There is no escaping the physics of profit and loss. Revenues that exceed expenses are a requirement of corporate existence. Extended periods of financial loss will lead to the disappearance of a corporation.
As an inherent condition of existence, where many companies, and many leaders, have stalled or regressed in their development is in relying on this one factor as the only one that matters, or making it so important relative to others that it might as well be the only one that matters. In the evolution of an organization, it’s akin to being a one-celled amoeba. Using a baseball analogy, it’s like stopping at first base and never aspiring to make it home.
The situation where a corporation focuses exclusively on profit as a measure arises simply enough: As the core principle of an organization, with most shareholders invested in the corporation only for its potential return on investment, and with many executives’ compensation tied to it, maximizing profit is an unavoidable characteristic of any corporation. There is no escaping it. The question then becomes whether a rigorous focus on finances and financial measures is the most effective way to maintain and grow a sustainable income stream in time.
There are some benefits to focusing exclusively on profit. It is easy to understand. Revenues minus expenses is a universal methodology, and everyone understands numbers. It absolves executive leadership of a responsibility for the people who work in the organization, as they are just another factor influencing the size of the profit or the depth of the loss. It’s not necessary to invest energy in figuring out the complex humans inside an organization because all that really matters is their level of productivity.
There are some downsides to this approach, too. Instead of being seen as an asset, employees become a liability, thereby creating a persistent incentive to reduce cost and increase output. Pressure can be overt through actions like cutting benefits and limiting raises, or it can be more insidious, as when management expects employees to work for free by putting in extra hours or working while on vacation.
The problem with this pressure on employees is that there is a natural limit to how much value can be extracted from them. People can give only so much, and chronic overwork is depleting over time. No one’s best work is done when they are fatigued or stressed. Squeezing employee compensation creates additional stress as the money available to support their interests (beyond mere survival) is reduced. Life becomes a rat race and enthusiasm for, and engagement in, work diminishes.
It’s bad for the corporation in other ways, too. It can distort decision making by overweighting financial considerations, i.e., making it easier to consider only potential profit independent of an honest assessment of the relevance to the corporation’s competencies and ability to execute. (Consider General Electric or any of the companies who have more spectacularly failed trying to emulate it.) By focusing exclusively on the thing that is most desired (more profit), the corporation actually risks too narrowly focusing its attention and creates an environment that could subvert its success.
So while there must always be a business model that supports revenues exceeding expenses, a corporation must have a reason for being that is more than just maximizing profit. In the hierarchy of needs, just earning more or less money is ultimately meaningless, and might actually make it harder to do so. Revenue needs to be a by product of purpose and not the purpose. Profit is like food: Once you have enough calories to sustain life, the excess is actually not useful unless there is some purpose for it, e.g., you are training for the Olympics, etc.
Leading from the Heart puts the monster back in the cage. It acknowledges the profit imperative and is honest about its necessity—without profit, the corporation could not exist, so it is the first box that must be checked in any strategy or assessment—but a Leading from the Heart organization does not rest once this box is checked. Instead, the values of the organization, its strengths and weaknesses, possibilities and promise, shape the business plan and inspire its approach to leadership.
In a Leading from the Heart corporation, people are not viewed as just another input to be stretched to extract maximum value and, once the value is extracted, to be disposed of. Leadership is committed to knowing the employees—their hopes, dreams, and possibilities—and supporting them. For one employee, being the best parent might be their primary motivator, and so their possibility at work is shaped by that one imperative. For another, it could be learning a new skill. The important thing is that a leader recognizes what matters to each employee and supports them in that to the extent possible consistent with the team’s accountabilities and overall corporate values.
Giving the corporation a heart, and establishing values and beliefs that are lived and that people are attracted to, creates a mutually beneficial relationship that serves to attract and endear employees to the corporation—and endeared employees are engaged employees. When an employee is engaged, productivity can improve and the conditions for innovation occur. Profit opportunities are enhanced in this environment. Instead of an ever tightening vice grip to reduce expenses and squeeze greater productivity, work can become more enjoyable and employees can feel more respected.
Moving the focus of corporate culture beyond profit into a more expansive place of possibility and purpose creates an opening for innovation and service beyond what could be predicted when operating from the narrower place of financial gain and loss. It bonds people together into a team that is a greater presence in the world—and from that place of greater attraction, more revenue is possible.