Steve Denning writes for Forbes, “‘Imagine an NFL coach,’ writes Roger Martin, Dean of the Rotman School of Management at the University of Toronto, in his important new book, Fixing the Game, ‘holding a press conference on Wednesday to announce that he predicts a win by 9 points on Sunday, and that bettors should recognize that the current spread of 6 points is too low. Or picture the team’s quarterback standing up in the postgame press conference and apologizing for having only won by 3 points when the final betting spread was 9 points in his team’s favor. While it’s laughable to imagine coaches or quarterbacks doing so, CEOs are expected to do both of these things.'”
“Imagine also, to extrapolate Martin’s analogy, that the coach and his top assistants were hugely compensated, not on whether they won games, but rather by whether they covered the point spread,” Denning writes. “If they beat the point spread, they would receive massive bonuses. But if they missed covering the point spread a couple of times, the salary cap of the team could be cut and key players would have to be released, regardless of whether the team won or lost its games.”
Denning writes, “Suppose also that in order to manage the expectations implicit in the point spread, the coach had to spend most of his time talking with analysts and sports writers about the prospects of the coming games and ‘managing’ the point spread, instead of actually coaching the team. It would hardly be a surprise that the most esteemed coach in this world would be a coach who met or beat the point spread in forty-six of forty-eight games—a 96 percent hit rate. Looking at these forty-eight games, one would be tempted to conclude: ‘Surely those scores are being ‘managed?'”
There is only one valid definition of a business purpose: to create a customer. – Peter Drucker, The Practice of Management
Much more in the full article – recommended – here.
MacDailyNews Take: Please see related articles below.
[Thanks to MacDailyNews Reader “Jax44” for the heads up.]
Apple posts record revenue of $28.27 billion, misses Street expectations for first time since 2004 – October 18, 2011
Wall Street got ahead of itself on Apple; shares plummet in after-hours trading – October 18, 2011
Wall Street logic: We were wrong on Apple yet again, let’s punish them! – October 18, 2011
U.S. stock futures fall on Apple’s record results – October 18, 2011
Nasdaq lower after Apple’s record revenue misses analysts’ expectations – October 19, 2011
Apple a $100 billion dollar ‘disappointment?’ The analysts blow it yet again – October 20, 2011
Agreed. In his example, coaches would also be rewarded for getting rid of players. Wall Street loves layoffs. Despite the fact that studies have shown they are harmful to businesses over the long term.
depends on whether you have too many employees or too few!
I reached the point where I had too many, and by keeping them on longer than I should have, ended up in a situation where all of my employees made more money per hour than I did. I am the one that took the risk of creating the company, not them. And I created the company with NO government help, and you don’t get a bank loan based if you are a startup. We financed the materials needed to produce orders with Mastercard.
As the owner, I was paid if there was money left over at the end of the month.
Life is just not as simple as you make it sound.
You are completely right but often companies simply whack employees to boost their short term profits and pay no attention to which employees are strategic or whether there are other fundamental problems that they should fix first.
Who hired your employees? Who was in charge of sales? Who was in charge of advertising? Who was responsible for creating customer interest in your products?
When you screwed up, you made the employees pay. At least you laid it out for all to see in this forum. You were a failure . . . . . yes, YOU.
idiot, talk about what you know about. you know nothing about the situation.
I paid out of my own pocket.
The employees in question produced a lot less than they cost per hour. I kept the particular ones one far too long trying to be “caring’ and in a sense, hurt the good employees by doing so. I will give you that much.
so yes. You screwed up.
It is a mistake that many people have made, kenh. No one is perfect, and it sounds like you cut too much slack on some underperforming employees. It can be difficult to set aside your natural empathy for your employees and make the difficult business decisions. But, as you already know, you owe it to yourself and your good employees.
Don’t listen to the BS from His Shadow and his ilk. I doubt that they are worthy to criticize you.
For the employees to ‘pay’ they would have to have had something of theirs taken from them. No, they were simply told there wasn’t enough work for them to continue. Not necessarily anyone’s fault (but I can tell you that as someone who’s had to lay people off, you end up blaming yourself regardless). A job is not a possession or an asset, as so many people seem to think. If you (or a corporation) need something done, you pay another person to do it fr you. If the scenario works for both employee and employer, it continues.
Now, when you’ve pulled together an amazing team that grows and learns together, the results are closer to art than to a straight business transaction. But at the end of the day, the whole company exists to do the work — and many have it backwards, believing that the work exists to support the team. Many huge corporations have forgotten that and paid for it with with their very existence.
How could you possibly know the circumstances?
You must be one of those do-nothings who pontificates loud and harsh on subjects he knows nothing about.
While I agree with your situation, these are different circumstances. You are not reporting to Wall Street and are not a publicly-traded company. Large companies do lay off employees just to make Wall Street happy, even though in the end it may not save them much money. The game of satisfying analysts is just plain silly, and it gets in the way of businesses operating properly.
Publicly traded companies do all sorts if stupid things chasing short-term lifts to the share price, or short-term profits.
Look at HP. The only company outside of Apple that had a real shot at competing with an integrated/mobile/OS offering (they could have been a mini-Appe, or even an enterprise-Appe). Rather than investing for the long-term in themselves, they trashed e place and bought some new technology to repackage/resell.
I think CEOs should be paid a decent wage, and bonused out very handsomely based on the value they were able to bring to the company 5 & 10 years out.
Unfortunately I’m from Cincinnati, and our NFL owner seems intent on maximizing shareholder value, product on the field be damned. The worst part is that he’s the only shareholder.
Creating customers! That is the bottom-line, not creating sharholders.
I read via RSS and accidentally clicked the link to load the actual page. I love your content, but…
Have you looked at your pages lately? So many distracting and animated ads I didn;t stick around to read the actual article.
If you don’t like Ads, go to a paid up members only site.
It’s just that easy.
All the bad things happening in Corporate America are due to one problem….Somewhere along the lines Accounting departments were tasked to be profit centers.
just my $0.02
hahaha that’s funny, but you might be right!
Blaming the Bottom Line Feeders is going to miss a huge amount of what else goes wrong. But I would point out that Bottom Line Feeders tend to be too limited in their intelligence to pay attention to LONG TERM PROFITS. Thinking only short term is all the rage. Thus the ongoing US mortgage catastrophe. Sell-sell-sell in the short term, rot, Crumble, DIE in the long term. OOPS.
And yes, this stooopid short term thinking is enabled by a lot of very stooopid teachers at stooopid biznizz schools. Don’t count on a modern MBA degree being a benefit to anyone.
I totally agree with Denning; ‘maximizing shareholder value’ is a byproduct not an objective of good management. Apple *has* maximized shareholder value – it just took a while and, on their current path, continue to do so.
Wall Street and Bay Street (Canada) don’t know how to maximize customer value, employee value or social value – these are the important values.
If a shareholder is unhappy with management’s strategy they can sell their shares and go elsewhere – after all, if they’re so clever they should be able to predict the outcome of management’s strategy before it affects the stock price. Oh, wait – seems that they can’t predict outcomes.
Keep up the good work, Apple.
MDN sez: “There is only one valid definition of a business purpose: to create a customer. – Peter Drucker, The Practice of Management”
Another KISS dunderhead? There is a lot more than that. As I frequently point out, our contemporary age of biznizz emphasizes treating one’s customers with disrespect, as part of the overall Marketing Moron strategy so prolific these days. Lose one customer, expect them to rant about it to all their friends, killing off an order of magnitude (10x) more customers.
Abuse your customer at your dire peril.
OMG. Did you just correct Peter Drucker?