Maximizing Shareholder Value

The company had struggled through the near collapse of the American economy by doing what it had always done, they way it had always done it.  They clung to the Big Box model hoping that the economy would soon recover. It didn't.

The company had stoically resisted any changes for three years while being trounced by its largest competitor.  It sustained 14 quarters of dismal results all without feeling the need to change a single thing about the way it went to market.

None of these events was enough to convince the company I work for that things needed to change.

But then, one day, almost as if by magic, the company finally woke up and decided it needed to completely change everything about how it did business.

This revelation was not the product of deep thinking within the company.  Nor was it the outcome of some hotly contested deliberation of a strategic overhaul.  It was simply the result of one person, buying so many shares of the company, that he could not be ignored. 

An activist shareholder bought into my company and while I was not there to overhear the conversation, I am sure it went something like this:

“Mr. Chairman, I now own a significant portion of your company.  I would like you to change the way the company is run so that the shares I own are significantly more valuable in three to six months then they are now.   If you can not find a way to do that, I will replace you and your executive team with people that will.”

Simple individual self interest, that’s all it took to get my company to change.

Self interest, the power that drives the engine of capitalism. 

What finally motivated the company I work for to change was the realization by senior executives that they could either change the way the company operated, or they would loose their jobs. 

From that moment, the floodgates opened.  The company embarked on a multi-year, three pronged strategic shift that was designed to “Maximizing Shareholder Value.” 

The strategy consists, in simplest terms, of:

1. Manipulating the company’s finances to increase the share price. 
2. Introducing ‘Technology’ wherever and whenever possible and
3. Completely overhauling the corporate culture. 

There is nothing wrong with what the company is doing.  In many ways, maximizing shareholder value is exactly what a publicly traded company is supposed to do, it is by some definitions the only reason a public company exists at all. 

The problem lies in the definition of ‘Shareholder Value’.  My company is focused on getting the share price up regardless of how it impacts the company’s ability to function or even survive in the future.

Is a higher stock price the sole definition of shareholder value?

You can argue that it is because there would be no future, at least not for the executives in charge, if they don’t get the share price up right now.

The questions remains, however, does shareholder value mean the highest possible share price today or the value of the company over time?

It’s only a mental exercise.  In today’s market, there is no mechanism for looking at shareholder value over the long term.  The goal is to get the share price up as high as possible, as fast as possible and then struggle to keep it there.

The Big Box model of retailing relies on continuous growth to be effective.  There is no more real growth for Big Box stores in this economy so rather than finding a new model, my company has decided to continue with the same model but tweek its growth orientation away from more stores, more customers, and more sales to a focus on more ‘Shareholder Value’. 

It may be the only way the company can survive.  I would have liked to have seen a more creative solution to the problem of no growth/slow growth, but I am left with what I have.

I’m the most popular person in America!! (Well, almost)

It’s official.

The Retail Salesperson is the most popular job title in America according to The Bureau of Labor Statistics 2010-2011 Occupational Outlook Handbook, and of course, my Yahoo homepage http://finance.yahoo.com/family-home/article/110348/the-popularity-issue.

In May of 2009, the BLS stated that 4.2 million people were paid an annual median salary of $20,260.00 to stand in one place for long periods of time, to work weekends, evenings and holidays, and to endure limited advancement opportunities, just so the American populace could get their fill of groceries, hardware supplies and back to school clothes.

If you add in Cashiers (3.4 million), Food Service workers (2.7 million) and general office clerks (2.8 million); that’s a grand total of 13.1 million people uttering the phrase “May I help you?’ some 90 million times each day.

Actually it isn’t a phrase. More often it’s uttered as a single word: “myelpu?”

So 13 million of us get up at the crack of dawn, put on a vest or name tag and struggle through a day of monotony and anonymity.

But sometimes we do get noticed.

By now the name Steven Slater is etched into the minds of each of us in the customer service business. His spectacular exit from a JetBlue aircraft and the company’s employment are the stuff of break room fantasies. Watch his exit here: http://extratv.warnerbros.com/2010/08/watch_steven_slaters_jetblue_slide_escape.php

His life will now be endlessly analyzed, and continuously debated through at least a week of news cycles. His actions will be celebrated, derided and contextualized to support whatever concept countless numbers of pundits care to make.

But I fear that the real issue, as I see it, behind both his actions and the cord it struck with the American people will go unexamined and unmentioned.

Anyone who has worked with the general public can tell you horror stories about the customers they have had to deal with. When pressed, however, they will admit that the vast majority of customers are really very easy to help and that more than most are appreciative.

Conversely, we have all had our fair share of run ins with nametag wearing obstacles whose sole function is to stand between us and the items we came to purchase. Here too, we have to admit that while we may focus on the negative, most of our interactions at retail are without conflict or angst.

So why has this extraordinarily unrestrained act of quitting generated so much interest and discussion?

It’s because at its most basic level it highlights the conflict between entitlement and frustration inherent in the world of big box retail.

My point.

Customers are continuously bombarded with ever inflated promises about what they can expect when they enter a big box retail store. Promises that are from their very inception deceptive. They expect to find legions of expert staffing and products at ridiculously low prices, in endless quantities and varieties. It’s not only a fantasy, but it’s also a model for economic disaster.

What they fail to realize is that the powers that be in the big box retail world care more about customers as a concept than customers as a reality. They worry endlessly about the idea of a “customer”, but could actually care less about a single, actual customer.

Now shareholders, that’s a different matter entirely. But shareholders are easier to keep happy than customers. Customers don’t always know what they want. Shareholders, however, just want you to hit the numbers. Reduce payroll, increase margin and limit inventory and then the shareholders are happy. Customers? Not so much.

Retail workers don’t have the privilege of dealing with customers conceptually; they have to deal with them in the flesh, each one an individual in a very specific time and place. It’s the retail workers lot to try and deliver on the false promises created by the big box marketing machine.

It all too often ends in failure for the customer, which generates disappointment and frustration.

The Retail worker is not immune from this frustration. No one gets up in the morning looking forward to creating disappointment and anger among legions of basically blameless individuals.

Unless of course you are a politician running for office.

So over time, the frustration builds in the customer. To meet this frustration, and to avoid admitting that their promises were false, big companies have enacted extremely liberal policies that are designed to “empower” the customer to the point that the customer feels as though their will should be enough to change the laws of physics.

This “empowerment” condones customers venting their frustration powerfully and continuously until product that isn’t there magically appears, until prices reach the point of negative numbers and until every employee in a five mile radius is summoned to do their bidding.

Retail workers are left to their own devices in trying to meet the demands of these corporately empowered customers.

As customers feel more and more entitled, retail workers get more and more frustrated.

So then, when the customers sense of entitlement leads to anger that they feel perfectly comfortable expressing in a physically damaging way, the retail worker hits a point where the glory of 12 hour days, the comfort of knowing that you will be doing the same thing for the next 20 years and the allure of a princely $20,000 a year in annual income just can’t hold the frustration back any longer.

KABOOM!!

Grab the beer, yank the emergency handle and slide off into the sunset of frustrated worker legend.

There has to be a better way.

Normally I would implore big box managers to examine how they handle both customers and employees and to make changes to policy that can mitigate these types of damaging interactions.

But because of the fact that there are more of us working in customer service than in any other industry in the country, I think It’s time we look to ourselves for solutions.

If you are a customer service worker, look at yourself as a member of a grand profession. Not glorious, but certainly numerous. You can look to your right or left in any crowd and see another soul in the same high frustration job and draw solace. There are more of us than there are of them. More hard working Customer Service professionals than overly-entitled customers and we need to help each other.

Stop and think about the guy serving us coffee on our way to work. He’s one of the 13 million. He shares more in common with you than you might think. Give a smile, take a breath and realize that he has to transact your purchase with a crappy computer system the same way you will for the next 10 hours. Remember the frustration and take a second to acknowledged that what we do, what 13.1 million of us do, is difficult, and demanding.

Lets’ each take a moment to give each other, and ourselves the break we need to do our jobs. There’s a ton of us out there and if we start thinking about how we can work together, there is no telling the changes that can be made