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winner69
22-09-2013, 02:57 PM
I saw this in the Sunday papers a few weeks ago.

The bit that surprised me was Carmel's admission that this concept challenged her thinking. I am glad it did because what was said in Pearlsteins article is how I see the world. Too many companies focus just on the the shareprice without giving too much thought to a sustainable future. Putting staff and customers first is a truly horrendous thought to some but those who do will be the ones who win in the end.

Anyway have a read ....it is quiet good

The value of putting the customer first


By Carmel Fisher
15 September, 2013

I enjoyed reading an article this week that challenged my thinking; in fact it challenged the very basis of capitalism. Its premise was that the accepted management theory, that companies should be run to maximise shareholder value, is not only wrong but is the cause of much that is wrong with today's economy.

A Washington Post columnist, Steven Pearlstein, took a journey through history and decided that the imperative to maximise a company's share price (for the benefits of shareholders) has no foundation in history or law.

Rather, early companies were generally run for public purposes such as building canals or roads and paid equal heed to all stakeholders - shareholders, staff, customers and the community. Pearlstein repeated a famous quote from 1953 when carmaker Charlie Wilson told a Senate committee "What is good for the country is good for General Motors, and vice versa."

The move towards prioritising shareholder interests is said to have begun in the 1970s when globalisation and deregulation led to profits being squeezed. Company executives found it easier to disappoint shareholders rather than workers or their communities. However by the mid-80s, companies with lagging share prices found themselves targets for takeovers by competitors or corporate raiders, and disgruntled shareholders were happy to sell.

This increased shareholder activism led chief executives to have a renewed focus on profits and share prices, at the expense of jobs and wage increases.

And so developed the management maxim that profitability and shareholder value was the end all and be all.

Business text books have ensured that business students are taught this basic capitalistic notion, share markets focus on profitability above all else, and companies encourage management to focus on short-term profit results and reward them accordingly.

This focus on maximizing shareholder value has resulted in a long, slow decline in people's trust and respect for large companies, and in an ironic twist, it hasn't actually delivered on its promise of value for shareholders. According to the University of Toronto, the compound annual return on S&P500 stocks during the "managerial capitalism" years (1930s-1970s) was 7.6% compared with a 6.4% return in the "shareholder capitalism" years from 1976 to the present.

The defense of maximising shareholder value is that no company can maximise value in the long term without keeping great employees, producing great products and services and doing their part to support their community and government.

It is true that, managed properly, there should be no inherent conflict between the interests of shareholders and all other stakeholders. But, there is a very good argument to say that if businesses put staff and customers first, they will still achieve the objective of maximising shareholder value.

Back in the 1970s, business guru Peter Drucker said "the purpose of business is to create and keep a customer." It is interesting that many of the companies that arguably put the customer first - think Apple, Johnson & Johnson and Amazon - have been amongst the most successful at maximising shareholder value.

Maybe the theory should be reworded to "maximise customer and employee satisfaction". Now there's a thought.


http://www.fisherfunds.co.nz/articles/the-value-of-putting-the-customer-first

percy
22-09-2013, 03:43 PM
Ready Fire Aim The Mainfreght Story by Keith Davies,published by Random House, isbn 978177532903 expands and puts into profitable practice what the above article talks about.
"Simple is best.If you want to change it,try to make it simpler;that's why we hire smart young people like you.To make it simple."

winner69
22-09-2013, 04:05 PM
Lastly, she should update her business school theories. The prevailing theory is that of maximising stakeholder satisfaction - where the interests of everyone (shareholders, customers, employees, government, and community) are balanced against each other so that the maximum beneficial financial and ethical outcomes are achieved.

Agree KW - but the article is sort of saying that in an around about convoluted way and not as succinct as you put it. Seems what challenged Carmel was that there was a world beyond just maximising the share price - and she might have only mentioned customers and employees but if she thought about it more the other things you mentioned (government, community etc) along with the environment would be included.

I think we agree that whatever is done always needs to make economic sense eh

winner69
22-09-2013, 04:22 PM
Ready Fire Aim The Mainfreght Story by Keith Davies,published by Random House, isbn 978177532903 expands and puts into profitable practice what the above article talks about.
"Simple is best.If you want to change it,try to make it simpler;that's why we hire smart young people like you.To make it simple."

I haven't read the book Percy but can vouch that Plested is truly committed to making sure he gives a lot back to the community - a genuine desire to do so and it gives his business a bit of an advantage that's a bonus to him.

Its like the support that they give to people like Alan Duff in setting up his books for schools scheme that gives me the warm fuzzies - ehrn I chatted to Bruce a few years ago about I could tell he was proud of that

Suppose those good things help Mainfreight win (and keep) business

winner69
22-09-2013, 04:30 PM
Michael Hill is pretty customer focused as well as bring social/community minded (even though at times it is about ME)

His business success built on customer service and satisfaction. All good stuff but it looks like the money men (with the aim of maximising shareholder returns) have got involved in his business and now Sir is likely to tarred as a tax dodger (Sunday Star Times today)

percy
22-09-2013, 04:58 PM
I haven't read the book Percy but can vouch that Plested is truly committed to making sure he gives a lot back to the community - a genuine desire to do so and it gives his business a bit of an advantage that's a bonus to him.

Its like the support that they give to people like Alan Duff in setting up his books for schools scheme that gives me the warm fuzzies - ehrn I chatted to Bruce a few years ago about I could tell he was proud of that

Suppose those good things help Mainfreight win (and keep) business

One of my fondest memories is of seeing a very young school boy walking out of Caversham Primary school in South Dunedin hugging with sheer pride,joy his Duffy book.The look on his face.!!
I often think people will look back in a few years time at people/things that changed NZ for the better,and realise just what a difference Duffy Books made to so many peoples' lives.
Plested ,an outstanding man.

percy
22-09-2013, 05:18 PM
Michael Hill is pretty customer focused as well as bring social/community minded (even though at times it is about ME)

His business success built on customer service and satisfaction. All good stuff but it looks like the money men (with the aim of maximising shareholder returns) have got involved in his business and now Sir is likely to tarred as a tax dodger (Sunday Star Times today)

Yes I read the article,and sorry to see he is tarred.
Reminds me of one scheme that did work out.That was Smiths City.One of their tax advisers came to the now chairman, Craig Boyce ,and told him he was confident that Smiths should be able to claim all their tax loses from going into receivership.The board decided to pay for the tax adviser's continuing research.The outcome was the adviser was correct,and Smiths were able to carry forward the tax loses.
Still not paying tax.Think it was about $18mil of tax loses.A very considerable sum.

winner69
22-09-2013, 06:25 PM
One of my fondest memories is of seeing a very young school boy walking out of Caversham Primary school in South Dunedin hugging with sheer pride,joy his Duffy book.The look on his face.!!
I often think people will look back in a few years time at people/things that changed NZ for the better,and realise just what a difference Duffy Books made to so many peoples' lives.
Plested ,an outstanding man.

Great story Percy - and kept you going with your books eh

Some times it is the things that we take for granted that give us the most satisfaction. I'll never forget the joy I got when I helped out in an adult reading program and worked with a mid 20 year old guy who couldn't read much at all. After a year of the program he was pretty good and to prove how good he was he made me go to his church one Sunday because he was going to read the lesson ... fluent as and the people next to me couldn't understand why I had tears in my eyes.

Was worth the effort and no doubt God rewarded me in some little way

janner
22-09-2013, 06:36 PM
Ready Fire Aim The Mainfreght Story by Keith Davies,published by Random House, isbn 978177532903 expands and puts into profitable practice what the above article talks about.
"Simple is best.If you want to change it,try to make it simpler;that's why we hire smart young people like you.To make it simple."

Do not dispute that thinking percy..

Is that thinking what Central and Local Government are all about ??..

They make the rules..

What ever happened to Town Clerks ??

percy
22-09-2013, 06:41 PM
Great story Percy - and kept you going with your books eh

Some times it is the things that we take for granted that give us the most satisfaction. I'll never forget the joy I got when I helped out in an adult reading program and worked with a mid 20 year old guy who couldn't read much at all. After a year of the program he was pretty good and to prove how good he was he made me go to his church one Sunday because he was going to read the lesson ... fluent as and the people next to me couldn't understand why I had tears in my eyes.

Was worth the effort and no doubt God rewarded me in some little way

Brought a tear to my eye too.!!!