Cultivating a new business culture

“A few men own capital, and those few avoid labour themselves, but with their capital, hire or buy another few to labour for them. The prudent penniless beginner in the world, labour for wages for a while, saves a surplus with which to buy tools or land for himself; then labours on his own account for another while, and at length hires another beginner to help him.”– Abraham Lincoln 1859.

It is no secret that business success today revolves largely around people, not capital. In most industries people-costs are higher than capital costs. People-centric businesses are those with a high ratio of employee costs to capital costs, and where there is limited spending on activities such as research and development aimed at generating future revenue. {{more}}This situation would be typical of most business entities operating in St. Vincent and the Grenadines. But people costs exceed capital costs in a wide array of other businesses as well: software products, airlines, telecommunications services, hotel, restaurants, hospital management etc. While it is clear that managing people is a key task for any company, in a people-centric business this task becomes central to success. The fact that employees represent both the major costs and are major drivers of value creation, leads to the conclusion that people management initiatives which result in even small changes in operational performance, can have a major impact on returns.

If success in capital intensive business comes primarily from making the right investment decisions, success in a people intensive business comes from hiring the right people, and putting in place processes and structures that make them productive. In most businesses, the majority of employees are engaged in activities – selling cars, manufacturing computers, office equipment, and consumer durables – that create value for their company. In some businesses however, a substantial percentage of employees become engaged in activities such as, developing a new generation of software or researching a potential new drug, all of which are aimed at creating future value, through the development of intellectual capital or some other intangible asset. A business that is not only people intensive but also future oriented is different in some important respects from people oriented business that focus on generating current value. For one thing, employee performance is harder to assess using measures based on annual financial accounts, as the current year’s work may create value only in subsequent years.

Most businesses today subscribe to the concept of a homogeneous workforce, but increasingly the view is held that a homogeneous workforce can be a hindrance when it comes to finding break-through ideas. If you want innovation, try going in the opposite direction; hire for diversity then look for the connection between the divergences. Innovation is best fuelled by intellectual cross-fertilization. The prevailing view is for knowledge to become more specialized; as we are told that in order to achieve something we need to dig narrowly and deeply into our subject matter, to become experts. Many intellectuals – doctors, lawyers, scientists, economists go to conferences of likeminded people to deepen their specific knowledge. But that kind of enhancement, critical as it is in certain circumstances, may not always deliver the real moments that can transform an understanding. People digging in their own tunnels may just end up stuck at a dead end. By contrast people who love to step into the intellectual unknown, to see what else is happening in physics, art, the environment, biology, computing, philosophy etc., are the ones who feel the stimulus to innovate.

So it may be more important for executives to accrue broad knowledge than deep knowledge. True innovation and strategic values are to be found more and more in the synthesizers, the people who draw together stuff from multiple fields and use it to create an understanding of what should be done. When disciplines are intermarried and placed in their larger universal context, they gain greater meaning. The most significant innovations will emerge not from pushing the boundaries of what you already know, but from figuring out where you fit in the vast knowledge that you don’t have. It is when an economy is in depression or in a state of transition that one should be thinking ahead or dreaming of the future, for once the economy takes off again it will be too late to start thinking about what to create. If indeed, as has been voiced in some quarters, the economy of St. Vincent and the Grenadines is in a stagnant state of underdevelopment, irrespective of the growth in GDP that is recorded from year to year, then a major investment programme, such as the one envisioned for the development of the Argyle Airport, could just be the trigger to unleash diverse developmental opportunities in the near to medium term. Businessmen, large and small should now be thinking and planning ahead to take advantage of some of the opportunities which will present themselves.

In any new emerging business culture, risk should be seen not as a threat as in the physical world, but as an opportunity as in the financial world. It is important also that we should develop social safety nets that will allow society to take all the risks it can afford and earn the highest possible return. It is not too farfetched for us to be thinking in some small way of leveraging some aspects of our intellectual capital as has been done elsewhere. Sports teams like Italy’s Lazio soccer club and Spain’s Real Madrid have raised $25m and $50m respectively through the issue of bonds secured against future gate receipts. Recording artistes David Bowie and James Browne have raised $50m and $100m respectively, secured by future royalties on their records. The West Indies Cricket Board could similarly have sought to raise $100m for developmental expenses, with the debt being retired in one lump sum payment at the end of 2007 with the proceeds from the Cricket World Cup.

Our countries in the Caribbean may be underdeveloped, but our minds certainly are not. Let us all work together towards the cultivation of a new business culture to take St. Vincent and the Grenadines forward in this new millennium.