I can almost see Professor Peter Drucker, widely acknowledged as the creator and inventor of modern management, gazing out his office window at Claremont Graduate University and pondering the recent proclamations by prominent CEOs that ‘maximizing shareholder value is no longer the primary purpose of the corporation.’
Jack Welch, former CEO of G.E., and considered the father of the “shareholder value” movement that has dominated corporate thinking for over twenty years, now says that “...shareholder value is the dumbest idea in the world.” He goes on to say that “Shareholder value is a result, not a strategy.... Your main constituencies are your employees, your customers and your products…”
The professor would remind us that it is the customer that provides the foundation on which every business is built. Creating customers is the primary task of business. “To satisfy the customer,” advises Drucker “... is the mission and purpose of every business.” Any executive who thinks otherwise should try doing without customers for a few months.
Focus Intensely on Employees
It starts with employees. There are no customers without employees who serve them. Does anyone seriously think that dissatisfied employees will work diligently to satisfy the company’s customers?
With the potential shift away from maximizing shareholder value, investing in employees becomes a corporate priority. For senior executives, Mr. Welch noted that “Investing in people is the whole ballgame."
Focus on Partners
There’s an old adage – You can’t trade with a partner you've killed. I can’t think of a company today that delivers anything to its customers without the help of partners of all types, including vendors, distributors, marketers, consultants and bankers.
Doing what can reasonably be done to help secure the health of partners will in turn help ensure the health of the company.
Focus Intensly on The Customer
Drucker would advise senior executives to talk directly to customers, and to talk to them as often as practical. Instead of relying on the assessments of the marketing folks, Drucker would admonish senior leaders to leave the insulation and isolation of their offices and to visit regularly with customers.
He would advise executives to learn first-hand how customers view the company. What do they think of the company’s products and services? How well do the products or services satisfy customer wants, and what might be done to provide even greater satisfaction? What other products and services excite the company’s customers? What do customers want today and what might they want from the company tomorrow?
As Jack Welch noted, senior executives that take care of their employees, help ensure the health of the company’s partners, and focus intensely on the company’s customers, stands a good chance of creating lasting value for shareholders.