Monday, March 19, 2012

What is the purpose of a business?

One of my favorite HBS professors, Earl Sasser, asked that question of our class (in 1989) . A student replied that it was to provide a return to our shareholders commensurate with the risk they accepted.

Professor Sasser said, "Providing value to shareholders is one purpose of a business, but it is only one. And as a purpose it comes after these: to provide value to the communities within which it operates, to its employees, and to the larger world."

A hush fell over the classroom and I realized that no one had thought of that before. I figured it must be important so I wrote it down on a little piece of paper, put it in the briefcase I bought at graduation, and carried it for at least 10 years -- until the briefcase was destroyed in a flood.

Today's new graduates are less likely to be as shocked by Professor Sasser's assertion that businesses are not solely about investor returns. In a survey of more than 1,000 of its employees born after 1981, Deloitte Touche Tohmatsu found that when respondents were asked to name three terms that encapsulate the purpose of business, 51% cited societal development and only 39% cited profit.

What are the implications for a society that sees the advancement of that society as the main purpose of daily life (which, really, is what business encapsulates for the vast majority of people -- it is our daily life to open our stores, teach students, raise crops, build cars, etc.)?

I can't wait to see.

No comments:

Post a Comment