The Great Trade-Off Illusion

It is crucial to note that people create organizations and firms in order to leverage their collective resources with an aim of pursuing common goals. Hart (2011) argues that as organizations and firms pursue these given goals, they interact with others within the larger context known as the society. Based on their goals, firms can be classified as either non-profit, for profit, or governmental. As a result of scarce resources, it has become extremely crucial for organizations to adopt sustainable ways of carrying out their activities or otherwise, they may fail to operate in the foreseeable future. For instance, many firms that rely on fossil fuels have experienced a drastic reduction in their profits in the last five years. This is due to the sharp increase of this commodity in the international markets, where oil prices per barrel have surged by almost 300% to at least $147 in 2011 in comparison to 2008 (Hart, 2011).

As a result of this, it has become crucial for firms to adopt modern ways of carrying out business to enhance profitability, both in the short and long-run. However, as indicated by Friedman (1970), sustainable ways of carrying out business remains highly controversial. Some people who deeply thought why business exists or the general purpose of it do not agree with societal obligations of companies, especially towards sustainable development. The paper will critically examine the issue of “the great trade-off illusion” in relation to the perspectives of Milton Friedman and Charles Handy.

As indicated above, the importance of enhancing social activities in the place where they operate cannot be underrated. However, in the past, the issue of participation in societal activities by firms has faced stiff criticism from such scholars as Milton Friedman and Charles Handy. Friedman, a Nobel prize-winning economist, argued that the issue of corporate social responsibility distracts leaders from attaining the set economic goals. He believed that the social responsibility of any business is to increase profits. Further, he argued that any society benefits enormously when businesses focus more on maximizing their financial success (Friedman, 1970).

On the other hand, Handy is critical of overemphasizing the share prices as the key metric for the success of any corporate organization. He candidly proposes that the main aim of a business is not to make profit only but to use the profit obtained in enhancing the livelihood of families of those who are engaged in business activities (Handy, 2002). It is crucial to note that this narrow view by some leaders has led to unsustainable operation of firms in the societies where they operate. Hart (2011) argues that organizations should pay for all the negative consequences linked to their operations. Paradoxically, this type of “end-of-pipe” approach by various leaders and firms has resulted in what is called “great trade-off illusion” (Hart, 2011). It is a general belief that in order to meet the set societal obligations, businesses must enormously sacrifice their financial performances. Consequently, this misapprehension has made many businesses across the world view aspects like an environmental impact as one of the negative responsibilities as opposed to exploring all the creative possibilities that it are entailed (Hart,2011).

Generally, in order to realize all the available sustainable opportunities, firms should develop new mindsets, which would enable them to develop full contextual solutions to the real problems faced. This should be done in a way that natural diversity and local culture are upheld (Hart, 2011). It is based on the factor that traditional assumptions concerning businesses should be discouraged, thus forging relationships that are built on respect, understanding, and trust to all the stakeholders involved.