{"id":82110,"date":"2022-10-29T15:56:00","date_gmt":"2022-10-29T19:56:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=82110"},"modified":"2022-10-31T12:00:12","modified_gmt":"2022-10-31T16:00:12","slug":"organizational-purpose-2","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/organizational-purpose-2\/","title":{"rendered":"How Organizational Purpose Outshines Profitability"},"content":{"rendered":"\n

How is an organization’s purpose<\/a> determined? Should profit be a driver or merely a byproduct?<\/p>\n\n\n\n

The strongest driver of a company\u2019s culture is its overriding purpose in the world. As Fr\u00e9d\u00e9ric Laloux explains in Reinventing Organizations<\/em>, this purpose is not dictated from on high but emerges organically from the work the company does and the values of its members.<\/p>\n\n\n\n

Keep reading to learn about the preeminence of organizational purpose<\/a> in visionary companies.<\/p>\n\n\n\n\n\n\n\n

Organizational Purpose<\/h2>\n\n\n\n

Laloux contends that, in a visionary company<\/a>, organizational purpose replaces profitability <\/strong>as the reason for the company\u2019s existence while guiding how it interacts with competitors, clients, and the community at large. For example, a software company whose higher purpose is to raise computer literacy in impoverished areas might offer discounts to elementary schools and libraries, or partner with them to seek grants for funding.<\/p>\n\n\n\n

(Shortform note: In Start With Why<\/em><\/a>, Simon Sinek<\/a> argues that a defining purpose is not only valuable for organizational structure but is also an essential component of connecting with customers<\/a>. Without a clear, inspirational purpose, marketers must rely on manipulation tactics<\/a> that may lead to short-term gains but don\u2019t establish long-term trust.)<\/p>\n\n\n\n

Laloux asserts that, from a visionary perspective, organizations have a calling, just as people do. While an organization\u2019s calling is initially determined by its founders, it can change. The job of those in leadership roles is not to dictate what that calling will become but to allow the company\u2019s purpose to emerge and shift organically over time. The needs of the world may align with the company\u2019s values in surprising ways, pushing the organization in new directions. <\/p>\n\n\n\n

(Shortform note: More has been written about individuals\u2019 <\/em>search for purpose than that of entire organizations, but many of the same ideas apply. In The Success Principles<\/em><\/a>, Jack Canfield states that you can derive a statement of purpose<\/a> by articulating your positive traits and aligning them with your ideal vision of the world. In Who Will Cry When You Die?<\/em><\/a>, Robin Sharma recommends regularly stepping back for a big-picture view<\/a> of your place in the world<\/a> (or in our case, your organization\u2019s) and how your overriding purpose creates meaning.)<\/p>\n\n\n\n

The shift from \u201cprofit\u201d to \u201cpurpose\u201d as the prime motivator means that fear for survival is no longer an underlying factor. Laloux says that visionary organizations act from an attitude of abundance. When the mission is paramount, visionary companies will often aid their own competitors<\/strong>, if doing so helps them achieve their goals<\/strong>. <\/p>\n\n\n\n

(Shortform note: Even companies operating from the modern paradigm can engage in this practice. For instance, Microsoft\u2019s guiding purpose is \u201cto empower every person and every organization on the planet to achieve more<\/a>.\u201d In Hit Refresh<\/em><\/a>, Microsoft CEO Satya Nadella describes how in order to better focus on this goal, they began cooperating with Apple and Google<\/a>, turning their rivalry into strategic partnerships<\/a> that emphasize long-term goals rather than short-term competitive gains.)<\/p>\n\n\n\n

To be sure, profits are necessary, but visionary organizations view them as a byproduct of fulfilling the company\u2019s purpose. For example, the companies included in Laloux\u2019s study all perform very well against their rivals. Nevertheless, Laloux admits that his research may be colored by survivorship bias\u2014he did not survey any companies that implemented visionary practices and failed. (Shortform note: In Built to Last<\/em><\/a>, Jim Collins and Jerry I. Porras conclude that strong core philosophies are essential to long-lasting organizations<\/a> and that organizations don\u2019t have to choose between purpose and profit. Collins and Porras argue that a core philosophy has two components\u2014values and purpose<\/a>\u2014both of which must be concise and actionable.)<\/p>\n\n\n\n

Exercise: Determine Your Business\u2019s Overriding Purpose<\/strong><\/h2>\n\n\n\n

Laloux says that visionary organizations have a defining purpose beyond making profits and providing value for shareholders. This may be true of many organizations that have not yet adopted a visionary mindset<\/a>.<\/p>\n\n\n\n