Tuesday, August 26, 2008

Clarifying a firm's purpose.

An organization needs to be really clear about its purpose before it can start rethinking how work gets done, how the firm's structure unifies employee's efforts, and how people can be engaged and developed to produce products and services that are consistent with the firm's purpose every time. The purpose statement should be a clear and succinct representation of the enterprise's reason for existence.

When Domino's Pizza started up, it aspired to "safely deliver a hot, quality pizza in 30-minutes or less, at a fair price and a reasonable profit."

Wal-Mart's purpose is "to save people money so they can live better." Sam Walton had a well-defined target in the 1970s of doubling Wal-Mart's sales from $500 million to $1 billion in four years. This seemed a tall order at the time but Wal-Mart hit it. Since then, the company has successfully retained its focus: By 2007, net sales had risen to $345 billion, saving money for more than 176 million weekly customers around the world at 6,779 locations.

Merck, the pharmaceutical company claims, "We're in the business of preserving and improving human life. All our actions can be measured by our success in achieving this." Disney aims to "make people happy."

You can think about stating your purpose in the following ways:

• Aim at a well-defined target, like Domino's Pizza and Wal-Mart.

• Focus on a common enemy; Nike thrived for years on aspiring to beat Adidas and Reebok.

• Have a world-class role model; Trammell Crow said its purpose was to be "the IBM of the real estate industry."

Once the leadership team has clarified and agreed on the firm's purpose, the next step is to define the strategies that will help it achieve this purpose.

We'll cover this tomorrow.

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