DEFINING CORPORATE PERFORMANCE
"Maximize the wealth-producing capacity of the
Ralph Cordiner, CEO of the General Electric Company
from 1958 to 1963, asserted that top management in the large, publicly
owned corporation was a "trustee". Cordiner argued that senior
executives were responsible for managing the enterprise "in the
best-balanced interest of shareholders, customers, employees, suppliers,
and plant community cities". That is what we now call
"stakeholders". Cordiner's answer still required a clear
definition of results and of the meaning of "best" with
respect to "balance". We no longer need to theorize about how
to define performance and results in the large enterprise. We have
Both the Germans and the Japanese have highly
concentrated institutional ownership. How, then, do the institutional
owners of German or Japanese industry define performance and results?
Though they manage quite differently, they define them in the same way.
Unlike Cordiner, they do not 'balance' anything. They maximize. But they
do not attempt to maximize shareholder value or or the short term
interest of any one of the enterprise's "stakeholders".
Rather, they maximize the wealth-producing capacity of the enterprise.
It is this objective that integrates short-term and long-term results
and that ties the operational dimensions of business performance- market
standing, innovation, productivity, and people and their development-
with financial needs and financial results. It is also this objective on
which all the constituencies- whether shareholders, customers, or
employees- depend for the satisfaction of their expectations and
Check the tradeoff your enterprise is making between long-term
performance variables- market standing, innovation, productivity, and
people development- and short term profitability. Decide whether these
trade-offs are healthy for the enterprise.
A FUNCTIONING SOCIETY.
A SCORECARD FOR MANAGERS
"The things that the proponents of 'magnitude
audits' talk about- integrity and creativity, for instance- are better
left to the novelist."
The "bottom line" measures business
performance rather than management performance. And the performance of a
business today is largely a result of the performance of management in
years past. Performance in management, therefore, means in large measure
doing a good job of preparing today's business for the future. The
future of a business is largely formed by present-management performance
in four areas:
* Performance in appropriating capital: We need to
measure the return on investment against the return expected.
* Performance in people decisions: Neither what is
expected of a person's performance when he or she is put into the job,
nor how the appointment works out, is "intangible". Both can
be fairly easily judged.
* Performance in innovation: Research results can be
appraised, and then projected backward on the promises and expectations
at the time the research effort was started.
* Strategies versus performance: Did the things that
the strategy expected to happen take place? And were the goals set the
right goals in light of actual developments? Have they been attained?
Perform a management audit of yourself and the people who report
directly to you. The criteria should include whether you/they made good
people decisions, whether you/they have had any innovative ideas, and
whether you/their strategic expectations came to pass.
MANAGING IN TURBULENT TIMES.
"To win without risk is to triumph without
PIERRE CORNEILLE (1606-84), French poet.
"Public service means service to the public, not
services the public has to put up with."
JOHN MAJOR, British Statesman
"A man without a smiling face must not open a
"He who does not hope to win has already
JOSE JOAQUIN OLMEDO (1780-1847), Ecuadorian statesman
"Every man who ever created anything was a
KERRY PACKER, Australian media proprietor.
"He who waits to every man's advice will have a
"He who has never learned to obey cannot be a
ARISTOTLE (384-322BC), Greek Philosopher.
Politics(4th century BC)
"Leadership is all about taking. Followers take
orders, leaders take charge."
"If you want ten days of happiness, grow grain.
If you want ten years of happiness, grow a tree. If you want hundred
years of happiness, grow people."
(HARVEY MACKAY, American business executive, CEO of
Mackay Envelope company, motivator and author.)
"The workforce today is screaming for
flexibility. If you can help employees meet their outside
responsibilities, you're going to have a more productive, more turned
on, and more energized workforce. Flexibility is a business tool."
ROBERT LAMBERT, Executive vice president of Carter