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The Importance of a Company’s Purpose

Written by Nigel Hartley, a Business Advisor with Shirlaws

Are you fully aware of the effect of culture on your brand?

Too often I hear business owners dismiss culture as ‘touchy feely” and having no real business value, which couldn’t be further from the truth. Your culture is your brand and without an aligned workforce, hopefully with a purpose, your business is worth nothing.

In the previous article, we talked about the importance of values and the challenge of living them. This time we delve into the importance of “Purpose” and the rise of the B Corp.

What is the company’s purpose and why is this important?

There is a rise in the number of companies touting purpose as a leading indicator. In a recent survey conducted by American Express, they found that Millennials were overwhelmingly looking for purpose in their career choices. Make no mistake other generations are also looking for purpose but as the Millennials now make up 33% of the working population and growing rapidly, they need to be listened to. According to the research “The upshot for businesses, is they need to have a greater purpose, while also being well-run and profitable” and “The evidence suggests that businesses with purpose deliver good growth and profits, but they do require different assumptions  about how the business is managed.”

If a company gets it right, purpose will be reflected in their culture (internal brand) and their external brand. A great example is: –

Patagonia, who are well known for high-end outdoor clothing, with revenues approaching $1bn a year. “You can serve the interests of your employees and do what’s right for the planet and still make great margins,” Rose Marcario says. Rose Mocario the CEO of Patagonia joined the company because she “was doing work that didn’t align with my values” in her previous company.

The mission statement for Patagonia is “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.

To add some balance to the argument, purpose is important in all types of organizations, and here are a couple of other examples: –

“Money motivates neither the best people, nor the best in people. It can move the body and influence the mind, but it cannot touch the heart or move the spirit; that is reserved for belief, principle, and morality.” – Dee Hock, Visa

“An organization’s culture of purpose answers the critical questions of who it is and why it exists. They have a culture of purpose beyond making a profit.” – Punit Renjen, Deloitte

For a business that is searching for their purpose I encourage them to start by asking the question “Why” am I in business, am I motivated/or not by my business, etc. To understand more about this, I suggest you watch the following video by Simon Sinek. It is now over 9 years old but has over 10 Million views which makes it the most downloaded business podcast ever.

In total transparency it is 18 minutes long but so great I have watched it many times. Once you have watched this, I suggest you watch a 90 second follow up video.

We talked about Patagonia earlier in the article and in addition, they are also a B Corporation and in fact, they were the first California company to sign up for this stringent designation in 2012.

What is a B Corporation and why are they important? Let’s start by looking at how Patagonia explains this.

“To qualify as a B Corp, a firm must have an explicit social or environmental mission, and a legally binding fiduciary responsibility to consider the interests of workers, the community, and the environment as well as its shareholders. A company must also amend its articles of incorporation to adopt B Lab’s commitment to sustainability and treating workers well. In addition, a B Corp must pay an annual fee based on revenues, biannually complete a B Impact Report (a lengthy questionnaire that measures social and environmental impact), meet B-Lab’s comprehensive social and environmental performance standards, and make that B Impact Report public, in order to receive the certification from B Lab.

Getting brands to reexamine their fiduciary responsibility and certifying B-corporations is part of B Lab’s larger goal to change the nature of business by changing corporate law. For-profit firms face legal pressure to forgo social goals in favor of maximizing profits. Current law requires corporations to favor the financial interests of shareholders over the interests of workers, communities and the environment. And nonprofit organizations and charities are often needlessly restricted in their ability to raise capital when they need to grow.”

There are currently more than 1,700 B Corporations worldwide, the majority being privately held small and medium-sized businesses. The demands of shareholder expectations make it harder for publicly traded companies to participate and the certification process can take many years, so it is not for the faint hearted.

However, another initiative underway is the “The B Team” a global nonprofit initiative co-founded by Sir Richard Branson and Jochen Zeitz that brings together a group of global leaders from business, civil society, and government to catalyze a better way of doing business, that prioritizes the wellbeing of people and the planet. Their ranks are growing and now include Marc Benioff of Salesforce and Oliver Bate of Allianz. Recently B team formed a partnership with B Lab’s to help companies to become B Corporations.

Setting up the next article and why I believe the importance of the B movement and having a purpose is so important is the role of the Millennial. We will delve into the rapidly changing demographics in more detail but suffice to say Millennials now account for over 35% of the workforce and one of their main reasons for taking a job is the purpose and values of a business, even if it means taking a lower salary.

Going back to the premise that culture is your internal brand, and this is increasingly important to the Millennials and then to generation Z, how are you responding? If the demographics are not aligned with your culture will they refer their friends to join the team and buy your products?

Shirlaws advises private enterprise how to grow, fund or exit their business in order to enjoy their life’s work. We help them find the confidence to change, the courage to invest and the freedom to choose their path. They love what they do, and so do we. www.shirlawsgroup.com. Nigel Hartley is a Business Advisor with Shirlaws and can be reached on 707 573 7154 or email at [email protected].

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