Corporate Purpose has become a trendy expression in the corporate world. But what does it really mean and why does it play an increasingly important role for companies? What characterises a company that has less of a “workforce” and more of a community which works collectively towards something bigger?

What does Purpose mean?

Purpose is a philosophical thought that deals with the question of meaning. Cambridge Dictionary says purpose is “the determination or a feeling of having a reason for what you do“.

Why does a person get up every morning and go to work? What is it he or she wants to achieve? And what is the purpose of his or her business? Not only do we ask ourselves those questions more often than maybe years ago, but also, we are more insisting to get answers. There is consensus that Purpose is becoming increasingly relevant for people and subsequently for companies as well.

The philosophical and abstract meaning of Purpose becomes clearer when we apply it to real-world examples: A company sells sustainable products. The purpose is not just to increase sales and generate profit, but the company’s actions are geared towards taking responsibility for the environment. This message reaches precisely those customers who think the same way and guides their actions accordingly.

Accepting social responsibility and the vision for a better world originates in Purpose. Life has meaning when every action fulfils the purpose of making the world a little bit better. Generation Z, in particular nowadays, is placing increasingly more significance on social commitment. Realizing that, forces companies to rethink their own values as to whether they meet expectations.

Purpose as indicator for a modern corporate culture

Until now, companies often defined their reason for being by their power to increase sales and grow profits. There is nothing wrong with that. However, those who want to continue to exist as a brand in the market for the years to come cannot avoid expanding their purpose beyond pure profit maximization. Company stakeholders – employees, customers, business partners and investors – expect a company to perform on different corporate ideals than in the past: they demand value creation instead of profit maximization.

Corporate engagement in social and societal causes shows that companies are increasingly becoming aware of their changing role expectations. Large corporations even had set up separate departments for Corporate Social Responsibility (CSR). However, the actual purpose of a company cannot be limited to that.

Setting goals, which determine Purpose and which make up the company’s corporate mission, is a joint effort of management and employees. The purpose is evolving from within the company, so that everyone can identify with it. Purpose is never a result imposed from the outside or from above. Belief in a shared Purpose stimulates motivation, employees will be full of passion and deliver highly professional work to achieve it. Individuals need to sense that their contribution is essential for the success of the greater whole.

Intention behind defining Purpose is to get all corporate stakeholders on board – and rowing in the same direction. It begins with the workforce, but also includes customers, business partners, and investors. The substantive arguments of a purpose are transformed into a guiding principle (Leitidee) and laid down in a mission statement (Leitbild). Corporate Purpose – meaningful business behaviour – is building on a fundament of authenticity, simplicity, significance, and inspiration.

Conditions for a Purpose strategy

Authenticity is the highest importance factor for Purpose. Plans have to be realistic. If this is not the case, there is danger that empty phrases will remain and that employees will no longer identify with the business objectives and the corresponding mission. As a result, productivity and satisfaction of employees will decrease.

Also, it is important that defined goals are kept simple and clear. Only this way stakeholders find easy access. Abstract intentions without meaning cause confusion and comprehension problems for internal and external company stakeholders.

Unique selling propositions are indispensable for products and services, but also for business to set themselves aside from competition. However, for Purpose to serve the company’s success it is not crucial to be individual and unique in itself, but more importantly, that it is charged with meaning and that it inspires; this helps both employees and customers to identify themselves with it.

The final critical factor of a meaningful corporate purpose strategy is relevance for the future – that it opts for a forward-looking and future-oriented vision. Let me mention, that if forward-looking becomes too much of a fantasy, and simplifying is neglecting the obvious, then reputation and credibility will be stake.

Why is purpose important for businesses?

Corporate Purpose is considered an essential qualification for successful business development. Nowadays, a healthy company cannot miss out on defining its Purpose. Employees who enjoy their work and who are aware that their work has a tangible contribution to overall company objectives, are a positive factor for the company’s development. Conversely, employees, who have no idea whether their contribution is making a difference, are losing motivation and productivity is spiralling downwards. No company can afford to let that happen.

Evidence of the growing importance of Purpose comes from HR: Companies are now recruiting their junior staff from among the Millenials. This Generation Z places much more value on purposeful or meaningful employment. They question whom or what they work for and how their contribution helps to achieve the common goal. Well, every generation is searching for Purpose: Political liberalisation, social independence, world peace and more. Today’s generation is seeking for an equation to keep personal life, society and the environment in balance. My son’s generation is not that much different than my parents’ generation in their search for happiness. Only that happiness may have been defined differently in the 60ies than it is nowadays, and that companies are being held to higher standards by the media and the public in general. Movements like Fridays for Future are not only an expression of their time, but the beginning of a new thinking. Gen Z is better connected, can easily draw upon vast knowledge resources, and can access and share information almost instantly – and their activism forces business to explain themselves. Changing investment priorities from investment firms such as BlackRock are a consequence thereof and indicator of dawning change (don’t get me wrong – I don’t believe that BlackRock is changing its profit mindset, but the firm knows exactly where profits will be made in future!). Knowing that, should give companies enough spur and direction for defining their Purpose – how to stay relevant and inspirational to employees, consumers, business partners and investors. Plainly said: a company’s positive contribution to society overall (nowadays measured in ESG metrics) is becoming its prerequisite to continue doing business.

“The importance of serving stakeholders and embracing purpose is becoming increasingly central to the way that companies understand their role in society. As I have written in past letters, a company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders.”

Larry Fink, Chairman and Chief Executive Officer BlackRock

Purpose drives our decision-making processes

On a commercial level, we are establishing emotional connections with businesses and brands – from the clothes we wear to the foods we eat. If we sense a brand’s purpose matches with our own beliefs, then we are more likely to become a regular consumer of that brand’s products. What is a more recent development, is the growing demand for our working environments also to spark some of those same meaningful connections that are driven by the sense of purpose and shared values. Purpose has become a fundamental factor that drives decision-making processes. 

This has tremendous implications for human resources. Traditional businesses from industries in midst of radical changes – such as the automobile industry – are in need of transforming themselves to stay relevant not only for consumers, business partners and investors, but more importantly for employees. Many companies from industry sectors that were the elite of our economy, nowadays are lacking popularity among a bright and demanding workforce. Faster, higher and further were applied attributes of an outdated profit thinking, which has no stimulus to a young and engaged workforce anymore. A company that is lacking employees who identify with its values & vision is literally asking for crisis. The company gets stuck in process improvements of global and digital modernization, which are important to modernize business, but not crucial for succeeding in corporate transformation, where people’s mindset decides about success and failure. A feeling of Purpose translates into loyalty, commitment, and pride an employee gets when they recognise their own values in the company they work for. With the COVID pandemic we entered a new era of workplace safety concerns, new operations, and virtual work. How is a company supposed to keep employees unified, focused, and motivated? Business leaders should realize there is more reason now than ever before to ensure that a company has articulated a valuable, inspiring, and relevant purpose for its dealings.

“When work is connected to what we deeply desire, we can tap into energy and creativity we don’t even know we have. But to reach that seemingly effortless productivity, it’s not enough to simply have a vision of what we want to accomplish; our work also must have a purpose that is significant to us.“

Ken Blanchard, American Author

What applies to the area of human resources also applies to other stakeholders as well, i.e., investors. If mentioned earlier, capital is investing long term into businesses which have future-fitness and low risk potential (ESG compliance). Without a clearly defined Purpose, any business is losing attraction to investors and other corporate stakeholders. Suppliers and partners will reconsider their business relationships with a company, if corporate values and (perceived) Purpose are not compatible anymore; they’ll rather change business partners to avoid public pressure, disturbances to their operations and eventual mistrust in their own brand.

Summing-up: Purpose is not a nice-to-have, but an essential business prerequisite that is not developed in an executive workshop over a weekend, but comes deep from within the company and has effect on all and everything the company is engaged in. The value of Corporate Purpose can be quantified by its absence: lacking the ability to attract the right employees, unable to gain new investments, struggling to find business partners, etc. Every business leader has to think about how to lead his or her company into the future – and which future that will be. We at Black Dolphin are helping companies and their CEOs to better understand their options and their implications when developing a Corporate Purpose, design activities to ensure stakeholders buy into it and implement strategies for operationalising it.