Are you happy with "business as usual"? Is it OK that it reduces people to 'resources', seeks to minimize their wages and rarely sees beyond the next quarter's results in the obsessive quest for short-term shareholder returns? Or are you part of the growing movement that seeks to replace this failed business model with one based on an understanding of the behavioural nature of organizations and economies, engagement of employees and inter-dependence of different stakeholders, including the environment?
As co-author, with Neela Bettridge, of the new book, New Normal, Radical Shift, I'm firmly in the latter camp. But I can't deny that sometimes, I find that the learning is missed or partial; that there is a nod towards 'creating shared value', as described here at HBR, but a reluctance to accept the implications.
So in an admittedly subjective way, here are five warning signs that someone is stuck in "business as usual" and five that they 'get it'. It's only my opinion, but what's the use of free speech without an outlet?
Five signs you're living in the past
"We must acknowledge the people side of the business." There is no other 'side' than the people side. There just isn't. Everything else is a by-product of what people do.
"I doubt that there is a way to incorporate a valuation of intangible assets into the financial accounts." This is the wrong way round. A company consists of people, who are not intangible. Finance should fit into the human report.
"We support the idea of a living wage, but can we afford it?" The wage bill is only a part of the operating cost of employing people, and in many cases it is dwarfed by the costs of high staff turnover, weak engagement and weak skills. See Marks & Spencer case study, below.
"I'm interested in human capital measures if they are credible – you can only manage what you can measure." You can't measure everything in business. By definition, you can't measure the course of action you decided not to take, but you still ought to take it into consideration. If you can only manage what you can measure, then leadership/management is not for you. Become a research chemist.
Making references to "onerous environmental obligations" as though being responsible towards the environment is bad for business and being wasteful with energy and commodities made sense.
Five signs indicating that someone 'gets it'
"The business model failed because of flawed assumptions; we can't go back to business as usual." Management guided exclusively by financial results encouraged repeated crises: the accountancy scandals, wasteful mergers, LIBOR-rigging, reputational damage. It was bad for business as well as society.
"People aren't just a resource; they're the key asset and they produce all the other assets." The best companies have always known this – examples include WL Gore, Southwest Airlines, Arup, Whole Foods, Mondragon, Semler.
"Actually, shareholders do not own the company, and their interests don't come first." Shareholders do not own publicly listed companies, they merely own shares, and benefit from limited liability, as the late Sumantra Ghoshal explains in this seminal article (PDF).
"What we found was that, by improving worker training, management training and productivity-training, we could free up cash to pay the workers more. It was a virtuous circle." So says Marks & Spencer's sustainability director Mike Barry. Read the case study here.
"Prioritizing the shareholder doesn't even help the shareholder – especially when measured over the longer term." This article by Professor Lynn Stout explains why.
