Three Types of Corporate Purpose

Three Types of Corporate Purpose

The purpose of any company affects its success in many crucial areas. To mention a few, think of 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:

1. Purpose as a COMPETENCE: The main function that a company/organization/products/services serves.
   For example, Mercedes has: "First Move the World".
2. Purpose as a CULTURE: The intent with which a company/organization is run.
   For example, Zappo has: "To Live and Deliver WOW".
3. 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.

		Comments Sort by date Sort by rating Rating
		3 Ronald Ainsbury Coach, New Zealand
	3C's of Purpose is Useful Approach for Corporates This is a useful approach as there is much confusion as businesses come under pressure from various ... Sign up

		2 Johan Bergstroem HR Consultant, Sweden
	Some Thoughts About the Purpose of a Small Company Very interesting, Thanks. Even though this is mostly about large corporations, I would like to add s... Sign up

		1 Ronald Ainsbury Coach, New Zealand
	Purpose of Small Business @Johan Bergstroem: Spot on Johan! Too often in management literature small businesses, which are the... Sign up

		3 Rob Thompson Coach, United Kingdom
	Purpose Depends on the Angle of the Viewer If I consider my role as a coach in education, then I might define my purpose as being one that crea... Sign up

		1 Paul Pretorius Management Consultant, South Africa
	Start with WHY May I suggest we consider the contribution by Simon Sinek in his book: "Start with WHY". This works ... Sign up

		0 Maurice Hogarth Consultant, United Kingdom
	The Purpose of Being The fun and confusion of the English language. "Purpose" can interchange with "reason" (the purpose... Sign up

		1 Barry Harrison Consultant, United Kingdom
	Purpose of an Organisation Its quite simple really. 1. Why was it formed? 2. Who are the beneficaries? 3. What are their exp... Sign up

		1 Maurice Hogarth Consultant, United Kingdom
	Purpose Means Different Things to Different People @Barry Harrison: I agree that for many businesses it can be quite simple; as I've been told: 1. W... Sign up

		3 Jaap de Jonge Editor, Netherlands
	Formulating a Corporate Purpose is Neither Simple Nor Should it Be I agree that if one formulates the corporate purpose solely as: "to make money for the owners/shareh... Sign up

		0 Barry Harrison Consultant, United Kingdom
	Primary Purpose of a Company @Jaap de Jonge: I agree making money may not be the raison d'être, certainly in a 'not for profit' o... Sign up

		1 Maurice Hogarth Consultant, United Kingdom
	The Purpose of a Business is Service its Customers @Barry Harrison: If the purpose of a business (v a Not-for-profit organisation) is to "make money" t... Sign up