Have you heard of any of the below companies: Better World Books, Warby Parker, Yoobi, Hand in Hand and the one that probably is the most widely known: Toms?
Apart from the fact that all these companies are ‘young’, the common theme they all share is that the value of doing good in the company is very high. In fact, they have built ‘giving back to society’ as their business model’s central theme. Better World Books gives a book to a child in Africa for each book sold. Warby Parker does the same for its glasses. Yoobi does it for school supplies. Hand in Hand with soap and of course Toms with shoes (if you want to see a full list of 23 similar companies check out this BuzzFeed article).
Why do companies do this? Is it a marketing gimmick to encourage product sales by making consumers believe they are contributing towards “eradicating poverty”? Is it a good ‘headline’ grabber so bloggers, like me, spread the virtues of the company? Or is it just a ‘thing’ that makes the founder of the company feel they’ve reached self-actualization? Based on these questions, the cynic in us would ask whether companies should engage in social activities at all?
Smart People Support the “Do Good” Model
But these organizations are not alone. In fact, their business model is supported by Milton Friedman, a renowned Nobel Prize winning economist. According to him:
The sole purpose of companies should be to maximize profits and return a portion of it to shareholders so that they can decide what social initiatives to take partake.
I agree. Integrating ‘doing good’ into your business will not only contribute to society but will ultimately maximize your profits as well. And not just for a quarter but for decades to come.
There is Value in Doing Good
You may have noticed that I didn’t say companies should just donate monetarily to social causes. I partially agree with Friedman. By definition companies and their CEO’s are not the best suited in deciding what causes to support and how many resources to allocate towards bringing about social improvements. However, I strongly feel that if you make ‘doing good’ an integral part of the fabric of the organization and design the business model around doing good for people, profit and the planet then you can create a specific USP that resonates with consumers, employees and other stakeholders.
To prove my point, in 6 years of its existence Warby Parker was valued at $ 1.2 billion in 2015 while Toms was valued at $ 625 million in 2014. Who said ‘doing good’ is not good for business or profit!
Of course appreciating the value of doing good attracts consumers as well but for me the real power is in its impact to attract, engage and retain the best talent that is out there. Look out for more on this next week.
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