IF one were to develop a real life class of business, where would one start? One necessarily has to start with an investigation of the purpose of business? If one were to ask the question of the purpose of business to the majority of Africa’s human inhabitants, the typical answer would be: “to make money or maximize profits, of course”. The seemingly enlightened would couch their responses in the following terms: “The purpose of business is to create sustainable value for all stakeholders.”
The search for the correct answer to the question of the purpose of business is important in order to correctly align this important vehicle for delivering the purpose of life with the roles of other vehicles – state and non-state actors. It is the case that confusion on the proper role of business and its actors always comes in as it is the case that people have come to believe that when properly constructed, the role of the state and its actors is and ought to deliver the true promise of life including to economically empower citizens.
Using this distorted narrative, it is assumed and concluded that the state and its actors can be relied upon to deliver economic freedom and that the rich represent a class of people responsible for creating the triple challenges of poverty, unemployment and inequality. Typically, the role of business actors is misunderstood sufficiently enough to create the perception that such actors are primarily motivated by the sole quest to maximize profit at the expense of the social good.
Political actors who benefit from the confusion have shown little or no interest in improving literacy about the idea called business and its utility in creating societies that deliver inclusivity and prosperity. The relationship between the majority of Africa’s human actors and the idea called business has been complicated by the intervention of colonialism in the experience and the seemingly consequential creation of a settler propertied class which further suggested a causal link between business success and race.
The idea of business and/or commerce in the civilization of humans is not new but the understanding of its purpose is not generally shared. In order for anyone to succeed in the world of business, one necessarily has to start with a correct understanding of foundational concepts of the idea of business including the big elephant in the room – the identity matter i.e. what kind of animal is a business actor?Advertisement
The identity of a soccer player, for instance is well understood in the public domain, for it is clear what a good and bad player looks like. However, it is not always the case that it is easy to know what kind of animal is a good business actor as the only reliable barometer often used is profit, itself a product of the interplay between income generated from sales and the expenses related to the production of the income in question. No businessperson can claim any control over sales revenues for such income is a consequence of the random choices and actions of sovereign customers whereas costs related to sales are a direct consequence of the orders placed on third parties on behalf of the firm.
A careful examination of the identity of a business actor would reveal the simple truth that such an actor is just another person of flesh and not a visitor from another planet. A business actor like a political actor, for instance, is just another human being who is incapable of appropriating himself or herself, however powerful the person may pretend to be, more time than others in a day of life let alone being able to cheat death.
Having disposed of the identity issue, it is now important to turn to the issue of purpose. What would be the best answer to the question? I could find no better answer than to define a business actor as an “undertaker of a promise.” What then is meant by an “undertaker of a promise”? The term “undertaker” is typically used to describe a person whose business is to prepare the dead for burial and to arrange and manage funerals. The same term has been used to describe a person who takes the risk and management of business.
It is the understanding of this latter definition that we should be most concerned about in better understanding the true construction of the idea called business. The second term relates to the idea of a promise. It is a statement telling someone that you will definitely do something or that something will definitely happen in the future. We all know that the term is a useful and operative one in the world of business and less so in the world of faith and politics.
A human being who wishes to be a business person will not need any rocket scientist to teach him or her that a promise not delivered has no value in the marketplace. A true business actor has to make his or her independent decision whether to embark on the journey of the unknown. A promise that is not clothed with obligations is nothing but an empty threat. It is also the case that economic freedom has little to do with notions of existentialism but has to be rooted in the realm of real and tangible delivery of promises in form of value that is tradeable.
A simple example of a restaurant operator would help explain the idea of the purpose of a business. A restaurant operator undertakes to deliver the promise of food or drink to anyone who wishes to cure his or her hunger or thirst, respectively. The menu sets out what the promise is but to deliver the promise, the operator has necessarily to marshal all the necessary hard and soft costs related to the delivery of the promise at his or her cost in order to discharge the promise on demand.
The customer is least concerned about the effort and resources inherent in enabling the proprietor to deliver the promise but in the end product that he or she has to give up cash in exchange of. The proprietor is forced to incur the costs without any promise that anyone would be on the other end of the promise. If no one comes to eat at the restaurant for instance, the proprietor has no choice but to absorb the inherent costs.
However, if many voluntary persons come to eat, it is the case that the same food that one can grow in the garden or one can buy from a supermarket, for instance, will be delivered at a higher value than the costs related to the service rendered. The purpose of business would have been accomplished when a happy customer is served with the food ordered and that customer pays the promised price. It is not open for the customer that has been served with what has been ordered to decide not to pay the price on the menu as the act of ordering represents a promise to pay the offered price.
At the transaction point, when payment is demanded, it should not matter whether the shareholder is black or white but simply that the customer must pay for what would have been ordered and delivered. The transaction would have been completed after payment. Completed value transactions do not need the assistance or involvement of third parties. If the proprietor becomes a billionaire, for example, in the deliverance of promises to billions of customers then there ought to be no basis for anyone, let alone state actors, to claim any injury from the process.
The business actor who promises chicken on the menu cannot expect to be paid by a customer who ordered beef, for instance. A good proprietor has to deliver the value that speaks to the customer’s expectations otherwise the last visit would be what it is. Any transaction in business involves two contracting parties and as such value is communicated when the promise would have been delivered and payment thereof would have been made. A customer would only pay what is on the menu and anything extra in recognition of service would constitute a tip to the service provider.
The restaurant may operate under a name of a company but customers do not pay for the name but promises that would have been delivered. In the case that the income generated from sales exceeds the inherent expenses, profit would be the natural consequence and the inverse is all true where losses are sustained in the delivery of promises. It is not easy to deliver a promise without taking risks and attended effort. People who choose to prosecute the business called life as undertakers of promises would easily confess about the sacrifices made to ensure that promises are delivered and rewarded.
If an entrepreneur is an undertaker of promises, then what is the role of the firm? A firm is an artificial person that assumes the role of a vehicle to deliver the promise. A company has no voice, no eyes and no ears but is brought to life to be the bridge between the supplier and the purchaser of a service. Such a creature has no independent existence from the human actors involved in the value chain. Imagine if we all understood that the true purpose of business has nothing to do with profit making let alone maximizing returns to shareholders, who in any event operate outside the four corners of the firm, what would change in our civilization as Africans?
We would soon learn that those who claim that the rich who acquire their wealth from commercial activities have done so at the expense of the poor are real fools. We would also learn that those who claim that foreigners have special skills also are fools. We would also begin to engage in conversations about how best the dictates of the human spirit can be advanced through service. We would also know that the true difference between a pastor, political actor and a business actor is the same, for all are in the peoples’ business. They all operate in the world of humans where promises delivered can confer real value that can materially change one’s life possibilities.
It is only then, can we give it up to persons who chose the lonely road of service in the name of business to other human beings as some of the champions that add value to the human experience.
If you find the above of interest, please join us at NIBCA www.nibcaportal.org, not-for-profit and non-partisan association of members established to promote awareness of the role of business in building societies that work for all.
NIBCA stands for the National Independent Business Correspondents Associations (NIBCA) an organisation established in terms of the laws of South Africa as a platform for members to share experiences, knowledge, ideas and insights into the supply value chain system and how plugging into the system can add value to the enterprise of life.