Profit Because Of Purpose, Not At The Expense Of It

© AdobeStock
With all due respect to Milton Friedman, purpose doesn’t happen at the expense of profits; it happens in support of profits. To be a strategic value driver that enables a company to achieve the greatest returns from its investments, purpose must be baked into the DNA of the company.

At the risk of being a drowned voice in a sea of many, I applaud the 181 CEOs members of The Business Roundtable that signed on to support a new, modernized definition of “the purpose of a corporation”— one that expands beyond simply maximizing shareholder returns to be more inclusive of actions that benefit employees, customers, the environment and society at large. Now comes the hard part: showing that they mean it and making it happen.

Skepticism has and will continue to come from multiple sides, as we continue what seems to be an inexorable march to the poles of every issue. It will come from those that suspect that this announcement and corporate purpose initiatives generally are the equivalent of lip service to improve public image without any meat to back them up. And it will come from those that have the opposite fear, believing that corporate purpose initiatives will take place at the expense of shareholder concerns and could jeopardize corporate profits. We need to make sure that we make “doing well by doing good” a reality – having a positive impact on the world and being profitable are eminently achievable.

As the CEO of a company whose sole focus has been to expand, support and demonstrate the tangible value of corporate purpose initiatives to a client list that includes a large chunk of the Fortune 1000 (including 25% of the signatory companies), I’d like to share some of the insight my team and I have gained into how the Business Roundtable can address these concerns quickly by empowering corporations with a roadmap to operationalize these goals.

Mitt Romney once (in)famously said, “Corporations are people too.” He was somewhat vilified for it, but I would say that although corporations might not be people, their ranks of employees, customers, supply chains, etc. can be a powerful force when galvanized, and they can have a mighty impact. That is but one of the opportunities the Roundtable can catalyze.

As we seek to execute on corporate purpose, we must consider the “how” of it, recognizing that we’ve now got some consensus on the “why.” Corporate purpose should not be reduced to a once-a-year exercise where directors and senior executives arm-twist employees into making a big donation to a charity chosen by the company. Having purpose today involves being a catalyst for employees and customers to get out there and do something that resonates with them and delivers on a sense of self-efficacy grounded in meaning, purpose and impact. Corporate purpose is TripAdvisor enabling their people to participate in refugee resettlement programs; it’s PayPal creating game-based programs to encourage their employees to save energy in their everyday lives; it’s Nike embracing social action, both as a brand and with its thousands of retail personnel; and it’s MSN adding donation widgets to news stories so people who read the news can do something about the issues. It’s all those things and so much more. And the best part? Building an ethical and giving culture results in people who are more engaged, more loyal and more productive, which ultimately boosts profits. The data is unequivocal in this regard.

And with all due respect to Milton Friedman, purpose doesn’t happen at the expense of profits; it happens in support of profits. To be a strategic value driver that enables a company to achieve the greatest returns from its investments, purpose must be baked into the DNA of the company.

There is ample proof that when done right, the whole is greater than the sum of its parts. And companies who harness the cross-functional power of purpose realize disproportionate financial gains—realizing up to a 6% higher market value and 20% more revenue, outperforming companies that do not invest in their social purpose.*

Today’s enlightened businesses are re-inventing the way their corporate purpose comes to life. They have recognized that: 1) purpose paves the way to profits; 2) the definition of impact is in need of a “re-boot” so that it’s not just about aggregated, top-down investments; 3) the power of the individual is one to be leveraged; and, 4) today’s most admired brands are authentic and social-impact oriented. All of this requires a shift in mindset, and also scalable technology that allows companies to more easily infuse their unique corporate purpose into all aspects of their business. If we have a society and culture where goodness is a global value, can you imagine how much more could be achieved?

So from the many of us who “get it,” thank you for taking this first step to a more engaged, productive, impactful and profitable corporate world.

Read more: Why Directors Must Rethink A Company’s Purpose Statement


  • Get the Corporate Board Member Newsletter

    Sign up today to get weekly access to exclusive analysis, insights and expert commentary from leading board practitioners.
  • UPCOMING EVENTS

    SEPTEMBER

    16-17

    20th Annual Boardroom Summit

    New York, NY

    NOVEMBER

    13

    Board Committee Peer Exchange

    Chicago, IL

    MORE INSIGHTS