The rise of the purpose-driven business
While it goes without saying that businesses must make money to survive, in today’s competitive marketplace for users, customers and talent, a well-defined purpose may enable a company to thrive.
The old-school notion that being purpose-driven requires non-profit status has given way to the concept of the purpose-driven business, which focuses on identifying a societal need, then working to fill that need.
In 1914, Ford Motor Company became one of the first firms to put purpose alongside profit when Henry Ford stunned the world by announcing he would double his workers’ wages to $5 a day — twice the average wage for automakers at the time. He also cut the work day from nine hours to eight — a major reduction from the 60-hour work week that was standard in U.S. manufacturing — and offered profit sharing to employees who lived a "clean" lifestyle. Ford said he wanted every one of his employees to be able to afford a Ford automobile.
It was unprecedented for a wealthy industrialist to share profits with workers on such a grand scale, and many suspected Ford had a few screws loose. But it worked. Ford automaker jobs became some of the most coveted in the industry, and the company continued to profit throughout the 20th century.
"An organization without purpose manages people and resources, while an organization with purpose mobilizes people and resources," wrote Sherry Hakimi, founder and CEO of organizational development firm Sparktures, in Fast Company.
"Purpose is a key ingredient for a strong, sustainable, scalable organizational culture. It’s an unseen, yet ever-present element that drives an organization."
To solidify the somewhat nebulous concept of purpose, more companies recently have begun publishing "purpose statements" in addition to traditional "mission statements."
Mission versus purpose
At first glance, "mission statement" and "purpose statement" sound awfully alike. But they are quite different.
A mission statement describes what a company wants to do now — it defines the customers and critical processes, and it informs about the desired level of performance.
A vision statement, on the other hand, outlines what a company wants to be in the future — it's a source of inspiration and motivation that often describes not only the future of the organization but the future of the industry or society in which the organization hopes to effect change.
"Your mission statement is more about what you want to accomplish, and the goals you want to get to, whereas your purpose statement is your reason for existence and more about the journey," Shannon Schuyler, chief purpose officer at PricewaterhouseCoopers, told GreenBiz.
The mission of PwC is "to help organizations and individuals create the value they’re looking for, by delivering quality in assurance, tax and advisory services." The company’s purpose is "to build trust in society and solve important problems."
This purpose statement is intended to guide PwC’s decision-making and investment strategy, ensuring its "relevance and leadership" in the marketplace.
As you can see from the following examples from other well-known companies, the mission statement is more about what the company does day-to-day, while the purpose statement focuses on the long-term:
Mission statement: "To inspire and nurture the human spirit — one person, one cup and one neighborhood at a time."
Purpose statement: "To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow."
Johnson & Johnson
Mission statement: What J&J calls its "Credo" (PDF) is a bit long. In a nutsell, it focuses on meeting the needs of its customers, respecting employees, supporting communities and satisfying shareholders.
Purpose statement: "Caring for the world, one person at a time."
While the apparel maker doesn’t have an official "purpose statement," its mission statement achieves the same end: Build the best product; cause no unnecessary harm; use business to inspire; and implement solutions to the environmental crisis.
The benefits of purpose
Just as Ford showed that focusing on ideals beyond pure profit can lead to profit, purpose-driven companies today are beginning to see themselves as forces for good in the greater world.
"Organizations now generally are starting to realize that being profitable and being able to make money to pay employees and — if you’re public — your shareholders and stakeholders is really important," Schuyler said. "But considering the infrastructure needs, considering the lack of funding governments have, considering the divide between the haves and have nots — more businesses are starting to say, ‘That is part of our world.'"
In addition, companies also know that the status quo is likely to change over the next several decades, and that they will need to adapt to develop new products and attract new customers — all within the context of scarcer resources.
"A lot of things now are prompting companies to say, ‘Even if we are solely focused on dollars, to get there we are going to need to positively impact people,'" Schuyler said.
Employee engagement is a clear business benefit to having a solid purpose. If employees feel they are working towards a good cause, it can increase their productivity by up to 30 percent, according to a study (PDF) by the Center for Economic Studies. Also, organizations that have clearly defined mission and purpose statements that are aligned with a strategic plan outperform those who do not, according to a study by Bain and Company.