Not just profits to make more profits
The diversity of a company’s goals enhances its competitiveness and efficiency
Profit and purpose: going beyond financial statements to something more profound, something that transcends them, remains at the forefront of the discussion over a corporation’s goals. Corporate reputation is on the line, as well as the organisation of production, the liveability of factories and offices, and ultimately, the very efficiency and competitiveness of production itself. However, reconciling profits with additional goals is a complex task. This is the inspiration behind “Grow the Pie”, the most recent literary work by Alex Edmans, a Professor of Finance at London Business School and, more importantly, an expert in the routes a company can take towards fulfilling its role for the common good.
In response to the question of whether companies should prioritise profit or pursue a purpose, Edmans argues that these objectives are not mutually exclusive. On the contrary, he points out that companies with a focus on a purpose beyond profit consistently achieve superior economic performance in the long term. However, working towards this goal is not without its challenges.
In the book, Edmans outlines a practical approach for business leaders to genuinely fulfil their company’s purpose and to navigate past the barriers that often impede progress. He also guides investors in distinguishing between companies that engage in mere greenwashing and those that are sincerely driven by their purpose. Furthermore, the author explores the role of citizens as workers, consumers and shareholders in reshaping businesses to be more aware of their multifaceted functions.
This gives rise to what can be termed “Pieconomics”, a distinct approach to economics wherein corporate profits are not enhanced at the expense of employees, customers, suppliers, the environment, the community, or governments, but rather by growing the “pie” as a whole. In other words, the range of benefits of any kind that a company produces for society boosts profits for investors much more significantly than merely attempting to secure a larger share for them. That is the message from Edmans, who, to reinforce his point, also draws on concrete examples, like that of Merck & Co, supplementing these with a meticulous analysis of extensive data and thorough research.
As ever, what Alex Edmans has proposed should not, though, be considered in isolation, but rather offers fresh insights for consideration. To gain a better understanding of the context in which businesses operate.
Grow the Pie
Alex Edmans
Franco Angeli, 2024
The diversity of a company’s goals enhances its competitiveness and efficiency
Profit and purpose: going beyond financial statements to something more profound, something that transcends them, remains at the forefront of the discussion over a corporation’s goals. Corporate reputation is on the line, as well as the organisation of production, the liveability of factories and offices, and ultimately, the very efficiency and competitiveness of production itself. However, reconciling profits with additional goals is a complex task. This is the inspiration behind “Grow the Pie”, the most recent literary work by Alex Edmans, a Professor of Finance at London Business School and, more importantly, an expert in the routes a company can take towards fulfilling its role for the common good.
In response to the question of whether companies should prioritise profit or pursue a purpose, Edmans argues that these objectives are not mutually exclusive. On the contrary, he points out that companies with a focus on a purpose beyond profit consistently achieve superior economic performance in the long term. However, working towards this goal is not without its challenges.
In the book, Edmans outlines a practical approach for business leaders to genuinely fulfil their company’s purpose and to navigate past the barriers that often impede progress. He also guides investors in distinguishing between companies that engage in mere greenwashing and those that are sincerely driven by their purpose. Furthermore, the author explores the role of citizens as workers, consumers and shareholders in reshaping businesses to be more aware of their multifaceted functions.
This gives rise to what can be termed “Pieconomics”, a distinct approach to economics wherein corporate profits are not enhanced at the expense of employees, customers, suppliers, the environment, the community, or governments, but rather by growing the “pie” as a whole. In other words, the range of benefits of any kind that a company produces for society boosts profits for investors much more significantly than merely attempting to secure a larger share for them. That is the message from Edmans, who, to reinforce his point, also draws on concrete examples, like that of Merck & Co, supplementing these with a meticulous analysis of extensive data and thorough research.
As ever, what Alex Edmans has proposed should not, though, be considered in isolation, but rather offers fresh insights for consideration. To gain a better understanding of the context in which businesses operate.
Grow the Pie
Alex Edmans
Franco Angeli, 2024