Business Fundamentals |
Most companies face issues from time to time when they have to make a decision which may lead to a conflict between different stakeholders (not just shareholders). How should they deal with this conflict? Of course, companies exist to make a profit but what about in terms of day to day stuff? Let’s say there is an issue with a particular product of a company in terms of quality. How should the company decide which interest group to put before the others? In terms of the hierarchy of needs, I think any business could and should use this simple framework to decide who the most important person in a business is: 1) This always without fail has to be the customer 2) The employees. They are the ones making the profit and employed as ambassadors to the customer on the companies behalf 3) The shareholders. Without their investment and support, there would not be a business 4) The board of directors In the 1990s, AMEX had to restructure and I always remember this anecdote. The new President decided to streamline and get rid of many Vice Presidents and other senior people in the business. This was difficult for him as he had known many of them for years. His move was criticized as there was a feeling that the company was going to be losing too much knowledge in one go. After a year or so, when he was asked about the effect of those firings. He is reported to have said that what he regretted was the fact that it made no difference to the business at all from a capabilities point of view. Senior management and Middle management need to be constantly reviewed and the question needs to be asked – are they still adding value? The interesting thing though is that when you look at an organization chart, the Board of Directors is at the top to denote seniority. I am in the camp that likes reverse charts, which show how important someone is in an organization depending on how closely they are involved with the client in either selling to them or producing the product for them.
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AuthorHi and welcome to my blog. Archives
August 2020
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