Revenue, cost and profit are seen as foundational components in business and those viewing cost as a cause likely focus on a simple linear equation—(Profit = Revenue – Cost)—as the basis of their view. After all it is quite straightforward since for a given amount of revenue cost determines greater or lesser profit. Accordingly if one can get cost to zero (or to approach zero) then profit will be at its maximum—the very business of business is assured. But is not so simple. There is a missing piece to this.
The missing piece, apart from the fact that cost is an outcome, is that revenue and cost are not separate and independent outcomes—though they may be different they are not separate. In fact they are very much inter-related in a dynamically complex way. As previously noted in the generation of revenue there are necessary costs that if diminished would have a detrimental effect; again revenue and costs can’t be separated as simple arithmetic calculation might suggest.
The popular practice exhibited by the vast majority of those holding positions in management rests on the assumption that things are linearly and independently related. Correspondingly, everything—at least what’s deemed important and worth one’s attention—is re-presented numerically (and quite abstractly) in an arithmetic (or accounting) display such as a spreadsheet or balance sheet.
Although there are identifiable item-level costs that are often listed the not-so-identifiable total costs are usually not listed and thus never given consideration. Deming often asked, what is the total cost of a dissatisfied customer or the total cost of purchasing on price alone? These costs don’t show up in the spreadsheet!
More On Total Cost
Let’s explore another total cost by asking yet another question. What is the total cost of holding the limited and limiting view that people are intelligent material-self interest seeking beings? Or to phrase it differently, what is the total cost of fear-based management: you know those ever so popular carrot-and-stick methods, merit pay, pay-for-performance and rank-and-yank methods? The total cost don’t show up on any of the spreadsheets used by management that focus attention and signal that their (re) action is needed. The worldview they hold in mind renders such costs either imperceptible or irrelevant. So how would they know?
Consider that one of the theories informing fear-based practice is the behaviorist view that uses laboratory rats as the model for informing management how to control the behavior of subordinates. This theory is the wrong theory for human beings—it’s appropriate for animals not for human beings. But given the current paradigm—the materialist mechanistic worldview—informing the conduct and management of business those in management not only can’t understand they don’t care to understand the human costs of these practices.
So those attached to and hell bent on using it anyway might say that it is appropriate because it works; it gets people to do as (their) management desires—it gets results! Okay but what is the total cost of such practice? What is the total cost of not understanding human nature beyond the limited and limiting view that people are intelligent material-self interest seeking beings?
The total cost involves the effects of controlling people by limiting them to live within their animal nature, which means they never get to the development of their potential as human beings. Edward Deci and Richard Ryan (Professors in Clinical and Social Science at the University of Rochester) conclude from their research “when people are controlled, they experience pressure to think, feel, or behave in a particular way.” As a consequence people structure life in pursuit of things of outer value and define their self by what they have. Such pursuits have no inherent satiation point and thus it keeps people in a vicious cycle of seeking more so they can have more, keeping them from becoming more of what they are in potential. Moreover, research supports the notion that pursuing extrinsic goals—which fear-based management rests upon—diminishes the satisfaction of peoples’ inherent psychological need for autonomy, competence and relatedness, which are required for actualizing one’s potential.
This is the case for all people. It applies not only to non-management but also to those in management. Managers are similarly controlled to think and behave consistent with the materialistic mechanistic worldview upon which the system of economics is based. If this were not the case then the system could not sustain its existence. In fact all in society are expected to obey and conform by aligning their values-in-practice, thinking and behavior with the principles of the economic system.
This is true especially for those creating government policy, because the policies must support the primacy and continuance of the system as the system. It matters not whether it serves people, what does matter is that people serve it! That is to say, the egoistic capitalistic system places it self above the living world—hence the exploitation and extraction in the name of wealth accumulation—and so what must continue above all else is the egoistic capitalistic ideology. Hence the position that there-is-no-alternative advanced by the system’s ardent devotees.
There Is An Alternative
To manage with consideration for total cost is to manage not through fear but through caring which requires an understanding and use of a different worldview and a corresponding different intent of business. A worldview that places people and life above material things and that acknowledges the deep interconnectedness throughout the living world. This worldview sees individuals as having an inherent need and capacity for self-initiation, creativity and (human) development—the need to become fully human.
Hence people couldn’t be acted upon and controlled for another’s material gain, since such action would be an inhumane act diminishing human development. Rather people would be facilitated toward developing and expressing their human potential and furthering their collective wellbeing. In the workplace this facilitation would be the role of management. Clearly a more difficult but far more meaningful role for anyone interested in being and becoming more of what they potentially are.
Obviously the widely practiced approach to management is so simple even a caveman can do it—perhaps the reason for its widespread use. But to manage with consideration for the total cost of what one does requires understanding far beyond the capability of a caveman. It is a role that is not so simple but far more humanly satisfying and productive.