Once upon a time, the sole purpose of a business was to make the owner rich. Today, it’s considered “mainstream” for a company to also have a more humane purpose. If done authentically, doing so will make the owner even more wealthy. Purpose is motivation, and motivation is a competitive advantage.
A corporate purpose explains how its team makes a difference in the world. It also gives your employees meaning and gets them to dive into projects with more energy and enthusiasm. Purpose attracts and inspires employees. You can’t invent a corporate purpose. It already exists, and you need to realize it and then champion it authentically.
We grow. As humans, we evolve. We view things today that we once thought were wrong, even naïve.
My business education revolved around the philosophy of Nobel Prize-winning economist Milton Friedman, who, in 1970, argued that “the social responsibility of business is to increase profits.” I remember my “aha!” moment when I realized that Friedman was wrong and that it was a mistake to manage employees as expenses.
That “aha!” moment came from Rudy, the owner of a cloth materials fabrication firm in southern New Hampshire.
In 1995, revenue was booming for Rudy’s business, but margins were thin. Rudy decided to cut costs by firing the bottom-producing salespeople, leaving the remaining members of the sales team to take over the orphaned accounts.
Rudy didn’t give a pep talk. He didn’t verbally thank the remaining salespeople for picking up the slack. His thank-you, as he put it, was that they were “getting a gosh darn check” (though Rudy didn’t say “gosh darn”). Employees at Rudy’s company felt like replaceable cogs in a wheel.
Rudy’s employees felt stuck in ruts. They weren’t performing up to their potential. To get more out of his employees, Rudy needed a more connected workforce, but he didn’t know how to get his people more engaged with their work.
Still old school
Rudy wasn’t a bad guy; he was just old school. Unfortunately, some business owners today are still old school. When managers act like Rudy, employees respond only to the incentives and punishments outlined in their contracts. They’ll ignore opportunities, resist feedback and underperform.
Rudy followed some of Friedman’s earlier lessons, but, unlike Rudy, Friedman evolved. Friedman died in 2006, but his business theories matured by then. Friedman, I suspect, would have been a fan of Larry Fink, chairman and CEO of BlackRock.
In Fink’s 2018 open letter to fellow CEO’s, he wrote: “To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
Fink realized what Rudy did not — you get more out of your people if they have a purpose. Larry says, and I agree, that purpose is the lodestar that should guide business decisions, arguing that “profits and purpose are inextricably linked.”
Without a sense of purpose, businesses will cave to the short-term pressure of cutting costs, eschewing employee development and innovation. Purpose unifies management and employees, drives ethical behavior, and connects the firm with its community and customers. That connection helps sustain and magnify long-term profits. Purpose has become the driving force in growing earnings over the long term.
Consider two competing companies — yours and the business down the road. Your competition pays minimum wage with no benefits and no training. You offer flexible work schedules, health benefits and a mentoring program.
Who do you think will gain more market share in the next five years? The company that squeezed its employees for their short-term output? Or yours, which engaged your people by subsequently encouraging them to work even harder because they were able to contribute to your customers’ experience?
Culture eats strategy for lunch
Purpose must come from the top and become part of the collective conscience until it becomes culture. And remember, culture eats strategy for lunch. When the culture changes, the organization performs at a higher level. Employees step up and start looking for permanent solutions instead of putting Band-Aids on problems.
To maximize this intangible workplace asset, purpose must be reinforced through personal narratives. As the owner, it’s up to you to tell your people a personal story that helps them connect to their work. Alternatively, have a customer share their story about how your employees’ work affects their lives.
It is critical to articulate the corporate purpose to your people. But, it’s even more important for an employee to know how a product or service impacts customers’ lives. When people understand how their input plays a role in helping someone, especially by experiencing it firsthand, they’ll feel a sense of purpose.
Having a corporate purpose does not conflict with profits. Customers want to deal with companies that contribute positively to society. If the purpose is genuine, it will stick for the company, the employees and the customers, and all involved will form strong and long-lasting bonds.
As a business owner who wants to gain market share in the longer run, your company will be best served by creating authentic programs for your employees and let like-minded customers find you. Your purpose is a motivator, a differentiator, and a strategic asset.
Allen Harris is the author of ‘Build It, Sell It, Profit: Taking Care of Business Today to Get Top Dollar When You Retire,’ and the founder/owner of Berkshire Money Management in Dalton, MA, managing investments of more than $500 million. Direct inquiries to firstname.lastname@example.org.
This column was originally published in The Berkshire Eagle on November 6, 2020.