By SVenkat
Let’s run a survey among owners/managers for “Why are you in business” and there is a very high chance that the answer will be “profits” or enterprise value or some other monetary metric. It is rare to see a small and medium business that expresses its “Why” in terms of its purpose, yet it is the purpose that defines the organization’s existence, its culture, its DNA, its direction and pace of growth and above all holds its people and stakeholders together.
The pursuit of profit is not wrong, it is a primal instinct of any entrepreneur. The question is can this instinct be evolved, be honed to something higher, something more worthy, something more lofty? The beauty is that the sense of purpose vastly improves the possibility that the objectives of profits will be achieved.
Let’s see some examples: for a healthcare company “Enabling 3 million patients to go ‘pill free’ by reversing existing chronic conditions over the next five years”, for a consumer durables company “Achieve and maintain Customer Net Promoter Score of 80+”, for a compostable products company “Leave the planet a cleaner place to live in by substituting 1% of plastic packaging in the food carry business, by replacing it with compostable packaging”, for a professional services company “Become India’s first turnaround consulting firm to build a global business, with presence in over 20 countries and deliver investment returns of minimum 30% to investors”
A good purpose statement will have a clear and measurable (non-financial) impact metric, is big and aspirational in the context of the current size of the company, and is aligned to the long-term vision and mission of the business.
Why does purpose work better over profit
Talent Attraction, Motivation and Retention
Any business will want to chase profits; but when you choose to state your purpose and state your “Why”, potential hires can immediately make out that you are different. There is a very good chance that you will attract the right kind of talent, the talent that relates to your purpose and therefore better aligned to the direction that your business wishes to take.
I have always marvelled at how a large, institutionalised spiritual organization or a well-run not-for-profit works. They don’t necessarily need to micro-manage their teams and tell them what to do. The spirit of volunteerism driven by purpose is far stronger than the spirit of employment driven by profit.
Chasing the means, and not the end
Purpose focuses the owner/manager and the organization’s effort on what can be controlled. Focusing on the purpose means focusing on the key operating lever(s) of the business. If you get this right, profit is an automatic outcome.
This focus also drives resource allocation decisions. Whether capital or the time of your team, all resources go into making a single point purpose a success. This reduces dissipation of effort and sub-optimal resource allocation which is a common problem when chasing multiple ‘targets’.
Maintaining your own motivation
Focusing on the purpose reinforces what our wise men over the centuries have known all along: your energy, passion and motivation are a direct function of the ‘source’ that you tap into. Money is a great motivator, but it is ephemeral and it ebbs and flows, and with it the entrepreneurs‘ moods, sentiments and energy.
Tapping into a higher goal gives the business owner a good reason to ‘get out of bed’ every single day, in an optimistic and positive frame of mind. The purpose acts as a lighthouse to provide clarity and direction and hope to the business owner, in the middle of the storms of business vagaries, uncertainties and personal insecurities.
The bigger your purpose, the bigger the motivation and need for you to grow personally to handle the challenge, the bigger the size of your effort and likely the bigger the financial outcomes you will deliver for yourself.
Discerning owners/managers recognize that if their efforts are directed towards creating outsized impact for their key stakeholders (society, customers, employees), the universe conspires to create outsized profit for them.
So, what is your purpose?
SVenkat is Co-Founder at Practus. Views are personal.