It’s Time to Balance Profits and Purpose
September 19, 2012 Editor 0
Sometimes it takes a throwback to put your business in perspective today.
In 2003, Dr. Jeffrey Spahn wrote “A New Capitalist Manifesto? Imagining Business in the 21st Century.” It focuses on the need to — and value of — balancing profit with purpose, and it contained a prediction: businesses in the future will recognize that the most successful companies are the ones that recognize the relationship, and can strike the appropriate balance, between higher purpose and financial success.
“What needs to emerge, and in some circles is emerging,” he wrote,” is what I call a mutual, or reciprocal, economy that focuses on the needs of both the individual and the collective.”
Spahn also challenged business to “define a more integral and profitable reason for existence. By doing so, business leaders can avoid being on the defensive, fend of more government intervention, move to restore public trust and take significant steps toward enduring profitability.”
In 2003, through independent research and conversations with executives, Spahn noted that about half of the corporate executives he spoke to defined the purpose of business as simply this: maximizing shareholder worth. The other half believed their business purpose was to contribute to the well-being of society. This might happen by meeting customers’ needs, by developing people, by working for a specific cause, or by making the world a better place through the organization’s philosophies or actions. But one thing was very clear: the two positions were strongly held and emotionally laden, on both sides.
It was clear in 2003 that executives were confused about the interrelation of purpose and profits. The goals were considered to be mutually exclusive, even though research at both Harvard and Stanford revealed a significant fact: The most successful companies, both in profitability and longevity, are the ones who recognize the absolute necessity of profits as well as the equally high necessity of having a purpose beyond shareholder wealth.
If we were having the same conversation today, where would executives’ opinions lie?
The good news: in our own discussions with regional and national leaders, the need and desire to do well by doing good is much clearer today. Executives and leaders understand the relationship. They also understand that a strong focus on social and corporate responsibility is vital to financial success. They also speak convincingly about the desire to build people at the same time they are also building products and profit.
However, there continues to be vast gap between understanding and actual action. While more organizations are highly committed to corporate responsibility and philanthropic programs, corporate corruption is high. Mistrust of government has perhaps never been higher.
Employee loyalty is receiving horrible marks–a CareerBuilder study in 2011 shows that 75% of employees would leave their current positions without hesitation if the right opportunity came long. Other studies show companies losing 20-50% of their staff every year.
While we as organizations understand the balance of purpose and profit much more fully than we did in 2003, on the whole, the ability to follow through is still abysmally low.
However, not every outcome is bleak. There are many good examples of companies who exemplify a culture of giving and who exhibit strong commitments to corporate and social responsibility. At our own company (Fishbowl) we work to live by our 7 Non Negotiable rules — Belief, Commitment, Loyalty, Trust, Courage, Humility and Gratitude — which we have spoken about in several of our prior HBR columns, every day.
From the responses of many who are reading our columns, it is clear we are far from alone in these goals.
However, on the whole and as a business culture, there is much room to improve. In many respects, we are further behind now than we were in 2003. As a nation and as participants in the global community, we issue the challenge to revisit and improve our capitalist culture.
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