BM_IMD_REPORT-How-Authentic-is-your-Corporate-Purpose

1. Defining The Business Challenge: Why Does An Authentic Corporate
Purpose Matter?
Many management scholars have tried to articulate what exactly corporate purpose means. For
example, almost 80 years ago, Chester Barnard (1938: 82) stated that a company comes together
when the following three things occur concurrently: (1) there are people who communicate with
each other; (2) there is an action/task to be completed; and (3) there is a common purpose. He saw
defining this common purpose as a core task of leadership.
Yet, success in both defining and implementing a common purpose is of necessity based on the
willingness of individuals in organizations to cooperate. According to Barnard, individuals will usually
act un-cooperatively unless there is an objective that unites them. However, simply having a defined
purpose does not mean that people relinquish their individual self-interests:
A purpose does not incite co-operative activity unless it’s accepted by those whose efforts will
constitute the organization (Barnard, 1938: 86).
More recently, scholars such as Collins and Porras (1994), Ellsworth (2002) and Binney (2006) have
built on Barnard’s initial ideas about corporate purpose.
Collins and Porras (1996: 68) stated:
Core purpose is the organization’s reason for being. It does not just describe the organization’s
output or target customers; it captures the soul of the organization. A primary role of core
purpose is to guide and inspire.
Ellsworth (2002: 4) defined corporate purpose as follows:
Corporate purpose sits at the confluence of strategy and values. It expresses the company’s
fundamental value — the raison d’être or overriding reason for existing. It is the end to which
the strategy is directed.
Binney (2006) defined corporate purpose as:
A shared sense of “Why do we exist?” and “What is the essence of how we do things around
here?” It was what gave exceptional companies a compass to steer by, and enabled them to
adapt and thrive in periods of great economic and social change.
We integrate the above, and define corporate purpose as follows:
Corporate purpose is a company’s core "reason for being.” It is the organization’s single underlying
objective that unifies all stakeholders and embodies its ultimate role in the broader economic,
societal and environmental context. Corporate purpose is often communicated through a
company's mission or vision statements, but it may also remain informal and unarticulated.
Through this study, we are interested in understanding what determines the authenticity of a firm’s
corporate purpose. Since “authenticity” is generally defined as being “true to oneself,” we further
define authenticity of corporate purpose, as the alignment between a firm’s perceived corporate
purpose and the actual strategic decisions and actions that a firm takes.
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