E J Gulda, 2012-06-08
For years I struggled to reconcile what I thought to be true with what I wanted to be true about the purpose of business. The truth as I saw it – and taught it – was that the purpose of business is to make money; and a “good” business makes lots of it. I gave speeches about this in my state of the business meetings, to business schools and to many other organizations. The message was always received with nodding heads, and I went on to discuss the cyclical nature of this process: convert money to resources, resources to product, product to more money – and how to do this with optimal effectiveness.
I practiced this in the businesses I led, and they were successful because I was right, of course, and my teams knew how to get things done. But what I wanted to be true is that a business could be better than this, more than this. I took it for granted that business was a good thing in the right hands but was not specific about why. In retrospect this was a big mistake, because the end results were not what they could have been. What kept the powerful machine on the right path was not to be found in clarity of purpose but in clarity of mission. I asked Bob Crumley, a longtime colleague and friend, to read the first draft of this entry and help me put my finger on what was bothering me about it. He had heard my speeches on business philosophy countless times in our past together. He asked for a few days to think it through and then we met for lunch to discuss it.
He pointed out what should have been obvious to me. It is counterproductive to carefully point out the fine differences between purpose and mission. It only serves to confuse the matter. Most people see them as the same. It dawned on me that what was bothering me all along was that I was stubbornly clinging to the old notion, held for decades, that the purpose of business was to make money. Bob suggested that this was the business nature, not the purpose. Bob was right. That’s what separates business from other forms of enterprise. An effective business makes lots of it. But we can’t equate an effective business with a good business. Good and bad relates to the mission of the business, and I rather like calling this purpose rather than mission. Mission can be very time focused, compartmentalized, and can change with circumstance. Missions are essential to planning. Purpose, though, is far more important. Purpose in business, like purpose in life, is longer lasting. It is true for a lifetime if properly defined and undertaken.
I believe that an effective and good business is the only great business. Consider this picture of business characteristics. Effective and ineffective refer to the performance of the business according to its nature: to make money. Bad to good relate to the purpose of the business.
In our next installment we’ll work our way through this matrix by looking at each cell.