The Purpose/Profit Paradox
Over the course of my career and my continued journey into the land of why purpose beyond product matters so much the most frequent question is around profitability. Will I make money doing this?
It is of course a viable question. In today's landcape where CEO's average life expentancy is shorter than time between political elections it is understandable that CEO's feel the pressure to produce enough short term results so that they can extend their tenure and hopefully enhance the future prospects of the company they are leading.
Behind the anxiety of this question lies an interesting paradox. We are trained in a mechanistic, linear way and are not appropriately prepared for the quantum world we now live in. A world where there are connections beyond imagination and where order and chaos are more related than perhaps some of us thought. We are trained to "put our mind to it". We are taught that if we focus hard enough the rewards will come. Of course this is true at a general level. Effort matters. But we need to be clear on what we are focusing on. In the world of rewards and returns we need to focus on inputs rather than outputs.
Most important outcomes are rarely the product of focusing on those outcomes themselves. Take love for example. We don't experience love by focusing on being loved. The same logic is true for most sports. If we focus on winning rather than each shot or each play, we probably lose. The same is true for profits. When we focus on how a company better serves its constituents the result is often that profit growth. But companies or people that set out to "just make money" often don't. Peter Drucker used to say that "most analysts don't understand businesses. They think business make money but businesses make shoes".
This is the problem and the power of purpose. If you set out to have a purpose bigger than your product in order to make more money you will be disappointed. It won't work. But if you are genuine. If you are honest, transparent and passionate about how your company is contributing to improving the lives of its constituents you will build stronger connections, more loyalty and ultimately higher profits. Welcome to the Purpose/Profit Paradox.
Mats
3 Comments
Reader Comments (3)
I do find these arguments enticing. They closely align to some of the most powerful philosphies which focus on giving to receive, on the means rather than the end: however whether this approach will always lead to material success is slightly less clear to me. For example I notice that Gates/Buffet et al seem to be doing the 'right thing' not via the purpose of the companies they have led but rather by using the wealth they have created in those companies in a kind of second post business career phase. What is clear is where purpose and profit do align the rewards are far greater than the purely financial.
I have felt this paradox in several companies, it's becomes even more a problem when not communicated properly.
Manager says: We wash cars, our customers has the cleanest cars in town, that is what we do and that is how you should work!
Manager says:we spend to much time cleaning each car, if we don't clean a car in less than 30 min we loose money.
I have experienced this myself, and it's no blessing working under short-terms goals.
We say you do this(but we need you to do this)
Everyone understands and work against the latter.
But when purpose is lost there is no love in the company, without love people quit for a small increase in salary. At that point management desides its time to show some love, but it's rubbercoated.
recommending 'The Blue Ocean project' for the bookshelf.
warms regards
Tony
Profit is connected to product and the Industrial Revolution has moved to third world countries and we need new values for the Service Management of The Information Age. Supportive encouragement through generosity is the angle of purpose I'd like to contribute to your paradox power. Invested interest yields appreciation