In some of my past blog posts I discussed the significant value a good reputation has by example of Switzerland’s repute as a high-quality producer of products and services. I showed that there is concrete evidence that a good reputation and the trust that it engenders in potential customers is not only an exercise for “doing good for goodness sake”, but also translates into hard cash and profits (see my recent blog entry on "Dismantling of a Swiss Holy Cow" ). Many corporations, due either to considerable competitive pressure or simply due to the myopic imperative of maximizing profitability, take short-cuts or systematically exploit the vulnerable. So it seems to be the case with Zara, the fashion house of the Inditex Group.
Thursday, February 27, 2014
Wednesday, February 19, 2014
Mass Immigration, the Growth Imperative and the Creative Metropolis
In Switzerland, votes can quickly turn into a political thriller accessible to the public. Here, the people as the ultimate sovereign has the right (which is rather exceptional compared to other countries) to say “stop, not like this!” in a vote, notwithstanding the recommendations of its government, of wealthy interest groups or expert warnings. This was the case with the recent initiative against mass immigration launched by the SVP that has won with a narrow majority of votes.
The reactions to this result produced quite predictable waves of indignation, hyperbole and panic (while the winners’ joy was a bit muffled): Switzerland at the economic abyss, an isolated island of happy xenophobes, a nation of spoiled farmers who tore open the “Röstigraben” and slapped the EU.
Is this outcry justified?
Wednesday, February 12, 2014
Thursday, February 6, 2014
I have watched the German jungle camp (“I am a celebrity…Get me out of here”; and the confessions end here). Much has been written and discussed on this broadcasting format in which more or less famous participants face nauseating tests in the jungle with the world watching. Let’s look at the jungle camp for a moment from the perspective of corporate stakeholder management. Stakeholder management aims at generating as much value as possible by including the stakeholders of an organization, in order to achieve what is called integrative or “win-win” results. In our thought experiment, let’s assume that RTL is the company we look at, which sells and broadcasts the product “jungle camp”.
Thursday, January 23, 2014
The initiative against mass immigration: Is it really just about immigration policy and economic success models?
Economic circles tend to argue similarly with all initiatives that could have negative effects on them. In their perspective, this is understandable in principle.
Monday, January 6, 2014
In my last blog article, I took a look at the deterioration of the brand “Swiss” and noted that this was in part due to the negative publicity that Switzerland has been getting abroad concerning its banking secrecy and opportunistic taxation schemes. While Swiss banking secrecy may now soon be something for the history books, it is still interesting to note that the Swiss banks and taxation regimes originally had their roots in virtues, and not vices. Whereas most of Europe featured unstable governments and legal frameworks, engaged in endless wars and built their “social contract” on the premise of mistrusting its citizens, Switzerland provided stability in both governance and law, was largely peaceful and had a basic “social contract” that espoused trust before mistrust (this being in part a consequence of its direct democratic tradition and a source of the extensive privacy rights as pertaining to financial matters). This resulted in the flourishing of the Swiss banking sector as it attracted wave after wave of foreign depositors, fleeing instability, insecurity, and states more interested in the gleaning of the wealth of its citizens than in the provision of needed services. While Switzerland – again, beginning with a virtue - for centuries already practiced a strongly decentralized (federalized) “good governance” regime which paired up freedom with accountability by allowing every commune and canton to freely levy their own taxes and invest these resources as best they saw fit, thus also creating a healthy competition to keep a sound budget and make wise investments, much of Europe experienced just the opposite: top-down directives with little to no citizen participation and consequently freedom and accountability.
With time, however, bit by tiny bit, these virtues became corrupted. Banking secrecy became no longer so much a reflection of privacy and trust between citizens and their state, but rather was a convenient pretense for the easy garnering of money from abroad. On the haughty altar of “discretion”, Swiss bankers would willingly bunker the millions and billions of dictators, tyrants or simply the clever evaders of taxation in their home countries. Much the same happened with the taxation regimes in Switzerland. Cantons and communes realized that much money could be made by adroitly positioning themselves in a zero-sum race to the bottom and attracting wealthy individuals – for whom special taxation schemes would be negotiated – and global companies in search for a more profitable tax haven from which to conduct their business. This led to the proliferation of countless “mail-box” companies which had little or no real connection to Switzerland.
Since the recent financial crisis and its accompanying scandals, however, the EU and the USA have increasingly started to put pressure on Switzerland (as also on other similar finance and tax havens, although often conveniently omitting some of their own) to change its “bad habits”. While a minority of Swiss citizens has always openly criticized its banking and taxation practices, and probably a healthy majority in private moments admitted to the status quo being ethically questionable, the matter was nevertheless nothing less than a “holy cow” amongst the Swiss economic and political establishment. So strongly was this self-righteousness engrained, that when a professor at the renowned Swiss Business School of St. Gallen was openly critical of this situation in an interview with a German magazine a couple of years ago, some voices (granted isolated, but nevertheless remarkable for a country with a rightfully proud democratic tradition with guaranteed free-speech) branded him as a national traitor and demanded his immediate demission!
It is a well known and studied phenomenon that countries that are blessed with ample natural resources such as oil, are often cursed with having their economies develop asymmetrically with an over-dependence on just these natural resources. As with abundant natural resources, the incentives that the Swiss legal system and historic precedents provided also resulted in relatively “easy money” to be made in the finance sector. Some of the nefarious side-effects of this in turn resulted in what may well be deemed an internal resource and brain-drain, as investors invested in the areas of greatest returns for the least risk (and for a long time, the Swiss private banking sector was a very low-risk investment, as success was not so much based on any unique, rapidly changing know-how but a legal framework which virtually ensured its competitive advantage) and many of the brightest labor market entrants turned their back to work in other sectors such as for example the risky high-tech area or lower-margin machine industry, in favor of the far more stable and lucrative financial industry.
While Switzerland still has a highly sophisticated, diversified and competitive economy, always jousting for the top spot in global assessments, there is a real risk and an increasingly high price that Switzerland has to pay for its extensive financial center. Apart from public bailouts (such as the UBS in 2008) and the internal resource and brain drain, the very fact that salaries paid in the financial sector are so high drives up concomitant costs such real-estate, making it increasingly difficult for, say, high-tech companies to get started in the country. Starting an export oriented business from scratch in Switzerland is simply prohibitively expensive, especially if the returns, as in many high-tech sectors, take years to materialize. Add to that the finance sector’s negative impact on the overall reputation on Switzerland, and you can well comprehend that the Swiss financial industry is increasingly unpopular also in Switzerland.
The tragedy of this entire matter is however that the age old Swiss social contract of trust between the state and its citizens may now have to be sacrificed in view of the financial center and taxation policies of decades past. The United States, long also a bastion of individual freedom and with a delicate awareness of privacy rights, has already sacrificed much of this on the altar of national security. The question thus remains one of just how much freedom are we willing to sacrifice for security, and how much privacy for fairness.
Tuesday, December 17, 2013
Customers in a shop or guests in a restaurant usually very much appreciate it when the employees are friendly, understanding or even empathic. It contributes to the fulfillment of their desires and needs with full satisfaction. Therefore, customer focus rightly is an important requirement in customer relations – the customer as a human being should always be in the center.
However, the human relationship between the customer and the company is being abused more and more as a sales gimmick. At Starbucks, you’re the barista’s best friend; you belong to the IKEA family or the salesperson at the high end Ralph Lauren store trusts you with her very own preferences.
The staff in shops or restaurants is instructed to create a feeling of closeness through simulating a strong friendship. Customers get the feeling that you really like them. But in reality it is only about encouraging them to buy more. It’s not about the individual and understanding and considering his or her personality and needs, but about hard selling and sale success. So customer focus ultimately only serves the purely financial success of a company and doesn’t add to the perceived quality of life of a particular customer.
However, in a humanistic perspective, human beings are considered as ends, not as means. Each human being is a unique person with specific interests and values. Already in the 1970s, Erich Fromm called for recognizing the “oneness” of people in a capitalist society, instead of considering them only in anonymous customer group categories in terms of “sameness”. Pretend friendships exploit our human peculiarities.
The employees of companies with such sales strategies are exposed to an emotional dilemma. They are asked and usually also trained to put their human abilities in the service of financial ratios. As a customer you also face a dilemma: How should you interpret the kindness of the salesperson? If it is authentic, you don’t want to reject it, but if it’s only manipulative, you can’t and don’t want to trust their advice.
However, recent empirical 1) evidence confirms that the trustful treatment of people and their recognition is crucial to the perceived quality of life. I hope that in 2014 you will have the opportunity in your professional life to contribute to the quality of human life.
1) Anderson, C., Kraus, M. W., Galinsky, A. D., & Keltner, D. (2012). The Local-Ladder Effect: Social Status and Subjective Well-Being. Psychological Science, 23, 764-771.
Wednesday, December 4, 2013
On the Pope’s criticism of today’s economic thinking
Last week the Pope published his text “Evangelii Gaudium”, in which he is giving different inputs for reorienting the Catholic Church. Although I am not Catholic, I was interested in his statements about the challenges of today’s world and especially in his criticism of our current economy.In quite a positive way, he recognizes the improvement the economic system brought to “people’s welfare in areas such as healthcare, education and communication”. Yet he blames this economy of “exclusion and inequality”. He thus asks critically, “how can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?” And he continues: “Today everything comes under the law of competition and the survival of the fittest, where the powerful feed upon the powerless.”
I was especially amazed by his criticism of issues that have also been discussed by the stakeholder theory for the past few years. One example is his critique of the free market.However, he makes no specific suggestions as to how extreme competitiveness could be limited. In contrast, the stakeholder theory proposes, for example, to focus more on the potential of cooperation among stakeholders, based on the resource based view of strategy, instead of pure competition: Through the cooperative pooling of resources, innovative solutions to issues, products and processes can be found, according to the stakeholder theory, which a single stakeholder who considers others only as competitors could not find. It would have been interesting to learn whether the Pope could in addition to this instrumental perspective on cooperation also offer a normative view, in his case based on the Catholic faith.
The same could be said about his criticism of the concept of human beings that prevails in economy. Certainly, many economists would agree with the Pope’s analysis that “the denial of the primacy of the human person” predominating classic economic theory is questionable or wrong. A growing number of publications are increasingly critical of the basic concepts of economic theory, in particular of the hypothesis of human self-interest. In this sense, the Pope states, “the socioeconomic system is unjust at its root.”This criticism also calls for the question of which normative concept could form an adequate basis for a more realistic image of human nature. The Pope refers only summarily to the need for ethics: “Ethics – a non-ideological ethics – could make it possible to bring about balance and more human social order.” One can assume that he refers to Catholic social ethics. One can add here that there are also ethical approaches not tied to a specific denomination or religion, which are therefore also acceptable to non-Catholics.
Our reflections on stakeholder theory refer to a humanistic approach based on Kant. This approach considers human beings always as ends, not means, also in economic interactions. In this view, the different values, norms, interests and capabilities have to always be considered and taken into account in economic and business activities. Such a general humanistic approach not only addresses believers of a particular denomination, but its non-denominational claim makes it a fundamental norm also for economic activity.