Tag Archives: entrepreneurs

Customers First, Investors Last: What were they thinking?

For years now, my colleagues and I here at BoardBench, have been saying that Wall Street has it backwards.  In the boardroom, directors have been fed, with a very large spoon, the mantra that they are beholden to the shareholder, that their purpose is to “maximize shareholder value.”  If you asked a large group of directors if this is true, you’d see a lot of bobbleheads in the room.  Many believe this is a legal requirement and in line with good business sense and good corporate governance.  Unfortunately, the concept of “shareholder primacy” is a relatively recent phenomenon.  It is also simplistic (shareholders’ wants are not homogeneous), has no legal basis anywhere (go ahead, try to prove me wrong), and, as many are now pointing out, usually damaging to companies, and the economy as a whole.

What we believe is real, and will eventually be proven again as real to the Street, is that customers, and employees are the two key drivers of corporate success.  When I say “again” I’m referring to Peter Drucker’s famous quote from decades ago: “the purpose of a business is to create and keep customers.”  So many seem to have forgotten this, or have never even heard of it.

But the basic premise is this: if you take care of your customers, and have great employees who are well supported and appreciated for being curious and excited about what they do such that they will ensure that customers love the products and services that the company offers, the company and shareholders will reap the rewards, too.  Of course other things come into play, like managing R&D investments (with the customer in mind), operations, and supporting a corporate culture that has strong values and morals.  The basic premise may be slightly oversimplified, but it applies, and should resonate with the board.

It appears that I’m finally not standing alone on this either.  In a recent interview, Jack Ma, the world’s newest CEO darling, made two bold public statements.  He basically shunned the current thinking of the Street by stating, on national TV, that “our customers come first, ouJack.jpgr employees second, and our shareholders third.”   He continued: “We aim to be larger than Wal-Mart by 2016, or sooner.”  If – no, when – Jack succeeds, and executes flawlessly on his statement, that customers and employees take a front seat over shareholders/investors, then he’s got an excellent chance of passing Wal-Mart as the world’s largest retailer.  Note, Wal-Mart just slapped some of its employees, who have the most direct relationship with their customers, by cutting their insurance benefits. This was probably done to cut costs, but it will probably also have a long-term impact on their customer relationships, too. But, I digress.

It seems that too many directors, CEOs, and business leaders, have become obsessed with what Wall Street, its analysts, and shareholders think.  Many have learned to play these groups exceptionally well, too. Countless analysts and shareholders have been taken in by companies’ projections, quarterly earnings estimates, and highly creative financial management and reporting.  Don’t get me wrong, the importance of the exchanges and the markets cannot be downplayed, but a balance is needed.  Focusing on Main Street is just as important, if not more so.

If you follow Main Street, you know about big box discount stores. Costco Wholesale Club, founded by Jim Sinegal and Jeffrey Brotman, believe in serving the customer first, and that if employees are treated properly, they will work with, and treat the customer well too.  Jim, the public face, is a “hands on guy” who is known for visiting each individual Costco store.  Jim is also outspoken about his views on Wall Street.  He’s been known to say that he puts his customers and employee needs above “pleasing shareholders.”  This philosophy must be working: Costco’s five year return is +116.73%.  If you bought the stock earlier, your return would be closer to 354%.

American Express is another company known for taking good care of its customer/members.  Personally I’ve been a fan of the company’s customer service representatives over the years, and tell them that every time I’ve called for help.  Don’t get me wrong, working at this company must be tough: when I was younger, AmEx employees were nicknamed The Dragons.  Perhaps because they were seehat2.jpgn as willing to fight for the company and their customers nearly to the end.  By the way, if you invested in American Express five years ago, your return on investment would be up 149.46%.

If you’ve worked with the general retail public, as I did during my college years, then you know just how tough this can be.  Sadly, not everyone who enters a store, calls a helpline, or dines in a restaurant is a kind and thoughtful customer.  Amazon deals with all sorts of customers from nearly every continent in the world, and I’m sure they have some interesting stories to share.  However, the company is noted for being one of the best customer service organizations in the world.  Amazon has more than one customer base, as many do: retail members, and consumers.  Jeff Bezos clearly divided the customer’s connection to Amazon into two categories: the experience and the service.  At this level, he notes that customer service is part of the full customer experience.  If it’s unpleasant, it’s a negative customer experience.  He supports the idea that a positive customer experience creates greater loyalty with Amazon.  If you’ve ever dealt with an Amazon Customer Service rep, you know that they work quickly to resolve your issue, they get the job done for you, and you are nearly always satisfied and left feeling good about your relationship with Amazon.  And, if you invested in Amazon five year ago, your return on investment is now up 236.64%.

While it’s much more pleasant to focus on the “good guys,” there are dark clouds.  Some companies are noted for their poor customer service.  Some survive because there are few alternatives: think of phone companies and cable providers, and some you can name on your own (take a look at their five-year ROIs).  However, when it comes to poor customer experience these days, I think sadly of that American icon Sears.  Whenever I bring them up these days, all I hear is: “Oh my gosh, I could tell you about the time when…”  Sears is a sad story101.jpg about the decline of a once great and loved retail giant.  Many years ago, the Sears catalog used to be called a “wish book.”  Families would anxiously wait for it to arrive in the mail.  It was nearly 5 inches thick. Moms, dads, sisters, and brothers would argue over whose turn it was to browse through and select from among the items they wanted for birthdays, holidays, special occasions and more.  Some people even bought their homes out of the Sears catalog.  But, it has lost its way, and it’s touch with its customers and has already begun its drop down that magical slide once pictured in its own catalog.  The entire company and its hopes for the future look pretty dismal: sell off of units and real estate, store closings, etc.  Sadly, if you invested in Sear’s five years ago, your return on investment would be -58.50% and it’s still falling today.

To sum up and put things into even sharper perspective, I recently spoke with the General Counsel of one of the largest, most recognized corporations in the world.  He told me, succinctly, that the biggest problem with their board is that not one director had any understanding of who their customers were and are or what they want.  I can also assume that they don’t understand their employees either.  So I will watch how this company slides in the next few years (Note: their record has been negative for some time), and report back with an update, unless, that is, they somehow figure it out and turn it around.

Do you need to focus on board improvement: composition, strategy, direction, execution, oversight?  Boards are our specialty. Give us a call.

Nancy May

Risk is free, risk-free costs

Enough said.

Unemployment is not working

Enough said.

Getting started on a non-career career

Careers are everything. Jobs are somewhat looked down upon. At least, that’s the way it’s been through most of my adult life (yes, I’m a dreaded baby boomer).

Career-primacy is what’s led to the notion that everyone ought to have letters after their name — and lots of them. When I entered full-time employment in 1974, Grade 12/13 (depending on which province you graduated in) was more than good enough. By the early 1980s, you needed to have a Bachelor’s degree — any “B” was fine, and many had three-year BA or BSc degrees. Later in the 1980s it became the four year degree only, and specifically one in the field that mattered. (This is when the disdain for the Humanities really started to seep in, along with the “job readiness” movement in academia.)

Today? A Bachelor’s degree, a Master’s degree, some industry certifications — these are the price of admission. Keep adding to the pile throughout your lifetime, as the requirements will keep going up (and with computers scanning résumés, there’s no one to argue that your thirty years’ experience more than makes up for not having more letters after your name).

But have you noticed, as well, that the word “job” — which for about 40 to 50 years indicated a “second-class citizen” of sorts (plumbers had jobs, “real people” had careers, with steady advancement in title to show for it) — has made a comeback?

That’s because more and more of us don’t work in organizations. We either start one (the entrepreneurial or small business route, and, yes, they’re not the same thing) or we become a freelancer — a contractor, independent consultant, or the like.

One in two people in Toronto (Canada’s largest city, and North America’s fourth-largest) doesn’t work in an organization. They have a “job”. Think about that. Careers are slip-sliding into history to return to their former percentage of the whole world of work.

Now, on top of being Ms. or Mr. BA, MPP, MBA, CMC, CHRP, CGA (or some such chain of alphabet soup) and seriously considering a PhD to “stay competitive” (while finding that the number of slots for ‘part-time’ or ‘executive program’ PhDs can be counted on the fingers of one hand), getting your résumé read and past the robots in charge (unfortunately, human recruiters increasingly deal with the sheer volume of enquiries by acting like their computerised scanning program counterparts) also requires that you have an unbroken track record of advancement in name-brand organizations. The real world, where your career has been fractured by acquisitions (and layoffs occurred to meet financial requirements, without reference to your contribution), bankruptcies (the average length of time a company stays in the S&P 500 is now around 15 years, and falling), outsourcing, offshoring, etc. cannot be allowed to intrude.

No wonder so many end up as consultants! There, what matters isn’t your unbroken career, but the projects you’ve done and the references you can provide from satisfied clients. (This, too, is far more like a plumber than the pathway to mahogany row.)

So, newly-minted graduate or seasoned pro trying to remake themselves, how do you start on a non-career career?

Well, first, you decide whether you’re setting up shop as an entrepreneur or as a small businessperson. (Even in “Me, Company of One”, this difference persists.)

Entrepreneurs are out to change the world. The firm may be small and never get large, but its eyes are always on the global market. A friend of mine went to Thailand, acquired some technology from its creators, partnered with an immigrant to California, and has started building a business with an eye to becoming the equivalent of a German Mittelständ company, outrageous market share globally in a mid-sized company. He runs this from Vancouver, is financed from New York, and life is spent on airplanes and in hotel rooms. The thought of putting the whole thing together in one location has never entered his mind, since his plans involve a global footprint anyway.

Instagram was at 20 people when Facebook paid a billion or so for it? That’s the entrepreneurial raison d’être: global reach, and the payday at the end (either from growing to go public, or from vending the firm to deep pockets).

The small business, on the other hand, seeks to provide its owner with a job, but without grandiosity. It’s the consultant who prefers to sleep in her or his own bed much more than gaining hotel points. It’s the creator of a neighbourhood fish & chips or coffee shop that doesn’t have dreams of franchisees lining up to “replicate the success story”, but is happy with making this location a place you come to, thanks very much.

There is no shame and great reward in either track, but first, know which one you’re on (because in the early going they look an awful lot alike). Obviously, your small business outlook won’t keep you, when you’re establishing yourself, from living in a hotel room and doing a gig out of town (you need early positive client references and you need to have an income!) but unlike the entrepreneur, a global “thought leader” brand isn’t why you took this project on. The entrepreneur consultant might still take that same project, but they’re gathering material for the keynote speech, the book, the articles in the trade journals, and the other tools of acquiring a global name for themselves.

As your references grow, your non-traditional résumé becomes less and less of a factor. So, too, do the letters after your name — some certifications or professional association programs can be helpful, but few are asking after the multiple graduate degrees (unless you’re the entrepreneurial consultant, who will need them for various visas). That “keep reality at bay” motif of modern corporate hiring means that your life of demonstrated independence makes you unemployable in BigCo on the corporate track anyway (at least, until you can be parachuted in near the top as a saviour, as often happens to senior consulting types or academics in business schools). But that — like being the “fix it executive”, going from one broken situation to another — is consulting with benefits, golden handshakes, stock options and other perks of top end corporate life, and nothing more.

So here’s my bottom line on this: always be thinking about whether you’re an entrepreneur or a small business type (know yourself) even if you’re on the corporate career ladder right now. Keep mulling over ideas for ventures so that you don’t fall into contracting or consulting out of despair.

For if there’s one truth, it’s that BigCo isn’t secure. Not anymore.

Entrepreneurs, optimism, prudence and saving a generation

Every time a Canadian moves south of the border to realize a dream because he or she couldn’t find someone here who believed in him or her, we’re diminished. A little bit of our potential, a little bit of our pride, a little bit of our future and a little bit of us slips out of our grasp. That’s not what the immigrants who came here expected when they sacrificed so that they and their children could build a life as Canadians that they couldn’t build in the old country. Those immigrants were our grandfathers and grandmothers, fathers and mothers.

These are tough times. Great downsizings were topical a dozen years ago. They’ve given way to lesser downsizings and restructuring. Both are still very much with us. Rows of vacant desks are still a feature of buildings with exteriors that show no sign of what happened inside. Learning why those downsizings took place will help you avoid them in the future.

I’ve seen 2000 desks and workstations that used to be occupied by 2000 people, each of whom I met personally minutes after they discovered that they no longer figured in their employers’ plans. This chapter of Canadian history is recent enough that most working people and those aspiring to be working people must be aware of it. Our post-secondary-education-bound young people and those holding undergraduate and postgraduate degrees and little else know almost nothing about it. They still believe that they’re entitled to find work in their chosen field. There are no entitlements.

If we’ve learned anything from this period, it’s that the good life is not a right guaranteed under the British North America Act and the Constitution. An ounce of prevention will always be worth a pound of cure. That’s another way of describing personal due diligence

Technologically, intellectually, creatively and socially, Canadians don’t have to take a back seat to anyone. You have options but you have to know where to find them. There are entrepreneurs and visionaries who are looking to you to help bring their dreams to fruition so that we all benefit. You will have to become aware of them.

The only way we can take from Canada is to give something to Canada because no one else is going to give it to us. If you can’t find work in your chosen field, you may have to choose another field. That’s one of the reasons Personal Due Diligence is here.

In his inaugural address, John F. Kennedy said: “… Ask not what your country can do for you — ask what you can do for your country.” High levels of youth unemployment suggest Canada is at risk of losing one generation if not more. We’re dependent on one another, and not only in times of high water or fire or blizzards. But we have to become aware of each other. It’s what a country is. If we’re going to be one, we have to act like one.

Robert Kennedy said: “There are those who look at things the way they are, and ask why… I dream of things that never were, and ask why not?” He also said: “All of us might wish at times that we lived in a more tranquil world, but we don’t. And if our times are difficult and perplexing, so are they challenging and filled with opportunity.”

Amen.