The Purpose of Purpose: Chickens and Eggs
Not so much the right answers about purpose, but hopefully some good questions.
I almost hesitate to broach this topic of “purpose” – well, these topics – because of the sheer magnitude of wank that can surround them. There’s also the gravity… the sirens’ song, tempting one to propose a unified theory of purpose, mission, values, etc. What these terms really mean.
When I’m running a training session and talking about objectives, I like to bring up SMART goals and challenge everyone in the room. What does the S stand for? “Specific!” Great. What does the M stand for? “Measurable!” Wonderful. What does the A stand for?
Silence. And then… Achievable? Actionable? Ambitious? Aspirational?
Okay, how about the R?
R… Realistic! Results-based! Reasoned! Resourced!
(It’s a great relief for everyone when they all know what the T stands for.)
Now, we could look back to George Doran’s 1981 article introducing SMART Goals and say, “This is what is correct – the A stands for Assignable and the R stands for Realistic.”
(Assignable?! A few readers having a Berenstain Bears moment, maybe.)
Similarly, we could look back to the HBR article which introduced the idea of having a vision, mission, values, etc., as integral to a business strategy, take those definitions and call them correct.
But in a wild departure from my usual desire to be correct, informative, comprehensive, etc., I actually just want to prod the general territory of “purpose” from a few angles. Just food for thought. What I’m really interested in is not what is correct, but what is useful.
One thing I am going to do is distinguish between “company purpose” and “brand purpose”. But first, just looking at “company purpose”.
Firstly, let’s think really clearly about what a “company purpose” might mean. The purpose of something, the intent, the reason for doing it or having it or using it.
In my Strategy Without Recipes course, one of the first things we talk about is objective hierarchy – the idea that objectives ladder up and down to higher-order and lower-order objectives. Higher-order objectives justify lower-order objectives. Lower-order objectives implement higher-order objectives.
The way to move up that hierarchy is to ask “why?” Note that here “why?” means “for what reason?” or “in order to achieve what?” (I clarify because “why” can also mean “because of what preceding event?”)
Let’s imagine a business that makes and sells safety gear for construction sites. Someone’s job at that business is to do SEO.
Why? To increase the likelihood of the company’s websites to come up in relevant searches by potential customers.
Why? To increase the number of website visits by potential customers.
Why? To inform more potential customers about our offering.
Why? To increase the number of prospects interested in our offering.
Why? To increase the number of sales.
Let’s pause there.
Why do we want to make sales? Well, on one hand, increasing sales will increase revenue, which will increase profit, which will increase return on equity – it will maximise shareholder value.
On the other hand, increasing sales means more of our safety gear is out there in the world, protecting construction workers from life-ruining (or -ending) injuries.
Which is more important? Which takes priority? Which is at the top of that objective hierarchy?
Well, obviously the two are closely related. We make money by protecting construction workers, and with the money we make, we reinvest some into R&D, manufacturing, distribution, marketing, etc. – all of which enables us to protect more construction workers. Which enables us to make more money.
Is protecting construction workers how we keep making money? Or is being profitable how we keep protecting more construction workers? While there is no conflict between the two, there’s no need to worry about which comes first.
So let’s introduce some conflict. What if there were a way to make the company more profitable in a way that means our products are a little less reliable? Nothing illegal, still meeting official standards, etc. It’s just this one ingredient we could swap out for something much cheaper, without lowering our prices.
Think about that for a bit.
And I’m going to predict that…
At least one thought you had…
...was about the PR blowback if some worker gets killed and it’s linked back to our cost saving.
And maybe you thought, “Yeah, nah, we should keep producing our equipment to the highest standards possible, no cost-cutting that risks injury.”
But is that because our company’s purpose is to protect workers? Or is it because our company’s purpose is to make money and risking the reputational damage of an avoidable injury isn’t worth the savings?
Just because there are times you might sacrifice short-term profits to ensure the company’s purpose is carried out, doesn’t necessarily mean you’re putting your purpose above profits. It could just be that you’re not short-sighted about maximising shareholder value.
To complicate matters, if you’re an executive of a company owned by someone else – especially a publicly listed company owned by potentially tens of thousands of shareholders – you have a fiduciary duty to the owners to maximise their returns. Again, that doesn’t mean acting like a cartoon villain, but at least some of the time, the reason you don’t act like a cartoon villain is because acting like a cartoon villain is bad for business.
Almost all of the time, this is a non-issue. The company’s purpose is descriptive more than it is prescriptive. If a company doesn’t have a written purpose worked out, and the exec team sits down to work one out, they start with what the company is already doing and attempt to elevate that to a higher-order purpose that makes sense of what the company is doing today – with enough scope to include what the company might do tomorrow.
In other words, attempts to articulate a company purpose are typically attempts to express what it is, not what it should be. So there ends up being a lot of conceptual overlap between “what we’re for” and “how we make money”. And because of the large costs involved in really significantly changing “how we make money”, the question of “should we make money in some other way?” only really comes up in extreme circumstances.
(For example, in our hypothetical above, what happens if construction work starts being done 90% by robots? Do we find some other kind of worker to protect? Do we narrow down to those last 10% of human construction workers? Do we pivot to developing protective gear for robots? The answer will almost certainly involve weighing up the prospects for profitably serving those different markets.)
So the issue doesn’t come up all that much – it’s kind of defined out of occurring, most of the time. What I want to talk a bit about over the next few posts is the instrumentality of a “company purpose” (how is it useful to have one?), the possibly prescriptive nature of “brand purpose”, and the psychological reasons for people believing what Simon Sinek tells them.
So, without giving any of my own answers, a few questions to think about:
What’s the difference between a company’s purpose and simply a poetic description of what the company does?
In what ways could a company’s profitability genuinely conflict with its stated purpose?
Is it possible to get “company purpose” wrong (incorrect, inaccurate)? What would getting it wrong look like? What makes it wrong?
And finally: what, then, is an articulated “company purpose” for? In what ways is it useful? (And to what end?!)