The New Deal - Essay Example

The New Deal “There is one and only one social responsibility of business: to use its resources and energy in activities designed to increase its profits as long as it stays within the rules of the game, engaging in open and free competition, without deception and fraud (Friedman)”. Introduction At first sight, it would seem that the words of Friedman point towards a capitalist system which focuses purely on money and nothing else. However, after extensive reading of the topic discussed by Tomkins (2006), it would seem that Friedman was certainly right when he suggested that “there is one and only one social responsibility of business”. However, the qualifiers which are given for this are quite extensive. It can be shown that “the rules of the game, free competition” and not deceiving the employees are not only rules which keep business from exploiting others; they are also good business decisions for companies like GE and many others (Colvin, 2006). Of the three qualifiers to making profits, the first one is the process of “staying within the rules of the game”. These rules have certainly changed drastically over time and the idea of exploiting workers for all they are worth is clearly not within the rules. It would seem that neither ethics nor social responsibility has a lot to do with it. The case of being good to employees makes fundamental business sense (Torrington and Hall, 1995). In the long term, employees who are secure in their jobs are likely to work harder and be more productive than employees who feel insecure in their employment. Similarly, employees who are paid well and rewarded with bonuses for good performance and motivational rewards will naturally perform better than employees who are only given a basic salary and no chance to increase their income as a direct result of the hard work they put in for their company (Boxall and Purcell, 2003) The Issues Yes, it does seem like companies are exploiting their labour resources across the world but it is certainly not the case for companies who wish to stay ahead of the curve and continue to be profitable in the long run. Considering theoretical evidence, the content theory of motivation considers the idea that individuals are motivated by inner desires to fulfil their needs and such fulfilment can come from their work if the work they do is able to combine the rewards for working with their desires. The primary work in this branch of motivation comes form Maslow’s Hierarchy of Needs which includes five levels including the basic needs of nourishment, second order needs for safety and security, third order needs for social affiliations, fourth order needs for esteem and fifth order needs for self-actualization of the individual. Clearly while the first, second and third order needs might be fulfilled by having enough money, fourth and fifth order needs might not be obtainable just by getting a salary alone. Tomkins (2006) discusses the same by saying that salaries have actually fallen in the UK and will continue to be pressured since workers will have to live under the threat of their positions being outsourced to other nations which the same job can be done at a much lower rate. At the same time, I do think that Tomkins (2006) is being very emotional when it comes to the realities of outsourcing and the transfer of jobs to India, China and other developing nations. In fact, China and India may not remain as attractive as they were a few years ago since the rising costs of labour in India often make companies think twice before setting up an outsourcing project. At the same time, it must be noted that such situations may not remain true in the long term. Even in China, the trends of working a full day for less money could be on a downward slope as the population gets used to having a higher level of income than their predecessors. A twenty year differential study for the economy of china shows that between 1981 and 2001 the percentage of working class individuals living on less than one US dollar per day decreased from almost eighty percent to less than thirty percent (Bardhan, 2006). This does lead me to believe that a future will come when the global labour costs and global labour input will come to parity around the world. Of course there may be significant differences during the time that particular situation is developing but the trends show that as salaries in the UK fall slightly, the salaries in India and China are rising rapidly. Globalisation does not hurt the world’s poor; it is simply an economic reality in which the inefficient and the overpriced are replaced by the efficient (Bardhan, 2006). Goods and services across the world differ in prices depending on the availability of labour and resources. These are inequalities which are difficult to change overnight and nearly impossible to overlook when a company sees the advantages of operating in more than one location simultaneously (Dicken, 2007). To clarify this idea, Feenstra (1998) gives the example of a Barbie doll and describes in detail how various components of the doll are made in different countries. The raw material comes from Taiwan and Japan, assembly takes place in Indonesia or Malaysia while China supplies the dresses for the dolls. The total economic input for these countries per doll is less than $2 while it sells for about $10 in America. Mattel Inc., the owner of the Barbie brand, could never hope to see such profits if it maintained its operations only in America. Additionally, the prospect of opening new markets and getting new consumers for their products is something which attracts companies immensely (Porker, 2005). While certain products might have had their run in one market, it is entirely possible that the same products might just be entering a new country where they are at the beginning of their life cycle (Bourque et. al. 2005). For example, while automobiles have been in wide use for most of the western world since the 1970s many developing nations are seeing them as a necessity rather than a luxury time only in recent times (Bardhan, 2006). Globalisation has brought a shift in how people experienced their world and instead of focusing on regional producers; a person may be more interested in internationally produced items if the marketing mechanisms for that producer are effective enough. In a similar fashion, as the company improves its marketing on a global scale to improve its profits, it also has to reduce its costs by curtailing expenditure. If the labour in the UK is not able to accept this reality then they will have to face a situation of either working for less or being out of a job. The objections of this proposition which are made by Tomkins (2006) and others will simply be overridden by the realities of economics. As companies become more diversified and things like outsourcing and off shore operations become the norm rather than the exception, a global corporate culture could develop with time. However, such a state is still far off in the future since societal norms and personal cultural backgrounds still have a greater influence than HR policies established by an organisation (Laurent, 1986). A simple comparison between China and the UK shows that even on the organisational level, China has only recently developed a culture of increased importance to the HR functions of a company. On the other hand, countries like the UK have been focused on the value of Human Resources for many years. With the development of a global culture, the differences may not remain that important but as long as they are present they have to be taken into account. Of course, the variety of capitalism and the power of the unions as discussed by Tomkins (2006) become quite important for individual salaries. Even small differences in the type of economy will create noticeable changes in labour price and visible advantages and disadvantages for companies operating in the region. For instance, the case of Germany and Britain is presented in a comparison of retail and fashion clothing industries and there is a marked difference between the industry wide salary policies due to the government’s economic policies. In this regard, Lane and Probert (2004) say that: “Divergent skill structures are reflected in payment structures. In Britain, wage levels in this industry are among the lowest in manufacturing. The industry in some areas has relied strongly on ethnic minority employees, many of them home workers. In Germany, the much more union-controlled industry had to pay comparatively high wages (Lane & Probert, 2004, Pg. 254).” Recommendations It is precisely because of that reason that companies need to share their profits with the employees who work for them. The picture is not all doom and gloom for employees in first world countries. There are quite a few companies who willingly appreciate what their employees do for them and with things such as stock options, performance bonuses and other rewards, help their stars come to terms with the present economic situation. Welch (2005) discusses the case where a scientist working for GE won an award for his achievements in science. Mr. Welch asked that the GE board immediately connect the scientist’s achievements with a large cash bonus since even the Nobel peace prize comes with a significant dollar figure attached to it. In this case, recognition by the peers as well as those outside the company was not seen to be enough since recognition alone or cash alone can not be the only answer to the needs of motivating individuals. In terms of rewarding the top employees of his company Welch reports that: “The top 20 percent of employees are showered with bonuses, stock options, praise, love, training, and a variety of rewards to their pocketbooks and souls. There can be no mistaking the stars at a company that differentiates. They are the best and are treated that way (Welch, 2005, Pg. 41)”. Conclusion I believe that in the short term, companies who do not reward their employees in direct relation to their performance will not be able to compete effectively as their employees leave for greener pastures. At the same time, when a few more decades have gone under the present influences and rate of globalisation, there will be an improvement for salaries and individual living standards across the world and not just for one or more countries alone. Once that happens, not only will Tomkins be made happy due to the improvement in global living standards, but also Friedman, since companies will continue to make profits only if they follow the rules of the game and do not cheat their employees or customers. More importantly, this situation can only lead to the eventual improvement of all workers around the world than just a few accountants and lawyers in Europe or a few software developers and product designers in California. Word Count: 2,038 Works Cited Bardhan, P. 2006, ‘Does Globalization Help OR Hurt the Worlds Poor?’ Scientific American, vol. 294, no. 4, pp. 84-91. Bourque, J. et. al. 2005, ‘Making Sense of Trade Treaties’, International Trade Forum, vol. 4, no. 1, pp. 30-31. Boxall P. and Purcell J. 2003, Strategy and Human Resource Management, Palgrave & Macmillan. Colvin, G. 2006, ‘What Makes GE Great?’, Fortune, vol. 153, no. 4, pp. 90-96. Dicken, P, 2007, Global shift, Sage. Feenstra, R. 1998, ‘Integration of trade and disintegration of production in the Global Economy’, Journal of Economic Perspectives, vol. 12, no. 4, pp. 31-50. Lane, C. and Probert, J. 2004, ‘Between the Global and the Local: a Comparison of the German and UK Clothing Industry’, Competition & Change, vol. 8, no. 3, pp. 243-266. Laszlo, C and Nash, J. 2007, ‘The New Ethics in Business’, Business Ethics and Organisational Studies, vol. 12, no. 4, pp. 1-12. Laurent, A. 1986, ‘The Cross-Cultural Puzzle of International Human Resource Management’, Human Resource Management, vol. 25, no. 1, pp 91-102. Porker, B. 2005, Globalization and business, Sage. Tomkins, R. 2006, Profits of Doom. Torrington D. and Hall L. 1995, Personnel Management: HRM in Action. Prentice Hall. Welch, J. 2005, Winning, HarperCollins. Read More