We devoted post #129 (Integrity Idea 003: Pay Today) to the idea that leading with faithful integrity through business a better way toward Biblical flourishing should include living the Golden Rule consistent with good stewardship by paying employees for their work, paying refunds to customer/clients, and paying suppliers/vendors promptly.

As in our most recent post (#237–“Real” Culture Revisited), the news has inspired us to revisit an important idea.  This time it is a Wall Street Journal article titled Supplying Saks Was a Soapmaker’s Dream Until He Got a $74 Check

The Saks Situation

The recent article about Saks Fifth Avenue paints a picture of an organization that is conserving cash by not paying, or stretching out for months payments to, its little vendors, particularly those unlikely to pursue costly litigation.

The amounts at stake were presumably small for Saks but significant for its vendors.  The Wall Street Journal noted:

For small suppliers, even small amounts of withheld funds can mean the difference between solvency and collapse.

The article reports Saks allegedly owed:

Jolie Skin $15,000

Terre de Mars $8,000

Luna Bronze $9,000

CTE Watch $41,000

It also notes that some vendors were paid, or told they would be paid, after the Wall Street Journal contacted Saks.  A spokesman for Saks is reported to have said “Any delayed payments are due to navigating our business through the current challenging macroeconomic environment.”

The article quotes a lawyer who has represented Saks vendors as saying, “Saks has always paid his clients after they filed lawsuits.”

Suggesting that Saks is not unique, the article notes “some vendors said their experience with Saks is indicative of broader problems with large retailers.”

Pay Today

“Pay Today” is about foregoing leverage with customers and vendors and eschewing manipulative compensation practices with employees–living the Golden Rule consistent with good stewardship. It is about cultivating a “Should We” rather than a “Can We” culture–doing the right thing, in the right way, for the right reasons.

It expresses a Biblical principle found in several passages:

You shall not oppress your neighbor or rob him. The wages of a hired worker shall not remain with you all night until the morning. (Leviticus 19:13)

Do not withhold good from those to whom it is due, when it is in your power to do it. Do not say to your neighbor, “Go, and come again, tomorrow I will give it”—when you have it with you. (Proverbs 3:27-28)

Business as usual–the way of the world–says to use leverage to its maximum advantage.  As we have emphasized numerous times, if a business is operating on the business as usual principle of Profit as Purpose, employees, customers and vendors can never be more than tools to be managed toward that end (“No one can serve two masters“, Matthew 6:24).

Employees. While there are legitimate uses of deferred compensation that are tax efficient and benefit employees, many employers use the deferral of compensation in one way or another in a manipulative fashion to incentivize employees in various ways.  Consider the classic delay of bonus payments to keep employees longer.

As we explained back in post #015 (Business As Usual–Self-Interest), whatever the goal of an organization, its achievement requires aligning people’s interests with that goal.  The goal of Profit as Purpose requires aligning people’s interests with the goal of profit maximization.  In an organization conducting business as usual, with Profit as Purpose and the Self-Interest assumption, people’s behavior will be manipulated through mechanisms of reward and punishment.

The Self-Interest assumption leads to the belief that morale problems can be “solved” with money.  While using the Self-Interest assumption to motivate people will work–at least for awhile–it is far better to cultivate a Re-Imagined Culture that people never want to leave.

Customers. How many times have you been told by a “customer service” representative that it will take weeks to process a refund? It certainly doesn’t take weeks for the same business to process your payment.

Presumably, someone decided that the bottom-line benefit of the “float” on refunds outweighed the negative bottom-line impact of a lost customer.  Perhaps they concluded that a customer being refunded is already a lost customer, so there is no benefit from treating them fairly or well. Business as usual and Profit as Purpose.

Vendors. It is certainly a common business as usual practice for businesses to delay paying their vendors until the last possible moment.  Those with leverage use it to negotiate extended payment terms.  This can put pressure on vendors, particularly small ones.

Saks appears to have taken delay one step further, paying some small vendors only when the “cost” of not paying potentially exceeded the cost of paying–whether because of potential reputational “cost” resulting from public exposure in the Wall Street Journal or litigation “cost” when a lawsuit was filed.

While there may be business as usual reasons and rationales for paying employees what they are due, refunding promptly and paying vendors promptly, “pay today” as a Biblical principle is about doing it simply because it is the right thing to do to treat others as you would wish to be treated–living the Golden Rule.

And as you wish that others would do to you, do so to them. (Luke 6:31)

At least when it comes to paying small vendors, Saks seems to have been taking a business as usual “Can We” rather than a business a better way “Should We” approach.  When faced with a choice, people in a “Can We” culture are explicitly or implicitly rewarded for asking “Can We“ choose the alternative that most aligns with a WHY of Profit as Purpose.  Questions might look like:

• Can we delay payments without violating the law?

• Can we delay payments without losing employees, customers, or access to products or services critical to our business?

• Can we delay payments without reputational harm?

• Can we delay payments without being sued?

Large retailers like Saks presumably have significant leverage when dealing with small vendors supplying products not critical to the retailer’s business.

Business a better way in alignment with Biblical beliefs, principles and priorities requires cultivating a “Should We” culture in which people are explicitly or implicitly encouraged to ask things like:

• Are we honoring the spirit of our promises?

• Are we honoring what our stakeholder reasonably believed was our promise?

• Are we misleading stakeholders in our communications, either by overstating or omitting the truth?

• Is the way we are honoring our promises and communicating with stakeholders doing the right thing, in the right way, for the right reasons?

• Is the way we are honoring our promises and communicating with stakeholders consistent with what we say we stand for and who we say we are?

“Pay Today” and Stewardship

It is easy to say “Pay Today”, but the easy thing is not always the right thing to do.   Proverbs 3:27 says (emphasis added), “Do not withhold good from those to whom it is due, when it is in your power to do it.”  We believe “power to do it” must be considered in the context of good stewardship of the organization.

Back in post #082 (Culture and Capital), we suggested that an organization that is aligning its Culture with Biblical beliefs, principles and priorities must steward its capital in accordance with three key principles, Sustainability, Mutuality and Generosity.  “Pay Today” requires consideration of all three.

Sustainability. As a business pursues its purposes, it must do so in a way that is sustainable across all of the dimensions of its interactions with its stakeholders. The most important principle in stewarding an organization on God’s behalf is not to destroy it!  An organization can die if:

• Leaders fail to foresee the organization’s dependence on a form of capital or fail to take steps necessary to identify sources of that capital and nurture those sources to ensure that they remain healthy and available.

• It runs out of financial capital (i.e., cash).

• It is unable to attract and retain qualified people.

• It is unable to secure natural resources, supplies of parts or distribution channels needed for its operations at prices that allow it to be profitable.

• It loses the trust and support of the communities in which it operates.

Sustainability is impacted by an organization’s relations with its employees, customers and vendors, which can be impacted by payment practices.

Mutuality. Mutuality is about ensuring that transactions are “fair” to both parties, regardless of bargaining leverage.  “Pay Today” is about being “fair” despite leverage.  For an organization aligning its culture with Biblical beliefs, principles and priorities, mutuality is simply the right thing to do AND it is good long-term stewardship of the organization’s broad capital.

Generosity. As explained in post #044 (Righteousness–Living Generously), pursuing faithful integrity through business a better way toward Biblical flourishing requires more than “giving generously”–it requires the “vertical integration” of generosity by “living generously”.  Living generously is about operating the organization (and, in the process, generating wealth) in a way that generously loves others and stewards creation.

Living generously is living sacrificially–choosing to give something up or to forego a benefit because it benefits the common good–because it is faithfully doing the “right thing”.  In this respect, generosity is closely tied to mutuality–treating vendors, employees and customers more fairly than you might need to based on your bargaining leverage is living sacrificially–and it is faithful stewardship.

If leaders determine that an organization “can” responsibly institute practices of “Pay Today”, then “Pay Today” can help reinforce the development of a “Should We” Culture.

“Pay Today” and Trust

The Wall Street Journal article includes a quote from Ryan Babenzien, CEO of one of the Saks vendors:

There is no amount of credibility in the world that offsets not being paid.

We believe it is safe to assume that Saks has lost the trust of the vendors it has failed to pay.  It is possible that the Wall Street Journal article will result in Saks losing the trust of other vendors as well as customers and employees.  Ignoring the Biblical principles that urge “Pay Today” has consequences.  Losing the trust of stakeholders has consequences.

We believe efficient commerce, stakeholder loyalty, healthy relationships, and a cohesive community require trust. A 2019 Forbes article titled “The Trust Crisis in Business” noted:

A lack of trust is a significant threat to an organization’s ability to grow, according to more than half of the CEOs surveyed by PwC in 2016.

Stephen Covey wrote, “Trust is the glue of life. It’s the most essential ingredient in effective communication. It’s the foundational principle that holds all relationships.”

Trust is fragile.  It is easily lost and, once lost, difficult to restore.  Even worse, when someone professes a Biblical faith and fails to be trustworthy, their hypocrisy reflects to the world an inaccurate and unglorifying image of God.

Being trustworthy can get complicated in a broken world. One challenge is the pressure of the world to conform to business as usual.  Business as usual is built on assumptions of Scarcity and Self-Interest, both of which exert pressure to shift “Pay Today” from “because it’s the right thing to do” to “if it is in our interest.”

The difficulties and practicalities of implementing “Pay Today” in a business as usual world are captured by a quote from François VI de la Rochefoucault:

We promise according to our hopes and perform according to our fears.

For faithful leaders seeking to lead with faithful integrity through business a better way toward Biblical flourishing, earning trust requires trusting. The Bible is pretty clear about the importance of trust in God:

Trust in the Lord forever, for the Lord God is an everlasting rock. (Isaiah 26:4)

Blessed is the man who trusts in the Lord, whose trust is the Lord. (Jeremiah 17:7)

He trusted in the Lord, the God of Israel, so that there was none like him among all the kings of Judah after him, nor among those who were before him. (2 Kings 18:5)

To be clear, trusting as a concept isn’t our problem.  We trust a chair every time we sit down without testing its integrity.  We trust pilots with our lives every time we get in a plane.  We trust taxi drivers and Uber/Lyft drivers with our lives every time we get into a car.

But trust in chairs, planes, pilots and drivers does not provide the security we need to face the challenges of leading an organization, particularly in difficult times.  We believe the world–and business as usual–teaches organizational leaders to trust “secure” money.

Business consultants, particularly those advising organizations in difficult times, sum it up in the phrase “Cash is King“.  It is much easier to trust God, personally or organizationally, when you have large cash reserves (just in case God isn’t trustworthy and shows up late, shows up the wrong way or doesn’t show up at all).

It is ironic that the declaration “In God We Trust” appears on the very money we trust in lieu of God.  Of course, trusting in “secure” money is a misplaced trust, because no worldly asset is truly “secure”.

A faithful leader of an organization committed to implementing “Pay Today” will face challenges that require the utmost trust in God’s sovereignty and trust in God’s commands.

PERSONAL NOTE (from PM): The Saks situation also exemplifies the type of misalignment between real culture and stated culture that I described in the most recent post. Although I did not find values on Saks website about how vendors should be treated, I did find the following in the HBC Supplier Code of Conduct on the website of Saks’ owner Hudson Bay Company:

Hudson’s Bay Company and its affiliates Saks Fifth Avenue, (collectively, the “Company”) are committed to conducting business in an ethical and socially responsible manner. We are determined to build our business together with our suppliers based on the highest ethical principles of trust, teamwork, honesty, and respect for the rights and dignity of others. 

Hudson Bay also describes one of its “Basic Principles of HBC Purchasing” as “mutual benefit based on mutual interest“.

ESSENCE: Leading with faithful integrity through business a better way toward Biblical flourishing should include living the Golden Rule consistent with good stewardship by paying employees for their work, paying refunds to customer/clients, and paying suppliers/vendors promptly.  It requires cultivating a “Should We” rather than a “Can We” culture. A recent news story paints a picture of a major retailer that is conserving cash by not paying, or stretching out for months payments to, its little vendors, particularly those unlikely to pursue costly litigation. Ignoring the Biblical principles that urge paying promptly can result in losing the trust of stakeholders.  When someone professes a Biblical faith and fails to be trustworthy, their hypocrisy reflects to the world an inaccurate and unglorifying image of God.  Being trustworthy can get complicated in a broken world of business as usual.  For faithful leaders seeking to lead with faithful integrity in alignment with Biblical beliefs, principles and priorities, earning trust requires trusting–trusting in God’s sovereignty and God’s commands.

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