Values – The Value of a firm or the Values of a firm?
This week the New York Times ran a piece in their You’re the Boss – The Art of Running a Small Business Section, called “The Very Picky Customer.” The author owns and manages a custom furniture company that specializes in tables, boardroom tables and conference tables – nice stuff!
In determining the value of a business there are a number of drivers:
• Future performance
• Financial leverage
• Financial return Expectations
• Cash Flow, not profits
Notice, in this analysis there is no mention of culture.
The Picky Customer visited the table manufacturer before placing her order. Visiting a plant or a division is a key in determining the value. While working with a multinational firm, we visited many firms; we visited suppliers and sub-suppliers, competitors and customers. In every case our task was to understand the value of the firm and the values of the firm. Some of the areas we looked at included:
The Physical values:
• Accuracy, cleanliness, utilization of resources, orderliness, punctuality and timeliness, safety, responsiveness and quality.
The Organizational values:
• Accountability, communications, cooperation, coordination, discipline, Freedom to take initiative, integration, standardization and systemization.
The Cultural values:
• Continuous Improvement, creativity, Customer Delight, decisiveness, develop people, harmony, integrity, loyalty, resourcefulness, service to society, and a will to succeed.
The Picky Customer taught the furniture makers a valuable lesson. When the Picky Customer visited, she found a flaw in a finished table, ready for shipment. There was 1/64th of an inch gap, misalignment between two panels, not bad-but not perfect. The owner shares that trapped moment we have all had, whatever was said next was not going to sound right. The real answer was it was not perfect and it done over we could not guarantee better results.
Here’s the real lesson, the owner in a presented the facts and in a non-confrontational, non-hostile way asked why? The ops guys explained the limits of the equipment; he then asked design and sales. “Did the customer request this detail? Not really! The lessons learned don’t sell tables with this feature.
Values – the Value of a firm or the Values of a firm? In Operations, in business, this might be the causality dilemma. Perhaps the most famous causality dilemma is “what came first, the chicken or the egg?” The causality dilemma in business is which came first, the value of the firm or the values of the firm? A dilemma is a problem offering at least two possibilities. There are many dilemma models, some have colorful names:
• Double bind: conflicting requirements ensure that the victim will automatically be wrong.
• Ethical dilemma: a choice between moral imperatives.
• Extortion: the choice between paying the extortionist and suffering an unpleasant action.
• Hobson’s choice: a choice between something and nothing; “take it or leave it”.
• Morton’s fork: choices yield equivalent, often undesirable, results.
Actually, creating value comes from having shared values. A company that is accurate, clean, has a Team that communicates, cooperates and is coordinated will succeed. These shared values include creativity, loyalty and the goal to develop people; all aimed at profitably delighting the customers. These Teams win; they bring Future performance, create financial leverage, meeting or beating financial returns, surpassing expectations and surrender Cash Flow, and profits.
All the runners in a race compete-only One wins- Lets Run to WIN!