Wrong Uses of Company Purpose

Moral Purpose
Knowledge Center


Jaap de Jonge
Editor, Netherlands

Wrong Uses of Company Purpose

🔥NEW A company or corporate purpose (statement) is meant to very succinctly communicate what a business firm is all about. It presents the (typically ambitious) long-term goal of the organization. It provides the reason or reasons you exist. It is about WHY you exist.

Neither confuse it with the mission (which is about what you do and for whom), nor with the vision (the desired future state at which the organization hopes to arrive).

In an increasing number of cases the corporate purpose has an idealistic touch to it by addressing certain societal problems besides just being profitable for the shareholders.
That is a very welcome departure from the days of traditional Value Based Management, as long as we remember "the proof of the pudding is in the eating". To taste and test the pudding, we might have a look to what extent the purpose of the company is actually integrated into the well-known 7S-es of McKinsey: Shared Values, Strategy, Structure, Systems, Staff, Style and Skills.

Formulating a corporate purpose statement is a most complex challenge and it's no wonder we unfortunately witness quite a few companies that have difficulties in getting their purpose right let alone making it work. To help out, let's try to collect a list of the ways purpose is being applied in the wrong or a too limited way. To get us started, Gulati interestingly mentions 4 categories of insufficiently "deep" purposes:
  1. CONVENIENT PURPOSE: Companies talk about purpose but don't act on it, or only in superficial ways. This category includes companies that tell they serve society but are actually selling harmful products. Think of companies active in the weapons, tobacco, alcohol, and junk food industries.
  2. PURPOSE AS A DISGUISE: Companies using a lofty mission to hide malfeasance. Pain-relief company Purdue Pharma is pressed the sales of it's drug OxiContin to such an extent that it caused a opioid epidemic.
  3. PURPOSE ON THE PERIPHERY: Companies that do (some) good through their Corporate Responsibility program while using funding from their profitable core business, but keep these 2 things apart. These companies miss the strategic opportunity to truly integrate these 2 areas.
  4. PURPOSE AS AN INSTANT WIN-WIN: Companies that aim only for perfect, ideal, instantly available combinations of financial and social value. There are often not so many of these "perfect combinations" and by restricting themselves to these, companies miss out on opportunities for more substantial contributions to society.
⇨ What do you think of Gulati's list? Do you know of another type of shallow/wrong applications of company purpose statements? Let's try to make this list complete once and for all. It will be a great tool/checklist of things companies should watch out for and avoid.

Reference: Gulati R., "The Messy but Essential Pursuit of Purpose", HBR Mar-Apr 2022, pp. 44-52



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