Unless we are talking about commerce on the basis of pure altruism, any exchange built on goods or services will require profit as a key motivation.
Reasonable levels of profit are accepted culturally, much the same way as the concept of “an honest day’s work for an honest day’s pay”. Our problem is that as new markets and opportunities expand, lifestyles that were once considered elite are now becoming commonplace. This in turn creates new markets and the expansion and proliferation of certain goods and services. The result is increased levels of growth and opportunities for gain.
It is often said that public is good, private is bad. This suggests that the non-profit incentive and the provision of public services, especially those provided by charities is more honourable and praiseworthy. We have recently seen a debate about how much profit should be made within NHS contracted-out services — but pegging profitability at a certain figure can be unhelpful. Profit with efficiency, diligence and humanity will always be preferable to trying to meet a political imperative over the free market. It can lead to toxic levels of waste and inefficiency, as do gratuitous governance processes and so-called performance management posts.
This is the danger of a generalisation around issues such as profit. Increasingly the consumer is beginning to choose between these two sides. For many, price and quality are all that dictate the purchasing decision. But for an increasing number, a company’s pursuit of profit, without appropriate moral conscience becomes a turnoff. Consumers want to know what they’re getting in their food and where it comes from, about the incentives and bonuses given to top managers, and particularly about how national and multinational organisations pay their taxes.
As we become a more global community the pursuit of profit at the exploitation of others becomes a key concern for many people. I know one Turkish manufacturer that produces a shirt for £5 and they are sold in Knightsbridge for over a hundred. This failure to share the wealth across all involved exploits both producer and consumer. We see this also in the food industry as supermarkets drive down the cost of supply prices.
In the new world of austerity, consumers are forced in two directions. They crave a lifestyle that has goods and services available at a reasonable cost but many have a conscience as to the fairness of the chain of transactions that result in the end delivery to them.
Conversely, we live in a society that celebrates profit, seeing it as contributing to jobs and wealth. Wealth creation is seen as a good thing that stimulates economies but there are key issues about the growth of the mega-rich in contrast to over a million now in the UK accessing food banks.
Profit in itself is not a dirty word. It can be sullied by misuse of individuals and industries or celebrated for conferring social good, contributions to the community, jobs, growth taxation and other factors.
Companies need to consider just what their contribution is as part of a wider community. Equally, aversion to profit and being excessively wedded to the notion of universal public ownership of key services, is not helpful either. We lose the debate about profit in favour of restrictive practices, ideological and politicised direction and inefficiency without true accountability.
Every case must be judged by its merits. We all must constantly apply a moral compass to our actions. In companies this extends beyond simple CSR policies and requires an organisation milieu that is one of transparency and social conscience balanced with responsible business ethic.
German existential philosophy refers to the concept of “Dasien”. It does not translate well, but is a balance of both being and being in the world. Something for individuals, without disregard of community. I suspect this is the balance that one must attempt to achieve when pursuing profit.
David Cliff is Managing Director of Gedanken and Chairman of the Institute of Directors’ Northern Sector Group.