In my advertising and public relations ethics class we spend a lot of time talking about the purpose of a business. We debate and discuss the pros and cons of different businesses, many of whom focus their purpose on either their employees, customers, shareholders, or other stakeholders.
Since the class started I have changed my views on who I think a business should focus their purpose toward. And at the risk of alienating my readers who think the focus should be only on the “bottom line” or that a company’s purpose should be their stakeholders, here is what I believe (via Charles Handy, the author of “What’s a business for?”):
“The purpose of a business, in other words, is not to make a profit, full stop. It is to make a profit so that the business can do something more or better. That “something” becomes the real justification for the business. Owners know this. Investors needn’t care.”
What do you think is the purpose of a business?
{ 4 comments… read them below or add one }
I love this post. It’s something I think about often and I think you hit the nail on the head. Great quote too!
Another thing to think about: many who argue the “bottom line” standpoint think of a business as an entity separate from emotion, good will, and other human characteristics. They think of it as a machine built for one purpose. However, businesses are run by people, supported by people, and judged by people; this aspect can’t be overlooked. Besides, who wants to invest long-term in a machine that does nothing but take from the community and not give back? Not me.
Hey Danielle,
Thanks so much for your comment. If you liked this post you should definitely check out Charles Handy’s article “What’s the purpose of a business?” He goes into much more detail about exactly what you are talking about in your comment.
The way I like to put it is this:
The purpose of business — the thing we want business to do, and the reason we would ‘invent’ business if we didn’t have it — is to increase social wealth (i.e., the total wealth of society). The means by which it is to do that is by seeking profits (in certain socially acceptable ways — namely by producing a product or service, by innovating, and by seeking efficiency).
According to Peter Drucker, the purpose of business is to create a customer. If a company does not create value for its customers, it will make neither profits nor social wealth. I like this definition because it puts the emphasis where it should be, generating value. If a company is generating value for its shareholders and society, it will be successful in many ways.