COPYRIGHT © 2009 KIRBY COCHRAN. ALL RIGHTS RESERVED
1. What is Your Purpose in theBusiness?
I am not looking for your marketing spin here. I don’t wantyour grand vision of how you aretransforming your product or serviceand I could care less about your elevator speech. I am looking for that lackluster but essential answer
that lurks in the rst chapter of everynancial accounting textbook. What is
the purpose of a business? Why does
it exist?The maxim states that the primary
goal of a business is,
to add value for the shareholders.
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If adding value for the shareholders is the purpose of thecompany, then,
ipso facto
, it is alsothe goal of Senior Management.So, what is this “shareholder value?” I am asking a little tongue-in-cheek, but consider that privatecompanies with a limited number
of shareholders have the luxury of being able to decide what maximum
shareholder value means. They might
be non-prot companies formed to
serve a cause which might be social, personal, political or even altruistic.Public companies on the other hand(or private companies with a tradingshareholder market) only deliver
maximum shareholder value in one
way—by increasing their stock price.It is a simple, universal, value per share formula.The transition a company goes
through from before it has signicant
number of shareholders (or more
specically a trading shareholder
market) to the time when it has a base of shareholders is fraught withthe desperation and heads-down
operational execution that are the
hallmarks of a company in the midstof rapid growth. The obligation of anew shareholder focus tends to sneak up on these teams and is easy to miss.It may not be part of the company’sDNA or even a blip on the radar of Senior Management.What’s more, Senior Managementtend to be unaware that there isanother side to their business, areresistant to admitting its importanceand are reluctant to embrace the addedresponsibility. In fact, if you have readthis far, you are already ahead of mostof your peers.
The rst key to success in leading
a growth company with a shareholder market is to recognize that you arerunning two sides of the business. Itis like you are running two companieswith linked but separate goals—andneither one can really succeed withoutthe other.First, you manage the businessyou are used to—the revenues
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