Videos

The Purpose Of A Company Is Not To Make Money

February 12, 2021 - By Simon Sinek, American author on leadership, and motivational speaker.

COMMENT BY WENDY LAMBOURNE, LEGITIMATE LEADERSHIP, ON THIS VIDEO

Legitimate Leadership believes that goals/targets/metrics are important, but as a means not an end. Firstly, they provide the context within which to define the contributions that need to be made – if you don’t know where you want to get to, any place will do. Secondly, the scoreboard is useful in terms of feedback – are you making enough of a contribution, or the right contributions, to achieve the results? If the results are not eventuating, do something different!

The purpose of a company is to add value to the customer, not to increase returns on investment for the shareholders. When companies succeed in serving the customer, there is a place in the sun for everyone, including the shareholders. Profits provide the means which allow a company to serve. Like the results, they are a means, not an end.

OUR SUMMARY OF THIS VIDEO: We are tangibly-driven animals. Metrics and targets and goals are important to us. That is a good thing. Abstract is not good – it doesn’t let you know if it hasn’t worked. You can’t run a marathon with no mile markers. We need to know and be able to measure progress.

But we have to understand the role that metrics play. Metrics help us understand speed and distance, but they’re not absolutes.

The problem is when they become absolutes – for example when somebody gives us a goal and says, ‘If you hit this target you will get a bonus.’

So the leader of the first team is making solid progress, building good systems and morale, staff turnover is low, and things are going right. It’s a good team, but at the end of the period they don’t reach the goal. So we don’t give a bonus

Contrast this with another team which can’t hold on to employees and morale is terrible. They’re begging, borrowing and stealing, dropping the price, etc. And on the right day and time, they achieve the goal. We give a bonus.

That sends a message to the rest of the organization that ‘we don’t care how you got there as long as you got there’.

The goal is important. It helps us measure and gauge. But if we miss the goal we have to look at how we’re doing, how we got there.

The first team is very satisfied and they love coming to work. The second team, not so much. They might be making more money for now. But in the long term the first team are better employees.

So it’s not one or the other, it’s both.

Understand the role of money inside an organization. Money is fuel, and fuel is very important. There’s nothing wrong with money, we just have to understand its purpose.

The company is the car and money is the fuel. So it does not matter how amazing your Just Cause is and how wonderful your culture, if you have no money you don’t go anywhere.

Like you might have bought the most beautiful car but you have no gas so you get nowhere.

The purpose of a car is not to buy gas. The purpose of a company is not to make money.

The purpose of a car is to go somewhere and fuel helps you get there. The purpose of a company is to accomplish something, to advance a greater cause, to contribute to society – and money will help you get there. It is very necessary, very important, but it’s not the reason we bought the car in the first place.

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