Purpose: Total Nonsense Or The Secret To A Successful Family Business?
Updated: Oct 2, 2024
Purpose has been taking a bashing. Terry Smith, the renowned fund manager, recently rebuked Unilever for their focus on purpose: “A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert – salads and sandwiches)”. Ouch.
Looking at the purpose statements Unilever has created for its brands, it’s easy to feel that perhaps Smith is right to call the emperor out over his new clothes. Unilever says the purpose of Hellmann’s is: “To inspire and enable 100 million consumers every year to be more resourceful with their food and waste less.” Knorr stock cubes exist to “reinvent food for humanity.”
Research suggests that Smith is in tune with the mood of the nation. Chief executives are 50% more likely to use social media to raise social and political issues than to talk about their customers or employees according to a study by Hanbury Strategy and Stack Data Strategy, the advisory firms. Yet the same study found that 56% of people believe that businesses do not understand and reflect their priorities.
Is it time to dispense with purpose? Or is the issue with the way it’s used and the grandstanding purpose statements that companies so often create? After all, Hellmann’s recorded 10% year-on-year sales growth in its most recent reported quarter.
The origins of purpose can be traced back to 1968 and a book by Chester Barnard in which he states that one of the essential functions of the executive is “to formulate and design purpose”. This idea goes to the heart of what a business is. The definition of a company is a number of persons united or incorporated for joint action, especially for business. The joint action is the company’s purpose.
Being united by a common cause is crucial to a successful business. Jim Collins, in his study of companies, Good to Great, observed: “That extra dimension [of great companies] is a guiding philosophy or a ‘core ideology’.” Doshi & McGregor in Primed to Perform find that: “[A strong brand identity] unites your team with a common objective, behavioural code, heritage and traditions. It feeds a total motivation culture.”
The problem is that purpose has become equated with social purpose. The phrase “purpose beyond profit” has become commonplace, as though purpose and profit are separable. In fact, the purpose of the business – it’s raison d’être that unites employees and attracts customers – is the thing that generates the profit.
For some companies their purpose is a social one. Patagonia’s purpose is “to build the best product, cause no unnecessary harm and use business to inspire and implement solutions to the environmental crisis”. This mission has been baked into the business from the start, born of Yvon Chouinard’s founding vision. It has a transparent supply chain, promotes social justice for its workers and creates durable products that, wherever possible, are made from recycled, fair-trade or organic materials.
Not every company will have a purpose that’s social. When businesses try to bolt on a social or environmental cause, that’s when problems occur. Last year Innocent created a television advert showing people of the world sailing a boat towards the edge of a waterfall while singing: “We’re messing up the planet, we’re messing up real good”. Last time I checked, Innocent sell convenience-based fruit juices in single-serve, single-use plastic bottles. Their advert feels a touch hypocritical. This isn’t to say that they shouldn’t – like everyone – be doing everything possible to address social and environmental issues. But it’s not their purpose. They’d be far better reconnecting with their original vision, which was around healthy, nutritious drinks.
Family businesses are well placed to know their purpose and keep it alive within their companies. The purpose of a business often stems from the founder. When this person leaves the business, the purpose can get lost or diluted. Family businesses have a bloodline between the founder and subsequent generations. They are well place to carry the torch and keep the flame alive. Doing so is powerful because it is what unites the interests of the family with the people they employ. It is everyone’s common cause. And the purpose should set the direction for developing values that foster the right behaviours in the business.
While purpose has taken a beating, if understood and used correctly then it’s still a powerful force within a business.
About the Author - Rob Gray is the Managing/Strategy Partner at Squad - a brand building firm from Manchester. He is well versed in the world of family business having worked with many family firms over the years including the likes of JW Lees Brewery, Vestey Group Holdings, Martin Moore and Tebay and Gloucester Services. www.squad.co/position-project.
