One of the first checklist items that any entrepreneur is told to complete is to incorporate a separate legal entity. Not only does it ensure that personal assets and liabilities are separated from the business but it ensures that the entrepreneurial idea is ready to grow whether through outside investment or an eventual merger and acquisition.
From the legal perspective, a traditional incorporation is considered a separate “person” with its own rights and responsibilities. This legal interpretation of a corporation has remained standing even though the decisions made by a corporation are an amalgam of decisions and actions made by numerous individuals that comprise the corporation.
While the legal perspective remains intact, with the changes that are occurring in business and society, it is increasingly questionable whether we can completely separate business from personal. The changes that have occurred in business and society may not necessarily lead to a change in the legal definition of a corporation but may lead to different operating principles in the near future.
The changes that society is seeing today is an increasing acknowledgement of what we implicitly knew since the inception of modern business which is business is personal. There is no doubt that while business has always tried to follow the mantra of “it’s nothing personal it’s just business”, the reality is that it is personal even in business.
Many business owners would argue that the mantra of “it’s nothing personal it’s just business” is justified due to the fact that such a stance clarifies what it means to do business. The focus on shareholder value and maximizing efficiency and productivity ensure that business owners and entrepreneurs are 100% focused on what matters in the short-term particularly as the business grows from its initial inception.
However, this singular focus on quantitative metrics, particularly financial ones, overlooks two critical factors: (1) businesses like humans can and do multitask and (2) businesses are driven by humans not business models, processes and technologies. Indeed, as with everything associated with business, looking solely at one set of variables may blind an entrepreneur to untold opportunities or challenges.
Maximizing efficiency and productivity is no doubt the most important goal that a business can undertake over its lifetime. Mass production and the ability to scale while driving down costs and improving quality is the dream of every entrepreneur as it will ensure growing margins both over the short-term and the long-term. Indeed, in a highly competitive market, such focus on maximizing efficiency and productivity are critical to thriving and surviving versus the competition.
However, a sole focus on maximizing efficiency and productivity by a business can have negative consequences over the long term. Just like economic and financial models, businesses on paper can and may be expected to function in a certain way but once they run into the realities of the real-world, the results are more often than not completely different.
Businesses in the 21st century cannot and should not run purely on quantitative factors alone. Indeed, businesses have not ever run on 100% quantitative factors since modern business was introduced. There are a number of reasons for this but the primary one is again the human factor.
Indeed, if one were to compare how quantitative models compare to reality, there is always a deviation because of the human factor. Humans are emotional creatures and, as such, we don’t necessarily make decisions on logic but based on illogical factors such as gut, passion or whim.
This illogical and sometimes emotional decision making thus upends “perfect” models and creates opportunities for new ideas and concepts to thrive. So what does this mean for business and why does it make it personal?
There are some entrepreneurs who believe “managing by spreadsheet” will lead them to success but time and time again this has been disproven. From the BlackBerry to the old BETAMAX video format, technologies that were superior on paper were ultimately pushed to the dustbin of history thanks to clever marketing that played on the emotions of human decision makers.
So what does this mean for entrepreneurs when it comes to growing and managing their businesses? The reality is that the “human” element is increasingly coming to the forefront in terms of growing and managing a business.
The “human” factor trend has been coming to the forefront for decades now thanks mainly to Silicon Valley and overall advances in technology. In many respects, Silicon Valley brought to the forefront what now really matters to businesses in the 21st century which is human capital.
Automation has increasingly eliminated the need of requiring human capital to complete manual repetitive tasks. Indeed, it has forced businesses to think through what exactly they are using human capital for and what is really required nowadays to attract and retain the best talent.
Silicon Valley realized the need to attract and retain talent from its outset. With the number of pivots that early stage startups have to go through to reach stability and eventual growth, finding individuals who can easily adapt and thrive in challenging environments is critical.
However, it is not only hiring the right individuals but melding them into a cohesive group. That’s where all companies regardless of whether they are startups or large enterprises are still working on. Culture continues to be a critical area that companies are investing in as they increasingly understand culture is a critical advantage.
How culture is formed and how it is managed at the end of the day is still driven by humans. Technology and processes merely enable the decisions made by individuals. So why is this fact important for businesses today?
Increasingly, consumers and employees are making decisions not purely based on quantitative factors such as cost but on personal goals and values. With choice increasingly available to a greater percentage of the population, individuals are increasingly aligning themselves with brands and companies that represent their values.
Whether it is individuals making purchases at boutique artisanal shops versus retail conglomerates or deciding to work for a company that acts to ensure inclusion and diversity, individuals are now forcing companies to decide not only who will work for them but what values both the company and its employees will represent. It is increasingly a business environment where quantitative factors are not the only factors at play concerning the success of a company.
Indeed, with the rise of social media and the ecosystem of influencers it created, it is harder for companies to state that “it’s nothing personal it’s just business”. For many businesses, managing the perception of their business and the values it holds is the difference between profit and loss.
At the end of the day, there is no doubt that businesses are measured on their success based on quantitative metrics such as profit and loss. However, though, qualitative measures such as culture and values that are incredibly personal by their very nature are influencing the bottom line as well. For a business to state “it’s nothing personal it’s just business” is to handicap the business from its true potential. As such, the “human factor” is something that entrepreneurs will need to manage as they grow their businesses.
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