“Nothing is fair in this world. You might as well get that straight right now”― Sue Monk Kidd, The Secret Life of Bees
I have long held a
theory in business that somebody usually gets screwed. What is ironic is that this is often
consistent with an organization’s values.
Since we spend a great deal of time in planning sessions on Mission,
Vision and Values; I thought it interesting that values are rarely fair. Values, when they are truly lived out by the
company, are generally ‘biased’ in a particular direction of another. Typically, these directions are the customer,
employees and shareholders or owners. These are often values that work against one
another – as customer needs, employee needs and shareholder needs pull the
company in different directions.
Fairness, and often unfairness, often results
from the organization’s values with respect to each of these stakeholder
groups. In British Columbia, where I
live, liquor is sold through the Liquor Control Board. This is a government organization that holds
a monopoly on liquor distribution and a near monopoly on the retail
distribution aspect of the business. The
LDB does very well. Not only is there a
10% liquor tax, but the LDB in fiscal 2013, LDB made of 30% profit on
sales. Not bad for retail these days. The employees at the LDB have a wage of
$21/hour plus government benefits. Guess
who is getting screwed? Well, when you
consider alcohol prices in the US and the UK then you guessed it…the customer
is paying way too much. Somebody gets
screwed!
Now consider Wal-Mart. Let’s accept the fact that it is a
competitive world, and set aside the impact that Wal-Mart has on the retail
landscape, and just think for a moment about Employees, Customers and
Shareholders. Wal-Mart is, in revenue,
the largest company in the world. They
have low prices so the customer is well taken care of. The shareholder’s do ‘OK’ but the stock has underperformed,
when compared to the Dow Jones Industrial Average, and the dividend yield is
only 2.5%. But it is the employees, and
the suppliers, who really get screwed. Wal-Mart
is not a great paying organization. Its
average full time employee in the US earns $12.83/ hour, according to the
Huffington Post (October 23
2013). Part time workers earn less.
It is interesting the
Costco, a direct competitor, pays well $21/ hour, prices well, but is
criticized for its lower profits. The
return on sales… merely 1.9%, Wal-Mart's most recent year was 5.64%, and the dividend yield is only 1.123%. This time, the shareholder / owner gets
screwed.
Values: Values define what a business will and will
not do. Values provide boundaries and
direction for the planning process.
Values are not good or bad, until some kind of judgment is placed on
them. Consider the following scenario –
which illustrates different business values.
A business has just received a report from a consultant advising
them that the company could raise their prices 1% without any effect on their
unit sales volume. That one- percent
would drop right to their bottom line! Three
executives of the company were discussing what strategy they should employ in
order to move forward.
The first executive said, “We can’t raise our prices – that just
wouldn’t be fair to our customers. We are only where we are because of our loyal
customer base.
The second executive said, “I think that we should raise the price
and pass that revenue directly to our employees. One percent of sales would represent a 10%
wage increase! Our employees made us
what we are today and they deserve this.
The third executive said, “I think that we should increase the price
and then declare a dividend to the shareholders. They took the risk to invest in the company
and they are the ones who should finally benefit from their faith in this
company!
Nobody is wrong…they
merely have a different take on company values.
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