Purpose-based organisations are the only ones that will be truly equipped to deal with crises such as the war in Ukraine, the cost-of-living crisis, the ‘great resignation’, and inequality, and thrive in the long term, says Andrew Thornton
There is a school of thought that says businesses are either profit or purpose focused, and that you can’t focus on both – not surprisingly, that view tends to come from profit focused business leaders.
I have a different view – that if you focus on your purpose and on meeting the needs of five of your six key stakeholders (employees, customers, communities, suppliers and the environment), profit will follow, and the needs of the sixth stakeholder (shareholders) will be met with the vital return needed on their investment. I don’t see this as an ‘either, or’ decision but as an ‘and’ decision – we will focus on our purpose, ‘and’ we will deliver a great profit. Without profit, there is no future. When I ran the purpose driven London supermarket Thornton’s Budgens, we had to make a profit each year – otherwise, we could not invest to develop and deliver our purpose. Without profit, purpose driven businesses will not survive to deliver that purpose.
So, for me, profit is not a dirty word. However, what is a flawed approach is when the entire focus of a business is on profit maximisation – this I believe will lead to difficulties. Let’s look at the example of Tesco, the (then) global food retailer based in the UK. Starting with their home market and a total obsession with meeting customer needs (which was their purpose), they grew to become one of the top three food retailers in the world with businesses in Europe, Asia and the US.
Over time, their growth slowed, and you could argue they lost sight of their purpose and failed to keep their strategies lined up with that purpose. Gradually, the narrative moved towards a profit focus which took them away from their customer – the more they focused on profit, the harder it became to deliver that profit and the more the pressure to do so grew. This pressure led to people at Tesco breaching financial regulations and in 2016 the Serious Fraud squad were called in. Dave Lewis, who was brought in as CEO to turn around the business shared with me,
‘You can’t talk yourself out of something you behaved your way into. The behaviour had to be that no one tries harder for customers and that we treat people how they’d like to be treated; and that we, the leaders, behaved consistently with these values.’ This had stopped happening – the words said customer, the actions said profit. He went on to say, ‘We only exist to serve customers – when people see you do that, they know you’re not just saying it. When people live one life and talk about something else, don’t be surprised when the audience notices that the words and music don’t add up.’ Customers pick up this disconnect and feel the inauthenticity, withdrawing their custom – exactly as they did at Tesco.
So, what’s wrong with being a profit-centred business?
While most businesses will not end up in such extreme circumstances as Tesco, being purely profit driven has an impact at numerous levels:
As a business leader, do you think that profit maximisation alone will help you live a fulfilling life? There’s only so much money you can spend in your lifetime, so surely there must be more to aim for than this?
Chasing profits provides even less satisfaction to employees than it does to its leaders. Many employees want to make a difference in the world, and a business with a meaningful purpose makes that possible. Millennial and Gen Z employees are far more discerning about who they work for than previous generations, posing a long- term existential threat to profit-centred businesses.
There’s no doubt that the ‘profit at all costs’ approach leads to environmental degradation, and the reward mechanism of this approach further increases inequality. Consumers are becoming more and more aware of this, and more discerning about how they spend their cash.
Most businesses have now woken up to the climate crisis and started to recognise it’s their responsibility to help deal with it. However, until environmental resources are properly priced through legislation, a focus on short-term profits will always lead to exploitation of those resources.
A 142-country study of 180 million employees by Gallup (see Resources) in 2013 found that only 13% of people were engaged at work. That’s a shocking statistic. They found that 24% – almost a quarter of all respondents – were actively disengaged. That’s not a good result for the business community. I know from experience that the heart-based approach engages way more than 13% of employees.
So, let’s look at how we used purpose at retailer Thornton’s Budgens to make an impact in the world and deliver a profit at the same time.
Our purpose was ‘we are the community supermarket that really cares about people and planet’ and we developed a manifesto that outlined how we were going to deliver this – the essence of this manifesto was that we were a heart centred business that encouraged everyone in the business to be authentically themselves; and to focus on what they were good at and loved doing.
Many of the key employees in Thornton’s Budgens were involved in developing this manifesto and hence felt ownership of our purpose. Of everything we did in the 15 years I ran Thornton’s Budgens, our biggest impact was the plastic free campaign we ran in 2018, where we introduced 1,800 plastic free lines in 28 zones across the store, allowing our customers to do a full plastic free weekly shop.
We delivered a huge increase in customer loyalty and grew total store sales by 4% ahead of the market – in bricks and mortar grocery retailing, that’s a big number! And, of course, that lead to an increase in profit, which helped us to keep developing and making an impact. In addition to that we created an extraordinary loyalty amongst our team members, who talked about being part of the Thornton’s Budgens ‘family’ and we had an average length of service of eight-and-a-half years which is unheard of in a central London supermarket; and amongst the more senior ‘self-leadership’ team, it was 15 years.
Let’s look to the global stage for a moment. For me, one of the most purposeful companies in the world is Patagonia. Founded in 1973 by Yvon Chouinard, their mission is ‘to build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to address issues related to the environment and social justice’.
Even in 1973, he saw the need to address the climate crisis. Everything they do is lined up behind and defined by this purpose – and it’s truly authentic. Just like Thornton’s Budgens (although on a much bigger scale), when you enter a Patagonia store, you have no doubt about their purpose and reason for being; and you don’t get the inauthentic disconnect that Tesco’s customers felt in the early 2010’s.
In an interview in the Financial Times on 17 May 2018, Patagonia’s former CEO Rose Margarito made the case for looking beyond just maximising profit, saying: ‘You can serve the interests of your employees and do what’s right for the planet and still make great margins.’ As I said at the outset, it’s not an either-or decision.
Right now, as business leaders, we are facing a myriad of crises – the war in Ukraine, the cost-of-living crisis in most western nations, the so called ‘great resignation’, the inequality crisis and, in my view the biggest of them all, the climate crisis.
I believe that heart centred purpose-based organisations are the only ones that will be truly equipped to deal with all these crises and thrive in the long term.
Andrew Thornton is co-author, with Eudora Pascall, of Putting the Heart Back into Business: How to place people, planet and purpose at the core of what you do and co- founder of Heart in Business.