When Rewards Become Sarcasm

Very often, doing the right thing in the wrong way can completely undermine its value.  Case in point, the present fascination with "gamification" by those who do not have a firm understanding of the concept is leading to some very awkward and even offensive practices in online experiences.   I'm most concerned of late with the notion of "badges" and "social rewards" with which retailers wish to encourage shoppers to give them more business - I have a sense there is some potential, but its present misuse may be damaging the potential of the practice.

In the context of a game, a badge is an icon or emblem granted to a player for completing a significant or unusual accomplishment.   "Significant or unusual" is critical, because a reward loses its value if the act it represents is common or of little significance.

To be granted a badge for completing the first and easiest level of the game on the lowest difficulty setting is not of value to a player because it's something anyone can do with very little effort.   It's tantamount to getting a diploma for completing kindergarten - which, ironically, is something that is actually done at some schools nowadays.  A trivial reward such as this is a nice gesture for the kids because they are not particularly intelligent or sophisticated at that age - but I've never heard a parent brag about their child "graduating" from kindergarten.

And therein lies the problem with granting rewards to adults, who are usually intelligent and sophisticated, for trivial accomplishments.  An adult studying a foreign language places little value in a photocopied certificate awarded to them for completing the first week of lessons.   If anything, such trivial gestures become a form of insult.   "Good for you, you've learned to tie your shoes" is not a compliment, but sarcasm to anyone beyond the age of five.

The same is true of retail rewards and badges for creating an account on a merchant's website, or purchasing an item, or successfully entering a delivery address.    Obtaining the product is the only reward that is necessary for the completion of such a trivial action, and any "extra" reward is unnecessary and a bit perplexing.

The retailer's self-serving agenda is further revealed when it is suggested that the customer should announce a trivial reward to others they know in social media - it is clear that the retailer does not mean to reward the customer, but merely to connive a way to get them to promote the store to their social network.   This fails miserably because a reward that takes the tone of a sarcastic insult is not something most individuals would care to announce to their friends and colleagues.

Moreover, this practice is damaging not only to the retailer whose reward system is poorly conceived, but to all retailers that might wish to leverage a social media reward system - much in the way that some advertisers' indiscreet use of email marketing has caused all commercial email to be disregarded as spam, even those that are the product of carefully targeted and thoughtfully planned advertising campaigns.

Thus considered, it may already be too late for retailers to leverage social media rewards programs because poor use by some has poisoned the well for all: the prevalence of trivial emblems is so great that every emblem is regarded as trivial, even those that represent a unusual or significant action.

Organizational Disorganization

In "Anarchy in the Office" I considered the rather bizarre concept of a project execution environment in which there were no formal leaders, merely ad-hoc coordinators that leveraged voluntary resources to complete tasks.   It seemed an interesting but likely impractical arrangement, and I've since read a book that proposes to do the same not only for a specific environment, but entire companies.

Peer Leadership proposes a networked (rather than hierarchical) organization structure, in which individual employees are like nodes of a computer network that are engaged as needed to accomplish organizational tasks - or which can, on occasion take on coordination of the efforts of others when they recognize the need for something to be done.

It remains an interesting concept, though it strikes me as being even more improbable on that level, given a number of potential issues - chiefly, that most of the day-to-day operations of a business are rather routine and non-dynamic and require the ongoing involvement of the same resources with few situations in which deviation from standard operating procedure is necessary.

Granted, the problems many companies face in a competitive environment is that standard operating procedure becomes bureaucratic and inflexible, as the author rightly suggests:  a front-line employee perceives a need for a change to be made, must communicate it up the chain of command to a high enough level for someone who is not familiar with the problem to authorize a change or deviation from established process, and then the change must be socialized within the organization before communicating back down to the front lines for implementation - a procedure which can take days or months.

But as in many things, I expect swinging the pendulum to the opposite extreme could do more harm than good ... or perhaps it's just that I've become institutionalized to the traditional approach of command-and-control hierarchies that I can't fully concretize the concept.  I don't really think that's the case, but I'll allow for the possibility.

My sense is that the determination of the amount of authority given to those on the front lines of an organization largely depend on the task in question.  For some tasks (day-to-day operations that are repeated) the procedure/control structure is likely the best approach whereas for others (which focus on changing the procedures that guide routine actions) a great deal more latitude is necessary to make progress.   To impose the organizational structure of one upon the other would be counterproductive.

Sustainability and Monopoly

The notion of "sustainability" seems to be popping up more often of late in conversations about enterprise management.   It's nothing particularly new, as it comes back under various names every so often and then goes away again.   My sense is that it's not at all a bad idea, just that the present culture is unready to embrace it in spite of its benefits.

The core concept is that focusing on serving a fixed number of customers, rather than seeking to constantly increase the number of customers served, is a more plausible long-term strategy because it facilitates planning and operational efficiency.

Much of the waste in business operations is pinned to the hope that the firm will sell more product next year than last year - managers ramp up production and staffing to provide products (goods or services) for 20% more customers in the next year.   When those new customers fail to materialize, the cost of the extra capacity is waste, which causes the firm to lose money on unnecessary expense and, in some cases, collapse from the financial burden of having spent an unnecessary amount of money to provide capacity that cannot be sold.

It is also a problem if more customers than anticipated are gathered by the various efforts to grow the firm, in that the company finds its staff and facilities insufficient to serve the massive influx of customers and its inability to provide service as promised is a disappointment to new customers (who are turned away) and old ones (whose quality of service diminishes as the company struggles under the strain) as well, and damages the reputation of the brand.

Both of these problems can be avoided by assuming a fixed customer base, which renders a fixed level of demand, which requires a predictable amount of production.   That is to say that a business is capable of profitably serving a certain number of customers, beyond which point growth becomes unprofitable and the firm becomes unsustainable.   Hence, a firm should be managed for long-term stability rather than constant growth.

All of this makes perfect sense, but for one thing: avarice.   I would not go so far as to claim all businesses are greedy and want to suck up as many consumer dollars as they can get - but I can say that I have never heard of a firm that doesn't covet growth and is willing to focus on providing quality of service to a limited market - and whose long-term strategy is to serve only as many customers as necessary to cover costs and generate a fair profit, and to the rest say "No thanks, we have as much business as we can competently and profitably serve right now."

To my knowledge, there is only one kind of company that seeks sustainable operations as a long-term strategy, and that is a monopoly.

Monopoly Efficiency

A monopoly exists when one firm serves 100% of the market and there is no competition.   This is generally considered by panic-mongers to be a bad situation because the monopoly "controls" the market and can use this power to charge exorbitant prices - though reason tells us this could not happen in a free market because entrepreneurs would quickly recognize the opportunity to underprice a monopoly and would enter the industry, thus ending the monopoly.  The only way for a monopoly to occur in a free market is if one firm provided service of acceptable quality at a fair price (what's wrong with that?) or for government to favor one firm and prevent competition (which, ironically, is called a "natural monopoly").

For the latter reason, monopolies exist in otherwise free markets, generally in the form of "public" utilities.  In most markets, there is no competition for electricity, water, waste disposal, and other services of that nature because local governments support one provider and prevent competition.   And what can be noticed is that these businesses run their operations with exceeding efficiency because of the predictability of demand.

Granted, there can be some objection to the suggestion that utility companies are efficient - though it is based largely on ignorance.  Most people complain about their monthly bill but haven't run the numbers.  Had they done so, they would quickly recognize that compared to the cost of purchasing an electric generator and paying for maintenance and a constant supply of fuel, the local electric monopoly's prices are in most cases very low.

The reason a monopoly is able to be efficient and reduce waste is that demand is highly predictable.   Except in rare instances, people do not move into or out of a service area in large numbers.  And in aggregate, there is very little fluctuation in the amount of power or water consumed by a population.   The monopoly can therefore make accurate plans for serving a fixed number of customers and eliminate the waste of overproduction.

Adopting Monopoly Thinking

In non-monopoly markets, there is a great deal of delusion.   Companies assume they have the ability to grow their business infinitely, and every firm in an industry assumes a 5% or 10% growth rate in the following year - even when there is not any reason to expect the same level of growth in aggregate market demand.

For example, take firms that produce diapers for babies under one year old.   In the United States, about four million children are born each year - a figure that has not fluctuated much in twenty to thirty years.  These firms should be well aware that this means there are four million customers per year (given that last year's customers "age out" of their product) and this figure is unlikely to fluctuate by much.   There is no significant increase or decrease in need, hence none in demand.   The only way these firms can grow is by stealing customers from one another - such that one firm's gain is another firm's loss.  In that situation, it is completely irrational for any firm to expect a 10% increase in business each year for the next decade (unless it can offer a significantly and sustainably better value proposition to consumers).

It would be far more rational, and efficient, for one of those firms to recognize that it has a 20% market share, and will not likely increase it, and so should set its production budget to manufacture and distribute enough diapers for 800,000 families and its marketing budget to merely replace any customers who may defect - then price its product to provide a reasonable and consistent return to long-term investors.

But this is not done: the combination of avarice and delusion lead firms to the belief that they can somehow manage to grab more of the market from competitors - often without making any improvement in product quality - and that its competitors will not be siphoning off their existing customer base.   The net result is an exorbitant expense of marketing and waste in the manufacturing operations - which causes firms to become inefficient, unprofitable, and unsustainable.

The reason firms do not collapse on a regular basis can be attributed to consumer surplus.  The customers pay not only the cost to manufacture and distribute the products they need at a reasonable profit to the providers, but they also pay for the waste of their providers' inefficient business operations.

It would also stand to reason that the firm that plans for a sustainable level of business could minimize this waste and more competitively price its product, resulting in a slow but sustainable growth in its market until it has reached the point of saturation in terms of the value proposition that is acceptable to its market segment.

Segmentation and Monopolization

While it is likely not possible for a firm to establish a monopoly in a regulated economy (regulators would prevent this, even if the market favored a single company's value proposition), many firms do seek to monopolize market segments - and doing so should likely give them the ability to apply sustainable monopolistic thinking to their operational strategy.

Consider the previous example, in which demand for diapers could be predicted according to birth rates in a given market.  A firm that proposed to sell all diapers to all ages would likely be recognized as a monopoly and shut down by regulators.   A firm that proposed to sell diapers for first-year infants would draw less attention.   And a firm that proposed to sell diapers for first-year infants of middle-income families in twelve states would draw even less attention.

To win a monopoly over such a well-defined market segment should be more feasible, as the firm could readily identify the needs and price sensitivities of a specific target with a relative degree of accuracy - and so long as it could find a way to manufacture a product that served their needs well at a price that customers found to be attractive, it should have little difficulty creating for itself a sustainable market.

***

I'm aware, at this point, that I've taken off into a realm of speculation based on a plausible theory and have perhaps gone a bridge too far.   But I expect the core theory is plausible: that a firm can define a specific market segment, plan for a specific market share, and thereby eliminate waste and gain operational efficiency at a level that is both profitable and sustainable.

The primary obstacles to doing so are likely cultural challenges: the present culture of "more and more each year" in defiance of all logic is likely difficult to impossible  - and attempting to use reason to dispel irrational beliefs is a difficult proposition indeed.

A Contradiction in Trends

An article about the new "virtual collaborative" office called attention to a contradiction in terms that even its author didn't seem to recognize, in spite of how obvious it was in his various descriptions of the topic: it is possible for an office to be virtual and it is possible for an office to be collaborative - but I remain steadfastly unconvinced that it is possible to be both at once, as they represent separate extremes of separation and colocation.

Separation (Location and Time Independence)

The "virtual office" is a concept that leverages technology to eliminate the need for a physical space in which employees would be present in the same location at the same time.   In this sense, employees can work from their homes, or from coffee shops, or from any location so long as they have connection to a network to access shared resources.   Physical files are replaced by digital ones, memos by email, and meetings by threaded discussions.

The benefit of this arrangement, aside of saving real estate expenses for the employer who provides a physical space, is that employees are untethered.   They do not need to be in the same place to share resources or converse, nor do they need to work at the same time of day, given that a person can read and respond to a message (email, text, or discussion thread) at their leisure.

The drawback to this arrangement is that collaboration is not efficient without violating the principles on which it is based: workers must be brought into the same space and time, or at least the same time, to exchange information in a dynamic and rapid enough manner to effectively contribute to the same effort.   It is not impossible, as an email conversation can still take place, but there is a great deal of lag between sending a message and receiving a response - such that conversation that would have taken five minutes in person can take several hours or several days to complete in a separated situation.

Colocation (Location and Time Dependence)

The "collaborative office" is a contradictory trend that not only requires a physical space, but requires that physical space to be more accessible than before.   The core concept requires (literally) tearing down walls to get people to be constantly accessible to one another - ideally within line of site and a distance at which they can observe one another and converse at any time, without having to make arrangements to meet because they are always meeting.

The benefit of this arrangement is increased exposure.  It is not possible for an individual to work on something secretly and unveil it at a meeting because others are always observe his actions, hear his conversations, and see what is on his desk and computer screen so that they may interrupt at any moment when they see an opportunity to contribute to his efforts.   In such an environment, information travels fluidly and conversations are constant.

The drawback to this arrangement is the very same thing: when an individual is constantly interrupted by others who wish to contribute, he is capable of getting very little done.   This can frequently be seen in meetings where a person is typing into a computer while others watch on a projection screen: he can scarce finish a sentence without someone else telling him what he ought to be typing (or multiple people telling him to type different things), nor is it possible finish a sentence and then go back and correct a typographical error because others will spot it and insist it be corrected right away.   It would be much more efficient for the individual to prepare work in isolation and bring it to others for review afterward, but this is not possible in a collaborative environment.

Blended Arrangements

The ideal situation would seem to be a blended arrangement in which individuals could spend part of their time working individually and another part of their time sharing information in a collaborative discussion.   Ironically, that is exactly the arrangement most offices have at the present time: people can withdraw to a cubicle or an office to work in private and schedule a meeting when a discussion is necessary.

That considered, it is likely that the physical office (or the degree to which a physical office is used) is not quite as bad, counterproductive, or outdated as it would seem.   While there are some tasks that can be done in a virtual office and others that require communication, chances are that many individuals hold positions that are a blend of the two - and what is needed is not a change in office arrangements, but better work management to ensure that work that is best done in isolation can be done in isolation and that which is best done collaboratively can be done collaboratively.

Perception and Reality

Sentiment arises from observation and reasoning, as these powers enable us to perceive or imagine the link between actions and consequences and evaluate whether the outcomes of an action were positive/praiseworthy or negative/deplorable.   It is from the aggregation of these judgments, in various circumstances, that form our impression that the object of perception - person, thing, location, or action - is to be regarded as good or bad.

The notion that there is a "moral sense" that exceeds our observation and reasoning has often been suggested, and is entirely absurd.   This is merely a shortcut or pretense for a person whose perception or thinking are flawed and superficial, who has not been attentive or diligent and is embarrassed to admit as much.  It suits their ego much better to claim supernatural powers than to admit to a lack of discipline and rationale.

Human perception, however, is often limited: what we perceive is merely color and shape, and this is always within the context of time and perspective.  That we recognize some subset of colors and shapes to be known objects is a mental process that imposes reasoning, memory, and experience upon this raw sensory data.   A certain combination of colors and shapes is a horse, another combination of colors and shapes is a carriage - so the fact that we speak of seeing a horse and carriage or even recognize the two are different things in spite of their tangency is a matter of interpretation of the colors and shapes that have been directly perceived, comparison to patterns in memory, and the assignment of identity.   That si to say we do not perceive objects, but define objects in what we see.

Our mental processes further interpret our perceptions, as we consider the horse to be a three-dimensional object - though we see only one side of the animal, our imagination suggests there is another side we cannot see - and thus when we consider a horse, we combine the half of the beast that our vision indicates with the other half we imagine to exist.  

This is not merely extrapolation on the assumption of symmetry, as no matter the angle at which the horse is perceived, we conceive its missing components based on the mental framework by which perceptions are translated to conception.   It is also the reason that our minds are so easily subjected to creating an illusion of completeness based on a representation that may in fact be incomplete.

Thus what we accept to be truth and reality is always some blend of the testimony of our senses and the fancy of our imagination: we may see the expression on a man's face and imagine him to be pained, only to learn that he was merely lost in thought.   But if we imagined him to be pained, we felt sympathy for his emotion and had already begun to imagine further to consider the cause of his pain.   This all occurs very quickly in many instances, without careful deliberation.   It can be somewhat difficult to overcome.

This lends itself neatly to a somewhat minimalistic approach to communication, in which the presentation of certain perceptible elements can suffice to communicate a broader and deeper sense of a reality in which the mental models of the observer can be leveraged to complete the concept that is described only in a few superficial details.   But also consider that we may do so unintentionally.

The Tao of Service

As a customer experience practitioner, my goal is to ensure that customers are well-served by any interaction with my firm. Most days, my calendar is filled with meetings in which I negotiate, persuade, and even plead for my colleagues to consider the interests of the customer.   And I find there is systemic resistance to the idea of serving the customer.  It troubles me, and I spend a great deal of time thinking about the difficulties I face on a constant basis.  Why should this be so?

Most often I ponder the nature of a specific issue, or consider how I need to approach a specific person, to overcome this resistance and do what seems self-evident, and in this notebook I have mulled over many topics.  And then, in a quiet moment, it occurred to me that I have failed to see the forest for the trees.   There is a fundamental cause to this resistance, and single question that represents the conflict, thus:  "Is your goal to help others achieve success, or merely use them as a means to achieve your own?"

Ideally, the two align, and our relationships with other people are mutually beneficial - such that each gains something from the time we spend interacting with one another.   But this is not always possible, and even when the arrangement is mutually beneficial, there are invariably aspects in which the interests of one party conflict with those of the other.


Feigning Virtue

When asked that question explicitly, "Is your goal to help others achieve success or use them as a means to achieve your own?" the natural answer, the one most people feel is right and moral, is to claim that they seek to help others.   Of course they will say that, because they like to think positively of themselves.  No-one wants to admit to being self-serving and indifferent to others.  But words are one thing, and behavior is another.

It is a common tactic of deceitful people, intentionally out for themselves, to claim to be acting for the benefit of others.  If they openly admitted that they were looking to take advantage of you for their own personal benefit, you would avoid them and they wouldn't get what they want.   The deceivers want your trust, so that you will cooperate with them, and it often is not until afterward that you realize you have been used and betrayed.  (And then, how often do you blame yourself for not recognizing the deception, rather than the other party for perpetrating it?)

Those who are intentionally deceitful cannot be turned to the right path.  They must simply be identified and avoided.   But a more pernicious type are those who have deceived themselves.   They genuinely believe themselves to be concerned about the welfare of others, even though their actions would suggest otherwise.  "I don't have the time and resources to do the best thing," they will say, and they will suggest that they are merely managing conflicting interests and scarce resources to do the best they can - but what is their priority?

So many people feign virtue in this manner.   Professing to believe something, or professing to be a specific kind of person, is simple enough.  All you have to do is say the words.   But our true character is revealed in action - the decisions we make and the things we do (though the latter are merely consequences of the former) demonstrate the quality of their character.

Watch what happens when push comes to shove in a conflict.  They will face a decision to be made between sacrificing something they want for the benefit of others and exploiting others to get something that they want.   Their declarations about themselves are merely propaganda, while their actions reveal their true character.

I am confident that this holds true, for any person in the context of any interaction.   Even in social relationships you can witness the schism between a person's words and actions, and the latter are a better testament to their values and character.   So to re-focus this meditation, let me shift back to the context of customer experience in the context of business.


The Virtue of a Business

Business is too often anthropomorphized, spoken and thought of as if it is a thing unto itself.   It is not: a business is an organization of people working together to achieve a common goal.  As such it is imprecise to say that a "business" has a character, as it is the amalgam of the character of the people in the organization that determine the way in which the organization is perceived.  If most of the people in an organization interact with a customer in an honest manner, that customer will regard the organization itself as honest.

The critical "people" in the organization are its management - those involved in making decisions as to the way others will behave in their roles.   This is evident in the way in which those who have direct contact with the customer are compelled to behave by policies and procedures set by those in positions of authority.   The experience of dealing with a store clerk who is unable to be helpful, or even to do the right thing, and who seems frustrated by being made to behave as he does because he is ordered to do so, is evidence enough that an army of clerks may have good personal character, but who are compelled against their morals and better judgment to behave in ways that they believe to be wrong.

The values with which a business starts are the values of its founder - and the same question may be put to the founder of any business: "Is your goal to help others achieve success or use them as a means to achieve your own?"   And as I have suggested, it is a question that is better answered by observing behavior than listening to declarations.

Ideally, a business begins with a founder who is oriented to help other people achieve their goals.   They recognize that something is missing in the lives of many people, or that there is a more effective or efficient way to fulfill needs.   Ideally, founders achieve success when they are right about this - the product they provide actually does serve the needs of others, and people reward them by purchasing it, enabling them to amass a fortune.  The profit an organization makes is a reward for the service it provides, and it is earned.

But in truth, there are many businesses that begin with a desire to make money, and serving the needs of customers is for them a necessary evil.  Their decisions begin with a profit motive - it is their goal, rather than the reward for achieving their goal, and it is entirely dismissive of the needs of other people.  The customer must be deceived into purchasing their product, given the impression that it serves their needs, and given the impression that the business is at all interested in serving them.

That is not to say the character of a firm is immutable.  A business founded for the right reasons may stray onto the wrong path - particularly when the service-oriented founder leaves and is replaced with profit-oriented managers.   And to be fair, a profit-oriented founder may sell the business to someone who transforms it by applying a service-oriented mindset.   Again, a business is an amalgam and its behavior in different times and circumstances comes down to which particular representatives a customer encounters.


The Character of People in Business

If the character of a business as a whole is assessed by the character of people in the business, it can be witnessed in the decisions they make and the agenda the promote.  As I work in a position in which I encounter many people within a business and negotiate for the interests of the customer, I am very much involved in conversations in which their character is exposed by the decisions they make.

I do feel somewhat fortunate to work in an organization that promotes the concept of service, and whose mission statement and core values are aligned to helping other people achieve their goals as a means to achieve its own success.   The frustration that I feel almost daily, in an effort to convince people to focus on that priority, is testimony to the difficulty of living up to professed values.   I imagine my work would be far more difficult in an organization that is merely feigning virtue - but even in one that attempts to live up to its moral standards, it can be very trying.

And given that I work in a firm that is lauded for customer service, yet I still experience great difficulty in getting people to make decisions that support a service orientation, I am led to the rather pessimistic conclusion that most people are entirely self-centered and indifferent to others, who want the reward and begrudgingly consider the needs of others in the course of achieving it.  Those whose mindset is on service, and who see profit as a consequence of getting service right, are rare.

To say that I am proud to be one of the "good ones" would be a conceit.  I hope that I am one of them.  I hope that I am not merely deceiving myself as to my true motives and my true character.  And I hope this is demonstrated by my actions.

And at this point, I've clearly degenerated into narcissistic navel-gazing and should likely wrap up this meditation.  Forgive me ... it's a blog, after all, and prone to that sort of thing.   The journey I have taken today has been considering a fundamental principle of the service mindset, the way in which it may be validated, the way it is expressed in an organization, and the way it is expressed in people.   That seems quite enough for now.

Regulation and Sustainability

An interesting point in favor of tighter regulation of companies is that investors, who control and direct the activities of firms have little interest in the health of the company or the welfare of customers, employees, or others affected by the actions of the firm but are only interested in short-term profit and have historically shown little regard for ethics or the law in pursuing the highest return possible.  It's an intriguing argument, but is based on the premise that all investors behave in this manner - which is not entirely true.

The structure of a corporation is particularly vulnerable to this accusation, as the "owners" are a faceless mass of shareholders whose intentions cannot be accurately gauged, so any intention can be conveniently ascribed to them for the sake of supporting an argument.   But a proprietorship is less vulnerable because it is assumed that the owner has some level of interest in the long-term welfare of the business and recognizes that relationships with stakeholders (customers, employees, and the community) must be served in a sustainable fashion.

But even in the corporate structure, there are those who are interested in the long-term welfare of the firm and take a similar position on sustaining relationships with stakeholders.  The majority of shares of most corporation is held by institutional investors, who seek a long-term profit on an investment they intend to maintain for decades.   These investors likewise maintain functional control of the firm, as they are not only the majority owners but are also the most active in participating in the governance of the firm itself, as opposed to short-term investors who seek to profit but are seldom involved in governance, whether by virtue of the brevity of their involvement or by their inability to form a sufficient bloc to overpower the majority of institutional shareholders.

Neither is there much incentive for short-term investors to organize a coup within an established firm.   These investors are attracted to opportunities for rapid growth and short-term profit, which are not characteristic of firms that are operated in a sustainable and conservative manner by long-term investors.  As such, the short-term investor is guided by his own profit motives to seek a different kind of vehicle for his investment: generally a smaller and less established firm that has the potential to provide a high short-term reward but whose long-term prospects are uncertain.

This does not invalidate the argument, but merely relegates it to a small minority of firms in the economy - specifically, smaller firms who have far fewer employees, far fewer customers, and whose operations constitute a negligible threat to the general welfare of the public at large.   This in itself is a safeguard against misconduct, as individuals are largely reluctant to engage with a such firms: customers are suspicious of unknown brands and recognize the risk they are taking in engaging with them, employees also recognize that a small firm is unstable and cannot be relied upon, and there is greater exposure of individual actions in a smaller organization, making it far easier for regulators to influence against or react to situations of misconduct.

In all, I'm left with the distinct impression that the argument that firms must be regulated to ensure their sustainability is half-baked and applies only to a negligible proportion of firms in the economy.   The test of whether a firm will become viable is in its ability to consider the broader impact, beyond immediate financial returns, and establish sustainable and mutually beneficial relationships with long-term stakeholders whose own behavior in interacting with the firm is supportive of such.

That said, there will always be incidences of dysfunction in some sectors, and even large and established firms will on occasion go astray - but in the larger picture such incidence will be uncommon and the damage that results will likely be negligible to the health and welfare of a large and established economy.   And so, the notion seems plausible but is unlikely to hold.