Well perhaps he didn’t exactly call it that, but in a recent article in Financial Time (3/12/2009) Jack Welch who is regarded as the “father of the shareholder value movement” said said it was “a dumb idea” for executives to focus so heavily on quarterly profits and share price gains.”
What is he really saying about an idea he promulgated in a speech in 1981 that has come to dominate the corporate world ever since? Is he saying we should abandon shareholder value? No, of course not; to quote the article, “On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.”
As we describe in The Living Organization™ model the soulful purpose of an organization is to contribute, in their unique way, products and services to their market and it is the employees who are the ones who are collectively making this contribution. Said another way, a company’s constituencies are the employees who collectively create products and services in service to the customers.
It is not that our financial metrics are unimportant, just misplaced in our focus. To again quote from the article, “Mr. Welch last week said he never meant to suggest boosting a company’s share price should be the main goal of executives. “It is a dumb idea,” he said. “The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees”.
I believe there are signs all around us that now is the time to rethink many of the assumptions that have framed management thinking for many decades. It is time for a new map to guide us as we navigate through not only these tough times but through the changing world the 21st century is unveiling.