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Wednesday, April 12, 2017

Strategic CSR - United

A key to understanding the full implications of Strategic CSR is the idea that corporations reflect our values; they do not shape those values. In other words, corporations reflect the aggregated values of their collective set of stakeholders (internal and external). To put this succinctly – it is not Walmart that puts Mom & Pop stores out of business; customers do that by choosing to shop at Walmart, employees do it by choosing to work for Walmart, governments do it by providing tax breaks for Walmart, and so on. If you have a problem with Walmart, then you have a problem with American society because it is clear that American society wants Walmart. 90% of U.S. households shop at Walmart at least once a year – I don't know of any other company that consistently receives that level of societal endorsement.
An extension of this idea is that corporations are not the problem; they are the solution. The for-profit firm is simply a tool that we have devised to solve a specific problem – how to allocate scarce and valuable resources. There is a finite set of resources available to us. How to allocate these resources in a way that produces 'optimal' value for the majority is a problem that has challenged humanity throughout our existence. The best solution we have found to date is for-profit firms operating within a market-based, democratic form of capitalism. Once you understand firms are merely a tool, you understand that they will do what we ask of them. If we ask them to pollute the planet (as we are, at present), they will efficiently do that. Equally, if we ask them to preserve the planet, they will find the most efficient means of achieving that goal. They will do what we want them to do – they reflect our collective set of values.
I was thinking about this again in light of United's recent challenges. To what extent is United shaping the airline industry and to what extent is it merely giving us what we, collectively, want – cheap tickets and bare-bones service? The most recent crisis to hit United is made all the more apparent in contrast to last week's news about the airline industry's most recent performance ratings. The one headline that caught my attention there – the low budget carrier, Spirit Airlines, is currently the most profitable U.S. airline; it also has the highest rate of customer complaints. I fail to understand how that can be. If people want the absolute cheapest tickets, why would they then complain if they receive poor service, or their bags get lost, or whatever caused them to complain? If we want good service, we have to understand that there is a cost associated with that. And, if we are willing to pay for good service, we should believe that there are many entrepreneurs out there who would be more than willing to provide it to us. Clearly, when it comes to airlines, however, most of us do not want to pay for that service.
This brings me back to United. I don't necessarily agree with the overall tone of the article in the url below, but it is the most unique perspective I have seen in the acres of coverage on this issue. More importantly, I think it captures effectively the idea that United is merely a reflection of a broader system that we have shaped through our day-to-day decisions. In other words, while it feels satisfying to shoot the messenger, we should always remember that it is we (the firm's collective set of stakeholders) who are sending the message. In the same way that we get the politicians we deserve, we also get the companies we deserve:
"It is commendable and necessary to direct your outrage at this particular corporation, on this particular day, but keep the larger truth in mind: You are not mad at United Airlines; you are mad at America."
Of course, on the flip side, the fact that so many passengers felt outraged at the events and spread the word so quickly suggests a willingness to induce change, …. perhaps. We'll have to see if there are any lasting consequences for United. Past performance suggests we will quickly forget and move on. But, it is worth keeping in mind the next time you purchase an airline ticket. Will you demand better service and pay for it, or are we all heading towards a future filled with versions of Spirit Airlines or Ryan Air (or your lowest-cost carrier of choice)?
Take care
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You're Not Mad at United Airlines; You're Mad at America
By Shane Ryan
April 10, 2017
Paste Magazine