Doing More For Less (of us)
Getting the most out of people is not a bad thing but in the extreme it translates into squeezing the life out of them. As Deming exclaimed, “beat horses and they will run faster—for a while.” Doing more with less implies squeezing more and more out of people until they drop.
When is the extreme pursued? When the goal is to maximize profit: when corporations squeeze whatever is left to get just that much more profit. From a previous post, according to Ethan Harris, chief economist at Bank of America Merrill Lynch, “companies are squeezing their labor costs to build profits.” Moreover, as noted in an interview with the Huffington Post, Kathy Bostjancic, director for macroeconomic analysis at the Conference Board “most of the productivity gains have gone to corporate America and stock prices.”
Our economic system rests on the belief that it is just if those who don’t benefit sacrifice for those who do. We don’t have to go to China to find evidence of workers sacrificing in service to corporate gain the history of work in U.S. industrial society shows both wages and working conditions were abysmal. It is only through the efforts of an organized labor movement beginning in the late 1800’s (e.g. Haymarket Square) that humane treatment (e.g. living wages, 8-hour work day, safe working conditions etc) to those laboring to do the work has been realized.
The two-tier wage structure of the Chrysler Corporation (as well as in GM and Ford) wherein labor for their U. S. manufacturing is hired at the rate of $14/hour. Some might say this creates more jobs, but if the jobs weren’t there already a low hourly rate wouldn’t create them. That is to say, it doesn’t create jobs it just makes it far more profitable for corporations who have the work to hire people to perform that work. It appears that it is an issue of where corporations make more with the cash they have on hand, in the financial markets or in the labor market. The guiding premise is if a corporation can get people to work for far less (or nothing) it could make a lot of money!
Gains for Me
The notion that productivity gains drives higher standards of living beneficial to society is only true to the extent that people in society—beyond the shareholders and executives—participate in the gains in productivity. According to an August 17th 2011 article by Jim Zarroli (a business reporter for NPR), “the U.S. economy may be slowing to a crawl, but a lot of individual companies are richer than ever.” Moreover, a 2011 report by the Congressional Budget Office (CBO) shows that between 1979 and 2007 income grew by 275% for the top 1% of households, 65% for the next 19% and under 40% for the next 60%, with the bottom 20% of households only realizing an 18% growth. Clearly the further away from the top the further away are the benefits.
In light of the current higher productivity levels and the greater number of people who are either unemployed or underemployed clearly more are benefiting less. Why? To a large extent the corporations are in business solely for their own self-serving purposes—the business of business is profit for top executives and major shareholders. It seems doing more with less translates into a select few realizing most of the benefit.
If, in general, fewer and fewer people directly participate in the benefits from productivity gains then the resultant higher standards of living become society’s burden. With fewer and fewer sharing the benefits there are more and more moving closer to the edge of poverty. Society as a whole suffers as the income inequality gap widens, as evidenced by the research of Richard Wilkinson and Kate Pickett presented in their book, The Spirit Level.
Since many of society’s corporations receive support and advantage from society—extracting from society whatever they can for self-serving purposes—without providing commensurate return, they could be considered parasites rather than partners of society. Progress in society cannot possibly be realized under a system where everyone is in it for him or her self—such a system subverts progress.
Doing More For More (of us)
However if the intent of the business enterprise is improving quality, not maximizing profit, then as Deming’s chain reaction indicates productivity would not only improve, the company would capture the market with better quality and lower prices as well. This enhances its competitive advantage and increases the company’s viability—portending a favorable future—enabling it to provide more jobs. In this view of business, more and more people win—customers, shareholders, executives, employees, suppliers and society! Deming learned from his decades of helping companies improve quality, “improvement of quality begets naturally and inevitably improvement of productivity”.
So the fundamental question is whether this society is a society of ‘We’ or of ‘Me’. That is, whether we are in this society with a commitment to the advancement of our collective wellbeing or with a commitment to advancing one’s self-interest. If the former then we rise and fall together and if the latter we all fall (eventually) as we each struggle alone, except of course those at the top. Every person for him or her self is not the way to a better society for all or a sustainable society.
For all of us to realize the benefits from increases in productivity we need to transcend self-interest. The responsibility of business is not merely the simplistic notion of maximizing profit for the owners and executives. Decisions based solely on what’s in it for me brings disorder to and the dissolution of society—it is just plain suicidal.
Wanted: Leaders for Action
Bostjancic recognized the need for corporations to begin hiring in order for demand to increase leading to the need for the production of more products/services—a growing economy. Bostjancic also notes the difficult decision corporate executives have before them saying “it’s very difficult to stand out like that and to be bold because if no one else is doing it, and you’re proven wrong, you could be penalized.” And Bostjancic continues, “if the economy does turn down, then you’ve over-hired, you’ve over-invested.” One is frozen against taking action if and only if: a) one fails to understand that having sufficient income enables consumer demand that causes the need for production; b) one doesn’t understand that money is the energy transferring substance in an economy and only if it flows can the economy remain vibrant; and c) one lacks the courage to lead. Waiting for someone else to make the decision you are unwilling to make is not the way of leadership.
It is time for businesses to be led by those who manage business with a different mind—a caring mind. Because organizations are reciprocally interdependent with society and the environment, viability any human activity system necessarily requires ethical, social and environmentally responsible action. The leaders of business we need are not narrowly and superficially fixated on maximizing material self-interest—exploiting whatever they can. The leaders we need critically think about the underlying precepts of our current system and understand how detrimental it is to our collective wellbeing and the viability of a business enterprise to continue following the herd.
If they are in deed leaders then they will cease merely following and erroneously believing that what’s in it for me is all that matters. They will cease being parasites and have the courage to act as partners to society.
Growing economies are growing not because business executives react to and feed off them, they are growing economies because true leaders proactively contribute to their (continued) viability. They don’t just extract from others they invest in others.