Lately, like many of us, I’ve been thinking a lot about climate change. I can’t help but notice as I work with various teams, the similarities between our current climate crisis, and a crisis of time and attention going on inside organizations. The pattern I see is one of false cost allocation. It has impacted the global environmental climate, and I believe a similar phenomenon applies to the climates within our organizations and societies.
The Environment: False Cost Allocation in 3 Stages
Stage 1: It’s All Free!
We start by seeing that the local impacts of extraction/exploitation are absorbed readily by the local system. For example, a single campfire’s smoke seems to disappear into the vast expanse of the sky. Janine, warming herself by the fire (the principal beneficiary of the exploitation) doesn’t appear to have any negative effects on those around her. The cost appears to be based solely on the effort required by her to gather and burn fuel.
Stage 2: It’s Free tor the Org.
As more and more individuals avail themselves of the resource, the local impacts are not readily absorbed by the local system and need to be absorbed by the global system at the cost of another element within the local system. A series of adjacent factory chimneys produce gases that hinder the growth of vegetation in the immediate vicinity which in turn impacts food availability/quality. Unlike her neighbours, Janine, the factory owner is able (due to profits) to avoid experiencing the negative impacts on the local system by residing elsewhere and /or purchasing (more expensive) food elsewhere.
Stage 3: Turns out it’s NOT Free.
As more and more local systems are exhausted of their exploitable resources in search of higher profits, networks of these local systems have a greater and greater impact on local systems further afield. The reach of the network trends towards global cumulative impacts. Pollution not absorbed by several adjacent local systems travels globally and impacts the environment of distant countries and continents, pokes holes in the ozone layer, and melts the polar ice cap. The principal beneficiary of the exploitation is no longer able to avoid the real cost of that exploitation and it is impacting them as well as others.
Regardless of whether the cumulative negative impacts have been caused solely by human activity, it is widely accepted that CHANGE in human activity can reduce and perhaps reverse the current cumulative negative impacts affecting us all. Our continued unwillingness to see the true costs of our actions will only continue us down the path of further accumulation of global impact.
Personal Time and Attention: False Cost Allocation in 3 Stages
This same pattern can be seen in the work environments that most people experience today.
It’s All Free! (Local impacts are absorbed by the local system)
Increasing demands on an individual’s time and attention by an organization are compensated for through the time and attention from a large and involved social fabric. This social network consists of the nuclear and extended families as well as the community. As an example, Jonathan and Janine work during the day and rely on relatives to look after their children during the day. Their retired parents are more than happy to help raise their grandchildren. The principal beneficiaries (Jonathan and Janine) of the time and attention spent don’t appear to have any negative effects on those around them. The true cost appears to be based solely on the time incurred by Jonathan and Janine for the income they receive.
It’s Free for the Org. (Local impacts are absorbed by the global system)
As more and more time and attention is spent away from the social network, the primary beneficiary switches to an entity (an organization) less aligned with the local system’s values. As Jonathan and Janine are required to spend more time and attention on their respective employers after hours, the quality of time spent on themselves, their family, and friends is diminished. This leads to social, behavioural, and educational impacts for their community. These deficits are absorbed by civic, provincial and federal programs mostly paid for by the parent in the form of taxes. Unlike those people surrounding Jonathan and Janine, the organization often avoids the direct costs to the local system. The proliferation of global and mobile communication that has brought an expectation of ‘always on’ time and attention for organizations has accelerated this phenomenon.
Turns out it's NOT Free. (Local impacts lead to global impact accumulation)
As the drive to increase profits continues, not only are employees expected to ‘do more with less’ (thus incurring more time and attention away from their social fabric) but corporate tax structures are also reduced to the point that the civic, provincial, and federal programs cannot be adequately funded. Healthy relationships are eroded within all levels of the system and impacts of these exhausted social networks are manifested in the general population by poor education, increase in mental and physical health issues, and homelessness. This in turn leads to a dearth of future employees for corporations and a decrease in their ability to compete in the global marketplace. At that point, the principal beneficiary of the exploitation is no longer able to avoid the real cost of that exploitation and it is impacting them as well as others.
As with climate change, the challenge that is incumbent upon leaders of organizations is to make a shift in behaviour before it’s too late. Organizations need to be led within the context of a larger human system. They cannot be driven by the single goal of profits without regard for the real costs born by the people in the system. Profits need to be the result of a larger vision which incorporates how the world and the organization’s employees will be better off because of the organization’s products and services. Further, those products and services need to account for the true costs of their development and leaders must regularly re-assess those true costs. Once that vision has been established, organizations will begin to realize that their employees should be #1, their customers should be #2, and 1 and 2 together will lead to truly sustainable profits.
For more reading on what has helped shape some of my views please visit:
Jason Fried on “How to make work less crazy”
Steve Denning on “The dumbest idea in the world: maximizing shareholder value”