Seriously, what is the purpose of your business?

Seriously, what is the purpose of your business?

Very early in my career the president of the company I was working for told me the only reason the company existed was to “keep him living in the style to which he had become accustomed”. Much later in my career the CEO of a group of companies, one of which I was leading as president, made it clear that shareholder value was the single most important metric guiding the strategy of the company. Most business leaders of my generation were devoted to the teachings of Milton Friedman. Shareholder capitalism was the primary focus during those days even at the expense of the environment, employee engagement, and social causes. 

This is not to say that profit is bad. To the contrary, profit is necessary. While profit is necessary to sustain a business it falls short of understanding the full value that it can and must create. Today, a growing number of entrepreneurs and business leaders are moving away from the exclusive focus on profit and shareholder growth and moving to a more enlightened focus on “stakeholder value”. These “stakeholders” include investors, customers, employees, the community in which the business operates, the environment, and humanity in general. 

What does this mean and how does it work? One example is the Davos Manifesto. In brief, it states that companies have an obligation to pay their fair share of taxes; show xero tolerance for corruption; uphold human rights throughout their global supply chain; and advocate for a competitive playing field. Ever heard of “Certified Benefit Corporations” (B – Corps)? This growing list of corporations hold themselves to a rigorous standard of operation that should be the model for all businesses. 

Unrealistic, pollyannaish? Check out the success story of Patagonia. It is a great example of doing well by doing good. (Definitely read, let my people go surfing, written by Patagonia’s founder, Yvon Chouinard)

Carefully considering answers to the following questions will help develop a sustainable business strategy – 

• What is the purpose of my business?
• What value does my business create?
• Why does my business exist?
• Who are my stakeholders and what expectations do they have?

In case you haven’t heard, many potential and existing employees (especially Millenials and Gen Z) will be asking you these questions. They no longer want to work for, purchase from, or invest in companies that exclusively focus on maximizing profit. Of course, the most powerful source of motivation should be to do the right thing for the right reasons. 

Food for thought…