It’s Important to Include Stakeholders in Defining an Organization’s Purpose

As the concept of purpose-driven organizations becomes more common, the way in which companies define their purpose gains importance. A new essay for The European Business Review — co-authored by Venkat Ramaswamy, professor of marketing at the Ross School of Business — argues that an enduring organizational purpose must be co-created by the business’s stakeholders, not just its executives.

“It’s one thing to co-create a purpose statement, but another to bring it to life,” writes Ramaswamy and co-author Nicholas Ind of Kristiania University in Norway. “It requires commitment over time and a willingness to involve people in the development of the purpose.”

The authors detail five specific principles organizations should follow to enact their purpose. 

1. Simple, but… “A purpose statement only acquires meaning when it is used to steer the actions of stakeholders.” 
2. Co-create it. “If a purpose is to meet the needs of stakeholders, it should not simply be a managerial creation, but rather the result of a participative and involving process.”
3. Integrate it. “A core benefit of a clear purpose is its role in decision-making... a purpose that is lived can guide strategy, but also the detailed everyday decisions that people make.
4. Let go. Alongside the managerial commitment to deliver on a purpose, organizations need to recognise that they also have to let go of the purpose and let others in their experience ecosystems build on it, develop it and enrich it. 
5. Communicate outcome impacts. “Often purpose statements deal in generalities about a future state – policies rather than outcomes and their impacts. This inhibits their organizational relevance, because it is hard to see what the impact will be and how stakeholders can contribute to it.”

The authors also offer parting thoughts on keeping a purpose relevant.

“This co-creative approach means a purpose has to be seen as a fluid, ever-evolving idea rather than something fixed,” they write.