Greed can be such an amazingly powerful driving force. Likely, we have all had a taste of it at some time or another, at different levels and in different ways. A windfall, a bonus, an inheritance, or even a simple salary raise can have us striving for more. On the flip-side, we may have been asked to do some work for someone that appears to be motivated by some other than simply doing the right thing. We might even get a funny feeling in our gut, telling us something is not quite right… however, out of fear of reprisal or vindictive behaviour we probably go ahead and do it anyway.
Morals cast aside
Most issues with greed begin at the top of an organisation. Board members, paid many hundreds of thousands of dollars per year, with million-dollar stock portfolios are motivated to behave in a way that will keep them in their accustomed lifestyle. As is the same with employees at the other end of the spectrum, they are still looking to make their mortgage payments, or save to buy a new car. The difference is that their mortgage might be for their 3rd (or even 10th) investment property, and that car they are saving for could be a new customised Ferrari. The other big difference is that a fall from grace would likely not leave them destitute, and the same cannot be said for those already struggling to keep a roof over their heads.
In saving for the new Ferrari, or the fancy yacht, or the first-class getaway to Bermuda, many leaders will make it their mission to maximise profit. After all, this has become the measure for them in their life achievements. We see this all the time throughout the business stories in the media; “Organisation cuts 1000 jobs, share price increases”, “Restructure to focus on profit”, “New sales drive for Organisation to beat poor forecasts”.
These example initiatives paint a stark picture – a motivation to increase the ever-growing bag of money. This isn’t a bad thing in itself, given that the idea behind any private enterprise is to make money. The issues come into play when that drive to make money overtakes the needs of the employees helping that company to make money, or in more cases than one would believe, to the detriment of the customers buying the services in the first place.
The morals have been cast aside for the sake of the almighty dollar. Instead of empowering employees to service customers in a way that customers want, they are often managed to within an inch of their lives, whipped by the system. Those measures pushing the top leader’s behaviour are manipulated and reinterpreted throughout the business as rules and targets about how employees should behave, to reach that target. Every part of the business becomes held accountable to their own ledger, driving profit from every corner, and cutting losses wherever possible.
Measures driving behaviour
I have written previously about how measures and targets drive behaviour, and generally don’t work, and you can read about it here. Extending from this, the interesting thing is the kinds of measures that are driving the most senior leadership. The board members of most large enterprises will bleat about the need for an increase in the share price, a reliable and large dividend, or even a strong and supportive vote from the shareholder body. Many board members would also say that ultimately they don’t have control over these seemingly external targets.
That is not entirely true, though.
As an example, most shareholder resolutions are not binding. There is no reason why the board needs to follow through on shareholder resolutions, especially if it’s not in the best interests of the organisation’s customers. In fact, many transformative and disruptive organisations happily ignore shareholder resolutions as a matter of course. A new age examples of this include Netflix, where votes to appoint or withdraw directors have been ignored often.
Most disruptive organisations also do not pay dividends to their shareholders. Instead, they use this money to reinvest into the organisation to enable their employees to do new and exciting things for their customers. For a traditional organisation to pull the pin and decide not to pay dividends anymore, might be a lot for accounting-types to get their head around. “The share price will crash!” is the call to arms. And yeah, the share price will drop in the short term. Then, as that money is poured into customer innovation and delivering on the right things, the share price will climb because the income and customer satisfaction will be climbing.
The measures trap often continues to pop up in many organisations though, despite this seemingly obvious conclusion. The closed systems of financial and accounting types know that if they press hard enough, they might get the outcome they desire, so they persist with what they know. Doing anything else is considered risky in their standards or models. This was discussed recently in an interesting opinion piece titled “Metrics-obsessed managers should be careful what they wish for, unlike the banks” (The Age). While I cannot agree with everything that is stated, one quote jumped out at me: “Staff are likely to believe that profit-based payments signal the true priorities of the organisation and they modify their behaviour accordingly.” Wow.
Where is the customer?
When looking at profit as a motivating factor, the customer’s needs have been discarded, likely becoming secondary to the needs of the business – or more accurately, the desires and personal models of the senior leadership teams. These personal models drive their professional lives, and they establish rules in their organisations in order to help them achieve their professional, and subsequent personal goals… ahead of servicing the ultimate needs of the customer.
Focusing on things like reducing costs only serve to cut parts out of an organisation without fully realising the impacts that they will have on the entire chain of delivery towards the customer. Yes, these will lead to operational savings and likely drive up the share price for a short while. That is, until your customer satisfaction drops because now you’re missing a piece of delivery that a customer actually needs, then the share price dips, and you look to further boost it by reducing costs further.
We see this death spiral in so many organisations, despite the same obvious mistakes being made over and over again leading to the same results. The boards of these organisations never really try and escape that downward spiral until their hand is forced, and their professional and personal models are being directly threatened.
Proactive customer focus is the only way to really escape from this. The ‘how’ is simpler than it sounds – drop those measures that do not directly show us if a customer is getting what they want, when they wanted it, and how they wanted it. That means getting rid of share price targets, individual unit profit and loss statements, and changing compartmentalised, silo’ed groups.
Putting the customer first in terms of delivery and priority will enable the employees to do what they need to do, instead of what they have been told to do, as a trickle-down measure from a personal model of a chairperson, CEO, or CFO who wants to upgrade their mansion.
Some CEOs have made a point of acting on their own organisations to this degree in the past. Steve Jobs is probably the most prominent example: he decided to slash his own pay to $1 per year, and he also stopped paying dividends to shareholders for a period of nearly 17 years (from 1995 to 2012, reinstated under Tim Cook). In this time, Apple went from the edge of bankruptcy to one of the most profitable organisations on the planet today. The focus? Customer simplicity and delivery. Many in the anti-Apple camp will try and argue that they are not focused on customers, and are only interested in building their walled-garden. This unfortunately dismissed the simple fact that customers flock to them for the same reason again and again: simplicity, ease of use, and getting what they want, when they want it, how they want it.
Which leads us to the conclusion: focusing on delivering towards the customer needs will lead to increases in profit and customer satisfaction in and of itself.