Introduction

1As the multitude of publications in organizational and marketing management shows, “purpose” has been one of the most extensively discussed marketing buzzwords over the past few years (Kantar, 2019). Surveys such as those from Edelman (2018) indicate a general trend toward “belief-driven buyers”, with 65% of respondents stating they would not even buy a brand if it does not take a stand. Moreover, practice-oriented studies report a positive effect of purpose on consumer behavior and various economic fields (Deloitte, 2014; EYGM, 2017), and even multinational corporations have responded to these findings with actions (Unilever, 2017). In contrast, another Edelman (2019) study shows that 56% of consumers perceive brands’ social commitment as a marketing ploy, and the inflationary and inconsistent use of the term has increasingly led to accusations of “purpose washing” (Tesseras, 2019). Accordingly, critics have voiced the view that purpose is just an intelligent sales argument and not a real win-win situation for both companies and customers (Giridharadas, 2018).

2At the beginning of 2020, mainly due to the economic crisis that resulted from the COVID-19 pandemic, discussion about the role of purpose in management gained momentum. Critics of the purpose movement called for its end and recommended a return to using financial indicators and objective evaluation criteria as primary decision-making tools (Murray & Meyer, 2020). From this point of view, purpose constitutes a nice-to-have tool for organizations during times of plenty (Shattuck, Stevenson, & Gamble, 2020). In contrast, proponents of the purpose movement consider it even more important during times of external crisis and uncertainty. They view the social and economic consequences of the COVID-19 pandemic as an adjustment to the course of the ongoing discussion and posit that organizations with an authentic purpose will ultimately come out of the crisis stronger. These proponents claim that in such situations, it is easier to sort out the good from the bad and thereby identify organizations that truly support their stakeholders (Harrington, 2020). The COVID-19 pandemic can also be viewed as a catalyst for alignment of organizational strategies with a purpose (He & Harris, 2020). In this sense, the pandemic has served as a crash course for organizations about what topics their stakeholders perceive as relevant and how to be farsighted in their actions. Simultaneously, it has helped organizations drive creativity and agility to implement these new insights and prepare for “the next normal” (Gregg, Kim, & Perrey, 2020). The plethora of perspectives indicates that the COVID-19 pandemic has increased the importance of organizations being perceived as relevant (Germelmann, 2020).

3Therefore, the pandemic has highlighted not only the significance of purpose in practice but also ambiguities in its interpretation and the specific application. Although attempts have been made to classify purpose in the corporate context (Kilian & Miklis, 2019), to our knowledge no scientific discourse yet exists that establishes a comprehensive understanding of the term and provides a basis for further research. Thus, purpose seems to be at a crossroads – at risk of ending up a marketing buzzword rather than a coherent and generally accepted concept (Dhingra, Nuttal, & Stone, 2020). To close these elementary gaps, this article – inspired by the basic idea of the theories-in-use (TIU) approach (Zeithaml et al., 2020) – first provides an overview of the conceptual evolution of purpose as well as a conceptual classification to derive a fundamental understanding. It defines purpose as the overarching, long-term, and never fully achievable reason for an organization to exist and introduces it as a central component of organizational management. Building on these findings, a conceptual framework for the (retrospective and prospective) development of a higher purpose is derived. It sheds light on its dimensions and provides guidelines for practical use. Using insights from the COVID-19 pandemic, central aspects of the framework as well as the role of perceived relevance and perceived authenticity are underscored. The article concludes by summarizing the findings, identifying central limitations, and discussing further research topics.

The conceptual evolution of purpose

4By the end of the 1970s, publications had begun to question the prevailing understanding of organizational purpose, which had until then been primarily connected with financial intentions (Levitt, 1977). Nearly a decade later, driven by Freeman’s (1984) stakeholder theory, a new management perspective developed that focused on all of an organization’s stakeholders, rather than the monetary success of shareholders or owners alone. However, it was not until 1989 that an expanded perspective of purpose emerged, when Pascarella and Frohman (1989, p. 8 ff.) defined a “purpose-driven organization” as one that contributes to the values and beliefs of all relevant stakeholders, both within and outside an organization. Shareholders’ or owners’ interests and, thus, financial intentions are still taken into account, but they no longer constitute the sole focus of an organization’s alignment.

5In this context, the metaphor of a guiding star emerged: purpose is defined as the overarching, long-term, and never fully achievable reason for an organization to exist, which through its unattainability stimulates continuous development and subsequently leads to economic success (Bartlett & Ghoshal, 1994, p. 88; Collins & Porras, 1996, p. 69 f.). It answers the question of why an organization exists (Collins & Porras, 1994, p. 78) by describing the added value it provides to its stakeholders in terms of fulfilling their needs and wants. This perceived relevance is just as important for the acceptance and success of purpose as to be consistent to the values and beliefs of the stakeholders and therefore being perceived as authentic (Collins & Porras, 1994, p. 76). Consequently, purpose forms a central component of organizational management, and its development falls under the aegis of an organization’s strategic management. Its operational application is further based on a derived purpose statement (Pascarella & Frohman, 1989, p. 9 ff.), that serves as a declaration of intent and a leitmotif. This expanded view of purpose, or higher purpose, does not contradict established elements of the vision and mission; rather, it complements them. As the German corporation Henkel shown in Figure 1 exemplifies, higher purpose serves as general foundation for the company’s development (Henkel, 2016, p. 2). After defining why an organization exists, the vision sets the goal by asking what must be reached to approach the fulfillment of its “raison d’être”. Finally, the mission determines how those objectives can be achieved (Spence & Rushing, 2009, p. 49), and operational measures are then derived. Successful organizations seem to instinctively follow a purpose, even if they have not yet described it (Collins & Porras, 1991, p. 41). Some have determined a higher purpose but use it erroneously as a mission or vision statement. For example, LEGO’s (2020) stated mission to “inspire and develop the builders of tomorrow” rather fits the expanded perspective of higher purpose. However, both the traditional and expanded understanding are still partly described with the single term “purpose”. To provide terminological clarity, hereinafter we use the term “higher purpose” to refer to the expanded perspective.

Figure 1: The role of higher purpose in the organizational context

Figure 1: The role of higher purpose in the organizational context

Source: own illustration.

Conceptual classification

6In subsequent years, Pascarella and Frohman’s (1989) concept of the purpose-driven organization almost fell into oblivion while fundamental market transformations took place. Although brands gained importance as a differentiating factor for consumers (Kotler, 1991, p. 442), demands on them increased as well: an Accenture (2018, p. 22 f.) study notes that over 60% of the respondents stated that brands should not only pursue but also actively communicate their higher goals. Consumers began to look for brands that actively address their individual needs and wants and support them by solving their problems (Kotler, Kartajaya, & Setiawan, 2010, p. 4). As one result, organizations increasingly oriented toward social issues such as environmental sustainability (Kotler, 2011, p. 133). This expansion of organizational commitment also gained importance for how potential employees viewed the company (Lis, 2018, p. 111); studies illustrate the direct negative impact of a lack of purpose on employer attractiveness (Backhaus, Stone, & Heiner, 2002, p. 312 f.). It therefore became increasingly relevant that organizations pursue higher goals that make sense for the individual (PwC, 2019; Savvides & Stavrou, 2020) and support their motivation and passion to pursue common goals (Blount & Leinwand, 2019). Even in the ostensibly more rational business-to-business context, in addition to objective information, emotions (Kemp, Borders, Anaza, & Johnston, 2018) and brands (Leek & Christodoulides, 2011) were proven to have impact on business relationships. The prevailing sentiment views an expansion of traditional purpose, particularly in the sense of assuming social responsibility, as an advantage also in business relationships (Kotler & Pfoertsch, 2007, p. 361).

7As a result of these transformations and increasing demands, an organization’s perceived relevance and thus how it can create added value gained importance. Accordingly, the term “purpose” re-emerged in the mid-2000s. Sinek’s (2009a) book Start with Why and his TEDx talk (2009b) are considered tipping points for the purpose discussion. In asking for the “why” Sinek (2009a) looks for a higher organizational purpose that is detached from purely financial intentions, and his concept of the “golden circle” provides an easy-to-understand application model. However, like Spence and Rushing (2009), he neither clarifies the terminology nor conducts a conceptual classification. Both works sparked a series of popular scientific publications, which have increased the popularity of the topic in practice. But due to a lack of a consistent definition and conceptual classification, they have blurred the terminology rather than brought it into focus.

8In addition, understanding of the term has narrowed as a result of equating higher purpose with the traditional concept of corporate social responsibility (CSR), which relates purely to the assumption of social responsibility. Furthermore, CSR is not overarching and strategic; rather it serves as a reactive communication measure, particularly with regard to external influences and demands (Porter & Kramer, 2006, p. 82 f.). It can therefore also be conceptually distinguished from higher purpose. LEGO, for example, regularly leads the top of CSR rankings through its intensive social commitment (The RepTrak Company, 2019, p. 4), but it pursues a much broader higher purpose (see the preceding discussion) (LEGO, 2020). In other words, social responsibility can be part of the operational application of higher purpose. Over time, some complementary – but also contradictory – concepts based on traditional CSR have emerged (Carroll, 2015). Most of them share the aim of counteracting criticism of CSR and therefore to expand their meaning and strengthen their strategic function (Latapí Agudelo, Jóhannsdóttir, & Davídsdóttir, 2019, p. 13 f.). The “creating shared value” (CSV) approach, for example, defines itself as the next iteration of traditional CSR and requires, among other things, considering both social and economic values as well as more strongly integrating them into strategic management (Porter & Kramer, 2011). Concepts like “integrated value creation” (Visser, 2015) and “corporate social opportunity” (Moon & Parc, 2019) in turn build on the CSV approach and its related criticism. An end of this conceptual transformation has yet to be reached, and a consolidation to a clearly defined, delimited and accepted successor concept of CSR is not yet foreseeable (Latapí Agudelo et al., 2019, p. 19 f.). It can therefore be assumed that these expanding concepts will continue to move up to the understanding of higher purpose. If so, the distinction between such management measures and higher purpose as a fundamental reason to exist will no longer be possible, making a clear systematization more difficult.

9Moreover, integrative organizational and corporate philosophies have emerged that identify a meaningful crisis of capitalism as the reason for the previously mentioned transformations. Various models such as “compassionate capitalism” (Benioff, Southwick, & Hassenfeld, 2004; DeVos, 1993), “inclusive capitalism” (Rothschild, 2016), and “sustaining capitalism” (Odland & Minarik, 2017) have been developed to harmonize the traditional understanding of capitalism (i.e. the goal of profit maximization) with higher goals. A popular philosophy of this ilk is “conscious capitalism”, understood as a combination of all relevant stakeholders’ values and beliefs, that places higher purpose at its center (Mackey, Sisodia, & George, 2013, p. 33 f.). Although the theory originated in Spence and Rushing’ popular scientific understanding (Mackey et al., 2013, 47 f.) and has been criticized regarding its scientific viability (O'Toole & Vogel, 2011; Wang, 2013), it illustrates the relationship of such philosophies with higher purpose: the latter can be part of such a concept and serves to implement the underlying philosophical attitude.

10The examples show that both broad modifications and narrow interpretations of higher purpose have arisen. In addition, developments from various fields can be observed that approach or integrate the understanding of higher purpose, eliciting conceptual vagueness. Therefore, conceptual positioning must be kept in mind: higher purpose can be seen as an advancement of traditional purpose and thus a central component of organizational management (Kilian & Miklis, 2019).

The framework of higher purpose

11To provide a deeper theoretical understanding and guidelines for practical use, a closer look at the dimensions of higher purpose is necessary. Describing higher purpose, Collins and Porras (1991) refer to employees as the only stakeholder group, excluding external stakeholders. Higher purpose here is exclusively seen as an internal motivational tool used to facilitate employee identification with the employer, ultimately yielding economic success (Collins & Porras, 1991, p. 41). In contrast, the focus in practice has been on consumers as main stakeholders, as illustrated by Unilever (2017). Both perspectives represent possible, albeit extreme, positions, as not every organization is solely concerned with employees or consumers. Thus, the first step in developing a higher purpose is a comprehensive consideration of all internal and external stakeholders (e.g., investors, politicians or society; Deloitte, 2014, p. 10) to determine those most relevant to the organization.

12Next, at least one reference point within the organization must be defined. Following Pascarella and Frohman (1989), this should be the higher-level organization or the company as a whole. Correspondingly, terms such as “organizational purpose” (Bartlett & Ghoshal, 1994, p. 80) or “business purpose” (Meffert, Burmann, Kirchgeorg, & Eisenbeiß, 2019, p. 281) have developed. Because of the increasing importance of brands, higher purpose has also become relevant from a marketing perspective, and the term “brand purpose” (Hsu, 2017) has emerged. For consumers this refers to a product brand, but for the majority of stakeholders the corporate brand is more central (Balmer & Gray, 2003, p. 977 f.). To avoid confusion, it is necessary to identify all possible reference points and then select those that add value to the previously selected stakeholders. Respectively, the scope of the definition as well as the number of reference points depends on their perceived relevance to stakeholders. Simultaneously, attention should be paid to interdimensional dependencies: in addition to consumers, organizations may also regard employees as relevant stakeholders, considering they own an equally large share in the perceived authenticity of the brand (Fritz, Schoenmueller, & Bruhn, 2017, p. 339). In companies with an extensive brand portfolio, the organizational structure may also add complexity because stakeholders can be addressed by more than one reference point of the same organization. In this case, a top-down approach, such as Unilever’s, is effective: each of the product brands forms its own reference point, which in turn are hierarchically subordinate to the group (Unilever, 2017, p. 26).

13Such structures also has an impact on the topic of higher purpose that mainly depends on the relevant stakeholders’ values and beliefs (Pascarella & Frohman, 1989, p. 10 ff.). This orientation coincides with the insight that a strong relationship arises when people identify with an organization (Bhattacharya & Sen, 2003), which in turn helps to meet individual needs and wants, ultimately leading to loyalty toward the reference point(s) (Rather, 2018). An organization’s raison d'être should consist of only a single higher purpose, so it should be devoted to an overarching topic. With its statement “making sustainable living commonplace”, Unilever covers a wide field that its brands can interpret individually: Dove, for instance, defines its higher purpose as promoting its female consumers’ self-esteem to initiate sustainable social change (Unilever, 2017). Again, it is important to stress additional interdimensional dependencies, such as if the topic is perceived as relevant to previously unobserved stakeholders or if a previously irrelevant reference point can add value to a chosen topic.

14In addition to the perceived relevance, perceived authenticity is another key factor when determining the dimensions of higher purpose. Here, it mainly refers to consistency (Lehman, O’Connor, Kovács, & Newman, 2019): as branding literature emphasizes, an organization is perceived as authentic if all of its actions fit to its values and beliefs (Bruhn, Schoenmüller, Schäfer, & Heinrich, 2012; Morhart, Malär, Guèvremont, Girardin, & Grohmann, 2015) – simply put, if it is true to itself (Lehman et al., 2019, p. 5). By aligning the development of a higher purpose to relevant stakeholders’ values and beliefs, organizations may gain perceived authenticity and, subsequently, trust (Eggers, O’Dwyer, Kraus, Vallaster, & Güldenberg, 2013; Portal, Abratt, & Bendixen, 2019), credibility (Napoli, Dickinson, Beverland, & Farrelly, 2014), and loyalty (Fritz et al., 2017). To do so, organizations sometimes need to prioritize stakeholders and take profound actions: Unilever, for example, is parting with brands that are not compatible with its higher purpose anymore (The Guardian, 2019). Conversely, a reason an organization may be perceived as inauthentic is that its higher purpose has become uncoupled from its conceptual positioning, thus losing consistency. When this happens, organizations risk an authenticity gap (Samuel, Taylor, White, & Norris, 2018) and the subsequent accusation of purpose washing. Even risk evolves that derived communication measures are perceived as deceptive, from which a negative evaluation of the reference point(s) (Held & Germelmann, 2018) or distrust (Darke & Ritchie, 2007) may result. For instance, the investment company BlackRock criticized Siemens for its rigid stance on an agreement in the context of a coal mine project while promoting its far-reaching sustainability goals. However, in a subsequent Siemens general meeting, BlackRock supported all management decisions, which in turn caused extensive public criticism of BlackRock (Mooney, Miller, & Smith, 2020).

15As a declaration of intent and a leitmotif for operational application, a higher purpose statement must be formulated. Its scope should be “broad, fundamental, inspirational, and enduring” (Collins & Porras, 1991, p. 38), because the focus is to address and motivate the internal and external stakeholders according to their values ​​and beliefs (Collins & Porras, 1996, p. 70). Hence, the challenge is to make the individual scope of the statement (1) specific enough for identification and motivation, (2) broad enough to be adaptable to market dynamics (Pascarella & Frohman, 1989, p. 38), and (3) open for co-creation with the relevant stakeholders (Rey, Bastons, & Sotok, 2019, p. 114). It is feasible that various organizations, even direct competitors, could pursue the same higher purpose statement (Collins & Porras, 1991, p. 41), though they may differ in the derived vision and mission. The example of the wind turbine manufacturer ENERCON shows this flexibility: building on its higher purpose statement (which is also its slogan in brand communications) “Energy for the World”, the company derived its vision of participating in the provision of energy, which in turn is translated into the mission of providing “sustainable, pioneering and future-proof renewable energy generation and supply concepts” (Enercon, 2020). Under changing conditions, the breadth of the higher purpose statement permits the vision to also define the goal of contributing to energy saving but remains consistent with the company’s overarching higher purpose.

Figure 2: From the development of a higher purpose to its operational application

Figure 2: From the development of a higher purpose to its operational application

16Figure 2 summarizes the derived framework graphically using three simplified examples with the focus on only one stakeholder group at a time: sustainable consumers may be addressed by the brand that positions itself analogously by using CSR with the aim of gaining loyalty through identification (He & Li, 2011; Marin, Ruiz, & Rubio, 2009). Similarly, the image and thus the attractiveness of an employer brand among prospective employees may be affected by signaling its social orientation (Turban & Greening, 1997). As the third example shows, even following a traditional purpose is compatible with the understanding of higher purpose: the management board, following a traditional shareholder value approach, initiates operational measures that may lead to further shareholder investments (Rappaport, 1986). The examples underscore that a higher purpose and its statement should be understood not purely as communication measure; rather, the framework offers an open approach that allows deriving holistic measures based on individual situations.

Insights from the Covid-19 pandemic

17This individuality and flexibility may be highly advantageous during external crises and uncertainty, such as the COVID-19 pandemic: Organizations following a higher purpose according to this framework should be able to build on a high level of trust, credibility, and loyalty. The pandemic therefore serves a countercheck of the understanding of higher purpose and highlights its central aspects.

18Whereas before the COVID-19 pandemic, consumers and society were often defined as an organization’s most important stakeholders, during the pandemic many organizations began to take account of stakeholder dependencies. In times of short-term work, for example, McDonald’s, well known as a customer-centric company, sent some of its employees to Aldi to keep them employed while ensuring basic supplies in supermarkets (Mühlhause, 2020). The public supports such actions: during the COVID-19 pandemic, 74% of Americans reported connecting their buying decisions to companies’ behavior toward their employees (Stepno & Robinson, 2020). In German industry, several production companies shifted to manufacturing medical products. In doing so, they fulfilled obligations to shareholders and employees, while contributing to society and accommodating politics (Orth, 2020). Across all sectors, the COVID-19 pandemic led to an increased awareness of the significance of such dependencies as well as previously neglected stakeholders, such as the so-called frontline workers and corona heroes, who gained at least temporary relevance across industry boundaries (Sims, 2020). Organizations also broke new ground in (re)defining the reference point(s) for their relevant stakeholders: corporations such as Unilever and LVMH increasingly began acting at a higher group level and deriving actions for their subsidiaries and brands to show strength (LVHM, 2020; Unilever, 2020). Shared projects between Apple and Google demonstrated that even cooperation across competition boundaries can make sense (Sainz, 2020), if the same or at least a similar higher purpose is pursued. The pandemic has also caused many organizations to consider pursuing general health and care topics, a justifiable strategy if the reference point(s) can make a relevant contribution to its stakeholders and simultaneously remain(s) authentic. Further positive examples include not only organizations in the food and health sectors that deal with basic needs, but also technology companies like Microsoft that facilitate access to free communication tools, following their higher purpose statement of “empowering others” (Microsoft, 2020).

19Those examples suggest that during times of external crisis and uncertainty, the perceived relevance of higher purpose, its dimensions, and their dependencies gain importance. Paradoxically, higher purpose organizations may also become temporarily less relevant to their stakeholders, as in exceptional situations, stakeholders look for actions that demonstrate real impact (Edelman, 2020, p. 18). Although constant monitoring the organization’s perceived relevance is recommended (Pascarella & Frohman, 1989, p. 39), fundamental short-term course changes in the sense of gaining relevance at all costs should be avoided. Coca-Cola, for example, has paused its advertising spend not only for financial reasons, but because the firm aims to “stay close to the consumer in a relevant way” (FACTSET callstreet, 2020). The COVID-19 pandemic and its consequences have also indicated that even high perceived relevance does not automatically result in perceived authenticity: if the context is too dominating and the application of an organization’s higher purpose becomes inconsistent, it risks losing authenticity and the accusation of purpose washing. This risk persists even beyond such times, especially for organizations that have undergone a successful realignment before. For them, it is important not to return to the “old normal”, because they risk causing a post-crisis authenticity gap and losing the trust, credibility, and loyalty they may have built.

20Taken together, a return to financial indicators and objective evaluation criteria appears unrealistic. The insights indicate that even in times of external crisis and uncertainty, focusing on rational arguments by no means always has the highest relevance for stakeholders and can even lead to a loss of trust (Edelman, 2020, p. 27). Therefore, critics of the purpose movement show what might be considered a limited and simplified view of purpose, which no longer seems justifiable. On the contrary, the latest developments indeed indicate that the COVID-19 pandemic has served as a catalyst for (re)alignment of organizational strategies along with the derived understanding of higher purpose.

Conclusion

21This paper shows that purpose is not per se a marketing buzzword that is pushed from the social and economic consequences of the COVID-19 pandemic and that will disappear from the discussion soon. To establish a common understanding of higher purpose, this paper examined its conceptual evolution and classification to provide an elementary understanding and delineation of related concepts and philosophies. Focusing on the fundamental definition and the classification provides the clarity that has been missing in the general discussion so far. With these findings, higher purpose no longer stands at the crossroads but builds the basis for a common scientific discourse and future research. The derived framework establishes a deeper understanding of its theoretical dimensions and offers applicable guidelines for the (retrospective and prospective) development up to a higher purpose statement in practice. Insights from the COVID-19 pandemic underscore that a conscientiously developed higher purpose and a focus on perceived relevance and perceived authenticity are crucial for its success in practice.

22We acknowledge a central limitation of this article: as this is a conceptual contribution building on literature review and the integration of practical examples, no empirical evidence is provided herein. With the aim of shedding light on the underlying processes and to strengthen the theoretical model of higher purpose, additional generalizable dependent variables (besides those derived from perceived authenticity) and possible moderators (e.g., context, involvement, cultural differences) for different characteristics of a higher purpose should be examined empirically.

23Future research could also expand the conceptual classification with concepts from various fields, for example, social purpose organizations (Kullak, Baker, & Woratschek, in press) or corporate sociopolitical activism (Bhagwat, Warren, Beck, & Watson, 2020). In addition, the expanding concepts of CSR should be observed, that move up to the understanding of higher purpose. The findings indicate that perceived relevance and perceived authenticity are crucial to the success of a higher purpose; thus, a deeper understanding of their possible dependence and especially of the ambiguous construct of perceived authenticity is needed. Lehman et al. (2019, p. 12) note that the requirement for consistency poses major challenges for organizations in dynamic environments. This raises questions of how flexible and broad a higher purpose can be while avoiding accusations of purpose washing, particularly when dealing with a variety of relevant stakeholders and possible value conflicts. Additionally, the role of (unfulfilled) expectations for the success of a higher purpose could be examined further as well as stakeholders’ expectations of the value orientation of an organization and its communication. Previous research on CSR shows that corresponding activities may lead to moral licensing effects (Ormiston & Wong, 2013). Because CSR may be part of the operational application of a higher purpose, it is important to know if such effects also occur for higher purpose and if so, how they impact its perceived relevance. Finally, at the time of writing this article, whether the COVID-19 pandemic is actually a “Black Swan Event” (Taleb, 2007), from which new behaviors will be established (Sheth, 2020), is unknown. Accordingly, the findings of this article should be verified for the period of normalization after the pandemic.