The Stakeholder Economy: An Antidote to Privatised Profits and Socialised Losses

Redefining Success in an interconnected world

Complexity is the source of uncertainty in human systems. Over thousands of years of innovation has sought to manage this uncertainty, resolve complexity and transform social systems. Yet, innovation takes place in silos, simplifying complex issues but amplifying the overall complexity in a finite ecosystem.

Modern schemes of measuring the success of nations, corporations and individuals have brought about much wealth and prosperity but its flaws are more apparent than ever before. The dominant economic model of the world, its metric system and the pursuit of endless financial growth supported by accounting principles that disregard an ecosystem approach, is unsustainable. Endless growth is not only socially divisive but also environmentally unsustainable. As we grapple with the realities of climate change, the idea that we can continue to grow indefinitely on a planet with finite resources appears increasingly untenable.

Nevertheless, the idea of endless economic growth is deeply entrenched in our collective psyche, we are rewarded this way from a very young age. It underpins our measures of success, from personal net worth to stock market indices and even Gross Domestic Product (GDP) of nations. There is no doubt this relentless pursuit of growth has led to remarkable advancements in living standards. Yet, it has also fueled a system where the gains are increasingly concentrated among a small elite, while the costs – economic, social, and environmental – are borne by the many.

The prevailing capitalist model has largely been a game of winners and losers, where profits are privatised, accruing to a select few, and losses are socialised, shouldered by broader society. Consider the global financial crisis of 2008. Major financial institutions, driven by the pursuit of profit, engaged in risky practices that ultimately led to a market collapse. These institutions, the ‘winners,’ had enjoyed enormous profits during the boom years. However, when their risky bets failed, they were bailed out by government funds, essentially passing on their losses to the broader society. Taxpayers, many of whom had little to do with these risky practices, found themselves footing the bill.

However, a rising chorus of voices, from boardrooms to grassroots movements, is calling for a shift to conscious capitalism, a model that emphasises a holistic approach to success. The worlds problems cannot be solved by Governments and Philanthropists alone. We must leverage the power of business as a force for good. In a world where the bottom line has traditionally held sway, a new economic model is emerging, one that places equal importance on all stakeholders, not just shareholders. This stakeholder economy is not only reshaping how we perceive success in business but also offers a potential antidote to the issue of privatised profits and socialised losses. Within this stakeholder economy, success is not just about financial profitability but also the positive impact on all stakeholders – employees, customers, suppliers, the community, and the environment.

This approach hinges on the understanding that all stakeholders in a business ecosystem are interdependent. In a stakeholder economy, businesses recognise that their long-term prosperity is intertwined with the well-being of all their stakeholders. This shift could help redistribute the benefits of capitalism more equitably, effectively challenging the paradigm of privatised profits and socialised losses.

Challenges and Skepticism of the model

Under the current paradigms, much of what must be done to solve for this is unprofitable. And without economic incentive, this is a herculean task. Additionally, the absence of a universally accepted system to measure success beyond financial performance adds to the complexity. Several companies offering ESG management and reporting tools use different frameworks that make it difficult to standardize. Some of these tools are being misused to make misleading claims about the social, environmental benefits of a product, service or company – effectively ‘greenwashing’. Without a universally accepted framework, companies might exploit their reporting outlets for public relations gains without making substantial changes to their operations.

In order to build a more equitable & just world where regenerative economics takes centerstage, there is need for a new paradigm in public policy, corporate governance and human consciousness. All is easier said than done, with challenges ranging from the practical – how to measure success beyond the bottom line – to the philosophical – whether businesses should even have a social purpose.

Proponents counter that in an increasingly interconnected world, businesses cannot afford to ignore their social responsibilities. Indeed, the COVID-19 pandemic has underscored the interdependence of businesses and society, with companies facing backlash for practices perceived as putting profits before people. The crisis has also demonstrated the potential of businesses to be a force for good, with many stepping up to support their employees, customers, and communities in unprecedented ways.

As for the philosophical argument, proponents of the stakeholder economy argue that businesses, as integral parts of our society, inevitably have a social purpose. They can choose to recognise this and harness it for mutual benefit, or ignore it at their peril.

In conclusion, while the shift to a stakeholder economy may not be without challenges, it offers a promising antidote to the imbalance in the distribution of wealth. By broadening our definition of success, we can evolve a form of capitalism that is not only more equitable and sustainable but also more resilient and successful in the long run.

Governments, industries, corporations, businesses and communities cannot effect meaningful change in insolation. We are part of a dynamic interconnected ecosystem and it is collectively that we can effect systemic change. The hope is that one day all companies compete not only to be the best in the world, but the best for the world. Together we must build a more human centred economy, for the sake of our children, our societies and the natural world.

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How contractors can overcome inflation and rising construction costs

So what can we do to survive when construction costs are higher than ever?
As inflation continues to affect the construction industry worldwide, we must find ways to counteract it or risk losing our already slim profit margins.

Try these seven strategies to minimise the effect of construction inflation and rising costs on your organisation.

1. Prioritise value over competition

Emphasising value over competition is essential, as prioritising bidding price over value can lead to greater expenses in the long run, particularly during times of high inflation and market volatility. The conventional procurement approach sets trade partners and contractors in opposition to one another, resulting in seemingly attractive bids that are more likely to result in costly change orders. To avoid this, a lean partnership model should be adopted, prioritising the value offered by each stakeholder instead of fostering bidding competition.

2. Emphasise transparent communication

Highlighting effective communication is vital, as the objective is not to eliminate cost and scheduling risks altogether, as it is almost impractical. The aim is to control those risks by prioritising communication from the initial stage and maintaining it consistently throughout the project’s duration. Communication should occur at all levels, with contractors informing about any modifications in costs and deadlines, managers disclosing restrictions and complications, and construction executives demonstrating a clear and open communication culture to establish the standard from the outset.

3. Pay attention to market impacts

Logistical bottlenecks and price escalation are two of the biggest factors affecting your ability to deliver projects on time and on budget. Understanding why they happen is the key to success. This means monitoring inflation and domestic supply issues closely to mitigate rising costs. You need to gather economic data to make accurate predictions and determine your next best step. Watch out for events that can impact the costs and availability of labour, materials, and shipping to plan ahead instead of being surprised by rising prices.

4. Adopt target value delivery

Target value delivery (TVD) is a methodology that provides teams with greater adaptability to promptly and efficiently address issues. However, how can this assist in lessening the impact of inflation and disruptions in the supply chain?

Consider a situation where the producer of a product necessary for your project is experiencing a delay in acquiring the raw materials they require, either due to elevated costs or a snag in the supply chain. As a result of this delay, they charge you more than the agreed amount.

This scenario places your project’s timeline and target cost in jeopardy. Nevertheless, the TVD process enables your team to swiftly discover an alternative product that arrives quicker, costs less, and still maintains the quality of your project.

Releasing funds for materials at an early stage is an effective approach to tackle inflated costs. Nonetheless, several construction executives and project managers are apprehensive about overspending due to unforeseen supply alterations and, therefore, hesitate to disburse funds for pre-purchasing materials.

5. Release funds for materials early

Releasing funds to vendors early allows them to get you the right materials at the right time, resulting in a lower risk of paying more lat

Additionally, collaborating with trade partners during the pre-construction phase can instil confidence and enhance the accuracy of cost estimation. This early design certainty enables the adoption of other techniques, such as modular construction, with greater ease.

6. But not too early

We discussed how buying materials early can help minimise higher costs due to construction inflation, but it is possible to release funds too early. So how do you distinguish between what can wait and what to order and pay for immediately?

You need to determine need-by dates for on-site materials. One way to do this is by implementing a commodity tracking log that every project stakeholder can access. This can also give you insights into what might impact the delivery of your materials.

These logs can help you identify what materials you need, when you need them, and how many you need to better understand what you should order early and what can wait.

7. Implement construction management software

You can also overcome rising costs due to construction inflation by introducing construction management software to your team. This allows you to streamline processes and weed out inefficiencies to cut down on costs without affecting the build quality of your projects.

Construction management software can help you eliminate miscommunications that lead to cost overruns and delays, compare estimated vs. actual costs in real time, optimise your use of resources, and more—all of which can help you stay profitable during times of high construction inflation.

Learn how Bettamint can help your organisation succeed during times of inflated construction costs: See our construction workforce management software in action with free personalised demo.

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Due to the nature of their job, stable construction cash flow is essential for subcontractors. Running out of money might result in a halt in production, delayed payroll, a decline in profitability, or even financial catastrophe. Most people start projects on spec and usually get paid once the task is finished.

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Are you paying for ghost workers?

It might be time to take a closer look at the actual headcount at your construction sites. With large contractors hiring hundreds of thousands of workers across sites, it’s almost certain that tracking headcount is error prone. Today’s construction sites are as vulnerable to theft and pilferage as they are to the more serious issue of payroll fraud.  If you’re still using outdated methods of workforce management, you may be paying more than you need to.

Construction site access control and attendance is largely still logged manually or at best tracked via excel spreadsheets. There are many problems with manual attendance systems. We’ve identified the top five problems that might be directly impacting your bottom line.

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