Discussions about purpose typically start with the question How would the world be worse off if we did not exist? This spurs people to identify an inspiring social impact that the business should strive to achieve. However, only a limited number of companies operate in industries where the nature of the business lends itself to a compelling answer to that question. Examples include Beyond Meat, whose purpose is to find “a better way to feed the planet,” and Disney, which aims to “create happiness through magical experiences.” Health, science, and clean energy companies fall into this category too. However, focusing on this question too much may lead the majority of companies to misrepresent the actual nature of their business—as WeWork did in its 2019 investor prospectus when it described subletting office space as striving “to elevate the world’s consciousness,” and Knorr (a brand known for stock cubes and gravy) did when it suggested that consumers could “change the world by changing what’s on [their] plate.”

Being able to define a social-cause-based North Star may be of benefit primarily to consumer-facing enterprises. But few others—particularly if they’re in B2B sectors such as basic materials, energy generation, capital goods, commercial transportation, and business services—have any particular higher purpose to which they can authentically lay claim.

A Strong Culture Is Often All You Need

The current fixation on purpose puts pressure on executives to be seen as running a “good” business. Sometimes, however, it’s enough simply to run a business well. Culture-based purpose statements are a great option for companies that provide necessary products and services but don’t present credibly as agents of positive social change. This is especially true when their success depends on high levels of employee engagement and collaboration with both suppliers and distributors. Those stakeholders are primarily interested in what the company is really like to work for or with rather than in its aspirations to have a broader impact on society.

Defining your purpose as embedded in culture—as operating in a thoughtful, disciplined, ethical manner—can be both pragmatic and genuine. Consider Mars, a family-owned consumer packaged goods company, which in 2019 unveiled its first purpose statement in more than 100 years of operation: “The world we want tomorrow starts with how we do business today.” While this expresses aspiration for a better future, its focus is on the “how” of the company’s culture—specifically its Five Principles (such as “We base decisions on Mutuality of benefit to our stakeholders” and “We harness the power of Efficiency to use our resources to maximum effect”) that since they were first published, in 1983, have actively guided the attitudes and behaviors of all Mars associates.

Contrast that with the initial approach to purpose of Mars’s rival Nestlé. In 2014 the company began positioning itself as “the world’s leading nutrition, health and wellness company”—a descriptor it was forced to retract when commentators observed that nearly three-quarters of its earnings were from snacks and confectionary. The company subsequently retreated to the more believable “Good food, good life.”

Choosing culture as the focus of your purpose statement can be a powerful way to attract talent. An engaged workforce is a key business driver. Conversely, Gallup has estimated that the cost of disengagement—in the form of turnover, low productivity, and low morale—can come to about 18% of salary costs.

A focus on culture may take one of three forms, each of which can establish a powerful sense of community and belonging among employees and business partners. Cultural consistency stresses adherence to a code for the business—such as the J&J credo and Mars’s Five Principles. Cultural fit emphasizes an aspect of the culture that will attract employees and partners who are similarly inclined. Examples include Bridgewater Associates’ culture of “radical transparency” and Zappos’s belief that great customer service depends on “[getting] the culture right.” Cultural diversity focuses on promoting inclusiveness and celebrating employees and partners for their differences as much as for their similarities. This approach is particularly effective at companies such as airlines and financial services, whose business models require that their employee base closely match the diversity of their customer base.

Don’t Delegate Purpose to the Marketing Team Alone

Because CEOs assume that the marketing team is most closely in touch with consumer sentiment, some combination of marketing and corporate communications is often tasked with articulating the corporate purpose. But given that marketing’s objective is to generate demand for the company’s products and services, the purpose initiative may devolve into an exercise in appealing to consumer preferences. Because research shows that most consumers, and especially Millennials, prefer to buy from companies with a cause-driven purpose, the marketing and corporate communications teams will almost inevitably arrive at an elevated statement that puts the company in a highly flattering light.

That’s not to say that purpose can’t inspire a successful marketing campaign, but business leaders need a clear understanding of how their corporate purpose extends beyond the objectives of their brands and their advertising. A purpose is about the essence of the company. Its goal is to achieve buy-in from a broad range of stakeholders—whereas the function of brands is to persuade consumers to buy the company’s products and services.

What Companies Typically Get Wrong About Purpose

The goal of any company is to attract and retain talent, satisfy customers, and conduct business in a manner that secures its license to operate in the eyes of the community and regulators—all while earning an appealing return on capital. Defining your corporate purpose is an opportunity to demonstrate how your company can satisfy those requirements simultaneously. But, as is always the case with strategy, corporate purpose requires clarity about the trade-offs being made and should result in something that is internally coherent.

Many of the challenges that companies encounter with purpose stem from a perceived lack of alignment between how they behave and what they say they stand for. It is tempting to claim being “purpose driven” because of the appeal to employees and consumers—but that works only if you demonstrate authenticity and coherence.

The competence-cause gap.

 This lack of alignment occurs when the connection between the nature of your business and your espoused cause is not obvious—a danger for even highly successful companies. For instance, a difficulty currently facing the platforms Facebook and Google is that their advertising-driven business models are perceived to be increasingly at odds with their stated missions: “to build community and bring the world closer together” and “to organize the world’s information and make it universally accessible and useful,” respectively.

The competence-culture gap.

This arises when a company is successful at creating value for customers but is less well regarded as an employer, a business partner, or a corporate citizen. Amazon and Walmart have historically enjoyed high levels of customer approval (reflecting their respective commitments to “be Earth’s most customer-centric company” and “saving people money so they can live better”) while regularly being criticized for their record as employers, their perceived reluctance to recognize workers’ rights, and their lack of transparency in the supply chain.

The culture-cause gap.

If your company has a clearly stated, cause-related purpose yet your employee engagement scores are low, you have a culture-cause disconnect. This suggests a need for greater focus on culture and behaviors or a reevaluation of your purpose’s authenticity as currently defined. That is the challenge the new management at Uber faced in 2018 and the new executive team at Volkswagen is currently facing: how to reinvent a culture that turned a blind eye to toxic behavior (in Uber’s case) and illegal behavior (in VW’s case).

Source: Harvard Business Review