The business of purpose

When transactions feel good

Millions of dollars have been spun from consultants purporting purpose as a, if not the, key to sustaining a successful business.

• Want to get customers to pay a premium? Have an altruistic purpose they are contributing to.

• Want to attract and retain top talent? Give them a purpose to align to.

• Want to woo ethical investors with a good cause their funds help to positively impact? You need purpose and you need it now!

Business purpose is the reason a business was started in the first place. It sits right up there in importance alongside strategy and culture. It’s meant to be the reason beyond money that a business was started, its ultimate ‘why’.

But actually… the reason for starting any profit seeking business is money. It is likely money as a means to some other end, such living a comfortable life or providing for one’s family… but let’s not kid ourselves. People start a business to make money (in a far more tax effective way than doing so as a salaried employee).

It just so happened the founder recognised an opportunity to make money using their unique circumstances and hard work (and probably skills… but it really does seem that some people just get ‘lucky’, so unique skill need not always apply). Then, some have an altruistic bent so want to give up some (or even all) of their profits to a non-economic reason.

A business is there as an economic machine, it is then owner’s discretion as to how surplus cash is distributed. Sometimes that’s back into the business, sometimes it’s towards their own prosperity, and sometimes it’s to something altruistic. If this sounds very Milton Friedmen-esque, well yes and no.

Friedman’s views were quite rigid. It was only after maximum returns had been distributed to shareholders, even if generating those profits was at the expense of other stakeholders (or the environment) of the business, that shareholders could then make altruistic choices with how to spend their profits. Something about that smacks of hypocrisy, or at best, leads to ‘good intentions poorly executed’ type mistakes.

You see in an authentically purpose driven business, good intentions well executed are embedded into the business’s way of operating. From sustainable environmental practices, employee profit sharing schemes, charitable giving programs and through to good ol’ great customer service. Everything, or at least as much as possible for the business model, is done in a way that makes the world a better place.

It’s not about pillage to prosper then serve a good purpose. It’s serve a good purpose and prosper whilst doing it.

There are the likes of Patagonia, long regarded as one of the worlds leading profit-with-purpose businesses. After many years of using Patagonia’s profits to do good in the world, after 49 years founder Yvon Chouinard transferred ownership of the company to two not for profit entities, to ensure profits are used to fight climate change over the long term.

Balancing profit with purpose is a completely legitimate business model, and one I believe strongly in. As shown through George Serafeim’s extensive research (I recommend his book Purpose + Profit), done authentically, it drives a powerful competitive advantage.

You see purpose gives business a heart, without one a business is heartless. For one person to connect to another person, we don’t need to know their purpose nor our own, it’s a heart thing. We feel it. But a business is a hollow entity, and if culture is the soul of a business, then purpose is the heart that beats a reason for being through the whole thing.

So does this mean purpose in business really just about giving customers, staff, investors and others something to feel warm and fuzzy about, i.e. a sense of doing something ‘meaningful’, whilst they are fulfilling their part of the transaction?

Yes. That’s exactly what it is. And there is nothing wrong with that. Let’s call it for what it is, because I’m pretty sure we all want that.

Cover image: Purpose by Nick Youngson CC BY-SA 3.0 Pix4free