A Better Business Model
As Long as I can remember, we have looked at a typical business model in the form of a pyramid or triangle. The CEO, CFO, and COO are at the peak of the triangle followed by the Board of Directors, Comptroller, Vice Presidents, Supervisors, and at the bottom or base of the triangle are the workers or staff. The whole of the triangle comprises all of the people in an organization. You are also subjected to the same model even within departments of a company.
The figure demonstrates that the greatest percentage of the people is closer to the base of the figure. In fact, if you consider most organizations, clubs, government, etc. they all seem to flow from a top down direction where the individuals of authority at the top set policy and exert power to the larger group below them. The mass at the bottom are responsible for making everything work, and one would think they would and should have the greatest responsibility. It doesn’t work that way even though the people at the bottom make everything happen. They put into motion all the policies, procedures, and orders handed down to them right or wrong.
In this business model, the bottom people are sometimes forced to involve themselves with situations that may be wrong, offensive, inappropriate, and sometimes illegal. In this system you can be subjected to these inequities and cannot speak out for fear of losing your job and benefits if you attempt to take an action to correct the inequity. In this model, you may be forced to compromise your work ethic in favor of a lower standard. The result can be an inferior product or service brought to market. In any event this working model can create unrest, frustration, injury, and sometimes violence.
It is fair to say that inequities in this model do not exist in all situations. In all that you do, communication, cooperation, and coordination in life is necessary to accomplish all that you desire. The lack of this is now very evident in business, government, and society in general. More products seem to be recalled than before. The Democratic and Republican parties in the USA many times seem more obsessed with putting each other down than focusing of the needs of the people. What is the price that is paid for profitability and power?
How many times have you become aware of the inefficiencies in industry, government, and society where the public is knowingly given an inferior product or service. We are seeing this in more frequent product recall. We find toxic chemicals in food and in a variety of products as well as in medication. How many times do we see, hear, and read about directives that seem contrary to common sense; and policies that favor one over another. What happened to the common good?
In recent years greed at the top levels of corporations, organizations, and government has been exposed that border on the unreal. City government officials nearby recently voted themselves salary and pension increases that were extremely excessive and then passed legislation so that it would be held from public viewing. We read frequently about heads of companies making tens of millions of dollars in annual wages and then even more in performance stock benefits while employees are being laid-off. It is no wonder why the top one percent of the population receives most of the income in the USA.
I am in favor of executives being paid for their services, but there are now too many imbalances where excessive compensation has become an acceptable practice. How can you justify a ten million dollar annual salary when a company is losing money? I realize these executives are under extreme pressure to show a profit, but at what expense? Downsizing and restricting employee benefits are common ploys to remedy lower profit margins. This is attacking the core people of a business who do the most to bring a product or service to market. Everyone should share in cutbacks, not just the ones at the bottom of the triangle.
Many of the inequities involve publicly traded companies. Upper level executives are under pressure to show a good profit to keep the price of their stock high to satisfy shareholders, and also guarantee more personal compensation benefits. You can increase profits by streamlining fixed costs (lowering salaries, inventory, accounting gimmicks) just so far without imploding the company. This is happening now in our slow economy where debt financing has also made our economic situation even more dire. Yes, debt financing is a common and needed business practice, but not when there are questionable sources of repayment, and a government bailout should NOT be a first alternative to keep them in operation.
What are we going to do? Think about what would happen if we turned the pyramid or triangle upside down. Now, the workers (staff) are on top and the executives are on the bottom. In this model the executives still receive sufficient compensation for their services, but not excessive. The input and the needs of the workers now become more paramount. They are more involved in the profitability of the business and their voices are more easily heard. Their needs are addressed more timely and efficiently as well because all communication now links directly to them, and gives them more involvement with the overall business operation.
There is a large industrial company in Brazil that made this switch, and a book was written about its success. A company in Argentina also made this switch, and it went from going out of business to a thriving entity. Why isn’t it done more? Is it a greed factor of protecting the rich at the expense of the middle class? Is management fearful of giving lower class workers too much power to set policy? We really are not to judge.
In the USA we have the freedom to choose how to do business within legal guidelines, and that is the way it should be. Since the middle class has all but disappeared because of decades of using them to finance the economy, it may be time for a change. It is time the middle class reassert themselves, and one good way is to have more companies adopt the inverted pyramid or triangle as the business model of choice.
Possibly with greater support to charitable organizations we can limit the government involvement in areas it does not belong. This will allow our tax dollars to go farther, and also allow the government to downsize as well.
What is it going to take to make an attitude shift to a more equitable system where people are not left behind? I’m convinced this can be done in the private sector, and the inverted pyramid business model may be a good way to begin the changes necessary to stabilize our economy and help the middle class recover and once again become the core force in the economy.