Monday, August 10, 2009

How to kill shareholder value

In my last post, I wrote about the search for precious things as requiring somewhat of a hands off approach. I wrote that the search for beauty cannot be successful because beauty is inside of you and until you stop searching you can never find it.

I think this idea applies to business as well. I think that the path to profit and shareholder value has to come from a focus within rather than on a search for shareholder value.

In fact, I think just saying "shareholder value" - as impressive as it might sound to the Harvard Business Review crowd - destroys value.

The search for shareholder value makes you look for operational efficiencies. It turns your attention to maximizing your IP - brands, technologies, etc. It calls on you to look out there for acquisitions that can round out your portfolio... All well and good.

But I think it is the wrong frame.

And so I'd like to propose an alternate frame. I'll call it "Employee Value" for the HBR crowd. I could call it "love" for you hippies. Call it whatever you like. But the idea is that if you want to make lots of money, focus on your people. Now, of course, every company dribbles out the corporate pablum about "our people are our best assets." I'd love to see a study on the companies that say things like this. I suspect you'd find them to be the least pleasant places to work. The least inspiring.

I'm not talking about your slogan. I'm talking about whether you really understand what you have in those people. Whether you really understand that in the hearts, minds and souls lies the jackpot you want to hand over to those shareholders.

People naturally seek excellence, beauty, greatness. Their natural propensity to search for it knows very few bounds. It does not respect your brand strategy. Your customer segmentation. Your portfolio. It just wants to create greatness. Your people will have great ideas. Let them run with these ideas. I'm not saying go execute every idea. I'm saying take off the P&L / shareholder value lenses and put on the "employee value" lenses. Give your people every opportunity to pursue their passions. Help them. Respect them. Encourage them. Yes, make sure they adhere to societal standards and your business values. But if you truly encourage them to find their greatness and then you provide the tools to commercialize that greatness (with as little editing as possible), you will succeed wildly.

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