“Who cares about our Core Purpose?” I thought when I joined my first company. “Isn’t a Core Purpose just a few vague nice-sounding words in an employee handbook?”

I couldn’t have been more wrong! As the company grew, growth pain points became more and more visible – which made me understand the absolute necessity of a core purpose. A core purpose briefly states why what you do matters; it explains the difference you make in the world.

As a reference point to help make decisions, a crystal-clear core purpose directs all the company’s energy and resources around the right activities, and makes it straightforward to decide not to pursue shiny opportunities. It also serves as a rallying cry for your team – and people are much more productive when they believe that what they do matters in the world. As a result it helps you grow faster and with less pain because resources are used much more efficiently.

What is a Core Purpose?

A Core Purpose (sometimes called “Mission Statement”) is the organization’s fundamental reason for being. It succinctly states why what you do matters (beyond profit); it explains the difference you make in the world, and why you do what you do. It captures the heart and soul of the business. As a reference point to make strategic decisions it makes it easier to decide which business opportunities not to pursue. It is the answer to the following questions:

  • What is it that attracted the founder in this industry (beyond profit)? What is the distinct reason that you started this, keeping in mind that you may have been successful in any industry?
  • What are you passionate about in your business?
  • Why do we exist as an organization?
  • Why does what you do matter?
  • What would be missing in the world if our company went away?
  • What is driving you? Why do you get out of bed every morning, even when business is bad?

The Core Purpose is your reason for being, beyond profit: making money is a result, not the fundamental purpose of your company. This being said your Core Purpose is linked to your profit driver: If you do your core purpose really really well (and often), you will make a lot more money. Core Purpose and Profit go hand in hand; you need to look at the world through both lenses at the same time. If one lens disappears you either become a non-profit and/or your growth prospects vanish, or you lose your soul.

Examples of Core Purpose

  • During their conversation to identify their Core Purpose, the leadership team of a company that decorates public spaces (eg shopping malls) for Christmas realized that they love it when they create these beautiful landscapes sceneries because then kids come in and run and laugh and have fun, which makes their parents happy. They defined their Core Purpose as: we exist “to create magical and memorable experiences that bring joy.”  It is inspirational and captures the heart and soul of the company – and it is also useful on a day-to-day basis: They use their Core Purpose as an input to their hiring and training decision criteria, what their goals and strategic priorities should be in the next 12 months,… As you notice their core purpose is connected to their profit driver: the more magical and memorable experiences they create, and the better they get at doing that, the more money they make.
  • Ashiana is a large real estate developer in India that builds developments with amazing community services in the middle, where vibrant communities live – they have dancing lessons, education centers,… Ashiana also maintains and services their developments forever, unlike their competitors, which typically sell developments off when they are built. They are driven by creating happy vibrant communities and they want to keep this happiness alive. Their Core Purpose is: “Nurturing smiles.” Similar to the example above you can easily figure out how a company in the same field but with a different core purpose would hire different people, would have different goals, and would have different strategies to achieve these goals. As an aside: here again the Core Purpose is linked to the profit driver: the more “Smiles” they nurture, the more money they make.
  • Zappos: “Delivering happiness.” There are many other online shoe stores, but Zappos’ approach is different – because their Core Purpose is not to deliver shoes, but to deliver happiness.

Why do you need a Core Purpose?

  • Employee engagement: a Core Purpose connects the team to something that is bigger than themselves, a shared vision, a rallying cry: it is a deep human need. It can align the leadership team and bring the team together. When that happens, you get much more out of people. It helps bring the right employees in, while it repels people who are not aligned with your Core Purpose. Research shows that if you ignite and capture people’s hearts, not just their heads, they will give you 40% more discretionary effort. Example: military people are not always well paid, and yet they are willing to risk their lives for what they believe in. Inversely if your company is in it only because of the money, without a higher Core Purpose, you are not tapping into the deeper human potential of your team. Similarly, employees who are in it just for the money won’t stay long when the company faces turbulence.
  • Clarity: It makes it easier to decide which strategic initiatives not to pursue, as it provides decision-making discipline. A Core Purpose provides guidance about what to preserve and what to change. A Core Purpose is the DNA for every strategic decision: it helps focus on the right things, and it helps say “no” to tempting, yet distracting initiatives. Without a clear Core Purpose, it is easy for management to get distracted indeed: any potential opportunity is worth pursuing, as long as their net present value is positive
  • Sanity: it can help keep toxic thinking and corruption at bay, because it defines a higher purpose beyond profit. It gets you beyond greed. Profit is important, but a “greed-only” business model brings crazy people and gets them to do crazy things.
  • Sustainability: when you start a company the core purpose may be clear to you, even if it is not formalized. As your company grows the core purpose becomes blurry because more people around you are involved in decision-making. Articulate it clearly and repeat it often to ensure that everybody is on the same page.

How do I know that I have identified the right Core Purpose?

  • Is it short and easy to understand by anybody in the company? Example: the Core Purpose of the Little Potato Company is: “Save the potato and feed the world better“: the potato consumption has been declining (hence the need to save them); in line with their Core Purpose this company created colorful, more nutritious, and more flavorful potatoes.
  • Is it inspirational? A core purpose has to get you and your team excited, it has to be emotional. For example: to the question “Why did you start this business?”, the founder of a manufacturing company starting crying: “I started this business to give an opportunity to everyone and anyone”: his business was an opportunity for him to hire “less employable” people (eg older employees (e.g. older employees).
  • Does it capture the heart and soul of the company? Is it truly why you exist? A Core Purpose is not a tagline or a slogan. Don’t have marketing touch it until it is finished: marketing thinks in terms of customer needs – this is not what a core purpose is. A Core Purpose is put together with the founder and the executive team. When it is done you can decide whether to communicate it externally (or not).
  • Would the Core Purpose still be relevant in 100 years? A Core Purpose is timeless.
  • Is your Core Purpose alive in your organization? The Core Purpose, together with core values, BHAG, and priorities, should be repeated frequently to the team to remain top of mind.