What is the difference between corporate purpose and corporate culture?

Key points

• Purpose involves why the corporation exists, the mission of the business
• Culture affects how things are done
• Different departments can view purpose from their perspectives
• Purpose is increasingly vital to shareholders
• Aligning corporate purpose with corporate culture can ensure that brands are delivering on their values
• Purpose is what gives meaning to work, but culture is what sets habits

Short term decisions can conflict with a company’s purpose, so it’s crucial for a company to decide what not to do as it is to determine what it will do.

There are many sides to understanding corporate purpose. It can involve social and ethical responsibilities and include the general creation of meaning and values. Different departments might look at corporate purpose from their perspective. For example, marketing may see it as being connected with the selling argument for its products. In contrast, HR may see it as creating a meaningful environment for employees to work. For this reason, it is helpful for the board to be involved in describing the purpose of the enterprise. In short, purpose explains what the organisation stands for.

We could also say that corporate purpose involves a higher reason for the company’s existence beyond profit. Having a purpose should ensure that the company creates value within its environment.

Since purpose and ESG commitments are increasingly important to shareholders, a company’s purpose should affirm its reasons for being in business and show what the organisation stands for. Having a strong purpose can help employees feel that their jobs are important. But sometimes, organisations can find it challenging to align purpose with workplace culture. However, organisations can ensure that they deliver on their brand promises and generate goodwill with customers and employees by carefully considering their purpose. Since short term decisions can conflict with a company’s purpose, it is almost as crucial for a company to decide what not to do as it is to determine what it will do.

Purpose is essential because today, people want to share resources with those they feel share that purpose. When culture is purpose-driven, this creates a net positive effect suitable for all stakeholders.

Employees should have a sense of ownership over the purpose, and the purpose should be used to guide day to day decisions. Therefore, like culture, defining and driving the purpose starts at the top.

In terms of corporate purpose, one of the challenges facing boards today is how to assemble a statement of corporate purpose. Many companies, such as Hermes, have issued a statement of purpose, a short one-page document from the board, detailing how the company will strike a balance between commercial success and social accountability.

However, one size does not fit all when developing such a statement. Things like ESG policies, risk profile, competitive position, and goals all factor in, which will differ for each company.

There may be some logic behind developing a corporate purpose statement alongside your sustainability report.

Is your company culture geared toward autonomy, individualism, and competition, or is it learning toward collaboration and integration?

Culture could be said to represent the organisation’s unwritten rules, and it is not simply down to individual characteristics but represents shared behaviours. There may be seen elements of the culture, such as shared rituals and stories, and unseen elements, such as mindsets and motivations. When it comes to selecting where to work, people are often drawn to organisations with similar values. Organisations select employees who they also feel will fit in. For this reason, culture can be seen as something which is self-reinforcing.

Furthermore, cultures can be viewed in different ways. One way is to look at whether the culture is geared toward more autonomy, individualism, and competition, or whether it is learning toward collaboration and integration and what is best for the group as a whole. Another perspective to view culture is whether the group is leaning toward stability and status quo or whether flexibility and innovation are favoured.

To get a sense of corporate culture, the board can observe how executives interact with each other.

With culture in mind, the board may want to select executives for particular traits and values that align with the culture they would like to create. For example, consider whether you would like to choose someone risk-averse or who values order, learning, authority or caring. What kind of culture do you think this executive will help instil within the business.

Culture also needs to be aligned with strategy, or it may become a liability. This can be seen in the example of one European industrial services business whose industry became subject to changes in regulatory demands and rapid change. While the company needed a change in approach to make it more agile to meet these demands, its strong culture represented an obstacle to change. While the culture had served the organisation well for a long time, it needed to change along with the business’s strategy to be oriented toward different factors. Coaching and training opportunities were introduced for management to remedy this, which helped the business leaders change the culture.

To get a sense of corporate culture, the board can observe how executives interact with each other. They can also use opportunities such as site visits and company events to interact with other employees. In addition, employee surveys can also be helpful documents. Raising ethical awareness in the organisation can also help reduce risk, and it can be beneficial to develop a statement of the desired culture.

Lastly, the board could also look at the structures and processes being used within the business and consider whether these support the desired culture. As in the above example, training and coaching can be implemented to move the organisation in the right direction.

How crises are handled at the top when things go wrong can be a true sign of corporate culture.

Two of the ways boards can influence culture are through the selection of executive leadership and through leading by example. They play a crucial role in communicating the values and purpose of the business, which then impacts the culture. Since creating awareness is essential for developing a corporate culture, the board plays a key role. So, discussions about culture should have a place on the agenda.

How crises are handled at the top when things go wrong can be a true sign of corporate culture, so hiring the right people for those top positions is crucial, and leadership should be in agreement about what they value and should make sure that appropriate succession planning is in place.

Regulators today know that corporations with weak cultures can be more at risk of having leaders who make bad decisions, creating poor performance and legal issues. Therefore, building a solid corporate culture should be an ongoing process with which all levels of the business are involved.

When the board model the kind of culture they value in how they interact with the various stakeholders and are open to reviewing their performance regarding cultural values, this creates the right environment for sound decision making.

Because of its confusing nature, many leaders leave the strategy around culture to the HR department.

One of the reasons it can be difficult for leaders to understand the topic of culture is that it can contain many unspoken mindsets and beliefs. Leaders can shape the culture consciously or unconsciously, whether they are aware of it or not. Because of its confusing nature, many leaders leave the strategy around culture to the HR department, and such plans can become a secondary concern.

The first step on the path to improving the culture of the business involves defining it. While the strategy might be defined from the top down, culture can be a blend of the values of the c-suite along with those of frontline employees. Since cultural norms will determine what is accepted and rejected within the business, this is an exercise worth doing.

Those at the top should lead by example, to create the culture they want.

For a company to achieve its purpose, it should align this with organisational culture. While the company’s purpose is about the journey, the culture will set the appropriate values and habits to get you there. Through company culture, values and habits make purpose something that is not just talked about in meetings but is achieved. So, when values and habits are aligned, this works to create a more purposeful culture.

You can think of purpose as your why and culture as your how. Leaders need to be transparent and communicate why the company’s purpose is important to create the kind of culture that will achieve this. Those at the top should lead by example, with the culture they wish to create in mind.

So, by aligning purpose with culture, you can create habits that move the company more toward their why.

Watch Zoe Bailey describe how organisations can enhance a good culture as they grow.