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Bringing purpose to life

What makes a good purpose statement?

While purpose statements are just an early stage in this transformation for any business, setting one is a key focus for many who want to drive a more purpose-led business.

The purpose should describe why the business exists and how it benefits society, rather than be just a description of what the business does. It should provide a ‘north star’ for the business: enabling it to set a long-term aspiration and provide a sense of direction that is reflected in the company’s strategy and core business.

By definition, each organisation will have a unique purpose, but there are characteristics that we see across the best examples of purpose in practice. Good purpose statements set this out in a way that is authentic, inspiring and above all, practical.

What do we mean by authentic, inspiring, and practical?

Authentic: 

  • Connect what the organisation believes, what it says, and what it actually does
    This is a judgement between what is said and what the organisation is actually known for. It is also likely to be affected by the perception of how deeply embedded the purpose is rather than a short-term or reputation-improving initiative.
  • Enable scrutiny of the alignment between the purpose and actual performance
    Indicators might include: are the stated vision, goals and strategy consistent with the purpose? Where is the purpose mentioned, how prominent or easy to find is it and how central is it to the business? For example – is it easy to find on the company’s website and accounts? Is it mentioned only in the context of CSR and recruitment? Is it mentioned in the CEO’s speeches, does it inform the agendas of the Board and discussions with investors? Is it prominent in induction and leadership development programmes?

Inspiring: 

  • Inspire people both within and outside the business
    This might be visible in engaged and innovative employees, loyal customers and suppliers contributing to innovation, receptive communities and regulators, future employees and customers wanting to be associated with the organisation, and a more stable and prosperous society
  • Reinforce the connection between the business and society
    The beneficial outcomes sought are clear and it is possible to imagine the better world that results. Also, they are not just designed to make the people in the organisation feel better about themselves and be in a successful business from which they will benefit – society and others are not just a means to that end. 

Practical:

  • Provide the strategic direction for the company
    If the purpose is too broad, as to accommodate any decision, then it is difficult for it to be seen to be embedded in business decision making. 
  • Enable people to make practical choices day to day, and to use the purpose as a constant reference point
    The intended outcome should be clear enough to enable people in the business to make choices, for example about what products and services are produced, what the company might stop or start doing, what assets are acquired, retained or disposed of, and what behaviours and outcomes are encouraged and rewarded.

In order to give a sense of what success might look like it is helpful to sketch a picture of what the outcomes of the purpose might look like and what is necessary to achieve it.

Economics of Mutuality distinguish three archetypes of corporate purpose statements (using a hypothetical example of a pet food manufacturing company to illustrate the differences):

  • The descriptive archetype describes the company’s existing activities, products, and services with a positive spin, e.g. “Manufacturing and distributing high quality sustainable pet food products”
  • The values archetype sets out what the company stands for: e.g. “Improving the life of pets” or “We love pets”
  • The meaningful challenge archetype defines a target group and what they specifically want to change for them: e.g. “Increase the healthy lifespan of cats and dogs”, or “Reduce the number of homeless cats and dogs”

Each archetype has its uses, strengths and weaknesses. A meaningful challenge archetype can provide a more actionable starting point for formulating a purpose-led strategy. Used well, it puts purpose at the heart of the business model, acting as a spur for innovation.

Reference: Much Purpose-Talk But Little Purpose-Action

Fundamentally a business’s purpose will be defined by real actions and behaviours. Clichéd though this sounds it remains a journey, so putting purpose into practice – into every decision made – may not be perfect every time. The important step for every business is to translate its statement of business purpose into what a company does and why it does it – and the best purpose statements will act as a north star to help them achieve this.

If a company’s purpose is too broad, then almost any strategy can be consistent with it. A broad purpose also avoids the reality of trade-offs, making purpose-led decision-making in complex dilemmas near impossible. To lead strategy a company’s purpose must be practical and authentic, connected to the core business and clear enough to guide strategy – for example about what products and services are produced, what the company might stop or start doing, or what assets are acquired, retained, or disposed of.

In any good purpose statement, there is a balance to be struck between avoiding being so general that it could mean anything (we are here to create a better world) and so specific that it is just a statement of what the business currently does, and cannot act as a guide or north star. What many companies need is to use their purpose to set tangible goals which give concrete expression to what the pursuit of the purpose means over a given timescale. Unilever’s 2010-20 Sustainable Living Plan, for instance, set a number of 10-year goals in service of its purpose. What is essential is that the business is able to use the purpose to set tangible goals so everyone can see what is different about what the business is doing and why.

Whilst defining the company’s purpose, and developing its purpose statement, we recommend taking an iterative approach, central to which is testing how a suggested purpose statement may guide difficult strategic decisions in complex scenarios. This also helps road test the leadership and board commitment to being purpose-led and appetite for tough decisions.

A purpose that tries to be all things to all people offers little practical guidance because it sweeps the harsh reality of trade-offs under the carpet.

Alex Edmans, Grow the Pie

Exercise:

Consider your purpose statement or draft purpose statement:

  • Does it connect what the organisation believes, what it says and what it actually does? (i.e. is it authentic?)
  • Is it inspiring in that it envisages some clear positive benefit to society?
  • Does it provide a strategic direction for the company and people to make practical choices?

Looking at the Purpose alongside Blueprint’s Five Principles

  • What would you stop, start, continue to do in support of each of the Principles?
  • How relevant is the purpose statement to each of the relationships in the Principles?

For a discussion of how purpose relates to strategy see Bringing Purpose to life: Purpose-led Strategy