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For profit or for purpose: do we have to choose?

This quote from Adam Braun’s (of Pencils of Promise a US-based charity that provides education in “high need” communities) talk at the Skillshare Penny Conference in NY made me stop and think.

Tweet from @brainpicker

Like most good conference tweets, it sounds pithy and rousing, and while I like the sentiment, I also want to give it a serious poking.

The implication that – by definition – a ‘for-profit’ organisation lacks a purpose beyond chasing profit is wrong. If the people that keep you in existence (customers, employees) don’t believe you have a purpose, how are they going to believe in your future? You’re just not sustainable. When profit becomes your sole purpose, you don’t have long left.

Profit should simply be a by-product of achieving your purpose in a way that creates value for someone else.

Ideally, every organisation would be setting out to create shared value beyond the two parties in a transaction (I like Umair Haque‘s idea of “meaning organisations“) but we’re all not there yet.

So, while I can believe that the purpose of most not-for-profit organisations may be more up front – they don’t have exclusive rights to purpose, and I don’t think it’s helpful to pretend they do.

The not-for-profit label is crap. At best it’s boring and meaningless, at worst it reinforces a them-and-us mentality with the private sector. It almost insinuates that any organisation that makes profit must have nefarious intentions. Even worse, it nearly justifies lower wages for those working in the sector.

But I also know that the people I work with in the not-for-profit sector (generally) have a pretty good clarity of purpose – of their organisation and how their work connects to it. Personally, I think that’s something to be celebrated.

When I started thinking about all of this, I desperately wanted to come up with a better, cleverer and shinier label for non-profits that took profit out of the equation.

I realised that rather than just come up with another label that differentiated between those out to do social good, and those out to generate profit, it would be better if all organisations had a crystal clear and credible purpose in the world that everyone – especially employees – could believe in.

The more pin-sharp and credible that purpose was, the more people who contribute to it, and the more people who benefit from it, the longer it’s going to last.

And then, the issue of whether there was profit involved would be irrelevant.

Just a thought.

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16 Comments

  1. Awesome post Maxi, couldn’t agree more. The fact we even have a ‘not for profit’ sector and even talk about the idea of a ‘for purpose’ organisation shows the utter dismal failure of free markets and typical businesses to create real enduring wealth for people, societies and the natural world. This is why capitalism needs a damn good reboot. What we need are what Umair calls next-generation organisations which use money and profit to grease the wheels, but where the goal is betterment for all of humanity and the planet, not profit for its own sake.

    Posted 25th April 2012 at 4:16 pm | Permalink
  2. Hey Max, I totally agree with the sentiment of this post, and many of the points you make, such as how all organisations should be ‘for purpose’. That said, if we’re talking utopia or radical change, I’d like to push things further, and suggest that in my ideal (socialist) world, everything would be a non-profit. In Marxist economics, profit is seen as money derived from unpaid labour, so if all ‘profits’ were fed back into the workforce or company (i.e. not pocketed by shareholders), it would mean the company became a non-profit.

    On the other hand, we need to stay suspicious of ‘non-profit’ organisations that may have been set up purely to benefit the trustees, even if they don’t make any profit. These may become less common with the tax avoidance law changes. This article is related, about how in a caring society, we wouldn’t have any need for charity: http://www.morningstaronline.co.uk/news/content/view/full/117966

    Posted 25th April 2012 at 4:53 pm | Permalink
  3. Out of interest Beth, do for-profit, employee-owned business fit into the socialist model? Personally I think profit is great because it gives you stability and ability to grow as you work towards your purpose. The problem as I see it is when profit becomes THE purpose (the case for most PLCs) or when it is unfairly distributed (as you suggest.) But I don’t see the problem with profit as a concept in itself.

    Posted 25th April 2012 at 5:39 pm | Permalink
  4. Tom’s second comment is where I’m at. All truly great organisations have a strong purpose, regardless of their capital structures or business models.

    A second point for me is how charities have become increasingly business-like, and as the business community becomes ever more purposeful, there is an interesting convergence.

    Then, taking Max’s original point further, not only are the labels poor, but the difference might become moot.

    What is then the difference between a purpose-driven organisation, with fair and naunced rewards for diverse sets of stakeholders, where employees are substantial shareholders, and the conventional notion of a charity?

    Posted 26th April 2012 at 3:44 pm | Permalink
  5. Laughing Laufen

    Fascinating and glad to see an organisation like yourselves, who do a lot of good work in Brighton, discussing this openly. Some good comments too, especially with regards dodgy charities and the reference to Haque, a very bright capitalist apologist claiming a conscience (of course) yet who wants to incorporate values and meaning into business without recourse to politics, history or context because… um… they’re old and oppositional!

    However, the tone is concerning. The main argument, focussing on undermining those who step up to help the most needy (often because the wages paid by profitable businesses are so poor or the state is failing them) because they don’t have the same concern for profit as NixonMcinnes’s ‘ethical or meaningful business’ is, shall we say, revealing.

    It seems to me that the defensive tone of this blog and some of the comments is actually a veiled attack on those people and organisations who put values before profit and is criticising them for not being profitable enough or indeed at all. I can’t help but wonder why it makes an organisation supposedly focussed on values or meaning or purpose so uncomfortable when some people believe values should come before profit? Lets not forget that not for profits can and do make money, but also try to make a difference to peoples lives … as their first priority. Not for profit can mean just that … not FOR profit.

    When you guys work for Coca Cola or a huge bank are you putting profit or values first or is your model to empower the consumer to alter Coca Cola’s values?

    Just a question, but did you mention trading in commodities and directly causing deaths, arms trading, offshore tax havens, poverty, or corporate sanctioned murder, torture, kidnapping, union busting etc. etc. etc. with your consumers or client? Are concerns about those part of your values/purpose or might that have undermined the profitability you require to further your values approach? Perhaps I’m being naïve here; maybe you really have helped change the way Coca Cola and HSBC work. Or perhaps I’m ignoring the realpolitik of the context. But then thats part of both of our problem … isn’t it?

    The point is your argument defaults to the view that profit is the way to ensure stability and growth (are we still on about that in these interesting times?) and thus these need to be prioritised as competition and surplus value are the right engine to keep your business going so you can continue doing … er… good meaningful work. At least your lucky in the fact that you don’t actually make anything which means you aren’t exploiting the commons too much as well.

    Its not that NixonMcinnes doesn’t do good work but doesn’t it look politically naïve, disingenuous and ideologically revealing (whether you believe you have one or not) to blithely brush aside the tension between values and profit whilst continuing to work for the companies you do? Especially given the immense suffering of people, often at the hands of business, nationally and globally, the current entrenchment of reactionary politics and a sorry exploited environmental context unable to sustain limitless growth.

    I can’t bring myself to comment on the differences between a charity and a ‘purpose driven business’ offering a ‘nuanced return for diverse sets of shareholders’!

    Your approach aligns nicely with business’s on-going attempt to elide the difference between profit and values and, in the end, to appropriate and monetise the human realm of values into business. Now that is meaningful.

    Posted 27th April 2012 at 1:04 pm | Permalink
  6. Max

    You pose interesting questions. But I wonder if it is perhaps impossible to resolve these kinds of dilemmas in the way they are posed.

    Rather than categorise organisations or thinking about purpose could we think about this from a different point of view?

    How about if people just oriented themselves on what was constructive moment by moment? If people asked themselves, whatever they were doing, “What is the most constructive thing I can do now. Right now?”

    Constructive might mean respectful, empathic, congruent – or some other way of understanding a current way of being.

    If I try to be conscious of every stakeholder as I do anything in business and constructive towards them I believe that itself leads to better outcomes and more success generally – including profitability.

    Posted 4th May 2012 at 5:05 pm | Permalink
  7. Hey Tom,

    Just replying to your question… firstly, you can’t really run things in a socialist model without the whole of society being socialist – it just breaks where it fits into the rest of society. That’s a big difference between the socialist and the anarchist way of thinking – anarchists tend to think they can live/do things in an anarchist way *despite / outside of* the existing social model, whereas socialists strive to change the social model *in order to* live/do things differently.

    But if we did live in a socialist world, you wouldn’t really have ‘for-profit businesses’ – they’d all just be organisations – and all of them would be ‘owned’ by the employees / the public.

    An organisation might invest some of its outputs back into the organisation itself, without paying it all out to employees, but then that wouldn’t be ‘profit’ really would it? – it’d just be running costs. Profit in the sense of dividend payouts to shareholders would not exist, no.

    I imagine that anything that wasn’t needed to invest into the company running/improving would be paid as taxes and salaries would be paid out of taxes by the government, but that kind of detail could be figured out (democratically!) after the revolution…. ;)

    Posted 9th May 2012 at 1:01 pm | Permalink
  8. Tom Nixon

    Trying to get my head around this! :) Do you mean that people are paid salaries which they are free to spend, however they would be banned from using their own money to set up a new venture and instead all new ventures would have to be created by the state? So if you had a great idea the only way it could become a reality is if you could persuade elected bureaucrats to take up the idea as a state owned organisation? How does innovation happen in the socialist model?

    Posted 9th May 2012 at 3:49 pm | Permalink
  9. Tom Nixon

    Honestly not trying to bash socialism, just understand it. How about being self employed, which is in effect a one-person for-profit business. Would this not be allowed and everyone would have to work for a state-run organisation?

    Posted 9th May 2012 at 3:56 pm | Permalink
  10. I’m not sure how salaries would work as such, but people would have what they needed to live a good life, provided by the state. They would also not need to work 40 hour weeks either, as it would be much more efficient without wastage and unnecessary competition. So they could use their new free time to innovate on interesting things, to make things more productive, more efficient, more fun… They wouldn’t need a salary to set up a new venture – if it was a good idea and enough people supported it to agree to provide the resources it needed, they could just get on with it. They wouldn’t make a personal profit from it though – but they’d be innovating for the satisfaction of doing something useful. And it’s been proven that people innovate in return for that kind of satisfaction more than they innovate in return for money. In terms of bureaucracy, things could be organised on quite a local needs based level for small start ups, reducing the bureaucracy, or at least keeping it relevant to the size of the (people’s) investment. Am gonna ask a friend to comment on this too in case they can explain it better…

    Posted 9th May 2012 at 4:22 pm | Permalink
  11. Phil

    I can have a go and explain what I think Beth . It will distract me from work for a bit at least! Socialism in the first instance would not mean the nationalisation of every privately owned enterprise. Public ownership would concentrate on the ‘commanding heights of the economy’, that is the ever shrinking couple of hundred companies, effectively monopolies, that dominate the economy and in effect exercise huge political power. In fact small businesses would benefit from a publicly owned banking system more able to loan not only on the basis of a return but on the social benefits of an enterprise. Things would get more complicated if a private business grew very large and then might be added to the list of publicly owned bodies. Co-operatives under socialism I believe would work the same way but be a model more encouraged. I don’t think all private owned ‘companies’ would disappear until money and private ownership did – real communism, but this is a long term, perhaps distant successor of a socialist economy.

    Posted 9th May 2012 at 5:40 pm | Permalink
  12. This might help reframe the discussion a bit – or it might not :)

    The paper suggests that it is possible to “transcend” the polarised debate between one (business) and t’other (ethics, values etc).

    Personally I agree. For me, life is all about perspective – I think our views are socially and individually constructed, and we do better to engage in practices that increase the breadth of our self-awareness and our skills of dialogue than slog it out against each other.

    http://cbbrighton.files.wordpress.com/2012/05/ejbo_vol16_no1_pages_41-47.pdf

    Posted 9th May 2012 at 10:19 pm | Permalink
  13. This event coming up soon also looks good, ‘What Money Can’t Buy – the moral limit of markets’ – http://www2.lse.ac.uk/publicEvents/events/2012/05/20120523t1830vSPC.aspx

    Posted 10th May 2012 at 12:46 pm | Permalink
  14. In hope that the discussion might revolve around your business…

    When you guys work for Coca Cola or a huge bank are you putting profit or values first or is your model to empower the consumer to alter Coca Cola’s values?

    Do you mention trading in commodities and directly causing deaths, arms trading, offshore tax havens, poverty, or corporate sanctioned murder, torture, kidnapping, union busting etc. etc. etc. with your consumers or client when that is what they are involved in?

    Do you have concerns about those part of your values/purpose or might that have undermined the profitability you require to further your values approach?

    Posted 15th May 2012 at 7:40 am | Permalink
  15. Laughing,

    I think your question deserves an answer even though I also think your anonymity and angle seems quite trolly-y. But I’ll have a go.

    What we are trying to do is hard, because in the one hand we are holding our ethics, our values (which you seem quite keen on), how we want the world to be, and in the other hand we are holding how the world is today.

    And we’re trying to get from ‘how the world is’ to ‘how we want it to be’ in a practical way.

    We are honestly trying to help make things better. But it involves compromise and patience and belief that long-term change is happening.

    In direct answer to your questions:

    1. We are putting our mission/values first – we had extensive internal discussions and a team vote about ethics of any clients where there was enough to talk about. Though, to be really upfront, we work with large organisations, and most large organisations either don’t do things how we would like in an ideal world all of the time – even those in government or not-for-profit.

    2. No. We have turned down a number of clients where we as a team voted against working with them because of these kind of issues, but when we decide to work with a client we focus on the goal of helping them change (we hope for the better). We’ve reviewed things later with at least one client, and then decided that the change we were hoping for wasn’t happening, and ended the relationship. In your language, that was putting values before profit.

    3. Don’t entirely get this one, but I think the answer is ‘yes’. It is a constant tension and judgement here about whether we’ve ended up drinking our own kool-aid and have lost sight of the change we are trying to help effect and are just chasing purchase orders and (ultimately) profits. There are times when it doesn’t look like change is happening with a client, and times when it’s clear it is. So yes, speaking for myself, I do have concerns – it’s something that needs watching.

    We are not perfect. But we are striving to make things better.

    Posted 16th May 2012 at 10:02 am | Permalink
  16. laughing laufen

    Will,

    Thanks for your full answers and honesty.
    Can’t agree with it all but very impressed.

    Good luck with compromise and patience and may the belief in long term change be well founded.

    LL

    Posted 21st May 2012 at 1:15 pm | Permalink

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