There are those who continue to frame the role of business in purely commercial terms. Business is hard enough, and the demands of shareholders and the markets so insistent, these people say, that companies need to avoid the ‘distractions’ of infusing a moral platform into what they do. They should just get on with making profits. That’s their purpose. After all that’s what shareholders demand and that’s typically what they’re compensated on.
And in that one word, purpose, and its ambiguities, lie the seeds of an increasingly vigorous debate that, to our minds, stems from a confusion of ideas (and priorities).
Functional purpose, intentional purpose
When you adopt a functional definition of purpose, this is pretty much where most of us land: The purpose of business is to make money. True. Single-minded. And responsible – in the sense that without money, there are no resources to keep people in jobs and to contribute to the economy and the markets.
If however you take an intentional definition of purpose this idea extends one stage further: the purpose of a business is to make money and to do good in the world; or even the purpose of a business is to make money by doing good in the world. Also true, for those of us who believe that there is more to business, and life, than just money. Less single-minded, because there is a linked agenda. Also responsible – but to different things, in the sense that money is a means as well as a resource.
Purpose when it is defined as a function revolves around the immediate and commercial reason for being. The focus tends to skew towards results. In the right hands, this concentration on outcomes energises and drives the business priorities and strategies inside an organisation. Coke became the biggest beverage company in the world because it set its sights on putting a glass of Coke within arm’s reach of every thirsty person on the planet. The pursuit of that result is reflected in its supply chain policies, in its product development, in its distribution and pricing strategies. When it goes too far though, the pure-play pursuit of results (and their attendant incentives) drives an organisation to pursue agendas that are so outcome-focused they can lack humanity and even responsibility. The actions of Enron and GM are cases in point. Both organisations pursued results at the expense of other considerations.
Purpose when it is defined as an intention reflects a more global bias. It frames what the people inside an organisation, and the customers who buy from them, would like to see change (for the better) in the world. In this context, the focus is on shared beliefs and on a shared view of the world that is much more long term. In the right hands, this focus on what’s desirable and altruistically aspirational holds an organisation on a steady morally-focused course. It puts some ideas in-purpose and renders others unacceptable because they do not contribute to the intentional purpose (even if they do contribute to the functional purpose). As Hilton pointed out in this recent post, a strong and clear purpose drives collective comprehension, cohesion and forms the basis for fundamental business choices. It focuses on an agreed worldview that provides people inside an organisation with powerful incentives to come to work and gives consumers reasons to stay loyal to a brand. When it goes too far though, the pursuit of an ideal leads to inefficiencies, lack of operational strategies and the adoption of an aggressive and self-righteous moral high ground that subsumes everything in its path and brooks no dissent or even debate.
Drucker believed profit was a consequence, not an objective
Interestingly the ‘grandfather of consultancy’ Peter Drucker held a perspective more in line with the latter view. He once famously said, “Business has one task – to create a customer”. In Drucker’s world profit was a consequence, not an objective. If an organisation successfully “created a customer” – through superb products, artful distribution and an alignment of the views of the organization with the views of the customer – then profits and success were inevitable.
Pursued to extreme, either reading of purpose, functional or intentional, is detrimental. Pursued in a balanced manner, however, the two agendas hold each other in check. They provide the business with a mandate to chase its commercial goals at the same time as they lay down clear guidelines within which that pursuit must take place.
The real happiness challenge for Coke
The challenge for Coke today is not whether it should make money or tackle obesity but how it can continue to keep everyone happy by making responsible returns, persuading people to consume less calories through its products and using natural resources like water in sustainable ways.
Back to the example of Coke from above. If Coke’s purpose is ‘Moments of happiness’, then a balanced pursuit of that means finding ways to achieve moments of happiness for all and not at the expense of some. And to do that, Coke’s leadership probably need to be asking themselves at least eight ongoing questions:
- How do we define a moment? (is it personal, is it in a group?)
- How much is a moment? (is it a gulp, a can or a 2-litre bottle?)
- What’s a moment worth? (if there were less moments, for example, could they be worth more? How?)
- How is happiness changing across the world? (specific, regional and global trends)
- Who must be happy in order for us to achieve our purpose? (how do we judge success and is that how our consumers judge success?)
- What makes people happy now and what will make them happy in the future?
- Where do the pursuits of happiness fight with each other and how do we resolve them?
- Must a moment always include consumption of our products or could/should we enable other moments?
They’re not easy questions – particularly when you’re as global as Coca-Cola and your organisation is a patchwork of owners, distributors, bottlers, franchises and partners like McDonald’s. But they are the questions that leaders need to be asking in our view in order to truly deliver the two sides of purpose. Aligning those entities is another key component because consumers don’t delineate Coke from a vending machine and a Coke poured at the Golden Arches. Let’s come back to that.
For purpose to work to its full potential in organisations, the commercial leadership that most decision makers are comfortable with needs to be balanced by a clear and shared moral leadership.
Co-authored with Hilton Barbour, Freelance Strategist & Marketing Provocateur. Hilton has led global assignments ranging from Coca-Cola, IBM, Motorola and Enron to Ernst & Young and Nokia. Working as a freelance strategist allows him to satisfy his insatiable curiosity about business, people and trends. An avid blogger, Hilton’s personal mantra is “Question Everything”. Follow him at @ZimHilton.
We’re committed to a series of posts on this subject. Look for them over the next few weeks. Your feedback, comments and input is appreciated.