An end to “the tyrany of growth”?
There are a few silver linings to the dark clouds of recession that hang over us. One of them is very early signs of an end to what I call "the tyrany of growth". This is the obsession of companies to deliver quarterly sales results in line with the targets promised to stock market analysyts, in order to prop up their share price and please shareholders, rather than doing the right thing for the business and customers.
The first sign of change was a gob-smacking comment from none other than Jack Welch, former CEO of General Electric. The guy credited with creating the concept of "managing for shareholder value" back in 1980's recently announced that "Shareholder value is the dumbest idea in the world.” This comment came in an interview with the FT. He went on to say “The idea that shareholder value is a strategy is insane. It is the
product of your combined efforts – from the management to the
employees (and customers)”.
Well done for spotting this Jack. Shame it took you 20 bloody years to figure it out.
The second sign of change afoot is the refusal of Unilever's new CEO Paul Polman to give any guidance on future revenue and profit targets. In the past, targets such as those Unilever's 5 year "Path to Growth" were a millstone round the company's neck. Polman said to the stunned analysts that he would gladly give guidance on profit if any of them could tell him for sure what was going to happen to the global economy over the next 24-36 months. This challenge was, of course, met with a deafening silence.
The interesting thing is that following this Goldman Sachs actually upgraded Unilever's shares to neutral from sell, saying it saw scrapping its guidance as a prudent
decision in light of the current global recession, as reported here.
Let's hope that Polman and Welch can lead a wider spread change, to re-focuson the long-term needs of customer and employees, rather than pandering to the short-term needs of shareholders and stock market analysts.