At first glance, Purpose Statements are a great thing. They serve to articulate a company (or DAO’s) reason for being, beyond maximising profits for investors. But these seemingly innocuous positive statements are a double-edged sword, carrying the potential to enable megalomaniac tendencies, fanatic tunnel-vision and purpose-washing.

Now, I don’t mean to demonise the Purpose Statement. If we take a quick detour into how Purpose Statements came to be, we’ll see they are but one step in the history of defining an organisation’s Identity. And they've been a good step. But this certainly shouldn’t be the end of the story.

This article traces the trajectory of the Purpose Statement, and carries us forward to a new framing for Web3 organisations: the Guiding Question.

The Rise of Purpose Statements

Before Purpose Statements became the rage, Mission Statements were the primary tool used to define organisations and focus their operations.

Take, for example, Barnes & Noble's "Our mission is to operate the best speciality retail business in America, regardless of the product we sell." Mission Statements were used - and sometimes still are used - to describe:

1. the core business (‘retail’ in the example above).
2. a statement of the organisations’ ambition to win, lead or be the best.

Then, in the last decade, pro-social causes progressively replaced statements of more selfish ambition, and soon the term Purpose Statements was coined. As an example of this trend, we can see Niki’s statement, “bring inspiration and innovation to every athlete in the world”, championing a pro-social cause that subtlety hints at global ambitions but puts purpose front and centre.

A combination of trends fueled the transition from Mission Statements to Purpose Statements:

• The rise of social media and websites like Glassdoor increased transparency on company practices.
• A new generation of activists and journalists challenged the image of businesses as a positive force in society, putting corporations under pressure to create a more positive narrative or face regulation.
• A new generation of ecologically and socially conscious consumers started voting with their dollars, and put further pressure on companies to have a positive impact.
• A host of psychology researchers and consultants popularised the idea that a meaningful and ambitious purpose was crucial for attracting and retaining talent, and increasing productivity for the growing proportion of knowledge workers.
• The rate of change in society accelerated, and with it, the speed at which organisations needed to evolve or change their core business (and with it their mission statement).

These factors fueled the need for businesses to become a force for good, or at least, to portray themselves as such. And so, the idea of justifying an organisation’s existance as serving something beyond shareholder profit took hold like wildfire. Naturally, Purpose Statements proved to be the ideal tool to communicate and encapsulate this new worldview.

The rise of Purpose Statements was a major improvement upon the era of Mission Statements. Yet, for all their merits, Purpose Statements are not flawless.

The Shortfalls of Purpose Statements

Purpose Statements enabled the pendulum to swing too far from dull and narrow-minded to overly idealistic. 3M, for example, states that they exist “to improve every life through innovative giving in education, community and the environment.” It sounds lovely. So lovely one might mistake this publicly traded corporation for a charity.

As this kind of idealism becomes expected, we’re seeing an influx of Purpose Statements that are:

• Retrofitted “Lipstick on the Pig” situations: The intent is to frame what an organisation has always done as ‘purposeful’, rather than digging deep to surface the organisation’s real potential to serve society, and then designing the business to pull it off.
• Falsely altruistic: Purpose Statements seldom acknowledge the fact that the business was created - at least partially - to make the founders money.
• A mixed bag for society: Purpose Statements acknowledge one desired change but systematically ignore the negative consequences this change can create for other stakeholders. At their worst, they encourage tunnel vision.

If the above sound overly cynical, consider the following example of the research carried out by Alex Pentland - a leading behavioural scientist - and his team at MIT.

The researchers gathered volunteers, gave them a dice, told them they would receive a dollar for every point they scored, and asked them to follow three simple steps:

1. Pick top or bottom (this is the side that will give you your points)
2. Roll the dice on the table
3. Once it stops, disclose whether you’d chosen top or bottom, and get paid $1 for every point on that side.

As you might have gathered, this creates a perfect opportunity for cheating. Participants can easily lie and pick whichever side lands on the highest number rather than their original choice. And indeed, most volunteers proved to be “luckier than average”.

The researchers then repeated the experiment with the participants connected to a lie detector. And sure enough, a significant number of lies were picked up.

Having established these base conditions, the researchers made one further change: they told the participants that instead of receiving the money themselves, it would be donated to a charity of their choice. And in this third condition, the participants still came out luckier than average, yet the lie detector couldn’t spot any anomalous tension.

Curious, right? When we believe we’re acting for a good cause, we don’t feel conflicted about bending the rules.

Taking this insight back to our exploration of Purpose Statements, it becomes easier to understand how unethical behaviour can flourish in purpose-led companies.

But perhaps the best example lies in a leaked memo by Facebook's executive, Andrew Bosworth, “The ugly truth is that we believe in connecting people so deeply that anything that allows us to connect more people more often is *de facto* good.” Their purpose of ‘connecting people’ has served as an alibi to justify, “All the subtle language that helps people stay searchable by friends. All of the work we do to bring more communication in. The work we will likely have to do in China some day. All of it.”

Facebook is far from an isolated case. WeWork, Theranos, On Taste, and thousands of less known companies have fallen prey to the same trope. It’s a fine line that separates the purpose-driven organisation from the cult.

And when we don’t walk the talk?

On the opposite end of the spectrum, many Purpose Statements end up disengaging the team and creating a culture of hypocrisy. Often, the Purpose Statement portrays pro-social or even altruistic priorities, and yet management’s criteria are based on pure market share and profit. For the employees, the cultural signal is clear: what we do around here is say one thing, and do another. And how can you trust a system like that? When these incoherences can no longer be ignored, Purpose Statements become symbols of management bullshit.

Reinventing Purpose Statements

Look, maybe I do want to demonise the Purpose Statement after all, but there is no need to throw the baby out with the bathwater. There are two qualities we need to keep:

1. Aligning and motivating the team around an organisation’s raison d’etre.
2. Encouraging organisations to go beyond making a profit for investors.

What if - with a few tweaks - we could keep these positives and mitigate or eliminate the negatives?

If a Purpose Statement is meant to explain the reason why an organisation exists, let’s start by being honest about that. Why do organisations exist, really?

It must be for someone’s benefit, right? So answering the question of Why? begins with answering the question, For whom?

Does an organisation exist for its investors? Or for its customers? Is it for the founders and employees? Or is it for the benefit of society at large?

We know that an organisation wouldn’t exist without the contribution of each and every one of these stakeholders. Without workers dedicating their time, investors committing their funds, customers giving their trust, a country providing basic services and infrastructure, and the natural resources from the land, an organisation would not be.

The issue is that this diversity of stakeholders comes with a diversity of needs, which means that any organisation serves a variety of purposes. Each group engages with the organisation for their own reasons. And no altruistic one-liner is going to make them forget that. We need to take a multi-stakeholder perspective.

When you care for all stakeholders, the community thrives

DAOs rely on the idea that caring for all stakeholders (and empowering them to govern) leads to better outcomes. And although this is still a somewhat radical idea, there is ample precedent in Web2 and before. The book Firms of Endearment followed a group of companies with a multi-stakeholder approach and compared them with the purpose-led companies from Jim Collins’ Good to Great. Over five years, the multi-stakeholder companies outperformed the purpose-led companies’ share price growth by 77% - 128%. And on a 10-year horizon, the difference had skyrocketed to 331% - 1028%. It turns out that paying attention to the needs of multiple stakeholders is not just good business, it’s great business!

Even if it’s just for the benefit of the shareholders (or token holders), we need to let go of the simplistic notion that organisations exist for a single purpose, and acknowledge that the success of an organisation depends on satisfying multiple priorities. And a great place to start is letting go of Purpose Statements to leverage a tool designed to both provide focus and acknowledge the complexity of our times: The Guiding Question.

The Anatomy of the Guiding Question

A Guiding Question frames both the Who and the Why of an organisation. It asks “how might we satisfy these needs of these stakeholders AND those needs of those stakeholders?” And in doing so replaces naive idealism with a more pragmatic concern for the impact an organisation can have on its ecosystem.

For an example of how they can feel quite different, let’s take a well known Web2 company like Deliveroo and turn their Purpose into a Guiding Question.

Their current statements read: “Deliveroo is on a mission to transform the way customers eat.” and “Our aim is to bring great food direct to customers as fast as possible, in less than 30 minutes.”

And so a Guiding Question could be something of the sort of: ‘How can we bring great food directly to customers as fast as possible, provide good working conditions for our contributors (drivers and employees), AND make at least 10x profit for our shareholders?’

Does it feel more honest?

The move from Purpose Statement to Guiding Question is a relatively small change on the surface, but underneath is a fundamental shift in worldview: success depends on serving multiple stakeholders, not one purpose. A change that fundamentally aligns better with DAOs and Web3.

A Guiding Question encourages a company or DAO to contribute to society at large by highlighting the diversity of needs and priorities of its stakeholders. And in revealing these multiple purposes, nudges the stakeholders as a collective to create answers that can serve them all.

And it frames these priorities as a question, because as the world changes and you learn and evolve, the answers will evolve too. Done well, Guiding Questions are not about constraining the variety of purposes with a definitive statement but about ongoing exploration and collaboration.

Written by
@_daniel_ospina

Special thanks for Rebecca Collins for her support in shaping and evolving this idea and article.