What companies still get wrong about being “purpose-driven”

What do companies mean when they say they're going to be purposeful? Do they even know? Rajeev Peshawaria says CHROs still get purpose wrong. He outlines why, and what they need to do to correct it

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Jun 19, 2024

In recent years, the term “purpose-driven” has become a buzzword across the corporate landscape, signaling a shift from purely profit-centric models to those prioritizing societal and environmental values.

However, the adoption of this concept is often marred by misinterpretations and superficial implementations.

Strictly speaking, being genuinely purpose-driven extends beyond just corporate self-interest to encompass a broader commitment to societal well-being and environmental stewardship.

But something companies don’t understand this. Worse than this, is the fact many consulting firms and business schools worldwide have quickly established purpose practices and executive education curricula headed by self-styled purpose pundits who charge high fees for their advice.

But while books and articles on purpose are proliferating, its misapplication is still rife.

As such, debunking common myths surrounding this trend is crucial, highlighting the pivotal role of steward leadership in enabling authentic purpose-driven transformations.

In the spirit of busting some of these misconceptions, there are a number of key things I’ve identified that companies still seem to get wrong when it comes to being ‘purpose driven’:

Purpose is not new

The first misconception begins with the definition of purpose itself.

Britannica defines purpose as “the reason why something is done or used; the aim or intention of something.”

If a company traditionally aimed to maximize profit, that was indeed its purpose.

A shift towards being purpose-driven in the 21st century should mean integrating societal and environmental considerations into this purpose, not merely pursuing vague notions of doing good.

Steward leadership, a concept rooted in integrating societal, environmental, and stakeholder needs, is pivotal for organizations aiming to be authentically purpose-driven.

Unlike traditional leadership models that focus primarily on shareholder returns, steward leadership champions a broader mission that optimizes profit with purpose to achieve long-term sustainability.

Purpose is not necessarily positive

Purpose in organizations is often praised as motivational and inspirational, which supposedly fosters collaboration and attracts talent.

However, the assumption that purpose is inherently positive is misleading.

Purpose, by definition, is simply the reason for action and can be either beneficial or harmful.

Consider the mafia: Its clear purpose meets all positive criteria discussed in business circles: motivation, inspiration, cohesion. Yet its goals are decidedly nefarious.

A purpose must be rooted in stewardship values to be truly positive.

Steward leadership extends beyond conventional goals to integrate the needs of stakeholders, the environment, and the economy.

It involves leading with an ethical, sustainable purpose that benefits the company and society.

This approach transforms the concept of purpose from a buzzword into a substantive force for societal good, ensuring that organizations contribute meaningfully to the world.

Purpose statements alone are not enough

Many organizations spend millions crafting and socializing new purpose statements and think their job is done.

Simply having a lofty statement like “To give people the power to build community and bring the world closer together” does not make the company a stewardship purpose-driven organization.

If you have not already guessed, Facebook’s purpose or mission statement is the above.

Similarly, Boeing flaunts this statement: “To connect, protect, explore and inspire the world through aerospace innovation.”

If these companies believed in their purpose, would they have sold our data or compromised our safety?

Profit is not the enemy of purpose

Another CEO I listened to recently said: “We are undergoing two transformations, one from profit to purpose and the other from value to values.”

Lofty words indeed. But here are my questions: Are you saying you will no longer look to make or maximize profits? And what do you even mean by “from value to values”?

What does a commercial organization exist for, if not to provide value to society with its goods and services in exchange for profit?

Let’s be clear: The purpose of stewardship needs not be at the cost of profit.

If anything, the reverse is proving to be true.

In today’s transparent age, where ordinary people have extraordinary access to information, customers and consumers demand stewardship behavior from companies.

They will shun products if an alternative is available for those who do not comply.

Purpose and values, not just purpose

Finally, before an organization can realize its high-purpose dreams, it must honestly ask itself which values it holds most essential and ensure two things:

  • Its purpose is based on stewardship values like interdependence, long-term view, ownership mentality and creative resilience. Stewardship values are rooted in the belief that success and well-being are interdependent and cannot be maximized in isolation. In corporate parlance, this means believing that for the company to maximize shareholder returns in the long run, it must pursue strategies that create societal benefit.
  • The values are lived and applied in everything the organization does, not just when convenient.

Another purpose pundit recently said that while values and behaviors form an organization’s culture, its purpose is the reason it exists.

He drew a pyramid in which strategy and execution plans formed the base, values and behaviors formed the middle, and purpose is capped at the top.

By showing purpose at the top, he suggested that purpose was the “why” of a company’s existence.

Companies must look beyond purpose statements and superficial commitments to navigate the shift towards purpose-driven genuinely.

It is crucial to embed steward leadership at the core of this transformation.

Steward leadership involves a deep-rooted commitment to societal well-being and environmental stewardship integrated with business strategy and operations.

Companies must align their purpose with robust stewardship values consistently practiced across all levels of the organization.

By doing so, they foster a culture of integrity and sustainability and drive meaningful change that resonates with today’s conscientious consumers.

Being purpose-driven is not just about adopting new business jargon; it is about embodying the spirit of steward leadership to create a lasting, positive impact on society and the environment.