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I had an interesting meeting with a CEO this week. Our discussion focused on his desire to develop his business Authentically but he was worried about the opinions of significant and vocal shareholders who are constantly pushing him for short-term profitability. He felt that board meetings had recently become something of a battle zone, and despite a track record of success he felt both insecure and angry that these shareholders are taking such a short-term perspective. This isn’t a new phenomenon of course, its a well known fact in publicly quoted companies, and is often one of the key reasons for under-investment.
Our conversation reminded me of an interview I heard recently with the owner of a Japanese family business that had been trading for more than 100 years. He attributed the long term success of the business to a philosophy of “growing like an oak tree not like a water melon….” He knew that slow organic growth made for a strong business with “A Heart of Oak”. He had seen many businesses that had pushed for aggressive and acquisitive growth that had failed or been taken over and integrated into other companies. I thought it was a good lesson for sustainable business.
But the Oak Tree metaphor didn’t really help my client… he could see the long term benefits, but he needed help to convince his shareholders that adopting an authentic approach can deliver increased shareholder value in the short-term too. So we sat down and brainstormed just some of the benefits, which include:-
- increasingly customers seek to do business with sustainable companies, and with those that fulfill a social need;
- customers of authentic businesses tend to tell their family and friends and these word-of-mouth recommendations results in more business; and
- happy customers keep returning – so customer retention is higher.
Reduced Operating Costs
- a true sense of purpose helps everyone focus on core competence, and reducing distracting activities;
- marketing spend is lower since word-of-mouth overtakes advertising and special offers as the principal source of acquiring new customers;
- staff turnover is reduced – resulting in lower recruitment and training costs;
- staff feel more rewarded – since money isn’t their key motivator – resulting in greater productivity; and
- suppliers are more helpful since the respect you show earns their loyalty – they go that extra mile to deliver on time, help develop new products, and find joint ways to reduce total costs.
Improved Shareholder Value
- sustainable growth and steady contracts leads to increased P/E ratios;
- increased profitability is multiplied by the higher P/E ratios to deliver higher shareholder value; and
- business success attracts more potential buyers – increasing competitiveness in the buy cycle.
The above benefits now need to be quantified, but the CEO feels reassured that he can justify investing in developing an Authentic business strategy, and adopting Authentic leadership across the organisation… Is this an opportunity for you too?
Why not get in touch for an exploratory chat about the benefits that your organisation could get from Authenticity…
Chief Business Designer – CULTIVAR Consulting