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  • What’s the purpose of a business?
Article:

What’s the purpose of a business?

23 February 2021

Dinusha Rajapakse , Associate Director - Tax Services |

This is a very pertinent question that each one should ask about their business. Is it to make money or to create wealth?

When you buy a vehicle, is the purpose of buying a vehicle to buy fuel? No. The purpose of buying a vehicle is for you to go from one place to the other. Just like that, the main purpose of a business is not to make money, but to contribute to society, to provide quality goods and services and to achieve a certain goals etc. Just like fuel in a vehicle, money in a business is very important to achieve its’ expected goals. But making money is not the only purpose of the business. Money is a very important driver in reaching the goal or purpose of the business. However, if we think of making money as the purpose of our business,  we will not be able to sustain the business for very long or service stake holders . It is very important that the leaders in the business should be able to strike the right balance.

Setting a purpose or vision for the business is very important to make any business a success. We also need targets, because as human beings, metrics are important to us. Even when we are running a race, or even simply walking for exercise, we need to know how far we have gone, how many calories we have burned etc. Therefore, even in business, it is important for the staff to know what we have achieved, what the target is.

In today’s corporate culture, most organisations set targets and KPIs for their employees. Most often the bonus or promotion is linked to achieving these goals. However, what we forget is that sometimes reaching the goal alone should not be the criteria for career advancement. How we got there is also an important factor that needs to be considered. Let’s take an example of two team leads who were given the same target. On team lead was very consistent, morale was high among the team members, staff turnover was at a minimum, but at the end of the year they were not able to reach the target. On the other hand, the other team lead was erratic, staff turnover was very high, there was no transparency on what they were doing, but at the end of the year they achieved the target. As an organization, we will reward the team that reached the target, but we will not look at how they reach  there. This team will make more money for the company in the short term, but they will not be able to sustain this for long. The employees in the team that did not reach the target are more likely to be with the company for long and their contribution will be more sustainable. Therefore, as organisations, achieving the target should not be the sole criterion. How you get there is also equally important.