A better business model

For as long as I can remember, we have analyzed a typical business model in the shape of a pyramid or triangle. The CEO, CFO, and COO are at the top of the triangle, followed by the Board of Directors, Controller, Vice Presidents, Supervisors, and at the bottom or base of the triangle are workers or staff. The entire triangle included everyone in an organization. It is also subject to the same model even within the departments of a company.

The figure shows that the highest percentage of people are closer to the base of the figure. In fact, if you consider most organizations, clubs, government, etc. they all seem to flow from a top-down direction where the individuals of authority at the top set policy and exercise power over the larger group below them. The mass at the bottom is responsible for making everything work, and you would think that they would and should bear the greatest responsibility. It doesn’t work that way even though the people below make it all happen. They put in place all the policies, procedures and orders that were transmitted to them, good or bad.

In this business model, people at the bottom are sometimes forced to get involved in situations that can be wrong, offensive, inappropriate, and sometimes illegal. In this system, you may be subject to these inequities and cannot speak out for fear of losing your job and your benefits if you try to take action to correct the inequity. In this model, you may be forced to compromise your work ethic in favor of a lower standard. The result may be an inferior product or service introduced to the market. In any case, this work model can generate discomfort, frustration, injury and, sometimes, violence.

It is fair to say that inequities in this model do not exist in all situations. In everything you do, communication, cooperation, and coordination in life are necessary to achieve everything you want. The lack of this is now very evident in business, government and society in general. It seems that more products are being recalled than before. The Democratic and Republican parties in the United States often seem more obsessed with belittling each other than focusing on the needs of the people. What is the price you pay for profitability and power?

How many times have you become aware of inefficiencies in industry, government, and society where the public is knowingly given an inferior product or service? We are seeing this in more frequent product recalls. We find toxic chemicals in food and a variety of products, as well as in medicines. How many times do we see, hear and read about directives that seem contrary to common sense? and policies that favor one over the other. What happened to the common good?

In recent years, greed at the highest levels of corporations, organizations, and government has been exposed to the brink of the unreal. Government officials in the nearby city recently voted for themselves salary and pension increases that were extremely excessive and then passed legislation so that it would not be seen by the public. We frequently read about company directors making tens of millions of dollars in annual salaries and even more in performance stock benefits while employees are being laid off. It’s no wonder why the richest one percent of the population receives most of the income in the US.

I am in favor of executives being paid for their services, but there are now too many imbalances where overcompensation has become an acceptable practice. How can you justify an annual salary of ten million dollars when a company is losing money? I realize that these executives are under extreme pressure to show profit, but at what cost? Downsizing and restricting employee benefits are common tactics to remedy lower profit margins. It’s about attacking the main people in a company who do the most to bring a product or service to market. Everyone should share the cutouts, not just the ones at the bottom of the triangle.

Many of the inequalities involve publicly traded companies. Senior executives are under pressure to show a good profit to keep their share price high to satisfy shareholders and also guarantee more personal compensation benefits. You can increase profits by rationalizing fixed costs (cutting wages, inventory, accounting gimmicks) so far without the business going bust. This is happening now in our sluggish economy, where debt financing has also further aggravated our economic situation. Yes, debt financing is a common and necessary business practice, but not when questionable sources of payment exist, and a government bailout should NOT be the first alternative to keep them running.

What are we going to do? Think about what would happen if we turned the pyramid or triangle upside down. Now, the workers (staff) are up and the executives are down. In this model, executives still receive sufficient compensation for their services, but not excessive. The input and the needs of the workers now become more important. They are more involved in the profitability of the business and their voices are more easily heard. Their needs are addressed in a more timely and efficient manner because all communications now link directly to them and give them a greater share in the overall business operation.

There is a large industrial company in Brazil that made this change and a book was written about its success. A company in Argentina also made this change and went from closing to a prosperous entity. Why isn’t more done? Is it a greed factor to protect the rich at the expense of the middle class? Does the leadership fear giving lower-class workers too much power to set policies? We really shouldn’t judge.

In the US, we have the freedom to choose how to do business within legal guidelines, and that is how it should be. Given that the middle class has all but disappeared due to decades of using it to finance the economy, it may be time for a change. It’s time for the middle class to reassert itself, and a good way is to get more companies to adopt the inverted pyramid or triangle as the business model of choice.

Possibly, with increased support for charities, we can limit government involvement in areas where it does not belong. This will allow our tax dollars to go further and will also allow the government to downsize as well.

What does it take to change your attitude towards a more equitable system in which people are not left behind? I am convinced that this can be done in the private sector, and the inverted pyramid business model can be a good way to start the changes necessary to stabilize our economy and help the middle class to recover and become the force again. central to the economy.