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Karin H.

Hi Steve

Shareholder value ;-) Try explaining to the work force why they are the most important issue in the company when a 'share-holder' buys shares one day to sell it off possibly even the following day. (So in fact they are asked to work their bu** off for 'ships passing in the dark')

What's wrong with seeing your clients as the best and most important shareholders? Keeping them happy is keeping the turnover and cash-flow happy - surely that must make the finance wizard more than happy?

Karin H. (Keep It Simple Sweetheart, specially in business)

Joe Raasch

Hi Steve,

My experience:

1. Be very close to the customer, or very close to the leading edge of change, or you're expendable.
2. If you cannot prove your specific financial value or influence in relation to revenue or shareholder value (helloooo HR....), you're expendable.
3. There are few if any business schools teaching leadership. An MBA lays the groundwork for being a manager.

Could we surmise then that organizations should be overbuying talent in positions that directly affect shareholder value, and outsourcing or getting by cheap in other areas? Hmmm...

An additional source:

Our friend Jim Stroup, writing at http://www.managingleadership.com/blog/, discusses this shareholder issue as well as director and CEO influence.

Thanks for shining your light on a grey area - that performance gap between leader and manager, client and shareholder!



Steve Roesler


Surely there is a relationship between a focus on short-term gains and an employee response of short-term loyalty.

This is one of the reasons I've been talking about worklife being a series of projects vs. a "career." I'm not sure how many companies are choosing to look at the long-term in ways that would generate long-term loyalty and engagement.

Steve Roesler

Hi, Joe,

Yes, I've been following and commenting throughout Jim's series. He's doing a terrific and thoughtful (as always) job.

Your take on this has me thinking a bit more:

From #1: If the customer is seen as the shareholder, then there are probably a half dozen or so people in any company who can claim to be close to the customer (through the Board of Directors, by having a seat on the Board, or being a member of the executive council).

#3. Right; MBA's are about learning about managerial functions. I continue to contend that leadership isn't taught anyway, it's learned. That is, it's important to teach the principles of leadership, especially those consistent with an organization's values and mission. But no one learns "leadership" until placed in a position to lead and then learning from the experience. Which is why it's so important for top people to mentor and coach.

As for the "overbuying and outsourcing" thought: very, very interesting. Now you've given me more to ponder...

Wally Bock

I believe that "shareholder value" has changed its meaning in my lifetime. It used to mean "value for the investor," the person or institution who will buy the stock because the company is well run and, as a result, who expects the stock price to rise in the future.

Today "shareholder value" means "short term shareholder value." That short term perspective has poisoned a lot of things. If you're looking to the long term, you know that your people, their knowledge and their relationships will be your primary driver of competitive advantage. If you're looking only at the next couple of months, you can justify getting rid of good people because the savings in salaries and benefits will fall straight to the bottom line.

Steve Roesler


Your observation about the change in meaning of "shareholder value" matches with a remark that I've been hearing rather consistently recently from members of client organizations:

"It feels like we're being managed by a venture capital firm."

They have good reason to feel that way. . .

Jim Stroup

Hello Steve,

As usual, you have taken a snippet of a conversation almost in passing and unpacked it into a thought-provoking and complex topic.

I agree with Wally that the problem of interpreting "shareholder value" is difficult, and increasingly so, and also that there is a tendency to drive it downward not to its fundamentals, but to simply to its most obvious and extreme components; in this case, the short-term profit-at-any-price (excuse the pun) traders who have no real interest in the business. Cam Beck of www.chaosscenario.com has stressed the deleterious consequences of this growing problem, as well. Karin's relation of this to the issue of employee morale is very interesting - that's a poser, but it only lends (insightful) force to the need to find a way out.

I'm of two minds about it. Your conversant's concerns are well-placed, and they point to something that I hold close: the recognition and support by managers of leadership instincts rising from within the organization to further its goals. His fear that these are being suppressed by financial-results-driven management indicates a failure, to me, not in that sort of leadership, but in the sort of management that succumbs to this sort of short-sighted pressure from its own in the finance department.

The situation is complicated, however, by real-world concerns of those finance officers who are trying to manage cash flow and investment issues that are directly affected by the consequences on share price of trading, even if it is short-term.

Which gets to the shareholder as customer. The shareholder, I think, is owner, and may not be "king" (or "queen") as customer, but is the boss. And management is obliged to do what the boss wants, although I believe management is also obliged to help inform the boss's view of what that is.

The thing is that this must normally be done through the mediation of the board, and managers seeking insight or communication with shareholders through boards composed largely of other managers - whether inside or outside - is problematic at best. That's why I argue for Peter Drucker's proposal that we develop a new profession of "professional directors" who are not managers, and who are devoted to looking beyond the daily ticker prices deeper into what the shareholder base of a company is and what it may want.

Sorry for the long, wandering comment.

Thanks, also, to Joe for his kind reference, and to you for your own.

But mostly, welcome back (even though Galba did a typically great job) and thanks to you for another great piece!

Steve Roesler

Hi there, Jim,

Well, I worry sometimes that taking a "snippet" will not do justice to a topic, but just serve as a point to start a larger sense of awareness and discussion. Thankfully, you took the time to pick up on this and lend more depth (I'm glad you've been immersed in thinking and writing about this topic).

I know that Cam has been writing about this as well.

The luncheon conversation that sparked this delved much deeper than my post; but th post was really the essence. The issue of management succumbing to the short-term pressures of investors is a valid one. We discussed it, and that led to another issue: continued employment:-) That's one of the places that grinds at me. Instead of being seen as responsible managers with something to say, all too often those who propose a longer-term view are treated as malcontents or whistle-blowers. Depending where one is in one's career, it may be prudent to finally succumb and say "Fine, but I tried to warn you," and then start planning for retirement.

What are the major roadblocks to moving Drucker's idea into practice? Heck, directors are paid anyway and are now even more accountable and liable than ever. Taking it on as a profession wouldn't seem to be a huge step and would seem to be a way to get past some of the blockages that we're talking about.

As always, Jim, thanks for the full context. . .

Wally Bock

I picked this as one of my top five posts on my Midweek Look at the Business Blogs.


I'm afraid what I have seen is even more depressing or even reprehensible. The shareholder's interests are not particularly well protected and the ordinary employee can tell you that. You only need to ring up a major firm to request customer service to get the distinct impression that is something seriously wrong. It may take some time for the financial markets to catch up with these firms, but it will happen as per Enron.

Everyone is talking about something been "wrong in the state of Denmark". A futurologist I spoke to the other day was talking about lack of leadership and lack of vision.

It is sort of weird. It's as if we are all subscribing to giant conspiracy theory or to a massive bout of learned helplessness.

Just before I spoke with the futurologist, I had been reading Barbara Sliter at Co-creatorship on "we are ready for more . . . we are ready to be co-creators". I prefer that take. We've grown up. We don't need "dad" anymore. We are ready to sit down and talk about what we should do and how we should do it. And when we are not part of that conversation, we experience the absence as lack of leadership.

It's late and maybe I have lost the plot?

David Zinger

A fine post Steve with a great conversation following in the comments.

It is disconcerting for people within organizations to be seen as merely tools to produce shareholder value...I hate the term human capital, not a great way to change the term human resources.

I have grown closer to managers this past year and see lots of work needed by them on the human element...they seem more comfortable with finances or project management. Perhaps just to confuse everything incuding myself: managers need more leadership and leadership needs more management.

This could just be the lens I am looking through at the current time. I always respected the great therapist Alfred Adler who would discuss something from a very specific perspective and conclude this talk to 300 people with the statement: "And things could also be quite otherwise."

Steve Roesler

Many thanks, Wally.

Steve Roesler

Hi, Jo,

I read your comment a few times before starting this response. In part because I spent waaayyy too much time on the phone this week with various companies' "customer service" departments. And I was trying to buy a service and spend money! But I didn't want this to turn into a customer service rant because:

The customer service was excellent at all places once I got to a human being. It was the plethora of prompts and being on hold (once for a full 45 minutes) that got be angry and frustrated.

As for the shareholders' interest being protected: For those shareholders in it for a quick flip, they are currently very well protected. Publicly traded companies are evaluated on quarterly results more often than not. It's the long-term shareholders and others (employees) who need to be more concerned.

Now, go get some rest:-)

Steve Roesler

Hi there, David. So glad you stopped by and weighed in on this. Have been traveling and working on a project; literally missed posting after Monday of last week and am just getting caught up on the comments.

You mentioned that "It is disconcerting for people within organizations to be seen as merely tools to produce shareholder value..."

It probably is for many. Yet I'm seeing acceptance by those earlier on in their careers. Not acceptance of the idea that it can't be better. But they've grown up with the current sort-term definition of shareholder value as a fact of life.

As for human capital, the first time I saw that term I sort of gagged. Especially since it's being tossed around mostly by Human Resource people who may have been better off as Personnel people; but that's a fun argument for another day.

Your observation of a managerial need for more focus on the human element is consistent with my current experience, too. Money and attention that was once given to building up people and people skills is now going elsewhere. And since the focus is on the short-term, I'm seeing an implicit sense of "people are expendable or can be replaced when needed. Interestingly, that implicit attitude is alive and well while the explicit cry is "We have a war for talent."

Wally's comment above does a wonderful job identifying the past and present notions of shareholder value. Each carries its own set of implications for workforce development or lack of it.

I think maybe I'm going to write something this week about short-term gratification and long-term implications.

Hope to talk soon, David...

Jay, writer MemberSpeed.com

I am a manager for advertising for an appliance distributor company in the Philippines. I must agree that the shareholders play the tune and we dance to it quite often. Motivating personnel is hard if they aren’t financially compensated for their efforts.

Steve Roesler

Hello, Jay,

Indeed, it's difficult for personnel to stay enthusiastic if they don't believe they are receiving proper compensation.

Is there anything going on to attempt to address the situation?

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