|P E T E R S. C O H A N & A S S O C I A T E S|
After three years of decline, the world's confidence in American capitalism has eroded. The value of publicly traded stocks fell from $18 trillion in March 2000 to $10 trillion in November 2002. Huge companies such as Enron and WorldCom filed for bankruptcy after investors and lenders discovered that they had produced false financial statements. In addition, accounting firms and investment banks operated with conflicts of interest that made it impossible for auditors and analysts to protect investors' interests.
American executives must take the initiative to repair American capitalism by following the concept of Value Leadership. Value Leadership is the notion that shareholders earn higher returns when companies outperform competitors at creating value for employees, customers, and communities. To adopt Value Leadership, executives can follow seven principles:
Value Human Relationships means hiring people who share corporate values and treating these employees with respect. By following this principle, companies create an environment in which people who fit with their cultures create superior value for customers. Customers respond by purchasing more over longer periods of time which lowers marketing costs. Employees are more engaged with the company so they work more productively.
Foster Teamwork means encouraging people from different functions to work together for corporate ends. Teamwork enables employees to solve problems more quickly and to develop more profitable solutions to business problems. The result is more satisfied customers, more efficient processes, and more profitable new products.
Experiment Frugally means encouraging employees to develop new products and processes without spending too much money. In competitive markets, companies that experiment frugally can tap their employees for ideas that lead to new products and streamlined operations. The result is profitable growth which benefits employees, customers, and communities.
Fulfill Your Commitments means saying what you'll do and doing what you say. Fulfilling your commitments builds trust between a company and its employees, customers, and communities. Trust flows from communicating intent and then backing up that expectation with actions. When executives fulfill their commitments over long periods of time, they create trust which allows companies to operate more efficiently.
Fight Complacency means defeating the arrogance that often comes from success. Frequently success creates wealth that causes executives to stop doing what allowed them to become successful in the first place. Executives who fight complacency maintain a sense of healthy paranoia that causes them to keep striving for higher levels of performance. As a result, employees are stretched to develop and customers get better products and services.
Win Through Multiple Means is a way for companies to sustain market leadership. By building their market lead through many different capabilities, leaders' strategies are more difficult for competitors to copy because they are not dependent on doing any one thing well. When companies combine skills to create superior value for their customers, the interaction among the skills is often the most difficult aspect of the strategy for competitors to understand and replicate. The result is that winning through multiple means helps a market leader to stay ahead.
Give to Your Community means contributing corporate time and money to people or organizations outside the company's core circle of operations. When companies let employees pick the recipients of corporate charity, they feel better about the company because the company is giving them a chance to feel the joy of giving. When companies enrich their local communities, they can overcome community resistance to change. When companies solve a big societal problem, they exercize a unique power to improve education or contain the spread of AIDS while enhancing their global reputations.
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