"you can not serve two masters"
Oct. 6th, 2008 09:56 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
acroyearA wise teacher said this about 2000 years ago (or so it was written down around then), but the sentiment is far truer than the original context, of a money-man asking what he can do to enter the Kingdom. Yes, the obvious, "money" or "a good spiritual life" is certainly true (would that the money-hungry evangelical and catholic churches have remembered this parable and lesson over the centuries...), but it runs far deeper than that. It applies to everything, including the ethics of business itself.
I once wrote about corporations and their primary goals, and how that changes when the company goes public. There were naysayers at the time, but I stand by what I wrote. You can not serve two masters. When you go public, your primary business is no longer serving your customers. Your primary business is improving your stock value for your stock holders.
Period.
That you do so, most of the time, by what used to be your primary but is now your secondary business (serving your customers what they need and want, increasing revenue by either increasing your services at higher margins or by increasing your customer base and relying on volume efficiencies). At some point, the secondary business won't serve your primary business - what your customers need you can't provide with the ever-increasing profits that your real customers demand.
When that happens, you have to make the choice. Take the hit on the profits (and piss off your primary customers, your stockholders), or cut your services to your customers, pissing them off. Take your pick. It becomes inevitable. Sometimes your customers will accept the reasoning and continue to go with you, but sometimes not.
But not serving your stockholders (by providing ever-increasing stock value through performance reports that show ever-increasing profit margins) will get you, as a CEO, fired. Your job, and by extension those of your employees, changed the second your company went public. This is why the internet bubble burst so painfully for so many. The geeks simply didn't realize who their real customers were when they filed those IPOs. The internet is an easy market to please. Wall Street is not, and never has been.
Until you had to serve that new master, you could make the ethical decision yourself - you could decide it was better to take a hit on the profits in the short term for the sake of maintaining strong customer relations in the longer term in the trust that the better profits will come.
But once you are public, you no longer have the freedom to make that choice without having to clear it with a LOT of people - the board, the stock holders, and the whole of Wall Street traders that get to decide what your stock holders really have.
Eventually, you have the great ethical dilemma we see companies face all the time to get that quarterly report. Either short-change your customers, or short-change the books to make it appear as though you are serving your stockholders. The latter is inherently unethical, of course, but the alternative is to be fired and replaced by someone who will force-feed the stockholders that happy news they want to hear, regardless of the truth.
It's for this reason that most "how to run a start-up" recommend postponing the first foray into VC financing as long as possible, even to the point of not doing so at all. (My company avoided the VC thing, and now runs itself as a 30+ million company with 8 million in cash and absolutely no debt at all). The longer you can continue to serve just your customers, the happier, ethically, you will be. (it's for this reason that Adobe and Microsoft postponed their IPOs as long as they could - the only reason either company went public was because their engineers demanded their "fuck you i'm fully vested" money - as with everything else here, THEY changed which master they were serving).
Why did the current bubble crisis happen? Because mortgage brokers acted in the short-term interests of the stock-based investment companies, not in the best interests of the people applying for the loans. The brokers primary customer was not the lendee, but the company that would eventually be holding the loans. These companies were the ones paying the brokers, not the lendees and the tiny percentage on your mortgage that they get. As such, it made it all too easy to lie about the quality of the loans and up the chain the lies went to the very top.
Even at the personal level, the sentiment holds. When someone at a company going through a layoffs phase (thanks to the current recession) but survived it is then told by friends "you should still get your resume out and look elsewhere", I question that. I question that strongly. You can not serve two masters. Either you are looking for a job, or you are working at one.
Every second of your time spent polishing your resume and looking at openings on Monster and LinkedIn is a second (actually more than one) NOT doing what you are being PAID to do: work for the company you signed a contract with. The inherent distraction automatically means you are no longer working at your best efficiency, the efficiency the company is expecting you to be working at. As such, your performance drop WILL be noticed and you'll end up on the chopping block anyways.
Companies that outsource their HR staffs also now create that situation of having a consultant serving two masters - on the one hand they are supposed to be supplying value for your company, but your company is not their primary company. They have to serve their own company first. As such, while "efficient" financially, they can never supply the level of confidence from your employees that a real fellow employee can. Your employees can't trust them to be objective on their behalf as an HR staff should, because they aren't the HR's primary concern, which is to serve the company that pays them, not the company that pays their company.
I once wrote about corporations and their primary goals, and how that changes when the company goes public. There were naysayers at the time, but I stand by what I wrote. You can not serve two masters. When you go public, your primary business is no longer serving your customers. Your primary business is improving your stock value for your stock holders.
Period.
That you do so, most of the time, by what used to be your primary but is now your secondary business (serving your customers what they need and want, increasing revenue by either increasing your services at higher margins or by increasing your customer base and relying on volume efficiencies). At some point, the secondary business won't serve your primary business - what your customers need you can't provide with the ever-increasing profits that your real customers demand.
When that happens, you have to make the choice. Take the hit on the profits (and piss off your primary customers, your stockholders), or cut your services to your customers, pissing them off. Take your pick. It becomes inevitable. Sometimes your customers will accept the reasoning and continue to go with you, but sometimes not.
But not serving your stockholders (by providing ever-increasing stock value through performance reports that show ever-increasing profit margins) will get you, as a CEO, fired. Your job, and by extension those of your employees, changed the second your company went public. This is why the internet bubble burst so painfully for so many. The geeks simply didn't realize who their real customers were when they filed those IPOs. The internet is an easy market to please. Wall Street is not, and never has been.
Until you had to serve that new master, you could make the ethical decision yourself - you could decide it was better to take a hit on the profits in the short term for the sake of maintaining strong customer relations in the longer term in the trust that the better profits will come.
But once you are public, you no longer have the freedom to make that choice without having to clear it with a LOT of people - the board, the stock holders, and the whole of Wall Street traders that get to decide what your stock holders really have.
Eventually, you have the great ethical dilemma we see companies face all the time to get that quarterly report. Either short-change your customers, or short-change the books to make it appear as though you are serving your stockholders. The latter is inherently unethical, of course, but the alternative is to be fired and replaced by someone who will force-feed the stockholders that happy news they want to hear, regardless of the truth.
It's for this reason that most "how to run a start-up" recommend postponing the first foray into VC financing as long as possible, even to the point of not doing so at all. (My company avoided the VC thing, and now runs itself as a 30+ million company with 8 million in cash and absolutely no debt at all). The longer you can continue to serve just your customers, the happier, ethically, you will be. (it's for this reason that Adobe and Microsoft postponed their IPOs as long as they could - the only reason either company went public was because their engineers demanded their "fuck you i'm fully vested" money - as with everything else here, THEY changed which master they were serving).
Why did the current bubble crisis happen? Because mortgage brokers acted in the short-term interests of the stock-based investment companies, not in the best interests of the people applying for the loans. The brokers primary customer was not the lendee, but the company that would eventually be holding the loans. These companies were the ones paying the brokers, not the lendees and the tiny percentage on your mortgage that they get. As such, it made it all too easy to lie about the quality of the loans and up the chain the lies went to the very top.
Even at the personal level, the sentiment holds. When someone at a company going through a layoffs phase (thanks to the current recession) but survived it is then told by friends "you should still get your resume out and look elsewhere", I question that. I question that strongly. You can not serve two masters. Either you are looking for a job, or you are working at one.
Every second of your time spent polishing your resume and looking at openings on Monster and LinkedIn is a second (actually more than one) NOT doing what you are being PAID to do: work for the company you signed a contract with. The inherent distraction automatically means you are no longer working at your best efficiency, the efficiency the company is expecting you to be working at. As such, your performance drop WILL be noticed and you'll end up on the chopping block anyways.
Companies that outsource their HR staffs also now create that situation of having a consultant serving two masters - on the one hand they are supposed to be supplying value for your company, but your company is not their primary company. They have to serve their own company first. As such, while "efficient" financially, they can never supply the level of confidence from your employees that a real fellow employee can. Your employees can't trust them to be objective on their behalf as an HR staff should, because they aren't the HR's primary concern, which is to serve the company that pays them, not the company that pays their company.
