If you have a small kid who goes to kindergarten you most certainly have used the word purpose during your conversation about her day at school. “She didn’t do it on purpose.” is an answer we get when we ask about stories our kids tell us when some kid got hurt during their school activities. But ask your daughter if she knows what purpose means. She will probably answer with curious explanations like “purpose means bad” since the word purpose is always associated with bad actions.
Purpose is a difficult word for kids, but it shouldn’t be for grownups.
However, we forget this word, specially in the business world, where we tend to think that the sole purpose of doing business is to earn money and be profitable.
Earning money and being profitable is not the purpose of business. It is one indicator that the business is doing ok. And it is one out of many others such as customer satisfaction, employee motivation, process effectiveness, etc.
Here’s an interesting list of 6 good reasons not to use profit as our primary purpose:
- Profit is an output and a symptom of success, not the cause.
- Profit is temporary and can be wiped out in an instant.
- In tough times, profit can be hard to come by.
- You need more purpose than profit to make it through.
- Profit doesnâ€™t motivate the salaried staff who make success happen.
- Customers donâ€™t appreciate being seen just for their revenue.
- Consumers are increasingly focusing on values and contribution to society when choosing who to do business with.
Source: Matt Stocker blog
What is the purpose of doing business if it is not being profitable?
Well, that’s a very important question, and if we don’t know the answer, the business may be in serious trouble, even if it looks healthy now because its profitable.
According to Nikos Mourkogiannis, author of Purpose: The Starting Point of Great Companies, there are four main types of purpose and he cites examples of companies that have each type of purpose:
- Discovery – rooted in intuition that life is a kind of adventure. Example: Apple and their goal to always come up with the new / most innovative products (esp. in comparison to Microsoft who clearly follows a different path).
- Excellence – implies standards and purports the belief that excellent performance in our role in life represents the supreme good. Example: Warren Buffet.
- Altruism – a purpose built in serving its customers in a way that is beyond standard obligation. Example: Wal-Mart, Body Shop.
- Heroism – demonstrates achievement (often with a charismatic and visionary leader). Example: Ford, Microsoft.
Source: Wendy St Clair Pearson review
Purpose and Mission
Purpose and mission statement seems to go hand in hand with each other. So it is that Wikipedia defines Mission Statement as the written statement of a company’s purpose:
A mission statement is a formal, short, written statement of the purpose of a company or organization. The mission statement should guide the actions of the organization, spell out its overall goal, provide a sense of direction, and guide decision-making. It provides “the framework or context within which the company’s strategies are formulated.”
There are two very interesting videos showing how important it is for an organization to have a purpose.
The first one is from Simon Sinek’s 2009 TED talk about “How Great Leaders Inspire Action”. I purposely set the video to start at 1m33s so you can view the exact point where Simon explains how important it is to know why a company does what it does. He argues that all companies know what they do, some companies know how they do what they do, but very few companies know why they do what they do:
The second video is an animated version of Daniel Pink’s TED talk about “The Surprising Truth About What Motivate Us”. In this talk he explains that knowledge workers need three things to be motivated – autonomy, mastery and purpose. Again I purposely set the video to start at 8m41s so you can watch the explanation about purpose. If you have the time, I’d recommend watching the full video:
From these two videos it is clear that knowing a company’s purpose can be very beneficial for the company. When the purpose is clear, we will have better chances of attracting employees, customers and complementors aligned with the purpose. Consequently we will have better chances of getting things done on time, on budget and with quality.
- Profit is not the purpose of doing business. It’s just one of many success indicators.
- It is easier to succeed if we know the company’s purpose.
- When the purpose of a company is clear, we will have better chances of attracting employees, customers and complementors aligned with the purpose.
- Consequently, when the purpose of a company is clear, we will have better chances of getting things done on time, on budget and with quality.