There can be no greater forces for cohesion in a group than having a common purpose and accepting a common fate, and the extent to which these were forged or even could be forged at the recent Jobs Summit 2018 will ultimately determine its success. To be sure, there were many aspects of the summit that were positive and could indeed create a more employment-friendly environment. (See Moneyweb radio discussion here.) But to put a figure to it such as 275 000 jobs a year is folly. We should have learned by now that there are many forces outside of the measures we can take ourselves that can turn the employment environment on its head.
The only counter we can create against these forces is a flexible economic construct that can absorb the bad times and exploit the good times to the fullest. In a business sense this can only be built on the principles of having a common purpose and sharing a common fate; a subject I have dealt with in depth in the revised version of my last book Common Purpose; Common Fate, (a free pre-publication PDF copy of which can be downloaded here). In some respects, the Jobs Summit and the practical interventions emanating from it fall significantly short of these principles, although they do support them in others.
On the negative side, it is always extremely difficult to find a common purpose at a centralised national level, let alone accept a common fate. One can only find a common purpose by being outward looking; by making a contribution to the outside world – specifically customers, or the needs and wants of others. Customers create jobs – not capital, labour or even government. By its very nature, jobs (and profits and taxes) are an outflow of that. So the concepts of job retention or job creation are inward-looking and mostly end up in a toxic trade-off.
The summit has placed a fresh and welcome emphasis on job retention as opposed to job creation. Unemployment is the outcome of losing jobs faster than we can create new jobs. Fix the problems causing job losses and job creation will take care of itself. We cannot do so by simply making some ‘sacrifices’ of corporate capital in terms of where it invests, who it buys from ,and occasionally waiving a dividend; or by labour being ‘less militant’ in fighting retrenchments. The latter was something of an inconsistent trade-off for not insisting on a retrenchment moratorium.
The cohesion we seek at national level can only be effectively created at an individual company level as these are the wealth-creating cells of our economy. Jobs are created and or sustained by an ability to create wealth, not simply redistributing the wealth itself.
It’s much easier to create cohesion around wealth creation because everyone can subscribe to the company’s common purpose of serving customers, irrespective of individual motives such as making a profit or receiving a wage.
The latter are entirely dependent on the former, and the more these motives can be aligned to the former, the greater its flexibility and strength.
The single biggest flaw in the Jobs Summit, and one that continues to bedevil all efforts to create flexibility and economic strength, is the cop-out by organised labour. It consistently behaves as a beneficiary or recipient rather than a contributor.
Yet, as shown statistically by this illustrated Contribution Account of average company wealth creation and distribution in South Africa, employees are by far the biggest group of beneficiaries when it comes to wealth distribution. However, because the value added itself represents both contribution and reward, it can be argued that that share represents contribution as well, meaning that they are the biggest contributors to wealth creation.
Yet labour’s share is the most rigid and inflexible in its individual units of the wage itself. When wealth creation is lower, other interests, particularly capital, scramble to protect earnings and when unit costs are inflexible you simply have to reduce the number of units. As long as wealth creation itself is under pressure, job losses will be the illogical outcome. I say illogical because faced with a socio-economic crisis of nearly four out of 10 employable people being out of work, it should make sense for labour to be more militant against retrenchments, and less militant if not more accommodating on wages.
At the very least, organised labour should not stand in the way of those enterprises that have such a solid relationship between all of their stakeholders that some sense of common fate, tangibly expressed in fortune sharing, is endorsed by labour itself. But it could even go much further and commit to protecting customer interests at all times and doing nothing that will harm customers, who are the real job creators for business.
Here I must pause and highlight the current Sassa strike, which Nehawu (the National Education, Health and Allied Workers’ Union) claims is against the biometric system that could harm grant recipients. As far as I can recall, this is the first time ever in this country that organised labour goes on strike in the interest of its customers, and not exclusively for itself. Whether a strike is the right method is, of course, may be something of a paradox.
Companies themselves can go a long way in creating labour flexibility – by encouraging an understanding of the value-creating (rather than profit) paradigm of business, and being consistently transparent about the performance of the company in an accounting expression that makes sense to all. The two pillars of optimum wealth distribution are to meet the legitimate expectations of all of the stakeholders and to encourage continued contribution.
These are far more manageable than one may think. All one has to do is change the lens through which one sees business: from an ‘institutional and money’ view to a ‘people and relationship’ view. That’s all. Do that and see what happens.