Part 4. The human-centric approach

In the interest of investors, owners, employees, and customers, businesses should be human-centric rather than investor-centric.

A human-centric focus is better for all stakeholders, including society as a whole, and definitely for owners of small businesses but also investors in businesses of all sizes.

The human-centric approach recognizes that central planning doesn’t work and markets are not as efficient as we’d all like to believe. It goes back to the fundamental reason business exists in the first place: to solve problems for people.

There is no magic to a human-centric business. Build the company using the right tools and keep the focus on people. The company would continue to focus on maximizing profit (and, therefore, also investor returns) but operates within constraints that ensure they operate in the interest of humans, not just profit.

The concept of businesses adding more value than profit is not new. One groundbreaking concept that came into being about 30 years ago is the triple bottom line.

This is a great, useful model that focuses organizations on more than just profit. The three bottom lines are profit, people, and planet.

In my experience, optimizing for three things is impossible.

I’ve been with organizations implementing the triple bottom line model. The problem is that, invariably, something happens, and managers have to choose between profit and people or planet, and in an investor-first world, profit always wins.

The problem is optimizing three things at once is very difficult.

So, a human-centric business continues to optimize for profit.

But instead of optimizing profit at all costs, a human-centric business operates within a set of constraints. The constraints recognize that there is no value in maximizing profit at the expense of employees, customers/clients, and the external world in the long term.

The best way to think of this is to start with soccer (or replace soccer with your favorite sport; there is nothing special about soccer).

Now imagine that the players played without rules other than the goal-scoring objective. There would be no inbounds or out-of-bounds; players could pick up the ball or even sit on it. They could score a goal, pick up the ball, and run away with the ball to prevent the other team from scoring. Of course, nothing stops the other team from producing another ball, declaring their goal the opposite team’s goal, throwing the ball in, and claiming their own point.

And so on…

The game would devolve into chaos, it wouldn’t be much fun to watch, and it wouldn’t be considered a game.

The rules make it a game. The rules make it enjoyable.

Note that the objective doesn’t have to change: both teams’ objective is to score goals. Each team makes up its own strategy; there is no central planning of what each team should do or how.

However, the constraints are well-defined. The rules of the game are clear.

Every sport has a different rule framework. In soccer, you kick the ball and don’t touch it with your hands. In American football, you mostly carry the ball in your hands and only occasionally kick it.

Baseball uses a bat.

Each sport maximizes the point-scoring objective, following the rules within the framework of the sport.

Today, the business objective is to maximize profit. Some rules are set by regulation, but the overarching rule framework is investor first.

The profit maximization objective makes sense because it gives the company something to focus on. Rules and regulations are much better than centralized planning, but the framework must change.

A human-centric approach changes the framework from investors first to humans. Replacing the purely financial objective with a human objective broadens the scope of concern. It doesn’t mean that investors don’t matter; it just means that investors are not the only ones who matter.

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