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Make your business something you and your staff are proud of and you'll reap the rewards, says John Haylock.

Every day we go to work. Some of us wake up dreading another day, while some of us bound out of bed excited. Why do some people and some businesses create life and energy while others suck it out of us? What gives purpose to a business and the people working in it?

Back at university I can remember being told that the purpose of a business was to increase shareholder wealth. This definition always sat uncomfortably with me, yet it is the way the directors and CEOs of many large corporate entities behave. There is a huge industry revolving around measuring and reporting on business wealth generation in such entities.

Management performance and remuneration depends on achieving specific targets. The accountancy profession forms a vital part of that industry along with all the financial, investment and business analysts who sift through the numbers and tell us what they mean. I was always uncomfortable with this definition because it appeared uninspiring and one dimensional. It left out the impacts that a business has on its customers and staff and on the community and environment in which it operates.

Financial performance can also be manipulated to achieve short-term shareholder wealth at the expense of the vital long-term results. Widely respected management theorist the late Peter Drucker developed a quite different definition. He said the purpose of a business is simply to create and keep a customer. Drucker’s definition is strongly focused on marketing and delivery – great marketing to attract customers and great delivery to keep them. This is a definition that I am more comfortable with because it includes customers and the concept of long-term sustainability. But to me this definition is still lacking.

There are many companies that are brilliant at attracting and retaining customers and as a result are financially successful – yet have staff who plainly couldn’t care less about where they work. Sir Richard Branson, in his latest book Business Stripped Bare suggests that the purpose of a business is to give people the opportunity to achieve something they can be proud of. Branson says what “gets me up in the morning is the idea of making a difference” and he clearly wants to help the people working in the various Virgin businesses to feel the same way.

The idea that a business should focus on allowing its people to achieve personal fulfilment is different to what is taught in every business school and what is practiced by virtually every large company. Yet it is an idea that people working in many businesses including most small businesses will relate to. Making money is undeniably important to the owners of small businesses and vital to their on-going existence, but the purpose of their businesses usually goes much deeper. The owner’s personal reputation and sense of self-worth is intrinsically tied to their business through providing goods or services they are deeply proud of. Being able to feel proud of their business really is its key purpose.

If that sense of pride can be transferred to staff, then everyone will be working in a common direction with a common focus. That’s always a recipe for outstanding financial performance and it is much easier in smaller businesses. Interestingly Branson’s business empire is, with a couple of exceptions, made up of hundreds of small companies. He says “small, compact companies are, generally, better run. This is partly because people feel more connected in smaller companies.” Branson says that “when one of our Virgin companies ended up employing more than a hundred staff… we would split the company in two. And when either of those companies got to a hundred people, I would… split the company again”.

Branson could argue perhaps that the purpose of a business is to grow, split and reproduce more businesses with the same basic DNA. While I am sure that Branson would find the concept of such virgin birth amusing I think that ultimately, a combination of Branson’s and Drucker’s definitions gives the best definition of the purpose a business: do something you are proud of that attracts and retains customers.

John Haylock is Practice Performance Manager at BankLink, john.haylock@banklink.co.nz.