Need to Adhere to Motives of Doing Business

In less than one year, some three banks have waded into troubled waters. This has raised concerns on whether there could there be some underlying problems affecting this lucrative sector of our national economy, which are unknown to ordinary Kenyans.

Any management scholar can’t lose sight of the principles advocated by Henry Fayol, the well known father of modern management. Engineer Henry Fayol achieved great success at the turn of the 20^th Century and particularly rose from a labourer to Chief Executive of his employing firm, which operated in the mining industry.  Eventually, he documented his achievements in the form of a small book that even today teaches on the principles of management.

The book details the 14 management principles that include communication, teamwork, subordination of individual interests to the general Interest, unity of command and unity of direction amongst others. Interestingly, Fayol only shared his experiences that have eventually become great universal guides on the global practice of modern management.

Alongside, many other writers who have continually borrowed from their own experiences have become subject of studies, especially in institutions of higher learning. Seemingly, all those principles that we learn from textbooks are not meant to be used only for academic purposes, thus being filed away once we are through with academics. They are in other words meant to guide us all through as we continue developing business and creating global wealth, especially in today’s highly competitive and technologically driven business environment. Could we be effective in applying these all important principles in our routine circumstances?

One of our greatest challenges is the tendency to demarcate between the theory and the practice, especially based on what we learn during the school system. Most often, we tend to concentrate largely on what has been working in organizations, in total exclusion of what we continue learning that could lead to continued improvement. Could it be that we fear change therefore remaining comfortable in our discomforts? Or could it be that change destabilizes the same comforts? More still, could it be that we fear change because its effects are unpredictable?

That brings me to three attributes that should be great guides of doing business in this 21^st Century. Balancing of the same could lead to great opportunities of continued progress, whatever the industry concerned. However, we may need to realize that the banking industry is highly sensitive. The same should borrow a leave from the insurance industry whose basic idea of doing business is pooling resources. The insurance industry recognizes the principle of utmost good faith (contracts ubrimae fidei) as the basic guide in the relationship with customers. But, do the two industries not handle deposits from customers?

Ideally, the banking industry handles customer deposits, which by the very nature of business allows them to on-led to other customers, in the course of commercial activities. The insurance industry on the other hand receives premiums on behalf of customers that are only payable in the event of claims. Some customers make claims, which are settled from the pooled funds, with the expectation that the claims will be fully covered by the funds.

This arrangement could work efficiently if we can recognize the existence of the profit, legal and moral motives of doing business, which are taught in studies in business values and ethics. Apparently, most businesses exist only for the purpose of making profits and nothing more or less. Any hindrance towards making profits is largely seen as a great inconvenience that should be avoided at all costs.

Second is the legal motive of doing business. A business focuses towards complying with the laws of land in every way possible, occasionally in disregard of other business driving motives. Businesses go to great length of fulfilling the requirements of the companies act, income tax act and such other regulations that will be enforceable by the respective agencies.

Finally, business is supposed to be keen in complying with the moral principle, which has no hard and fast rules. It is about choosing to conduct business, while at the same time emphasizing greatly on social values such as fairness to other stakeholders, respect of the rights of others, upholding high levels of integrity and social responsibility amongst others.

During the first decade of the 21^st Century, some locally based corporate banks did what was considered unthinkable. They raised the standards expected of their clients and instantly made many of these clients to become un-bankable. They closed upcountry branches and all those in the clouded areas of the city. The then upcoming SME banks took full advantage of the developments. Some of these banks that discriminated against their customers have to date never recovered.

What are the attitudes of most other organizations towards the moral principle? Largely, the moral principle seems to be in the hindsight of most organizations, especially as long as they are operating profitably, and are in compliance with the legal statutes. A good indicator could be the fact that company value systems exist only for the record and not necessarily entrenched business guiding principles. Keep in mind that any business is a person like any of us, thus having legal rights and obligations.

The only difference is that any business is an artificial legal person, whereas we are natural persons.  Like each of us, the business needs to have guiding moral values, which need to drive the purposes and respective visions. And since business can’t behave on its own, it is the people who comprise the same, who behave on its behalf. So, could the moral attitudes of the founders or directors of the fallen banks have contributed to the existing predicaments?

The response of the customers towards internal information that inadvertently became public, informed their reactions in one case, leading to cash crunch, thus eventual collapse. The total closure and receivership process imposed by the Central Bank on two of the banks was based on the morally challenged happenings within Imperial and Dubai Banks.

Effectively, the moral principle can only be taken for granted at great costs, especially by organizations entrusted with customers’ funds. It may therefore pay to take heed of the moral principle and balance it with the others for all businesses that wish to continue experiencing desirable growth trajectories, which are devoid of some of the prevailing predicaments.

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