Category Archives: Sales leadership

Sales Lesson #1: Don’t “Get” Your Customers to Do Anything!

Every so often, an article with a title like How to Get Any Customer to Take Action Immediately, burbles into my newsfeed. There are infinite variants. No matter what you want your customers and prospects to do, you can count on finding a putative method for making it happen. But for all the how-to’s devoted to getting customers to do things, it’s easy to forget that the goal, of course, is helping them succeed, and not twisting their arms – figuratively or otherwise.

If you ask top producing sales reps – those who truly serve customers – how they get their customers to buy, they’d probably be confused by the question. Instead, they’d reveal that they don’t get their customers to do anything. What produces their excellent results is their ability to guide their customers, and ultimately help them achieve good outcomes. Guiding versus Getting: these are fundamentally different approaches, with little in common. Guiding assumes prospects can be trusted, Getting assumes they cannot. Guiding sees prospects as partners, Getting sees them as objects. Guiding views prospects as capable decision makers, Getting views them as inept. Guiding relies on inquiry and collaboration, Getting relies on telling and insistence. In countless interviews I’ve held with successful sales professionals, I’ve learned they embrace Guiding in every customer interaction, and eschew Getting.

“How to get your prospect to [fill in the blank]!” What regularly emerges are manipulative high-pressure sales tactics that break customer rapport and erode trust. Instead of improving sales outcomes and buying experiences, the resulting behaviors and activities undermine them.

The top producers I’ve worked with have figured out a better way, and honed their skills accordingly. They begin with a natural curiosity, and connect it to a sincere desire to understand customer problems, limitations, issues, concerns, performance gaps, and strategic challenges. They uncover the intensity of motivation to change the situation, and learn the mechanisms their customers have developed for investing in solutions. And if customers lack the mechanisms, top producers guide them to create a path forward. From there, they harness the power of the customer’s will to change. The energy might be low, or altogether absent, which is why reps, often goaded by their managers, turn to Getting. My question to them: how’s that working for you? . . .

The best salespeople know that attempting to force customer action can become a distraction. It can also backfire. As one rep, Denise, explained it to me, “I don’t push the monthly specials the way management wants me to. They don’t work, and it’s not the way my customers buy . . . When I talk on the phone, there’s no sales urgency to my voice.” The year I interviewed her, she was her company’s top producer out of over 50 reps. Though her immediate boss wasn’t clear about the reasons for her success, her statement provides much of the answer: Denise guides her customers. She doesn’t get them to do anything.

Considering a Career in Sales? Find Something Different!

“Do you know what a sales interview is?” a friend of mine quipped. “It’s one person lying about the future, talking to another lying about the past.” My friend knew his joke contained truth. Newly retired from B2B sales, he wasn’t sanguine about the future of the profession. As we chatted over lunch, I added a few of my own anecdotes and observations. It was a lively talk. No need for alcohol.

Selling ain’t what it used to be. It’s possible that my friend stowed his sales bag for the last time because he was burned out. Though, at age 61, it was probably the right time to get off the bricks. The rest of that afternoon and into the next day, I thought about what he shared with me. I ruminated on the meaning of his dark joke. I considered how I might respond if a young person sought my advice about whether to pursue a sales career. The assessment that followed my introspection did not come easily, but here it is: look elsewhere. Today, there are better choices.

When I began my business career in the early 1980’s, things were different. Salespeople were respected. While most of us toiled in offices with a boss sitting nearby, salespeople had autonomy. They worked variable hours. They dressed well, and from all appearances, they lived well, too. At many companies, salespeople could expect higher-than-average income, often garnering better pay than managers. At a time when level of education predicted lifetime earnings, selling careers flamboyantly defied the calculus. A salesperson’s earning ability depended more on his or her motivation, tenacity, and street smarts than having a college degree. It still does.

At the manufacturing company where I worked my first job out of college, you could easily identify the cars that belonged to the salesmen (the company had no female sales reps): big, new, four-door, and well-appointed. A sales rep’s car did not just provide transportation, it proclaimed success. An important message for customers and coworkers to hear.

As the company’s IT Manager, I had nebulous goals. But the salesmen were measured on one thing –  revenue production. And they were paid accordingly. No mealy objectives, no ambiguity, and no boss holding sole power to dictate next year’s income. If salespeople felt anxiety about their compensation at risk, their job perks and upside income potential eased the pain. For these reasons and others, I too became drawn to a sales career.

When I was hired for my first sales job in the 1980’s, Marketing Representative was a common title for entry-level salespeople. Dale Carnegie, Zig Ziglar, and Brian Tracy were popular role models. I read their books, and listened to their tapes on the way to sales calls. Their messages brimmed with optimism, and were consistently inspiring. “Success is getting what you want . . . Happiness is wanting what you get,” Dale Carnegie wrote.

I learned that great power came from an unwavering belief in yourself. Good stuff. Today, those messages can still be heard, but they’re muted beneath the torrent of condescension and humiliation that spills unabated into my newsfeeds. Mislabeled as coaching and tips for self-improvement, today’s writing upbraids the rank-and-file. It carries titles like Salespeople – Shut up and listen!, and Salespeople Can’t Sell Anymore . General Patton would be proud.

What happened? The sales profession has lost its allure. Technological, economic, and social forces have combined to erode many of the once-valuable tasks that sales professionals provided. None have been profound than Artificial Intelligence (AI), data warehousing and distributed information systems, and investor demands to increase profits.

AI: AI has displaced thousands of repetitive, tedious sales tasks, and enables buyer self-service. Lead qualification and content fulfillment, once large drains on selling time, can now be performed better, faster, and cheaper by using algorithms.

Data Warehousing and distributed information systems: The ubiquity of customer information has allowed companies to knock down the massive walls that once surrounded the sales organization. Today, almost any employee can make rain, or generate revenue. In departments as disparate as customer support, maintenance, and route delivery and logistics, employees can take an order, recommend upgrade services, sell new products, and make other changes without referring customers to a “sales desk,” or an assigned salesperson.

Investor demands to increase profits: Spending excess has always been a popular target for the CFO’s scalpel, and sales operations contain conspicuous fat. Peeling back the covers on Sales, General & Administrative expenses reveals copious spending hiding in plain sight. Cutting high sales salaries, generous incentive pay, over-the-top benefits, Quota Club, annual golf outings, and season tickets at sports events, quickly gains approval from investors. “Think about it: If you have to ply your clients with gifts or meals to get them to do business with your firm, then your product  probably isn’t worth its price,” Andy Kessler wrote in The Wall Street Journal this month (The Expense-Account Racket, December 4, 2017).

Young people will find sales and business development careers less promising than when I started out. Some key issues:

Money. Meh. Commonly used as a recruiting tool, the promise of high income for salespeople is often illusory. A chunk of annual comp is “at risk,” which means what’s actually earned might be less than what’s projected (recall my friend’s joke at the beginning of this article).

The University of Virginia McIntire School of Commerce Destinations Report for 2017 reported average total compensation for its newly-minted grads who accepted sales and sales management jobs: $61,300. Tepid, compared to other business disciplines listed in the report. Among McIntire grads, the best coin goes to investment bankers, who were rewarded with a list-topping average annual comp of $115,000. Finance holds the #2 spot, at $90,294. (The average starting pay for 2017 undergraduates across all categories is around $50,000, according to Money magazine.)

Career path. You might think I’m mansplaining, but I’m not. There are two well-established trails:

  1. Revenue you produce meets or exceeds quota – keep your job
  2. Revenue you produce is less than quota – get fired.

If you crave living in northern reaches of the corporate org chart, the likelier route to get there goes through finance. “About 30 percent of Fortune 500 CEOs spent the first few years of their careers developing a strong foundation in finance. This is by far the most common early experience of today’s CEOs,” according to an article in Forbes.

Autonomy. Thanks to CRM software and advanced analytics, selling has become the most scrutinized, measured, and micro-managed business activity. “Drive higher quota attainment across your entire sales team by recording, transcribing, and analyzing their sales conversations,” one product website says. Some reps might welcome the assist. But I question the reasons. If a sales rep or manager needs software and spreadsheets to learn how customers perceive his or her words, or if they struggle to recognize positive things to say, maybe they’re in the wrong job. Or, maybe management simply doesn’t trust them to have adequate judgement.

Culture. A sales organization’s mission is to produce revenue, and its activities are aimed toward that goal. That’s a good thing if you don’t mind thinking about money above all else. But if you’re moved by more than how much business you will close this quarter, or the gross income figure on your W-2, that can become stultifying. Further, employers are often conflicted about sales. Sales VP’s expect reps to open accounts and build customer relationships, but they feel threatened when customers become more loyal to a sales rep than to the company. Hiring managers promise high income, but ratchet it back when they feel reps earn “too much.” It’s a power game, and companies try to maintain hegemony. As one district sales manager I worked with described it to me, “My ideal rep is a young guy with a stay-at-home wife, a mortgage, a baby, and another one on the way.” I’ve heard similar sentiment from others. A rep in a consumption trap can be controlled.

Goal conflict. Almost every sales position faces this problem, and it can be gut-wrenching to navigate. “Above all, make your number!” versus “Serve our customers!” It’s hard to keep two masters happy. But companies put their reps in a moral vise when they tie job security and pay to revenue results.

I don’t mean to imply that sales experience isn’t worth having. In fact, hands down, nothing prepares a young person better for success than gaining the rare combination of skills needed for converting prospects into buyers. This knowledge transfers to every business discipline, and provides understanding for how an enterprise achieves its central mission: acquiring – and keeping – customers.

You can’t learn any of it in a college classroom, and no other business experience provides a person anything more useful. People who have sales background understand not only that revenue doesn’t roll in on its own, they know the nitty gritty details of face-to-face selling. If you can get the opportunity to sell door-to-door, work as a sales intern, or have another sales experience, take it!  And if the work pleases you, stay with it. But keep your options open. There are other careers that are possibly more rewarding, and they can also benefit from your energy, effort, and passion.

From accounting to zoology, every career has its unique set of warts. Those that sully professional selling are no better or worse than any others. But whatever career you choose, make sure the warts that exist are warts you can live with. And as many in sales have learned, stay vigilant, because new ones grow all the time.

“Today, it is estimated there are anywhere from twenty thousand to forty thousand distinct occupations in the United States,” writes Robert Moor in his book, On Trails. “Rapid changes in technology, culture, education, politics, trade, and transportation have combined to allow people access to an array of lifestyles that was previously unthinkable. In the aggregate, this is a positive development, proof that our life’s paths are evolving to meet our varied desires. But a side effect of this shift – halting, gradual, and unevenly distributed as it may be – is that life’s options continue to abound until they overwhelm . . . Collectively we shape [life’s pathways], but individually they shape us. So we must choose our paths wisely.”

Hate, Bad Product Placement, and Brand Risk

The author and his dogs on The Lawn at the University of Virginia. The Rotunda appears in the background.

 

What keeps marketing executives up at night? A duo of sticky problems:

  1. how to create unique product designs that consumers easily recognize, and
  2. how to ensure consumers prefer their product, and not ones that appear similar.

By solving these two challenges, marketers earn a beautiful gem: brand equity. Enjoy it. Cherish it. But remember – in an instant, that gem can turn ugly.

On August 11, 2017, white supremacists organized a rally called Unite the Right, and marched in Charlottesville. The group of about 100 men and women walked past the University of Virginia’s iconic Rotunda, and then down a pacific area on the UVa grounds known affectionately as The Lawn.

Chanting racist and anti-Semitic slogans, the supremacists carried torches that were readily identifiable based on their distinctive features: Tiki-brand torches, manufactured by a Wisconsin-based company called Lamplight. The racist symbolism of the torches and their connection to the Ku Klux Klan was not a coincidence. The purpose was to communicate an odious message, and to intimidate anyone watching.

It’s unlikely that product planners at Lamplight ever developed a use case for this malevolent activity. How could they? An abiding assumption for most marketers – myself included – is that our prospective customers have benign intent for using our products or services. When deciding how many torches to manufacture and where to distribute them, Lamplight probably considers banal matters like economic conditions, leisure trends, and weather patterns – not the number of hate rallies to be held, or how many marchers will participate.

For Lamplight, the prominent role their torches played in the Charlottesville tragedy are what author Nassim Taleb calls Black Swan events – situations that are extremely difficult to predict. The proverbial blind-side tackle. The catastrophe that came out of nowhere. No company should ever be self-satisfied that such things could never happen. Prior to August 11th, few people heard of Lamplight, or its parent company, W. C. Bradley. After that, both became known globally, for all the wrong reasons.

Shortly after the Unite the Right rally video went viral, the company issued the following statement:

“TIKI Brand is not associated in any way with the events that took place in Charlottesville and are deeply saddened and disappointed. We do not support their message or the use of our products in this way. Our products are designed to enhance backyard gatherings and to help family and friends connect with each other at home in their yard.”

Marketers and salespeople worship at the revenue altar, and here’s a company that states unequivocally that some revenue is filthy, and they’d rather not have it to augment the “top line.” Kudos to them not only for their morals, but for making them public.

Tiki torches weren’t the only easy-to-identify brand dragged into the supremacist vortex:

New Balance shoes was recognized by a writer for the neo-Nazi website Daily Stormer as “the official shoe of white people.”

The Detroit Redwings hockey team had their logo corrupted by the Unite the Right marchers, who modified it only slightly. On August 12, @onelectionday posted a Tweet that would make any marketer break out in a cold sweat:

“Wait a minute…@DetroitRedWings have you sanctioned the use of your logo here or is a copyright infringement suit pending?”

Perry Polo shirts. “The alt-right’s Proud Boys love Fred Perry polo shirts. The feeling is not mutual,” wrote Kyle Swenson in The Washington Post on July 10. Proud Boys describes itself as a “western-chauvinist men’s club” and the distinct Fred Perry [shirt] design helps them “sport a common uniform: black polo shirts trimmed in yellow stripes.”

In the aftermath, all three companies moved quickly with public statements:

“New Balance does not tolerate bigotry or hatred in any form…New Balance is a values-driven organization and culture that believes in humanity, integrity, community and mutual respect for people around the world.”

“The Red Wings believe that hockey is for Everyone and we celebrate the diversity of our fan base and our nation . . . We are exploring every possible legal action as it pertains to the misuse of our logo in this disturbing demonstration.”

“No, [Perry Polo shirts doesn’t] support the ideals or the group that you speak of . . . It is counter to our beliefs and the people we work with.”

Bad product placement is not a trivial issue. Ubiquitous video cameras and social media have upped the risks for companies. It’s hard to say how long it will take these brands to lose their linkages to heinous events, as others have suffered:

  • White Ford Bronco and OJ Simpson
  • Tic Tacs and the Donald Trump – Access Hollywood video
  • Skittles and Donald Trump Jr.’s statement about Syrian refugees
  • Skittles and the murder of Trayvon Martin in 2012

On June 17, 1994, over 95 million people watched livestream coverage of the OJ Simpson chase, but nobody at Ford cheered about the free product placement. Ford stopped selling the Bronco in 1996, though it plans to reintroduce the model in 2020. No doubt, one of the top-of-mind questions at Ford is how many years it will take for the OJ-Bronco connection to dissolve. 2020 probably seemed safe for re-introduction, because in 1996, the core buying demographic for the 2020 either wasn’t yet born, or couldn’t comprehend the news reports. Still, I wonder if white will be among the color choices.

What’s the impact on brands and revenue when products are tied to hate and political controversies? Not good – at least, initially. “When a brand gets involved in political issues, whether accidentally or on purpose, it’s bound to have an impact on how consumers talk about it on social media,” according to a December 12, 2016 AdWeek article, How New Balance, Pepsi and Kellogg’s Were Impacted by Trump Controversies. “Three brands that made headlines due to the election of Donald Trump—New Balance, Pepsi and Kellogg’s—had to deal with negative sentiment on social media as a result.” A research company, Taykey, explored how each incident impacted the brands on social media.

New Balance. In November 2016, consumers protested New Balance when the company’s VP of Public Affairs, Matt LeBretton, spoke about President-elect Trump’s position on the Trans-Pacific Partnership Agreement, telling The Wall Street Journal that “things are going to move in the right direction.” Some New Balance customers took umbrage to that endorsement, and protested by posting videos of burning New Balance Shoes. As a result, “brand sentiment declined by 75%,” according to Taykay. “Social conversation volume for New Balance rose by 100% (their biggest conversation-generating event of the year). This conversation was negative, though, and brand sentiment declined by 75 percent.”

Pepsi. Following the US presidential election in 2016, Pepsi CEO Indra Nooyi said some of her employees were “in mourning” about Trump’s election. Trump loyalists were not pleased with that comment. They announced a boycott of Pepsi products, and launched fake news stories alleging that Nooyi told Trump supporters to “take their business elsewhere.”

“Again, social media conversation volume for Pepsi spiked, but the negative conversation drove social brand sentiment down by 93%, as positive sentiment for Pepsi dropped from 72% to 4.5%, according to Taykey . . . However, since the incident, positive sentiment for the brand has been on the rise.”

Kellogg’s. Compared with Pepsi, Kellogg’s has faced more durable backlash after terminating its advertising on Breitbart, a website popular with white supremacists. Following that action, Breitbart launched a #DumpKelloggs campaign, and encouraged Trump supporters to boycott Kellogg’s products. “The boycott caused Kellogg’s social media sentiment to fall dramatically, with a 75 percent nosedive, according to Taykey. Through Dec. 5, that sentiment had stayed mostly negative.”

Brand managers cannot easily mitigate the risks that their products could become entangled in public controversies. But they can be prepared for what to do when it happens:

  1. Immediately issue a public statement to separates the company, its products, and its brand from the controversy.
  2. Make the statement clear and unequivocal. Do not leave room for other interpretations.
  3. Stick to the brand knitting. Don’t attempt to exploit the controversy to drive sales, or to create related advertising messages. These only serve to solidify negative connections in consumers’ minds.

Tiki torches, New Balance shoes, and Perry Polo shirts were not the only brands to get sullied on August 11th. The University of Virginia did, too. The school’s logo features a simple white outline of its Rotunda surrounded by orange. With its viewpoint from The Lawn, the logo is integral to the UVa brand, and instantly recognizable to UVa alumni. For me, the logo carries meaning beyond the physical building that Thomas Jefferson designed, and is now recognized as a UNESCO World Heritage site. That enslaved people constructed the building brick-by-brick and board-by-board makes the August events in Charlottesville even more poignant today.

For the time being, I can’t un-see the white supremacist marchers, or stop hearing their hateful chants as they walked past the Rotunda. And I can’t ignore their worldview that we should return to the institutions and society that subjugated human beings, and openly advocated the existence of a “superior race.”

At least in Virginia, many of us have convinced ourselves that Jefferson – who himself enslaved over 220 people – would be reviled at the Unite the Right marchers, and what they stand for. “It is safer to have the whole people respectably enlightened than a few in a high state of science and the many in ignorance,” Jefferson said. For generations, that idea has been woven into UVa’s brand. On August 11th 2017, I suspect Jefferson was twirling in his grave.

Is Maximizing Shareholder Value Poisonous?

If you grab your favorite marketing book and boil away process diagrams, statistics, and literary fluff, just two words will remain: create value.  Easy-sounding advice, but for most executives, it’s wicked hard. An ideal place for opportunists to step in and promote simple answers and quick remedies.

Business leaders have an insatiable appetite for how-to’s on value creation. And they get a nonstop barrage of erudition from practitioners, self-anointed experts, and academics who cobble salads of trendy verbs, nouns, adjectives and industry jargon, producing inscrutable sentences to solve the insoluble. Maximize/Optimize/Leverage [fill in words]! Measure this! Control that! Be laser-focused on [name of thing]!

Some recommendations show great insight. But others are obvious admonitions and bland platitudes hawked as panaceas, hacks, and fixes for whatever strategic impediment wanders into a CXO’s crosshairs. Useful or not, many are shamelessly aimed at a goal few have dared to question: maximizing shareholder value.

Until now. People have started to recognize that maximizing shareholder value has a central role in harming other stakeholders. The problem is growing. In the name of maximizing shareholder value, crucial employee benefits are being slashed, workers and contractors are hired and churned at whim, and producers with sketchy labor and supply chain practices are awarded contracts – as long as they maintain the highest quality at the lowest cost. Who cares if the widget was made in a firetrap factory by laborers required to work 80-hour weeks, with no overtime pay differential?  Magnanimity and fairness, once emblems of corporate pride, have been expunged from C-Suite vocabulary. Hey, stock prices don’t increase without trade-offs!

Customers are suffering, too – mentally, physically, and financially. Faulty product designs cause injury or death, as we saw recently with GM and Takata. Companies weaken customer service, often under the guise of improving it. “As part of our commitment to our loyal customers, we are now automating . . .” Every customer support rep I’ve spoken to this year has dutifully reminded me that I can take care of my transaction or inquiry through a website. “I can step you through setting up a profile, if you like . . .” Part of the script, I suppose, but what a humiliation to be required to pull the rug out from under your own job, one conversation at a time!

With public trust in corporations waning, a new type of social-media superhero has emerged: the “disaster specialist,” to rush in post-debacle and patch things up with aggrieved customers. They bring “field-tested industry best practices.” Reassuring to know, if you’re prone to repeating widely-publicized mistakes. And when employee morale tanks, a different group of consultants waits at the door, promoting “surefire” ways to rekindle worker passion. Meanwhile, in the executive office, all’s well. Why worry, when your stock price streaks on a heavenly trajectory? There’s a hefty bag of bonus money waiting at the end of the rainbow.

This is a perverse system, in every sense of the word. In the name of maximizing shareholder value, companies routinely decimate their vital infrastructure and brand equity, then pay steeply to repair and rebuild. Some companies complete this circuit more than once. “The non-investor stakeholders? Let them eat cake!”

Maybe if we humanized those likeliest to get hurt, things could improve. For starters, we should stop calling investors, employees, customers, and vendors stakeholders, and instead refer to them as people. “It would be a funnier story if it weren’t for the tragic aspects of American capitalism in the 21st century,” wrote Matthew Stewart in a Wall Street Journal review of Duff McDonald’s book about Harvard Business School, titled The Golden Passport (Schools of Mismanagement: a Modern Business Education Provides Theories and Metrics But No Moral Center, April 22, 2017).

How did this happen? Stewart writes that in the 1980’s, Harvard Business School “suddenly embraced the notion that managers are just a shareholder’s idea of roadkill – and that it is positively bad for shareholders to possess anything resembling a moral conscience. If there is a villain painted in a single shade of black in Mr. McDonald’s version of history, it is Michael Jensen, the economist and Harvard Business School professor who supplied the intellectual rationalizations for the leveraged buyout boom, the CEO compensation boondoggle, and the rampant financialization of the economy. In Mr. McDonald’s tale, Mr. Jensen shows up ‘spewing out ridiculous blanket claims such as . . . “shareholders gain when golden parachutes are adopted.”’ Forty years ago, I drank the same Kool-Aid as an undergraduate business student.

For his part, Jensen was influenced by an op-ed article by Milton Friedman that appeared in The New York Times Magazine on September 13, 1970 (A Friedman Doctrine – The Social Responsibility of Business is to Increase Its Profits) that has become “the most read, misread, and referenced article ever written by a Nobel Laureate economist.” wrote James Heskett (Should Management be Primarily Responsible to Shareholders?, Harvard Business Review, May 9, 2017). “And It’s still being argued today. Friedman argued that the best way for managers to contribute to the social good was by maintaining a single-minded focus on profit, acting as agents for shareholders who put their capital at risk investing in their companies . . . Of greater importance than the issue posed in the article’s title was the proposition that followed: Because shareholders are owners of a corporation, professional managers and directors are their agents, primarily responsible for carrying out their wishes and creating value for them.”

According to Stewart, Harvard Business School produced “magic sticks that promised to answer every human need with a handy spreadsheet. In the more recent chapters of the history, the scariest parts are where the faculty take the spreadsheets off campus.” Among the locations Stewart is referring to is the customer-facing side of business. The retail sales floor. The Point-of-Sale terminal at Target, Home Depot, and Walmart. Online commerce. B2C, B2B and B2G. Neighborhoods monitored hundreds or thousands of miles away by wonky marketers and data scientists using predictive analytics dashboards.

Friedman’s and Jensen’s ideas have permeated into a “river of self-love that is America’s management-ideology complex,” as Stewart describes it. Every day, putrid bubbles of pomposity rise up from the sediment: United Airlines drags a paying passenger from one of its planes, initially defending its action. Wells Fargo systemically exploits its customers and employees so its president and senior managers can receive multi-million dollar bonuses tied to stock price. Theranos coerces its employees into silence to conceal the dangerous technology flaws in its widely-installed blood assay equipment. This is Mr. Friedman’s “single-minded focus on profit” at work. If he were alive today, Friedman would object to my characterization. “There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud,” he wrote. It took society nearly fifty years to fully recognize that Friedman’s view had great potential for harm. Today, many people simply ignore every word he wrote after profits. No doubt, some believe his sentence ends with that word.

In the 1990’s, the privately-held company I worked for was acquired by a firm traded on the NASDAQ, and a massive cultural shift overtook the sales organization almost immediately. Some salespeople who regularly provided great support for their customers became pariahs for not making goal. They were flushed, to use the indelicate vernacular of the profession, meaning they were fired. “Everything’s changed,” we were regularly reminded at our monthly sales pep talks. “Investment analysts are looking closely at our revenue performance, and it’s imperative that we hit our number every quarter.” Did our buyout and concomitant obsession with satisfying the analysts’ revenue expectations increase customer satisfaction? Did it motivate the company to invest more in customer support? Did it improve morale? It’s a fallacy to believe that on-target revenue production means employees and customers are happy, or that “top revenue producers” have delighted customers.

Should we replace maximizing shareholder value as management’s objective? If so, what goes in its place? The core issue is allegiance. “Harvard Business School Professors Joseph Bower and Lynn Paine propose that the primary allegiance of managers and their boards should be to the health of the corporation, not the maximization of shareholder value [emphasis, mine]. The rationale for this includes the arguments that managers can be held legally accountable while shareholders ‘have no legal duty to protect or serve the companies whose shares they own,’” writes James Heskett. And it’s immaterial whether investors have morals or personal integrity. Under maximize shareholder value, governance is not automatically granted a role in how companies are managed. In fact, governance can threaten shareholder value. In business, there’s no such thing as an immutable truthEven the notion of shareholders as owners of a company has been called into question.

The widespread practice of prioritizing shareholder value maximization seems odd, given the ambiguity over their role and rights in the development and implementation of corporate strategies and tactics. This becomes especially problematic when ensuring high returns to shareholders exacts heavy costs on others who are similarly vital for creating value.  For example, decisions that benefit shareholders, such as increasing short-term profitability through downsizing, can be catastrophic not only for customers and employees, but for the communities and the ecosystems of enterprises that depend on them to thrive. To make financial ratios more attractive, companies often reduce or eliminate essential long-term investments in research and development. In some cases, a company’s most valuable assets can be sold or leveraged to provide investors with immediate, substantial financial returns, while jeopardizing a company’s overall vitality. Few could argue that outcomes for customers, employees, and suppliers are fairly protected under this system.

If maximize shareholder value is so bad, why have so many companies embraced the idea? First, companies need investment capital to launch, grow, and fund new development. Those who put their money at risk deserve to be rewarded – and should be. Second, according to Heskett, “One reason the theory has predominated is that it is simple and straightforward. Shareholder value is easy to measure. Agency theory [the idea that a company’s managers and directors are responsible for carrying out the wishes of an organization’s owners and shareholders] simplifies the mission for managers; they need only serve one primary master [emphasis, mine].”

The problem is, converting to another corporate edict – one that is ostensibly healthier, more egalitarian, and more long-term focused – is complicated, as this passage from NCR Corporation’s annual report, excerpted from an article, Two points of view: The Point of Shareholder Wealth Maximization, illustrates:

“. . . board of directors no longer believe that shareholders is [sic] the only constituent to whom they are responsible”. (Wang, Jia and Dewhirst, H. Dudley, 1992). Explicitly, shareholder value maximization is not the only goal of the company, a company can’t do well without caring the interests of customers, suppliers, employees, or government environment . . . Stakeholders are constituencies who play an important role in the fortunes of the company. Their primary mission is to create value for stakeholders.”

That can work when the activities involved in value creation for all stakeholders are harmonious and aligned. But they are not. A point that Michael Jensen picks on:

“Stakeholder theory effectively leaves managers and directors unaccountable for their stewardship of the firm’s resources . . . plays into the hands of managers by allowing them to pursue their own interest at the expense of the firm’s financial claimants and society at large. It allows managers and directors to devote the firm’s resources to their own favorite causes – the environment, arts, cities, medical research – without being held accountable.”

I think his worry that managers will pursue disparate goals like aiding environmental causes or solving world hunger is overblown. Isn’t that the role of leadership – to keep everyone in the organization on the same page, so to speak? Here, Jensen backpedals, and provides a tiny concession:

“But . . . No company can create great value for its shareholders without stable growth of revenue, which comes from the relationship with customers, suppliers, bankers or government and so on.”

I agree with this last point. But I also recognize that with diminishing consumer trust, growing wealth inequality, and information power skewing back to corporations, Jensen and I are looking at business through the same rose-colored glasses.

Society cannot assume that by focusing on fulfilling the interests of shareholders we will produce consistently benign outcomes for others. We need something better than maximizing shareholder value as a managerial marching order. I’m just not sure exactly what it should be.

The Unfinished Business of the Internet

These days, people have reasons to keep secrets in Washington. But I have a good grapevine, and as soon I heard scuttlebutt that Vint Cerf, Google Vice President and Chief Internet Evangelist would be speaking this week in Northern Virginia, I knew I wanted to be there.

Odd that in the Internet age, finding details about this event wasn’t easy. No announcement. No informational website. No registration page. And zero search results. I only knew that Cerf was speaking at the Thomas Jefferson High School for Science and Technology (TJHSST)  on June 6. When I contacted the school, even the front desk personnel weren’t aware. An hour later, I got a call back from an administrator. Yes, Mr. Cerf would be speaking at 3 pm.  I headed over and found the auditorium packed, and the energy palpable.

In the back rows sat a smattering of parents, who, like me, finessed their way in to learn from this iconic person. “I wouldn’t have missed this for anything,” a dad told me, adding “My daughter thought Cerf was speaking because he developed Ion (the moniker for TJHSST’s intranet). I told her, ‘no, he pioneered The Internet!’”

In the early ‘80’s, Cerf was co-inventor of the now-ubiquitous TCP/IP protocol that allows communication between disparate IT devices. He was involved in the development of the first commercial email system. And he formed ICANN – the Internet Corporation for Assigned Names and Numbers – the organization that makes it possible for you to read this article online. It’s not often that I anoint anyone as a Rock Star, but it fits here.

Cerf began his talk with a summary of the early beginnings of the Internet. He and TCP/IP co-inventor Bob Kahn were prescient, deciding not to patent TCP/IP because they recognized that doing so would inhibit growth of an industry that had not yet even formed. “The result,” he said, “was that many people adopted the Internet.” On January 1st, 1983 when the Internet was first turned on, “there was no central control, which allowed aggregate global collaboration.” The key insight he and Kahn discovered was that open architecture allowed millions of people to connect rapidly.  Seems obvious today, but back then it was a revelation.

Cerf spoke about other technology milestones, including the World Wide Web (1993), the MOSAIC browser (1993), and Netscape (1994).  But the heart of his talk was on “unfinished business.” Each point covered an issue that touches us daily, and each has a highly uncertain future.

  1. Strong authentication. The Internet has many structural impediments that make it difficult to ensure that identities are genuine.
  2. Cryptography. “Anonymity is still important because in some parts of the world it’s unsafe to speak up.”
  3. IPV6 address implementation. Rapid change and expansion in IoT, cyber-physical systems, and mobile devices present great connectivity and data challenges.
  4. Long-term digital preservation. The Internet is a fluid system, and unlike printed material, it’s not always possible to archive something in its fully-original form.
  5. Stable identifier systems. “Domains and URL’s are not stable,” Cerf said. Web pages can be taken down as easily as entire websites, or they can be redirected to new websites. This complicates academic and scientific research.
  6. Broadband wired or wireless access. Not everyone – or every place – has equal access to the Internet.
  7. Internet of Things (IoT). There’s an “avalanche of devices coming into being.” Cerf asked, “What happens when you have hundreds of devices connected in a house, and you move to a new house?” It’s not trivial to reconnect everything. Also, with voice-recognition devices such as Amazon or Alexa, how will the underlying AI adjust results when different voices use the same words?
  8. Misinformation, disinformation, and critical thinking. Last year’s presidential election underscored the perils.
  9. Consequences of malware and buggy software. The Smart Machine Age has increased our reliance on software to make critical life-and-death decisions. But programing is still subject to flaws.
  10. Ethics of software-based decisions. With IT, the “right” choice is not always an ethical one.
  11. Digital literacy. In a technology-dependent world, our understandings of how things work has not kept pace.

I intended to beat the crowd leaving the auditorium when Cerf wrapped up his talk. It was the end of school, and even a short delay would have me dodging students, and sitting in my car, snarled in a sea of boxy orange school buses. But the moderator allowed audience questions, and I indulged a few minutes to listen to the first one. It was from a student who asked Cerf for his opinion on net neutrality, and specifically, about the Trump administration’s efforts to roll back regulations. Cerf’s answer was thoughtful and measured. He shared that in the 1990’s, there were about 8,000 Internet Service Providers, but broadband changed that by reducing the number to zero, one, or two providers for most of the US population. Cerf told the audience that if you’re a broadband provider selling subscription video entertainment, the natural inclination would be to slow down data on a Netflix – or similar service – because it competes with your cash cow. He said, “the simple idea is don’t inhibit competition,” and that it would be “a big mistake to abandon those rules.”

“The Internet was a stupid platform when it was originated,” Cerf said. I take that to mean that the Internet was never good at protecting us from ourselves. The unfinished business of the Internet tells us that in that regard, we still have a long way to go.