This idea doesn\u2019t sit well with everyone. \u201cWithout profit, the company dies! People starve!\u201d<\/em> But the discussion is about putting purpose before profit\u2014not in place of it.<\/p>\n So the first natural question is: what should a company\u2019s \u201cpurpose\u201d be? And the crucial follow-up: can a business really thrive and grow without a profit-first mentality? What about the effects on employees, customers, shareholders, investors, and the broader economy?<\/p>\n We believe that businesses can thrive, making healthy profits while also putting their social purpose first. Let\u2019s look at how.<\/p>\n There is a somewhat famous quote which perfectly summarizes the mindset of business owners in the 1960s and 1970s eras. Made by the CEO of an large textiles company and published by Forbes<\/a>, it goes:<\/p>\n \u201cThe objective of our company is to increase the intrinsic value of our common stock. We are not in business to grow bigger for the sake of size, not to become more diversified, not to make the most or best of anything, not to provide jobs, have the most modern plants, the happiest customers, lead in new product development, or to achieve any other status which has no relation to the economic use of capital.<\/p>\n Any or all of these may be, from time to time, a means to our objective, but means and ends must never be confused. We are in business solely to improve the inherent value of the common stockholders’ equity in the company.\u201d<\/p><\/blockquote>\n Famed Nobel-winning economist Milton Friedman worked hard to solidify the notion that for a company to pursue anything other than legal profit<\/a> would be \u201cpure and unadulterated socialism.\u201d His view was, quite simply, that businesses have no social responsibility to the public or society at large.<\/p>\n The opinion, back in 1970s capitalist America, was a popular one. Or we should say, popular among the wealthy investors and business owners that became immensely rich and influential as a result of a profit-first ideology.<\/p>\n But we\u2019re no longer in the 1970s and businesses\u2014and their dogged pursuit of ever-higher profits\u2014are under more scrutiny than ever. Social responsibility is no longer a laughable idea\u2014it\u2019s being demanded by consumers. Business must now be designed to create positive contributions to society, benefiting customers and communities as well as<\/em> shareholders.<\/p>\n That is the definition of a purpose-led business.<\/p>\n The point isn\u2019t that there\u2019s one single \u201cpurpose\u201d that should replace profit. It\u2019s that companies need to engage more directly and forcefully in social issues across the board. Things like:<\/p>\n The idea is that when making important decisions, the first questions aren\u2019t about how the bottom line will be affected, but the effects on the points listed above.<\/p>\n Distinction between goals and purpose<\/strong><\/em><\/p>\n Management expert Peter Drucker said that there is only one purpose of any business: to create a customer.<\/p>\n I would alter and expand this statement to say that the goal of any business is to create enough customers\u2026to enable its purpose<\/strong>.<\/p>\n Like generating profit, purpose is something that\u2019s fulfilled only by running a successful business. Companies still need to nail their product design, have creative marketing, understand their audiences, recruit well\u2014all of this is essential to allow businesses to fulfill their purpose.<\/p>\n And in much the same way, fulfilling that purpose usually leads to profits anyway!<\/p>\n We aren\u2019t dealing with a naive or hypothetical concept here: purpose-driven businesses have been shown to be more successful<\/em> than those chasing profit. That success takes many forms\u2014yes, including profit itself\u2014and we\u2019re going to look at a few of them here.<\/p>\n Happier and more engaged employees<\/strong> <\/em><\/p>\n Today\u2019s employees\u2014and especially younger workers\u2014need to work for organizations that give their lives meaning<\/em>. For both companies and employees, a sense of belonging has become essential for success<\/a>.<\/p>\n Companies driven by higher purposes than profit create more value for employees. They become more invested in the company\u2019s success, they have better mental and physical health, and they\u2019re more driven to deliver high-quality work.<\/p>\n Meaningful work is now a stronger motivator than salary. And there\u2019s no more meaningful work than contributing to a company whose purpose is beyond profit.<\/p>\n More loyal customers <\/strong><\/em><\/p>\n A recent global study<\/a> found that consumers are four to six times more likely to buy from, protect, and \u201cchampion\u201d purpose-driven companies. Part of this is the mindset of today\u2019s customers: 83% of those surveyed said that companies should only earn a profit if they also deliver a positive social impact<\/strong>.<\/p>\n And the customer is always right. People still want to spend money and have amazing products and services. The difference is that, especially in an era of unprecedented choice, they are also willing to forgo brands which don\u2019t deliver perceived societal value.<\/p>\n Strong profits<\/strong><\/em><\/p>\n It\u2019s purpose before<\/em> profit\u2014not instead of profit. Today\u2019s companies are increasingly dependent on knowledge workers and focused on customer experience. If employees are forced to work in poor conditions (low pay, long hours, impersonal management, etc.) then their return to your business will be lower.<\/p>\n Their motivation, productivity, ambition, willingness to go the extra mile\u2026how can any of this be sustained if you\u2019re not investing properly in them? Part of every business\u2019s purpose should be the financial and mental wellbeing of its employees. Arguably this should be their first objective.<\/p>\n There is a misconception that putting purpose before profit will make beggars of us all\u2014this couldn\u2019t be further from the truth.<\/p>\n While most corporations believe their purpose is to deliver results for shareholders, it doesn\u2019t need to be that way. As we\u2019ve seen, dedication to a clear purpose can improve<\/em> a business\u2019s growth, innovation and even profit. As we look towards the future of more sustainable businesses and the vital importance of happy<\/em> knowledge workers, a purpose-first philosophy is something that major investors and shareholders will get behind.<\/p>\n Research from HBR says that if a CEO focuses primarily on maximizing profit, employees\u2019 view of the organization will suffer<\/a>. Conversely, putting stakeholders\u2019 interests (environmental impact, customer & employee concerns, community initiatives) ahead of profits leads to greater workforce engagement and, therefore, superior financial results.<\/p>\n![\"Should](\"https:\/\/www.sogolytics.com\/blog\/wp-content\/uploads\/2022\/05\/carl-heyerdahl-KE0nC8-58MQ-unsplash-1.jpg\")
<\/a><\/p>\nHow did \u201cprofit-first\u201d become the status quo?<\/h2>\n
What could their purpose be, if not profit?<\/h2>\n
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<\/a><\/p>\nThe benefits of purpose before profit<\/h2>\n
Would shareholders tolerate this new philosophy?<\/h2>\n
The pebble that starts the avalanche<\/h2>\n