By Jerry Schuitema.
There are a number of follies in the intensified hype around job creation. One that came from the recent job summit is setting some target, albeit vague, of creating some 275 000 000 jobs a year. We should have learned by now that there are many forces outside of measures we can take ourselves that can turn the employment environment on its head.
Another is an attempt to create some form of tangible cohesion between representatives of groups that are so widely fragmented themselves. There can be no greater forces for cohesion in a group than having a common purpose and accepting a common fate, and the extent to which these can be forged in efforts such as the job summit will ultimately determine its success.
The only counter we can create against outside forces is a flexible economic construct that can absorb the bad times and exploit the good times to the fullest. In a business sense this can only be built on the principles of having a common purpose and sharing a common fate; a subject I have dealt with in depth in the revised version of my last book Common Purpose; Common Fate (a free pre-publication PDF copy of which can be downloaded here).
One can only find a common purpose by being outward looking; by making a contribution to the outside world — specifically customers or the needs and wants of others. Customers create jobs – not capital, labour or even government. By its very nature, jobs (and profits and taxes) are an outflow of that. So the concepts of job retention or job creation are inward looking and mostly end up in a toxic trade-off.
Unemployment is the outcome of losing jobs faster than we can create new jobs. Fix the problems causing job losses and job creation will take care of itself. We cannot do so by simply making some “sacrifices” by corporate capital in where it invests, who it buys from and occasionally waiving a dividend; or by labour being “less militant” in fighting retrenchments. The latter is something of an inconsistent trade-off for not insisting on a retrenchment moratorium.
The cohesion we seek at national level can only be effectively created at an individual company level – the wealth creating cells of our economy. Jobs are created and or sustained by an ability to create wealth, not simply redistributing wealth creation itself. It’s much easier to create cohesion around wealth creation because all can subscribe to the company’s common purpose of serving customers; irrespective of individual motives such as making a profit or receiving a wage. The latter are entirely dependent on the former, and the more these motives can be aligned to the former, the greater its flexibility and strength.
The single biggest drawback that continues to bedevil all efforts at creating flexibility and economic strength, is the cop-out by organised labour. It consistently behaves as a beneficiary or recipient rather than a contributor. Yet, as shown statistically by a national Contribution Account© of average company wealth creation and distribution, they are by far the biggest group beneficiaries in wealth distribution. But, because value added itself represents both contribution and reward, it can be argued that that share represents contribution as well; meaning that they are the biggest contributors to wealth creation. Unfortunately, that part is the most rigid and inflexible in its individual units of the wage itself. When wealth creation is lower, other interests, particularly capital, scramble to protect earnings and when unit costs are inflexible you simply have to reduce the number of units.
As long as wealth creation itself is under pressure, job losses will be the illogical outcome. I say illogical because faced with a socio economic crisis of nearly 4 out of ten employable people being out of work, it should make sense for labour to be more militant against retrenchments, and less militant if not more accommodating on wages. At the very least, it should not stand in the way of those enterprises who have such a solid relationship between all of its stakeholders that some sense of common fate, tangibly expressed in fortune sharing, is endorsed by labour itself. But it could even go much further and commit to protecting customer interests at all times and doing nothing that will harm customers, who are the real job creators for business.
Companies themselves can go a long way in creating labour flexibility: by encouraging an understanding of the value-creating (rather than profit) paradigm of business, and being consistently transparent about the performance of the company in an accounting expression that makes sense to all. The two pillars of optimum wealth distribution are to meet the legitimate expectations of all of the stakeholders and to encourage continued contribution.
These are far more manageable than one may think. All one has to do is change the lens through which one see business: from an institutional and money view; to a people and relationship view. That’s all. Do that and see what happens.
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