In the Intelligent Enterprise, James Brian Quinn writes, “an overemphasis on profits rather than on those things that achieve profits, with rare exception forces an internal and short-term orientation that is actively destructive to service delivery.”

In business, the pursuit of profit is often considered the ultimate goal. Companies focus on increasing their revenue streams, cutting costs, and maximizing shareholder value. However, a growing school of thought is advocating that profit should be viewed as a consequence of a business’s core purpose, rather than the sole objective.

Peter Drucker wrote, “The customer is the foundation of a business and keeps it in existence. He alone gives employment.” This was in the context of arguing that profitability is an element of a business that should be optimised, rather than maximised. I would concur. Profit maximisation could in fact be viewed as dangerous to both the business and its stakeholders, as well as society as a whole.

But purpose should not be purely focussed on the customer and meeting their needs. In order to meet the customer’s needs, it is also important to include employee welfare, the impact on the environment and society in your purpose. By developing a purpose for your people and hence your internal culture, you will increase productivity and align your people to serving your customer better. Business literature often asks, “what problem do you solve for your customer?”. I would add employees, the environment and society to that question.

More and more, customers are asking what the business’ purpose is in relation to each of these elements. Looking for authenticity, they want to be able to buy in to this purpose and in so doing enhance their loyalty to your brand. This creates a long term relationship at an emotional level, which can contribute to the sustainability of the business.

But watch out for businesses that articulately promote a purpose for their business, but don’t live it. Focussing on purpose is not a marketing exercise. You’ll see it in the eyes of their people if you look long enough. That’s the authenticity “tell”.

Profit is certainly an essential ingredient in mitigating financial risk and the demise of the business.

But, if the focus is purely on profit, the risk arises that the needs of the customer become secondary, leaving the way open for competitors to come in and take market share by supplying the customer with what you are no longer adequately providing. This neglect might involve cutting corners on quality, service or product performance. It might even involve compromising safety, both that of the customer and also employees, both of which could lead to the destruction of the business. There are several examples of this in the pharmaceutical, food and automotive industries.

Focussing purely on profit can actually cost money. Not increasing capacity, both human and physical, can lead to higher staff turnover and excessive maintenance costs. It is far more expensive to hire and train new staff as a result of losing existing staff than to invest in new staff to relieve the pressure on those existing employees and gear up for the next phase of growth. Similarly, the actual costs of lost production due to breakdowns and excessive maintenance can far exceed the cost of investing in new machinery and technology.

Profit and purpose are not mutually exclusive. A must be built on a sound business model that does lead to long term sustainability.

At wauko, we firmly believe that profit is a result, not the purpose of our business. This forms a key part of our core values.

Our purpose is to empower every person and organisation everywhere with the cash flow management tools to optimise their return on investment. And we do this by creating determinable, distinguishable, and sustainable value through building long-term relationships with our people, clients and service providers, using state-of-the-art technology, dynamic expertise and innovation.

references:

1.https://www.linkedin.com/pulse/profit-purpose-business-soumitri-das/
2. https://www.hrexchangenetwork.com/hr-talent-management/columns/the-purpose-of-business-is-not-to-make-a-profi
3. https://www.promisegroup.co.za/news/when-profit-is-the-result-and-not-the-reason
4.https://www.clemmergroup.com/articles/profits-reward-purpose/