We Need A New Business Measurement Standard
This blog promotes the urgent need for a new business measurement standard.
All material appearing on this site is the Copyright © of Adrian Mark Dore
Capitalism has been blamed for putting the profit objective before all else and to serving the needs of shareholders at the expense of all others. This is quite true, business does place profit before all else, and it does serve the exclusive needs of shareholders at the expense of other stakeholders, which has created serious social, environmental and economic problems. However, these are not problems caused by capitalism - they are caused by our inadequate and inappropriate business measures.

We use financial measures inappropriately as a business measure, which places the emphasis on profit creation for the benefit of shareholders, at the expense of all others. We do this because financial measures are our only comparable measures and our economy relies on comparable measures. Therefore, we will only shift our reliance and focus away from financial measures when we introduce more appropriate business measures, which provide a balanced picture, that includes all stakeholders, and are comparable across all businesses, irrespective of sector or size.


Capitalism is about free enterprise, which relies on the creation of profit to sustain it. So, while sustained profit is essential to business, capitalism does not suggest, or favour, profit generation at the expense of other stakeholders. That would be counter-productive, making long-term profit generation more difficult. This would be contrary to the objective of capitalism, which is the longevity of business. So while capitalism sees profit generation as necessary, it also sees profit as just reward for shareholders, which it is. It does not see profit as its sole objective. The longevity of business (or free enterprise) is its objective, achieved through a fair and equitable distribution of value creation amongst all its stakeholders. This is key to achieving longevity - capitalism’s objective.  It is our poor business measures which have corrupted the course of business, for which capitalism is unfairly blamed.


It’s crucial that we stop all this anti-capitalism nonsense now, not only because capitalism is an effective way of helping us all prosper, and for protecting our environment, but because by always pointing the finger of blame at capitalism we hide the real problem.  Let us rather divert all our frustration and anger towards the real culprit - our poor, inadequate and inappropriate business measures. Unless we do something about it, and urgently, we hurtle towards a vastly changed and unfavourable future.


I know many people will have difficulty in associating profit with environmental protection and social upliftment, but profit is not a “dirty word” and a contradiction in terms. Profit is the just and fair reward people who take financial risk are entitled to. It only becomes a “dirty word” when it’s the sole objective of business; where profit is made at the expense of other stakeholders. Profit enables a business to survive, and by the business surviving, it can fulfil its role as a societal tool. Free enterprise encourages creativity, innovation, diligence, hard work and fair play - noble qualities, which create value. This helps with the upliftment of all. It provides for all and is good for all when it functions as a balanced system. This guarantees the longevity of free enterprise, which is what capitalism is all about. This requires a harmonious balance between all business constituents, or stakeholders (which represents its sense of fair play.) However, this is all thrown off kilter when we use financial measures as a business measure. This isn’t a problem of capitalism’s making. Capitalism isn’t involved in the management of business. Capitalism describes the philosophical role of business, it has nothing to do with the management of business. It is our poor management of business, over the past decades, and our indolence in not addressing a problem we have known about for decades. We haven’t just stumbled upon the problems of our inadequate and inappropriate business measures, we’ve known about it for many decades, but done nothing about it.


This brings me onto my next point, which involves the terms we use to describe capitalism. These either directly, or indirectly, infer that capitalism is involved, or is implicated, as the cause of our major socioeconomic and environmental problems.


“The evils of capitalism” - Capitalism expects that shareholders receive no more than their fair share of the value creation rewards of the business’s endeavours. It encourages and expects, the harmonious interrelationship between all constituents as the means to achieving longevity. It encourages the noble traits of creativeness, innovation, industrious hard work, and fair play, which leads to the upliftment of all, and the protection of what sustains us. There can be no evil in this, only something to cherish, protect and celebrate. If we believe business follows the principles of capitalism, then these principles have been so fundamentally corrupted by our inadequate and inappropriate business measures, it’s almost inconceivable.


“Inclusive capitalism” - is a confusing term as it implies that somewhere in the principles of free enterprise there are terms which exclude some from participation. This is simply untrue. There is no question about it, we do have an economy which behaves in an exclusive manner, but again, this is not of capitalism’s making. Our economy is simply reflecting the exclusions imposed upon it by our inadequate and inappropriate business measures. People (or staff), community, environment and other stakeholders are not included because our business measures exclude them. So when somebody talks about “inclusive capitalism”, what they are really referring to is the need for inclusive measures. However, it doesn’t do capitalism’s cause any good to imply that it’s capitalism which is the “bad boy” which needs reforming, as again this deflects attention away from the real cause. The more we can get people to start talking about, and naming our inadequate and inappropriate business measures as the problem, the greater the groundswell support we can bring to bear on the problem to bring about much-needed change.


“Conscious capitalism” - this is another case of a confused term, which does not serve capitalism’s cause well while professing to do so. This term implies that capitalism “is out to make a quick buck, but has no conscience as to how it does it.” Well, you and I know that’s a load of baloney. Capitalism, if understood correctly, is definitely conscious about how it generates profit. It’s certainly not about making a quick buck at any cost. It considers longevity as more important than a quick buck, and that requires being fully conscious about other stakeholders needs and requirements. How on earth they could confuse the principles of capitalism, with the poor management of business, through the use of an inadequate measure, I don’t know. We will only make business conscious, or aware, of other stakeholders when our business measures include them.


Capitalism provides the philosophical framework within which business is supposed to work, but it’s up to business to apply the correct management tools to achieve these principles. Business has, in fact, not been following the principles of capitalism, although most mistakenly believe they have. Our business measurement standard, currently, cannot support the principles of capitalism, instead, it supports a form of “profiteering.” It can be argued that as our current measures do not consider the interest of others, and encourage and support the compromise of other measures to generate excessive profits or to prop up profits, this represents a form of profiteering.


It’s time for change. We need a new business measurement standard, one which can support the principles of capitalism, which is about business longevity, achieved through considering the needs of all stakeholders.

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It’s a strange phenomenon how people can latch onto a philosophical concept like capitalism and blame it for the problems we face today when business measures directly responsible for unfavourable outcomes escape scrutiny and blame.
It beggars belief, particularly when it can be logically argued that business doesn’t even follow the true philosophy of capitalism. Read this article to find out more.
 
The evils of capitalism - what nonsense!
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