is very powerful as it can appeal to, motivate, propitiate, and attract clients, employees, investors, governments and even society at large.
Moreover, in a VUCA world with constant change, the corporate purpose can be the beacon and/or glue holding everything and everyone in the organisation together.

However, Knowles et al. (rightly) explain how the term "purpose" is confusing. It's because purpose can have several meanings. It can be understood in (at least) 3 distinct ways:

1. Purpose as a COMPETENCE: The main function that a company/organization/products/services serves.
   For example, Mercedes has: "First Move the World".
2. Purpose as a CULTURE: The intent with which a company/organization is run.
   For example, Zappo has: "To Live and Deliver WOW".
3. Purpose as a CAUSE: The social or moral good a company/organization aspires to.
   For example, Tesla has: "To accelerate the world's transition to sustainable energy".

It is important to note that an organizational purpose can be defined in any of these 3 ways. In particular, according to Knowles, even if every company should work to become a better corporate citizen, "not all companies can save the world". All others should use one of the other 2 options to provide the basis for a meaningful and motivating "why" they exist when creating a corporate purpose statement. In a pragmatic, but authentic way.

⇨ Do you agree with these 3 meanings/types of corporate purpose?

Reference: Knowles J., Hunsaker B.T., Grove H., James A., "What Is the Purpose of your Purpose? Your why may not be what you think it is", HBR Mar-Apr 2022, pp. 36-43.

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		4 Ronald Ainsbury Coach, New Zealand
	3C's of Purpose is Useful Approach for Corporates This is a useful approach as there is much confusion as businesses come under pressure from various groups in society to have a "purpose" when they really mean "social purpose". There are already sundry (Editor:~of various kinds) organisations that have a social purpose, they are called charities. Business Purpose confusion has been compounded by the advent of B-Corporations and Benefit Corporations which seek to combine business-for-profit built on a social purpose, For many managers (and writers) Purpose, Mission and Vision seem to be used interchangeably, as if they all mean the same thing - when they are quite different and each provides an answer to three distinct questions: WHY does your business exist? => PURPOSE, why are you in business? WHAT does your business aspire to be? => VISION what will success look like? HOW does it go about its business? => MISSION, what is your strategy for achieving success and VALUES, what are the core values upon which you implement the strategy (which underpin CULTURE)? For most businesses, which are small, Purpose is going to be quite fundamental – built around a customer base. As James Rouse, US Businessman and Philanthropist, said: "The legitimate purpose of business is to provide a product or service that people need and do it so well that it's profitable" or as Peter Drucker said, "The purpose of business is to create a customer." As businesses grow and become diversified corporates, an overarching Purpose becomes difficult to define. In the article referred to the authors cite Dove with its inspiring campaign encouraging women to reflect that beauty comes in all shapes, sizes, ages, and colours. But how to make AXE, another successful Unilever brand, fit under "Sustainable Living" when AXE's image has been built on an image of ordinary guys 'pulling' attractive girls?

		2 Johan Bergstroem HR Consultant, Sweden
	Some Thoughts About the Purpose of a Small Company Very interesting, Thanks. Even though this is mostly about large corporations, I would like to add some input on the smaller end of the spectrum. Small companies are often smaller both in budget and number of employees, they are family-owned and family-driven. The purpose of a small company is often to solve a combination of needs in the local area. To solve the need of locals and friends, and to give a steady living and income for the immediate family. I think these smaller, family-oriented local companies are often overlooked. It could be everything from arts and craft, through carpenters, builders, (heavy) machinery entrepreneurs, auditors. Some ideas and methods are scaleable, but some are not. But I do not know exactly how this works. I gather at "too small size" and the energy, time, resources are needed elsewhere in the small company than to make plans and documents. The actual family name, is their moral and their standing and inclusion in the comunity is their culture. The seal of approval from their neighbours, the word of mouth, is their sign of competence.

		1 Ronald Ainsbury Coach, New Zealand
	Purpose of Small Business @Johan Bergstroem: Spot on Johan! Too often in management literature small businesses, which are the backbone of communities, are overlooked. Small businesses survive, not because they, as you say, "make plans and documents" - but because they understand that their purpose is built on providing their customers with what they need. And if they do this well they succeed - they earn the "seal of approval" and are profitable.

		3 Rob Thompson Coach, United Kingdom
	Purpose Depends on the Angle of the Viewer If I consider my role as a coach in education, then I might define my purpose as being one that creates the conditions for those that I work with to iteratively become better versions of themselves. ...

		1 Paul Pretorius Management Consultant, South Africa
	Start with WHY May I suggest we consider the contribution by Simon Sinek in his book: "Start with WHY". This works well for me: Find your 'why'....

		0 Maurice Hogarth Consultant, United Kingdom
	The Purpose of Being The fun and confusion of the English language. "Purpose" can interchange with "reason" (the purpose/reason for the meeting was...) and "mission" (the mission/purpose of the patrol is to...") etc. On...

		1 Barry Harrison Consultant, United Kingdom
	Purpose of an Organisation Its quite simple really. 1. Why was it formed? 2. Who are the beneficaries? 3. What are their expectations? 4. What performance measures do you set? 5. What targets do you set? Vision, Mission, ...

		1 Maurice Hogarth Consultant, United Kingdom
	Purpose Means Different Things to Different People @Barry Harrison: I agree that for many businesses it can be quite simple; as I've been told: 1. Why was it formed? - "To make money" 2. Who are the beneficiaries? -- "The investors" (The family) "...

		3 Jaap de Jonge Editor, Netherlands
	Formulating a Corporate Purpose is Neither Simple Nor Should it Be I agree that if one formulates the corporate purpose solely as: "to make money for the owners/shareholders", then that at least seems relatively simple. But simplicity - although attractive - is not ...

		0 Barry Harrison Consultant, United Kingdom
	Primary Purpose of a Company @Jaap de Jonge: I agree making money may not be the raison d'être, certainly in a 'not for profit' organisation! In the case of a 'for profit' organisation complication occurs when there are too many...

		2 Maurice Hogarth Consultant, United Kingdom
	The Purpose of a Business is Service its Customers @Barry Harrison: If the purpose of a business (v a Not-for-profit organisation) is to "make money" then it would seem that many businesses are in the 'wrong' business. I was told that businesses like ...