Purpose expresses what the organization does for others. Why has it become hot stuff?
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The word purpose has suddenly become interesting in Norway. Recently, a promotional video for a conference using the word generated ridicule, a Facebook post by a PR agency leader stated that purpose was not dead after all (after his organization was made fun of for using the word), and Dagens Næringsliv recently ran a 'kommentar' by two management consultants defending the word.
Coincidentally, in October 2016 a researcher from UK Plymouth University asked to meet in Oslo to discuss common interest areas. Her "emerging research field is understanding the increasingly prominent concept of 'purpose' in mainstream organisations."
Vision, mission, goals and objectives are common words associated with organizations and leadership. Purpose, however seems a bit out of the mainstream management literature and has a bit of a buzzword sound to it.
What is purpose, and why does it deserve study?
Purpose is hot stuff. According to a 2016 Harvard Business Review (HBR) article titled The Type of Purpose that Makes Companies More Profitable by Serafeim and Gartenberg, purpose is on the agenda of the World Economic Forum in Davos, it is discussed by leaders like Richard Branson, and public dialog on purpose has increased five-fold between 1995 and 2016.
The HBR article defines purpose broadly as the meaning of a firm's work beyond quantitative measures of financial performance. EY Beacon Institute defines purpose as "an aspirational reason for being that is grounded in humanity and inspires a call to action." Purpose serves as a powerful platform from which leadership can speak to issues that transcend the products, services, or category of their company.
As opposed to vision or mission that are more or less internal guides for the organization, purpose takes an outward focus and expresses what the organization does for others, i.e. its impact on the lives of its stakeholders be they customers, students, clients, etc.
EY Beacon Institute provides the example of Pearson publishers who says its purpose is "the reason we are in business; a shared and passionate reason we exist." Disney defines mission as what they do and purpose as why they do it.
The differences between purpose and mission are shown in the box.
|It is a statement of doing something||It is a statement of how to accomplish a vision or a purpose|
|Purpose is deciding to go ahead with a task||The mission is following that task to a completion|
|Purpose guides the task||Mission drives and encourages one to complete the task|
|Purpose explains the "why" in doing something||Mission states the "what" and "whom" for accomplishing a task|
|In business, it means the fundamental reason for which the organization exists||
In business, it means the organization's focus, which may change with time
Having Purpose is Profitable
There is plenty of evidence that the most profitable companies are not those that are the most profit-oriented. Early research by Collins and Porras in their 1994 book Built to Last found that firms guided by a purpose beyond making money returned six times more to shareholders than those who were not (Caulkin 2016).
Serafeim and Gartenburg found two types of firms with purpose: high purpose-camaraderie organizations and high purpose-clarity organizations. High purpose-camaraderie organizations score high on purpose and also on dimensions of workplace camaraderie; this is a fun place to work and we are all in this together.
High purpose-clarity organizations on the other hand score high on purpose but also on dimensions of management clarity. Management makes its expectations clear and they have a clear view of where the organization is going and how to get there. These organizations have superior financial performance.
Purpose Good for Reputation
A well-stated strategic purpose also fosters a superior reputation, which attracts employees that are more talented. Employees who believe in an organization's purpose are proud to work there, they are more motivated and they are more likely to stay.
Purpose is increasingly important for employer branding, i.e. hiring and retaining employees. According to Davis (2016), young people want to spend their time in organizations that have greater vision and a greater purpose.
- 60% of millennials believe that a sense of purpose is part of the reason they chose to work at their current employer
- 90% want to use their skills to create positive social impact
- 87% millennials believe that the success of a business should be measured in terms of more than just financial performance
- Six in ten millennials indicated that an opportunity to "make a difference in society, my city, or my country" is the top factor they look for in a job.
As an example, Apple's clarity about its purpose and ability to communicate it to customers have marked it out, according to Financial Times.
"Apple has reflected all the qualities of what makes a great brand, irrespective of sector: clarity for what it stands for, coherence about how that shows up through everything it does, from distinctive products and services, to the stores and online experience, to its people who are great to deal with," says Rita Clifton, chairman of consultancy BrandCap.
- Davis, E. (2016). Is "Purpose" just another word for our workplace? https://www.weforum.org/agenda/2016/06/is-purpose-just-another-buzzword-for-our-workplace
- EY Beacon Institute, 2016. The state of the debate on purpose in business. Available online at http://www.ey.com/Publication/vwLUAssets/ey-the-state-of-the-debate-on-purpose-in-business/$FILE/ey-the-state-of-the-debate-on-purpose-in-business.pdf
- Mattu, R. 2015, Apple's clarity of purpose and communication skills keep it top. Financial Times [London (UK)] 27 May: 3.
- Serafeim, G. and C. Gartenberg 2016. The Type of Purpose that Makes Companies More Profitable. Harvard Business Review. https://hbr.org/2016/10/the-type-of-purpose-that-makes-companies-more-profitable
This article was first published in Communication for Leaders No. 2 - 2016.
Read E-magazine. Communication for Leaders is a Science Communication Magazine published by Centre for Corporate Communication and Department of Communication and Culture at BI Norwegian Business School.
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