Which stakeholder should the leadership team put first?
Shareholders, Customers or Staff?
Certainly there are many examples of leadership teams and CEO’s putting shareholders first.
Recently I was working with a listed company, and I could feel the energy being sapped from my soul with every extra hour I spent in the business. Of course the leadership team were excited when we workshopped Core Values, discovered their Core Purpose and developed a strategy. But the problem was that the whole leadership team had a central belief that the entire reason they existed was to serve shareholders. I mean every single pencil and drop of water felt like it was there for only one reason, to serve shareholders.
And that belief sucked the life out of every single person in the building.
I was more passionate about their business than anyone on the payroll. Everyone was just counting down till 5pm Friday so they could go and do something they enjoyed.
Delivering to shareholders
One of the most important jobs of the leadership team is to create and acceptable return for shareholders (I say it should be north of 10% Net Profit), but it is not the reason the business and the staff exist.
But Net Profit is a net effect. It only happens when you get everything else right. A larger carrot or a larger stick will not necessarily equate to acceptable Net Profit. Getting the four decisions of People, Strategy, Execution and Cash right will.
If you don’t have the right people, it will impact Net Profit.
If you don’t have an effective strategy, it will impact Net Profit.
If you don’t execute efficiently, you will not consistently generate Net Profit.
If you don’t manage cash effectively to enable growth and liquidity, it will impact Net Profit.
Delivering to customers
The essence of any strategy must be to understand your Core Customer and deliver what the Core Customer needs in a unique manner that differentiates you from the competition. An effective strategy will organically drive revenues to your business, because you are meeting the Core Customers needs better than the competition.
A leadership team must enable the business to meet the Core Customers needs, but the Core Customer should be put second.
Delivering to staff
As Jim Collins said in Good to Great in order to build a great business, the first thing is to get the wrong people off the bus, the right people on the bus in the right seat, doing the right things, the right way.
Once you have built a team that you would enthusiastically rehire, the intent that everybody is in the top 10% of people for their role in your pay bracket.
So you have the best people, put them first!
Challenge them. Align them onto a bold mission to be the best. Pay them above industry wages and drive productivity to create results. We want “Less people, who are paid more with a lower total wage cost”. Build a great business where people want to work.
But you can’t do that if you put shareholders or clients first.
Below is a 3.39 minute interview with Sir Richard Branson explaining to Inc. why you should put staff first.