Henry Ford: long-term purpose

Henry Ford: long-term purpose

Long-term view

Source: Conference Board Review
Reviewed: 06-Jun-07

The role of the board is to keep the top management team focused on the company's purpose - its sense of what is right and worthwhile - and prevent it from deviation because of short-termist shareholder pressure.

Purpose is a better generator of profit than profit-maximising, provided it is clearly linked to shareholder interests. Henry Ford's first company lasted only one year because other shareholders saw it as a money-making concern.

Similarly, Ford left his second enterprise after just 18 months because he believed that the board's drive for profits bred a fear of failure. After establishing his third enterprise, the Ford Motor Company, Ford sacked his original backer from the board in order to follow his dream of democratising the car. Between 1908 and 1917, he worked at reducing production costs until he could price the Model T at $345, by which point the company was selling 730,000 a year. Having purpose enables leaders to see the possibilities in their market that others cannot.

The true purpose of the board,
Nikos Mourkogiannis,
Conference Board Review, March/April 2007