Slow Leadership

Adding all the pluses and minuses honestly might produce a different picture

The almost universal assumption that “the bottom line” in business equals the net amount of profit is not correct. That’s merely the accounting version—and generally accepted standards of accounting omit a great many elements of a business that carry significant weight in real terms. If you want to understand the true corporate “bottom line,” you must take account of all those intangible and non-financial items that affect an organization’s growth and progress. It’s the same in your own life: the bottom line needs to be calculated using all the data, not just the parts that are easily turned into numbers. The only version of the “bottom line” that really counts is the one that measures whether you are acting in a way that enhances life . . . or diminishes it.

For decades, businesses have used accounting conventions to provide a picture of their status and progress. If they are being honest, everyone knows that these are inadequate. They omit huge areas of importance, such as the power of a brand, the impact of customer attitudes to the business, and the impact of fashion and the changing nature of society.

There have been some attempts to put a numerical value on a brand, and “goodwill” is used as a financial proxy for the intangibles of customer loyalty and appreciation, but such intangible items play a minor role in reaching a calculation of “the bottom line.” And that is without all the growth in “off balance sheet” items that has been so characteristic of certain corporations—especially those that have later fallen foul of the law.

Corporate intangibles

Organizational types are always attracted to things they can measure numerically. It gives them a feeling of being “scientific.” It makes it easy to produce comparisons and benchmarks. It looks objective.

But what is easy is not always correct, and reaching a “bottom line” figure on purely numerical and financial data tends to distort reality.

What is the true position of an organization that is currently making substantial profits, but alienating its customers by the methods it has chosen to do so? What about one that is maximizing short-term gains by mortgaging—or compromising—long-term growth necessities? As the world finally wakes up to the size of the problem of the human impact on the environment, what is the “bottom line” for an organization that relies on old, polluting technologies to make its profits?

The rash of Chinese imports to the USA that break US standards of product safety shouldn’t surprise anyone. All these Chinese companies are doing is copying their Western models by finding ways to maximize short-term profits at the expense of quality and safety standards. The main difference is that they aren’t nearly as practiced at doing it, so they are caught out more easily. Western companies have been sacrificing ethical and environmental standards for over a hundred years in their belief that immedaite financial profitability is the only “bottom line” that matters.

Personal calculations

For individuals too, those “bottom line” calculations are far trickier than they look.

The writers of the Christian Bible were aware of this thousands of years ago. “What shall it profit a man,” they asked, “if he gain the whole world yet lose his own soul?”

That question is just as relevant today as then. Is it a fair calculation of your personal “bottom line” to look only at getting and spending? Is it enough to make as much personal profit as possible, if the cost includes wrecking relationships, threatening your own health, and reaching the end of your life rich, alone, and despised? What if your personal profit comes mostly by exploiting others or pillaging the environment? Is that acceptable, merely because it makes sense in financial terms? What value do you put on a clear conscience and a civilized world?

A fresh calculation

The assumption that profit and financial success are the only “bottom line” calculations that matter, even to corporations, seems to me to be hopelessly superficial and naive. The rise of Hamburger Management, with its mindless mantra of “faster and cheaper,” has merely made matters worse.

The most effective corporations have never subscribed to a view that short-term profitability is all that matters. Costco, for example, provides employee wages and benefits well in excess of what proponents of financial-bottom-line-only thinking believe is correct; and still makes substantial profits. Before it lost its way and gave in to the supposed financial gurus (and not incidentally nearly went bust by doing so), Marks & Spencer in Britain was noted for putting product quality and high ethical standards at the top of its list of priorities. So long as it did so, it appeared impregnable to competition. When it dropped such “antiquated” notions in favor of fashion and profit, it soon lost its premier place.

What about your “bottom line?” How are you calculating it?

Is your personal “bottom line” calculation based on nothing but the size of your bank balance, the number of expensive toys you own, or your prospects of promotion? Where do peace of mind, sound relationships, trust, ethical standards, and good health rate? You cannot put a monetary value on them, but many people have found after a while that they would give all the money they have to bring back these intangibles of a civilized life . . . if only they could.

The true “bottom line” is the value your life has. Does your presence on this earth enhance it or harm it? Are others glad that you are alive, or do they blame you for diminishing their lives?

Until you make that calculation—and make it honestly—you are nowhere near the real “bottom line” of existence.

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