This next chapter in Making It In America is very important: it's about treating your people right. A lot of businesses and MBA's have forgotten that it is regular people who help make businesses a success. Up until now, no business could exist without customers or without employees. You have to have both.
John Bassett, the author, described some of the actions he took to take care of his people and, in turn, they took care of him. The author also had some choice words about the financial folks:
"In the financial world, data points get all the attention. People make their fortunes moving money around, not actually creating anything. Hardworking Americans who build real companies with their blood, toil, tears and sweat are treated like just another entry in the expense column. They are easily and rapidly downsized the minute the market shifts or the margins decline.
It's this approach to business that motivates the hedge fund and private equity types who stand ready to swoop in and pile a mountain of debt on a solid company. They say they are extracting unexploited value, wringing out the inefficiencies. Aren't they often risking the company's future and draining the business of its strength? And for their trouble, they pay themselves exorbitant fees and leave the workers to shoulder the burdens and get left holding the bag. I don't believe it's good practice to take a company with a strong balance sheet and weaken it with a big load of debt where management gets a hell of a payout in three to five years, regardless of how the company performs. That's not business. That's exploitation." Making It In America, pp. 59 - 60, hard cover.
What a zinger against the financial industry.
Yes, this is the chapter that all businessmen and MBA students should read. It's this kind of bad financial value system that has led middle America to vote for Trump. Businesses and business schools need to rethink the concept of markets and capitalism and we need to hold businesses to higher standards. The shareholder concept without that excludes concerns about the greater society has brought us the Great Recession and is bringing us climate change.
At the end of the chapter, the author outlines some action plans for treating people right:
- "Don't treat your employees like children if you want them to act like adults." Instead, ask for their input, tell them the truth, and set high expectations.
- "Remember that your success depends on their motivation." Just like senior management need their bonuses to deliver the goods, give your employees some incentives. They deserve to share in the bonuses too.
- "Don't act like you are better than the people who work for you." This is about treating them right and with respect.
- "Share the rewards as well as the risks." Too many times senior management give themselves bonuses but don't partake in the pay cuts. On the converse side, employees don't participate in the bonuses but they bear the greater risk of layoffs. You need to be generous and fair. They will remember during layoff times.
From Making It In America, pp. 66 -67, hard cover.
As I said before, this chapter should be required reading for all business people.
The other aspect about treating your people right is that your people are the one who will know the most about improving the processes or coming up with innovative ideas. They are on the floor. They know where the inefficiencies are. I believe the importance of people will be even stronger when everything is automated, at least in the early stages. At the early stage of automation, machines will just do things better and quicker but won't necessarily come up with innovative solutions - at least I hope so. (And I hope it stays that way - once, machines start being creative, all bets are off.) I remember reading an article many years ago about some manufacturing firms finding out their engineers no longer knew how to improve the production processes or be innovative once the manufacturing shipped overseas for a couple of years. Without working with the production processes up close, the engineers lost the necessary skills. So some manufacturing firms started to bring back some manufacturing or hold back on some offshoring just so their engineers could retain their skills. That physical, manual handling is crucial to their and our learning process. We just don't learn as well on books alone.
Businesses have lost sight of a lot stuff.
"People beat numbers any day."
Other related posts: