Monday, January 30, 2012

Purpose, profits and people.

Slowly and inexorably the tide has turned. Being customer driven as opposed to profit driven is no longer an exercise in public relations, but has become a strategic necessity for survival.

The writing may have been on the wall for some time now, but one only notices how far things have moved when one looks back on the debate over a number of years. Since then, the financial crisis, wealth disparities, public debt, global recession, unemployment, and social and political protests have culminated into what a current Financial Times series has called “Capitalism in Crisis”, setting a scene for a similar debate at Davos. World Economic forum founder, Klaus Schwab put it strongly, describing capitalism as being “out of whack” and adding: “I'm a deep believer in free markets but free markets have to serve society," Even if one agrees with Citigroup CEO, Vikram Pandit that the loss of public trust is “not as a result of a failure of capitalism but from specific failures by certain participants in the financial system”, we cannot escape the reality that some of the fundamental tenets of the system are being increasingly scrutinised by a growing number of even the capitalist elite.

The profit motive is one of these core principles. Under its mantle, and the seductive call of immediate self-gratification, behaviour has been allowed to develop into reckless short-termism and the creation of large volumes of financial froth. What is being observed to an increasing extent is something which a few decades ago would never have been seriously argued: that there is not an axiomatic link between the profit motive and service. The idea that being profit driven is the same as being market driven has been thoroughly debunked. We have witnessed too many appalling cases world-wide where customers and society as a whole have been severely disadvantaged, if not harmed by greed and profit maximisation, often within legal boundaries.

So it is not totally surprising that Netcare CEO Richard Friedland proclaimed recently that the company was “going to put purpose before profits.” Perhaps it is not surprising, but rather puzzling, given that for decades business schools have steadfastly preached the Milton Friedman edict that the purpose of a business is to generate profits. No doubt creating ambiguity around a simple and uncompromising word such as “purpose” is a product of organisational theorists ever keen to create consulting interventions.

But if Friedland’s logic is that the company’s focus is going to be on customers then the company is certainly in touch with a global shift. The 2012 Edelman Trust barometer based on research in 25 leading economies and released at the World Economic forum this week confirms again that business has a monumental task in regaining public trust. This has plunged to below half for the general public, and is barely above 50% for the informed public. In the United States, still only half of the informed public trust business to do what is right. Unsurprisingly, there have been massive falls of up to 20 percentage points in trust in business in key Eurozone economies. Perhaps even less surprising is the very low credibility of CEO’s: down to 27% in the U.S. and 22% in the United Kingdom, France and Germany.

About half of the informed public in the 25 countries believe that governments do not regulate business enough to ensure consumer protection and responsible corporate behaviour.

This is a bit of a paradox, because the same survey revealed an even bigger decline in public trust in governments than in business. This has fallen from 52% to 43%, the biggest slump in the Barometer’s history and meaning that while business is not widely trusted to do the right thing, governments are trusted much less.


Richard Edelman observes that business still has a promising opportunity to take leadership not only in regaining trust but in shaping society. He points out that what most stakeholders want from government are actions business can take on its own without waiting for regulation. Unilever CEO, Paul Polman is quoted in the survey as having told the Washington Post: “Our version of capitalism has reached its sell-by date. Never has the opportunity for business to help shape a more equitable future been so great.”

Taking its cue from its respondents, the survey lists (see graph) a number of actions business can take to engender trust, and the extent to which they are doing them at present. Top on the list is listening to customers! Even for this cynical, profit driven age, the low number of people (36%) who believe business

currently does so, is quite appalling. Other top requirements are high quality products and services, treating employees well and putting customers ahead of profits. Most of the current assumptions about good business actually rank pretty low in what the informed public expect businesses to do. The delivery of financial returns ranks 14th out of 16 attributes.

As I read the list, I hear echoes of the words of great past and present entrepreneurs, whose ventures pre-date the profit driven madness of these last few decades. “It is nothing more than business sense,” they would argue.

Or, as Bill Kellogg once put it: “The purpose of a business is not to make a profit. It is to add value to people’s lives.”

Monday, January 23, 2012

Jobs: the real mismatch.

When my son had just begun to say his first words, he witnessed my car crush one of his favourite toys in the driveway.

“It’s bonnie”, he wailed with such forlornness, hopelessness and sorrow, that it became for a very long time the family’s favourite superlative for something that is broken, trashed, crocked or destroyed.

The word comes to mind again when thinking about the labour market. It is truly “bonnied”.

These last few weeks we have been inundated with announcements, reports, articles, and talk shows covering the celebrations of improved matric results, the tragic scenes of prospective students being crushed trying to register at Universities, the Green paper on Higher Education and Training, and research results on the number of job vacancies in South Africa.

The vacancy numbers more than any other, reflect the real issue of the South African job market. The anomaly has been given excellent coverage by Moneyweb journalist, Malcolm Rees. Together with Kim Cloete’s report on the Green paper, and Felicity Duncan’s assessment of the crisis, we have been given a comprehensive picture of the labour market malaise and government’s response.

To recap briefly, and to quote Malcolm: “On the one hand we have one of the highest levels of unemployment in the world with official figures placing the number of adults without work at over 25% of the population. On the other, estimates suggest that there are anywhere between 500 000 and 800 000 unfilled vacancies in the economy”.

The so-called “mismatch” is largely attributed to poor career counselling; and education and training which is out of line with market requirements, delivering people with softer humanities skills, when technical skills are more needed. Add to this, thousands of qualifying students that have been turned away from the gates of universities, and we are indeed left with a sad, confusing and disconcerting picture.

While a simple statistical comparison between supply and demand, may lead to answers such as those proposed in the Green Paper, there is an important dimension that lies far deeper, is far more chronic, and touches on many other socio-economic ills of our time, here and abroad.

It is the underlying force of human behaviour. I have always questioned the logic of the so-called labour market. The idea that supply, demand and price are the dominant factors in channelling people’s efforts and aspirations is ludicrous and tries to equate the human spirit to little more than a pocket of potatoes. Worse still, by promoting this fallacy and encouraging individual behaviour to fit, we create responses driven by the worst in us, such as greed, materialism, selfishness and immediate self-gratification.

Beating the “education” drum loudest may seem the appropriately encouraging thing to do, but it has severe pitfalls without an equally loud melody of meaning. It creates despair of the kind that will see people crush others to death in admission queues. It leads to a sense of hopelessness and surrender when education is interrupted. Certificates and not knowledge or aptitude become the issue. Even if a young aspirant loved building and bricklaying, he would likely prefer a Bachelor’s Degree in anthropology or art as having far more substance despite having little interest in them. Degrees and certificates are seen as an end in themselves and not a means to an end. They become winning lotto tickets giving the holders unrealistic expectations and a sense of entitlement. The easiest subjects are preferred to ensure quick title. And the problem is severely compounded by lowering the bar for a pass mark.

When we have taught the recipients of fish hand-outs how to catch their own, they still will not be fed unless they are willing to be held accountable for their catches. One cannot approach life with terms and conditions. The most important basic life skill that should be taught in our formative years, long before career counselling, is that we are what we do, not what we own in money, property, certificates, title or status.

Education is not about getting a job and becoming a modern wage slave. It is about creating a meaningful life. It is about equipping the holder with the means and ability to make the right choices. It is about being the best they can be. And it is about expressing their true value in the contribution they can make to others. In most cases, education is also only the beginning. “Education is what remains after one has forgotten everything he learned in school,” Albert Einstein said.

I think I said it best in the article, A decent job, which had good response and repeat placements on other websites. The single, most important thing we can do for our society, for our economy, and for employees, is to promote work and the work-place as an instrument of meaning; of empowerment; of enablement and of contribution. Material rewards are very much a secondary albeit essential consequence.

Understanding work as primarily about giving and not about getting liberates and changes perspectives across a very broad range such as career selection, subject choices, incentives and involvement. Someone who examines contribution above reward has the essential makeup of an entrepreneur. He or she is far more likely to create a job than to search for one.

Perhaps a few thoughts I gave my academically challenged grandson earlier this year, will say it better: “Find something that you can be passionate and enthusiastic about and how you can use it to make a difference to others. Always and at every moment explore what contribution you are making. And never stop learning.”

Or as Jacob Needleman puts it: “You should be looking for the joy, the struggle, and the challenge of work. What you bring forth from your own guts and heart. The happiness of hard work. No amount of money can buy that. Those are things of the spirit.”

Monday, January 16, 2012

Making the right choices.

“What do you wish for in 2012?” I was asked by someone at a New Year’s Eve social gathering. I was tempted to respond with “That all my wishes will come true”, but then gave it some more deserved thought.

“That all my choices in the coming year prove to be the correct ones”, I replied. And that’s my wish for you as well. The daily choices we make, from the smallest to the biggest, shape who we are and can create happiness or severe discontent both in the immediate and the future. It is quite astounding how many times we will make choices based on knee jerk responses, instinct and emotion. Yet with a little practice and a smidgen of patience, we can ensure that our choices become far more appropriate and productive.

The first tool is reflection. This is more than giving greater thought to each choice, although it is that too. I have made reflection something of a hobby these last few years, but must concede that I am not applying it nearly appropriately enough. I tend to wallow in nostalgia and meander in the hall-ways of the past, sometimes very dark and at other times pleasant and uplifting. But the real value of reflection lies in reviewing the choices we made in those events, their outcomes and how we could have responded differently. It is simply a technique of learning from past mistakes and improving knowledge of the self, which is the most important knowledge of all. We are seldom in control of what happens to us, but we are always in control of how we respond to it.

More important than reflection, but linked to it is patience. A decision postponed to allow for greater reflection leads to a more appropriate and positive outcome. It has been the wisdom of ages, a cornerstone of sound economics for several centuries, and a basic tenet of financial security and saving. I am reminded again of a previous quote by Adam Smith when he praised as one of the most useful attributes to have “self-command, by which we are enabled to abstain from present pleasure…to obtain a greater pleasure in some future time”.

Yet it is one that we regularly get wrong, and seemingly more so these days than in previous generations. Impatience, immediate self-gratification, imprudence, and short-termism have been a growing feature, if not the main driving force of our economic life since the mid-seventies. There is a very credible argument that says that this, more than anything else has caused the economic quagmire we are in today, having led to rampant greed, the financial crisis, greater debt, our cappuccino economies and wealth disparities. The price we have had to pay for impatience has been dealt with in a previous article.

Why are we so prepared to ignore the wisdom of ages? The answer must be found in the third, and perhaps most important dimension of choice: that of intent. It must surely drive everything we do, all the actions we take and all the choices we make. A closer examination of intent is essential to assess the validity of any choice. It seems as if this is painfully obvious, but surprisingly few of us are fully aware of our deepest intentions and misguided motives are more often than not the real source of bad choices. It is only when we re-examine our intent that we fully grasp the inappropriateness of many of the choices we make.

Intent lies at our deepest desire. Our choices may be based on many motives, goals and purpose, but it is only when asking “why” makes no further sense that we have peeled away the layers of the onion to reveal the inner core of intent. Let’s use an example: someone does something and when asked why, he responds: “to make money”.

“Why do you want to make money”?

“For financial security.”

“Why do you want security?”

“For peace and contentment.”

At this point, any further “why” is silly and superfluous. I may have removed a layer or two, but eventually the outcome is most likely to be the same. And it can be logically argued that for all, if not most human beings, intent will reflect a desire for sustainable peace and contentment.

So the simple question to ask is whether the choices we have made both at an individual and communal level have enhanced human peace and contentment over the years, or have they detracted from it. Empirical research confirms the latter. Motives behind the choices we make seem to be totally at odds with achieving our deepest intent.

The solution is quite simple. All motives are defined from two perspectives: a raw immediate self-interest or a desire to contribute; taking or giving; malevolence or benevolence. There are many shades of grey between them – giving to get, getting to give, meaning or means, unconditional altruism, or legitimate rules of transaction. But each gives the opportunity of tipping the balance towards contribution.

Our grand flirtation with the unbridled material self-interest hypothesis has clearly failed to achieve what we as humans desire most. There’s been much talk in recent years about the demise of capitalism and the need to find new economic models. Some of it is based on the false premise that free enterprise is best driven by selfishness, greed, consumption and acquisition. Any model or system builds in automatic failure if it does not re-examine its ultimate intent and the most appropriate behaviour that will achieve that. Ultimately we have to change the context of economics and redefine its true purpose. The resultant change in behaviour will give rise to system changes and new models.

Our capacity to make a contribution to others is not only where our true value lies, it is also the best way of achieving personal contentment.

Together with reflection and patience, it is the perfect guide to sensible choices.