A group of nearly 200 chief executives of corporate America, including the leaders of Amazon, Apple, Pepsi, and Walmart, recently convened and redefined the role of business in society and how they are perceived by an “increasingly sceptical public,” as reported by The New York Times. These companies comprise the Business Roundtable, a lobbying organization that represents many of America’s largest companies.
The group issued a statement on “the purpose of a corporation,” asserting that “companies should no longer advance only the interests of shareholders.” Rather, “they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers”, breaking the decade-long-held corporate orthodoxy of just serving the interest of their shareholders.
This dramatic change comes at a time when American companies face tremendous public pressure in terms of mounting income equality, poor working conditions, and harmful products. There are also striking shifts in consumer and employee preferences which are driven by the younger generations.
That’s why a purpose statement is becoming a requisite corporate element, apart from the vision, mission, and values. Many global companies have already adopted and embraced a purpose statement to guide their employees and the organization as a whole. For example, Microsoft’s stated purpose is “We believe in what people make possible”; Sweden-based home furnishing company Ikea’s purpose is “We believe that connection is a human right”;
American Express’ purpose statement is “We believe it is noble to serve others”; and shoes and apparel firm, Tom’s purpose statement is “We believe we can improve people’s lives through business.”
A purpose statement answers the question — why we choose to exist together, beyond financial gain. It should be true for both the organization and yourself, and it starts with “We believe…” for the employee or any member of the organization to imbibe its true meaning. Above all, a purpose statement should be simple, short, and free from jargon.
In contrast, a company’s vision statement says what the organization wishes to be like in some years’ time — “where are we going”. Whereas a mission statement answers the question, “who we are and what we do”, and values describe the company’s desired culture
There’s a strong case for companies to have a purpose statement, apart from the vision, mission, and values. For one, there’s evidence that Millennials are all about working for or starting purpose-driven companies. In a 2017 study of American Express in US and Europe revealed that 81 percent said a successful business needs to have a genuine purpose and 78 percent said that the values of their employer should match their own.
In a more recent survey, 63 of millennials said the primary purpose of businesses should be “improving society” instead of “generating profit’; and 94 of millennials want to use their skills to benefit a cause, according to a study from the Society for Human Resource Management.
Hence, in order to attract and retain the younger generations of employees, a company needs to craft and communicate a purpose statement. They also buy and become loyal as consumers to brands that demonstrate a social purpose.
Interestingly, many of the top local companies do not have a distinct purpose statement. It’s high time that local companies revisit their vision, mission, and values, together with crafting their purpose statement.
The author is President & CEO of Hungry Workhorse Consulting, a digital and culture transformation firm. He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at firstname.lastname@example.org.