The Friedman Doctrine, first espoused by economist Milton Friedman in the 1960s, claims that a company’s sole responsibility is to maximize shareholder value.
Once merely a theory, it was embraced wholly by many businesses. However, I believe that this idea tilts the scales in favor of shareholders and investors at the expense of employees, vendors and the planet. I would suggest that a company that embraces both the Friedman Doctrine and a “purpose” is, in fact, purpose-washing. This is because purpose-washing refers to presenting your brand as if it operates according to a larger purpose, when in reality it only operates to serve itself.
The truest expression of purpose, from my perspective, is a passion for the multistakeholder model. I’m gratified to observe that this definition of purpose has been accelerating recently to help stop the spread of hate speech, unsubstantiated facts and misinformation, as well as to curb the spread of the coronavirus and address racial injustice in our nation.
Cases in point include:
• The advertising boycott of Facebook, supported by longtime purpose-driven brands such as Patagonia and REI, that is now gaining momentum.
• Instagram auto-linking to the Centers for Disease Control and Prevention when viewing content that uses a coronavirus hashtag.
• The Association of National Advertisers and the Alliance for Inclusive and Multicultural Marketing's pledge to put forth a list of systemic interventions for the marketing and advertising industry to follow that will raise the bar on diversity and inclusion efforts so we can begin to truly address inequality.
• Hundreds of thousands of small-, medium- and enterprise-scale businesses that recently took on Paycheck Protection Program loans in order to protect employee jobs, survive store closures as a result of stay-at-home orders, pay employee salaries and benefits, and establish longer-term or permanent work-from-home solutions.
• In perhaps the most vivid example of a company embracing the multistakeholder model, companies are taking steps to provide better support to all employees and prevent burnout. For example, in a conversation with an Autodesk employee, I learned that the company has continued hiring and onboarding virtually, stated it expects no reduction in its workforce, given every employee stock and implemented three company holidays in June and July.
In each of the cases above, the companies participating aren't putting profits first; they're investing some of their human and capital resources into fostering the well-being of employees and a better society. It’s a commitment that, by nature, negates their ability to fully espouse the Friedman model.
By contrast, companies that claim to be purpose-driven while paying unfair wages to employees, not offering reasonable healthcare plans and more are not truly purpose-driven. To me, moving away from the Friedman Doctrine means offering so-called good jobs. It means emancipating the working class from the bottom of the inequality gap, not making social service reliance a part of their business model.
Are you purposeful or purpose-washing?
From my perspective, your mission is an empty one if you don’t prioritize all of your stakeholders in your company's purpose. Providing jobs with benefits, concerning yourself with your employees’ emotional well-being (especially during times as difficult as right now) and pursing an energy- and waste-neutral sustainability program that includes your supply chain are all examples of purpose-driven missions. However, many companies fail on these points. Is yours one of them?
If your answer is yes or maybe, that's OK. Like much in life, the path to purpose is a journey, and if you believe in return on purpose (ROP), something I'll help you calculate in an upcoming contribution, you're likely to feel increasingly purposeful as your company matures and it becomes a core to your company's culture and ethos. A few tips in the meantime include:
• Fake it until you make it. Purpose-washing is unacceptable. But, expressing and acting on your aspirations until they become a process is, from my perspective, admirable. If you want to be more inclusive, for example, make the commitment and act on it. Don't just talk about it.
• Find and lean on those you admire. Purposeful professionals are purposeful humans. I've found that most of the time, purposeful leaders love to share their purpose-driven secrets. Don't be afraid to ask or share with others.
• If you are not the first in your category, take pride in being a fast follower. Developing your brand's purpose isn't a race against your competitors; it's valuable no matter when you turn it on. As Harvard Business Review reported, purpose-driven companies routinely outperform. Don't let not being the first to develop a purpose in your industry keep you from making one at all.
In conclusion, once you determine how purposeful your organization truly is and then take more steps to exist with purpose, you will be well on your way to joining so many others in leading an era that will drive benefits far beyond profit to your own employees and customers and to your culture.