Your Reason For Being – Understanding Your Organisation’s Purpose
What is your Reason for Being?
Every organisation needs a reason for being. It needs a purpose.
Everything flows from the organisation’s purpose. Your vision, mission, strategy, and even the high-level design of your organisation all flow from your reason for being.
What is your reason for being? Do you know what your organisation’s purpose is? Can you complete the sentence “My organisation exists to…”?
We can categorise organisations into two basic types: for-profit and not-for-profit. The basic objective of a for-profit organisation is simply to make money for its owners and shareholders in the most efficient and effective manner possible. For a not-for-profit organisation, the objective is to use the money it receives through donations and grants as effectively as possible.
Both types of organisations need a purpose – a reason to exist. I shall discuss the role and importance of knowing your reason for being in this post; the importance of knowing your organisation’s purpose. And, most importantly, why your organisation should have a clearly defined purpose in the first place.
Importance of Reason for Being
What is the purpose of your organisation? why does your organisation exist? What impact does your organisation have on the community and on the world? What value does your organisation add?
If you have a Reason for Being statement, you will easily be able to answer these questions . If you can’t, you are missing out on a huge opportunity to get your employees fully engaged.
People are Motivated by Purpose
Research has shown that people who resonate with their organisation’s purpose are more motivated, are more committed to making a contribution and adding value. They aren’t just working for a salary, they want to make a difference.
Your Reason for Being statement clearly explains your organisation’s central purpose. It defines the essential thing your organisation must deliver to justify its existence. A well-written Reason for Being statement is unambiguous about the organisation’s primary constituency. The statement should also be unambiguous about the primary outcome it provides to that constituency.
As Stephan Haeckel wrote in his book The Adaptive Enterprise: Creating and Leading Sense-and-Response Operations, “A clear Reason for Being statement serves as the cornerstone of organisational context. It provides the reference point for formulating governing principles and the high-level design of the business.”
According to Haeckel, an organisation’s reason for being influences its values embodied in what he calls ‘governing principles’. It also directly influences the way the business system is organised.
A Reason for Bing, or Purpose Statement, is the driving force for decision-making because it reflects the organisation’s core values. It provides the basis for making trade-offs on how work should be organised. It also acts as a filter for potential business opportunities. We evaluate all business opportunities against the organisation’s fundamental purpose to see if they are compatible. If they are, we pursue that opportunity. If they’re not compatible, we reject them, regardless of how financially attractive they may seem.
All potential business opportunities should be viewed through the lens of the organisation’s purpose.
The Power of Higher Purpose
While most organisations have a Vision Statement and a Mission Statement, very few have a Purpose Statement. Many business owners and leaders only spend energy on discovering their organisational purpose when things are going badly, and they try to figure out what has gone wrong, and how they can get their employees more engaged.
Employees need a reason to be engaged
Employees are only motivated and engaged if they see a benefit in working for the organisation. When employees are aligned with the organisation’s purpose, they become motivated and engaged.
People are undoubtedly an organisation’s greatest assets. This is why we refer to people as human capital. It’s the people who work in the organisation who differentiate the organisation from others of the same type in the same industry. People make the organisation what it is, the organisation doesn’t make people who they are.
People make the organisation what it is; the organisation doesn’t make people who they are
When people get together and work for a common purpose, they are able to accomplish something collectively they could never accomplish alone.
People need a Sense of Meaning and Purpose
People make a difference to the organisation they work for when they have a sense of meaning and purpose. They become engaged and are motivated to perform at their best when they believe they are doing a meaningful and purposeful job.
David Packard co-founder of Hewlett-Packard, and author of The HP Way: How Bill Hewlett and I Built our Company, believed very strongly that the individual who is doing a good job works because he believes that he is doing something worthwhile.
People want to make a contribution and they do this best when they have a real and meaningful objective to work toward. They know what they want to achieve, they know it is meaningful and worthwhile, and they know that they are adding value to the organisation. When all of these things are in place, the individual is motivated and is able to perform at their best using their capabilities to the fullest extent.
A person who is only working for money, doesn’t add any value to the organisation – they only add expense
According to Packard, a person who is only working for money, doesn’t really make any positive contribution to the organisation. They only work to get paid. The work and the job they are doing has no real meaning for them. In reality, this person adds no real value to their organisation.
Perceived meaningfulness of work
Perceived meaningfulness of work requires that there is a direct link between the job task and organisational purpose. There must be a direct link between the work the individual does and the success of the organisation (Oldham and Hackman, 1975)
Robert H. Frank wrote “One of the most important dimensions of job satisfaction is how you feel about your employer’s purpose.” People are motivated to work if they buy into, and are aligned with, the purpose of the organisation.
A leader’s most important task is to connect people to their purpose (Quinn and Thankor). Effective leaders align the organisation with a higher, authentic purpose. The purpose of the organisation must become part of the collective conscience of everyone in the organisation.
David Packard sums up the reason why a company exists in a speech he gave to a group of HP managers in 1960.
“I think many people assume, wrongly, that a company simply exists to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reason for our being.”David Packard
Importance of Purpose and Profit
A company should make money and be profitable – that goes without saying. But making money is not, and should not, be the prime reason for a company’s existence. Profit is simply a measure of success. If your company is adding value to your customer, it will make money. And if you manage your company well, it will be profitable.
David Packard believed that it was very important to understand the real reason for a company’s existence, over and above the need to make money.
“So with that in mind, let us discuss why the Hewlett-Packard Company exists. I think it is obvious that we started this company because Bill and I, and some of those working with us in the early days, felt that we were able to design and make instruments which are not as yet available.”
“The real reason for our existence is that we provide something which is unique. Our particular area of contribution is to design, develop and manufacture electronic measuring instruments.”Dave Packard
If you want your employees to be motivated, work hard and to make a positive contribution, you need to identify your organisation’s real reason for its existence. After you have identified your purpose, you must then communicate that higher purpose to all your stakeholders, both internal and external in the most effective manner possible.
The Difference between Reason for Being, Mission and Vision
While most organisations have a vision and mission, the majority don’t have a clearly defined purpose or reason for being. Most executives haven’t really given any thought to that most fundamental of questions – “Why do we exist?”
You must know the ‘why?’ (purpose) before you decide on the ‘where?’ (vision) and ‘how?’ (mission).
So, what is the difference between organisation purpose, mission and vision?
Purpose – Your Reason for Being
A reason for being statement describes what the organisation exists to do, as opposed to what the organisation must do to exist. It defines the essential things the organisation must deliver to justify its existence.
Your Reason for Being describes what your organisation exists to do, as opposed to what the organisation must do to exist
You must start with the reason for being, the purpose of the organisation, before you can define your vision and mission. Organisation purpose is like a beacon on a hill. When lit, the beacon can be seen for miles. It guides people in the right direction, it can also act as a warning of impending danger. We can describe organisational purpose as being the ‘north star’ or ‘lodestar’ for the organisation. Sailors and travelers in ancient times used the stars, and the north star (Polaris) in particular, to navigate and find their way. Polaris (the north star) is unique, because no matter where you are in the world, the star always remains in the same place in the sky. Simply look to the north, just above the horizon, and you will see a bright shiny star.
An organisation’s Reason for Being statement serves the same purpose. It guides the actions of every person in the organisation. It gives direction. Regardless of where you are in the organisation, if you simply follow the lead given by your organisation’s purpose you won’t lose your way.
Your vision is your ultimate destination. It is where you want your organisation to be at some point in the future. You will achieve your vision if you implement your strategy effectively. Your vision flows from your reason for being.
Your mission is how your organisation intends to serve its purpose and its reason for being. You derive your mission statement from your organisation’s purpose.
Unfortunately, there is some confusion between the purpose of the organisation and the mission. Many organisations mistakenly believe that their mission statement is their reason for being. They are not the same because they serve two different purposes. Purpose guides your decisions and actions; Mission describes how you make decisions and what actions you will take.
A mission statement, according to Chris Bart, professor of strategy and governance at McMaster university, is a sentence that describes an organisation’s function, markets and competitive advantage. Commercial mission statements typically consist of three elements; target audience, the product or service on offer, and what makes the organisation unique. This is not the same as your organisation’s purpose.
“Purpose guides you, mission drives you, vision is what you aspire to.”Brian Sooy: The difference between Purpose, Mission and Vision
Hewlett-Packard and Intel
The best way to show the difference between purpose, mission and vision is to use examples. I have selected two companies with a clearly defined purpose, mission and vision.
Hewlett-Packard and Intel Corporation are two world-class companies, and both have been world-leaders in their own respective industries. Both companies are in the computer technology industry, located in Silicon valley in the USA. but they are not direct competitors.
Hewlett-Packard, or HP as it is commonly known, was founded in 1939, in Palo Alto, California by two electrical engineers Bill Hewlett and David Packard. HP manufactures measuring instruments, computers, and printers.
Intel Corporation was founded in 1968 by Robert Noyce, an electrical engineer, and Gordon Moore, a chemist. Intel makes semi-conductor computer chips and integrated circuits.
Comparing Purpose, Mission and Vision for Intel Corporation and Hewlett-Packard
|We create world-changing technology that enriches the lives of every person on earth.
|Our purpose is to advance the way people live and work.
|We engineer solutions for our customers’ greatest challenges with reliable, cloud to edge computing inspired by Moore’s Law.
|We earn customer respect and loyalty by providing the highest quality and value. We achieve sufficient profit to finance growth, create value for our shareholders and achieve our corporate objectives.
|To be the trusted performance leader that unleashes the potential of data.
|Our vision is to create technology that makes life better for everyone, everywhere – every person, every organisation and every community around the globe. This motivates us – inspires us – to do what we do. To make what we make. To invent, and reinvent. To engineer experiences that amaze. We won’t stop pushing ahead, because you won’t stop pushing ahead. You’re reinventing how you work. How you play. How you live. With our technology you’ll reinvent your world.
While there are distinct differences between purpose, mission and vision, we can see that there is a relationship between the three. Mission and vision flow from purpose.
Your Reason for Being Statement (Organisation’s Purpose)
Stan Phelps in his blog post on LinkedIn suggests that defining your corporate purpose begins with understanding your reason for being. This is the fundamental ‘Why’ the company was started in the first place. First, you need to understand what your reason for being is, and second, you need to find a way to bring your reason for being to life. You do this through your purpose statement.
The three elements of a purpose statement
There are three essential elements that you need to address to develop your purpose statement (Haeckel), these are:
- The primary purpose of your organisation
- Your primary constituency
- The primary constraint within which you work
Words matter. The way you word your purpose statement will directly influence the way you design your organisation. An organisation is a system which changes and adapts to its environment. Every part of the system should work together to achieve the organisation’s purpose. You have direct control of how the critical elements of the organisation interact to fulfil its reason for being. You do this through your high-level business design. Your organisational purpose directly influences the structure and processes within your organisation.
1: Primary Purpose
An organisation must have a primary purpose. This is the reason why your organisation was started in the first place. Intel Corporation was founded for the sole purpose of manufacturing and selling semiconductor-based computer chips. Their purpose statement reflects this:
“We create world-changing technology that enriches the lives of every person on earth.”Intel Corporation Purpose Statement
Hewlett-Packard was founded for the sole purpose of designing, developing and manufacturing electronic measuring instruments
“The real reason for our existence is that we provide something which is unique. Our particular area of contribution is to design, develop, and manufacture electronic measuring instruments.”Hewlett-Packard Purpose Statement
The original Hewlett-Packard company split into two companies in 2015; HP Inc and Hewlett Packard Enterprises Company (HPE). HPE’s current purpose statement reads:
“Our purpose is to advance the way people live and work.”HPE Revised Purpose Statement
Neither Hewlett-Packard nor Intel were founded simply to make money. They had a higher purpose. It was this higher purpose that attracted talented engineers and provided the motivation and commitment from all employees to make both companies world-leaders in their respective industries.
2: Primary Constituency
Your primary constituency is the second element in your purpose statement.
Every organisation interacts with one or more constituencies every day. We normally associate the word ‘constituency’ with politics and elected officials. However, because organisations are political systems, we can also use it to describe the complex relationship organisations have with their various stakeholder groups.
Definition of Constituency
A ‘constituency’ is essentially a group of people with shared interests, values or opinions. An organisation’s constituency typically include: business owners, shareholders, investors, employees, employee unions, customers and suppliers, just to name a few. Each of these constituencies are stakeholder groups with their own interests, needs, and wants.
Successful leaders and organisations know who their various constituencies are, and understand how to deal with them.
When we develop our purpose statement we need to clearly identify who our primary constituency is. This is the stakeholder group that is at the very heart of our reason for being.
Purpose determines primary constituency
For example, if the reason for being is to make money, then the primary constituency are the owners and shareholders of the business. The primary constituency is the customer, if the reason for being is to serve a customer’s need or provide solutions to customer problems. If the primary purpose is to engineer solutions to solve customers’ greatest challenges – then the primary constituency is the employee, or employee group, who is able to engineer those solutions.
There can be only one primary constituency. The challenge is to identify who or what that constituency is. Remember, words are important.
Let’s have a look at our two examples to see if we can identify who the primary constituency is for HP and Intel.
Intel’s Primary Constituency
When we analyse Intel Corporation’s purpose statement: “We create world-changing technology that enriches the lives of every person on earth,” we can see that we have two possible constituencies.
The first constituency is the people who create world-changing technology, and the second constituency is ‘every person on earth.’
Intel’s primary constituency are the people, the employees, the engineers, who create world-changing technology that enriches the lives of every person on earth. The organisation exists to create technology that will enhance the lives of everyone on earth. Intel Corporation needs competent engineers and inventors to create that technology.
The wording of the mission statement also reinforces the fact that employees are the primary constituency.
“We engineer solutions for our customers’ greatest challenges with reliable, cloud to edge computing inspired by Moore’s Law.”Intel Corporation Mission Statement
The emphasis in the mission statement is on engineering solutions for customers, and not on the customers themselves. The employees who do the engineering are the primary constituency. For Intel Corporation to fulfil their purpose, company management must design and structure the company in such a way as to encourage innovation and creativity. They need innovative and creative engineers, and those engineers need the space to be innovative and creative.
Hewlett-Packard’s Primary Constituency
Hewlett-Packard’s primary constituency are their customers. The purpose statement reads “Our purpose is to advance the way people live and work.” This is reinforced in the mission statement: “We earn customer respect and loyalty by providing the highest quality and value.” Making profit is important, but is it secondary to creating customer value.
3: Primary Constraint
The third key element in any purpose statement is the primary constraint within which your organisation works.
A constraint is a limitation or a restriction. It is something that limits or controls what you can do. Every organisation operates within constraints. These may be imposed on the organisation from outside. Or you may self-impose the constraint, through the decisions you make.
Intel’s Self-Constraint – Moore’s Law
The Intel Corporation has a self-imposed constraint. Any solution to customer problems must be based on computer technology, and specifically on Moore’s Law.
The constraint that Intel Corporation has chosen to self-impose is that any solution to customer problems is based on computer technology, and specifically on Moore’s Law. Intel clearly indicates this constraint in their mission statement:
Gordon More, one of the founders of Intel, is credited with being the key inventor of the integrated circuit, commonly known as a microchip. He is also the author of ‘Moore’s Law’. This is not an actual law of physics, but more of an observation of the relationship between computing power and cost. Moore observed that while the number of transistors on a microchip doubled every two years, the cost of computers is halved. There is an inverse relationship between computing power and cost. As computing power increases, the cost of computers decreases.
This ‘law’ has had a profound impact on the computer technology industry as a whole and It has been the driving philosophy behind Intel’s success. It is hard-wired into their mission statement, which may or may not be a good thing going forward. By confining themselves to the semiconductor industry, Intel has chosen to operate in an industry that requires highly competent people to design and manufacture semiconductor chips, through highly automated mass-production processes. High productivity and economies of scale are the name of the game. This is a very difficult game to play and the stakes are very high.
Hewlett-Packard’s Primary Constraint
While Intel have locked themselves into the semiconductor industry, Hewlett-Packard have taken a different approach. Their vison is to create the technology that makes life better for everyone, everywhere. They are undoubtedly a technology-driven company, but have not specified what that technology will be. HP are broadly confining themselves to operate in the computer technology space. This means that Hewlett Packard are able take advantage of many more business opportunities than Intel. HP’s primary constraint is the computer technology industry as a whole, and not just a subset of the industry.
Identify the Primary Constraint for your Own Organisation
You need to identify the constraint(s) within which your organisation operates when you develop your purpose statement. This will usually be governed by the industry you operate in. When you choose a particular industry to do business in, you are automatically constrained by the ‘rules of the game’ of that industry.
How to Develop Your Reason for Being Statement
Developing a meaningful Reason for Being or Purpose statement is a challenging process. It forces leaders to re-evaluate how the business works. It forces leaders and managers to think deeply about their organisation.
Word your statement in such a way that both internal and external stakeholders understand it clearly. The statement serves as the ‘north star’ for organisational behaviour.
There is nothing optional for the reason for being. The meaning of words matter. A different phrasing of words may give a completely different meaning, so take care when crafting your purpose statement. An effective reason for being statement can have only one primary purpose and one primary constituency. The statement must be unambiguous.
Eight steps for creating your purpose statement
1: Assemble the Reason for Being/ Purpose Statement team
Decide who will be part of the team. This will usually be senior executives and managers of the organisation. You need people who have the power and authority to make decisions and carry out actions. Remember that organisational purpose has a direct impact on the high-level business design. What you choose to put in your reason for being statement will influence the structure and operation of the organisation. Structure follows strategy, and strategy follows the organisation’s purpose. The people who develop the purpose statement should be those who have the authority to change the structure of the organisation if required.
For best results use a professional facilitator to lead the team through the process.
2: Get each member of the team to write a single sentence beginning with the words ‘[Name of Company/Organisation] exists to…’
Each member of the team completes this statement individually. All members must participate, and write down their own idea of why the organisation exists. It is important that you do this before the team gets together as a group to craft the purpose statement.
After writing their statement, the team member submits it to the facilitator responsible for coordinating the effort.
3: Analyse each statement
When the team get together as a group, each team member reads out their reason for being statement to the rest of the team. The team analyses each statement in turn to identify primary purpose, primary constituency, primary constraint and any other non-negotiable constraints or qualifiers.
The role of the facilitator is to guide the team through the process, and to facilitate an exchange of ideas.
4: Identify common themes
The team, led by the facilitator, goes through each statement and identifies common themes. The objective is to identify and agree on primary purpose, primary constituency and primary constraints for the group as a whole.
5: Write the purpose statement
The team, led by the facilitator writes the purpose statement incorporating the agreed primary purpose, constituency and constraints.
6: Refine wording
Rework the statement. The group as a whole must agree on the wording of the statement.
All stakeholders, both internal and external, will see the published statement. For this reason, it is important to word it in a way that all the organisation’s constituencies understand it clearly.
7: Get input and buy-in from others
Get input from others in the organisation. Remember, the purpose statement should resonate with all employees. It will serve as the ‘north star’ for individual and group behaviour.
8: Publish your purpose statement
Publish your purpose statement and communicate it throughout the organisation. The organisation’s purpose must sink into and become an integral part of collective conscience throughout the organisation.
Lastly, when you communicate your organisation’s purpose to employees, customers and others stakeholders remember that while words matter, actions are even more important. You need to walk the talk. Be true to your organisation’s purpose. be true to your Reason for Being.