Tuesday, October 27, 2015

If It’s Not Maximizing Shareholder Value, What Is the CEO’s First Priority?

In recent years, Apple Inc. was announced the most valuable stock to ever be traded, reaching a peak market cap over $950 billion. Since the departure of founder and CEO, Steve Jobs, company shares have continued to grow. From debut through the present, Apple has been a driving force outside its original core competencies and a poster child for innovation.

Apple’s performance is
unlike any other company. Thus, the question remains, “What allowed for it to happen?” Either success is the result of a single-minded focus on maximizing shareholder value or Apple has something happening inside that other organizations lack.

Steve Jobs and his successor, Tim Cook, were committed to creating an environment that engages and empowers people to effectively work together in the customers’ interest. Too often, CEOs focus too heavily on maximizing shareholder value, developing strategies to target the stock price. Apple however, for all of its top line growth, customer loyalty, and employee satisfaction, climbed through the rankings because of its culture.

Though CEO’s most critical creation is culture, it regularly gives way to excuses like “nice to have, but hard to create.” This excuse can create a default culture with poor results. And businesses with a poor culture often find themselves meeting roadblocks to innovation and top line growth.

For all the wonder of a successful culture, it does not just happen. There is something that allows for a successful culture like Apple.

Social anthropologists call it “a network of conversations”. Therefore, CEOs in partnership with their top managers need to decide what the conversations will be when all stakeholders refer to their enterprise. Whether it is the incumbent CEO or a new CEO, he/she must have a vision for the type of culture desired and the correlated conversations that drive it. That way it is intentional and can be built into strategy. 

When well designed, a successful culture implies collaboration, open communication, the ability to attract and retain top talent, constructive disagreements at every level, and a network of conversations that are empowering. To drive and sustain this type of workforce, there are many important conversations that should be built into the organization and part of every meeting. To name a few, there are four conversations that can allow for the kind of environment at Apple:

-      What is in the best interest of all involved?
-      What additional value can be added to the customer?
-      How do we exceed customers’ existing and anticipated needs?
-      How do I intentionally develop my people and myself personally and professionally?

These four tenets are the walk the CEO must walk and ensure it is reinforced, rewarded and continuously developed. That way he/she can build change and innovation into strategy with a culture that will more effectively accomplish outcomes, keeping Wall Street and Main Street happy.  

Everyone’s Best Interest

Companies answer to a number of stakeholders: employees, management, owners, the community, government policymakers, etc. They must carefully consider every potential action, to ensure the general well being of everyone. That is not to say however, that corporations need to try to make everyone happy.

Instead, acting in the best interest of all involved forces the discussion between “What can these stakeholders gain?” and “What do these stakeholders lose?” The ultimate goal is to minimize damage while pushing the organization onward.

As an example of minimizing damage, a job is an expression of self-interest. At the same time, if self-interest is the only motivation of an individual, it will be difficult to have harmonious relationships between colleagues and clients. Therefore, an appropriate question for leadership to ask is: “What is in the best interest of everyone involved?” People are forced out of a stubborn position between right and wrong and can look at the bigger picture to focus on doing the right thing.

Customer Value

No matter the corporate department, without people to buy the product a company cannot function. Changes to the product must be made with customers in mind. What will give them additional satisfaction?

Exceeding customer needs

There are things consumers need, and there are things they want. Nonetheless, companies tend to struggle in finding the things consumers need to want. Fundamentally, customers must be engaged in a conversation. “What’s possible beyond what we’re already doing?”

Meeting customers’ existing and unmet needs requires happy employees. Employees and clients are like a married couple, who will perpetuate that happiness by always anticipating the needs of their spouse, even when not articulated. It happens through engaging conversations.

In a business, this process has to be intentional. To name a few, it means different parts of the company are talking to one another about what they are working on, what they do for customers, why they are not selling to non customers and what’s possible as a result of recent developments.

Externally it means to discover where clients are going. And asking them: what do we do well for you? What do we do poorly for you? And what would you like us to do that we have never done?

Employee Development

Now more than ever, CEOs can leverage people smarter than themselves because of the proliferation of knowledge workers. If you assume all employees are knowledge workers, how must a corporation be structured for employees to perform their best? The answer is organizational culture. Nonetheless, a successful culture does not manifest by itself.

The corporation is filled with initiatives that require staff and management to learn new skills and competencies. Additionally, when projects stretch people, it can cause frustration and confusion. Therefore, it is imperative that people develop interpersonal skills that allow them to work together more effectively. Employees must learn skills to better handle disruptions, frustrations, opportunity, failure and success.

In the past, command and control was the strategy of leaders.  With knowledge workers, collaboration between colleagues, customers and suppliers are imperative.  To add, in an ever-changing environment, constant development is the way to prepare staff and management for the future.

What do you think? I would love to hear your feedback. And I’m open to ideas. Or if you want to write me about a specific topic, let me know.

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