What Should Be the Purpose of Business?

What’s at the Core of Your Business?

On Sunday I played Monopoly with my kids. I hadn’t played that game in years. As we sat down to play, I looked at the rules. Since it had been so long since I played Monopoly, I wanted to familiarize myself with the purpose of the game.

Purpose

Under the section entitled, How to win, here’s the purpose of Monopoly.

Move around the board buying as many properties as you can. The more you own, the more rent you’ll be able to collect from other players. If you’re the last player with money when all other players have gone bankrupt, you win!

It seems American society believes that’s what business is all about: win by crushing your competition. The very foundations of capitalism have been crumbling, in no small measure because many companies have had a win-at-all-costs strategy. While your business may not be guilty of a Monopoly mentality, society at large thinks you are. Here’s what that means for you, and what you can do about it.

 

Shooting themselves in the foot

 

The Nobel economist Milton Friedman posited that the purpose of a corporation was to maximize shareholder value. In recent years, that premise has fallen under increased scrutiny. Society has become disenchanted with shareholders being the only recipients of a corporation’s good fortune. Americans sense the widening inequality of wealth (the average worker made less than 1% of the average CEO salary in 1980; in 2000, that figure dropped to less than 0.2%) as well as a short-sighted focus on short term results.

Companies have become very successful on accomplishing the short-term results that they measure. But what they don’t measure can come back to bite them.

Gary Shapiro, President and CEO of the Consumer Technology Association, warns

Brands are about public perception – and leaders of businesses define their brands by the goodwill they generate. Increasingly, younger generations are making purchase decisions on the basis of brands and whether they do good.

 

Times are changing

 

Entertainment geared at children—in recent years or in past decades—has made the businessman the bad guy. Whether it’s Rio 2 or Scooby Doo, the person who stands to make a profit has been cast as the villain.

Now those kids are adults, and they are concerned about the byproducts of capitalism and what corporations leave in the wake of their pursuit of profit. We see that younger workers aged 25-44 want their employers to be more involved in “social activism.”

But it’s not just younger adults who are concerned about how the money is made. A Fortune survey of 1,026 adults found that 72% agree that corporations should be “mission driven” as much as they are concerned about serving their customers and their shareholders. In addition, the same percentage (64%) of respondents want a corporation’s main purpose to be about “making the world better” as “making money for shareholders.”

To combat this trend, CEOs of nearly 200 of the largest corporations in America changed their tune. Collectively known as the Business Roundtable, this elite group ditched their own statement written two decades ago that enshrined Milton Friedman’s purpose of a corporation. In its place, the BRT in August produced a new purpose statement that enumerates their responsibilities to more stakeholders than just shareholders.

Delivering value to our customers…

Investing in our employees…

Dealing fairly and ethically with our suppliers…

Supporting the communities in which we work…

Generating long-term value for shareholders…

 

Paying the piper

 

While significant, these ideas in this statement are not groundbreaking. John Mackey, the co-CEO of Whole Foods Market, proffered these same ideas in 2014 with his co-author in their book, Conscious Capitalism. These ideas have been gaining steam for some time, but it may be due to a confluence of events that these ideas have finally been espoused by the BRT.

  1. Public opinion is moving away from capitalism. Americans are no longer feeling like the American Dream applies to them. They feel Big Business doesn’t care about workers, and workers are ready for change.
  2. People are not—and have not—been engaged at what they do in the workplace. Employee engagement has hovered around one-third of American workers, as reported by Gallup in their State of the American Workplace Report.
  3. People want meaning in their lives. With the pace of change, life, and technology, people are feeling disconnected. They want their lives to count for something. They want what they do in their work lives to reflect what they feel is important in their personal lives.

It appears that the BRT has heeded late Sen. Everett Dirksen’s advice: “When I feel the heat, I see the light.” The same companies represented in the BRT have espoused corporate social responsibility for many years, and yet it seems as though that’s not enough.

As John Mackey explains,

Too many businesses have operated with a low level of consciousness about their true purpose and overall impact on the world. Their tendency to think in terms of trade-offs has led to many unintended, harmful consequences for people, society, and the planet, resulting in an understandable backlash.

 

The real thing

 

Corporate social responsibility, while noble sounding, seems to function like penance for sins. It’s as if companies know that they are making money off the backs of people, and CSR is their way of throwing a bone to society. Their CSR efforts appear to be after thoughts, done to make their money-making look good.

Instead of just looking good, companies should be about doing good. The whole idea of capitalism and business in general is to solve problems for people at a profit, in order to continue to solve problems. The whole purpose of a company should be based on doing good from the very core of the company. Instead of an after-thought, the good the company does should be central to what the company does. In short, it should be central to its purpose.

Companies need to be aware of their purpose. It should be something that they use as a touchstone for all of their decision-making. It should be the guiding star for how they navigate their strategic planning. And it should be a central theme in all of their executive level discussions.

Not only does a heightened sense of purpose help with making decisions, it also resonates with society. People want to do business with people who are doing good things. As Aaron Hurst tells us in The Purpose Economy, “consumers are putting less emphasis on cost, convenience, and function and increasingly are making decisions based on their need to increase meaning in their lives.”

 

What you can do

 

By having a clear purpose for your company, you can do well by doing good. But it has to be the real thing. Americans, especially younger generations, know what it feels like to be marketed to—and they will smell a fake.

Your customers want to cheer you on. They want to be part of something larger than themselves. But they want to know that you’re the real deal.

What is the purpose of your company? Do you have a purpose that is central to all that you do? Do you have something that animates you? Is there something deeper than money that gets you going in the morning—and sustains you when times get hard? Do you have a uniting common bond that will draw your employees to you—so that they don’t want to leave? Do you have a focus of your company that draws people to work for you—even if that means they have to take a pay cut?

If your answer to any of those questions is no, then you have a huge opportunity. Not only can a core purpose provide meaning to you and your employees, it can provide a point of differentiation between you and your competition.

This focus on purpose will provide you with the glue that connects you to your customers and employees, and it will provide you with a sense of well-being knowing that you are doing good—and not just making it look good.

 

If you need help in articulating your company’s purpose, click on the button below to start the conversation.

 

Start the Conversation

 

Robert McFarland is the author of the bestsellers, Dear Boss: What Your Employees Wish You Knew and Dear Employee: What Your Boss Wishes You Knew. Robert is also President of Transformational Impact LLC, a leadership development consultancy helping companies improve their employee cultures to make the companies healthier, more productive, and more profitable.

 

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