Culture

What Is The Purpose Of A Business?

There was a time in the not-too-distant past when companies could get away with an externally facing brand designed to appeal to consumers whilst concealing a completely contradictory way of behaving internally.

Author

Paul West
CEO

Many years ago when I was studying for my business degree I remember a discussion during a lecture about the purpose of a business organisation. My tutor was expressing the view that a business’s sole purpose is to generate wealth for the owners of the business in order to create shareholder value. I didn’t agree with this view then and now, having run an agency business for 14 years, I know for certain that it’s wrong.

Businesses are a function of people and they exist as part of society. They are entities in their own right, operating in the physical world. They should hold values and their conduct is influenced by those values. If they believe in the environment, they don’t negligently spill pollutants. If they believe in helping society, they contribute to the well being of society.

There was a time in the not-too-distant past when companies could get away with an externally facing brand designed to appeal to consumers whilst concealing a completely contradictory way of behaving internally. In today’s interconnected digital world that is now unwise. Unhappy employees can tweet & blog and social misbehaviour can go viral instantly. Companies must now have a single brand supported by their values that faces inwards as much as outwards.

One of Ignite’s CHAD core values is Human as we collectively believe in behaviour that is “instinctively sincere, warm, honest & kind.” As a small business with a team of 19, we are regularly faced with decisions that affect the lives of our team members. Some of these decisions must strike a fine balance between the interests of the people involved and the interests of the team as a whole. But it’s how the people involved are affected that is of primary consideration.

At Ignite we wholeheartedly support the view that a business exists to enhance the lives of the people that make up the organisation, including the owners. It’s there to give everyone more Life and more Happiness. It’s not there to make everyone work all weekend, so common in agencies and other service companies. Maybe that’s necessary occasionally to deliver a particular project to deadline but that certainly shouldn’t be the norm. In fact, if a team needs to regularly work long hours then something is seriously wrong, it’s a failure on the part of the leadership. Business success should not be dependent on the team working all night, that’s not a sustainable solution. The real strategic problem must be identified and corrected.

Of course entrepreneurs and investors should be rewarded for taking risks, which is part of the motivation for taking risks and starting a business in the first place. Financial reward should not be at the great expense of the people working within the organisation or at the expense of the environment and society. Profit will be achieved; as a result of getting many things right but it should not be the entire purpose of the organisation.

Happy people in an organisation that are achieving their life goals, enjoying their time at work and who are treated with respect, kindness and consideration will reward the entrepreneurs with business success. This will in turn generate increased shareholder value and investor returns. Put people first, profit will follow.

If you share our principles and want to find out how Ignite can work with your hospitality business, please get in touch.

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