Finger Pointing at the Moon – The Single bottom-line and GDP

“The welfare of a nation can scarcely be inferred from a measure of national income.”

This quote from Simon Kuznets, one of the originators of the GDP, can also be applied to individual companies as microcosms of the overall economy.

What is the purpose of your company?  To maximize shareholder value?  Or is it something greater, broader than that?  And what do you use as guides and measures for setting goals and evaluating performance?

Fingers pointing at the moon

Fingers pointing at the moon
Photo credit: http://apod.nasa.gov/apod/ap070926.html

All companies have P&Ls, of course, and most have mission statements that usually point to how the organization will contribute to making the world a better place – or contribute to overall welfare.

Webster’s online dictionary defines welfare as “the state of doing well especially in respect to good fortune, happiness, well-being, or prosperity.”  This naturally raises the question: “welfare for whom?”  For shareholders exclusively, or for a broader set of stakeholders?

While metrics like revenue growth and profit are essential indicators of an organization’s financial health, they are poor proxies for how well the company is fulfilling its mission.  And a myopic focus on the single bottom line distracts management from the company’s larger purpose, resulting in unintended and often harmful social and environmental consequences.

GDP reflects this single bottom-line focus at the national level with societal ramifications, as illustrated in this excellent video:  RSA Shorts- Growth is Not Enough

In Zen, focusing on the finger pointing at the moon refers to mistaking the symbol for the truth that it is intended to represent, or confusing the map for the territory.

So step back and reflect on such things as:

  • Board meeting agendas and discussions
  • Board and executive evaluation criteria
  • The degree to which your mission, values and strategy are aligned

Then ask yourself: “Are we focused on the finger or the moon?”

 

 

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