VBM is Value Based Management.
Business models can be better.
VCM is Values Centered Management.
This is an important distinction about Managing with Aloha, and a hot button with me; I will do my best with staying off my soapbox about it! In our value alignment, this article relates to ‘Ike loa (learning), Ho‘ohanohano (dignity), and Pono (integrity).
“Is Managing with Aloha about ‘value based management’?”
No, it’s not. Not if you’re referring to the VBM business philosophy where the primary objective is optimizing monetary value for shareholders.
Managing with Aloha was written, and is practiced, to promote values centered management: Our primary objective, is to optimize the values which capsulize the Aloha-inspired convictions and beliefs within how we manage, and why. Our mission, is to teach VCM to managers and leaders, so they become better.
To be rather blunt, shareholders are rarely our concern at all, other than as pertains to having a realistic and feasible business model.
- VBM drives profits above all else, often to the detriment of workplace health, social issues and ethics, and sometimes, even to the detriment of the shareholders it seeks to serve. (There is more about this in the footnote.)
- The VCM of Managing with Aloha drives Aloha-intentioned behavior above all else, and seeks to bring more humanity to business in particular. We define our success much differently, with our focus on thriving workplace culture and customer service.
As a philosophy applied to the business environment, MWA’s ‘Ohana in Business Model does include profitability and a decent return to founders, owners, and stakeholders as a necessary objective: It is right to honor those who finance your mission.
Those ‘returns’ however, hold their descriptive adjective of ‘decency’ to task: our ‘Ohana in Business Model ensures the costs associated with profits are not too high, or detrimental to the core values of Aloha in any way whatsoever.
In addition, the way I see it, participating in the work of a business, is just another vehicle in financing it— the currency is sweat equity. I strongly believe that a profit-sharing component should be designed into every business plan. Every business plan, without exception. Far better that we honor all STAKEholders, and not just SHAREholders.
Those beliefs were solidified in me because I experienced the alternatives the hard way. In my corporate history, I worked for companies which I now realize were often operating with broken, half-hatched business models. Ill-conceived business models make the work so, so frustrating, and they sabotage good people! Today, after studying, and working within both good models and bad ones, I see plowing through business within a bad model to be extremely irresponsible and unethical.
You may have noticed, that within last week’s bring-back posting, New to Management: A Learn-the-Ropes Checklist, I started with The Business List before launching into The Managing People List— that became a key learning sequence for me as well. This is important:
If you do not share an organization’s values, and
You do not buy in to the ethics and integrity of their business model, Leave.
I mean it. Choose another company to work for, one where
You will be an ambassador of their values, and a champion of their business ethics.
Honor your personal values, and you honor your integrity.
As within our listing of Alaka‘i 24 Affirmations:
2. Practice discretion constantly, and lead with the example of how your own good behavior does get great results. Otherwise, why should anyone follow you when you lead?
11. Don’t be a victim or a martyr. You always have a choice, so don’t shy from it: Choose and choose without regret. Look forward and be enthusiastic.
If you have chosen business for how you will make a living, understand the business model you will operate in first, and then grow within your particular area of expertise second— especially if you aspire to be an Alaka‘i Manager. You cannot drive new visions without a feasible business model to support you.
‘Decent Returns’ starts with paying people well when they work for you.
My current campaigns, connected to the integrity of having an ‘Ohana in Business Model, and walking the talk in even daring to say “we manage with Aloha,” are highly focused on equitable compensation.
I am a dedicated proponent of:
- Increasing the minimum wage, as step 1 in achieving the vision of a Living Wage
- Removing all tipping assumptions from any hourly or salaried compensation calculations
- Ending overtime abuse (most often inflicted by employers trying to avoid paying for benefit packages which accompany full-time and part-time employment)
- Eliminating gender wage gaps and other discriminatory payment practices
- Doing away with unpaid internships – pay them!
- Doing away with paid-by-commission only business models
- Cleaning up the ‘volunteering expectations and assumptions’ of non-profit business models
- Reinventing the old, unrealistic pension plans of crippling short-term thinking with new, sustainable profit sharing plans
I have very little patience for business owners who claim these innovations will put them out of business. They may say “we can’t” yet what I always hear, is “I won’t.” They aren’t trying hard enough, and I won’t relent on debating them, teaching them, and holding them to task, until they do.
Business plans will always shake out in mathematical equations; I get that. However, morally decent, ethical, and responsible business plans are composed of sound, sustainable mathematical equations as well. Thankfully, there are a multitude of good ones we can learn from.
Business may be complex, yet we also tend to over-complicate it. Having the integrity to do business the right way is not as difficult as people too stubborn to change make it out to be.
Own your influence. Managers can take a much bigger role in designing business plans than they think.
Your fingers are on the pulse of the work. Managers in the trenches of any business are much closer to the operational machinations of that business than most founders, owners, and shareholders are—much, much closer.
We managers need to be the ones who articulate the campaigns I’ve listed above, and show how they can become possible and practical. We must tweak existing business plans in realistic ways—in value-aligning Managing with Aloha ways—which can be successfully sold to our corner-office leadership teams, helping them in turn, to sell positive change to founders, owners, boards of directors, and shareholders.
On a more basic level, we managers need to have a healthier respect for the value associated with work, and the human energies required in the performance of worthwhile, meaningful work: Managing Basics: Study Their Work.
Overtime abuse, for example, is a direct result of the week-to-week work schedules managers down to the supervisory level are responsible for designing and implementing. Do NOT be a manager who says, “I can’t get my boss and H.R. office to approve the change to up my staffing pars.” You abdicate your influence, and I don’t buy it, not for a second.
The last 3 paragraphs describe a reinvented, better-articulated financial literacy for business that is the best managing up we can possibly do. Please join these campaigns with me, and use the influence you have in your own workplace.
Business plans can be so much better. Let’s focus on making that happen. Compensation is just one variable, and perhaps you can affect the others, like asset securities, pricing, marketing, or supplier partnerships and vendor certification. Learn the ropes wherever you are, having the objective of continuous improvement, one small iteration at a time— they add up to positive change.
Here is some related reading on my compensation campaigning:
- On compensation: Let’s talk Compensation.
- On a living wage: My Vision of a Living Wage.
- On Ending overtime abuse: Mālama, the value of Stewardship written for Ke Ola Magazine.
- Related to “I won’t.”: An Attitude of Scarcity or an Expectation of Abundance: Choose Palena ‘ole.
- On the responsibility of citizenship: On November 4th, your Civic Duty calls. Answer, and answer well.
- And more philosophically: The Rub of the Business Model is Solved by your Values .Mission and Vision aren’t viable without Value Alignment.
- On a better business model: The ‘Ohana in Business written for Ke Ola Magazine.
Longer read, well worth your time:
The Secret Shame of Middle-Class Americans, The Atlantic.
“Nearly half of Americans would have trouble finding $400 to pay for an emergency. I’m one of them.”
Mahalo Neal Gabler, for your courage in writing this.
Footnote: On VBM, Value Based Management
Found this interesting, when looking back at the history of VBM (from Wikipedia):
“On August 12, 1981, Jack Welch made a speech at The Pierre in New York City called ‘Growing fast in a slow-growth economy’. This is often acknowledged as the dawn of the obsession with shareholder value. Welch’s stated aim was to be the biggest or second biggest market player, and to return maximum value to stockholders.”
“In March 2009, Welch criticized parts of the application of this concept, calling a focus on shareholder quarterly profit and share price gains ‘the dumbest idea in the world.’ Welch then elaborated on this, claiming that the quotes were taken out of context.”
Criticism and Disadvantages of the shareholder value model:
The sole concentration on shareholder value has been widely criticized, particularly after the late-2000s financial crisis. While a focus on shareholder value can benefit the owners of a corporation financially, it does not provide a clear measure of social issues like employment, environmental issues, or ethical business practices. A management decision can maximize shareholder value while lowering the welfare of third parties. Shareholder value coupled with short-termism has also been criticized as lowering the overall rate of economic growth due to reduced business capital accumulation.
It can also disadvantage other stakeholders such as customers. For example, a company may, in the interests of enhancing shareholder value, cease to provide support for old, or even relatively new, products.
Additionally, short term focus on shareholder value can be detrimental to long term shareholder value; the expense of gimmicks that briefly boost a stocks value can have negative impacts on its long term value.
Shareholder value may be detrimental to a company’s worth. When all of a company’s focus and strategy is concentrated on increasing share prices, the practice and ethics of the firm can become lost because of the following problems with the shareholder value model:
- Lack of transparency
- Increased risk
- Short-term strategy