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Thursday, April 20, 2006

Profits and purpose

During a recent strategic planning meeting, directors of a publicly traded company got into a heated discussion about goal setting for the organization. I suggested that we step back and clarify the company’s purpose and mission.

“Well that’s easy,” said one director, who then highlighted revenue and profitability targets.

But there’s a difference between purpose and profits.

Joan Magretta’s great book, “What Management Is: How It Works and Why I'ts Everone;s Business,” explains why understanding the difference is important if we want everyone in the organization to “pull in the right direction.”

“Now that we’ve become a nation of shareholders and investors, we are more likely than ever to think that the purpose of a business is to generate profits,” she writes. “But the real purpose of any business is to create value for its customers and to generate profits as a result.

“While the distinction between purpose and results may sound like hair splitting, it’s not. It goes to the heart of how managers get organizations to perform.”

In the book Magretta uses Fidelity Investment’s retirement business as an example. Fidelity doesn’t define mission and purpose in terms of profitability or number of retirement accounts. Its purpose? “Make sure people who invest with Fidelity have enough money to retire.”

Such a clear purpose then helps us create the goals and strategies to achieve the greater purpose. And to measure the right performance benchmarks.

1 Comments:

Anonymous Mary Schmidt said...

Yes, it can get heated pretty quickly, can't it? I'd suggest it would have been far quicker more productive if the executives had been open to inviting some front-line employees and customers to the meeting.

What do we do? What do we want to do better? How do we want to make a difference? What makes us want to come to work? What gets you (the customer) excited? And so on.

I've spent way too many hours of my life in conference rooms wordsmithing mission statements that were really nothing more than C-level ego massages (Become the leader in XXXXX by providing world-class service to the Fortune 500 market to enable them to maximize profitability bla-blahhhhhhh). The goals end up being purely financial (as happened in your example) with little to no thought given to the people that must produce the results.

I now get on my soapbox with clients reguarly about making it real. If I see words like "premier" or "world-class" I just cringe.

9:57 AM  

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