At the Stretch leadership conference in Budapest this week, one of the recurring themes was that of business purpose. One of the quotes I shared as part of my session was Peter Drucker’s far-sighted observation from 1954 that ‘Profit is like oxygen. You need it to survive, but if you think that oxygen is the purpose of your life then you’re missing something’. Similarly, if you are a business leader and you think the sole purpose of your business is to make profit then, increasingly, I think you’re missing something.
One of my fellow speakers at the event, Tim Steigert, later shared a graphic on purpose that I had not seen before. The beauty of this graphic is that it simplifies the topic of purpose into four crystal-clear statements:-
The graphic’s wording fits for a discussion on individual purpose, but with a few small tweaks it can also be applied to the topic of business purpose by asking the following questions:-
- Do we get paid a sustainable value for what we do in the eyes of our owners/sponsors
- Are we great at what we do in the eyes of our customers?
- Does what we do make the world a better place in the eyes of our grandchildren?
- Do our employees love what we do and the way we do it?
Businesses that can honestly answer ‘yes’ to all the above questions are living on purpose. If you have one or more ‘no’s then I am afraid you have more work to do.
One of the organisations that this week struggled to answer ‘yes’ to living on purpose is Sports Direct. Upon revelations of the working practices at their main warehouse, plus indifferent financial results, the shares of Sports Direct fell 13% in one day, wiping £500m off its value. In this instance, Sports Direct failed to live on purpose, because it’s various stakeholders decided that the way it treats its workers does not make the world a better place and that those employees are unlikely to love what they do and the way that they do it.
At this point, I can hear some business leaders paraphrasing Milton Friedman’s quote from 1970 by crying, ‘Hey, this isn’t fair. I’m a businessman. I’m here to make as much money as I can, so long as I stay within the rules of the game. I’m not here to save the world.’ But here’s the catch: the rules haven’t changed, but the game has. The game must have changed, otherwise why did the shares in Sports Direct fall? Instead, why didn’t the shareholders of Sports Direct applaud the company on such a canny piece of red-toothed capitalism?
Stories like those of Sports Direct reveal that the coming paradox of organisational life is that those businesses that live by the four questions above will find themselves making the most sustainable financial returns, even though profit is not the sole business purpose that they are focussed upon. One of the further consequences of this game-changed landscape is that the distinction between a charity, a social enterprise and a corporate business will become increasingly hard to discern in the coming years – we live in fascinating times.
I am not saying that this will all happen tomorrow. Many businesses will continue to live off purpose for a long time to come and they will ‘get away with it’ to varying degrees. But the trend is clear. Can we really see it being reversed any time soon? Managers manage. Leaders anticipate. Which then are you?
John will be discussing more about business purpose in his forthcoming book, ‘The Trusted Executive: Nine leadership habits that inspire results, relationships and reputation’. You can pre-order now via Amazon.
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