Beliefs

Ownership, Care, and Responsibility

Applying God's laws of ownership in the business realm

by Ken Ewert

Most consumers simply won't 'vote' with their dollars for companies that don't please them

Capitalism

Business Management

Implementing the Ownership Principle

Conclusion

I knew the post office closed at 4:30 pm, and it was 4:31 when I hurriedly pushed open the still unlocked main entrance doors. The last customer was just turning away from the counter, and as I hurried towards the counter the clerk looked at me and promptly rolled down the shutter in my face.

This is a mundane but frustratingly typical example of why government employees - "civil servants" - are not generally noted for civility or service. Of course, there are notable exceptions. And, to be fair, the problem is not limited to government workers. My wife and I were once shopping in a large department store. The clerk in the department in which we were shopping was on the phone to a girlfriend. She looked us in the eyes and kept on talking (and chewing gum, as I recall). She then turned her back so she didn’t have to see us. After five or ten minutes had passed, and we hadn’t, she reluctantly ended her call and, with a big sigh, asked us what we wanted. I wanted to say: "I’m so sorry, can you ever forgive us for bothering you?"

Clerks like her don’t tend to last long in private businesses. Bad service is more the exception than the rule. The reason is simple: in the market economy a business must serve customers’ wants in order to be profitable. Most consumers simply won’t "vote" with their dollars for companies that don’t please them. Since business owners and managers seek consumers’ votes and the accompanying profits, they devote considerable energy to hiring and managing workers who will effectively serve their customers. This does not just apply to the "front-line" employees who directly serve customers. Every employed person is in the customer service business. In a profit-seeking business, the ultimate goal of every job - whether in the R&D lab or in a retail outlet - is to contribute to satisfying customers.

However, government managers do not have this same profit incentive. For this reason, the general quality of any government service will always be below profit-seeking businesses. The rule of thumb is the more government involvement in an industry, either through direct control (state schools), funding ("the arts"), or restriction of competition or entry into a field (banking or occupational licensure), the less responsive to customer wants it will be. It is no mystery as to why public schools teach things with which the majority of parents disagree, why publicly-funded artists produce art that few would choose to buy, and why your "friendly banker" is often more intimidating than friendly. These entities are, at least to some degree, independent of consumer "votes" for their survival and prosperity.

Capitalism

The free market system is sometimes called "capitalism." Capitalism is actually a Marxist term, and the word certainly has negative connotations. But capitalism, or rather, the free market, is the order that naturally arises when a civil government rightly enforces laws based on God’s decree:

"You shall not steal." God’s laws against theft explicitly recognize the legitimacy of private ownership; after all, you cannot steal what is not owned. The free market is simply a system in which people are free to own property (including "capital") and exchange that which they own.

Capitalism has long been accused of being a system based on indifference to others. The opposite is much closer to the truth. While no economic system can hope to change the human heart, it is the private property system, more than any other external motivation, which prompts people to be concerned about each other’s needs. The free market helps focus peoples’ minds on fulfilling the wants of others (including some wants that should not be fulfilled!). This is not to suggest that all businessmen "care" about their customers in the full sense of the word. Certainly many do not. Their care is of a self-interested nature: they care because they want to get their hands on what the customer has, namely his money. Still, this kind of care is significant, and I, for one, am grateful for it.

Jesse Jackson once bragged that while he worked in a restaurant he used to spit in the "white folks" salads before serving them. Although spitting in customers’ salads sometimes happens, what tends to stop young racists (white or black) from doing so? A profit-seeking manager who "cares" is what tends to stop it. His business is ruined if word of this practice spreads.

Because of our fallen nature, each of us tends to be concerned primarily with ourselves. We need an incentive to think about others. I recall a lecture by an engineer from an electrical company which had been contracted to build a power plant in a remote region of the Soviet Union. He gave many examples of the perverse consequences of the Soviet system that explicitly repudiated private ownership. He spoke of the cook assigned to him. The cook was meticulous in her compliance with her instructions. Each day she pulled back her hair and wore her prescribed cook’s hat and apron. She scrupulously washed and dried the utensils. She carefully followed the Western recipes she had been given. But rather than keeping the beef in the cooler (which was some distance from the cookhouse), she kept the meat under her cooking table, where the cat slept. It was a cold walk to the cooler, and she had not been given specific instructions to keep the meat there.

The Soviet cook is not so different from any of us. Her lack of care epitomizes sinful people working in a system which rejects private ownership: lacking incentives otherwise, they go through the motions without much care for the customer.

Business Management

Unlike the Soviet cook, a businessman cannot just go through the motions. After all, if his customers are not pleased, he does not profit; and if he does not profit, sooner or later, he is out of business. He must find a way to maximize the amount of "customer satisfaction" in his product and yet economize on the amount of resources he uses to produce it. Consumers want a good product at a good price.

His employees, however, do not have as strong an incentive to maximize customer satisfaction and economize on resources. Since they are paid a wage or a salary they are not directly motivated by the prospects of profits. (They do have an indirect motivation: higher profits for employers will tend to lead to higher wages.) Lacking direct profit incentive, employees often suffer a strain - albeit a much milder strain - of the Soviet disease.

The more accurately a business perceives customers’ wants, and the more creatively frugal it is in fulfilling these wants, the more profitable it will be. Profits are a sign that a business has served the customer well. The dream of every employer is to have his employees care about profitability as he does. This is no small thing. An employer’s day is filled with fixing annoying problems, many of which, he suspects, have been caused by his employees "who just don’t care" like he cares. His suspicion is correct: because of our sinful nature, non-owners do not care like owners do. Jesus alluded to this principle when he contrasted the care of the "shepherd" who owns his sheep, with that of the "hireling" who, being a non-owner, is "not concerned about the sheep" (John 10:11-15). A wise businessman will recognize that private ownership always helps people to care.

Every purposeful human action has both costs and benefits. Because of sin, these costs and benefits need to be borne personally if responsible behaviour is to be encouraged. Let me explain by way of example. Recently, the men and boys in my extended family went for a fishing trip on lake on a private ranch. The lake was several miles from the main ranch house and accessible only by a four-wheel drive road, and so we were "guided" to the lake by a ranch guide driving another four-wheel drive vehicle. The road was very rough, and although I am not a timid off-road driver, I found that I could not keep up with the guide. Several times he had to stop and wait for me. I suspect the reason he was willing to travel the rough road much faster than I was because his vehicle was owned, not by himself, but by his employer.

Getting to the lake quickly was a benefit to me (Let’s get fishing!), but since the cost of my traveling the road too fast and damaging my vehicle was also borne by myself, I was somewhat more cautious. My guide, however, faced a different scenario. The benefits of him getting to the lake quickly (like getting his work finished early) went directly to him. But because he did not own his vehicle, the costs of abusing his vehicle were not borne by him. They were borne by his employer.

Implementing the Ownership Principle

Effective business managers find ways to implement a kind of "ownership" in their workplace to bring the costs and benefits of an employee’s actions together. For example they give employees "allowances" for specific expenses that they have direct control over. The employee can then keep whatever they conserve of these resources. Paying bonuses for exceptional service (giving a benefit to an employee to offset the mental and physical "cost" he or she has paid to render that service), or payment on a commission or contract basis are based on this principle.

In our painting business, we recently implemented a "contracting in" arrangement that involved selling tools, equipment, and vehicles to a number of former employees who will now own their equipment and fulfill the painting contracts in their designated territory. Attitudes immediately changed. For example, when a paint "sprayer" is cleaned out, solvent - not water - should be left in the sprayer lines. (Water can rust the sprayer.) It has been a perennial battle to get our employees to consistently remember to do this. (Again, for them, the costs were divorced from the benefits.) Many times water was inadvertently left in the lines. Significantly, minutes after we sold our sprayers, the new owner of one sprayer turned to me and asked, "There’s thinner in these lines, isn’t there?"

The trend in many large industries - such as automaking - is towards "outsourcing" or contracting out aspects of production. The managers of these companies understand that they must shift production out of an arena where it is hamstrung by union and regulatory policies that sever the costs of irresponsible actions from the benefits, and into an arena that better applies the principle of private ownership. The unions are fighting this movement vigorously. But given the tremendous decentralization accelerated by the computer and communications revolution, they are fighting a losing battle. Small companies and self-employed contractors are proliferating. These new companies are simply able to do things cheaper or better by taking advantage of the principle of private ownership.

Conclusion

Private ownership gives fallen people an incentive to care. But implementing aspects of private ownership in the business realm is not easy. While sinful people like to reap the full benefits of their responsible actions, they are not so enthusiastic about bearing the costs of their irresponsible actions.

An even greater obstacle is the many laws and employment regulations that try to block the ownership principle at every turn. Our culture has been at war with God and with His laws. But God’s laws operate regardless of whether or not we acknowledge them. If we are to walk in the goodness of His blessing in our businesses, we will need to creatively implement His laws of ownership


Originally published in U-Turn

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