It is time for companies to grow up
I am going to go out on a limb here and make a radical statement with this blog post. At least radical for a tutor of business management and business law. There may be many people who agree 100% with what I am about to say but amongst educators there seem to be depressingly few thinkers. The task of the teacher seems to be largely a game of playing it safe. The college or school will buy into the right to teach a certain subject and the examining body will provide a set of materials which will then be decanted into the minds of the students. I am not one of the types who say those who can, do, but those who can’t, teach. However, I do recognise that just as there are many who practise in their fields with no idea what they are doing, there are also a great many teachers across the world who are simply seeking to earn a paycheck and never develop a full understanding of their subject.
Personally I am not saying I have a greater understanding, indeed everything I write whilst making my point today may well be complete garbage. I have noticed that in general most ideas seem to be split down the middle between those who hold one view point and those who hold another. Half of these people must be wrong. In fact the people who stand on the fence and agree with some elements from each side would probably say that both sides are wrong. A lot of the greatest experts we have ever had in many areas have ultimately been proved to be wrong. It would seem that I can therefore take as extreme a viewpoint as I like because if it turns out I am a complete asshat then I will be in illustrious company.
I have been provoked to write today by the appointment of John Browett as senior VP of retail by Apple. Browett has had a great deal of experience in setting the strategy of large electronic retailers in Britain. American readers may not be so familiar with his work. On the English side of the pond those who know his name are largely critical. Those who don’t know his name are also largely critical, they simply do not have such a specific target at which to aim their ire.
I have had the benefit of working in an organisation that has been guided by Browett’s ministrations. I spent approximately a year working in an electronics store which came under the general Dixons umbrella. In our store the staff were pushed to speak to customers in a certain, almost scripted fashion. For instance there were certain openings we were meant to use which would guide a conversation down a set path designed to maximise sales and ensure the purchase of add-ons, insurance schemes, accessories, etc. Many of the staff resented this as they would not be allowed to improvise to the extent that they wished in order to achieve rapport with the customer due to the understanding that certain boxes had to be essentially ticked during the conversation in order that a mystery shopper would see that we were doing as we were told.
Naturally the customers could see right through this. We knew the customers could see right through this so we would try and avoid appearing scripted at all costs. We did have a lot of good conversations with a lot of happy customers but we would also have an overwhelming amount of customers who would say “FFS” and roll their eyes as soon as we opened our mouths. I remember one customer whose hatred of the sales technique was so severe that a standard trick with the newbies was that as soon as he came in, a member of staff might suggest to them that they go and serve him. Perhaps this was largely because they didn’t want to go anywhere near him themselves but at the same time it did also generate some amusement as newbie was left open mouthed at the tirade of abuse he received over heavy handed sales techniques.
We were a national joke and we knew it. Searching through forums online would turn up pages and pages of abuse at the staff in our stores. I am quite pleased to say that most of the usual complaints were for levels of customer service that fell far below that which was seen in our store. We were both lucky and unlucky to be in a high street store. Unlucky because high street stores have a difficult job coming anywhere close to getting the level of profit that could be made in an out of town superstore, this meant that for us ‘a bonus’ was a mythical beast that may have once been encountered by a lone employee 5 years previously. We were lucky because we sought to be as helpful as possible and tried to ensure that every customer who needed help would get as much help as was humanly possible, whenever I have shopped in one of the out of town superstores I have been lucky to get assistance if I have gone looking for it.
And of course that is the crux of the issue with John Browett taking this position at Apple. Apple have developed a fantastic reputation for customer service. The Apple Genius bar is praised across the world. They might not turn the profit that is usually desired from a retail chain but that is not really their purpose. Everyone knows that those who are most tech savvy will usually turn to the internet to purchase their goods. The advantage that Apple stores have is that the prices in the store and their prices online are not radically different. Other stores are in competition with so many online retailers that they really have to cut corners to survive. Apple stores are not really about sales though. They are about the Geniuses and they are about customer service. That is why it is worrying that Browett is taking this position of authority over them. Browett’s philosophy is one of cutting costs and maximising profit. Store members are being laid off and methods are being streamlined. I imagine that down the line sales techniques will become more forceful and it won’t be long before Apple stores start to develop the reputation that Browett drags behind him like the rotting carcass of a hunted deer that he refuses to discard until he has taken every bit of protein off its bones.
Milton Friedman said many years ago that the purpose of a company was to seek maximum profit. That is the free market system that we have been living with through the decades since his statement. I am told that Keynesian thinkers like Stiglitz consider this approach to be one of the causes of the economic collapse we are currently trying to escape. Even government has tried to do something to change this dangerous point of view. The 2006 Companies Act in the UK kept the main element that directors should always seek to maximise profit but added that when doing so they should have regard for the implications of their decisions. Essentially they should consider how their decisions might affect the environment, the economy, etc. Not exactly a brave direction to take with legislation but then governments are timid creatures that know if they push too hard then all those lovely corporations with their lovely profits will go and cosy up to some other government.
The immediate problem with seeking to maximise profit is that while it may help the consumer to buy bargains at low cost it is inevitable that many of these bargains will be shoddy goods that are poorly designed and will soon need to be replaced. The consumer will have little choice about accepting them though due to the fact that so many members of his family have been made unemployed by cost cutting measures that the family are unable to afford the quality goods anyway. It is not all bad though. At least if you are unemployed then you do not have to work in one of these corporations that are so keen on cutting costs. That is not a great deal of fun as you are regimented to follow precise procedures designed to maximise profit, and doing so the whole time at the lowest possible wage the company can get away with paying you. In addition you know that you have to reach certain impossible targets or else there are huge numbers of unemployed people put on the streets by other cost cutting companies who will eagerly take your place. I am glad that I left after only a year. Thankfully I now have a full head of hair again.
Of course cost cutting measures do maximise profit so this must be a good thing. Lets see where this profit goes. It doesn’t go on buying in quality stock. Stock is kept to a minimum to ensure that nothing is left unsold. As a consequence we had to turn away dozens of people everyday who wanted specific items. Mostly those made by Apple. It doesn’t go to the staff. They are operating on a wage so low that they need to supplement their income with government handouts. It somehow doesn’t seem right that a person should work in a miserable job yet not even earn enough to live on. If tax payers money is being given out to support those who are working then there is something seriously wrong with the system. It doesn’t go on the company’s infrastructure. Out of about 7 tills our shop had there were many times when we would have a shop full of customers but only one till that was in operational order. The touchscreens would break down or the OS wouldn’t load or the scanners wouldn’t work. There was always something. I cannot speak for the example of my store or chain but in general I know that profit also doesn’t go on paying taxes. I was reading yesterday about Walmart paying rent for their property and therefore claiming tax back on the outgoing. The people to whom they were paying the rent were a subsidiary of Walmart. This subsidiarity also claimed back tax on the rent that they paid for the property… to another subsidiarity of Walmart. I could go on but this would become quite tedious because there were over half a dozen subsidiarities of Walmart claiming back tax on rent that they were paying to each other. Some of them did not even have a single employee.
So the profit will go to the shareholder. With many of these shareholders one can not blame them for trying to get some profit out of a business that they have no hand in supporting through hard work. They are trying to keep their head above water in similar industries a little higher up the chain. They may get paid enough to invest in shares but they kind of have to invest in shares as they are the ones who the government is not paying out money to. They have no choice other than to invest or they are going to have just as much trouble making ends meet. Their companies are also governed by Milton Friedman’s idea that a company’s main aim has to be the making of profit above all else. Indeed the only reason that companies care about the health and safety of their employees is because the law started making them pay out some of their precious profits as compensation when employees fell foul of dangerous working conditions.
We all know where the profit substantially ends up. It ends up with those who are probably sitting on their own private beach sipping cocktails in some exotic country right now. The reason we accept this is the vast majority of us live in such a hell at the hands of profit obsessed companies that the only thing that keeps us going is the belief that one day we too might be able to sit on a sunny beach sipping cocktails instead of slogging away on a production line while our body wastes away from standing in one position for eight hours a day while only being nourished by a diet of fried trimmings of the otherwise delicious food that is currently being cooked up for someone to eat outside their beach house after they have had their cocktail. We imagine that if we play the game and work hard then maybe there is a slim chance we too might get there as well. Some do make it of course.
I wonder how the exact figure compares to those who get there by simply winning the lottery.
This is the free market system. While it is obvious that too much government control does not work, as we have seen from the failings of communism, it must be dawning on people by now that perhaps the free market may have its failings as well. Naturally the best way to do anything is to find a balance between too much control and too little control. It can be difficult working out exactly where that is and when the most powerful and influential people in the world tend to be those who personally make a profit from one form over another then it would be foolish to imagine that the balance is going to be any easier to perfect.
For me the conundrum comes from the fact that those people sipping cocktails in their luxurious beach houses let it happen. In fact the conundrum lies with the fact that anyone lets it happen, that anyone plays their game. We all know the saying that it is easier for a camel to get through the eye of a needle than it is for a rich man to enter heaven. I can imagine how those who hold a secular viewpoint could ignore this wisdom as the mention of heaven suggests it has no implication to affect anything of substance that they might believe in. This is not the case, as psychology and our understanding of conscience has successfully proved. I certainly cannot understand how those who are religious continuously ignore this wisdom. They purport to believe it fully yet they still seek to compete for the ability to buy things like shiny translucent stones when they know for a fact that there are people across the world, or even in their local inner city centres dying of diseases that are easily preventable with a little monetary input.
Personally I have had difficulty playing the game myself. I have certainly had the dreams of becoming wealthy myself but since then I have begun to understand my conscience. I am in a job now that I enjoy. I do not make enough money to pay all my bills but I am constantly learning and the work atmosphere is friendly. That is how I continue to live my life. If I had to return to working in the minimum wage conditions of those who support the shareholders I would not do it. The cost is too high. Time is our most precious resource, followed by our health and happiness. All those things would be taken from me if I were to submit to being the pawn of the free market system.
Neither would I seek to be one of the ones who sit at the top of the ladder. If I were to make money as a shareholder in one of these profit driven companies then the things I have experienced combined with what I know of the world would not let me do it. I would feel constant guilt and would not be able to feel happy. Not to mention that too much comfort makes you flabby and robs you of your health anyway so you still cannot escape that unhappiness.
I know there is a better way. I have not fully engineered all its intricacies yet but the way that we are doing things at the moment is broken. If we actually got to simply choose where we were in the system we would realise that most people would get a choice between working hard in poverty or growing fat in opulent surroundings with the disdain of the rest of the population. There are obviously exceptions. Starving with a bloated stomach in an African scrubland would be an exception. Getting a little education and managing to afford to take on a twenty year mortgage or pay enough rent to live somewhere that is not horrible but not affording to buy a huge mansion would be another exception. I am not even happy with that one though. I guess I am cursed with being a worrier but it feels like living like that is an equivalent to putting my fingers in my ears and closing my eyes and hoping that the world will sort itself out.
I am happy to accept less if others can have more. Of course I would like them to put in a decent amount of effort to achieve what they gain but I do not think their failure to work is their own fault. That lies with the cost cutting companies refusing to employ them whilst also putting anyone who would employ them out of business by undercutting them. This does not mean I am anti company. I think that the company has the potential to be the most powerful force for good we have. In order to do this though I think it is time that the company grew up. The concept of the company is largely around 500 years old. Its petulant adolescence is over now. It is time to start taking on some responsibility. It is time to develop a community spirit. The time has come to stop squabbling over who has the most toys or gets the most sweets. As companies approach adulthood they must start taking care of their environment. If children were left in a house to look after themselves indefinitely we all know that it would not end well. If these great big children called companies are left in a world to look after themselves and they fail to grow up then this will also not end well.
Posted on August 18, 2012, in business, Economics, Law, Management, Technology and tagged Apple, browett, companies, companies act, dixons, economics, management, profit. Bookmark the permalink. Leave a comment.