Who Do We Blame For ‘Greedflation'?
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Who Do We Blame For ‘Greedflation'?

Who Do We Blame For ‘Greedflation'?

Business leaders and economists are always obsessing over a recession. Is it coming, has it started, and how long will it last? One of my favorite quotes around this topic is, “(Economists have) predicted nine of the past five recessions.” This basically means no expert knows what the hell they are talking about when they try to predict what the economy will or won’t do. However, one thing is certain, between price increases, continuing supply chain disruptions, alleged price gouging, and other inflationary pressures, we are in one of the worst customer service recessions ever and have been since 2018.

Could this financial crisis be Milton Friedman’s fault? American economist Friedman is famous for his theory introduced back in 1970 in an essay for The New York Times titled A Friedman Doctrine, in which he stated:

“There is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits to maximize shareholders’ wealth.”

He argued that a company has no social responsibility to the public or society, i.e., the average consumer; its only responsibility is to its shareholders. For his theory, which became extremely influential in the corporate world over the following decades, Friedman was awarded a Nobel Prize. Many of his economic theories, some regarding government spending–including monetary policy taking precedence over fiscal policy–remain important.

Greedflation: Power, Unchecked

“Greed is good. Greed is right. Greed works.”

Contrary to the words of Gordon Gekko, the ruthless character from the movie “Wall Street”, greed leads to unethical behavior. Today, as a society, we seem numb to corporate scandals, e.g., those of Enron, WeWork, Theranos, Uber, Arthur Anderson, Facebook, Lehman Brothers, and BP. The list goes on and on. When unethical corporate behavior becomes the norm, brands lose the trust of both employees and customers.

However, behavior by businesses can walk a fine line. Even if an organization is not behaving unethically, it can still be greedy. Greedflation refers to how employee compensation is falling farther and farther behind relative to senior-level executive pay. The last time the federal minimum wage was increased was in 2009. Meaning it has declined by 26 percent over this time. The Economic Policy Institute (EPI) estimates that CEO compensation has grown 1,322% since 1978, while typical worker compensation has risen just 18%. In 2020, CEOs of the top 350 firms in the U.S. made $24.2 million, on average—351 times more than a typical worker.

The Good News About The Economy

Crisis creates opportunity. A crisis is a horrible thing to waste! As a business owner, I prefer recessionary times or even the Great Resignation. It isn’t that any of my businesses do better in such times, it is that my competition does worse. During difficult business conditions, your business has an incredible opportunity to lap your competitors. Indeed, to totally crush them, gain more market share, have the pick of the top talent, and maybe even enjoy record profits.

I had seen first-hand, long before the pandemic, that companies with the strongest company culture were significantly less affected by the Great Resignation, whatever the inflation story of the day happened to be. And the organizations with subpar business practices, the ones that churned and burned their team members and where a great workplace culture was only lip service, are the ones now being hit the hardest by employee turnover.

There is a strong correlation between the overall customer satisfaction average and corporate profit over time. This is why organizations need to focus on the BX Strong (Brand eXperience Strong), which is an entire experience ecosystem. Your service vision statement is just the beginning. Beyond this current bout of inflation with its uncomfortable rise in energy prices and the cost of food, the companies that will dominate their industries for the next decade will be the ones that are obsessed with evolving the experience at every level–the employee experience as well as that of the customer, vendor, and community.

Published: February 20th, 2023

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