Not-For-Profit Business - Profit
Why do businesses that make things like toothbrushes have to earn a profit?
All sorts of organizations operate effectively without earning a profit. The Red Cross, Harvard University, Amnesty International, and Habitat for Humanity are well known not-for-profit organizations that do good work without earning a return for shareholders. Wikipedia says there are more than 1.6 million not-for-profit organizations in the United States alone, addressing a wide variety of issues. Is there any reason why a business that makes toothbrushes needs to earn a profit when these not-for-profit organizations don’t?
The story that is often told is that the profit motive encourages innovation and efficiency. The more efficient a for-profit business is, the more its shareholders earn. Governments and not-for-profit organizations are supposedly inefficient because efficiency doesn’t benefit anybody in the organization directly. This view that we only work effectively when we will benefit personally is simplistic. Even in for-profit companies, the rewards for individual workers are usually only loosely tied to performance. Only the owners of the company and perhaps senior management stand to gain significant financial rewards from improved efficiency and innovation.
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