OPINION: Business lessons from a student of politics

enron

So, I have no CONTROVERSY LEVEL in this writeup, because it’s really an FYI article.

Why am I writing this? Because I get asked all the time about the usefulness of political study, and, in the American context, apparently the only thing that gains credibility is the ability to MAKE MONEY! So, this blog is aimed at you business types who think political study has no use in business. The theme here is that organizational development must occur at rates similar to profit increases, and obviously Enron didn’t follow that advice. Rather, Enron build a dynasty on Ponzi-like scheming rather than investing in sustainable operations.

In the future, I think I’ll write one on the importance of understanding politics for your personal life (with friends and family and such). However, for now, I’m targeting you business-like types!


Business v. Politics

In many ways, the study of business is very similar to politics. Businesses and governments strive to moderate interests and produce something (though admittedly they have variances in objectives). Also, practitioners of both business and politics have been blamed for unethical conduct, human rights abuses, and hoarding power; and rightfully so. The management of a country or a business is very important for those who are a part of it. In this view, emphasis needs to be placed on the leaders more than the individual components.

Because politics has a more-complex and less-defined product than business does, students of politics have a broader knowledge about human behavior and affairs, comparative cultures, and history. To contrast this, business students specialize in overcoming practical communication and organizational barriers to most-effectively create profits. While this is obviously the most-important component of businesses, it still doesn’t quite target what politics can help businesses understand: human behavior. Instead, business study targets employee and consumer behavior; and employees and consumers (for study/academic purposes) don’t have the same behavior that citizens or individuals have because this behavior is less quantifiable.

So, for all you nay sayers out there who claim that political study is only good for creating non-profits, moderating interests, and working in government, check THIS out!


I’m a business owner, why do I care about politics or political study!?

A: Because politics is loosely defined, and students study all facets of the world including the interaction between businesses, leaders, organizations, and citizens. I would say that businesses should take advantage of this broad knowledge base in order to find out where business fits within the broader cultural context. Also, politics is the study of wants, and how to mediate and prioritize those wants.


A political perspective on business owners:

So, just so readers have an understanding of how I would evaluate business operations, a business owner’s main objective is to make a profit. From a political perspective, this means that profits rule the owner as well as the employees. So, profits take priority over individual needs, and hence people work for ridiculous amounts of hours.

So what’s in it for the employee? Money, reassurance of health security, and leisure time. It’s essentially a social contract. Once the employer fails on these guarantees, the organization is effectually useless to the employee. Similarly, if product quality decreases or price unnecessarily fluctuates outside of appropriate demand, consumers will find the organization useless. Hence there is a balance between employee and consumer guarantees that needs to be moderated.

Truthfully, from a jobseeker perspective, I’m a bit annoyed that business-types hijacked a complex concept like culture, and reduced it to meaningless business-speak. I have to say, quality businesses don’t really have to “sell” their culture, because it’s guaranteed if there are decent wages, health security, and leisure time in a stable atmosphere. In a similar logic, if the product is quality, decently priced, and has utility for the consumer, sales should be relatively stable. At all times, there is a balance between employee and consumer investments that must be made and, politically speaking, decisions have to be made to balance those interests.

Here are a few things a political student can tell you about business:

1) A time-tested method of attracting top talent is to ensure health security (life), leisure time (liberty), and solid wages (property). If you noticed, these are the same principles inherent in the American political system. If you run on the principle that top talent equals top products, then compensation packages must reflect that and protect employee interests. Similarly, consumer interests are to pay as little as possible for the highest amount of quality. However, to improve the product with profits, employees must be guaranteed their interests over the consumer. In an ideal world, profits will lead to higher-quality, lower-cost products. However, you need quality employees behind those products.

2) Environment should dictate business principles. What are the principles in the United States? Life (health ensured), liberty (leisure time), and property (decent wages). While Americans demand all three, other societal norms may emphasize only one or two of these principles (i.e. employees in some European employees may emphasize health and leisure over wages; similarly, wages are the only thing desired in lesser, developing countries). Exploitative? Perhaps, but it’s still a benefit for potential employees; granted the organization understands the interests of local people. So why not give them what local employees desire most? Businesses need to think about who they’re targeting from a consumer and employee perspective. Understanding local political and societal principles could potentially increase production and minimize costs precisely because the organization is working within local environmental constructs, and not against them. In this way, some contemporary startup types emphasizing commutarian, socialized “cultural” values may experience resistance with American employees who expect fairly specific employer guarantees, and rather than attracting top talent may get inexperienced or younger applicants only.

3) Democratic “culture” is only useful for marketing and recruiting, and it’s not practical for business. Buzzwords like ‘collaborative;’ tag lines like “inspire one another;” and creating company “manifestos” are useful only for public relations and initial employee recruitment. Genuine democratic conduct is not compatible because of profit goals. State (country) governments, by contrast, survive because of ideas, principles, theories, cultural contributions, and ability to offer public goods (and even “democratic” countries are only limited democracies). Businesses, however, survive only because of profits; so no profits, no business. Because of this, decisions must be made by either one person, or very few people. The “rule of” the employees (“the people”) would yield inconsistent, ever-changing decisions (because public opinion is notoriously malleable and unpredictable). This is not viable for consistent profit performance. So, true democratic conduct is not appropriate for businesses applications. I see some companies try to harness the democratic spirit in their “culture,” even if those principles are intrinsically not viable.

4) The only way to consistently ensure profits is to have an analytical CEO (or board) who has the appropriate decision-making power, and one who is insulated from external pressures. This is exactly why the Supreme Court is insulated from the president or Congress. In many ways, Supreme Court justices decide the fate of the United States by upholding the country’s principles and making controversial decisions; and the judicial branch was designed precisely for that purpose. So the CEO (or board) is ultimately the judge, and a smaller subset of people create potential solutions to problems. The CEO (or board) must maintain clear analytical linkages between company policy and company output: do actions have the desired effect of profits, and are these actions in line with business principles? To answer these questions, it takes thoughtful, insightful, and analytical individuals. Also, top decision makers must be insulated from controversy regarding difficult decisions, and power-dividing mechanisms and structures should reflect this.

6) The tighter the control on information, the more employee frustration (but the more consumer speculation and attention). This is why the President has to address Congress every once now and again, and everyone watches (well, not everyone; but some people). Also, speculation among consumers increases when information flow is tight (look at Apple). Thought should be put into information flow, and if company actions keep employees and policymakers in the dark, then it’s likely that these people will grow frustrated. However, too much information flow exposes the organizational strategy to competition. Businesses should conceal strategic logic for the same reason countries do; to insulate themselves from competition. After all, you wouldn’t tell your chess opponent why you moved your bishop, would you? The challenge is striking a balance between information flow and strategic organizational conduct.

*** Also, information flow depends on organizational purpose: tighter information flow ensures the organization is reactive to rapid changes while democratized information flow fosters innovation. This is why the military is information-constrained and hierarchical (militaries can react quickly with limited information), and Google is open-ended (because they need to new ideas to innovate and remain competitive).

7) Norms matter, and can cause conflict. Policies affect the way people work, and alter behavior. So if the norm is that developers come to work in T-shirts and jeans while sales teams wear suits, then that fosters two distinct cultural groups. The strength is that each dress code matches each department’s goals; however, conflict occurs when policies favor one group over another. If there’s one thing political students understand, it’s how conflict occurs between groups, and how policies targeting groups can cause backlash. Because dress policies define what “normal” in that environment is, thought should be put into what the overall goal of the policy should be, and careful analysis should be given to piecemeal (as opposed to uniform) application of policies.

8) Explicit rules and policies equate to efficiency. Because people intrinsically challenge any claim to power, substantial logic needs to be applied to the rules in any organization. In addition, these rules must be intuitive and be backed up by the organization’s goals. Bureaucracies operate on the fundamental principle of policy. If you go to the DMV and don’t have the correct documentation, you’re turned away; if you apply for a passport without all the paperwork, you’re turned away; when you file taxes, everything must be explicit and documented. This is because bureaucracies process massive amounts of data, and operate much like machines. However, if the machines don’t receive the proper input, then there is no output. In bureaucratic defense, all policies are explicit, and each bureau is efficient because of this. It’s all because of documentation of policy and making clear expectations of customers. For businesses, this should mean clear documentation of all internal policies and employee expectations as well as clear mission statements.

9) Because markets are anarchic (and anarchy is a condition that has no clear solution), strategy is key to survival. Markets are the wild west, and so is international politics (this is what distinguishes the international from domestic politics). Essentially, companies can form loose coalitions with others, but profits make the decisions; not relationships. The international political answer to anarchy is the United Nations. The business/corporate answer to anarchy is mergers and/or partnerships. So it’s better to merge or partner with a competitor than to be defeated. But it’s better to stay autonomous, and, because of anarchic environments, strategy counts exponentially. It’s easy to get lost in short-term profit numbers over long-term business management. So, from this perspective, it’s worth investing in intelligence, strategic research, and credible analysis before making decisions in such an unstable and unforgiving environment.

10) Individual talent isn’t as important as some claim. More important than any one supremely talented individual is a well-planned business theory (or ‘model’ as you business folk call it). Because people can be taught a variety of duties, work processes, and technologies, the only real frictional element is personality. Individuals demanding outrageous salaries are probably not worth the investment, and it’s only worth the investment at top decision-making levels. After all, if you invest in the cheaper alternative of hiring somebody with a slight learning curve, then you’ve saved in the long run. The key is to offer substantial benefits to maintain a collaborative workforce. Reasonable benefits and pay have enormous power to keep individuals working together and even have the power to overcome gender, cultural, or ethnic barriers. When it comes to individual contributions, a business should never rely disproportionately on any one individual, because then it becomes a house of cards that could fall if that individual ever leaves.


Is this sound advice? YOU TELL ME BUSINESS EXECS!

Generally, political inquiry evaluates interests, people, groups, and organizations. There are may things to learn from students of politics. Understanding political phenomena fosters a useful mentality that seeks to formulate solid assumptions about behaviors, evaluate soundness of strategy and policy, and seeks to contribute sound advice for organizational development.

From a political point of view, I would suggest businesses stop searching for their perfect, profit-maximizing, all-star employee and start looking for individuals who can add long-term and sustainable input that supports practical operations. I find all too often that long-term stability is sacrificed for short-term profits.

The fact remains that businesses can grow on a strict profit-only trajectory. However, if internal developments don’t match the speed of profit growth, then the business model rests on very unstable footing (look no further than Enron as a case of that).

Greed is a powerful phenomena, and there are intrinsic challenges when creating organizations for the sole purpose of profit. Creating organizations that are evaluated solely on their money-making ability borders dangerous and murky territory when not managed (or governed) properly. As such, working within a profit-only mentality challenges human capacities to control greed. Because of this, businesses need to do more than devise superficial internal “cultures,” and clever marketing and PR campaigns to remain relevant, effective, long-lasting, and impactful organizations. Instead, thought and careful consideration needs to be invested into organizational purpose and structure, employee compensation, and product quality.

POLITICAL STUDENTS UNITE!

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