It’s Not All About the Bottom Line

If you walk into an accounting professor’s office and take a look at the exam questions on his desk, what you might see today, compared to many years ago, may be different.

Many people see business school with largely profit-focused education – meaning what matters is whether the bottom line goes up or goes down. Exams would put students in hypothetical situations as a manager, and oftentimes, a decision is made based on how much profit will be made. Will it get us more sales from consumers? Will this change increase product margins?

Today, there is a clear shift away from basing every decision upon money. Students are being challenged to raise questions like: How are we affecting the company’s most vulnerable stakeholders? What message will this promotion campaign send to different groups? No longer should business decisions be based on inward looking, narrow-minded criteria of whether the bottom line goes up or down, but companies must consider the societal impacts each decision materializes.

Take for example, Abercrombie & Fitch’s marketing targeting strategy. In a 2006 interview, CEO Mike Jeffries stated, “[A&F goes] after the attractive kids… a lot of people don’t belong [in our clothes], and they can’t belong.” They do not carry XL or XXL sizes for women’s clothing, and the largest women’s pant size is 10 (compared to H&M’s size 16 and American Eagle’s size 18). [Note: for other statements from Jeffries, you can see him here, on the Huffington Post’s list of the 9 CEOs with the Worst Reputation] In a world where only profitability matters, one could argue that A&F is targeting a specific segment in order to create a certain brand image, and by doing so achieve financial success by influencing those who are willing to pay extra to wear a “cool brand”.

However, we need to consider the implications of being exclusionary to the “not-cool” kids. By purposely excluding from consideration the fashion needs of the marginalized, A&F is actively discriminating against them and reinforcing the obsolete dogmas of appearance-based values among youth. Instead of asking the question, “how will our brand profit from having a certain image?” I think an even more important question is to ask, “What sort of message are we sending?”

There is nothing wrong with wanting to have financial success. Businesses cannot survive without implementing a sustainable plan that, of course, guarantees financial stability. However, I argue that such a goal cannot be achieved in the long-run without simultaneously considering the “profitability” of the environment in which the company is situated as well. The financial profitability of a company cannot be healthy while everything around it is being exploited.

In An Inconvenient Truth, Al Gore’s reflection on this picture sums it up pretty well:

Bottom line

Picture taken from:

Al Gore:

“We have here a scales that balances two different things. On one side, we have gold bars! Don’t they look good? I’d just like to have some of those gold bars. On the other side of the scales… the entire planet!

I think [choosing the gold bars is wrong] for two reasons: number one, if we don’t have a planet… The other reason is that, if we do the right thing, then we’re going to create a lot of wealth, and we’re going create a lot of jobs, because doing the right thing moves us forward.”