What business term is being defined as what an organization is why it exists and its reason for being?

Organizational purpose and meaningful work are frequent topics in the media and businesses. And rightfully so. People expect more from brands and their employers than ever before. They want organizations to take a stand on important social issues and treat their employees, communities and customers well.

Purpose, like mission, defines why an organization exists. Purpose and mission are both foundational, strategic business elements that help organizations stay on track toward achieving their ultimate objectives. Purpose- and mission-driven companies reap numerous benefits. These companies can more effectively navigate change, recruit and retain employees, and build deeper trust and loyalty with customers.

People sometimes use the terms interchangeably, but there are important differences between purpose and mission. Businesses must understand these differences to determine whether their organization is purpose- or mission-driven. 

While organizations must choose between purpose and mission, neither choice is better than the other. Both are valuable guideposts for businesses. The key is to understand the difference between purpose and mission. Then, choose the one that best aligns with the organization’s reason for being. 

Organizations cannot be both purpose-driven and mission-driven. It’s much different in practice to be driven by purpose than by mission (and vice versa). Understanding the key similarities and differences between purpose and mission clarifies the best approach for an organization. 

Similarities between purpose and mission

Both purpose and mission:

• Define why an organization exists 
• Serve as an organization’s “North Star,” which helps align teams and guide business decisions
• Help inspire employees and attract loyal customers

Unique to purpose-driven companies

• Objective is to make a lasting, beneficial impact on society, often by creating a more ethical, equitable and/or sustainable world
• Aim to deliver an impact to a community broader than just those directly affected by their business (e.g., customers, employees, shareholders)
• Measure their success based on the impact they have on the specific social issues they’re trying to influence
• Must take an extra step to demonstrate they are acting according to their purpose through third-party validation
  • Examples of third-party validation: Certified B Corporation, Social Enterprise, Public Benefit Corporations, ESG reporting 
• Organize their business and operational processes around impacting the greater good
• A purpose is both timeless and often global in scope. It rarely, if ever, changes

The following businesses use the profit they make to address significant global issues and make a positive impact on the world.

• Unilever: To make sustainable living commonplace
• Patagonia: To save our home planet
• Danone: Bringing health through food to as many people as possible

Unique to mission-driven companies

• Objective is to deliver value back to their key stakeholders, including customers, shareholders and employees
• Aim to make a positive impact for a narrower set of stakeholders than purpose-driven companies. They don’t seek to benefit a broad population beyond their stakeholders 
• Measure their success through their revenue, profit, customer engagement and customer outcome (e.g., improved quality of life for a medical device company) 
• Responsible for holding themselves accountable to their mission through internal measurement and reporting 
• A company’s mission might change over time as the market shifts or business objectives change

The following businesses enrich or improve their stakeholders’ lives through their products or services.

• Google: Organize the world’s information and make it universally accessible
• Philips: Improve people’s health and well-being through meaningful innovation
• Southwest Airlines: Connect people to what’s important in their lives through friendly, reliable and low-cost air travel

How to choose purpose vs. mission

Choosing whether an organization should be purpose-driven or mission-driven is a critical strategic decision. The decision clarifies whom the organization serves and impacts its financial and operational processes. These factors influence the type of organizational culture and values needed to achieve the purpose or mission. 

Consider the following three questions when determining whether an organization should be purpose- or mission-driven:

1. Who is the organization serving? Is the organization willing and able to embed a broad-reaching, perhaps global purpose into its business, process and culture? Or, will the organization drive a greater impact by focusing on the stakeholders it directly impacts?
2. How committed is the organization to transparent reporting on all business practices? (e.g., reporting related to supply chain partners, sustainability, diversity, equity and inclusion, and corporate giving)
3. How well equipped and motivated is the organization to embed purpose into its business, legal, financial and operating structures?

Once an organization chooses a direction, the purpose or mission can’t simply live on a piece of paper. Leaders should activate it across the organization. They do this by using the purpose or mission to inform cross-functional business decisions, embedding it into the strategic plan and thoughtfully integrating it into the organizational culture.

What is meant by business organization?

What is the meaning of purpose in business?

What explains why a company exists?

What is a mission statement definition and examples?