profit maximization

profit maximization

 

Dan Markovitz provides an article that explores what it means to be a healthy company.

What is a healthy person? We can argue over specific metrics, but we’d all agree that we have to account for physical as well as mental/emotional health. What is a healthy organization? As with 

individuals, there will be disagreement over metrics, but clearly we have to consider financial performance, internal stakeholders (employees), and external stakeholders (community). Healthy organizations recognize the importance of all three areas, and while a specific decision might prioritize one over the others, in aggregate, healthy organizations make decisions that, on average, address all of those needs. 

Financial Performance

Milton Friedman is the primary exponent of the belief that a company’s sole purpose is making a profit: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits,” he wrote in 1970. In the past decade there’s been a backlash to that one-dimensional view, most notably by the Business Roundtable. In 2019, the organization announced that corporations should be governed to benefit all stakeholders— customers, employees, suppliers, communities and shareholders.

But many companies have long subscribed to this more holistic—and I’d argue, healthier—mantra. As Jim Collins wrote about visionary firms such as Merck, 3M, General Electric, Boeing, and Disney in Built to Last.

 

Key points include:

  • Profit maximization
  • Internal Stakeholders—Employees
  • External Stakeholders—Community

 

Read the full post, What Is a Healthy Company, on MarkovitzConsulting.com.