Business musings

Articles and thoughts about all things innovative and strategic

10
Jul
Posted by Matt Stocker , stored in: Vision, Values, Purpose & Mission  

Profit is an output, not a purpose

A business must have reason to exist beyond that of making money and maximising shareholder value. Profit cannot be the goal, vision, or the purpose of an organisation. An organisation that posts great year end results doesn’t automatically earn the title of being a great company.money_house_small

Seeking profit as a primary business purpose is like building a house of cards or building a house on sand – it will eventually lead to collapse (ably demonstrated by many financial institutions over the previous months). Profit is too temporary to guide a business by.

If a business’ main purpose is to make a profit, this will both lead to a lack of strategic direction and reduced staff motivation. For employees, once they have earned the company enough to cover their salaries, they make money for the owner of the business. That’s not a real purpose!

6 good reasons not to use profit as your primary purpose

  • Profit is an output and a symptom of success, not the cause.
  • Profit is temporary and can be wiped out in an instant.
  • In tough times, profit can be hard to come by.
  • You need more purpose than profit to make it through.
  • Profit doesn’t motivate the salaried staff who make success happen.
  • Customers don’t appreciate being seen just for their revenue.
  • Consumers are increasingly focusing on values and contribution to society when choosing who to do business with.

Beyond profit…

A true vision for a business rests on foundations of both purpose and values. The people within the business have to be passionate about what they do and why they do it. The business’ goals must then align with this foundation. Without a clear foundation, a business will never be truly strategic.

Values

A business’ core values are defined internally through a process of introspection and discovery, and are based not on the outside but on what lies within. Core values do not change with the seasons but are deeply held values already embedded within the DNA of an organisation.

To give you some examples, core values held by a variety of well-known organisations include: imagination; product excellence; great customer service; respect for the individual; quality; market focus; teamwork.

Your organisation does not have to hold these values but will need to discover its own. Core values are the handful of values that, even when push comes to shove, your business is not prepared to sacrifice to get ahead.

Purpose

The core purpose of a business is also discovered by introspection and discovery. A business’ core purpose is its most fundamental reason for being. By stripping away the layers of what a business does and what motivates it, any company will discover a deeper purpose that unifies and motivates. In essence, to discover your business’ core purpose, you could ask, “Why does this business exist?”

Again, to give you an example, the core purpose of my wife’s tutoring business is to “Help people realise their full potential.”

Why does your business do what it does? What is the bottom line about why you make the products you make or deliver the services you deliver?

6 good reasons for your business to look beyond profit

  • Purpose and values motivate and unify management and staff.
  • Purpose and values give a company a solid foundation from which to make decisions.
  • Purpose and values provide a navigational compass to all elements of the business.
  • Customers will have more to buy into and engage with.
  • Purpose and values encourage loyalty of both staff and customers.
  • Purpose and values encourage a strong culture and ethos within a business.

What next?

Start working on it! You need to involve staff and managment alike and discuss and argue over what the key values your business does (or should) hold and what, at the end of the day, your business is about. Look beyond what it does. In challenging times such as these, going back to basics and understanding the bottom line foundation of your business may well be the thing that gets you and your staff through.

If you would like support through this process, then please contact me. You may also be interested in my workshop, Vision, purpose & values: a solid foundation.

Many thanks go to James Collins and Jerry Porras, whose work provided the foundation for this article: Collins, J.C. & Porras, J.I. (1996), Building Your Company’s Vision, Harvard Business Review.

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