It doesn’t work if you fill up the tank with petrol when your car runs on diesel. It doesn’t work to turn up at a nightclub and expect to get peace-quiet. It doesn’t work to drive down the wrong side of the road at a busy time when there are lots of cars on the road and expect no problems. It doesn’t work to turn up in your bikini for work or to turn up with your business suit to sunbathe on the beach. And almost all of us get that.
So why is it that in the world of business we forget this. Why is it that we still cling to stupid ideas, and practices, like what gets measured gets done. Rubbish. In the world of business what gets measured gets gamed. And if it isn’t being gamed now, then you can rest assured that someone is working on finding a way to game it especially if his/her bonus cheque depends on that measure.
Take the idea of best practice. When all the players in the industry go for best practice, the best practice is to do something totally different. Isn’t that what Jobs did? And in the process he reinvented and created industries. So worshipping at the altar of best practice and benchmarking is a stupid practice especially if you are on of the followers, the laggards.
Then there is the stupid idea that you can generate genuine collaboration and teamwork within the organisation – social business – when the context the players operate from is one of competition: for resources, for recognition, for rewards. In a context of competition what shows up is competition. If you are stupid enough not to accept this and demand collaboration then you will get competition disguised as collaboration.
Which is the most stupid idea of all within the realm of business? It is the one that was invented some 30 – 40 years ago. It is the idea of shareholder value as being the sole purpose of a business and its management team. Why is it stupid? Allow me to quote Roger Martin, Dean, Rotman School of Management:
Customer delight is a more powerful objective than shareholder value ….. if you take care of customers, shareholders will be drawn along for a very nice ride. The opposite is simply not true: if you try to take care of shareholders, customer’s don’t benefit, and ironically, shareholders don’t get very far either.
A lot of the issues that I see in the customer thing is that many of us are attempting to force it into the shareholder value game. And it doesn’t fit. The shareholder value game is the ‘one night stand’ game – get me laid this year! Whereas the customer delight game is a longer-term game, an affair that keeps both parties interested in each other over the longer term.
The Customer Blog 
Reblogged this on Geek/Husband/Dad/Catholic.
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Maz, as I read this post, I was reminded of the famous quote from Peter Drucker:
“The purpose of a business is to create a customer.”
Drucker never said “The purpose of a business is to create shareholder value.”
If you focus on customer creation and customer growth, the shareholder value will take care of itself.
Unfortunatelly, there’s too much “financial peer pressure” to deliver the numbers drive shareholder value in the SHORT TERM. So, who should be responsible to stand up and say, “We’re not going to play the Short game – we’re going to play the long game?”
Should it be the CEO? The Board of Directors? The Shareholders?
Who should it be?
Jim Watson
Portland, Maine
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Hello Jim
Here I think of companies like Apple and I think of Steve Jobs who clearly operated from the viewpoint that it was not about the money, it was about making great products, putting a dent in the universe.
I think of Zappos and I think of Tony Hsieh (CEO, investor, co-ownder) who shows up via his book Delivering Happiness as being a people-relationship-service person: Peace, Unity, Love, Respect. And who walked away from tens of millions of dollars of reward because he got that his life, his work, mattered more than the money. And he staked all he had to live his ambition to make Zappos the brand for great customer service.
I think of Chris Zane as the founder/owner/CEO (via Reinventing the Wheel) where he shares if business philosophy on/around building a business around service and customer lifetime value.
I think of Bezos as the founder/CEO who still plays the long term customer value creation / market leadership game.
I think of John Timpson of Timpson who as owner/CEO choose to compete against formidable competitors by encouraging/allow the people in the shops take the decisions and head office became a resource to be called upon as and when needed.
As I understand it Japanese and German companies pursue long term market share leadership strategies. They are able to do this because that kind of approach fits better with their cultures. And they have cross shareholding relationships (banks, govt, suppliers, competitors) that are set-up for the long term.
As to your question, who should it be, the answer is none of the actors you have suggested if you are talking about a publicly listed company. The rules of the game for publicly listed companies are set and each of the actors is set a prescribed role. The CEO has to deliver the short-term profits or he is out. Exception, he inherits the basket case. Shareholders are short-term traders and move in-out of stocks. Vultures are ready to pick companies up and tear them apart. The Board of Directors tend to be handpicked to serve the CEO and as such tend to be of little use.
What is needed is a change in the fundamental working of the system. A change in the fundamental rules of the game. That can only be done by government. And if you think that government has no role or part to play in the game of business then I remind you that we are in the mess we are in because Bill Clinton undid the separation of retail banking from investment banking. And set the stage for bringing the capitalism to its knees. And if it was not for an enormous act of socialism (ordinary citizens taking the losses and bailing out the bands) then we would now be living in a very different world. No, it falls to government to change the rules of the game. They should start by outlawing executive compensation that is based on the share price. Next, the legal duty of the company and its management team should be altered so that it is a duty not only to shareholders, but also other stakeholders.
Maz
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Maz, clearly this hits your hot buttons.
I agree it doesn’t work, but it isn’t my personal favourite piece of management dogma.
That award goes to “performance management”, the idea that you can identify your top 10% and bottom 10% of talent in your pool of employees and reward them appropriately with carrots and sticks.
All you succede in doing is pissing off (I chose my words carefully) the middle 80% of the organisation who after a hard years work are toldon their appraisal form that they are “average”.
And how do you measure talent anyway?
I will get off my soap box now.
James
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Hello James,
I find myself to be in agreement with you. Performance management is an outgrowth of a philosophy and ideology that once served a useful function: it freed the population from the control of the Catholic Church. And of course individualism is the most fervent in Protestant countries as they pretty much arose together in Europe.
As the Ha-Joon Change, the Cambridge economist makes clear in his book 23 Things They Don’t Tell You About Capitalism, individual performance is never individual performance. He points out that being entrepreneurial is the default way of life in developing countries. Why? That is how people survive. Yet, these people are not as productive compared to westerners because the the systems that support and make entrepreneurship are simply not there in the developing world.
As soon as one sees performance as a property of the system then new opportunities open up. Whilst this is blindly obvious, it goes against the ingrained habit of holding people responsible so that we can reward them, blame them, manipulate them. And of course, we, the Tops, do not have to take any responsibility.
Is performance management the dumbest management invention? I have no point of view on this. This is a question that has no answer and in any case it is context dependent. If you are running a service operation it probably is. If you are looking at the business and formulating a business strategy then it probably is not.
Maz
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Great piece Maz. I found myself enthusiastically nodding with agreement. It’s a bit like the question: which is more important, keeping customers or getting new ones? I’m clear – it’s all about delivering a great customer experience for your existing audience. Do a great job delivering exceptional service and you get great advocates – the new customers will come. Enthuse about what you do!! Great blog! James.
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Hello James
Welcome to The Customer Blog. I thank you for making the time to share your perspective and thus make yourself visible to me. For my part I am pleased to make your acquaintance.
What shows up for me is that I am in agreement with you. What you say strikes me as being “common sense”. Yet, what I find remarkable is who often “common sense” is not common. Being trained in physics I find myself drawn to workability – what works, what does not work, what are the fundamental principles behind stuff. I was shocked when I entered into the world of business. Why? It occurred to me that business is a religion and has no listening for what works and does not work. It still occurs to me that our way of business is born of a particular ideology that was birthed by the Chicago School of Economics. It is what lead to the biggest act of socialism in a country that hates that word/concept: the American taxpayer without his consent saved capitalism by taking on the losses of the banking system.
All the best
maz
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Everybody around the world urging to bring the change and put the customer ACTUALLY in the centre of the business but most companies find it difficult to implement and afraid of implementing it. Also I would like to share a similar article with same appeal:
http://customervaluefoundation.wordpress.com/2012/09/19/maximizing-shareholder-value-is-ill-conceived-concept/
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Hello Maz,
I am CRM enthusiast from Lithuania. I want to say, that I am impressed by the metaphor, which is written in a first paragraph. Well done!
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Hello and welcome,
What can I say except thank you; kindness is always welcome! I am grateful that you exist and that you took the time to brighten up my day.
I wish you the very best
Maz
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