One of the concerns that companies have discussed the most in recent years has been how to ensure people are motivated, proactive and highly committed to their everyday work. A great deal of time, money and efforts have been spent to this end – from improving work conditions to adopting the most fashionable techniques like agile methodologies, leadership development programs and currently, proposals for well-being related to health, education or financial management. Among these proposals there is one that is very unique and I think it is essential to deciphering what could be the future of the company.
For several years now, a concept has burst onto that scene that aims to not only strengthen employee commitment or customer loyalty, but something more: how to improve life for the people or communities where the companies operate, focusing on society’s needs. This concept is the “purpose” and its scope goes far beyond improving the company-worker relationship or reinforcing commitment.
In this new connotation, “purpose goes beyond accomplishing a specific financial target and must give meaning to what the company does, justifying its existence and defining a way to behave in its environment. The purpose should have a real impact on society and not just maximize the value of the company for shareholders.
Examples of these corporate purposes include BBVA’s “to bring the age of opportunity to everyone” – opportunities created by technology and the need for sustainable development; or Nestle’s: “Enhancing quality of life and contributing to a healthier future” where the emphasis is placed on improving people’s health. Others like Veolia, which works on waste, water and energy management, proposes “to contribute to human progress by firmly committing to the Sustainable Development Goals set by the UN to achieve a better and more sustainable future for all”, putting the focus on environmental sustainability.
Therefore, a purpose inspires the company strategy, its business plans and its long-term goals. Ultimately, all of the company’s actions refer to the purpose and align the interests of shareholders, employees, clients and society in general in the search for the common good. Without a doubt, as part of society, companies have been adapting their activities to social changes, but this time, the change goes far beyond their traditional role as an economic actor in order to join the social, and possibly political debate whether it’s related to ecology, diversity, inequality or human health. And their participation has consequences and poses new challenges that change the role of companies in society.
A little history…
The search for “meaning”, a “purpose” or “goal” is something that is inherent to human nature. According to Ortega y Gasset, everyone needs a “life plan” or purpose. “Human life, by its very nature, has to be dedicated to something, an enterprise glorious or humble, a destiny illustrious or trivial. We are faced with a condition, strange but inexorable, involved in our very existence.” More or less consciously, we choose a life plan that entails living according to certain values and behavior guidelines. Happiness lies in fulfilling this purpose.Thus, aiming to change the world through political or environmental revolutions is just as valid a purpose as dedicating one’s life to teaching poor children or sponsoring a music band.
Historically, humanity has had great universal frames of reference or worldviews that give meaning to life and people’s activities. A worldview offers an explanation for our world or environment, for humanity’s actions or natural phenomena. It gives meaning to our existence and provides ethical guidelines, values and behaviors; and mainly, they underpin our purpose in the world, the motivation to live and the attainment of happiness.
Examples of worldviews are religions, where the meaning or purpose of our life is offered through divine action in the world or revelations. Thanks to faith and the fulfilment of the divine commandments, humanity finds peace and happiness. Other examples are worldviews based on the progressive perfectibility of mankind throughout history, like the case of Marxism, with its purpose of creating a classless, equal society in which humanity would find happiness; or positivism, whose purpose is to reveal the way nature functions, as only scientific knowledge can make life on Earth more free and happier.
And in the framework for these worldviews, the vast majority of people have set up their individual purposes with the values and behaviors they took from them. Following the previous examples, caring for the ill was done in the name of the Christian commandment to love your neighbor, or the Communist fight against capitalism was based on the value of universal justice.
What is the current validity of the repertoire of purposes of these great worldviews? At the end of the last century, JF Lyotard published The Postmodern condition, in which he affirmed the loss of credibility of these worldviews. At least in many parts of the world – Europe, the Americas and places in Asia – historic worldviews have lost their ability to influence. Their values have been questioned and their proposal of the universality of the human race have been rejected. The result has been an “orphan feeling” or lack of purpose for life. In its absence, individual or identity-based proposals related to race, sex, language or place of birth have proliferated. The emancipatory ideal of modern philosophy based on education and advances in humanity as a whole is no longer pursued. Now, different movements are disputed that represent the interests of specific groups with competing values in many cases. They are the so-called “cultural battles”.
This loss of confidence in the values of the great worldviews, together with the inadequacy, if not disparagement, of certain public and private, national and international institutions, political parties and traditional political ideologies, to bring about a better world – either in the fight against climate change, hunger, or in improving the quality of life, have led people to have to search for the purpose of their life in other institutions or in different projects.
And in this context, the role of the company as a source of alternative meaning emerges strongly through the proposal of a purpose and shared values. With it, the company aims to create a common culture, understood as a set of beliefs and values, behavior guidelines and ways to engage in relationships. But above all, a specific impact on the solution to a human problem: health, environment, well-being, etc. Corporate purposes therefore become a very attractive, real possibility of the available repertoire and with an potentially high impact. If we aimed to improve the world through political, religious or scientific revolutions in the past, we can also now do so through startups and large companies.
The capacity to deliver and commitment when a purpose is adopted to change the world and improve society is infinitely superior to any material benefit that can be obtained from the fruits of work. Working with a purpose means seeing oneself as the protagonist in the solution to social problems that affect a sector of the population, community or the entire world. It is not the same to say that I work for better hours or a better salary as to say: “I work to improve people’s health through food,” as Nestle proposes. In addition, once the purpose has been adopted, simple and modest tasks like sending packages of food takes on a different meaning, as the purpose could not be fulfilled without the adequate distribution of packages. Feeling that I am part of something bigger than me, which can improve the society to which I owe myself, is probably the greatest source of satisfaction and happiness for a person.
Several recent studies by McKinsey underscore the importance of “living out the purpose” to face adverse life situations, like the current pandemic. According to the authors, identification with the company purpose is beneficial for both the company and the person. People who are more connected to the purpose say they feel better and their commitment is four times higher than those who do not feel this identification.
What is the ultimate goal of a company?
Until now, the response was clear: to maximize value for shareholders or the owner of the company. Traditionally the biggest criticism of this goal was the subordination of corporate decisions to the profit rationale. In other words, taking advantage of all that technology, the labor market, competitive conditions, etc. had to offer in order to increase the profit margin.
One of the most informed critiques of this profit rationale was the Frankfurt School in the middle of the 20th Century, and especially Max Horkheimer in his Critique of Instrumental Reason. Horkheimer maintained that this model objectified people, reducing them to intelligent machines in charge of solving operational problems through a combination of techniques and personal skills. The ability to ask for the reason or purpose of the activity was lost. People become mere instruments subjected to the dominance of the profit rationale in an improvement process with infinite demands. Human reason, that faculty that separates us from other living beings, becomes a simple tool. We are accounting specialists, fantastic engineers, excellent salespeople, but we don’t go beyond the increasingly efficient management of resources to increase the profit margin. Therefore, we are compensated and we should feel satisfied.
However, in the working world today, we are not content with being experts in the application of techniques that improve performance. We want something more. We are looking for that purpose to which we can dedicate our time, experience and skills – an important part of our life. And for that, we must expand the use of reason: utilize its evaluative capacity, which not only deals with the means, but these means are the consequence of certain purposes based on previously defined values. First the “what” and then the “how”. And if we use reason to define the “whats”, the profit rationale is no longer the only aim and we expand the possible impact of companies. In my opinion, this transition is underway.
Robust evidence of this transition already exists. The incorporation of “sustainable” environmental or social goals at many companies or investment funds is evident proof of having a purpose or commitment to improve one of the United Nations Sustainable Development Goals, or any other social objective – whether it is poverty, hunger, gender equality or clean energy. An example of this is BBVA’s commitment to mobilize €100 billion by 2025 to finance sustainable businesses that help reduce the effects of climate change.
This shift toward a purpose with a social impact inevitably leads to the redefinition of the concept of “value creation” for the company, as it is no longer limited to maximizing profit for shareholders. An example is the existence for years now of indexes like the Dow Jones Sustainability Index or FSE4Good, which include companies evaluated based on criteria related to economic sustainability, environmental impact, corporate governance practices and social efforts. It is the investors themselves who have included social impact objectives into their decision-making process. Another example of how to measure this expansion of value and social impact is the BBVA Microfinance Foundation’s Social Performance Report.
In short, I would dare to say that we find ourselves in a historic moment: the definition and roll-out of a purpose with a social impact is a unique opportunity to find another way to give meaning to what people do and build a better world. Defining the purpose and putting it into practice will distinguish certain companies from others. Like everything others, any decision is not neutral. There are economic, social, and possibly political, consequences that come with taking a position in the social debate and joining the discussion regarding what is preferable for people or even for the planet. But I’ll leave that for next time.
- J Ortega y Gasset, “The Revolt of the Masses”, Orbis, 1983.
- JF Lyotard, “The Postmodern Condition”, Cátedra, 1994.
- “COVID-19 and the employee experience: How leaders can seize the moment” June 2020, McKinsey.com.
“Igniting individual purpose in times of crisis”, August 2020. McKinsey.com.
- M Horkheimer, “Critique of instrumental reason”, Trotta, 2002.