Why purpose-driven businesses are few and far between

It's the latest corporate buzzword but 'purpose' isn't something that can be created overnight.

by Jack Torrance

What is the purpose of a business? The obvious answer is to make money for shareholders. A company’s owners appoint its board, which appoints its executive team, which hires and fires the rest of the people that make up the organisation. Therefore, in theory, all should be focused on maximising shareholder returns.

But that’s not a very exciting story to tell customers or potential new hires. And nor will it inspire under-pressure executives to succeed and to build a business with longevity – even if they do stand to be handsomely rewarded. A sense of higher purpose is clearly a desirable thing, as a couple of research reports have highlighted this week.

The total value of Britain’s businesses could increase by £130bn if they were more effectively ‘organised around clear corporate purposes that unite all stakeholders’, according to a report by the Big Innovation Centre (BIC). It’s a largely symbolic figure but you get the gist. A more sceptical take on the matter from PR firm Claremont Comms expresses concern that in some cases ‘purpose’ is becoming a shallow add-on in the same vein as a million useless CSR programmes, but nonetheless acknowledges that having a purpose can add real value.

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