An Upside to the Economic Downside

Blame who you want for our economic woes—the President(s), Congress, Wall Street, Main Street, the mechanic down the street who overcharged you for new brakes—but the end result is a workforce left battered and bruised, with a mistrust of business in general. The missteps of high-profile execs during tragedies like the BP (BP) oil spill serve only to reinforce our existing cynicism toward corporate motives and management.

The upside to the downside may be that it's shining a light on an issue that has been with us for some time. The corporate environment is not working for workers, and it's now apparent that it's not working so well for companies, either. This corporate suffering (yes, there is such a thing) is the inevitable result of a culture that celebrates individuals working within a system set up to see them as commodities.

Business is the economic driver of our country and plays an important role in society. Having so many disillusioned with the corporate world, fearful of losing their jobs through no fault of their own, creates an environment in which any deviation from the status quo seems risky. What does this mean for businesses' ability to innovate and compete in the long term? More important, what can be done about it?

If people have to choose between doing what's right for themselves vs. what's right for the business, they'll choose themselves every time. That's natural. Why not create incentives for them to do the right thing rather than putting them in situations that force them to make bad business decisions?

Hitting Short-Term Targets

The structure of corporations encourages short-term thinking as managements seek to deliver on yearly financial forecasts and meet quarterly earnings targets for shareholders. If unforeseen challenges arise that negatively affect profit, expenses must be cut in order to make the numbers work. In most cases, head count is much easier to reduce than almost any other item on the balance sheet.

The impact of this short-term thinking is probably apparent to management, but they often have no choice other than to carry out their fiduciary responsibilities. They may also have personal incentives to make forecasts, but while making the numbers work suffices in the short term, it doesn't reflect the true impact of sacrificing human capital.

What's that impact? Treating people as commodities trains them to behave as commodities. The high achievers that remain after a downsizing no longer have any incentive to go the extra mile for their employer. They're expected to do more with less and are responsible for hiring and training replacements for the downsized once the situation changes. If they have performance bonuses tied to certain milestones, it's hard to blame them for "gaming" the system so they can collect regardless of business impact.

Sadly, this "every man for himself" survival credo has become an accepted corporate maxim with significant implications for our country's long-term economic health.

Everyone a Competitor

We're conditioned to be hypercompetitive in our society. It has been our longtime "go to" response to everything, whether it's keeping up with the Joneses or viewing everyone at work, regardless of level, as our competition. We compete for the sake of competing—even when there's no clear win. This behavior is ratcheted up in environments where workers fear for their job security.

Knee-jerk competitiveness eliminates a critical competitive strategy, namely cooperation. It's a strategic choice to consider whether you're better off cooperating and pooling resources or going it alone. But it's hard to do if you feel that by doing so, you're putting yourself at risk.

This is not to suggest we all get together for a group hug and a round of Kumbaya. The recognition that information hoarding is no longer the only path to power and that sharing resources and information is an appropriate response can lead to more profit for everyone, often at less cost.

Innovation Through Failure

The world is increasingly complex and becoming more so. With business focused on short-term profit and the fear that your competition will somehow get ahead of you, there's no time to make mistakes. Only through failure can true innovation occur, but when you're considered only as good as your last "win," there's an inordinate amount of pressure on every decision. Time and money are wasted as every conceivable option is evaluated.

The innovators of the 20th century understood the importance of exploring options without fear of personal consequences and considered it a natural part of business. Henry Ford observed: "One who fears limits his activities. Failure is only the opportunity to more intelligently begin again." And credit Thomas Edison with a masterful PR job when he proclaimed, "I have not failed. I've just found 10,000 ways that won't work." Both men achieved incredible business success with a mindset that viewed failure as a data point, not an indictment of their value as a worker.

Creative destruction is the process of transformation that accompanies radical innovation, according to Austrian economist Joseph Schumpeter. We're seeing this economic theory in practice today—witness, as one example, the struggle of once-dominant newspapers to stay relevant in the face of online news sites. Wouldn't it be great if this current Great Recession encouraged creative destruction of the current corporate workplace, leaving behind one where both people and business could thrive?

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