Tuesday, September 30, 2008

The Value of Work is Inextricably Linked to its Impact

(This is the first installment in a series of articles about the problems associated with government's attempts to ignore free market principles in a free market world ecomony.)

There is no free lunch.

It seems an obvious foundational principle to all things business - at least all things business in our capitalist system. Somehow, somewhere along the line, we seem to have forgotten.

We have started to believe, even in business, that we are entitled to something, simply because we are. We live and act and conduct our enterprises as though we are entitled to remain profitable on the basis of our existence, our history, the size of our assets, or the supposed quality of our product. Employees think that they should continue to be paid just because they show up, and do some work. It doesn't work that way, and it never should have.

Can you say that any job/activity has quantifiable, intrinsic value?

I once heard Hillary promise to use government programs to guarantee jobs to the manufacturing workers in the northeast. I once heard Obama say that he will do the same to restore the jobs of auto workers. They speak as though they believe that any and all workers should be entitled to be paid whatever they need, doing whatever they can, without considering the real value of their work for the company or the customers they work to serve. These people act like one can dictate prices and wages, without regard for the associated value of the products or the service provided. They are deceived.

Anyone believing that there is intrinsic, quantifiable, fixed or naturally escalating value in performing the tasks themselves is equally deceived.

What Determines the Value of Work?

What dictates the value of the work done by an auto worker, or anyone, for that matter? What guarantees him or her a position by which wages can be justly deserved?

Only the value of the contribution the position makes to the product or service produced, and the customer who buys it.

When that contribution does not exceed the value available, recognized, delivered, received, and desired by customers, that work is no longer worth doing. The worker can no longer expect to continue to be paid for his services. The work is no longer valuable, or necessary.

At one time, thousands of people were gainfully employed as elevator operators. The landscape changed, and elevators became automated. Attempting to maintain that the elevator operators of the world should continue to be paid for operating elevators would be pure foolishness.

Why are there no more people employed as elevator operators? That service is unnecessary.

Attempting to maintain that any job should be preserved, "just because so many people do it" is equally foolish. It is nothing short of a "free lunch."

The same principle is at work in every industry, in every healthy economy.

This same mentality will produce disastrous, protectionist policies to be imposed on a world economy. They won't work. They can't work. They never have worked in a free market economy. And, no matter what we may try to tell ourselves, the world economy is a free market, even capital based, economy.

Somebody will pay, even for a "free lunch." And whatever the cost, it exceeds the value received. It is a bad deal.

Sunday, September 7, 2008

Beware of Business HIV: It's On the Rise

The less you pay, the better the deal. Right? The less time you spend, the more money you save. Right? These precepts are the foundation of a creeping business virus I call the Hidden Inefficiency Virus or Business HIV.

At its most fundamental DNA, Business HIV is the average individual’s response to too much and contradictory information. Needing to make decisions that guard profit and no longer having a grasp on the millions of pieces of data that dart in and out of their field of vision, business people have settled into a way of thinking that makes them wrong often but rarely willing to admit that they’re wrong. Doing so would require more in-depth study of data than they feel they can do. Sticking with saving money as the bottom line seems like the wisest course of action to many decision-makers.

Economic, human and social realities fly in the face of this sort of out-dated logic, however. The more time you spend investigating your own needs and the offerings of different vendors, the more money you can save – not only in the purchase but also in the long-term. The more money you spend on individuals with specific expertise, the more money you are likely to make as your operations improve.

Business HIV removes the real logic and replaces it with a sense of false scarcity and urgency. Business HIV is an emotional and intellectual disease that prevents decision-makers from seeing how off course they really are. It’s ego, comfort, fear. . . and it’s just plain illogical.

The remedy to Business HIV is a restructuring of the big picture. A realization that costs such as energy, taxes and insurance are spiraling and they’re not going to come down. Competition is more rampant than ever in the history of commerce as Third World countries replicate everything better and cheaper. A new strategy based on people creating profit through innovation is the only antidote to Business HIV.

Are you ready to move from a sick mechanical business model to a healthy organic business model? Are you ready for that shot in the arm?

CJ is a regular contributor to HRTools.coms.
You can now get your own copy of his groundbreaking book, The Squaredime Letters.
You can vist CJ online at www.cjcoolidge.com.