Why Do Companies Exist?

There are those who think that businesses exist for solely utilitarian reasons: to satisfy customers, generate profits, create shareholder value or make the founders rich. You get the drift… Thousands of business pundits will tell you so.

Others think that businesses should be animated by some larger, enduring values-based Purpose, one that serves as sort of a moral compass to inspire and keep the organization and its people on a chosen course.

Classic examples of companies with a clear sense of Purpose include:

• Johnson & Johnson: “to alleviate pain and disease”
• Merck: “in the business of preserving and improving human life
• Disney: “to bring happiness to millions”

Those of us who worked at Apple in the 1980s were inspired by this mantra: Changing the way people live, learn, work and play. We were indoctrinated in this belief system, starting with Orientation, our first day on the job (think brainwashing, Apple style!)

It’s safe to assume that this notion still animates the company.

A Resource for Purpose-Seeking Organizations

Thought leader Nikos Mourkogiannis writes eloquently on this subject in his book Purpose: The Starting Point of Great Companies. I recommend it for founders, CEOs and senior executives who want to build and lead organizations capable of making lasting contributions.

Mourkogiannis describes Purpose as something larger and more enduring than strategy (in fact strategy exists to deliver on the organization’s Purpose).

A successful Purpose both drives a company forward and helps build sustainable competitive advantage. In the hands of an effective leader, Purpose becomes the engine of a company, the source of its energy. And you can tell, by a loss of energy, whenever there has been a lessening of Purpose…. This may precipitate some kind of crisis…

Great companies remain true to their Purpose over a period of 20 years or more, says Mourkogiannis. This theme is also echoed in the business classics Built to Last and Good to Great.

Doing Without a Sense of Purpose

Organizations that lack a shared sense of Purpose run the risk of degenerating into warring fiefdoms, inhabited by employees who feel enslaved to their paycheck, going through the motions for customers who feel hostage to uncaring front-line robots. We’ve all encountered companies with these characteristics (and some of us even work for them!)

If their products and services meet authentic market needs and their business model is robust, for a time such companies can survive, and the lucky ones even thrive. For a while…

But at some point they’ll be like cars whose drivers go faster than the area illuminated by the headlights… CEOs sometimes describe this situation as “having outgrown the company’s mission.”

Companies without Purpose can cause tremendous societal harm when they decline or implode, leaving thousands without jobs, customers with no one to maintain the products they’ve bought, and communities with an eroding tax base.

These days we face a daily onslaught of depressing business stories. Articles that detail the unraveling of corporate empires, the destruction of people’s retirement portfolios, the impacts on local communities struggling with demands for increased social services at a time of dramatically reduced revenues.

We’re seeing unparalleled wealth destruction as a consequence of all too many morally impoverished institutions.

It’s become personal.

As I fill out my tax forms and prepare to write a check to the IRS, it makes me angry to know that taxpayers like me are being forced to pay the price of organizations that operated without a larger sense of Purpose, those former greed-fueled Wall Street empires that were caught up in global financial shell games.

I hope the next generation of business leaders take a different path.