Five principles in defining a powerful purpose

KRISTIANIA TOOLBOX: Defining a meaningful purpose

The traditional view of purpose is that it is an articulation of the essence of an organization, its reason for being, why it does what it does, and why that is relevant to its future. Yet, presentations on the subject tend to step over, the ‘meaning’ attached to a purpose, and ‘how’ it is arrived at.

Generally, it is seen as the task of management to filter out the superfluous and focus in on that, which best represents the uniqueness of the organization. Inevitably this editing process brings some aspects of the organization into view and pushes others into the background. Even when the process is rooted in gaining feedback from people, this is still an inside-out approach.

• Read also: How enterprises can create meaningful purpose together with their stakeholders

Engaging all stakeholders

The alternative to the inside out approach is to become closer to stakeholders and to engage them as partners in the process of defining purpose together. 

An organizational purpose that involves all stakeholders is likely to be seen as more meaningful, drive better engagement, and generate developmental impacts that are more sustainable.

• Read also: The Power of a Story

In a Fortune survey in May 2020, around half the CEOs believed that COVID would accelerate the move to stakeholder capitalism. This shift requires purpose to become a core tenet of how an organization meets the needs of its different stakeholders.

How? We recommend the following:

1. Make it simple, but not too bland

A purpose statement only acquires meaning when it is used to steer the actions of stakeholders. Make a statement too complex and it will be ignored.

Rather organizations should err on the side of simplicity and concision, but if a statement is so bland that it could apply to any organization at any time, then it is unlikely to appear relevant to employees and others.

Of course, a purpose statement does not exist in isolation, and will be supported by other statements and values, but if it fails in its primary duty to direct and inspire, it becomes pointless.

2. Co-create it

Organizations always have a purpose – from the start-up to the multinational enterprise. However, as organizations grow and develop, they move from an intuitive understanding of purpose, to one that is more nuanced and that needs to be articulated.

If a purpose is to meet the needs of stakeholders, it should not simply be a managerial creation, but rather the result of a participative and involving process.  

This may slow things down, but it also helps to create something that is authentic and relevant to both internal and external audiences.

3. Integrate it

A core benefit of a clear purpose is its role in decision-making. A purpose that is lived can guide strategy, but also the detailed everyday decisions that people make. This helps companies to be agile, because the boundaries of choice become clearer.

In COVID times, this has been particularly important in enabling companies to innovate rapidly in such areas as personal protection equipment, track and trace systems, home working processes and small business funding.

4. Let others enrich it

Alongside the managerial commitment to deliver on a purpose, organizations need to recognise that they also have to let go of the purpose and let others in their experience ecosystems build on it, develop it and enrich it.

There is sometimes a fear that letting go can lead to a purpose that heads off in an unintended direction. There is certainly a risk here, but this is ameliorated, when a properly integrated purpose and effective governance processes combine to determine the way companies work with the ecosystem.

5. Communicate outcome impacts

Often purpose statements deal in generalities about a future state – policies rather than outcomes and their impacts.

This inhibits their organizational relevance, because it is hard to see what the impact will be and how stakeholders can contribute to it. Also, given that a purpose is designed to be enduring, how does an organization know whether it is making progress or needs to adjust. A company such as Philips, which has a target is in a better position in that it can measure its progress towards realising the purpose and motivate everyone involved.

• Read also: How Business is Accelerating Toward a Fairer Future

Organizations will only realise the potential of purpose if it is used to guide managerial choices and the actions of stakeholders. This co-creative approach means a purpose has to be seen as a fluid, ever-evolving idea rather then something fixed.

References:

• Gast A., Illanes, P., Probst N., Schaninger B. and Simpson B. (2020). Purpose: Shifting from why to how. McKinsey Quarterly. April 22 2020.
• Ramaswamy V. and Gouillart F. (2010) “Building the Co-Creative Enterprise,” Harvard Business Review, October 2010. https://hbr.org/2010/10/building-the-co-creative-enterprise
• Younger, R, Mayer, C. and Eccles, R. (2020) Enacting Purpose within the Modern Corporation: A Framework for Boards of Directors. EPI.

This article is an excerpt from the article «How enterprises can create meaningful purpose together with their stakeholders» published in The European Business Review on January 21, 2021.

Text: Professor Nicholas Ind, Department of Economics and Innovation at Kristiania University College and Professor Venkat Ramaswamy, the Ross School of Business, University of Michigan, Ann Arbor, USA.