This past weekend I watched a CEO summit on Bloomberg Television. The idea was to bring on CEO’s of leading global organizations to discuss the rapidly approaching fiscal cliff and for these global business leaders to provide some insight into how they feel these delicate matters need to be treated.
The panel was comprised of a number of high power CEO’s including:
Laurence Fink (Blackrock)
David Cote (Honeywell)
Robert Greifield (Nasdaq)
Scott Davis (UPS)
For a summary and review of the event you can visit here.
I watched with a conflicted combination of interest and apathy as I have grown increasingly tired of all of the rhetoric and the complete lack of progress that we have made in the past several years. However as a proud citizen and someone who genuinely wants the best for America I was definitely interested in what these gentleman (Yes, all men except the moderator) had to say.
While I think it is wonderful that our global business leaders took the time to discuss their ideas to fix our biggest problems. I also felt it was sort of a double edge sword as most of the world cannot relate with these leaders nor do they actually see them in a positive light. Regardless of how they “Should” be seen, (Many F500 CEO’s are brilliant and Admirable) I have always said that “Perception is Reality,” and the overwhelming perception of Fortune 500 executives isn’t positive . Again, not saying I agree or disagree, just stating the facts.
So I wanted to take a crack at some of the most gigantic gaping issues that troubles our government and economy and share them with my readers. Shedding just a little light on how a “Main Street” CEO sees the world and perhaps share a few business lessons that executives can learn from watching the US government flail around when trying to balance the budget.
Disclaimer: Before I go further with this analysis, I feel it is important to note that I am not taking any sides here. I refuse to even dip my toe in the water of partisan drama. I’m pretty sure that partisan politics are a substantial contributor to our country’s troublesome fiscal position.
Here are 5 “Tell it like it is” business and leadership lessons that every business can learn from our governments continued challenges with implementing sound fiscal policy.
While I understand the needs for a two party (or more) system. There is a fundamental flaw when trying to move any policy forward. In business when leadership is in opposition, it is ultimately bound together by one common goal. Usually being the desire to drive the success of the business forward in line with the vision. In the government, there is no shared vision. Even within the party lines the interests at the highest level aren’t in common making it nearly impossible to make any real change. Until our leaders on both sides of the aisle determine at the highest level that reform is needed and that it is going to take sacrifice both in revenue and entitlements nothing will move forward the way we need it to.
The Lesson: No common goals, no common vision…no meaningful progress
One of the biggest flaws I have always seen with publicly traded companies is the short term earnings requirements to keep shareholders happy. Most businesses operate far more than a quarter out, however when you are publicly traded you have to think very short term to keep the equity holders in check. In government we have a 2-4-6 year revolving door where more than 25% of the time in office is usually spent campaigning to stay in office. In a world that is often paralyzed by change, we give our leaders in congress just two years to make meaningful change or they are out. While I like the expectation of change, the short terms and time spent campaigning doesn’t give enough time to fix the problems. It is hard to make substantial change in a small business in just a year or two. How in the world can we fix a 16 trillion dollar mess in that period of time? We can’t, and that is why we haven’t.
The Lesson: Real change takes time. The results you see today are often a reflection of the past years and months. Be sure to attribute this appropriately when analyzing your business as well.
If you knew your business was going to lose money at break neck speed next year under your current operating plan would you just continue to operate that way? Of course you wouldn’t, but our government does. That is the benefit of being able to print money and borrow recklessly. While I have said that change of this magnitude does take time, this mistake has been made and repeated annually for as long as most people can remember. The US Government has the great benefit of knowing (Roughly) its annual income which most businesses do not. Yet still, they plan and budget to spend at paces that far exceed the income with no end in sight. With thanks to our divided leadership all they need to do is pin the blame on the other side and we the people are the ones left holding the bag. All the “Blamestorming” that goes on from party to party is merely a wag the dog tactic while party leaders from both sides stay proverbially fat and happy. No real business leader would operate this way (even if you could stay in business).
The Lesson: You have to have a model that meets your operating and profitability goals. A broken business model will yield a broken business.
Keep It Simple Stupid
Have you seen our tax code? Thousands upon thousands of pages of which most if not all of us couldn’t comprehend. The only thing between our government having full predictability over revenues is our ridiculous tax code, which I and many other smart business folks benefit from. The politicians have the average American fooled about lowering and raising taxes. Thanks to our highly complex tax code it is actually easy to pay very little in taxes. All of which is completely legal and most of which rarely benefits the lower and middle class. In business and innovation the most successful leaders will tell you how simplicity is truly the most difficult thing to accomplish. Our government has proven us right with their deliberately overt tax code that allows the rich to stay rich not because of the published tax rates, but because of the gaping loop holes which prevent them from paying most of those taxes anyway. Don’t be fooled by either side, your interests are not their interests. If business leaders try to be this (not) transparent, they would never earn the trust of their customers or employees.
The Lesson: Simplicity is an art and a science. It is easy to make business complicated, but the results won’t be good.
The Real Loser
In the end you know who the real loser is? It is all of us. Every single person who consumes products and services of any type. What most people fail to understand or at the very least choose to ignore is that the costs and taxes imposed on the top earners and businesses as well as the benefits provided to those in need are ALWAYS paid for by YOU. Who is you? It is every American that is paying their share. Whether it is through sales tax, income tax or some other form of tax, you pay. I remind you, this isn’t a partisan thing. I know some folks will say that this sounds like a “Slant-Right” view. It isn’t. It is simply the truth businesses will always find ways to meet their earnings targets. Whether those are wall-street targets or their local bankers targets, maintaining their profitability is key. It doesn’t matter if it is the wage of a line worker, the pay of the executive, or the commercial during the Super Bowl, those costs have to be covered with offsetting revenues. Where do those revenues come from? They come from your business, your household or your taxes.
The Lesson: Don’t be fooled by “The Spin.” Remember the duck…Looks like, quacks like…probably is!