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Bringing purpose to life

Exploring the relationship between purpose & profit

In developing a shared understanding about purpose-led business it is vital to explicitly explore the relationship between purpose and profit with the leadership team.

A central part of what is involved in becoming purpose led is a shift in understanding the place of profit – that it is no longer the purpose of a business to maximise profit, but instead profit becomes one outcome of a business whose purpose is to benefit society. It is now a means, not the end. What makes for a successful business that serves society in the long term? Profit is important as without that the business cannot survive, but profit is not the purpose of the business but an outcome of a well run business that provides services and goods that people want and need and that has a positive impact on people and planet.

For more see: The role of business in society

In discussing the relationship between purpose and profit it can be helpful to have a few analogies to share to help people to see the difference between seeing profit as the purpose vs profit as an outcome:

  • One used by John Kay, a British economist – “Profit is to business as breathing is to life, without it you die but it isn’t necessarily why you get up in the morning
  • Charities need to fundraise to do their work, but they do not exist to fundraise
  • Governments need to raise taxes but they do not exist to raise taxes

Navigating by purpose, rather than by simply maximising profit, means steering a careful course between:

  • Frictionless win/win – the idea that having a purpose is the new thing but that everything else can carry on as before
  • Purpose always means accepting lower performance – the idea that there is always some kind of enduring trade-off

In our view, both assumptions should be avoided. But it is not easy, it means setting the direction of travel fundamentally by reference to the better society that arises from the success of the business. Profit is a vital fuel that powers the ship, but is not the goal. Difficult decisions may need to be made – being purpose led is not about avoiding these decisions – for a discussion of this read this Blueprint blog: Being “Purpose-led” is not about avoiding tough decisions

However, if we look at the longer term, academic evidence points to a positive correlation between being purpose-led and long-term sustainable performance. Some of this evidence is discussed in Blueprint’s webinar with Alex Edmans and in the responses to the questions asked during the webinar – and these could be useful to support your conversations with leaders on the relationship between purpose and profit.

Webinar

Profit and purpose – in practice

Hear Alex Edmans in conversation with Dee Corrigan discussing the practical challenges businesses face, drawing on Blueprint’s engagements with FTSE 100 companies.

Listen to this webinar which was held on 24th February 2021 (45 minutes) 

Read the follow-up Q+A series Alex co-answered with Dee Corrigan – part 1part 2 and part 3 (10 minute reads)

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