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What is the purpose of a business?

My coffee cup froze half way to my mouth as my eyes took in the full-page advert in The Financial Times. The ad was by The World Economic Forum (WEF) - those who are famous for hosting a conference for the great a good in Davos every January. What stopped me in my tracks was the businesses framework proposed by the WEF. Since frameworks are my life, that ad had caught my attention.

The framework proposed by the World Economic Forum has three parts to it. Firstly it says the purpose of a company is to serve a number of stakeholders – employees, customers, society and not just shareholders. Secondly a company must have objectives that go beyond profit. The environment and social order are also important. The third purpose is more nebulous. It suggests global companies bring their core competences together to improve the state of the world. The “three purposes” framework is called “the universal purpose of a company in the fourth industrial revolution”.

By the time I had digested these fine words my coffee was cold. Of course I fully applaud its aims. Companies should engage all stakeholders. They should take care of the environment. It is in their interests to harness all their core competences. This is all good stuff. What I was struggling with is how these ideals work with companies in different stages of their life cycle. Companies struggling to make a profit at the beginning or the end of their life cycle may not be able to balance the three WEF purposes of a company as easily as one that is mature and readily generating funds.

It should be a requirement of all business leaders that they do no harm and indeed, whenever they can, they should do much good. The more good they can do to wide audiences, and still run a good business, the more we will approve them. However, frameworks must not be ivory towers. There are times in business when we have to accept that the survival of a company (or part of it) is most important. This may mean harsh choices. Fairness is important but ensuring the survival of a business must be the number one requirement if you are the person in charge. I can imagine in such a situation that trade-offs may have to be made that may not appear altruistic.

Running a business is a story about money and responsibility. The long-term aim of businesses would do well to heed the aims proposed by the World Economic Forum. The day-to-day management of those businesses may well need to make difficult and what may seem conflicting choices from time to time. However, the number one requirement of all businesses is survival.

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