How Looking Beyond Profits Will Make You More Profitable

In our capitalist age, it is easy for businesses to slip into the mindset that making a profit should be the ultimate goal. While any for-profit entity by its very definition exists to make a profit, Martin Wolf of The Financial Times suggests, “If a business substitutes making money for purpose, it will fail at both.”

However, a business that does not maintain its financial sustainability and prudence will be pretty useless regardless of its best intentions. Financial viability is simply necessary for altruistic action.

In an attempt to strike a balance between altruism and pragmatism, Colin Mayer of Oxford’s Saïd Business School suggests that the esteemed and exceptional companies of the future will recognise the importance of “producing profitable solutions to problems of people and planet.”

Put more simply and with slightly less alliteration, profit must flow from the pursuit of a broader social purpose – and the trusted brands of tomorrow will be known for doing just this.  Validating this line of thinking, long-range studies have found repeatedly that companies and organizations with a non-monetary focus actually earn more than their profit-driven counterparts over time.

The important principle is this: clarity of purpose matters regardless of what that purpose is.

Amongst other things, clarity of purpose informs:

• The products and services you will offer and those you choose not to
• The locations and markets you will compete in and those you steer clear of
• The yardsticks of success that determine what is a ‘hit’ and what is a ‘miss’
• The partners you will and won’t engage with
• The people you hire and those you won’t
• The internal culture you allow or endorse and that which you don’t

One of the world’s most trusted brands, Patagonia, has won the hearts and minds of the marketplace through an unswerving commitment to their purpose of “Saving our home planet”. While many brands have a purpose related to environmental sustainability, Patagonia’s devotion to the cause goes so far as to urge people to reduce their environmental impact by not buying its products. Now that’s commitment to the cause!

In April 2019, Patagonia also took the bold and purpose-driven step of walking away from one of its most devoted customer groups – finance professionals.

On Wall Street, Patagonia fleece vests have almost become an unofficial uniform over the years. Despite this popularity, Patagonia announced that they wouldn’t be supplying any new corporate clients with co-branded products if the client company engaged in environmentally damaging activity, cutting off much of its business with the Wall Street crowd.

While some criticised the move as brand activism gone too far, Patagonia have reaped enormous rewards from being ruthlessly focussed on purpose – they are trusted and admired like few other companies.

Many organisations have attempted to articulate their purpose by crafting vision or mission statements, but these are all-too-often a concoction of policies, practices, strategic aims and goals.

True driving purpose, however, is more fundamental, long-term and even philosophical than these things. Writing in the Harvard Business Review, my friend and colleague Graham Kenny of the consultancy Strategic Factors suggests that the unique power of purpose is that it forces an outward focus. It compels everyone in an organisation to put themselves in the shoes of those they are looking to serve. According to Kenny, a clear statement of purpose is uniquely important as it becomes the ‘philosophical heartbeat’ of an organisation.

Consider the purpose statements below which drive some of the world’s most enduring, trusted and successful brands:

• ING – Empowering people to stay a step ahead in life and in business
• Kellogg’s – Nourishing families so they can flourish and thrive
• Dyson – To solve the problems others seem to ignore

So here are a few questions to help you articulate yours or your organisation’s driving purpose.

1. Why do you exist?

The cosmetic giant Mary Kay has a profound purpose statement, created by its founder. “We are in the people development business.” Mary Kay Ash stated, “Cosmetics are just the vehicle.” This inspiring and stunningly altruistic purpose has guided the Mary Kay Corporation since 1963.

What is your answer to the question ‘Why do we exist?’

2. How would you describe your business on the back of a T-shirt?

How could you capture the essence of your business, brand or organisation in a couple of words, in an image or with a short slogan?

3. If you were to cease to exist tomorrow, what would be lost?

Jim Collins and Jerry Porras in their iconic book Built to Last pose this question in a different way: “Why not shut the organisation down, cash out, and sell off the assets?”

4. What would make you volunteer?

If you didn’t need the money or there was no financial compensation available, what would motivate you to still give your time and energy to the organization?

Speaking a few years ago at the Edinburgh International Television Festival, Rupert Murdoch’s daughter, Elizabeth, openly criticised her father’s company News Corporation for operating with an absence of values.

Elizabeth Murdoch observed that “profit without purpose is a recipe for disaster” and that companies and their leaders need to “reject the idea that money is the only effective measure of all things.” To this, she added that an absence of purpose could be one of the most dangerous things in a capitalistic world.

Profits are indeed a helpful and necessary measure of business success. However, the moment they themselves become the goal or raison d’etre, a dangerous dynamic quickly develops.

In the sage words of Confucius, “Conduct guided by profit is cause for much complaint.”

In order to win the admiration, esteem and trust of our marketplace in the years ahead, having a clear sense of purpose that transcends mere profitability will be vital.