Why Corporate Purpose Statements Often Miss Their Mark

Christopher Michaelson Headshot

By Christopher Michaelson, Douglas A. Lepisto and Michael G. Pratt

By Christopher Michaelson, Douglas A. Lepisto and Michael G. Pratt

In extraordinary times, a statement of purpose can serve as an organization’s anchor. A clear reminder of a company’s core identity grounds employees, customers, and other stakeholders, who may feel adrift — enabling them to focus on addressing critical problems. Most recently, the coronavirus pandemic has prompted the world to reconsider what work and which organizations are essential to society’s function. And unrest over social injustice has led many organizations to reflect on their role in promoting diversity, equity, and inclusion. These important initiatives will be most effective if they involve a close examination of purpose.

Of course, even in ordinary times, articulating a corporate statement of purpose has long been considered vital to success. It provides a justification for a company’s existence, as well as a blueprint for navigating what that company does. The marriage of why and what has become increasingly important: Cultural attitudes toward business have broadened, from a focus on shareholder value to the need to also contribute to society, and emerging generations of employees often prioritize meaning over money. An effective purpose statement makes this why–what connection clear. But the reality is that many statements fall short: They rely on platitudes, fail to connect with an audience or beneficiary, or lack balance between being abstract or specific.

To better understand these shortcomings, we analyzed nearly 2,000 responses when CEOs were asked to describe the purpose of their organization. These CEOs, who were participating in a survey conducted by a professional services firm, led companies of diverse size and industry representation, headquartered in different regions around the world. Some respondents quoted polished corporate purpose statements, whereas others improvised on the spot; statements of purpose are not limited to what can be found on a company’s website. In all cases, we inferred the response was the CEO’s most readily available and genuine expression of his or her organization’s purpose, which a CEO is charged with representing to multiple stakeholders. Incredibly, we found that 93 percent failed to state why their company is in business. In other words: Most purpose statements lack any meaningful sense of purpose.

Read the full Strategy + Business article.
Ronni Burns is Adjunct Professor in the Business and Society Program.