Rethinking what business is for

Posted by on Jun 16, 2010 in Social business, social object | 13 Comments

 
Product_thumb-1
Here's something I've been wanting to get off my chest for a while. Not sure it's that popular, but that doesn't stop it being fundamentally right.

Amid all the confusion of the last year or so you can't have missed the increasing popularity of suggesting that the public sector (i.e. things owned in common by you and me, delivering essential services for you and me) has got to be reduced in size and importance (relative to the private sector – the stuff that is owned by a relatively small number of people and delivering largely non-essential services to you and me)

Of course, running huge fiscal deficits (having more of this stuff around than you can pay for or plan to pay for) is not something that is such a good idea (depending where you are in the cycle).

All of which has led to calls for a debate about the public sector: what is it for? Which services should it provide and which should it leave to Social Enterprise and the market? More importantly, how should it be funded and who should pay how much for it?

But there's precious little discussion of what business is for? Who does it serve and how? How should we evaluate business? Merely in terms of shareholder value as we have done for the last couple of decades? Or are there (as I and some others have been arguing for some time) some other things that businesses should be doing?

Aside from the late conversion to the Purpose Idea in US marketing writers – there's precious little public debate on what business is for, either here or in the US. It seems to be taken as read that private enterprise – being the opposite of the public (or commonly owned) sector – is ok because its motives are purely financial/venal (delete as inappropriate).

Hugh's
cartoon (above
) is a great start in this conversation – if one of the other main points of business is it's social functions (for its employees, customers and society at large) then maybe we ought to start putting a number of these (other) dimensions. Being (economically) efficient (i.e. employing lots of people) if that serves other goals (e.g. serving a community).

Not least because if we don't do so then the existing kinds of number (sales, proftis, shareholder value and senior management's reward programmes which are based on these) will continue to dominate and distort the private sector further.

What we need is a rethinking of both business and the private sector – not re-adjustment of the share.

Anyone got a suggestion as to where to start?

NB UPDATED 17th June

13 Comments

  1. Leigh Caldwell
    June 16, 2010

    An interesting project. However I’d query your premise a little – is it really true that public sector services are essential and those in the private sector are not? Some counterexamples:
    Provided privately: food, water, electricity, clothes, most housing
    Provided publicly: higher education, training for businesses, foreign diplomacy
    Of course most public services are actually in a grey area – perhaps not essential, but still often worthwhile for society to provide collectively. Then again, the same is sometimes true of private business – cars, the Internet and pubs are not essential but our lives would be much less rich without them. And they all needed the commitment of hundreds of thousands of savers and investors to build them and the supply networks behind them.
    There is a lot to explore in the area of mixed models, and other ways of providing a structure for cooperation across groups and across society. But I think you run the risk of caricaturing and oversimplifying the role of the private sector in this article.

  2. Marty
    June 16, 2010

    I’ve got one idea… What about businesses getting back to the thought that they serve at the pleasure of their customer? It would be nice to see the customer focus sometimes trump the shareholder focus. That slight shift alone might make a huge difference.

  3. Mark Earls
    June 16, 2010

    Take your point, Leigh. The essential/non-essential aspect is probably more provocation than utility here.
    And you’re right that mix is important – I’m just not sure that the current political obsession with (reducing) the size of the public sector is the end of the matter: we need a proper rethinking of what organisations in the private sector (broadly speaking “the company”) are for…and no, saying to make money isn’t good enough.

  4. David Harvey
    June 16, 2010

    Hi Mark – Take a look at the work of Jeffrey Pfeffer, if you haven’t already. “Building Sustainable Organizations: The Human Factor” and several other papers available on SSRN (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1545977). I like the idea of sustainability – a corrective to the “business is war” metaphor that many companies continue to live by.

  5. Mark Earls
    June 16, 2010

    Absolutely, David. I’ve been a Pfeffer fanboy for ages. Particularly liked The Human Equation, Hidden Value and (on a slightly different note) the Knowing Doing Gap.

  6. Will Davies
    June 17, 2010

    Excuse the self-promotion, but I published a report on this in September. The quote on the front echoes your concern quite closely! You can download it here:
    http://www.demos.co.uk/publications/reinventing-the-firm

  7. Mark Earls
    June 17, 2010

    Sorry, meant to link to it, too. Great stuff.

  8. charlie gower
    June 17, 2010

    Dunno if you’re seen this, but some nice points about the ‘why’ issue and how it affects business…
    http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.html

  9. Graham Horton
    June 17, 2010

    here are four definitions i give students to discuss in an entrepreneurship course:
    the purpose of a business is:
    – to maximise profits for its owners
    – to serve the interests of (a larger group of) stakeholders
    – to create a satisfied customer
    – to organise a community of participants around a common purpose

  10. Mark Earls
    June 17, 2010

    except that he’s got it the wrong way round.. should be called how great employees learn from each other

  11. jonhoward
    June 17, 2010

    Have you read Umair Haque’s Great To Good?
    http://blogs.hbr.org/haque/2010/02/great_to_good.html

  12. Mark Earls
    June 17, 2010

    I’ve read the post, Jon. Of course. But not the book
    Is it any different from what we’ve being arguing here for as long as I can remember?
    Not that agreement is bad,…

  13. Ian Leslie
    June 18, 2010

    I don’t think it’s right to say there’s been little discussion of what businesses are for…there’s no end of it! Eg http://bit.ly/aRPuWH The fundamental debate is over whether social responsibility is best pursued obliquely – via managing a profitable enterprise (and thus serving and employing people) or directly (devoting resources to good works, being accountable to communities, etc). Lots of shades of grey in between.