Welfare destruction
(Peter Drucker reference sourcing: Mr. Adriaan Meij, www.ame.nl )
In 1995 Peter Drucker stated that “companies that make less profit than their costs of capital actually make no profit at all, they in fact destruct welfare”. Using this economic reason we go a little further and state that “companies that have no sustainable ideological basis for the material successes actually parasite on themselves and the environment”. Combining both criteria we get our multidimensional model and we use that to index companies along the multidimensional axes representing a forward equilibrium between the moral policy development and capital development. Money is a means not a goal.
We index groups of companies of a same sector and came to the conclusion overall 99% are destructive for welfare due to an excessive material focus. In Holland a colleague company (www.ame.nl) publishes the index of the top 120 ICT enterprises concluding that they all together invoiced over 631 billion euros world wide, employing nearly 2 million people full time and destructing all together 14 billion euros of our wealth. This loss was the total balans. The companies representing 78% of the total turnover and over 54% of the amont of companies where the worst performers. The balans was lifted to the current level over a deficite of 14 billion by the 22% of great performers.
Interestingly we did a similar research but without the statistics, since we are more interested in the policies in the boardroom connected to the identity of the company, on supermarketschains, banks and wasterecovery companies. The result was equally staggering as the ICT branch. Over 75% was not even bothered about their moral responsiibilities distroying happily our habbitat in order to make a profit. Oly a few actually bothered and were even the ones tha presented better overall financial results. All this indexing only shows that large organisations are not at all used anymore to create added value and compete by subtracting values (cheaper labor, cheaper materials, cheaper housing, etc.). When you sum all that up you come to the conclusion that business is destroying everthing we care just by trying to be successful. We did not need a credit crisis to get into trouble, in the end it would have been something else that would have done the same trick.
It appears to be difficult to get back to a situation of competing on added values because of the material mindset of business nowadays. But it is imperitive to do so if we want to get back, in years, to a stable economy again. The world has avoided to change according the laws of sustainability for over 20 years follow the all destructive path that we can visualize now with numbers. We are now confronted with billion of people wanting to live life with welfare instead of a few hundred million. This means that things need to be transformed rapidly, we have no time. So we might as well get started.
If interested download f.o.c. the document “the convenient solution to the inconvenient truth”.
Where do you stand morally?
If we consider that 99% of western businesses are managed purely on material basis (KPI’s, product/price, cost reduction programs, etc.) you are not really to blame when you find out that you do the same. But the credit crisis has shown us that this way of thinking causes us to behave far to insensitively to moral values which causes the general and gradual decline of our overall wellbeing. In the end we do not distinguish ourselves anymore from competition and all players together become responsible for a moral crisis of which the credit crisis is just an example. More are to come.
When we draw a point of balance between moral and rational material decision making than we can visualise this point on the following drawing:
Find the point of balance
The rational path is our traditional way of entrepreneurial thinking: Product/Client/Cost optimalization with pure material goals. Money is the target and we would be willing to take immoral decisions just to make the triangle work. For who? For our pockets.
But in a global era we are too many doing just the same, covered by government who push for growth. What identity do we develop among so many others? How long a technical lifetime does our product innovation have nowadays? How loyal are our clients to us if the receive temptations all the time? How good can our cost optimization be if we run out of low wage countries? How high will inflation be if we have to compete to purchase our natural resources?
Doesn’t this mean that we are forgetting something? While we are at it making money we are destroying our own market potential by increasing the costs of resources, making low wage countries rich and competing our products so cheap we can hardly make them anymore. How TVs can a household have? Or anything else by that matter? Shouldn’t we remind ourselves continously that there are three basic moral rules to make sure we can run a business still at all in the future? Why should we want other to take the responsibility to comply with those rules and not us? Why are the companies that do comply more successful in general than those that don’t?
How moral are you when you run your business? What do you want to achieve? Money? Or recognition for a good job? Just think about it.
Public tenders should not be a potential crisis factor
Public tenders have been issued by government organizations to take benefit of so called “market workings” or, in reality: dive under any reasonable price to get the order and try to adjust later. What government really does by chosing mainly on price is to introduce speculative and potentially dangerous behavior in entrepreneurship. A common practice is to find ways to get the cheapest entry knwoing that this will get the deal. A bribe or just undercutting by planning inappropiate material usage or hiring very cheap, unskilled labor forces, whatever will do the trick.
Often we find that school or city busses are not maintained correctly, truck drivers make too long hours, balconies collaps due to wrong cementation, roads are rained away because some “forgot” to put an expensive substance into the tarmac. It all seems to go well for a while until a bridge collapses, a bus collides, a plane crashes or a building falls over. Many death, years of investigation and all the cover ups to avoid pinpointing the real causes. Just like the banks did for many years until it all blows up into our face.
Public tendersneed to include the three basis world agreements:
- Continuous iImprovement if health and vitality of the human being
- Minimization of usage of critical resources
- The company needs to present itself as a true added value for society
With those three statements as framework within which any tender has to be executed the government takes responsibility to sustainability in all its projects. If a company tenders it should first comply with this before the actual proposition is taken into account. Price is not the main determination factor but the measurable added value for society is. Like that government will protect its long term interests and companies will learn to behave with ethics and moral, competing for wealth creatin rather than self interests.
Interestingly we have been able to show that ethical behavior according to multidimensional principles does not at all make products more expensive or companies less profitable, on the contrary. The fact that responsible behavior is shown in the proposals but all in the commitment and execution those companies tend to be highly desired. Their quality of work reduces risks and hence liabilities that reduces insurance costs, pressure of regulation, etc. And that is in the interest of all of us.
Sustainocracy, the new democracy 