The Business Enterprise and Today’s Society

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drjohn11aDr. John Psarouthakis, Executive editor, The Business Thinker magazine, and Founder and managing director, JP Management Center, llc.

 A lecture at the Institute for Advanced Studies in the Humanities, University of Edinburgh, Scotland.

We have been in the midst of a fundamental and historic shift of how the economies around the world develop.  With the collapse of communism, the centralized and state control model of the economy has also collapsed. Other socialist State models, i.e., Sweden, UK before Margaret Thatcher, have also collapsed.  What we have now, however, imperfect it maybe, is the model of the “Free Market.”

This shift is occurring in parallel with two other sociopolitical expressions:

  1. Smaller government, though the last couple years this seems to have moderated quite a bit
  2. The need, indeed the demand by our society to provide assistance, protection, and distribution of economic benefits  a “fair” way

What we are witnessing is a major shift on “how we can fulfill our expectations of a humanistic society” while we keep the state’s interventions and control power at minimum.

Before I deal with this question (shift) let me digress in to a bit of history .  .  .  .  After all, how can a Greek like myself discuss such matters without referring to HISTORY .

These great shifts of power are not without precedent.  What is new is the rapidity of change that we are witnessing.  When such major shifts of power occurred in the past, they had a great impact in the ways the society functioned.  Examples:

  • The emergence of secular values over religious values and authority during the 16th, 17th and 18th centuries.  Power centers changed.  Princes of church gave way to princes of land, who,  in turn, gave way to the chiefs of industrial, commercial and financial wealth.
  • Societal institutions and the most firmly established organizations were forced to conform or disappear with the passage of time.These shifts took place not without sacrifice of then well established ways of life.  Now, let’s get back to the question I posed earlier.  Let me repeat it.

How can we reduce the intervention of the State (or at least slow it down) and at the same time, respond to our humanistic societal needs?

I believe the answer is:

  • The evolution of the “Business Enterprise” from a strictly economic mechanism to one that also is directly instrumental and involved in fulfilling our humanistic societal needs.

Again, back to history.  With the 18th Century we had the practical use of science along with the government’s commitment to bring about prosperity to its citizens and the acceptance of exploitation of material resources which resulted in an, relatively speaking, immense economic growth.

During this time, the corporations came to function without undue external interference.  Economic results were the measure of performance.  Good or bad intentions were not relevant and the compassion was a sentiment that did not last long.  This is not difficult to understand when cost reductions, efficiency and growth were paramount.

Growth in itself became a dominant.  Corporate growth and all corporate activities evolve and revolve around it, i.e., management careers and rewards were and continue today to be directly tied to the “Bottom Line.”

The pressures that our societies exert on businesses to respond to our societal needs, i.e. environmental preservation, welfare safety-nets (via taxation), etc. do not conform to the traditional way business and its management operate.

Gradually, we are moving toward a restructured thinking of what a business should do and measured accordingly.  What we are witnessing today is the introduction of the concept of social performance of corporations, which I believe, relevant measures will emerge, which along with the “Bottom Line” measure will determine the career paths and financial rewards of management.

Business has been defined as a mechanism (or system, if you wish) with which (or within) individuals and organizations seek profit and accept the related risks, employ people and other resources in order to produce and distribute goods and services.

Now, let’s move forward to the present.

In addition to the major shifts already mentioned, we now have also other shifts caused by the explosion occurring in front of us in the information industry.

  • One change is globalization that has rendered national borders meaningless.  This in turn has increased competition for goods and services by several orders of magnitude.  Today, companies anywhere in the globe can compete in markets which in the recent past were not accessible to them.  They can have the advantage of new technologies, low-paid and highly skilled labor, and capital availability as they need it.
  • Second change:  Quality of labor.  In 1972, one third of the work force in the USA was “brain power” related, while two thirds were people that used “muscle power.”  Now, it is exactly inversed to  two third’s “brain power,” one third “muscle power.”
  • Third change:  Whether the worker is “brain power” or muscle power, he or she must be able to think for themselves.  They must be involved and make critical decisions on the goods and services they are engaged to produce.
  • Fourth change:  We must be a team
  • Fifth and most important:  Business executive leadership is redefined.
    – Make technology your friend
    – Be innovative
    – Communicate
    – Motivate
    – Solicit participation by teammates
    – Be a Visionary
    – Be involved in the affairs of the community
    – Be sensitive to employees problems beyond the workplace
    – Attract the financial community
    – Be analytical / conceptual
    – Be sensitive to the bottom line
    – Be aware and sensitive to societal needs and the corporation’s
    participation in fulfilling them
    – Contribute time and money to worthy causes
    – Be able to walk on water

What else is happening out there in the real world?

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