I’ve recently noticed a few interesting articles about setting objectives. Should the primary objective be to provide shareholder value or should it be to make the best product or deliver a premium service? How you answer this question and ultimately run your company will define business success.
For example, in the often interesting Morning Manager by Harvey Schachter, he writes about the pitfalls of goals that are too specific and narrow. If the objective is shareholder value then product quality might suffer due to managers focusing on profit instead of delivering customer value that drives profit; customer service reps might be incented to sell instead of being empowered to problem-solve.
There are a couple ways to set and manage objectives as detailed in the MITSloan Management Review article below, “What is your management model?” You can take a direct approach and define goals as clear targets such as driving shareholder value. Or you can manage objectives obliquely by setting sights on goal A (shareholder value) while also aiming at a second goal such as delivering great customer value. The authors of the Management Review article use the following IKEA vision to illustrate an oblique goal that drives tremendous profit: “to create a better everyday life for the many people.”
Either objective-setting method can work, but apparently the most profitable companies focus on goals like IKEA’s. I’d argue that during this time when consumers and customers are looking for value, companies that put them ahead of shareholders will ultimately make all of these stakeholders happy.