David Masover Process Selling Blog

Capitalism is not broken, but without accountability, it will fail just like your sales team

At Davos and elsewhere recently, there has been a lot of talk about capitalism.  Does it work? Does it need to be re-engineered? Is it outdated? Is it inherently unfair?

The question itself is so misguided it makes me want to pull my hair out!

Simply put, capitalism means that if you invest money or time or energy into a potentially money making endeavor, you get to keep (the net of) what you make.  There is nothing unfair about that.

Of course the other side of the coin is that if the potential money making endeavor fails, then you loose the money and time and energy that you put into it.

Now – when governments go through all kinds of contortions to keep failure from happening, then the rules of capitalism are fundamentally changed – one could even say that it is no longer capitalism.

• When Clinton bailed out the savings and loans in 1994, this was a circumvention of the rules of capitalism;
• When Bush and Obama both used taxpayer money to bail out the banks, this was a circumvention of the rules of capitalism;
• When the US Federal Reserve keeps interest rates artificially low in order to prevent certain failures, they circumvent the free market with it’s inclination to let fail what does not work – and other problems come up in the meantime.

Not letting failure manifest itself is like not letting forest fires happen in the wild.  In forests, small fires come through every once in a while and burn out the brush, re-mineralize the soil, and complete a natural cycle that includes short-term removal of some stuff but fosters the long-term health of the ecosystem in general.

When governments try to prevent failure, they keep capitalism from doing what capitalism does.  Hence the questions “is capitalism broken” is misguided.  The real questions is “does trying to manipulate capitalism with government intervention work”?  It seems to me that governments are not smart enough to know what they need to do.  Just like stock traders – you can benefit from the market if you are smart and lucky, but it is impossible to fully predict and manipulate a system with so many truly independent variables – and trying seems to not work so well, at least not in the long run.

At this point in the argument, many folks start to argue about the need for regulation.  The above is not an argument against regulation.  Regulation is important to keep things fair and transparent.  But regulation is quite different from attempts at manipulation, like bail outs and interest rate suppression.

Regulations like the Glass-Steagall Act were really helpful.  The Glass-Steagall act was written in 1933 to keep commercial banks (like the ones where you have a personal bank account) out of the business of speculative investing.  This was important, because as long as they were not in that business, it made sense for the government to insure your bank account

However, Glass-Steagall was laid to rest in 1999 in the last days of the Clinton administration.  The problem then became that banks could make speculative investments with money that was insured by the government.  The rest you probably know.

[By the way, the Glass-Steagall act was 37 pages long.  Dodd-Frank, the "Wall Street Reform and Consumer Protection Act" that was written in part to correct problems coming from the absence of the Glass Steagall Act, is 2319 pages long - plenty of room for loopholes, but that is a topic for another post!]

When governments succumb to the temptation to please lobbyists who donate to their campaigns, or to prevent a short-term crisis at the expense of a long-term catastrophe, they are acting as players in a game which can no longer be called capitalism.  I don’t know what to call it, but to say that capitalism doesn’t work in this environment is misguided.

Failure in capitalism is the markets way of holding players in the system accountable for mistakes and errors in judgement.  Take away the accountability, and the rules of the game are fundamentally changed, and no longer effective.

The same thing applies to your sales organization.  If you make rules, whether they are revenue targets or activity goals, you must enforce them, one way or the other.  If your salespeople know that they can break the rules without consequence, why follow them?

Banks continue to behave in a risky manner because they seem pretty confident based on recent history that if things get bad, the government will bail them out.  The Fed continues to keep interest rates low, in spite of the fact that it seems that this was a big part of the cause of the housing price bubble.

Without accountability, these systems don’t work.  To be a capitalist is to embrace failure as the price of not succeeding, and to proceed with due diligence and caution.  Without this as a part of the picture, players in the economy become reckless and sloppy, and don’t do the work they need to do to play smart, play to win, and accordingly benefit the greater good of the economic system.

Does this sound like some of your salespeople?  If so, consider the role of accountability or the lack thereof in your organization, and maybe you can prevent or mitigate your own little meltdown .

Author: David Masover

David Masover has over twenty years of business-to-business sales experience, including more than ten years in sales management, training, and consulting. He has consulted and negotiated in the United States, Europe, and Asia. Masover is co-founder of Branders.com, the world's largest online seller of promotional products, and the author of "Mastering Your Sales Process" which is available on Amazon. David is currently engaged in private sales consulting in Budapest, Hungary.