This is one rule, which every leader can internalize. It’s a myth that customer’s, shareholder’s and employee’s interests are always aligned. A leader always has to maintain a balance across these three entities. This tip helps a leader to make this perpetual act of balancing to be simpler.
Shareholder is foremost boss
The value chain is ‘A financially satisfied shareholder leads to a loyal customer leads to engaged employees’. The first priority is always to keep your shareholder happy. An unhappy shareholder is going to take away his monies and your ability to keep happy customers and employee will crash. Therefore, one always has to work on maximizing value for the shareholders. That’s why one needs to be driven by the shareholder wishes related to return on investment, embedded value expectations, book value expectations, earning per share and maintaining healthy P/E (market stock price divided by earning per share) ratios.
Next boss in the chain is the customer
A customer is who gives you the monies in lieu of your products and services. Customer is a significant asset and customer attrition can have significant customer attrition cost. One should do all what you can to keep a customer happy as long as it does not hurt shareholder’s interest. For example, you will not give a business class service to an economy class customer to win his loyalty. Customers are also no naive. They do understand the value which they can expect vs. what they are paying. Sometimes companies do take financial loss in the short-term to gain long-term customer relationship. However, this will be blessed by the shareholders. A big challenge with the CEOs is to meet the short-term expectations of the shareholders, while investing for the long term. The joint-venture partnerships are more interesting as may have different shareholders with different expectations. The rule is ‘Customer is your king and shareholder is your emperor’
And finally its the employees
Employee comes as the next to demand your attention and focus. A prudent organization always takes the decisions which are best for the customer and the shareholder, and considers the impact on employees before going ahead with the same. In other words, an organization will take all the steps to have satisfied and engaged employees, as long as it is not compromising customer and shareholder objectives.
In all the above there is not always ‘either and or’. One needs to consider that pampering shareholders at the cost of customers, will finally hurt the shareholders and similarly dis-satisfied employees will finally lead to dis-satisfied customers. Therefore, in this tip, we are not suggesting an extreme approach. The idea is on which entity takes precedence over the other.
As an example, I have faced this question ‘will you support a 7 day week, if it makes your customer happy?’ I find this question little absurd, as a 7 day week will result in 100% attrition of high quality employees, which will destroy my capability to serve my customers as I will be left with fewer and 4rth quartile employees. Yes, if 7 day week does make sense for customer and shareholder perspective, I will hire more employees, so that I can rotate week-end duties, I will pay more monies for week-end duties and make the work environment for week-end working highly employee-friendly.
There is another way to support this tip-
- A customer always wants to be with a company which is financial strong and robust.
- An employee always wants to be with the company which is financially strong, has a safe future and has satisfied customers.
You may have best employee practices, but if you are not financially sound , both customers and employees will leave you over time. As some philosopher has put it ‘Warmth of love emanates from the kitchen fires’.
The contents of this post are referred from Be Shareholder-driven, customer-focused and employee-sensitive from business intelligence and performance management institute.
