Last month at the Stretch Leadership Conference I attended in Budapest, one of the recurring themes was that of purpose. One of the quotes I shared as part of my session was a far-sighted observation Peter Drucker made in 1954. ďProfit is like oxygen. You need it to survive, but if you think that oxygen is the purpose of your life then youíre missing somethingĒ.
Similarly, if you are a business leader and you think the sole purpose of your business is to make profit,then youíre missing something very important.
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 graphicís 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 four simple 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 Ďyesí to all the above questions are living on purpose. But if you have one or more negative answers, then I am afraid you have more work to do.
One of the organisations that this week struggled to answer Ďyesí to living on purpose is troubled British retailing group, 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 itís 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 or the way that they do it.
At this point, I can hear some business leaders paraphrasing Milton Friedmanís quote from 1970 by crying, "Hey, this isnít fair. Iím a businessman. Iím here to make as much money as I can, so long as I stay within the rules of the game. Iím not here to save the world." But hereís the catch: the rules havenít changed, but the game has. The game must have changed, otherwise why did the shares in Sports Direct fall? Instead, why didnít 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 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. More than ever, then, we live in fascinating times.
I am not saying that this will all happen tomorrow. Many businesses will continue to live without a larger purpose for a long time to come and they will Ďget away with ití to varying degrees. But the trend is clear. Can we really see it being reversed any time soon? Managers manage. Leaders anticipate. Which one are you?
John will be discussing more about purpose in his forthcoming book, The Trusted Executive: Nine leadership habits that inspire results, relationships and reputation. You can pre-order a copy now at Amazon.