THE BIG IDEA: Executive leaders are faced with a big question: Who should they put first: customers, employees, shareholders, or management? The best answer lies in understanding how each area relates to the other.
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Who comes first in your business?
- Customers
- Employees
- Shareholders
- Management
This is one of those frustrating questions. You can make an argument for each answer:
A. Put Customers First
Customers are the lifeblood of your business. As management thinker Peter Drucker always said, “the purpose of business is to create a customer.”
Many businesses give lip services to the “customers first” idea, but only a few actualize it—L.L. Bean, Costco, Amazon.com, MINI USA, Trader Joe’s, to name a few.
Amazon.com CEO Jeff Bezos says one of their three big ideas that made Amazon successful was: “Put the customer first.” McDonald’s founder Ray Kroc said, “Always put the customer first and success will be yours.”
B. Put Employees First
If you create customers by providing value to them, how do you deliver this value? Through your employees.
Companies like The Container Store, Southwest Airlines, Google, Patagonia, and Zappos are high fliers, in part, because of their “employees first” mantra.
Virgin CEO Richard Branson has a simple formula: happy employees equal happy customers. The converse is also true: unhappy employees create terrible customer experiences and destroy brand equity.
Branson says, “Put your staff first, customers second, and shareholders third.”
Branson’s priorities echo Southwest Airlines’ founder and former CEO Herbert Kelleher: “Take care of your employees and they will take care of the customers.”
C. Put Shareholders First
This has been a popular answer for many publicly-traded companies in the era of shareholder capitalism. Investors often look for businesses that put shareholders first.
Customers, however, don’t care about shareholder value. And this directive doesn’t resonate within organizations either. The goal of “maximizing shareholder value” doesn’t motivate employees or drive high performance.
This priority can help improve cost management and operational accountability. But, too often, over-emphasizing shareholder value leads executives to focus on the short term (quarter to quarter metrics) at the cost of long-term profitability and sustainability.
D. Put Management First
There’s two ways to look at this answer. First, it can be used by selfish, self-interested executives driven by greed and personal gain.
Or, second, it can be based on a profound, but often neglected truth: you can’t effectively serve others if you don’t first invest in yourself.
As PepsiCo CEO Indra Nooyi explains, “If you want to improve the organization, you have to improve yourself and the organization gets pulled up with you … I cannot just expect the organization to improve if I don’t improve myself and lift the organization.”
Where’s Option E—All of the Above?
The reality of modern business is that you can’t afford to focus on one of these area at the expense of the others.
These four areas form a symbiotic relationship: the role of management is to take care of its employees. Employees serve customers. Customers increase shareholder value, which in turn, elevates management. And the upward spiral continues.
Based on the internal strengths of your enterprise, you may have an emphasis on one of these four categories, but leaders looking to compete in a fast-changing marketplace will consciously drive growth in all of them. Doing so will strengthen your business and increase your chances of long-term market success.