Profit and Purpose: The Emerging Narrative

In their book, The Purpose Revolution, John Izzo and Jeff Vanderwielen argue that a new narrative is emerging and companies must move from a sole focus on profit to an integrative focus on profit and higher purpose.  The essence of their argument is there are three sets of stakeholders and each is evolving.
Employees.  This group has already crossed the tipping point: recruits demand organizations serve a higher purpose and many recruiters are struggling to hire.
Customers.  The group is lingering near the tipping point.  They want products at a fair price, but if all things are held equal, they will buy from a company that is pursuing a higher purpose.

Investors.  The authors argue this group has not yet reached the tipping point.  Yet, when they reach it, companies will be under intense pressure to change and advantages to changing will be less than they are now.
The argument about investors was made over a year ago.  Since then, I have been paying close attention to statements in the investment community.  Recently we read a Bloomberg story worthy of note by Annie Massa and Ross Larsen (January 17, 2019)  about Larry Fink, the CEO of BlackRock Inc.
Blackrock is a management investment corporation that oversees six trillion dollars.  In his annual letter, Fink told global CEOs they had to move their focus beyond profit.  As governments fail, stakeholders are expecting private companies to step in and make a difference.
In the letter, Fink pointed out that millennials are growing in their influence and they expect companies to pursue a higher purpose.  He challenged the classic statement of Milton Friedman that the sole focus of a company should be profit maximization.  He took a more complex view, indicating that profits are not inconsistent with purpose.  He stated, “Purpose is not the sole pursuit of profits but the animating force for achieving them.”
It is not only individual investors that are changing but even some economists and large institutional investors, ostensibly the most motivated by wealth maximization, are reflecting on this new narrative.
Professor Colin Mayer, a University of Oxford Finance Professor and leader of a project of the British Academy called “The Future of the Corporation,” argues an important part of every firm’s objective function should be higher purpose, not profits alone.  He follows this shocking statement by claiming current laws about corporations and profit must change.
In essence he is telling us that human consciousness has evolved, the narrative has changed, and now the laws must change.  When they do, leaders will have to do something they currently do not know how to do: imbue their organizations with higher purpose.

Reflection

  • Do the leaders of your organization believe higher purpose is the animating force for raising profits?
  • Does your organization have a purpose higher than profit?
  • Who in your organization successfully imbues people with a sense of higher purpose?
  • How could we use this passage to create a more positive organization?

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