I often find clients engaging in spirited discussions about the role of profit in their companies. Some argue passionately that profit is greed, and that the company’s vision or mission must take precedence. Some argue passionately that profit is the only good reason to be in business, and that it must be maximized at all costs.
Both arguments are wrong. Yet both have elements that are right.
I’ve worked in companies who were so focused on their vision that they went bankrupt trying to get there. I’ve worked in companies who tried to maximize profits at the expense of their customers, rather than by delivering value to them.
Both behaviors are wrong. And there’s a better alternative.
We’ve all heard of conscious capitalism – the desire to create a company that does well and does good. Based on my research, more than 80% of companies with $5-250M in revenues get a “D” rating on the core metric of Profit per Employee. (Download your complimentary copy of the Benchmark report). That means they’re not doing well. That means they can’t do good. In fact, it means that most of them can’t even afford to give their employees a small raise without going into the red.
Conscious capitalism requires Profit On Purpose – an abundance of profit in order to fund good initiatives inside the company and in the greater community. But it must be earned safely, sustainably and with integrity – according to the greater Purpose of the company.
How do you reconcile the two? I’ve recently worked with a client to redefine their Purpose, which goes well beyond Vision and Mission Statements. A Vision is a fairly ethereal destination. A Mission is a fairly broad description of how you’re going to get there. A Purpose is why you exist in the first place, and what value you contribute to society. A strong purpose serves to keep the company on track but more importantly, is the best way to motivate and engage employees to be part of it.
There’s only one little problem. It’s one thing to talk Purpose. It’s another to live it by actually doing good things, because employee pride and motivation relies on “seeing is believing”.
Let’s take Tom’s Shoes for example, known around the world for their “sell a pair, donate a pair” Purpose. What if Tom’s had a bad quarter and decided to stop all donated shipments so their bottom line would look better? Disaster – from a PR perspective, from an employee engagement perspective, and from a community impact perspective. Tom’s needs to do well to do good. And it’s not the now-and-then commitment that Corporate Social Responsibility departments have the luxury of doing.
Purpose requires profit. And the best way earn the profits you need to fund all the good things you want to do is:
1. Sell more of the RIGHT products and services
2. To more of your IDEAL customers
3. At prices based on the value you provide
4. With lower costs
5. And to innovate in ways that leapfrog your competition.
Dig deeper into each of these strategies when you access a complimentary 3 part video series. Go and get those now, and share them with your team. If you’d like some help developing your Purpose, feel free to reach out.
What’s the pervasive culture in YOUR company? Is it Profit, or is it Purpose? How does that show up in the everyday actions of leaders within your company?