Why Clarity of Purpose Drives Better Business Decisions

Research & Sources / Entrepreneur Growth

Before GPS, sailors navigated by the North Star. Every other star moves across the sky during the night, but the North Star stays in the same place. Whatever the waves and wind did, sailors could look up and know which way north was. A clear purpose is a business’s North Star. It doesn’t tell you every turn, but it always tells you the direction.

Decisions without a North Star

Without a clear purpose, every decision is made from scratch. Should we take this client? Launch this product? Enter this market? Each question is weighed only on its own merits: is it profitable, is it interesting, is it urgent? The result is a business that drifts wherever the strongest wind blows.

Purpose, done properly

Many companies have a purpose statement on their website. Often it is so general that it could belong to any company: “We create value for our customers.” That is not a North Star. It’s a cloud.

A useful purpose answers three questions: who do we serve, what change do we create for them, and what will we never do? It should be specific enough to say no with.

What research shows

Claudine Gartenberg, Andrea Prat and George Serafeim studied a large number of companies and found that financial performance was strongest where employees saw a strong sense of purpose combined with clear direction from management.¹ Purpose alone was not enough; it had to come with clarity.

At the personal level, Kennon Sheldon and Andrew Elliot found that goals that fit our own values are pursued with more lasting effort.² For entrepreneurs, a purpose that genuinely reflects what they care about is easier to stick to in hard times.

How purpose improves decisions

Faster decisions. Many options can be ruled out quickly because they don’t fit.

More consistent decisions. Different people make similar choices because they share the same star.

Easier no’s. Turning down an attractive opportunity is easier when it clearly points away from your purpose.

Better teams. People who share the purpose stay longer and work with more commitment.

Making purpose practical

• Write it in plain words, two or three sentences.
• Add what you will not do.
• Use it openly in decisions: “Does this fit our purpose?”
• Check it once a year: is it still true?

What this means for you this week

• Write your purpose: who you serve, what changes for them, what you won’t do.
• Test it on three recent decisions. Would it have helped?
• Share it with your team and ask what is unclear.
• Use it openly in your next decision.

The waves will keep moving. Find your North Star.

Sources

1. Gartenberg, C., Prat, A. & Serafeim, G. (2019). Corporate Purpose and Financial Performance. Organization Science, 30(1), 1-18. doi.orgCompanies where employees saw a strong sense of purpose combined with clear direction from management showed better financial performance.
2. Sheldon, K. M. & Elliot, A. J. (1999). Goal striving, need satisfaction, and longitudinal well-being: The self-concordance model. Journal of Personality and Social Psychology, 76(3), 482-497. doi.orgGoals that fit our own values are pursued with more sustained effort and add more to well-being.