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Should money be your company’s goal?

penniesThe Theory of Constraints holds that “the goal” of for-profit businesses is normally to make money both now and in the future. That’s certainly the case for most companies that I work with. But not always – there are successful businesses where money is not the goal.

Note here that I’m talking about goals – the result we are aiming to achieve – not about mission or purpose. That’s a discussion for a different day.

This discussion might be obvious for not-for-profits where the goal is philanthropic and making more money (obtaining more funding) is just a necessary condition. But there are for-profit companies that take this approach too.

Of course, many Japanese companies, like Toyota, have security of employment as a goal. But I recently had the delightful experience of working on a growth strategy with a successful US company that shares that same goal.

The shareholders view employing good people and providing financial security as the primary goal. Of course,they understand that to meet that goal, financially success(making money) is a necessary condition. They know that customers must be delighted in order to make money. They also know that it takes effective, committed employees to create the products and provide the service required to delight customers. And employees are much more likely to be effective and committed when they know they have secure employment. It’s a virtuous circle that has served them well for decades.

Am I suggesting that other companies can or should do the same thing? No – Dr. Goldratt had it right when he said that the goal of a business is ultimately whatever the owner chooses. However, to be effective for the long term, your strategy must include all three elements: financial growth, delighted customers, and effective employees.

{ 8 comments… add one }
  • Syb Leijenaar March 7, 2011, 2:38 pm

    Mike,
    I very much agree with you. For many people it looks a contradiction, but not only focusing on making money for the shareholder can be much more profitable in the long run. If a company has a policy of trust, commitment and passion combined with a skilled labor force, than it becomes possible to organize ‘principle based’. This enables that decisions are made where the work is done, so quick adaption to changing conditions is possible (with less managers). In a later stage one can check if decisions were made correctly according to the principles. As mentioned this is only possible if the employees feel secure about their position and are not fired after a poor decision. For employees, customers and owners this type of working together is much more rewarding than the ‘rule based’ organizations that focus solely on the shareholder.

  • Arvid Hardin March 10, 2011, 8:21 pm

    Goldtratt has some very good ideas, particularly from an operations point of view. In the 80’s and 90’s there was a movement called TQM that focused to bring all 3 together. Shareholders decided after some years that the cost of quality did not in fact give the desired results. Many companies canned all that teamwork approach and moved to outsources many types of operations to, in many cases, centres with poorly paid and very unhappy peice-workers living in horrid conditions. Product quality also suffered as we are seeing the the poorly manufactured products coming out of China, India, etc.

    Something is missing in the arguments here.

  • Tyge Mortensen March 12, 2011, 2:30 am

    Gathering people around a purpose and a goal. Thats building business. Building a small comunity you might say, where people live dependent off each other.
    Securing and feeding the community must be the main thing. And maibe happiness – if thats seccurity. Otherwise they will find food somewhere els. With or without happiness, but not with or without food.
    I think companies main goal has to support the purpose off the operation. Thats to ensure the food supply individually and seccuring the community, thats happiness, but maibe secondly.
    If there is enough food the goal is seccurity, els the people will eat until they die. If the food is rare, then that will be the main focus. But seccurity, isn’t that always important? Or are we all soldiers?
    Just thoughts 🙂

  • Pat Patterson March 12, 2011, 10:32 am

    Even for those successful companies where making money is not a stated goal, I beleive that what is implied in Goldratt’s original presentation is that making money both now and in the future is a necessary condition for delighted customers, and effective employees, etc.

  • Michael A. Dalton March 13, 2011, 12:35 pm

    Goldratt holds that all three are necessary conditions, and that the one set as the goal is ultimately up to the owners and their values and principles.

    Semantics? Maybe. But when a company like Toyota has people work on training and improvement projects during a downturn, that’s pretty different than the layoff actions many other companies took.

  • kul b razdan March 24, 2011, 4:50 pm

    let us take both examples-For profit and not for profit
    For Profit: even if your goal is to serve employees and customers, you cannot do it if you do NOT make money/profit. If you want to invent, many times it needs front end money. Even though, it is said it is a knowledge economy, you still need lot of starter money to succeed. Also money, along with other things customer and employee satisfaction, is a thermostat whether you are running the business right, as it tells you that something needs correction.

    Not For profits:It is a known fact that NGO’s(not for profit organizations), can only help in limited way. To really scale up a noble cause, you need Profit motivation as it is a win win proposition. For example in Micro-finance you make pretty good return with low risk but the recipient is much better off than before.

  • Herman Walburgh Schmidt April 4, 2011, 9:29 am

    Mike,
    I always feel uncomfortable when thinking of the only goal being ”making money”. Of course this is necessary to stay in business, but I also feel that it is more then that. If you spend more (or less) then 8 hours a day on your work, it needs to fulfill more the just the need for money, but it needs to contribute to happiness and fun.

  • Keith Parris May 19, 2011, 3:33 am

    Effectively this is a discussion about why have organisations. The only organisations I know whose real purpose is to make money are mints and they are tightly controlled. An organisation is always started to supply something to others; that is their purpose, money is the “oxygen” that enables the organisation to survive and grow (as has already been said a necessary condition; and its also a measure of healthiness). So the real goal of an organisation (even the mints) is how well they are delivering what they set out to supply.

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