25 Mar Corporate purpose: door opener for big changes
What is the significance of an overriding corporate purpose in times of existential challenges, when companies may even have to lay off employees? In a recent interview with the Handelsblatt (published on 4 October 2020), Bielefeld professor and consultant Stefan Kühl claims that corporate purpose is only a management method that has lost further importance in the crisis. “In a year or two, hardly anyone will be talking about purpose anymore,” says Kühl.
Kühl’s view is probably based on an incorrect understanding of purpose. If existence is endangered by Corona, then this naturally has short-term effects. And for some of the companies that have set out on the question of their overriding corporate purpose, the pace may change. But a purpose does not hinder change processes or make them inflexible, but is rather part of the solution in transformations towards future-oriented companies.
Let’s take the example of Philip Morris: the tobacco company has formulated its purpose as being to create a smoke-free future. The global corporation’s goal is to replace conventional cigarettes with alternatives that reduce harmful substances. With this purpose, Philip Morris has initiated a comprehensive transformation and is further developing its business model and value chain. A purpose does not prevent change, but at best drives it forward decisively and is therefore of great strategic importance.
Serious concern or purpose washing?
If, like Philip Morris, a company is repositioning itself by defining a clearly formulated goal in order to remain competitive in the future, a purpose is by no means a “luxury of cultivating management antiquities” or even “the verbal play of individual staff positions”, as Kühl puts it. This is a false understanding of purpose, which can rather serve as a door opener for major change processes, as the example of Philip Morris shows. But it is also true that purpose cannot be brought into a company half-heartedly. Then it is better to leave it all alone. It’s the same as with sustainability: a few years ago, with increasing professionalization, it became clear who was really serious and who only wanted to do green-washing as a marketing ploy without substance.
In analogy, Stefan Kühl’s assessment could possibly also be understood as a criticism of “purpose-washing”. If his criticism is meant like that, he is right. Nobody needs purpose-washing. Purpose is not an end in itself for companies, but can be traced back to the increased need for meaning among younger generations and a generally more critical public. With our Purpose Readiness Index we have shown that even in Germany more than half of the companies still have to work on themselves in order to be able to credibly represent a purpose at all. Corporate purpose is often equated with a brand promise by advertising agencies, for example, and then misunderstood by marketing and HR departments as a fast-moving slogan for positioning.
Corporate purpose opens up scope for strategic adjustments
If a purpose is formulated in relatively general terms with a view to social benefits, it allows companies the greatest possible flexibility in the necessary adaptation of their business model. There is nothing rigid or even prevents change, as Kühl believes. A good example is the chemical company Covestro, which has set itself the goal of “making the world a better place to live” by pushing the boundaries of what is technically possible in many areas. For example, the company is doing everything it can to increasingly replace crude oil in production with recycled or renewable raw materials and to establish the principle of recycling management throughout the group. This is a very positive example of how a purpose can sustainably drive change processes.
That is why corporate purpose remains important for companies
Unlike Stefan Kühl, we don´t see corporate purpose as a fad that loses its significance in the crisis. The big problems of our time are still there. They remain virulent even in the current crisis. The crisis will also be over at some point, while global challenges such as climate change remain. The apocalyptic images from California, the autumnal monster storms and floods – all of this further raise customer expectations of companies. The claim to meaning therefore remains important even in the crisis. This is not a luxury one allows oneself in good times. Credible approaches to solutions and groundbreaking new technologies can – which is important in many companies right now – lead to innovative business models, new opportunities for differentiating offers and stronger customer and employee loyalty.