I take Charan with a huge lick of salt. He was a consigliere to GE's C-suites for years. He is a sort-of Erdős-for-business.
https://money.cnn.com/magazines/fortune/fortune_archive/2007...
What the CEO wants you to know (2023)
21–30 of 53 posts
Re: What the CEO wants you to know (2023)
#22I for one would really like to know why the CEO gets paid so much, why are the employees not getting paid proportionally, why RTO is absolutely necessary, why the stock buybacks are necessary when investment in the business is going down, etc.
Re: What the CEO wants you to know (2023)
#23> Charan makes a rather controversial assertion in the introduction to this section: if your company isn’t growing, then it is dying. The argument goes something like this: in a world that grows every day, a company that is standing still or doing ‘just fine’ is falling behind. A company that is overtaken by a competitor eventually gets boxed in. It loses many of its advantages over time. Charan’s conclusion: growth…
If I could change one thing about corporate culture, I think it might be this attitude of "success necessarily produces growth". There is nothing wrong with reaching a successful size and staying there. A good company charges money to solve a problem. The company only needs to be as big as the problem. Anything beyond that is just an exercise for investors. There is nothing wrong with that per se, but it should not b…
Not weighing in on either side of this debate, but from a systems perspective it can be incredibly difficult to keep a complex system in a fixed state. Businesses are no different, so if something is working to get you "up" to the local maxima (let's say this is the "right" size) it's really hard to predict when & how to keep you there, and instead keep doing the same thing that seems to be working. It's hard to find examples of companies that are static, outside of the largest public or government enterprises; most are cycling between growing and shrinking.
Re: What the CEO wants you to know (2023)
#24> A sales rep who negotiates a 30-day payment term instead of a 45-day payment term is cash-wise. The company can get the money sooner and is able to put it to use elsewhere.
I don't understand using a sales rep as the first example.
Don't you just tell the salesperson how their compensation is tied to deals signed, revenue, and the speediness of payments?
Doesn't that formula alone tell you what the behavior will be?
Agreed on the value of educating employees about what's important to the business, but isn't sales an exception, due to convention of how their compensation is structured?
Re: What the CEO wants you to know (2023)
#25> A sales rep who negotiates a 30-day payment term instead of a 45-day payment term is cash-wise. The company can get the money sooner and is able to put it to use elsewhere. I don't understand using a sales rep as the first example. Don't you just tell the salesperson how their compensation is tied to deals signed, revenue, and the speediness of payments? Doesn't that formula alone tell you what the behavior will be…
Comp is typically aligned to Revenue rather than payment schedule, unless the rep is involved in the A/R process which is unusual but not unheard of. The incentive comes from deal language standards for which exceptions must be approved by senior leaders for things like delayed payments or other arrangements.
In the above scenario, the more likely situation would be the rep goes to bat internally for a 45-day term so they can close a larger or more favorable deal that management will be incentivized to approve.
Re: What the CEO wants you to know (2023)
#26> Charan makes a rather controversial assertion in the introduction to this section: if your company isn’t growing, then it is dying. The argument goes something like this: in a world that grows every day, a company that is standing still or doing ‘just fine’ is falling behind. A company that is overtaken by a competitor eventually gets boxed in. It loses many of its advantages over time. Charan’s conclusion: growth…
If I could change one thing about corporate culture, I think it might be this attitude of "success necessarily produces growth". There is nothing wrong with reaching a successful size and staying there. A good company charges money to solve a problem. The company only needs to be as big as the problem. Anything beyond that is just an exercise for investors. There is nothing wrong with that per se, but it should not b…
I agree with you, but it might be worth noting that a business which is not increasing profits in absolute terms is shrinking due to inflation. In other words if their costs increase 5% and their revenue increases 5% then a 5% increase in profits is expected.
Re: What the CEO wants you to know (2023)
#27> Charan makes a rather controversial assertion in the introduction to this section: if your company isn’t growing, then it is dying. The argument goes something like this: in a world that grows every day, a company that is standing still or doing ‘just fine’ is falling behind. A company that is overtaken by a competitor eventually gets boxed in. It loses many of its advantages over time. Charan’s conclusion: growth…
If I could change one thing about corporate culture, I think it might be this attitude of "success necessarily produces growth". There is nothing wrong with reaching a successful size and staying there. A good company charges money to solve a problem. The company only needs to be as big as the problem. Anything beyond that is just an exercise for investors. There is nothing wrong with that per se, but it should not b…
in the West this is related to money lending IMHO
Re: What the CEO wants you to know (2023)
#28I for one would really like to know why the CEO gets paid so much, why are the employees not getting paid proportionally, why RTO is absolutely necessary, why the stock buybacks are necessary when investment in the business is going down, etc.
> why the stock buybacks are necessary when investment in the business is going down
Boeing is a very recent egregious showcase to how fucked up this behaviour can get.
I'd like to live in a world where shareholders' returns are not the goal, just a side-effect of good business.
I still cannot understand why stock buybacks aren't limited, actually I do not understand why it exists at all but since I'm not educated enough can't really argue with substance against it, it just doesn't sit right that a company (like Boeing) can spend a lot more cash flow on stock buybacks than R&D... R&D creates something of real value, stock buybacks just enrich shareholders (and hence, a company's C-suite), it's so self-serving that I really do not understand how it's even legal.
Re: What the CEO wants you to know (2023)
#29> The new manager believed he could gain significant market share by cutting prices. He was successful—at first. Sales grew over the next three months, and so did the unit’s share of the market. However, the competition responded in kind... all the price cutting caused revenues, profits, and cash generation to shrink throughout the industry, hurting Global Building along with everyone else.
Sounds like the system working as intended to me.
Re: What the CEO wants you to know (2023)
#30I for one would really like to know why the CEO gets paid so much, why are the employees not getting paid proportionally, why RTO is absolutely necessary, why the stock buybacks are necessary when investment in the business is going down, etc.
> why the stock buybacks are necessary when investment in the business is going down Boeing is a very recent egregious showcase to how fucked up this behaviour can get. I'd like to live in a world where shareholders' returns are not the goal, just a side-effect of good business. I still cannot understand why stock buybacks aren't limited, actually I do not understand why it exists at all but since I'm not educated en…
Can't comment on Boeing specifically, but if a company has a bunch of cash on hand and doesn't have enough plausible projects to invest in that could return better than the benchmark rate, then I think it makes sense to return it to investors.
Even in a well-run company (Apple?) it's reasonable to imagine that cash on hand could exceed the company's present capacity for new research projects. Scaling up an R&D department could take quite a bit of time, and it might not make sense to sit on that cash while they do it.