The meaning of a business
SEE REAL CALIBRE: GET A BETTER IDEA OF THE COMPANY HEALTH VS FOLLOWING THE MONEY
The health and success of a company depends on the meaningfulness of its relationships.
Follow the money, they say, and you will get to the essence. Do that with any company or business and you will confirm a self-evident truth: it comes from the customer. But here’s a more relevant proposition: follow the meaning. Here, you’ll most likely arrive at the same point – the customer. Imagine what an honest response would be if you asked any business leader: “what’s the meaning of your business?”; or “what difference does your business make?”; and “what value do you add?” Will that not reflect their real calibre?
It’s certainly a question that’s become far more relevant today against the background of King IV and going back further to Ed Freeman’s “stakeholder theory”; John Elkington’s triple-bottom line; and Kaplan and Norton’s balanced scorecard.
All can be distilled into one powerful principle: the health and success of a company depends on the meaningfulness of its relationships.
They include the mutually empowering relationship between meaning and money; meaning and means; and meaning and form. The above theories don’t do that very well.
If psychologists are right in arguing that meaning is found in the contribution we make to others, then following meaning and money both lead to customers. That makes the relationship with them the most important of all.
MBA schooling, that often defines the market as an “exploitable resource” in profit pursuit, is crassly inappropriate and simply untrue.
Perhaps equally inappropriate is to relegate customers to “stakeholders” under Freeman’s theory, or one of the beneficiaries in “creating value for all” under King IV. Being market-driven means being driven by customers’ needs and wants within the rules of ethical, mutually fair and legitimate transaction. That is subject to only one higher order: the interest of society as a whole as expressed in its values, norms and laws.
Those rules don’t detract from business’s natural external focus and being the most inclusive institution we’ve devised. The service driver actually supports sound business principles of prudence, sustainability, productivity and maximum efficiencies. That’s rooted in the understanding that going out of business is the ultimate customer letdown and inefficiencies are mostly paid for by the customer.
There can be no tougher test of any action, behaviour, asset or measurement than simply asking: “Does it add any value and is it in the customers’ best long-term interest?” The perfect order is when the interests of society, customers, and the company are aligned.
Customers’ interests should also inform any regulator, policy maker, lobby group, trade union and outside supplier, or even a competitor whose actions may impact on a company providing a product or service to their society.
I’ve dealt only with one main category of wealth creation: customers. There’s also outside suppliers and an even a bigger problem of dysfunctional relationships in wealth distribution
Some may argue that we’re essentially a free market economy. But that’s a very far cry from being market-driven or even market-orientated. It is the latter that gives meaning … and money.