Column : The purpose-driven company

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: The conventional view is that, in hard times, business leaders have a responsibility to keep their eyes firmly on the bottom line, protecting workers’ jobs and shareholders’ investment. To do this, business leaders often focus on cutting costs since it is difficult to raise prices in times when consumers are especially price conscious. An auto manufacturer may use lower quality inputs, a consulting firm may staff fewer resources for a client, or a consumer goods manufacturer may cut back on quality checks. Alternately, or sometimes in parallel, businesses will try to raise prices through hidden fees—whether that be airline fuel “surcharges” or credit card late fees or hidden penalties. The result is that customers get lower quality yet pay higher prices. But—the argument goes—this is justified because profits are protected, jobs are saved, shareholders remain confidant and the business leader has fulfilled his obligation. There is simply no room, it is argued, for anything beyond economic survival when we are in such tumultuous economic times.

To the contrary, my experience suggests that it is precisely in such hard economic times that business leaders have to look deep into the souls of their companies and be true to the purpose of their companies, that is, to be a purpose-driven company. What I mean is that, whatever purpose drives a company —whether that be providing high quality cars or good airline transportation or producing soaps—the right strategy in tough times is not to lower quality and raise prices, but to ask shareholders to shoulder the burden. Sounds counter-intuitive, I know, but let me explain why this makes sense.

Consider my company, SKS Microfinance. I launched it with a purpose-to provide financial services to poor women to enable them to get themselves and their families out of poverty. Because we are purpose-driven, we have designed products with the poor in mind—doorstep delivery, small weekly repayments, no late fees, micro-insurance, even interest-free emergency loans. And because this works for the poor, they have been extraordinarily good borrowers. The result is that we have delivered over Rs. 5,000 crores in unsecured micro-loans to over 3 million poor women with no credit history and they have maintained a 99% repayment rate. This has happened because we stayed true to our purpose—that of providing financial services in a way that works for the poor.