Drivers of organisational purpose
Whether the organisation values shareholders over stakeholders, or vice versa, will be evident in its purpose. Organisational purpose is discerned by economic and non-economic determinants.
An economic purpose aims to fulfil the wealth-creation objective of shareholders. This requires reliable intelligence on competitors, the company’s cost structure, consumer preferences and possession of appropriate resources to seize market opportunities.
The consequence of a wholly economic purpose is that managers’ fixation on profit-maximisation may encourage unethical behaviour to the detriment of other stakeholders. For example, when organisations tighten their belt to increase profits available to shareholders, they may cut back on customer service personnel, employee training and quality suppliers in favour of cheaper and often inferior ones.
On the other hand, a non-economic purpose aims to realise the social and community needs of stakeholders as communicated in the mission, vision and values statement. Most organisations have formal and advertised statements, while others have an unwritten ethos that guides their behaviour and activities.
The vision of the organisation is its ideal state, where it wants to be in the future. The mission is the activities it seeks to undertake to achieve that ideal state, and values are the philosophy that guide daily operations. Over time, the vision, mission and values give rise to the personality or culture of the organisation. Let’s summarise:
- Vision statement: The ideal state and destiny of the organisation. What do we want to achieve?
- Mission statement: The activities of the organisation. A clarification to stakeholders about what needs to be done, the business they are in and what difference it makes.
- Value statement: The core and enduring principles that guide the organisation’s operations regardless of events and business circumstance.
Contemporary organisations are mostly hybrid and will point to economic and non-economic purpose in their activity. To fully understand their degree of profit or social-maximisation, and who and what they stand for, an analysis of organisational performance and interaction with various stakeholders produces a better picture. It is possible and often the case that organisations are deliberately ambiguous, neither economic nor social in their purpose.
Visit the corporate websites of the world’s most valuable brands in 2019 and extract their vision, mission and value statements. How do these statements compare with your and the public’s perception of these companies? Discuss in the comments area.
The companies are:
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