The Problem of Profit as a Purpose

Businessman with vampire fangs in the office

Just yesterday the Harvard Business Review presented an article by a London Business School professor suggesting that companies don’t always need a purpose beyond profit. I had to take a walk on the beach to get my blood pressure back to normal.

He starts off by lamenting that his school tries to instill in its students the desire to improve the human condition, but fails.

At London Business School, we often try to explain the purpose of our existence by showing pictures of our students who are working on environmental issues in rural India or improving sanitation in a township in South Africa. We also always highlight the wonderful work of our Professor of Economics, Elias Papaioannou, on clearing landmines in Mozambique. However, the reality of things is that most of our students go to work in management consulting, tech, or investment banking — even hedge funds.

I would suggest this in itself is a fundamental failure to teach the value, and non-financial rewards, of a worthy purpose beyond simply making money.  He then launches into how he believes the pursuit of profit has helped our world.

Economic growth, for example, is an effective way to reduce poverty – likely more so than aid – because it benefits the lowest income brackets in a country significantly. Moreover, increases in wages and wealth have been shown to have positive effects on other critical societal problems, such as crime, malnutrition, infant mortality, mental health, and general feelings of happiness.

That’s true, but context is needed.  The benefits of capitalism are optimized for the greater good when they are combined with a deeper purpose and constrained by appropriate guardrails.  I have lived in and visited countries where those guardrails didn’t exist, where new buildings collapse, drinking water is contaminated, healthcare quality is stratified between those who can and can’t afford it, and so forth.

And, yes, the opposite can and often does occur where the system is too restrictive and great ideas and investment can’t take root and thrive.  One of the most dramatic examples I’ve experienced was when I visited Bosnia & Herzegovina, and Slovenia, two countries formed at nearly the same time with the breakup of Yugoslavia, but with different sociopolitical values and economic systems and very different results.  Like everything in life, balance is needed.

A primary focus on profit also creates situations like the Boeing 737 MAX, where a decision to effectively design a new plane but not go through costly regulatory hurdles, and then make a necessary sensor an add-on option, cost hundreds of lives.  Or Facebook where chasing profit has meant compromising privacy (who is really their customer?) with fiascos like Cambridge Analytica.  Uber and background checks on drivers, Google and censorship in China, Wells Fargo and “improper” lending practices… there are innumerable other examples.

A primary focus on profit can create short term rewards, but can also create tremendous if not deadly long term reputation and financial damage and, most importantly, hurt people and society.  Purists would argue that the “invisible hand” will punish such situations, and eventually that’s probably true, but not before a lot of harm can be done.

The professor is correct, however, that many if not most corporate focus on purpose is just window dressing.

They come up with mission statements that appeal to some higher and lofty goals in society, proclaiming that they seek to “inspire and develop the builders of tomorrow” (Lego), “enable people to make new friends in different cultures” (Airbnb), and “inspire and nurture the human spirit” (Starbucks), rather than make money. Often, however, it seems to leave people feeling somewhat cynical rather than motivated.

Valid point.  Purpose, mission, vision, values, principles – they have to be more than words on a conference room wall.  They have to have true meaning and be driven and reinforced every day by leaders who also support employees who make tough decisions based on them. They have to be discussed, challenged, and embedded in culture and standard work.  I used to run a company where the owners intentionally refused to take orders for a certain class of very profitable products because it would conflict with their religious beliefs.  Making those kinds of decisions is tough, far more than a simple focus on profit, but the rewards, non-financial and even financial, are far greater.

The most successful organizations have a purpose that improves and satisfies a human need, place it in a foundation of principles rooted in sound ethics and integrity, and create customer value and delight by delivering a product to support the purpose.  They know profit is a byproduct, and a metric of how they are doing on their purpose.

I like to think we’ve done that at Gemba Academy, where our purpose is to improve the world by spreading the knowledge and power of continuous improvement.  To do that we hire great people, provide great benefits, continually reinforce a people-focused culture code, and endeavor to first understand and then help others, not just our customers, solve problems.  We try to add value to the community in everything we do, from our core products to our blog, podcasts, speaking, collaborating with organizations like AME and Lean Frontiers, and even working with what others might consider to be competitors.  To us we share a similar purpose.

We strongly believe that if we help make the world a better place, we will also be successful.  After ten years we know it’s true.

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