While it might seem an obvious truism to say that a business must have a purpose, you are probably familiar with how easy it is to lose sight of that purpose amongst the day-to-day operations of a large organisation.
Indeed, a Harvard Business Review report found that, although 90% of executives surveyed said their company understand the importance of such purpose, only 46% said it actually informs their strategic and operational decision-making.
With environmental, social and governance (ESG) metrics increasingly relevant to both investors and consumer decision-making, it’s important that the purpose of a business be articulated in more holistic terms than those of profit and loss. Distilling the purpose of a business into a short, written statement and then ensuring alignment with that purpose can lead to a range of benefits, both for the business itself and for society at large.
What is purpose-driven business?
While the purpose of a business has been traditionally understood as the generation of profit, a new vision of purposeful business is emerging. Sustainable Business Transformation company AGContext writes that, ‘Purpose-driven business is a new way of thinking about how our organisations work. It places a focus on creating a positive impact, above and beyond creating profit for shareholders’.
Of course, for a business to succeed, it must remain profitable. Indeed, if you want to maximise your potential impact, you can’t simply be profitable, but you must also be on track to grow. But placing the bottom line at the very heart of your organisation’s existence is being increasingly revealed as out of line with community expectations and is in fact detrimental to company performance.
Businesses that are purpose-driven are guided by ‘an aspirational reason for being which inspires and provides a call to action for an organisation and its partners and stakeholders and provides benefit to local and global society’, according to the Harvard Business Review report.
Advantages of being purpose-driven
It goes without saying that being purpose-driven will deliver benefits to that purpose. What might be more surprising is that a purposeful business, in general, also experiences a variety of other improvements in its performance.
Financial performance
Multiple studies have demonstrated that businesses with a clearly articulated and well-aligned purpose outperform those without. Using 10 years of empirical research in over 50,000 brands, researchers Millward Brown and Jim Stengel ‘established a cause/effect relationship between a brand’s ability to serve a higher purpose and its financial performance’, to the degree that, ‘investment in these companies over the past decade would be 400% more profitable than an investment in the S&P 500’. The Harvard Business School similarly found that ‘companies with high purpose outperform the market by five to seven percent per year, grow faster and have higher profitability’.
The reasons for this are varied, but a significant one is that consumers increasingly favour businesses with a clearly articulated social concern. According to The Plato Project, ‘89% of consumers are more likely to buy from companies that support solutions to particular social issues. For more than half, purpose is the most important factor influencing brand choice when quality and price are equal’.
Transformation advantage
Having a clear business purpose can also give your organisation an edge during transformation efforts. Such periods are often fraught with risk, with employees struggling to rally around new initiatives or messaging becoming confused with shakeups in products and services.
But, again, according to the Harvard Business Review report, ‘53% of executives who said their company has a strong sense of purpose said their organisation is successful with innovation and transformation efforts, compared with 31% of those who are trying to articulate a sense of purpose and 19% of the companies who have not thought about it at all.’
Employee satisfaction
A compelling business purpose has an inspiring and uplifting effect on company employees. Executives agree, with 89% of those surveyed by Harvard saying a strong sense of collective purpose drives employee satisfaction. Bearing this out is a survey conducted by Virgin Pulse, which finds that, for 77% of millennial employees, organisational culture is just as (or even more) important as base salary and benefits. With so much to consider when it comes to employee well-being, having a clear, strong purpose is a good place to start.
High employee satisfaction also has flow-on effects through to quality of work and, ultimately, to profitability. As another working paper from Harvard Business School makes clear, ‘firms with employees that maintain strong beliefs in the meaning of their work experience better performance’.
Finding your business purpose
The benefits of clearly articulating the purpose of your business are plain to see. The next step, then, is to set about actually defining that purpose. Here is our guide explaining how to write a business purpose.
Discover your business ideals
Before anything is written down, some brainstorming is required. Stengel and Brown recommend attempting to conceptualise your business in terms of the value that is offered. They identify five fundamental human values relevant to organisational purpose that can be summarised as:
- Happiness: A business can work to provide customers with positive feelings like happiness, joy or amazement.
- Connection: We all have the desire to be connected with each other. Business can facilitate human community and togetherness.
- Novelty: Opening up the world in surprising or interesting new ways.
- Achievement: The urge to improve, develop or rise in status is universal. Businesses can provide people opportunities to strive.
- Social Improvement: In addition to the experience of individuals, businesses can look to resolve social problems or improve general conditions.
Where specifically does your organisation fit into the above mix? What does it offer people? This is the place to start when brainstorming a business purpose.
Write up the business purpose
Having identified the value your organisation offers, you should now attempt to articulate this vision in a short, simple statement. In doing so, you can follow the recommendations of Business Queensland, which offers the following steps:
- Work with relevant stakeholders to craft a vision
- Boldly articulate the importance of the business to the wider organisation and to customers
- Define what it is that the business does (e.g. what are the products and services?).
- Take the above and distil it into a short statement composed of just one or two sentences. The statement should be understandable by someone totally unfamiliar with the business.
- Take steps to put this vision into practice throughout the organisation.
- Set a date to repeat the process annually, to ensure the statement remains relevant.
It's clear that undertaking a process of clarifying, articulating and reinforcing the purpose of your business has significant potential benefits. Businesses with a clear purpose perform better financially, have higher employee satisfaction and enjoy an advantage when embarking on transformation processes. Of course, understanding how to write a business purpose is only the first step. There is much to be done to ensure that your business is, in fact, aligned with what you have written. Yet, by answering the question ‘what is the purpose of our business?’, you will be well on your way to securing the advantages that come from becoming a more purposeful business.
