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Managers should be able to eat today while dreaming of tomorrow

Managers should be able to eat today while dreaming of tomorrow
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First Published: Sun, Mar 22 2009. 10 27 PM IST
Updated: Sun, Mar 22 2009. 10 27 PM IST
Jack, your comments about shareholder value being “dumb” sure ignited a debate, both pro and con. Did you really say what the ‘FT’ said you did?
Every direct quote in the FT is accurate. In a wide-ranging interview about the future of capitalism, I was asked what I thought of “shareholder value as a strategy”.
My response was that the question, on the face of it was a dumb idea. Shareholder value is an outcome—not a strategy.
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Is that a new position for you? Some people seemed to think you’d had some kind of conversion experience.
Absolutely not. It’s obvious that strategies are what drive a business. You might, for instance, have a strategy around innovation aimed at producing the leading products in every cycle, or you might have a strategy to become the low-cost global supplier, or you could have a strategy to globalize a company, taking its strengths in one market and translating them to every market.
But you would never tell your employees, “Shareholder value is our strategy.” That’s not a strategy you can touch. That’s not a strategy that helps you know what to do when you come to work every day. It doesn’t energize or motivate anyone.
So basically my point is, increasing the value of your company in both the short and long term is an outcome of the implementation of successful strategies. I’ve always felt that way and I’ve always said I felt that way.
The article implied you were the chief proponent of short-term management, based on a speech you delivered in 1981. What do you think about that?
The article also noted that I never mentioned the term “shareholder value” in that particular speech. In fact, that speech was all about a long-term strategy for General Electric and how the company was going to operate over the next 20 years. Somehow, that speech got spun in the FT article to equate short-term earnings and shareholder value. That I just don’t get.
OK, so how do you feel about a short-term earnings focus?
Look, the job of a leader and his or her team is to deliver to commitments in the short-term while investing in the long-term health of the business. Bottom line: that’s management. Good managers know how to eat today and dream about tomorrow at the same time.
Any fool can just deliver in the short term by squeezing, squeezing, squeezing. Similarly, just about anyone can lay back and dream, saying, “Come see me in several years, I’m working on our long-term strategy.” Neither one of these approaches will deliver sustained shareholder value. You have to do both.
And if you do?
You’ll see everyone win. Employees will benefit from job security and better rewards. Customers will benefit from better products or services. Communities will benefit because successful companies and their employees give back. And obviously, shareholders will benefit because they can count on companies who deliver on both their short-term commitments and long-term vision.
Why do you think your comments caused so much reaction?
As people struggle in the current economic climate, everything is being questioned. People are asking what corporations do, how they reward people and who they’re for. The context of the FT interview was about the future of capitalism. That’s on everyone’s minds right now and it’s a good debate to have.
Write to Jack & Suzy
Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Their latest book is Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today. Mint readers can email them questions at winning@livemint.com Please include your name, occupation and city. Only select questions will be answered.
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First Published: Sun, Mar 22 2009. 10 27 PM IST