You’ve seen that my schtick is all about growing a business that matters. That is, one that provides the owner with attractive profits while helping make the world or your corner of it a better place. I talk about that a lot.
Recently, I had someone ask me if there’s a tension between the two. More accurately, she asked which one is more important: profit or impact? So, I want to chat about that today.
You know, sometimes the questions we ask reveal assumptions we make about the world. It’s not the first time I’ve been asked about this and I find it interesting how many people feel the two ideas are incompatible, when in fact they are intimately connected, or should be.
So, let me start way up at the high level. As I do so, it’s going to be very easy to assume I’m saying things at a political or ideological level, which I’m not. So resist the temptation to make quick judgments.
What is capitalism? Capitalism is the best system we’ve yet devised to unleash the creative energies of the most people to solve problems that people face. Solving human problems, by definition, makes the world a better place.
But people need to feed themselves and experience personal fulfillment. So, capitalism provides a system of compensation that creates incentives that encourages creative problem solvers to…well… solve problems.
Look at the automobile. Did you know that the car was originally an environmental savior? It’s true. Before the car, people used horse power. And horses produce manure. As cities grew, horses became an increasing problem. What could be done with all the manure? It was piled up, it ran into the streets into the rain. The stench is something we would likely find unbearable and the spread of disease was a constant threat.
A meeting of municipal planners from around the world ended in despair as no one had a solution to the problem of the horse. Until some entrepreneur came up with the idea and the technology for the horseless carriage. And within a short period of time, the problem that was unsolvable was solved.
Since then, this saviour of an environmental crisis has itself become a severe environmental threat. As a result, the spirit of innovation and problem solving is again being deployed to address this problem, although belatedly.
One of the important elements of a free enterprise system is that it is supposed to be an exchange of value for value. So, in theory, the bigger the problem you address, solve or mitigate, the more value you’ve created and, therefore, the more value you should receive.
And this is why the conflict between profit and making a difference is more perceived than real.
Now nothing I’ve said should be taken as advocating any political or ideological stand. There are very interesting conversations and debates to be had about the proper mix of public, private, charitable and civil society needed to address a whole array of problems. I’m only suggesting that private enterprise can play an important role.
Having said that, the distinction or conflict between profit and principle does show up in a few areas of HOW that difference gets made. It is very easy to promote one’s “generosity” or commitment to solving a problem as a cheap substitute for justice. So, if you dump chemicals into a river while making batteries for electric cars because it’s cheaper to do so, then, yes, there is now a conflict between doing the right thing and making a profit.
If you are running a business that helps deliver wellness services to corporations, but you pay so little that your people need other jobs to survive or you work them so many hours they all burnout, or your hiring practices systematically exclude people of colour, there is now a conflict between profit, your stated desire to have a positive impact and the ethics of your practices.
So, here’s what I recommend to help avoid those kinds of unanticipated conflicts. Coincidentally, it is similar to how you go about creating a high performance culture.
First, define the kind or kinds of impact you want to have. They may be a result of the product or service that is the core of your business. For instance, providing elder care can be fully about providing healthy and dignified living for senior citizens. It could be about the supply chain such as only engaging in fair trade sourcing. It may be only about the team in that you want to provide an inspiring place for people to work and grow. Or it might be about the processes you deploy such as those that ensure there are no negative environmental impacts from your production processes.
Whatever the impact is, ensure it is clear and shared with your team.
Second, articulate the values that you commit the organization to live by. When you have defined ahead of time the values that are important to you and that will inform your decisions, many of your ethical dilemmas will be resolved before they ever arise.
As a result, you can keep making a profit without sacrificing your principles or the positive impacts you want to have on the world.