Creating a Meaningful Corporate Purpose - HBR

Today, most company leaders believe that their firms’ larger purpose is to make a positive difference in the world — not just to maximize shareholder value. Most executives also understand that purpose helps companies navigate a volatile and unpredictable environment and delivers higher and more sustainable performance. Defining a corporate why and making sure it guides decisions and operations has therefore become a cornerstone of doing business.

Five considerations are critical for defining a powerful corporate purpose:

#1: Look for your company purpose at the intersection of four circles.

The purpose of a corporation is the ultimate goal of the business, the essential reason why it exists, and how it contributes to the common good. For example, Google’s original purpose was to “organize the world’s information.” Netflix has defined its purpose as “entertaining the world.” Explicit in this definition is the view that business can and should be a force for the common good, rather than merely a vehicle whose only objective is to maximize shareholder returns, as Milton Friedman argued.

You might have noticed that there also isn’t a lot of information about how to find corporate purpose, either (unlike, for example, how to define a business strategy). Of course, there’s more than one way to proceed. But here is one looking for your company’s purpose at the intersection of four circles:

What the world needs: What specific, important unmet needs exist in the world? How critical is it to address these needs? What difference will it make?
What people at the company are passionate about: What drives people at the company? What difference are they keen to make in the world? (These apply to senior leadership as well as the overall employee population.)
What the company is uniquely good at: What are the unique assets that allow it to address certain needs in a way others can’t? How do they need to evolve/be augmented to address the chosen needs in a way others aren’t?
How the company can create economic value: What business opportunities stem from these considerations? How attractive are the associated potential profit pools? Can the company capture enough of this value?

Combining the analytical and the emotional is powerful.

# 2: Anchor the company purpose in underlying human needs.

Focusing on underlying human needs, rather than on the products and services you offer to address them, is critical when defining a corporate purpose. First, it is far more inspiring. In Simon Sinek’s words, this is what separates the why from the what and the how. Second, it broadens the company’s horizons, opening up its market beyond what it already does.

# 3: Connect with what you and your team care deeply about.

Business is fundamentally about human relationships — and if, like me, you see a company as a human organization made of individuals working together in pursuit of a common purpose — it’s imperative for leaders at all levels not only to be clear about their own why, but also to understand what drives people around them. Making things personal is also critical for defining the company’s purpose because it illuminates what people in the company, from front-liners to top leadership, are passionate about. When people’s passions align with the company purpose, then everyone is fired up to give their best to pursue that collective purpose. Beyond individual specifics, most people typically want to do something good for someone else. It then becomes easier to see how this could extend to colleagues, customers, and everyone in the company’s orbit.

#4: Embrace all stakeholders in a declaration of interdependence.

The question of what the world needs touches on a company’s employees, customers, suppliers, communities, and shareholders. Business cannot succeed in isolation. How can companies ensure that stakeholders can all benefit from the company’s purpose? It starts with identifying clearly who they are, what they need, and how the company could help address those needs. This reflects a view of business that goes beyond the company’s four walls to mobilize all stakeholders in pursuit of the company’s noble purpose, as illustrated below. In this approach, business is an ecosystem based on a mutually beneficial interdependence of all stakeholders. This architecture has employees at the heart of business, creating and nurturing caring and authentic relationships both within the company and also with all of the company’s stakeholders in a way that not only contributes to the company’s purpose but also creates great outcomes for each stakeholder.

# 5: Pick the right level of ambition

The company purpose shouldn’t be too ambitious or not ambitious enough, but just right. A purpose that’s too disconnected from the core business of the company or so broad or vague that it could apply to any company is likely to remain an empty statement. At the other end of the spectrum, a purpose that describes what the company already does, rather than addressing an unsolved problem, is unlikely to do much good or inspire anyone.

Ponder the following when calibrating the level of ambition in your company’s purpose:

Articulate a timeless aspiration. Think about how your company can continue to meet customers’ needs even as technologies and markets evolve. Disney, for example, strives “to entertain, inform, and inspire people around the globe through the power of unparalleled storytelling.” This is far more inspiring and ambitious than, say, making animated movies and amusement parks. Similarly, Apple’s purpose is to “empower creative exploration and self-expression.” These are bold and inspiring ambitions. They’re about making a difference in people’s lives, not about market share, profits, or being number one. They’re also timeless — people will always need to be entertained, inspired, and to express themselves. There’s no finish line for companies with such aspirational purposes.

Consider going beyond customers to impact society. In what has become a multi-stakeholder world where companies are encouraged to have a “net positive” impact, companies are beginning to articulate purpose statements that seek to benefit more people than just their customers by addressing broader needs. For example, Tesla’s is, “We exist to accelerate the planet’s transition to sustainable transport.” And Patagonia “is in the business to save our home planet.”

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How do you know you’ve landed on the right company purpose? Once you’ve come up with a possible formulation, you want to make sure that all that work, reflection, and searching amounts to more than an empty statement. Evaluating your company purpose against five criteria is a good way to kick the tires.

Ask if your purpose is:

Meaningful. In other words, does it make a real difference in people’s lives? Does it have the potential to make a meaningful difference for all stakeholders?
Authentic. Does it match what people at the company care deeply about? Does it resonate with the company’s values?
Credible. Does it leverage the company’s unique abilities or assets? Can the company deliver in a way that makes a significant difference? Does it make business sense? Can it be translated into concrete actions?
Powerful. Are the needs the company addresses important and sizable? How much good comes from addressing these needs?
Compelling. Is it clear, specific, and aspirational enough that it can inspire and mobilize people both within and outside the company?

Articulating a beautifully worded purpose is only the first step, however. Next is making sure that it actually becomes real, beyond PowerPoint presentations and company websites. What does it take? First, it requires making the company purpose the cornerstone of the company’s strategy. It also requires enabling every employee to make it their own, translating it into their individual work. And the third essential element to bringing the purpose to life is unleashing what I call human magic by creating an environment in which everyone is able and willing to give their very best in support of the chosen purpose. This is the hard work that builds genuinely purposeful companies.

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