Breaking Bad Business Systems: A Deep Dive into the Inputs, Processes, and Outputs of Major Scandals

In this episode of The Bliss Business Podcast, hosts Stephen Sakach, Tullio Siragusa, and Ash Maher take a closer look at the anatomy of business scandals by dissecting the key elements of bad business systems. The discussion revolves around how flawed inputs, processes, and outputs have led to some of the most notorious corporate scandals in history. By understanding these failures, businesses can better safeguard against similar pitfalls.

The Anatomy of a Business System

Business systems are made up of various components that work together to achieve a specific purpose. These components include inputs, processes, outputs, feedback loops, and the environment in which the system operates. When any of these components are flawed, the entire system can go awry, leading to negative outcomes that can damage a company’s reputation and financial standing.

The hosts revisit several infamous business scandals, examining how each company’s systems failed at critical points. They focus particularly on three elements: inputs, processes, and outputs, highlighting how these elements can either make or break a business.

Case Studies in Failure

1. Wells Fargo’s Fake Accounts Scandal

   • Input: Aggressive sales targets and employee performance metrics.
   • Process: Opening accounts and processing customer information.
   • Output: The creation of millions of fake accounts.

   The hosts discuss how Wells Fargo’s input of high-pressure sales targets led to unethical behavior in the process of opening accounts. The output was a staggering number of fake accounts, which resulted in a massive loss of trust and legal repercussions for the company.

2. Countrywide Financial and the Subprime Mortgage Crisis

   • Input: Borrower applications and market demand for loans.
   • Process: Loan approval and underwriting.
   • Output: A high volume of subprime loans.

   The subprime mortgage crisis is a prime example of how prioritizing volume over quality in the loan approval process can lead to disastrous outcomes. The hosts explain how this approach not only caused widespread financial instability but also had far-reaching impacts on the global economy.

3. Volkswagen’s Dieselgate

   • Input: Vehicle designs and emissions standards.
   • Process: Emissions testing and software development.
   • Output: Vehicles that falsely met emission standards.

   In this case, Volkswagen’s manipulation of emissions testing software allowed them to meet regulatory standards falsely. The hosts highlight how the flawed process of software development and testing led to one of the most significant environmental scandals in recent history.

Actionable Insights

These insights provide practical steps that businesses can take to strengthen their systems, ensuring they are ethical, sustainable, and aligned with the company’s mission and values.

1. Prioritize Ethical Inputs:

   • Ensure that the goals and targets set for employees are realistic and ethically sound. High-pressure targets can lead to unethical practices, as seen in the Wells Fargo scandal. Focus on metrics that promote customer satisfaction, trust, and long-term relationships rather than just short-term gains.

2. Refine Processes with Transparency:

   • Regularly audit and refine business processes to ensure they are transparent and align with your company’s values. Implement checks and balances that prevent processes from being manipulated, similar to how Volkswagen’s emissions testing was compromised.

3. Align Outputs with Company Values:

   • The products and services your company delivers should reflect your core values. In the case of Countrywide Financial, focusing solely on output (loan volume) without regard to quality led to disastrous consequences. Make sure your outputs support sustainable growth and ethical standards.

4. Integrate Feedback Loops:

   • Develop robust feedback loops that allow for continuous monitoring and improvement of your business systems. These loops should incorporate customer feedback, employee input, and environmental impact assessments to ensure that your business is on the right track.

5. Embed Love-Based KPIs:

   • Consider implementing love-based KPIs that measure the impact of your business on people and the planet. This includes customer satisfaction, employee well-being, and environmental sustainability. These metrics can guide your business toward long-term success and help prevent systemic failures.

6. Encourage a Culture of Accountability:

   • Foster a culture where accountability is valued at every level of the organization. When employees and leaders alike are held accountable for their actions, it reduces the likelihood of unethical behavior and systemic failures.

The Role of Feedback Loops

A key takeaway from the discussion is the importance of feedback loops in maintaining the integrity of business systems. Feedback loops allow companies to monitor their systems in real time and make necessary adjustments before problems escalate. The hosts emphasize that by incorporating love-based KPIs—such as customer satisfaction and environmental impact—into feedback loops, companies can create more sustainable and ethical business practices.

Conclusion

The episode concludes with a powerful reminder: businesses must build love into their systems to ensure long-term success. By focusing not only on profits but also on people and the planet, companies can create systems that are resilient, ethical, and capable of withstanding the test of time.

Stephen, Tullio, and Ash encourage listeners to critically examine their own business systems, asking themselves whether their inputs, processes, and outputs are aligned with their company’s purpose and values. By doing so, businesses can avoid the pitfalls that have ensnared so many others and instead build systems that support both financial success and societal well-being.

For the podcast episode related to this blog click here