Question

What tensions do you see between profit maximization and the well being of society?

Answer 1

For organizations with multiple goals, maximization of both income and social welfare are priorities, but the way they relate to each other varies. In moving along the spectrum of social welfare, Hierarchical goals with priority to benefit are the view that businesses should set their end goals in a hierarchy, and order them. Profit may come first in this situation, but social welfare should be treated but not in such a way that profits are deleterious.

Running a company comes with ongoing risks, and the higher the amount of risk you face, the more you expect to gain. You must stock up on inventory and invest in marketing to bring customers in the door to boost revenue and maximize income in a retail store. However, it is difficult to predict demand correctly at all times, and you could end up with a surplus of goods that no one really wants, decreasing the profits that you've been trying to optimize.

Rising income often typically needs additional manpower to accommodate the extra volume, but if the forecasts aren't right you'll probably find yourself overcrowded with a bloated payroll. However, if you make the right decisions and the risks pay off, the extra income you receive will go a long way towards making good payments to yourself, paying down debt and investing in the future.

You may find yourself having to make choices that run counter to your values when you focus on maximizing the profit. In the short term, you can earn extra money if you cut corners and use materials of lesser quality, but you are likely to create a product of lower quality. Aside from the financial issue of losing customers when your understandard goods do not fulfill their needs, you would also end up taking less pride in your services and sacrificing your ideals if you have based your company on quality and honesty.

Maximizing profit can also be achieved by making it harder for employees to work without paying them extra, or by using environmentally harmful materials, such as non-recyclable packaging. You should of course spend the extra money that you receive on doing good, such as contributing to charity or investing in sustainable technologies. But avoiding harm in the first place is simpler and straighter, even if that means earning less profit.

Maximizing income has the potential to bring in more revenue in the short term, thus reducing the long-term earnings. If you commit most of your energy to satisfying one demanding customer who wants all of your stock right now, you run the risk of alienating loyal, long-term customers who aren't as demanding but might be investing more over time. If you are equipping a facility quickly and cheaply to meet immediate demand, you may lose the opportunity to build a larger facility that will take longer to build but will generate better earnings in the future