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Harry Hertz

Management

Do You Have an Organizational Purpose, or Is It Mere Propaganda?

Commitment to making a difference is what really matters

Published: Tuesday, October 11, 2022 - 11:02

In a recent blog of mine about CEO challenges and opportunities in 2022, the first opportunity listed was to determine how to make a difference.

As stated, employees, customers, and investors want to associate with organizations that serve a larger purpose (emphasis added) than may be expressed in the mission statement. They want to be associated with organizations that live their values and are committed to societal responsibilities, environmental stewardship, equity, and inclusivity.

In 2019, The Business Roundtable (BRT) issued a Statement on the Purpose of a Corporation signed by 181 CEOs who committed to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders. It thus redefined the purpose of a corporation as participating in stakeholder capitalism, putting the interests of employees, customers, suppliers, and communities on par with shareholders. 

There was some subsequent criticism of the degree of follow-through on this commitment by some members of the BRT. In 2022, this commitment is taking on significant importance with a growing number of organizations in the BRT and beyond.

To show a commitment to a larger purpose, many organizations are now developing statements of purpose that accompany their mission, vision, and values.

As with mission, vision, and values, purpose is meaningless unless translated into action. As with mission, vision, and values, purpose is detrimental to the engagement and loyalty of stakeholders unless the purpose is incorporated into organizational strategy, goals, and metrics.

Incorporating purpose

The topic of incorporating purpose into strategy (and action) was addressed by Graham Kenny in the May/June 2022 issue of Harvard Business Review. As reported in other studies, he points out that companies with a clear purpose and deployment of that purpose through actions do better than those without such a commitment.

As an example, he discusses Woolworths, Australia’s largest supermarket chain. In 2017, Woolworths provided two very different statements of its corporate purpose. One spoke to adding quality of life for its customers and people. The other stated, “We are focused on shareholder returns through the effective deployment of capital and ensuring we deliver on our Group targets.”

Today, Woolworths’ stated purpose no longer mentions shareholders; it now aims to create better experiences together for a better tomorrow. This statement is a guide for Woolworths’ strategic planning, and the business now has a broad range of related metrics across its stakeholder groups of shareholders, customers, suppliers, employees, and the community.

At the Consumer Goods Forum in Dublin in June 2022, the consumer products division chief of L’Oreal reported on its sustainability goals, which are set out to 2030. As of today, 70 percent of the PET plastic that the division uses worldwide is recycled, and 25 of its 44 manufacturing plants are carbon neutral. By 2030, the company intends to use recycled and reused water for all its industrial processes.

Baldrige Excellence Framework and purpose

Societal contributions is one of the Baldrige core values. The Baldrige Excellence Framework booklet description of the core value states: “Considering societal well-being and benefit means leading and supporting the environmental, social, and economic systems in your organization’s sphere of influence.”

• Item 1.2 of the Baldrige Criteria for Performance Excellence is titled “Governance and Societal Responsibilities.” It asks how societal well-being and benefit are incorporated into your strategy and daily operations.
• Item 2.1Strategy Development asks how changes in your external environment are considered in your strategic planning.
• Item 5.2—Workforce Engagement specifically asks about workforce equity and inclusion for a diverse workforce.

The criteria also ask about how you track progress on achieving strategic-plan objectives and the results for achieving those objectives.

Given the changing stakeholder demands and the greater commitment to more inclusive purposes, future revisions of the framework might provide greater emphasis on societal well-being to remain at the leading edge of validated leadership and performance practice.

Is a purpose statement necessary?

A purpose statement can provide great focus and be a powerful engagement vehicle for an organization’s stakeholders. That said, commitment to making a difference is what really matters. Instead of, or in addition to, a purpose statement, an organization could include its purpose in its vision statement or make it a strategic pillar with associated strategic objectives, action plans, and metrics.

Real companies are doing real good. Each organization must craft its own path to its purpose and that purpose’s deployment through strategy, goals, and metrics. The value comes in what your organization actually does. So please consider your purpose today.

Discuss

About The Author

Harry Hertz’s picture

Harry Hertz

Harry Hertz retired in June 2013 from the National Institute of Standards and Technology (NIST), where he had served as director of the Baldrige Performance Excellence Program since 1995. For more than 15 years he was the primary architect of the Baldrige Criteria for Performance Excellence, responsible for expansion of the Baldrige Program and Award to healthcare, education, and nonprofits, including government. Hertz serves on the advisory group for VHA’s Center for Applied Healthcare Studies, and on the adjunct faculty of American University. He has a bachelor’s degree in chemistry from Polytechnic Institute of Brooklyn, and a Ph.D. from M.I.T.