The reality about business – a toxic “machine”

I am troubled. I am deeply troubled by much of the wreckage of the outcomes of the modern corporations and its current business practices. I want to be, and generally am, an unfettered advocate for open markets, for globalization, for ownership and private property rights and for the right to conduct business under conditions of reasonable law and enforcement and to seek maximum profits from those rights. I live that reality for my clients most of my working hours.

However, when one witnesses the carnage of the modern corporation one can only be troubled. With its environmental record of scars and wastelands, and with massive future liabilities accumulating in all parts of the globe; its at-best dysfunctional relationship – and at worst toxic — with the very labour that helps it operate; and an increasingly fractured relationship with the consumer where sometimes the very products are literally toxic, the modern corporation can be very toxic indeed.

Business – A Toxic Machine

It’s hard to be an unfettered fan of business when one views the too-often toxic relationship business can have with three of its primary constituents – the environment, the employees, and the consumers. It troubles me deeply. The modern corporations of today are often operating out of control and with a profit growth mantra at its core, it goes where the profit is, and attempts to mold its constituents accordingly to get the job done. That’s what it does and what it is exceptionally good at, and what it is by and large engineered to do.

From my years as an employee operating in numerous company trenches, my general fascination with all things business, and my experiences growing my own businesses, I’ve seen some of it first hand, with a toxic boss or two, and lived through massive personal disruption through multiple layoff rounds in various industry consolidations and meltdowns. I’ve been part of businesses that designed and produced amazing tools and infrastructure that have driven business productivity through the roof. I’ve seen a fortune or two amassed by dynamic entrepreneurs. I’ve seen a lot of the good aspects of the business and how well run businesses can operate, and I’ve lived through my fill of poorly run organizations.

But I don’t believe that they have to be that way, and I believe, at some level, that business can be dramatically “detoxed”. Maybe it’s the engineer in me. I think I can help fix this thing. If we examine the basic underlying assumptions in the relationship the modern corporation has with each of the three named constituents – the environment, the employees, and the consumers — we find the basis for the toxic relationship that business often has:

Environmental Toxicity

The modern corporation has the apparent luxury of externalizing much of its cost base, so that it – and ultimately the specific consumer – don’t always end up paying the “full true cost” of the product or service. This is most often experienced as all forms of air, water, and soil pollutions, carbon-dioxide accumulations adding to climate change conditions, and the like. It is externalized in that the corporation generally doesn’t pay the consequences of the pollution but instead society –through taxes for clean ups, related health impacts, and a myriad of ways – carries the true cost.

The obvious solution is a pricing scheme where such externalities were appropriately valued and priced into the market. This would provide the corporation with a clear incentive to respond to market pricing and figure out ways to reduce their costs – and hence reduce their pollution and ill effects – and hence to improve their profits. While conceptually straightforward and appealing to the free-market thinker, the difficulty here is really two-fold:

  1. Determining the valuation methodologies that allow a “true cost framework” to be built that withstands scrutiny from business thinkers, economists, environmentalists, regulators and policymakers;
  2. Getting it implemented.

Of course, many of these debates have already started. There are numerous not-for-profit organizations pursuing any number of worthy sustainable business and environmental objectives. There are leading companies that are working at improving their relationship with the environment, who are seeking to develop and nurture like-minded businesses to work with. So, it is happening today in various spots all around us.

However, it is not yet the mainstream of how the modern corporation acts – in fact it is very much a depressingly small portion of enlightened business leaders. But it is happening, so we need to collectively keep fanning the flames of sustainable change.

Employment Toxicity

It seems many business days of most weeks, there are stories of somewhere, hundreds – and maybe thousands – of people losing their job in a business closure of some type. It may be an old industrial manufacturer or it may be a knowledge intensive new economy type, but there is always a story or two about layoffs, disruptions, business closings, and the like. It is the story of business and incredibly disruptive at a personal level. I’ve been through a number of layoffs myself and even when the businesses conduct the process reasonably humanely, it is still disruptive and painful and possibly devastating at a personal level.

There are lots that well-meaning corporations do to enhance the employee’s work environment to allow them to be more productive, such as flexible working hours, on-site day cares, gym facilities, and mobile computing and communications. This is increasingly important as the company struggles with getting the most out of an increasingly wired new generation of workers who have seen their parents – the baby boomers – dealing with the stresses of work and possibly the effects of layoffs and down-sizings — and so they themselves are highly cynical and generally treat their work as “only a job”.

That we got here is not really a surprise – the labor management practices of the modern corporation are still based on the 1800’s industrial-revolution labor needs: the same labor availability day in and day out that, once trained, could perform the same tasks over and over. With capital intensive industries where the machines had to be fed on a constant basis it made great economic sense. And with it grew up the cost structure of the labor side of the business – wages, benefits, vacations, pension programs, employee development incentives, and the required company contributions to government funded labor support programs.

In the knowledge-based economy, the model doesn’t really fit nearly as well. Businesses and often whole industries are evolving so rapidly that it is becoming difficult to have any confidence in what specific business lines you will be into in five years, and possibly whether your business won’t have been consolidated into some other business in the time being. So at the employment level, sure you might still be here but who knows what any of us will be doing?

The false sense of security that permeates today’s employment model and the labor market is most probably a major contributor to the lack of commitment and trust that many employees have today with the companies they work for. It doesn’t make for the most productive and innovative workforces.

Consumption Toxicity

With business competition generally increasing, corporations are motivated to examine ways to streamline their businesses, and very often rely on increasing levels of integration of various outsourced components from their “business ecosystem” to offer up new branded offerings to attract new consumers. Thus, consumers are getting more and more choices in their product and service offerings, and arguably are increasingly interested in consuming safe and “socially acceptable” products, at a price point that meets their budget realities.

As consumers today, we actively seek out and purchase products which are many times toxic in form, or in design and production. Often times there is a toxin introduced somewhere in the globally diverse outsourced supply chain that brings that product to market, which we may or may not be informed about through some channels. It might possibly be the use of abusive child labor in the manufacture of the product, inhumane treatment of animals in the food chain, or perhaps an unexpected tainted input somewhere in the process. Regardless, our companies are too often not able – or perhaps not always willing to design in enough of the appropriate assurances – to adequately control and ensure safe and toxic-free products.

Much of this comes down to what assurances consumers are really looking for from the corporations they do business with. Over the past several decades various consumer movements have been able to drive health and safety improvements and improved government regulation and oversight. Social groups have advocate for better working standards, conflict-free diamonds, fair-trade coffee, and many other advancements in business practices and product standards.

As it stands now, each company that conducts business today is playing a little fast and loose, and may well have a very high potential risk profile with its consumers, if it is not taking seriously the ethics and standards of the business ecosystem it operates in. It is an open question how well a company’s brand – and the underlying business – will stand up to intense scrutiny on the toxic front, or to any shock to its consumer base if a significant toxin is discovered somewhere in the offering.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s