Three Types of Corporate Purpose
The purpose of a company or non profit organization affects its success in several crucial areas, like demand generation (how customers see it, brand personality
), HR (employee engagement
), investor attractiveness (ESG Factors
, corporate sustainability
), strategy (stakeholder management, strategic growth opportunities for long-term), corporate valuation and risk reduction.
What is a Corporate Purpose for? Purposes
A well-formulated "corporate purpose" or "organizational purpose" is very powerful as it can appeal to, motivate, propitiate, and attract clients, employees, investors, governments and even society at large. Moreover, in a VUCA
world with constant change, the corporate purpose can be the beacon and/or glue holding everything and everyone in the organisation together.
However, Knowles et al. (rightly) explain how the term "purpose" is confusing. It's because purpose can have several meanings
. It can be understood in (at least) 3 distinct ways:
- Purpose as a COMPETENCE: The main function that a company/organization/products/services serves.
For example, Mercedes has: "First Move the World".
- Purpose as a CULTURE: The intent with which a company/organization is run.
For example, Zappo has: "To Live and Deliver WOW".
- Purpose as a CAUSE: The social or moral good a company/organization aspires to.
For example, Tesla has: "To accelerate the world's transition to sustainable energy".
It is important to note that an organizational purpose can be defined in any of these 3 ways
. In particular, according to Knowles, even if every company should work to become a better corporate citizen, "not all companies can save the world". All others should use one of the other 2 options to provide the basis for a meaningful and motivating "why" they exist when creating a corporate purpose statement
. In a pragmatic, but authentic way.
⇨ Do you agree with these 3 meanings/types of corporate purpose?
Reference: Knowles J., Hunsaker B.T., Grove H., James A., "What Is the Purpose of your Purpose? Your why may not be what you think it is", HBR Mar-Apr 2022, pp. 36-43.