It costs too much

Since the election is now decided a lot of homogenized, generic spot producers, sorry, family restaurant chains, have been moaning up a storm about how awful it is the president is being re-elected and are going to punish their employees and customers for it. At least that’s how I hear it when their multimillion dollar earning CEOs start speaking.

Really, they are making excuses for their poorly constructed business entities by blaming the possibility of future shareholder earnings drops on the Affordable Healthcare Act’s now imminent implementation that will require the majority of US citizens to carry some kind of health insurance, including a provision that employers in certain circumstances offer access to their employees.

So, the response to having to treat their employees with dignity by providing them a benefit that potentially makes them more productive employees is to whine about it. Stomp their feet. Make threats. And act like a two year old (sorry two-year old kiddies, that insulting to even you to be compared to these douches)

“Oh, everything’s too damned expensive these days. This Bible cost 15 bucks! And talk about a preachy book! Everybody’s a sinner!” – homer simpson

I don’t know about you as a food consumer, but sick people handling my food doesn’t sound all that appetizing, to be honest. One would think healthier employees are less likely to pass along illness, an illness that could potentially cost you a lot more than offering health insurance when I sue you for getting me sick. But really, it’s not just restaurants crying about the now several year old regulation so we won’t focus solely on that. Sick employees cost all businesses across the board, eliminating sickness isn’t possible but mitigating its effects is proven to reduce costs.

In business school you quickly learn three key pieces of information for being successful:

1. The customer is always right.
2. Employees are your most valuable asset.
3. Stakeholders include more than just the “debt” holders (shareholders).

It seems like these CEOs are selfishly forgetting about points one and two in that list. Seems like their list looks more like this:

1. Disdain the customer as an unfortunate necessity.
2. Employees are disposable.
3. Protect shareholder profits which fund my lavish lifestyle at all costs.

Change is inevitable for every business and change management is key to a thriving business’ lifetime success. The failure to adapt to change and adopt new business models in response to change is the primary reason why businesses fail. They are set up to fail due to rigidity, to short sightedness, to stubbornness.

It is human nature to resist change. And to be greedy. In this case the combination is exactly why CEOs are taking the tone they are. Before the AHA there were any number of regulations that businesses fought against because it could impact the bottom line. Even if it didn’t, just the possibility it might barred them from even thinking about tolerating the potential regulatory request even when it is inevitably in their best interest.

Their responses sounds an awful lot like their response to some of these other landmark changes in how businesses needs to be run:

Women in the non-war time workforce
Racial integration
Minimum Wage and overtime
Time off requirements and consecutive hour restrictions
OSHA regulations
Product labeling requirements
Truth in Advertising regulations
Minimum safety standards for products
Age distribution restrictions
Environmental impact regulation

Just to name a few… And, you know why most of these regulations are in place? Because businesses misbehaved. Specifically, they hurt and killed people, sometimes with full knowledge of the danger they were presenting. When that wasn’t the case, the business practice in generally was unethical or counter to the notion of our underlying Constitutional beliefs as a Republic. The cost of creating and maintaining these rules is excessive, yet the social cost of letting irresponsible business owners run all over their customers and employees is so crippling there’s no other choice but for government to step in.

These complaining business owners forgot the first two rules of business and thus intentionally neglected their fiduciary responsibility to society. A society that funds their very existence because without employees you create no product or service and without customers you have no one to consume that product or service, and thus there’s no reason to exist. Then the CEO is on the street.

Furthermore, they also suck at accounting.

Or, they willfully determine that other things are more important than their employees well being … like giving away two million pizzas in a feeble attempt to gain perceived market share and an effort to potentially drive a few incremental sales. The cost of producing and promoting the fiasco is so many times greater than the cost of actually offering (note offering, not 100% subsidizing the cost of) health care to their employees it isn’t even funny. One independent economist ran the publicly available numbers for it and determined the company’s expenses on the promotion aren’t covered in the additional sales and if that money were invested in the health care offer it would cover several years worth for the employees at the current rates. Wow, right? Furthermore, even accounting for the charity of free pizzas and the brand good will incurred the promotion does little to increase the long term net profit for the company in the model, but healthier, happier employees would require less sick days and produce higher productivity according to several studies using similar situational data resulting in fewer customer complaints. The better service would more than off-set the lost “good will” from not doing the promotion and produce a stronger brand identity that sustains longer term profits. Bigger wow, right?

You can run this exercise again and again with nearly every one of the companies complaining right now and come across a very similar result. The few where you can’t their biggest problem in sustaining themselves as a business lies well beyond the net effects of the AHA, or any other single government regulation. Just look at all the failing restaurants that are put on reality TV on shows like: “Kitchen Nightmares,” “Restaurant Impossible,” “Restaurant Stakeout,” “Mystery Diners,” “Heath Inspectors,” “Restaurant Makeovers” as a single industry snapshot sand tell me that owners big and small really are equipt to actually run their businesses. Imagine that on a bigger scale and the problem isn’t bad government it’s bad business.

There’s a great example of mostly trying to treat an employee right in the nationally franchised foodstuffs industry to look at: Starbucks. They pay barristas a higher working wage on average than their fast food counterparts and make healthcare options available to a sizable portion of their retail employee base and still manage to turn decent profits despite the higher personnel costs. Some of the best local restaurants I’ve ever been too have similar philosophies and thus by offering even just slightly better than the baseline benefits attract and maintain a better staff who produce significantly better product and thus allow the restaurant to make money.

Finding the right balance of employee costs is the challenge every business faces, it’s not unique to the AHA situation so blaming it on it is divisive partisan hatemongering not responsible business ownership.

Also missed in the picture is the social cost of the uninsured overall. One of the primary reasons the AHA was put in place was to shift the burden back to the individuals since generally speaking the uninsured become subsided by everyone through higher insurance premiums and higher taxes. There’s not going to be a direct correlation between greater coverage and subsequently lower premiums and taxes per se, but there are definitely noticeable trends in increased premiums and related taxes as the number of uninsured continues to increase. These are taxes that theoretically every one of these companies pay and their CEOs pay into. It’s not like they aren’t contributing already, its just indirect and inefficient.

I’d rather see a few poorly run big companies that steal jobs from small businesses by homogenizing culture they way they do go out of business from this and have a more equal opportunity for those in need of health care to have (fairer) access to it than let them keep on pillaging the average worker for their own pocket padding process. Just like if you cannot pay a fair living salary to your employees you probably don’t have a sustainable business model and thus shouldn’t be in business in the first place, if you can’t ensure the health and safety of our most valuable asset you shouldn’t be in business either. This is the baseline cost of doing business, get used to it.

Why should society subsidize your inability to function as a contributor to society if you’re going to just show contempt and disdain back? Do you not see how by being allowed to exist as a business entity you inherently accepted the social contract that allows for their existence? Do you not realize that the tax breaks provided to you are corporate welfare, or that the government subsidies on your business or those businesses that are inter-related to your business are also welfare? Do you realize that corporate welfare costs us more than 2-times what social welfare does out of the Federal budget and if you ran your businesses more efficiently and effectively we could simultaneously reduce your dependence on corporate welfare and also reduce many of the reasons why social welfare exists too?

It is irresponsible to blame the AHA, or any regulation created in response to overwhelming problems with how you fundamentally do business, on your inability to turn a profit. If your product was indeed as perfect as you claim it to be none of this would be an issue in the first place, you would easily overcome most changes that occur in the normal cycle of doing business. Because your product is inherently inferior you are forced to chicanery in order to succeed and using the nominal costs the AHA may cause your business as an excuse for your poor business results is insulting to all of your stake holders and society in general.

Big business wonders why consumers have such disdain for them these days? They need only take the horse blinders off and look around. Read some of their on blatantly selfish and demeaning statements that demonstrate their utter hatred of their employees and their customers and it would make complete and total sense. As employees we could quit but fear of change binds us to accepting crappy wages and poor benefits. We don’t have the luxury of enough quality jobs to move into. As consumers we could boycott but fear of change binds us to defaulting our purchase patterns and being overly price conscious (something for another post). For the most part, the reaction to these asshole owners from the public has included the willingness to accept a slightly higher cost in the end product in order to ensure already poorly treated employees aren’t further hurt by these few greed driven owners and the continued turn away from unsustainably, mass-produced crap to more responsibly, locally produced products and services.

Change…substantial real sustainable change will only occur when all three work together (consumer, employee, owner). However, that is probably the biggest pipe dream so in the mean time regulation will have to suffice to keep everyone in some kind of working order.

About thedoormouse

I am I. That’s all that i am. my little mousehole in cyberspace of fiction, recipes, sacrasm, op-ed on music, sports, and other notations both grand and tiny:
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