The pursuit of profit with purpose requires patience

The writer is the author of ‘Purpose + Profit’ and Charles M Williams professor of business administration at Harvard Business School

An increasing number of business school students are interested in pursuing a career that combines purpose and profit. They understand that they can make a difference in the world while also becoming financially successful entrepreneurs, managers, consultants or investors.

This view overturns two myths about business. First, that business is just about making money, while purpose is found by joining a non-governmental organisation, a social enterprise or, perhaps, the public sector. Such careers can be enormously rewarding. But do we think the leaders of Moderna or Zoom — companies that have changed countless lives over the past three years — have had less impact than anyone else? Or that people such as Microsoft chief Satya Nadella or Tesla boss Elon Musk have had less impact than others outside business?

The second myth is that the pursuit of purpose in business is futile because it is antithetical to profit. Combining the two can be challenging, but requiring leaders and companies to structure their operations, products and business models differently, with higher levels of career and organisational risk, makes it highly possible.

More and more funds are flowing from venture capital and private equity to enterprises that reduce carbon emissions, create economic opportunity through skills and learning, provide access to life-changing health services and improve compliance with regulations and laws.

It is a myth that the pursuit of purpose in business is futile because it is antithetical to profit

For students who want to pursue entrepreneurship or growth investing, this has been a fertile career path and probably will be for decades. Mature companies are also improving operations and designing new products that benefit people and the planet, creating new career pathways.

It is crucial to keep in mind the importance of profit as more students gravitate towards purpose. Finding a strong product market fit, designing business models that scale, and creating efficiencies are as important in purpose-driven businesses as any other. At times, this will require hard choices and ensuring ideals do not become the enemy of progress.

It is easy to criticise a business for charging high prices, not reducing its carbon emissions or failing to pay workers enough. But managers constantly have to make tough decisions, such as: how much and how soon to invest in decarbonisation technology? Will customers pay for a new, safer product? Will investors finance our expansion? Students need to be ready to grapple with such questions.

Whether they are looking to join a large company, a start-up or an investment organisation, students need to choose three parameters: the lowest level of alignment between their goals and those of a prospective employer that they are willing to accept initially; the desired pace of growth in the alignment; and the overall growth of the alignment.

Graduates should think about alignment as a line that evolves over their career. I ask my students what matters more to them: the level of alignment they have now or the change in alignment over time? Imagine an organisation that has a high level of alignment, but that alignment does not grow over time. For someone interested in climate change, that might mean joining a solar energy company. Compare this with an organisation that starts out with a much lower level of alignment but that alignment grows, such as a natural gas producer that moves into green hydrogen.

But there can be crucial differences in the speed of change. In some cases, there will be many years with little progress, followed by exponential improvement — for example, a fossil fuel-based energy company that transforms itself into a green hydrogen powerhouse. In others, improvement is faster but linear, with ultimately less overall change — such as a traditional carmaker that transitions to electric vehicles. The difference between the two extremes comes down to patience, or what I label “your own personal discount rate”.

I have seen students choose all three options: high levels of alignment with little change, low levels of alignment with immediate but lower overall change in the long term, and low levels of alignment with slower but larger overall long-term change. Some prioritise the initial alignment — such as offering access to healthcare for underserved populations — with little concern for whether it grows over time. Others prefer to see their efforts have a meaningful effect on their organisation’s impact trajectory, and are willing to sustain low levels of alignment for some time. There is no right or wrong; it comes down to individual preferences.

The situation to avoid is one with a low level of alignment to start with and little improvement over time. Students should seek another job if they see a lack of leadership commitment to improved alignment, a culture of resistance to change, and pay policies and career incentives that oppose an increase in alignment.

By taking such an approach, students can help drive the transition to profit with purpose.

See the winners of our second annual Responsible Business Education Awards on January 16