For many years, I have regularly asked my audiences the question, “What is the purpose of business?”
On every occasion, bar two that I can recall, the first answer called out is, “To make money!”
I immediately challenge that response by asking if making money is the purpose of business, or is it the purpose of other entities.
There is little argument that corporate legislation stipulates that the ‘fiduciary duty of directors is to maximise the wealth of corporate shareholders.’
But the duty of directors has nothing to do with the actual purpose of the business. Making money is the purpose of the directors on behalf of the shareholders, the owners of the business. It is not the purpose of business.
Similarly, making money is the purpose of a small business owner. Again, It is not the purpose of their business.
There are two additional stakeholder groups whose purpose it is to also make money … employees and suppliers.
But what then is the purpose of business, the reason for its existence … if it is not to make money?
Well let’s hear from three highly respected business minds on how they answer that very question.
- “The primary function of business is to service the customer.” – Peter Drucker
- “The sole purpose of business is service.” – Leo Burnett
- “The purpose of business is to serve the customer.” – Seth Godin
I totally agree!
Because when you think about it, if you don’t have customers, you don’t have a business.
Yet how often are customers treated as an interruption to someone’s day? Customers are NOT an interruption to your business; they are the purpose of it. They are the sole reason it exists.
The customer is your CPO – the Chief Payroll Officer. Employees and shareholders often forget that it is the customer that is making their mortgage repayments, paying their children’s school fees, and putting food on their table. The finance department only handles the money on the way through … it is the customer who pays your salary and wages.
So what then is profit?
Profit is the scorecard of how well you are taking care of your customers.
So in simplistic terms, if you wish to increase your profit and fulfil your obligation to shareholders, increase the quantum and value of service to your customers.