In previous blogs, I have described profit as a wonderful word that connotes a concept that is essential to all forms of life for survival and advancement. Here I will show that your company’s profits reach far and wide to quietly contribute to the prosperity of individuals and their communities.
Our bottom lines grow with the profits of our constituents; our recorded profits come as a result of win-win relationships among 5 groups of stakeholders.
Our companies are systems that function like machines. They are comprised of parts that work together to meet needs. Just as machines are systems that sputter or fail when components falter, companies are systems that require each of their parts to work smoothly to achieve win-win results.
Five constituents make up the basic system of all companies–all have communities, customers, suppliers, employees, and owners upon which they depend for their successes. Unlike machines that enslave components to play their respective roles, company constituents participate voluntarily and do so only as long as they profit sufficiently to want to stay involved.
Each company’s constituents work together like layers of a wedding cake; each supports the other as long as they stay wed by common purposes. If one layer crumbles or goes away, the whole cake stays at risk unless and until repairs are completed or replacements made.
The foundation layer of every company is its community—it profits most from company successes. Citizens of our local, regional, and national communities personally profit from the successes of their private-sector enterprises. Companies exist to directly or indirectly serve needs and wants of the citizens of their communities. Companies win when they serve well and fail when they do not.
Beyond value received in the form of products and services, communities cannot continue without the wealth created by their private-sector enterprises—there are no other sources to fund community infrastructures and government services. Companies and communities are highly interdependent. How well they work together determines their mutual longevities and levels of health.
Customers comprise the second layer of profits. As individuals, they exchange money for products and services they judge to be more valuable than the amounts they spend. This means that customers profit emotionally the moment the purchase is complete. They profit even more when they put their purchases to use. For companies to be successful they must not only make sales, they have to meet or exceed customer expectations.
All firms that supply necessary parts, materials and services are unmistakably company constituents. Company advancement depend on their timely deliveries of quality goods and services. Among suppliers are material vendors, truckers, bankers, lawyers, insurers, personnel agencies, recruiters, consultants and others that contribute to company success.
Employees include all who profit from the constituency, whether paid directly by the company or they earn their paychecks from suppliers of goods and services. All of them contribute to company success as they build on their own personal successes. Accordingly, employees should clearly recognize and promote their win-win relationships within and among all five classes of company constituents.
These individuals invest time and money in exchange for shares of company ownership with hopes of gaining more than they might from alternative investments. They accept ever-present risks in hopes of growing their wealth for further investments in the health and prosperity of their communities. Although the owner’s layer is necessarily the smallest by far, without it there would be no “cake” at all. And owner returns grow as all layers grow.
The 5 layers of symbiotic profits explain many of the wonders of capitalism and why it is the fountainhead of civilization.