04 May #119 – Faithfully Positioning Profit – Optimize vs Maximize
ESSENCE: It is impossible to talk honestly about the WHAT, WHY and HOW of business in alignment with Biblical beliefs, values and priorities without addressing how profit fits in. Profit is NOT bad, and the creation by business of economic prosperity is good. Profit in a business is necessary for good stewardship of the business, which means it is necessary for the Creation Mandate, which in turn means it is necessary for business in alignment with Biblical beliefs, values and priorities. Economic prosperity enables families and communities to flourish. Like money, profit becomes bad when it moves from being a tool to being an idol. Profit is an idol when it is the end toward which the business is managed. Faithfully “doing right” through business a better way requires changing the heart of the organization by putting profit in its proper place as a means rather than an ultimate purpose. Profit as an end requires its maximization. Profit as a means permits its optimization. Faithfully positioning profit means seeking the optimal level of profit to maximize a faithful WHY–the level of profit that brings God the most glory.
If you have been reading our posts, you will know that we have talked a lot about profit, which makes sense. A focus of this blog (and Integrous) is faith and business, and a focus of business is profit. Our posts urge faithful leaders to lead faithfully by pursuing what we call business a better way–business in alignment with Biblical beliefs, values and priorities.
It is impossible to talk honestly about the WHAT, WHY and HOW of business a better way without addressing how profit fits in. In some sense, it is the “elephant in the room”.
We believe a helpful way to think about the role of profit in business a better way vs business as usual is to think about the terms “optimize” vs “maximize”. But first, let’s review what we have been saying about profit for the last 118 posts!
Refresher: Profit Is Not Bad
Profit is NOT bad, and the creation of economic prosperity is good because it enables families and communities to flourish. That bears repeating–PROFIT IS NOT BAD! In fact, we believe PROFIT IS NECESSARY for an organization (other than a non-profit organization) to be obedient to the Creation Mandate.
Hopefully you recall the Creation Mandate (the commandment about our purpose on earth) that we discussed at length in post #46 (Lessons from Creation-Why We Are Here). Here it is again from Genesis 1:28:
And God blessed them. And God said to them, “Be fruitful and multiply and fill the earth and subdue it, and have dominion over the fish of the sea and over the birds of the heavens and over every living thing that moves on the earth.”
Theologians (which we do not claim to be) seem pretty confident that the terms “subdue” and “dominion” mean “stewardship“. We are to care for all God’s creation as its STEWARDS.
Back in post #058 (Love-Respect and Sustainability-God’s limits), we suggested stewardship translates practically into two things–Respect and Sustainability:
• Respect. Respect for all humans God created, which means treating all stakeholders of an organization with dignity (owners, employees, vendors, customers, communities).
• Sustainability. Sustainability across all aspects of a business, including its utilization of all forms of capital that drive the business and its relationships with the stakeholders related to those forms of capital. We have frequently turned to Jeff van Duzer’s book Why Business Matters to God (And What Still Needs To Be Fixed), and its insights on the breadth of sustainability are worth quoting: “Sustainability, however, can be understood in a much broader sense as well. As a business pursues its purposes, it must do so in a way that is sustainable across all of the dimensions of its interactions with its stakeholders.“
Profit in a business is necessary for Respect and Sustainability, which means it is necessary for the Creation Mandate, which in turn means it is necessary for business in alignment with Biblical beliefs, values and priorities.
• Respect. Business a better way does not mean ignoring owners. A business faithfully “doing right” needs to promote and facilitate the flourishing of ALL its stakeholders, and that includes owners. It needs profit in order to permit its owners to flourish through a fair return on their capital. Anything less is not respecting them, and that is poor stewardship.
• Sustainability. Without profit, a business will lose access to one of the four types of capital on which a business relies–financial capital (post #014 describes the four types of capital on which a business relies). Without profit or access to financial capital, the business is likely to be unsustainable, and that is poor stewardship.
Profit is like oxygen. You absolutely need it to win the race. But that’s not the objective. The primary objective of business is serving others to the glory of God. (Ken Eldred)
Faithfully Positioning Profit
Profit is not bad just like money is not the root of all evil. It is the love of money that the Bible tells us is the root of all evil. Like money, profit becomes bad when it moves from being a tool to being an idol.
Perhaps the most consistent theme over the last 118 posts is that profit becomes a problem when it becomes the purpose of a business. We call it Profit as Purpose, and it is a hallmark of business as usual–business according to the world’s beliefs, values and priorities. Back in post #017 (“Profit” Problems), we explained the key problems created by Profit as Purpose that contribute to the brokenness of business as usual.
Maximize Profit – Business as Usual: Profit as Purpose is the idea that the primary or sole purpose of a business is the maximization of financial profit for the benefit of shareholders. As we explained in post #013 (Business as Usual-Profit as Purpose), it is often referred to as the “shareholder primacy” model, and it has been predominant for the last several decades in America.
If profit is the end toward which a business is managed:
• People and the rest of creation can never be more than tools of production to be managed toward that end (“No one can serve two masters“, Matthew 6:24).
• People will be valued based on their perceived profit contribution, and value is likely to be based on short-term profit or stock value.
• Decisions will be made mainly based on financial metrics, because they measure profit and they are easily measurable.
• Because an organization manages to its purpose, a key role of the organizational culture of the business will be to drive profit. Business culture can be designed (or will just emerge) to drive or inspire people to perform at higher levels and contribute more to profitability through manipulative mechanisms like bonuses/commissions/promotions and the fear of elimination or demotion.
Business as usual and Profit as Purpose work against faithfully stewarding people and the rest of creation toward flourishing, which means they work against the Creation Mandate.
In describing the role of profit in an organization, leaders sometimes characterize the role and priority of profit in ways that sound good but are not in line with Biblical principles or reality. In post #059 (Love-What About Profit?), we explained why profit can’t be one of several “ends” and why Profit as Purpose can’t be transformed into a bigger WHY. Like a person, an organization can have only one ultimate ambition–one ultimate identity–one true “heart”. Without intentional leadership, that heart will be “business as usual” and profit over people.
Optimize Profit – Business a Better Way: Business a better way requires changing the heart of the organization by putting profit in its proper place as a means rather than an ultimate purpose. Recognizing profit as a good and necessary tool toward a bigger WHY, a leader can focus on optimizing profit toward the maximization of that WHY. But what WHY?
The Bible offers the ultimate WHY for our work and for business, because it is the ultimate WHY for all we do. We are called to use our gifts to “serve one another” in a way that glorifies God (1 Peter 4:10-11). Ken Eldred captured this beautifully:
Profit is like oxygen. You absolutely need it to win the race. But that’s not the objective. The primary objective of business is serving others to the glory of God.
As we explained in post #101 (God Glorified), a business glorifies God principally through lovingly and generously serving people and stewarding all creation: (1) providing jobs that allow people to fulfill their humanity and purpose by living out Imago Dei, the Creation Mandate and the commandments to love God and love each other through service, (2) providing economic prosperity, goods and services that enable families, communities and creation to flourish, and (3) creating a culture of Shalom built on Biblical principles of relationships, community and human dignity that is conducive to the flourishing of all people it touches. In other words, Humanizing people and Beautifying the world.
Optimizing profit means generating the optimal level of profit to maximize the flourishing of all people touched in a way that recognizes God’s limits of Respect and Sustainability. It is seeking the level of profit that brings God the most glory.
PERSONAL NOTE (from PM): It is a lot easier to chase “maximize” than “optimize”. That last sentence used to say “It is finding the level of profit that brings God the most glory.” Then I realized that we could never really know if, in fact, we had optimized profit for God’s glory. But what matters isn’t “finding” it as much as it is genuinely “seeking” it, because God knows the heart.
That reminded me of a prayer my wife shared with me several years ago–the “Thomas Merton Prayer”. I keep it on my phone for quick reading (and sharing). It is why I believe WHY is more important than even WHAT or HOW.
My Lord God, I have no idea where I am going. I do not see the road ahead of me. I cannot know for certain where it will end. Nor do I really know myself, and the fact that I think that I am following your will does not mean that I am actually doing so. But I believe that the desire to please you does in fact please you. And I hope I have that desire in all that I am doing. I hope that I will never do anything apart from that desire. And I know that if I do this you will lead me by the right road though I may know nothing about it. Therefore will I trust you always though I may seem to be lost and in the shadow of death. I will not fear, for you are ever with me, and you will never leave me to face my perils alone.
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