Combining Purpose With Profits

Book description

Is it possible for a company to strive for a higher purpose while also delivering solid profits? Some have argued that pursuing goals other than making money means, by definition, spending on things that aren’t profit-maximizing. Others have countered that by investing in worthwhile causes the company is doing something intrinsically valuable that will generate a long-term payoff to all parties. In the authors’ view, the important question is not whether there is some tension between purpose and profits; there is. Instead, the question to ask is: How can the tension between purpose and profits best be managed? This article is based on research that the authors conducted over the last five years looking at the organizational challenges involved in managing two different objectives at the same time. The authors describe how goal-framing theory provides an understanding of why pursuing “pro-social” goals — which the authors define as goals that involve working toward common causes that go beyond just making money and staying in business — creates a stronger motivational basis for working in organizations than does pursuing self-interest goals that emphasize financial gain or personal enjoyment. The authors’ research identified many companies with a clear sense of purpose, typically expressed as a set of pro-social goals such as putting employees first or investing in local communities. In the majority of cases, there was no discernible impact on the way employees actually behaved; however, the authors also found a small number of highly successful companies whose pro-social goals seemed genuine. Using examples such as Svenska Handelsbanken, Tata Group and HCL Technologies, the authors argue that there are a few organizing principles that help a company sustain its sense of purpose over time while still achieving a solid level of profitability. For example, they observe that pro-social goals need supporting systems within the company if they are to stick. Even with such supporting systems, however, the authors note that it is quite common to see executives bowing to short-term financial pressures.