Sorry Friedman, The Talent Wave is Here

By Thomas MacIntosh  |  

5.8 min read

Sorry Friedman, The Talent Wave is Here.

The Beginning of the Corporate Raider

In 2006, Milton Friedman was bestowed the honour of being called one of the “most influential economists of the 20th century,[1]” by a magazine that knows one or two things about economics.

The Economist had some pretty solid points to back this claim. Friedman broke from the chains of academia and gained control of the corporate ship, spinning the steering wheel 180 degrees.

Friedman, the sworn intellectual enemy of famed British economist John Maynard Keynes, was the leader of the now famed neoclassical Chicago School of Economics. Friedman popularized monetarist beliefs, small government, and a host of other economic theories that won him a Nobel Prize in 1976.[2]

However, perhaps one of his greatest marks on the corporate world was a single quote in a September, 1970 New York Times article. A quote that rocked the foundational beliefs of the corporate world, and gave way to the “corporate raider,” of the 1980s.

“There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”[3]

Friedman finished by saying anything else is “pure and unadulterated socialism”[4], the Economist-equivalent of cursing out the Queen.

Pre-Friedman tycoons were not so…tycoon-ish. Robert Johnson, founder of Johnson and Johnson, was cited saying something in his company’s credo that sounds like it’s taken straight out of a 21st century startup:

“We are responsible to the communities in which we live and work and to the world community as well. We must help people be healthier by supporting better access and care in more places around the world. We must be good citizens — support good works and charities, better health and education, and bear our fair share of taxes. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.”[5]

This was the case for a great deal of businesses in the world. Henry Ford paid his line-workers $5.00 a day, instead of the conventional $2.50, so they could afford the car they were assembling, (although there were conditions in the pay increase, it still was net-benefit to the workers.)[6]

Although he probably didn’t broadcast it, Ford had another reason to increase his worker’s pay; he had a 73% turnover rate. Increasing pay was a good way to decrease that number, and increase his worker’s productivity, (something he did, increasing car production by 32,000 units the year of the pay increase).

A few decades later, Friedman entered the scene and spurred shareholders to demand that their company stop putting money into CSR initiatives, and instead focus solely on increasing their profits.

Corporate raiders began to buy up companies and slash anything wasn’t directly profitable. The lean company became the American enterprise. One reporter at the Financial Times wrote:

“Over the past year I have had business leaders lament to me that no Wall Street analyst ever asks them about their efforts to tackle climate change; I have seen companies such as Merck and Johnson & Johnson remind investors that their pre-Friedman founders believed profits would only flow if they attended to other priorities first; and I have heard Unilever’s outgoing CEO Paul Polman ask provocatively: ‘Why should the citizens of this world keep companies around whose sole purpose is the enrichment of a few people?”[7]

The New Talent Wave

But in the 2010s, that notion began to change. The growth of news on social media, increased awareness of issues pertaining to the environment, and a rise in calls from governments for CSR has created a business environment that is swinging back away from Friedman.

And it isn’t just calls from the public.

Invest In Your Employees, Not in Gimmicks

In August, 2019, 200 CEOs from top companies such as Apple and Amazon called for businesses to look at all stakeholders, not just investors. Their call was to evaluate environmental impact, effects on consumer, and, just like Henry Ford, invest in employees.

Now, when mentioning investing in employees, the typical response is to add a new coffee machine, bean bags, or some other stereotypical startup gimmick to the office.

But instead of investing in things that make the work more, “bearable,” what if employers could invest in simply making the work itself more conducive to an individual work style?

Over the last 100 years, personality assessments have evolved greatly. Science can no longer just pin you as left-brain or right-brain, or tell you what your colour is, but instead, give you a detailed breakdown of how you like to work, what engages you in your work, and what even direct strategies managers can take to make your job more you.

This is where the modern manager sees both a business and management strategy. A Society for Human Resources Management study in 2017 found that low-level employee turnover can cost over $5,500 CAD per employee who leaves. Unhappy employees leaving = a thinning bottom line. At the same time, an engaged employee doesn’t turnover, and will produce more, some studies have pinned it at 20% more productivity.[8]

Assessments like Boston-based Predictive Index are no longer just the assessment, the analytics can go even further to accurately predict what an employee needs to stay motivated and engaged in a job. So, instead of now knowing that your employee is the theoretical colour “orange,” and having a vague idea of who will show up, managers can run tests, and five-minutes later be creating a better individual working world for each of their employees.

Friedman centered a business’s goal on profit. And while his point holds true, profitable firms create income for employees and the general economy, simply taking into account the  employees’ general engagement in their job can pay dividends far beyond the bottom line. Invest in your employees work world, not in stuff for your employees’ work world.

To get a free trial of The Predictive Index assessment for your next hire, email Lauren Danes at ldanes@predictivesuccess.com or call (905) 430-9788 x 105.

Sources:

[1] “An Enduring Legacy.” The Economist. The Economist Newspaper, November 17, 2006. https://www.economist.com/news/2006/11/17/an-enduring-legacy.

[2] Chappelow, Jim. “Milton Friedman.” Investopedia. Investopedia, August 29, 2019. https://www.investopedia.com/terms/m/milton-friedman.asp.

[3] Friedman, Fulton. “A Friednzan Doctrine‐.” The New York Times. The New York Times, September 13, 1970. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html.

[4] Ibid.

[5] “Our Credo.” Johnson and Johnson, December 14, 2018. https://www.jnj.com/credo/.

[6] Worstall, Tim. “The Story of Henry Ford’s $5 a Day Wages: It’s Not What You Think.” Forbes. Forbes Magazine, May 21, 2012. https://www.forbes.com/sites/timworstall/2012/03/04/the-story-of-henry-fords-5-a-day-wages-its-not-what-you-think/#58807217766d.

[7] Edgecliffe-Johnson, Andrew. “Beyond the Bottom Line: Should Business Put Purpose before Profit?” Financial Times. Financial Times, January 4, 2019. https://www.ft.com/content/a84647f8-0d0b-11e9-a3aa-118c761d2745.

[8] “2017 Talent Acquisition Benchmarking Report.” Society for Human Resources Management, 2017. https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/2017-Talent-Acquisition-Benchmarking.pdf.

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