Why Every Organization Needs a Purpose

By Markets Fool.com

In this segment from the Rule Breaker Investing podcast, David Gardner continues to share some of his Foolish thoughts on this divisive political climate. This time, he ponders the idea of conscious capitalism, the non-profit vs. for-profit dichotomy, and the question of organizational purpose. In a perfect world, even non-profits would have a better handle on their bottom lines.

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A transcript follows the video.

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This podcast was recorded on Oct. 19, 2016.

David Gardner:You know, four years ago, I attended a conference called the Conscious Capitalism Conference in Austin, Texas. It's held every year. In fact, my brother is there this week as we speak. I'm just back here in Alexandria doing my podcast. But Adam Braun (who's the founder of an organization called Pencils of Promise, which The Motley Fool has done some good stuff with in the past), Adam stood up in front of the crowd and said something I thought was wonderful. He said he doesn't like it when people call Pencils for Promise a "non-profit" or a "not-for-profit". He doesn't like that. He thinks of his organization as afor-- in this case,for-purpose.

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And I like that a lot because I don't tend to frame things up in terms of for-profit and not-for-profit too much. I think that what really unites most organizations is a purpose; whether it's The Motley Fool, whose purpose is to help the world invest better. Whether it's the purpose of the organization that you might work for, or whether it's Adam's Pencils for Promise, every organization has a purpose. And my hope for every organization is when possible (and it's not), when possible to earn a profit in pursuit of its purpose.

I realize that sometimes, especially when I was going through college, it seemed like for-profit corporate was greedy, and wrong, and you know, lots of my peers in college would not have been voting for that. And by contrast, and somewhat Dickensian comic contrast, in my mind, not-for-profit, so-called, was thought of as really a wonderful, wholesome thing. Save the world. Altruistic. And all the really good people go to work for those. Well, now, 30 years removed from college, I can say with confidence that if every not-for-profit (or for-purpose, in Adam Braun's words) organization could earn a profit; I wish for it that it would, for the dynamics that we just described.

In fact, if you think about the difference between owning a house and renting, you'll recognize where I'm headed, here. I think when you are for-profit, you have shareholders (they might be private, or you might be a public company), and they're owners. They have an owner's mentality. When it's really done well (and we try to do that really well as Fools), we're patient, long-term minded, and we feel like owners, and we treat that stock, and the system itself, like a house that we're going to keep clean, because it's our house.

By contrast, I think a weakness of things that don't earn profit or can't earn profit is that they are ultimately unsustainable, relying on people to give. Now the good news is, I hope you give. I try to give, too. I hope you try to give to good organizations that you respect and that you want to sustain, but the truth is that if organizations aren't earning a profit, then they rely on your and my altruism. They rely on our generosity, and they hope that we'll be more generous every year. And darn it, when the stock market goes up, I think we can do a good job with that over the course of time (to give a little bit more every year).

But it's still a weakness of the model if you are CEO of one organization or the other -- I think I, anyway, I'm not going to choose for you -- I would choose the thing that earns profits, because then you can reinvest in yourself and grow in a sustainable manner.

And so, that's one of the things that I love about business, and to get back to my point: At the end of the day, we should be judging all organizations not by whether they're earning a profit or not, but by what their purpose is, how big their purpose is, and how effective they are at fulfilling it. So, that's ultimately how I think I score how any organization has done. But the difference between, I think, the common view (which is that for-profit things are greedy and not-for-profit things are cool); at least in my experience, that doesn't really resonate.

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