A path to disaster

We have a fundamental ethos in too many companies that appear to have merit within our capitalist philosophy. Unfortunately it is an ethos that benefits the few at the expense of the many, and it justifies some really bad policies and procedures.

The 2 universal responsibilities of every business

Check out most large companies’ mission statement and it won’t take long to start to see a common theme.

We do xxx so that our customers will xxx while providing a xxxx return to our shareholders.

Small companies may not have a mission statement, but the sentiment is basically the same.

We all fundamentally agree to the first responsibility of a business – to the company.

After all, we expect to be looked after when we buy a product or service from a company. We are upset when they fail to deliver what they promise. At the end of the day, we love the quote:

The customer is always right.

The second responsibility is a bit more hit and miss – the return to the shareholders or owner.

We see this responsibility each year with the AGM and shareholders report. We accept it when we cheer the massive payouts to startups.

I say “hit and miss” because unfortunately the owner or shareholders are often see as the bad guys. They are the ones who are stripping profits from the company.

As a business owner I have taken the hits over the years and financially risked everything to build the business. That risk was always on the basis of a hope in a better future. From that perspective I can fully justify a return to the owner.

But have we missed the true calling of a business?

Forget about the share holders!

When you start to think about it, the person who probably has the least to do with any business is the shareholder.

They interacted once with the company – when they bought the shares. Technically they didn’t even interact with the company. The company has received absolutely NO BENEFIT from a shareholder buying their shares. All the benefit went to the previous shareholder. And they gave absolutely NO BENEFIT to the company either.

The only shareholder that ever benefited the company was the original shareholder. They are the only one who injected any money into the company. They carried the risk. They provided a tangible benefit to the company.

Every share holder after them are leeching off the benefits of that initial risk. Yes, they are gambling with share prices, but they are not benefiting the company. The company is benefiting them.

And customers aren't much better

As for the customers, yes they have injected money into the company (much like the initial share holder), BUT they have received an immediate benefit in exchange.

They aren’t doing the company any favours! In fact, they fundamentally believe they are better off (or at least when they are doing the transaction) because they are swapping something of less value (money) for something that is of greater value to them.

And then to top it off, many customers will only have a single transaction with the company. Yes, there are some companies that have incredibly long term relationships with their customers, but most are transactional and they are as fickle as Hollywood marriages.

Which means our mission statement is useless

All of those mission statements are focusing on the two groups of people that arguably have the least interest in the company.

It’s great marketing. After all, who wouldn’t want to buy a gizmo from a company that makes the world’s best gizmos and is focused on producing the best gizmos for me ever!

Who do businesses really impact?

It's really obvious

OK, I will fess up. My original business statement when I brought on my first employee was “to put food on our plates each night” (followed by something about great products for our customers).

I wasn’t out to get rich as the business owner. I was working hard in the company, as was my employee, and our fundamental motivation was to feed our family.

Every business impacts one group of people every day – their employees.

But how do businesses view their employees – as liabilities. They are a necessary expense that is required to meet an outcome. They are an expense. They are a loss. They are a problem.

It’s ironic that a business is quite happy to make their employees’ days a living hell, all for the sake of making a customer happy and a shareholder richer.

And in second place..

If employees are impacted the most by a business, then which group is number 2?

Who does a company interact with every day/week/month?

Suppliers!

But who is it that also appear on the P+L as an expense. As a loss. As a problem?

Why is it OK to screw a supplier down on price? Why is it OK to not pay them for as long as possible? Why is it OK to do whatever is possible to get the best deal for yourself, and forget about the consequences to the employees of the supplier?

And that's where I used to leave it, but then I realised I had missed two key responsibilities for every business

The bigger picture...

Businesses don’t exist in isolation. We are a part of a community. People leave work and go home. They take their day with them. Businesses impact on how they engage with their families, with the other drivers on the road, with the person at the shops, and the kid across the road.

Our advertising sets the tone for those who are subjected to it. We are impacting far more people than just our customers. That is a frightening thought when you think of many of the ads that have pushed the boundaries over the years.

Our products impact more people than just the customer. An extreme example would be car manufacturers who are not just responsible for the safety of their customer, but the safety of every person around them.

That’s the direct impact. Then there is the potential impact. We have the opportunity to be a force of change. We see it in organisations donating to charities, supporting causes, and speaking out against bad government decisions. Unfortunately we also see it in the corruption of politicians, and the self serving acts in the name of profit.

The biggest picture...

Over the last couple of decades we are learning that everything we do has consequences, and the environment isn’t an infinite resource. Businesses need to take responsibility of how they use natural resources, minimise waste, and actively change how things are done.

But that’s a tough call because this doesn’t appear in the general ledger. It’s not something that can be easily measured, and out of sight is usually out of mind.

Worst of all, however, is that it takes millions of businesses making a difference to make a big difference, and it is too easy for each one to leave it to another.

And there is one responsibility I left out

It is only a relatively recent concept that a business is something that has many of the rights of a human. Businesses can now own property and shares. It has legal protection. It can take action against humans.

And mentally we now think of businesses as living entities. They grow. They evolve. They consume. They react.

As living entities, we then think that they need to be looked after and nurtured. Consequently we start to believe that things like strong growth is a desirable outcome. Decisions can be made that will negatively impact many people, but we can do it for the sake of the company.

Don’t get me wrong. I’m not saying that growth isn’t desirable. It may well be. It may mean that more people are employed. It may mean that more money is injected into the local community and help many other people.

Or it could mean that employees are working longer hours, are more stressed, and are being burnt out. It may mean more pollution or burdens on the local infrastructure.

What I am saying is that the business is not alive, and growth as an end in itself is misplaced.

Getting it right

Fortunately we understand the concept of “win-win”. We know it is possible to have an interaction with another person where both parties benefit. What we need to do is ensure that this attitude extends to every person a business interacts with.

Of course that is not easy. It is a huge juggling act.

But it starts with a better attitude.

It starts with a business asking how it can improve the lives of every employee. It continues with ensuring that suppliers are supported and encouraged, and will be around for the long haul. Of course it flows into the lives of our customers, but then it overflows into our community. And finally it is the reevaluation of our impact on the environment.