The profit motive in perspective

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The Independent Online
The principal purpose of a company is not to make a profit - full stop. It is to make a profit in order to continue to do things, or make things, and to do so even better and more abundantly.

This was Professor Charles Handy's opinion on what a company was for in a speech delivered at the Royal Society for the encouragement of Arts Manufactures and Commerce in which he criticised British companies for being detrimentally profit-driven.

His words sparked the two-year investigation in 1993 into how they could fundamentally change the way they operate.

The premise was that UK business did not have a competitive future if it continued to function solely for profit.

Under the leadership of Sir Anthony Cleaver, then chairman of IBM UK and now chairman of the Atomic Energy Authority, 25 of the UK's top businesses battened down the hatches in a two-year stint to try to find a practical way forward.

The core group's objective was to develop a shared vision of tomorrow's company. But the aim was practical - to stimulate competitive performance by provoking business leaders to think about the sources of sustainable business success and to educate and change top management's thought processes.

The two-stage pounds 1m programme will reach its climax tomorrow, when the RSA will publish its findings in Tomorrow's Company: the role of business in a changing world.

An interim report published in 1994 concluded the only way forward for British business was an "inclusive approach", where success is not defined in terms of the bottom line, nor a single stake-holder. Instead a firm must assess, understand and measure the value it derives from all its key relationships.

The report stated that "unless UK companies adopt this inclusive approach, both individually and as part of the wider economic system, they will fall behind, no longer able to compete, or to support current living standards." Mark Goyder, programme director of the RSA, author of the report and the man who has done most of the talking, said the final report reinforced the need for the inclusive approach.

"Any company which wants to avoid the elephant traps out there needs to read the report - it's all about taking a total approach," Mr Goyder said.

This approach attracted Stewart Hampson, chairman of John Lewis to take part.

The company is usually reluctant to take part in ventures which may distract it from serving customers but "the emphasis in the interim report was very much about what John Lewis is about", Mr Hampson said.