For a brand to reach higher, it needs to go deeper
When I run purpose clarification workshops, I invariably have at least one leader tell me their purpose is to maximize shareholder value.
This is the kind of answer that comes from someone that's either posturing for the CEO or is too lazy or uninterested to really think about the question.
Focusing solely on maximizing shareholder value is troublesome. It has a history of leading to a litany of problems. These have included the prioritization of short-term gains at the expense of long-term growth that has led to mass layoffs, the spreading of a culture of everyone for themselves, and even the practice of turning a blind eye to questionable behavior.
Maximizing shareholder value should not be characterized as a purpose. It is an outcome. And for success today, it alone simply does not go deep enough.
Getting to the root of the problem
In 1970, economist Milton Friedman famously said, “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.”
While Friedman was all about the shareholders, today's visionary brands widen the perspective. They take into account the customers, the employees, and the communities they serve. In other words, all the stakeholders. They do this because they understand that greater success comes when we take into account all those that our efforts affect.
To be fair to Milt, that quote is over 50 years old. But what is troubling is that many companies still operate with this as their core belief. Let's look at why that's myopic.
Maslow weighs in
Maslow's Hierarchy of Needs is a well-known concept detailing human motivation. The hierarchy is most often depicted as a pyramid with the base needs at the bottom and aspirational needs at the top. The base needs are those things we need to survive, like food and shelter. As we meet these needs, we move further up the pyramid to things like social needs and esteem. Ultimately, we work toward the topmost need – self-actualization (becoming everything you are capable of becoming).
Maslow's Hierarchy of Needs illustrates the problem with Friedman's theory on the purpose of business. Under his definition, If increasing profits is the sole purpose of a business, it will only help fulfill the bottom two tiers of the hierarchy for shareholders. Profits can get you food, shelter, and safety. But that's about as far as it goes.
More importantly, Friedman's theory doesn't address those who are most critical to the organization's success. Customers and employees. And it doesn't address the broader community – a constituency that has grown in importance to the success of modern organizations.
A BBC article highlights the problem with a quote from Hanover Insurance President and CEO Bill O'Brien, "Our traditional organisations are designed to provide for the first three of Maslow's hierarchy of human needs," he said. "Since these are now widely available to members of industrial society our organisations do not provide significantly unique opportunities to command the loyalty and commitment of our people."
We all need food, shelter, and safety. Brands that help fulfill these needs are valuable to us. But if this is all they help us do, they will never be viewed as anything but entities that help us cover our base needs. They will never get the same appreciation given to organizations that help us pursue our aspirations. Those brands are viewed as invaluable to us.
How to become invaluable
If we want to become an invaluable brand, we need to embrace a deeper purpose. We need to go beyond the base needs asking what difference can we help make in a life, a community, or even the world. I call this your Big Audacious Meaning. Then we need to invite all our stakeholders to help in the pursuit of that deeper purpose.
We all have a need to feel like our time here matters. We want to feel like our existence is meaningful. We accomplish that by doing the things that make a difference for those around us. That is what self-actualization is all about.
A smart brand realizes this need. It goes beyond shareholder gains to clarify a deeper purpose to help all those it hopes to serve feel like they are part of something that is making a difference. This can be in small ways (making a difference for just one life) or it can be in big ways (helping make the world a better place).
The magical part of this is that shareholder gains increase. The brand is rising to the top of Maslow's Hierarchy of needs and connecting with something invaluable to all stakeholders. As a result, stakeholders feel a stronger affinity to the brand. They become advocates and even evangelists.
It's easy to state that the purpose of business is to increase profits. It's easy because it's obvious – a business needs to be profitable to survive. But what if you're looking to do more than survive? What if you're looking to thrive? In that case, you need to look higher up the pyramid of needs. And then clarify your deeper purpose.
For another good read on the importance of developing a purpose with real depth, check out "It’s Not Only About Purpose, But How Deep It Goes" by Glenn Geffcken.