Thoughtpiece - Redefining Profit

I recently spent an interesting Saturday afternoon with a group of professionals discussing ideas around professional services. Central to this was the role of lawyers in society and it struck me how similarly all of this could be applied to consultants in the voluntary and community sector.

Profit is often regarded as a dirty word. All charities and community groups are not-for-profit by definition but for them to be effective, they need to raise often considerable sums of money, pay staff well and to charge for services they provide. Charging applies whether they are grant funded, delivering a service contract or formally selling services.

I have often thought that the preponderate.network might be better as a not-for-profit. After all, we don't aim to make profits - our core goals are to provide services to clients and to make a living. In fact, we go as far as to say we invest our profits in the pro bono (professional skills volunteering) work we do and in other support for the community.

But back to that Saturday afternoon...

Lots of lawyers are really frustrated with their jobs, often to the point of leaving the profession. Money really doesn't pay in this case. People want much more than 'selling their soul and their life' for 30,000 pieces of silver.

We got into a conversation about profit and what it means. The word has negative connotations but the dictionary expresses it simply as "An advantageous gain or return; benefit". Therein lies the issue - people see profit as 'taking advantage'.

So how could we redefine profit? Well, bearing in mind that we're talking about professional services work, we thought of all the components which went into a piece of work.

Firstly, there was the money we get paid for doing it. Sometimes very good, sometimes not enough.

Secondly, there is the 'intellectual capital' we gain from the work. Every time we do something, we learn something (hopefully) and develop new skills and experience. It's what makes us better next time.

Thirdly, whatever we do has an impact on society. If we complete a piece of research which leaves a community better informed, that's an impact. If we save someone money, that's an impact. As Newton said, "to every force or action there is an equal and opposite force or reaction".

Finally, there's another impact - the impact on the person doing the work. We call this 'personal emotional value'. If you love what you are doing, the emotional value is positive. If you hate it, the emotional value is negative. If you're 'tolerating it', the emotional value is still likely to be negative.

But where does this leave us? Well, those of you who hate maths should look away now because here comes an equation.

PROFIT = Cash received + intellectual capital
+ societal value of work done + personal emotional value of work done

At preponderate, we've long considered these four aspects in everything we do. It's one of our motivations for our pro bono and volunteer activities. We don't make any cash (in fact it often costs us cash) but we do gain on intellectual capital and the societal and personal emotional value.

It also impacts the work we choose to do for fees. We don't do work which has a negative value on society or on people (that includes our clients as much as us) and we've been known to sack clients who aren't fulfilling this part of the bargain.

What the equation clearly shows is that earning money is not the most significant part of profit. Professional development and the wider implications count for a lot. It's fair to say a lot of work thought of as high profit, would actually equate to a loss using this method of calculation.

A redefinition of what profit means? Maybe we'll stay for-profit for now.

Dr Simon N Davey
Managing Associate
Preponderate.network
June 2005

The author wishes to acknowledge attendees at 21C Law for their ideas and contributions to this article and especially to members of Pineapple Partners and Lawyers for Change.

"What Preponderate uniquely offers is a link between local communities and local small businesses. This will benefit both and could provide a model for a wider, nationally based initiaitive based on these principles."

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