Business Management Blog

America’s highly touted productivity may be destroying its legendary enterprise and many of its powerful enterprises. Many of the claimed productivity gains in recent years have amounted to productivity losses. Imagine what would happen if you fired everyone in your company and shipped from stock: Working hours would disappear while output would continue. That would be extremely productive, and you’d make a lot of money in the bargain, until you ran out of stock.

Many American companies are running out of stock. They’re trading away their future health for short-term results. Thanks to corporate subservience to shareholder value, which means driving up the price of a company’s shares as quickly as possible, CEOs have been finding all kinds of other ways to cash in the goodwill that accountants and economists have trouble measuring.

Trashing the brand is one easy way. Cutting R&D is another. Then there is managing by the numbers: The CEO decrees the desired results, and everyone else has to run around meeting them — no matter what the consequences.

Most popular of all and closest to shipping from stock, has been “downsizing,” a euphemism for firing operating workers and middle managers left and right to cut costs. At the drop of the share price, even as the company remains profitable, out the door they go: bones thrown to the hungry dogs of the financial community.

Certainly there are exceptions –- companies that have been managed sensibly for the long term. Costco, for example, seems to respect its employees and pay them fairly. But I thought that the shareholder-value philosophy is increasing its hold on publicly traded American companies.

And stories from Europe suggest that the problem is spreading. Think of DaimlerChrysler introducing tiny cars that undermined the legendary Mercedes brand and BP destroying its heavily promoted environmental credentials through cost cutting that led to disasters in Texas and Alaska.

What is to be done? All we need do is change our concept of the world.

Get the analysts off the backs of the corporations. Companies can’t be managed from a securities analyst’s office. Great enterprises are built slowly and thoughtfully by people who are fully engaged.

Take corporate governance seriously. Corporate boards need to be opened up to the voices of people who care about the long-term health of the enterprise, most notably the employees.

Keep the mercenaries out of the executive suites. People in charge of enterprises should care deeply about the firm’s long-term health. Anyone predisposed to demanding a massive personal package that sets him or her apart from everyone else has no claim on the title “leader.”

Treat the enterprise as a community of engaged members. Corporations are social institutions, which function best when committed human beings collaborate in relationships based on trust and respect. Destroy this and the whole institution of business collapses.

American enterprise needs to get out of the impossible state it is now in. It is time to get past productivity.

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