Profit Is Not A Reason For Being In Business
CSP FAIM © 2008 All rights reservedOne of the most profound statements of our time was made by The President of the World Business Council for Sustainable Development Bjorn Stigson, “Business cannot survive in societies that fail.â€(1) Currently society is failing many of it’s citizens. 2006 Nobel Peace Prize winner Muhammad Yunus says in his excellent book ‘Creating a world without poverty’, “Half of the world’s population lives on two dollars a day. Over one billion people live on less than a dollar a day.â€(2)
What are the solutions from a business perspective. I believe broadly speaking there are three options.
1) Yunus strongly suggests social businesses such as his own Grameen Bank or their joint venture with Danone, Grameen Danone, a business that sells a special yoghurt product for a fraction of the cost of traditional markets.
Social business according to Yunus have social goals only. Investor’s get back their in-vestment over time however any profits are put back into the business. I agree with Yunus in his assertion that the number of social businesses on the planet will increase dramatically in the not to distant future.
2) Businesses with social and economic goals (‘double bottom line’), or social, economic, and environmental goals, (‘triple bottom line’).
For the past 25 years or so ‘double and triple bottom line’ focused organisations have been making their mark and the so called corporate social responsibility (CSR) movement is gaining momentum. I subscribe to www.reportalert.info and automatically receive notifi-cation of the latest CSR reports by companies. The ReportAlert service is managed by CorporateRegister.com Limited, the world’s largest online directory of CSR Sustainability reports. I sometimes scan reports and sometimes read them in full. All are food for thought and provide insight that helps me to stay informed and to make my own decisions. The last time I looked there were 17543 CSR reports across 4468 companies!
These numbers demonstrate businesses of this type are already making a difference.
3) Businesses whose goal is profit yet are serious about philanthropy or giving back to the societies in which they operate.
Which one of the above is your organisation? For me purely profit oriented businesses will become dinosaurs. Profit is not a reason for being in business, profit is a result of being good at business.
Dave Packard, Co-founder of Hewlett Packard company said the following in 1939.
“I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reasons for our being.â€(3)
Famed economist Milton Friedman held a very different view to Packard.
“Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.â€(4)
The continuing fall out from the world’s credit crisis suggests the Friedman’s of the world presently outnumber the Packard’s! For me once the dust settles a new world will emerge that no longer tolerates the greed, lack of accountability, poor legislation in some countries, and just plain stupid business practices, that were the underlying causes of the crisis in the first place.
In our new world businesses with operating models like the three I suggest above or hybr-ids of these will be the most successful. Already households names such as Alcoa, BP, Hewlett Packard, Starbucks, Unilever, Vodaphone, are making a difference by measuring their impact on society and the planet and by ensuring changes in strategy and execution plans that will lead to the reduction and eventual elimination of negative impact.
The following are the key signposts of a successful modern business:
- Vision is no longer trite words displayed on board room walls and in annual reports, that no one really believes in, rather an authentic and compelling story is being lived and told that inspires and engages all stakeholders
- Mission statements have been replaced by a genuine cause beyond profit
- Values have become virtues rather than words very few people live
- Strategy is the social, environmental, and economic reference point/s from which deci-sions are made concerning the future direction of the business
- Strategy execution plans have been cascaded down to and are owned by teams and individuals
- Structure is based on determining value delivering roles without people in mind and then matching people to roles
- Systems fully support people in bringing everything remarkable that each of us is to our work on a consistent basis
- The order and alignment of the above is never taken for granted and is always a work in progress
Be remarkable
Ian
(1) refer to his blog www.president.wbcsd.org
(2)‘Creating a world without poverty’ page 238
(3)as stated by Charles Handy, What’s a Business For? Harvard Business Review, December 2002, p54
(4) Milton Friedman, Capitalism and Freedom, Chicago: University of Chicago Press, 1962
Ian Berry is speaking at R is for Recovery, a one-day event produced in association with The Academy for Chief Executives and aimed squarely at owners and directors from businesses employing between 5 and 250 people.
Ian Berry CSP FAIM is a writer and international business speaker on how doing good is great for business and the CEO of Remacue® a project leader and partner for organisa-tions wishing to increase the percentage of employees fully engaged in their work thereby guaranteeing productivity improvements. He is the Difference Makers Director for Fresh Business Thinking and the Founder of The Differencemakers Community.
Link: http://www.freshbusinessthinking.com/business_advice.php?CID=&AID=2365&PGID=1
