A few days back I was a guest on SA FM talking about unemployment: what I call South Africa’s ticking time bomb. While discussing the issue and lack of entrepreneurship in our beloved country, one listener commented on how businesses were not responsible for creating jobs. In his view, the role of business is only to create profits, nothing more, and nothing less. I wanted to comment on the issue, but due to time constraints, I could not. The statement of this particular listener was ringing in my head as I left. Driving past large and reputable business on my way to dinner with my siblings, I couldn’t help but wonder if all these businesses had a similar view. I pondered on the effects of putting profits above all else, and I came up with 4 reasons why businesses shouldn’t focus only on profits. In my view, a business cannot exist for a lengthy period if it focused only on profits and below are my reasons.
1.The role of Direct Stakeholders: Shareholders, Employees, Customers, etc.
In this instance, stakeholders are groups that have interests in the business. Shareholders’ main interest is getting value for money in terms of return on investment, while employees are interested in working in an environment that is both fruitful and fulfilling to them, after all, most employees spent more than 40 hours a week in their work place. If businesses do not take care of their employees, they not only jeopardise their relationship with the most important “asset” (the employees) but they risk the quality of their product. An unhappy employee seldom becomes creative and productive.
Business owners often mistake the value of happy customers. A happy customer is a repeat customer. The best thing about happy customers is word of mouth. Word of mouth referral vitally accounts for the growth of business clientele. It will be foolish for businesses to ignore the importance of customers. If businesses’ main concern is only profits, other direct stakeholders will suffer.
2. The role of Indirect Stakeholders: The society the business is operating in
A business that is oblivious to a society its operating in is shooting itself in the foot, and thus will not survive very long in that society. It is not enough for businesses to depend on the government to set rules that will force them to contribute to society, as is the case in poor countries. Businesses must take initiatives that add value to society. In a quarterly report by McKinsey, they note that relationships between big businesses and society can be viewed as an implicit social contract with obligations, opportunities, and mutual advantages. Businesses must incorporate social issues into their strategies in a way that echoes the importance of their presence.
3. The importance of Economic Sustainability
Be warned, if your business cannot market its products or services in such a way that they can be sustained over a long period of time, you are doomed from the beginning. Economies change all the time and when they do, a business must be willing to adapt. Many businesses did not survive the 2008/9 economic down turn because their strategies did not have in place means of surviving difficult periods. If you are going to focus on profits and miss the opportunity of creating a business that is sustainable over time, you will be in for a nasty surprise.
4. The importance of leaving Legacy
When you create a business, you should have the end in mind, in other words, what do you want your business to be known for? A legacy goes beyond profits; it includes all stakeholders in its vision. When you create a legacy, you understand that your business wouldn’t exist without the involvement of all stakeholders.
Great profits are an indication from society that the company is providing things that they want, but companies should not be deceived into thinking that they will not be punished by the very society if they fail to take into account the importance of other stakeholders and factors that determine their long term sustainability and growth.