On the train on the way home from work I read about the latest chief executive of another large company announcing his departure after less than a year in the role. The statement around his departure indicated that he’d ‘achieved what he wanted to achieve’ in the role and the company was left stronger for the incoming chief executive.
Now, this may be absolutely true, but how many of you are, like me, reading those words and thinking they’re code for ‘I’ve taken a look under the covers, the whole place is utterly dysfunctional and I’m getting outta here while things still look good before the bomb goes off’.
The tenure of the average board member now seems to barely exceed that of the average premier league football manager. The idea these days seems to be not to stay anywhere long enough for anything to catch up with you.
If you get the big job then the three steps success model appears to be: 1) spend the first four months pointing out how bad things had got before you arrived, 2) spend the next four kicking the nasties under the carpet and painting over a the cracks and 3) spend the next four trumpeting your hasty paint job as the next big thing all beautifully packaged and delivered. ….and if you’re in the role longer than 12 months you’re doing it wrong. And don’t forget to practice the ‘it was all fine when I left it’ gaze at the heavens once you’ve moved on and one or two of those nasties climb out from under the carpet.
So who loses from this exec merry-go-round? Well the customer would appear to be the number one casualty. Focus appears to be on profit targets measured in months not years. Costs are cut relentlessly and many great initiatives hit the cutting room floor alongside the fat. Senior execs no longer stay in position long enough to pull apart and understand complex customer facing processes, generate insight from the plethora of data sources coming at them, and make the investment case needed to ensure company capability keeps pace with technology and customer behaviour changes. As a result long-term profitabilty suffers.
The result can often be great disparity between the brand image of big companies and the grim reality of being caught up in their customer processes. But as long as that customer unrest doesn’t become out and out revolt then companies ignore the drip, drip effect of customers voting with their feet until the avalanche hits.
It’s no good blaming exec behaviour for this by the way, they’re doing exactly what they need to do to make sure they get on in their careers. So what’s the answer to all this short term decision making and current year profit chasing?
In my view the time is now right to create a much more transparent link between customer behaviour and true worth of the company. Accounting for profit and methods used for valuing a company are still quite rudimentary in their use of key customer behaviours, like cost to acquire a brand new customer, average purchase values, repeat purchase metrics, churn and winback, to calculate company worth. If company valuation spreadsheets were more closely linked to customer metrics, in the way that true profit REALLY IS linked to these metrics, then exec behaviour would change overnight.
Departing execs would wave goodbye pointing at enhanced customer lifetime value and happy customers as their measure of success rather than the profit figures from last month. That, surely, would be a step forward for everyone.