Here's a very clear visual: Article extract:
Blodgett boils it down into very simple terms:
Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low - Henry Blodgett via Business Insider
What’s wrong with this picture?
What’s wrong is that an obsession with a very narrow view of “shareholder value” has led companies to put “maximizing current earnings growth” ahead of another critical priority in a healthy economy:
The happiness and well-being of employees.
What those who obsess exclusively about profits forget is that one company’s wages (costs) are other companies’ revenues.
If American companies were willing to trade off some of their current earnings growth to make investments in wage increases and hiring, American workers would have more money to spend. And as American workers spent more money, the economy would begin to grow more quickly again. And the growing economy would help the companies begin to grow more quickly again. And so on.
But, instead, U.S. companies have become obsessed with generating near-term profits at the expense of paying their employees more, making capital investments, and investing in future growth.
When do we finally start marching? When do we begin to form some solidarity-oriented movement of workers?
It was almost as much work modifying the programs to discover ‘reasonable’ line item minimums and maximums as it was to figure out all the equations and apply them in order to produce a budget.
Superficially, it all made perfect sense and the MBA crowd produced exactly what they were hired to produce: budgets that maximized their corporations’ profits.
What very few noticed was that profit maximization was not, and could not be, sufficient to a healthy enterprise. The IBM model correctly determined that expenditures for (things like) toilet paper contributed absolutely nothing to the bottom line and so produced a budget that allocated no money for its purchase.
There are other, less obvious, cost centers for which various corporations’ models reduced funding. It’s normally difficult to determine a meaningful correlation between R&D expenditures and profitability; and it’s painfully easy to see how unsophisticated models might call for minimizing employee income and benefits.
I felt lucky that the zero allocation for TP happened to jump out at me and that my IBM clients were able to find that simultaneously hilarious and serious, because it provided us with a heads-up to a problem that might not otherwise have received due consideration.
IBM deserves credit for being willing to absorb the costs associated with moving from a ‘knowledge-based’ system to a ‘wisdom-based’ system. I more than suspect there were many corporations who did not make that same discovery and that of those who did, there were few willing/able to make that large additional software investment.
Does this better connect the dots?
[For what it's worth, when the budgeting software went “live” the budget it produced for the following year was used and resulted in an actual 30% NIBT increase over the previous year. The development money appears to have been well spent. ~MRD]