Wednesday, June 08, 2011

Ideas of Business

Business is a social organization: It is important to see all stakeholders as having a 'stake', not just the shareholders. In the face of conventional wisdom that countries must run like businesses, what about thinking business must be run like countries?

I am indeed not talking about turning all businesses into shabby, insolent government offices. There are good and bad businesses, and there are good and bad examples of countries. And, a country isn't just its government offices, but its people, culture, enterprise, institutions everything. So, this suggestion is about making employees and customers feel like citizens, all of whom own a piece of the country - metaphorically - and have a voice. Business as an entity which exists solely for its financial owners and for reasons of financial prosperity of a small group of people is a flawed concept and need to be retired.

However strange this may sound, some businesses already know this and behave accordingly. But vast numbers don't. I shall meet entrepreneurs who could only think of 'making money' as the reason for doing business, and explaining to them that a successful business exists to solve a problem (even if that falls short of changing the world) and they get rewarded with profits for solving that problem, is often a cumbersome task.

Entrepreneur is a 'master-agent', wrote Jean Baptist Say, the French economist who would popularize the term (coined perhaps by Richard Cantillon, another French-Irish economist), who sets in motion resources, land, capital, labour, everything else, to solve problems. Say saw them as the necessary drivers of the economy, the sort of alchemist who would wriggle us out of economic crisis, an impression that persists to this day. But, one should be careful not to confuse the function of the entrepreneur with the provision of capital, which is one of the elements in the alchemy, but not the whole thing: And, rewards of such entrepreneurship are also diverse, and not just limited to money. This isn't socialism, this is Free Market economy 101.

So, in a world where businesses are social organizations which exist to solve problems, and employees and customers are 'citizens' of a kind who use 'voice' rather than 'exit' (not leave in the economic sense, but speak up and change things), people who come to work together carry a responsibility towards each other. I have always thought, as a Manager of people, my role is not just to enhance value of my company (which is one dimension of what I do) but also to ensure that people I work with enjoy their work, feel a sense of freedom and empowerment and are able to work towards realizing their full potential. Often, these ideas would be seen as subversive, because invariably an individual's personal agenda will run counter to the company's short run agenda (for example, cost reduction versus salary hike); but, I shall argue, it makes business sense to think long term and turn the discussion into long term job prospect and employee loyalty, and see the two equally valid sides of the argument as one coherent objective. This is where the zero-sum idea of rational business feels inferior to win-win ideas of a social organization.

I shall argue - this is not idealistic tosh or socialist ideas, but just plain good sense that made successful businesses. Our recent experiences, if anything, show the unsuitability of the ideas of business we have built. Even in this throwback age of neo-liberal monetarism, it makes sense to look back at what business means and how it should be run. May be, it is time to read more of Say and of economists like Albert Hirschman (Read this wonderful critique by Rajiv Sheti of Columbia University) - and of businesses of yesterday and today which was built as social organizations - and draw new ideas from them.

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