President Barack Obama

Solving the Sustainability Puzzle

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sustainability-boy-world

Gridlock can often derail sturdy locomotives when all the leaders are driving it in different directions.  The Federal government is no exception.  Political in-fighting is the game of the day.  President Obama delivered his State of the Union Address this month which earned mixed reviews depending on their party affiliation. 

Yet, many politicians recognize that America’s massive financial debt isn’t sustainable.   The latest crisis involves sequestration which requires automatic cuts across the government, including defense and domestic programs based on a specific deadline.

 According to a recent George Mason University study, over 2.14 million American jobs would be lost if sequestration took place.  The original concept of sequestration was to create an artificial doomsday that would force both political parties to work together.  It didn’t work!

Senator Rand Paul of Kentucky made a plea for deep spending cuts and congressional term limits:  “The path we are on is not sustainable, but few in Congress or in this administration seem to recognize that their actions are endangering the prosperity of the nation.” 

If the federal government, with its massive resources, is  unable to deal with the issues of sustainability, what hope do other smaller organizations have then?  “Instead of negotiating, party leaders were busy issuing ultimatums and casting blame,” noted Washington Post columnist Lori Montgomery.

With the ever increasing chaos and complicity of business operations to achieve a profit, the concept of sustainability becomes more than an Ivy League Business School buzz word.  The speed of change and the constant bombardment of market problems continue to haunt business executives who hope to survive another crisis situation.

Organizations that do not understand this necessity soon find themselves looking at the behinds of other organizations that are in front of them. In order to survive, today’s business leaders need to understand the market environment, recognize their strengths, pursue market opportunities, and obtain continuing profitability while taking a long-view perspective of their operations to achieve sustainability.

More and more organizations recognize that sustainability is more than keeping the environment clean.  Yet, the concept of sustainability is often difficult to define. According to the U.S. Environmental Protection Agency, sustainability is defined as “everything that we need for our survival and well-being depends, either directly or indirectly, on our natural environment.” 

Consequently, one person may view sustainability simply as the ability to use resources continuously without any long-term depletion.  Andres Edwards, author of The Sustainability Revolution, breakdowns sustainability in several  key components which are  ecology/environment, economy/employment, equity/equality, and education.

Some businesses executives quietly argue that profitability supercedes many other priorities such as the environment.  Edwards disagrees: “Creating a healthy environment, free of pollution and toxic waste, and simultaneously providing the basic for a dynamic economy that will endure for an extended period are viewed as complementary rather than conflicting endeavors.”

 However, are there many things that are possible to be sustained without proper planning for them?  In order for businesses to avoid these conflicts of interest between capitalism and the sustainability model, visionary leaders must communicate their expectations to all members of their organizations and throughout their supply chain. 

Discuss the concepts of sustainability as it relates to your profession.

© 2013 by Daryl D. Green

Sustainable Job Creation

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Several weeks ago, I was exercising at the YMCA downtown.  I was starting my workout at the bench press and noticed a young man lifting a lot of weight (not typical for this recreational area).  He asked me to spot him with this heavy weight. I learned that he was a new professor at Lincoln Memorial University Duncan School of Law. 

I mentioned I was serving as an adjunct professor for the same school in the School of Business. We talked about various issues—as we both tried to complete our workout at the same time.  As I walked him through my strategy of giving MBA candidates practical application for studies, he asked me a question that stopped me in my tracks. He asked me what would I advise President Obama about the current financial crisis.  I didn’t have an immediate answer. I have always tried to deal with this economic crisis at the local level.  Yet, I knew what worked locally might not have the same results nationally.  Therefore, the answer was very complicated, especially regarding job creation.

We are in troubling times. In August of 2011, our nation posted no job gains.  This economic slump is historical since it’s the first time since World War II that the economy has had precisely net zero for job creation for a month. Retail, manufacturing, information services, and construction all lost jobs.

Furthermore, government employment fell by 17,000 as state government begun their budget exercises which included downsizing government employees including teachers and policemen.  According to some financial experts, the economy must add 13.7 million jobs over the next three years (381,000 each month) to bring unemployment from a current rate of 9% to 6%.

 With over 15 million people unemployed in our nation, worried U.S. citizens look to their government and/or business leaders for job creation. Is this faith misplaced?   The concept of job creation is a hot buzz word among politicians and media pundits.  Last week (September 8, 2011), President Barack Obama announced a ‘job creation jumpstart’ plan before a Joint Session of Congress.  A $447 billion American Act proposal, consisting of infrastructural upgrades, was proposed.  Yet, partisan politics make this job creation initiative an uphill struggle. Furthermore, many people doubt that the government can create any sustainable jobs. 

 

Other individuals look to businesses to create millions of jobs because they are considered commensurate with job creation.  They argue that giving businesses major tax breaks and other financial incentives will encourage them to create millions of jobs. However, anyone taking a basic course from the School of Hard-knocks understands that businesses primary mission is making profit for their investors.  

Financial experts applaud major outsourcing initiatives and layoffs by corporations because they feel it will lead to greater profitability for shareholders.  However, John Gamble and Arthur Thompson, authors of Essentials of Strategic Management, suggest that a low cost strategy can backfire on a business. 

They note, “Perhaps, the biggest pitfall of a low-cost provider strategy is getting carried away with overly aggressive price cutting and ending up with lower, rather than higher, profitability.”  Despite an economic crisis, many U.S. corporate profits hit all-time highs at the close of 2010.

According to the Federal Bureau of Economic Analysis, corporations reported an annualized $1.68 trillion in profit in the fourth quarter. The previous record (without being adjusted for inflation) was $1.65 trillion in the third quarter of 2006.  For example, General Electric posted worldwide profits of $14.2 billion, while JPMorgan Chase’s profits went up 47%.  The financial firms were some of the biggest winners.

While the federal government provided aid during the economic downturn to save many of these ‘too big to fail’ institutions, these firms did not return the favor.

They found little incentive to provide loans to struggling U.S. businesses to assist in job creation. Their investors applauded their actions since it moved toward greater profitability. Yet, the public frowned on their self-servicing actions which were interpreted as market driven.

Given this financial crisis in America, there are two concepts at odds with each other.  They are economic viability and one’s quality of life.  Economic viability relates to creating jobs that are necessary for a business.  One’s quality of life involves an unwritten standard of living for a citizen to live reasonably comfortable given his or her work effort.   

This reality for many organizations has meant outsourcing high-cost activities such as manufacturing, to countries abroad like India, China, and more underdeveloped countries. 

If it costs $20 an hour for customer service in the U.S., would a business give up sending that work abroad for $1 per hour?  Therefore, companies that have a focus on a low cost strategy will continue to search for the newest lowest labor market to be competitive. 

Yet, this reality drives down the wages for US workers and the quality of life for U.S. citizens.  Therefore, the concept of job creation as it relates to sustainability is a difficult problem for any nation to solve.

As U.S. businesses deal with globalization and hypercompetition, is it possible to achieve economic viability and a good quality of life at the same time for U.S. citizens? If so, how?

© 2011 by Daryl D. Green