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The New Model for Business

by Thomas Fee    

The History of Business

In the beginning there was the Hunt and Gather Economy. This economy lasted for thousands of years. Nobody really knows how long. The Hunt and Gather Economy created the need for teamwork and the Teamwork Model was born. In the coordinated activity of hunting, there were special skills employed to locate, transport and utilize the resources provided by nature. It was a workable model based on survival needs.

Then, for about ten thousand years, there was the Agricultural Economy. This economy demanded a new model for business. The original model was modified to utilize more sophisticated equipment, accommodate seasons, apply more efficient techniques and meet other requirements to be successful in the business of agriculture. The key element of change in this time period was from a primary mode of survival to the discovery of the basic business model of producing something for a profit. The Profit Model demanded that one produce something for less than for what it could be sold.

This later evolved into the Entrepreneurial Model which still exists today. This model was created when someone decided that there was a better way to do something than the way it was being done and risked whatever they had on the chance that they could make a profit doing it. Free enterprise was born with this idea.

Sometime during all this business activity the concept of government came alive. All government is built on a Political Model of some sort. The difference between the Political Model and any business model is that Political Models are not designed to create efficiency or profit. History will bear out that there has rarely been a financially self-supporting political entity of any kind. The reason is that this is not their purpose. Their purpose is not to create monetary profits.

With the growth of certain businesses, the Bureaucratic Model became popular. This model, although well suited to government, because there is no profit incentive, was not well suited to business. The nature of bureaucracy is to build layers of insulation between upper management and their constituency. This is not good business practice because it creates lack of responsiveness to the customer. This may cause frustration with government, but it is fatal to the long-term profitability of a business. Businesses who create large bureaucratic operations become noncompetitive and either go out of business or are forced to re-engineer their organizations to compete.

Could it be that we do not learn from history? Now that the Bureaucratic Model is finally recognized to be a detriment to business, it is being replaced with an even more problematic Political Model.

What Is the Political Model?

The political model is a model that, as its name implies, is based on influence rather than creation of value. A business model that is not based on value will eventually become unprofitable. So, how does this model look in American business?

In organizations there is a formal structure designed to identify function and rank. This is illustrated by the organization chart. What these charts don't tell you is who has influence in an organization. Those with influence in the organization make up its political structure. This concept has become so widespread that there are methodologies practiced by businesses that teach their salespeople how to uncover this shadow organization in their prospects for purposes of using it to gain competitive advantage.

Internally, organizations develop cultures that are nothing more than a smoke screen for those at the highest levels of influence in organizations to impose their values on employees. The effect of this model is that contribution of value is weighed by each employee against their acceptability as a member of the culture. This approach has a negative effect on individual initiative and has caused a breakdown of the social contract between employer and employees. Organizations that place greater emphasis on politically correct behavior than on results are headed for trouble. How many are in this condition? The answer is to calculate how many organizations are spending their time these days re-engineering to compete instead of competing by delivering value.

Re-engineering activity consumes many organizations. The problem is not developing a better model that will deliver value; it is the resistance put up by the Political Model in an effort to perpetuate its own survival. For example, a large cable company recently delayed the installation of many new cable subscribers because a purchase order was held by someone who wanted the blame to fall on another person in the company who didn't process the order properly. The blame was laid, but thousands of subscribers paid the price by receiving late installation.

Another company published a career path for all employees. The problem was, that it was politically incorrect to promote from within, nullifying the ability to implement such paths. The owner of this 400 million dollar company commonly hired people on a whim, and everyone in the company was afraid to push too hard to promote their own people for fear of offending the big boss. The career path program was developed by those who were politically correct and was without substance. It took months of meetings and many resources to produce a completely meaningless program that had no value to the employees. The program was introduced and never implemented since it was culturally unacceptable to those in power.

What's Wrong With the Political Model? The biggest problem with this model is that it is based on influence rather than contribution of value. If an employee wants to succeed, the primary skill required is to manage up in the organization. Since this is not everyone's cup of tea, the person whose efforts are customer focused goes largely unrewarded.

Political models avoid extinction at all costs, regardless of the ongoing usefulness of their purpose. (Remember the TVA, Social Security and Medicare?) They tend to outlive their usefulness even when alternatives offer better solutions in a changed environment. The primary function of any political model is self-perpetuation.

The Political Model creates redundancies and duplication of effort. The competition for recognition, rewards and resources in the political organization is paramount. That's why it takes six committees to come up with what a single work unit used to produce.

Because the political model promotes self-interest instead of value for the customer or organization, those who tend to get promoted are those with the strongest personal agendas. Those who end up running the organization do so in their own self-interest without regard for those who will lead it into the future. They focus on their own rewards and the rest be damned.

The problem is that you can't continue to do the wrong thing and succeed. Many large organizations are struggling to survive because they have become so political they completely stifle their own ability to succeed. Unfortunately, like any political organization, they resist change and radical change is nearly impossible.

Are There Benefits to the Political Model?

The best thing about the Political Model is that it is giving rise to a new entrepreneurial spirit in American business. Many more than ever are giving up their cushy corporate existence to become the mavericks that will lead us into the future. Even large organizations are "breaking up" into smaller, more value-focused entities.

People are learning that formal models don't tell the whole story and are looking under the covers to find out who companies really are and what they do best.

The customer is still the boss no matter what the model. This message is loud and clear. Customers are forcing organizations to change because they don't care what the model is; they only care about being served. More effective competitors are filling the void where traditional ones won't deliver. There are more learning organizations now than before because they must learn to survive. This is good because learning organizations provide opportunities for new ideas that benefit customers and fuel growth.

The Political Model isn't all bad. Influence is certainly one aspect of doing business. But when it interferes with the creation of value for the organization and those it serves, it can be a detriment to success.


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Thomas Fee tomfee@procentral.com