by Richard Ramdial, Mark Stephens, Axel Kravatzky
In the face of the current global pandemic, just as we as individuals have had to pause and reflect on what is important, similarly corporations have a tremendous opportunity to rethink what is important and to rediscover why they exist, how they can continue to create value, including profit, in ways that are more harmonious with common human aspirations and the natural environment.
Indeed, as a corporate leader standing on the balcony, looking out into the near and distant future, you can sense that there is a need to change. Even if the corporation that you lead, or lead within, is not yet reeling from the global systemic changes underway, you sense that something must give. More of the same is unlikely to get us what we desire most.
The pandemic, the cries for social justice throughout the world, environmental crises, financial crises, the emerging brave new wild west transglobal world order being created by the internet and social media, indeed myriad crises have uncovered an inescapable truth. It is that our system of organizations like governments, the nation-state, NGOs and enlightened corporations that have an explicit responsibility to work for the common good, even collectively, cannot fix this. We need a new plan. In this way, it should be increasingly clear to even the most jaded corporate leader that we are now “all in this together” and that something has to change to realize the possibility of “building back better”. And so many are saying that corporations need to be part of the solution, to us surviving and thriving in this era, but not in the way that most think of themselves currently. The issues for consideration are quickly moving from whether there is a need to change to a focus on exactly how corporations begin the process of transformation and preparedness for the next phase of their life cycle.
Until now, corporations have, with varying degrees of success, relied on their missions, visions and values as gyroscopes and compasses to navigate their landscapes. Yet, at this moment, the systemic risks we collectively face have more fully exposed the discrepancy between corporate intentions, actions, and what is needed to overcome the crises we are facing. So, it seems, just when we need them most, most corporate gyroscopes (mission, vision, and values) are falling short. In our review of some of the world highest rated corporations (Dow Jones, Best Companies to work for), we found that not even the companies that pledge the Business Round Table (2019) have yet clearly defined statements pertaining to a purpose beyond profit, to which they have publicly committed.
Moreover, one would think that mission and vision are so commonly called upon in corporate leadership circles that they must be well understood and consistently used. However, if we examine these gyroscopes, we find that they are, in fact, very inconsistently constructed across organizations. In truth, having reviewed these statements, one would walk away confused on even what a mission statement is. Thinking about how they could be applied consistently to guide the organizations themselves is even more challenging.
If corporate evolution is in part a response to increasing complexity and if we are to get past our current and continuous state of crisis to realize the hoped-for “better”, we will, at a minimum, need to refocus our corporations, to equip them with new maps, new tools, new ways of being and new ways of working.
The future that we sense emerging is filled with both hope and possibilities. It urgently requires our corporations to re-imagine who they are, restate what their role might be and redefine their intended impact on those they serve, those who serve them, as well as other relevant stakeholders and the natural environment. In other words, our corporations must re-imagine and then realize their identity – the combined expression of vision, mission, values, and, importantly, purpose. Voices calling for a re-imaging of corporate purpose, and thereby identity, are getting louder by the minute.
We suggest that there is a clear, concise, and repeatable process that corporate leaders and those supporting corporate transformation (consultants, coaches and facilitators) can use to enable both a (re-) discovery of a corporation’s true intent and a redefinition of its identity. The Purpose Wheel brings together the deceptively familiar mission, vision and values elements of corporate life and connects them to the most foundational of notions: organizational “purpose”. Our process provides much-needed clarity as to “how” the corporation could update, reinvent, and transform itself in response to these new and changing circumstances.
Well-being & rise of the corporation
Our need to organize arose as part of the human evolutionary journey, and the organizational forms evolved as a response to increasingly complex situations and opportunities. Organizations were groups of people that came together to achieve common objectives that ultimately served to fulfill human needs, including financial security and wealth. These needs can be collectively thought of as furthering aspects of well-being.
The model developed by the Organization for Economic Co-operation and Development (OECD, 2020), for example, features eleven dimensions of our lives that should be considered when thinking about current well-being and an additional four to secure future well-being (see Box).
In the OECD Well-being Framework current well-being includes 11 dimensions, covering outcomes at the individual, household or community level, and relating to:
- material conditions that shape people’s economic options (Income and Wealth, Housing, Work and Job Quality);
- quality-of-life factors that encompass how well people are (and how well they feel they are), what they know and can do, and how healthy and safe their places of living are (Health, Knowledge and Skills, Environmental Quality, Subjective Well-being, Safety);
- how connected and engaged people are, and how and with whom they spend their time (Work-Life Balance, Social Connections, Civic Engagement).
Future well-being is depends on maintaining and enhancing four dimensions:
- natural capital
- human capital
- economic capital
- social capital
Simply put, organizations, at their core, have always been designed to ultimately make one or more aspect of our lives “better”. Through organizations, we humans have sought to arrange and coordinate our activities in response to the challenges posed by our environment. One of the most successful and impactful forms of organization is the corporation.
Early forms of corporations, found in Ancient Rome and India more than 2000 years ago (Davoudi et al., 2018) were legal persons created to conduct public works, religious and charitable activities. In other words, well-being. Later in Europe, 1550-1600 AD, when the first chartered companies were formed, privately owned business pursuits were not granted incorporation. In fact, until 1844, when the Registration Act was passed in Britain, which enabled anyone to register a joint-stock company, all corporations were required to fulfil public service mandates through the commercial activities of the corporation, even if these were increasingly loosely and widely defined. So, at this point, corporate purpose was still tied to well-being. However, over the 150 years that followed, the evolution of corporations was not uniform. While there continued to be great and purposeful corporations, as such, the frame of reference of the corporation evolved away from well-being primacy to shareholder primacy.
Today, modern corporations have five core features: they are legal persons, liability is limited, contributors of capital have shares and are members of the organization, shares are transferable, and a governing body holds ultimate accountability and can delegate responsibilities (Kraakman et al., 2009). Together, these features enable corporations to amass large quantities of financial and other capital, which, in combination with sophisticated forms of administration, are turned into powerful commercial systems.
To the edge of chaos
Shareholder primacy has been particularly pronounced in the Anglo-Saxon context, where neo-classical theory came to dominate economic thinking. Thus, between the 1970s and the two decades of the 21st Century, the view that corporations ought to be focused only on making profits rose rapidly in prominence. Addressing the notion of how ideas or memes shape behaviour, evolutionary Biologist Richard Dawkins (Dawkins, 1978) says, “When you plant a fertile meme in my mind you literally parasitize my brain, turning it into a vehicle for the meme’s propagation.” The prevailing economic ideas and models of the time framed and shaped the way corporations saw their identity and how their leaders perceived their role.
One popular meme that helped the identity, priorities and behaviour of the modern corporation is the Friedman Doctrine, named after American economist and Nobel Laureate (1976) Milton Friedman. In his famed and often quoted editorial in the New York Times, Friedman made a compelling case for the overwhelming primacy of shareholder’s interests (Friedman, 1970). He was unambiguous about the role of the corporation’s leaders, saying: - “a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society.”
It is widely accepted that as individuals, we behave in accordance with how we perceive ourselves and in concert with what we sense is our life’s purpose. Our purpose influences how we behave; it regulates our actions and determines the level of empathy we generate in our relationships. Our corporations, being constructed of and by people, are no different. When their perceived existence included a purpose that served society, it influenced how they behaved. Once the notion emerged that they were free of this obligation, and even that they ought not to do it (see (Friedman, 1970), people thought of them very differently. Their purpose became entwined and identified with the generation of profit for the sake of (more) profit. The essential character of the corporation was reframed. The fundamental business that the corporation was thought to be in had changed. It was only at this point that, after almost 2000 years of the evolution of the corporation, that this form of organization no longer had to show a link to a purpose beyond commercial activity.
This unending drive focused on continuous growth and profit certainly had a long list of positive outcomes. It resulted in the rapid expansion of national economies and the growth of the global economic pie. Corporations, as such, have played a significant role in raising the standard of living billions of people not only through jobs but also through a wide range of philanthropic endeavours, which have positively impacted almost every area of our lives, not least of which are education and healthcare. Sounds like a good story, and one might be tempted to ask, “What’s the problem?” The problem is that untethered from its original purpose and influenced by the prevailing memes of the time, corporate leaders and intellectuals alike embraced the negative impacts of corporate activities and production as necessary costs of doing business to be managed or off-set by good (CSR) but not things that could or ought to be ultimately eliminated. Thus, the corporation veered increasingly into paths where it wreaked as much havoc on well-being as the good it was creating. Now far too many are focused on commercial activities missing the opportunities for the realization of their true purpose, which again is invariably connected to solving meaningful problems of people and planet in commercially viable ways (see Mayer & British Academy, 2020).
But now, during repeated and persistent economic, public health and environmental crises, calls for a re-orientation of the corporation back towards well-being are growing louder amongst governments, NGOs, international institutions like the United Nations, a number of the largest institutional investors, and even a large number of corporations themselves. The recognition that all corporations, for better or for worse, whether they are conscious of it or not, have, in fact, a purpose and an impact on well-being is once again gaining sway. For almost 2000 years, there was a necessary and explicit link to the social impact of corporations. We are now at the point that we are not only linking commercial activities with a social impact but that corporations make their purpose the primary principle driving all their activities. Successful organizations will fulfil their purpose in profitable ways (see Future of the Corporation project by the British Academy).
The Purpose Wheel - returning to purpose
So, in this Fourth Industrial Revolution, the challenges we are faced with, taken as a whole, feel unprecedented and overwhelming. Nation-states, government, NGOs seem ill-equipped to deal with it by themselves. Except for good works here and there, at their core, our corporations have lost sight of their original purpose, being mainly driven by a profit motive that is effectively an accelerant to the fire that is consuming our planet.
How do we ensure that, en mass, the corporation as a collective can rediscover its original purpose beyond profit and even innovate to shift the balance? It is apparent that current approaches to building identity and governance (mission, vision, and values) do not in and of themselves create a clear path to identify, define or fulfil purpose.
Despite the good and dedicated work of so many working in the Corporate Social Responsibility (CSR) field, the approach has not led to the required systemic change. It may be that CSR was not born out of a true sense of purpose but was rather seen as an obligation and a response to increased expectations from the nations and communities in which they operate. In 1970 Friedman described such efforts as “one way for a corporation to generate goodwill as a by‐product of expenditures that are entirely justified in its own self‐interest.”(Friedman, 1970)
There are, of course, instances where corporations have demonstrated bold, almost pioneering leadership in their journey to rediscover purpose. However, these instances are typically spearheaded by a charismatic and visionary leader. But corporations that depend only on the strength of one leader to rediscover their purpose are always at risk of returning to dysfunctional behaviours once that leader is gone.
What corporations need is a systematic way of arriving at a purpose that is not dependent on the personality of their leaders. The “Purpose Wheel”, developed by Kravatzky and Stephens, provides a clear and concise way of rediscovering purpose that is systematic and coherent. By reexamining the known levers of mission and vision in a multidimensional and interconnected way, and building on the work of Peter Drucker, Richard Barrett, Victoria Hurth, Colin Mayer, B-Lab, ISO37000 and many others, the Purpose Wheel takes corporate leaders through a succinct step by step process, to arrive at their real organizational purpose and one that is consistent with their values, vision, and mission. Once they use the process, the most compelling and true purpose emerges.
The elephant in the room is that today most leaders can articulate the customer/client benefits that drive their company’s existence but struggle to see beyond that and determine just exactly how these benefits could be related to more fundamental concepts, such as well-being. We believe that this is an important reason why mission statements, as they are currently often written, effectively stop at these parochial benefits, first-order customer-centric benefits that companies believe are within their sphere of influence. This is completely understandable because if the focus is only ‘doing’ and immediate transactions that lead to payments, they do not realize that the well-being itself is also within their sphere of influence.
The Purpose Wheel helps leaders establish clear linkages between the specific elements of their identity (Purpose, Mission, Vision, and Values) and internal implications for the organization (The Hub) as well as the external consequences (“where the rubber meets the road”) of each.
The Purpose Wheel is different from previous approaches because it forces a deep exploration of “why” a corporation does what it does and how that is connected to an element of long-term well-being, which is Purpose. Then we can turn the Wheel and delve systematically into how a corporation’s direct capabilities and the benefits that accrue from them contribute to fulfilling one or more of these dimensions of well-being. This is how we arrive at Mission, which is the “how” of ‘purpose’. Having established this link (Purpose → Mission), and turning the Wheel again, we ask why the corporation is pursuing this Mission (Mission → Vision)? In other words, what is self-actualization for the organization? This is how we arrive at Vision, which is the “why” of Mission. Finally, turning the Wheel one last time we ask why does the organization want to be what it can become (Vision → Purpose)? We are back to Purpose. So, Purpose is the “why” of Vision. In conclusion, Purpose is grounded in well-being and is linked to Mission. Mission leads to Vision. Vision cannot exist without Purpose.
The Purpose Wheel allows leaders to develop an integrated self-propelling identity for their corporations that is inherently linked to well-being. Finally, Values are both the underlying source as well as the glue that binds Purpose, Mission and Vision, a corporation’s identity, together. They are core beliefs that supply the energy it needs to move forward in time and to face challenges and competitive pressures without losing its identity or its way.
The Circle - As a circle, the Purpose Wheel reminds us that the outcomes of our actions become the inputs for and gates to our future possibilities, and illustrates the mutually dependent nature of corporations, their stakeholders, and their natural environment. It sensitizes us to the consequences of our decisions and actions, and the need for ongoing good governance.
Energy & Movement – The interconnected composition of the Purpose Wheel serves to dynamically integrate all elements of the corporation’s identity in such a manner that it becomes not only aligned but self-reinforcing and self-propelling. The kinetic energy generated through the process of turning begins to activate the corporation’s identity, transforming its elements from nouns to verbs in motion, driving the corporation forward by acting in service of its Purpose.
Interconnections & Implications – By continually focusing attention internally, externally, and integrally across the corporation’s entire eco-system, the Purpose Wheel provides the basis of new types of thinking, challenging long held assumptions and enabling new, integrated, narratives about and within the corporation. By focusing attention on where “the rubber meets the road” the Purpose Wheel becomes a touchstone for assessing whether the corporation’s actions are always geared to and having the intended impact.
Turning The Wheel
In this way, building on previous approaches, the Purpose Wheel establishes a governance tool for leaders demonstrating how their organization can authentically and profitably contribute to well-being because that is their purpose, rather than indirectly and in a philanthropic kind of way only. So, for example, when Mission is considered, the Purpose Wheel forces clarification on what capabilities and key resources a corporation can uniquely call upon to achieve its purpose and then, looking externally, the sustainable benefits (and for whom) that can be derived from leveraging these capabilities.
Thus, at every turn, the Purpose Wheel implores us to go deeper because it is not just about the theory of corporations and the generation of statements. It is, at its core, a practical tool for the type of transformation corporations must undergo to get to the next stage of their evolution. As sponsors and agents of change, leaders within corporations can also lean upon the symbolic and subtle attributes of the Purpose Wheel to guide them as they move to activate Purpose within the corporation and externally within their wider system of stakeholders.
Having established that for the greatest part of the past two millennia, corporations had collective and social mandates at their core which addressed aspects of well-being and the societal ties were first significantly ruptured in the 19th Century, and then took the most extreme departure from its origins in the last 40 years with shareholder centricity and profit as presumed purpose. We offer the Purpose Wheel as an easy and systematic way to re-establish this link, even for leaders of corporations that are not particularly tied into the “woke” movement.
Still, why should the average CEO who is down in the trenches producing value for their customers and shareholders while minimizing any negative externalities from their company’s activities care? The answer is that the Purpose Wheel can help unlock the untapped and hitherto unseen potential of your company. We mean this because the Purpose Wheel will precipitate a shift in your company’s frame of reference, widening the definition of what business you are really in. Reimagining your purpose with well-being at its core can unlock unseen adjacencies that can lead to new market opportunities, spur innovation and differentiation that will drive a growth in your business that is sustainable and empowers people.
Business Roundtable, (2019). Statement on the purpose of a corporation. https://opportunity.businessroundtable.org/wp-content/uploads/2019/12/BRT-Statement-on-the-Purpose-of-a-Corporation-with-Signatures.pdf
Davoudi, L., McKenna, C., & Olegario, R. (2018). The historical role of the corporation in society. https://www.thebritishacademy.ac.uk/documents/976/JBA-6s1-Davoudi-McKenna-Olegario.pdf
Dawkins, R. (1978). The selfish gene. Oxford University Press.
Friedman, M. (1970). The Social Responsibility Of Business Is to Increase Its Profits. 1–7. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html
Kraakman, R., Armour, J., Davies, P., Enriques, L., Hansmann, H., Hertig, G., Hopt, K., Kanda, H., & Rock, E. (2009). The anatomy of corporate law (Second Edition). Oxford University Press.
Mayer, C., & British Academy (2020). Principles for purposeful business. https://www.thebritishacademy.ac.uk/documents/224/future-of-the-corporation-principles-purposeful-business.pdf
OECD. (2020). How’s Life? 2020 | READ online. https://read.oecd-ilibrary.org/economics/how-s-life/volume-/issue-_9870c393-en#page22