Seething at Steinhoff and others
Let's use our fury to restore business to its true purpose.
It may take a while to unravel the wicked web that Steinhoff’s leaders and mercenary executives elsewhere have woven and who have flung another layer of tarnish on free enterprise. But after countless examples of the recent past and present, including the state capture thugs, we should now be very angry at those who play shareholder-value Sudoku for maximum self-gain: at executive remuneration which encourages this behaviour and constantly reduces the line between the acceptable and unacceptable: at the highly paid watchdogs turned scavengers who now need watching themselves; adding another tier of watchers, more rules and prescriptions. And at those who have morphed capital from being a great enabler into being a parasite.
The point is simply that we have been duped by theorists, economists and academics into believing that the overall purpose of enterprise is maximum short term self-gain for its owners. What mad creature defines itself and its success by the motives of greed and self-gratification? What species can hope to survive if it is built on the premise that each individual pursues his or her own immediate self-interest: tempered only by laws and prescriptions? What folly creates a premise that relies on the worst in us to extract the best: and then constructs institutions and systems to entrench and give expression to that premise.
It’s been a central theme to my writing for many years, backed by decades of experience in the field as a journalist, as management consultant and as one who has studied and closely followed the actions and thoughts of great business leaders and companies. I have admired them and have never quite understood how such a magnificent construct that for the most part has created so much value and made such a difference to humanity, could fail so dismally at getting this across and earn such a tarnished reputation in populist parlance. It is partly, perhaps, explained by the ideological divisions that took shape in the 19th century and crystallised starkly in the cold war that brought humanity to the brink of a war to end all wars. Many of those dogmatic assumptions still linger and give direction to much of the debate and policies that we pursue. But they are fraying as we begin to understand that economics is not a system, but an evolutionary process that will inexorably force us to adapt or die. (See article here).
Some years ago it dawned on me that a fundamental flaw in organisational theory was the default assumption that each individual is driven by their own immediate material self-interest: that their first and driving response to situations and interactions was “what’s in it for me”; tempered only by a fear of breaking a law or some cognitive mechanism called “enlightened self-interest.” I challenged that assumption in my article “Survival and Empathy” some years ago, and in my book “Empathy: the real power within.”
Organisational theory has for many years tried to see business as a science, giving it systemic form and institutionalising it as a predictable, measurable entity with a specific purpose and defined inputs and outcomes. In that pursuit it was convenient to simplify the “human” driver in the default mode of immediate self-gain, and then construct processes and reward systems to optimise this driver. All that is then needed are rules and disciplinary procedures to ensure order and “acceptable” behaviour. That understanding was simply extrapolated to the collective called a company, business or enterprise – a mercenary, predatory entity pursuing maximum gain, tempered only by law and growing definitions and prescriptions around ethics and governance.
How on earth can we ever expect such a collective to be authentic; to have sincere benevolent intent; to be seen not as an exploitive gang but as a collective of people serving people?
In my own experience this understanding is so ingrained that any detraction from it is immediately interpreted as an assault on free enterprise and socialist outpourings. That is pure nonsense. It is contradicted by the behaviour of both great entrepreneurs and successful companies. An empathetic understanding of business does not detract from sound business principles. Indeed it should imply greater value creation for all, a point argued in my article in 2014, called “A two faced Business.”
Our dehumanised view of business, which was more widely adopted in the shareholder value expression of the past 3 or 4 decades, has downplayed the important perspective that ultimately business is about meaningful, mutually enabling human relationships: between the company and its community, customers, suppliers and government, and then between workers, management and shareholders. If these relationships are forged on mutual exploitation, trust goes and they collapse. If they are based on principles of Common Purpose and Common fate, they are perpetually strengthened.
Yes, we should be angry at an understanding and expression of business that regularly exposes it to malfeasance, criticism and ridicule. With some vindication, but more out of pique, I posted a comment on a LinkedIn group that read:
“The Steinhoff debacle will unleash a plethora of "governance" wisdom and advice. And all will miss a critical point: that regulations, rules and prescriptions will fail regularly if there is not a change of heart. The triple bottom line is a 30 year old burdensome governance framework that does nothing to get to the heart of the matter -- sincerity of intent! You have to change hearts and minds away from creating shareholder value to creating value for all.”
I was encouraged by the responses of the mostly professional readers: at their own anger and disillusionment. Clearly it is time for a complete paradigm shift around enterprise.
Redefining purpose from shareholder value to customer and community value
From profit to value-added (the magnificent metric)
From capital gain to community and customer gain
And from conventional cost accounting to Contribution, inclusive or stakeholder accounting in strategy and operations.
I have always had faith that value-creating cells in the form of businesses large and small will survive any tectonic shift in their environment. All it takes is to throw that switch from self-gain to contribution, and then measure the right things.