Let’s start with an eternal question: What should a company seek to optimise? Its profits? Share price? Or something else?
For many, company profits is the obvious answer. “Without profits a company cannot exist”, they proclaim. This is obvious but misleading. It’s like saying “Without water a human cannot exist”. Its true but that doesn’t mean I should always optimise my water level. As long as its over a certain level, I’m fine.
For others, shareholder return is the focus. Investors and owners are certainly important, but are they most important? Think about it. We have all seen the negative effects of management trying to inflate share prices. How good is truly the quarterly focus for a company? And how motivating are stock price increases to employees?
Some management gurus claim that everything must start with a customer focus today. Customers should pull what they need from organisations. Organisations should be designed and adapt continuously to cater to their needs. This strikes a chord with me, but what if customers don’t really know what they need? Or what if my job is to know a lot and learn what they need?
There are other thoughts on this. Some system and complexity thinkers, claim you should not optimise for one group but strive to satisfy all stakeholders, including even the families of employees and society at large. This sounds great, and I agree, but there are two problems:
- In context, some groups are more important than others and there are dependencies between them.
- Saying you should satisfy everybody doesn’t really provide much focus at all. It doesn’t help us attack our initial question.
From the above, we can deduce that even very smart people disagree on how to answer this question. I guess it’s because there are many true answers and it depends on context. In this post, I’d like to explain how my own company, Adaptiv, has reasoned around this. We have chosen none of the options above.
Let’s look at the context of my trade, the software consulting industry. In software consultancy, the consultants are the products, in a way, and they are used to provide complex services to customers over often longer periods of time. Services range from software delivery, to software development, as well as coaching and training. It’s not typical that customers pull services from the suppliers when needed, although that happens occasionally for smaller, bounded services, like a training course. More typically, a relationship is established and held until the need is fulfilled or the customer chooses to end the assignment for other reasons. The services are highly differentiated and not exactly repeatable.
For my company, Adaptiv, we have another thing to consider. For us, all employees are working consultants. There is no other management, nor administration. Also, it should be noted that Adaptiv is not a public company. There are no external stakeholders to care for. This puts us in multiple roles, which we need to hold separate.
So as an example; should Adaptiv focus on profits, owners, customers or employees? Well, as a life-style company we certainly won’t follow the money. We would certainly like to have a customer focus, but considering the nature of our services and customer relationships, this simply feels wrong. Of course we want to satisfy our customers and make a difference, no doubt about that, but as long as we offer services that are in demand, we’re fine. This can be seen, for example, when we refuse to accept silly, unrealistic assignments even if a customer is ready with the check book. Also, we won’t let an engaging assignment take over a consultants life, leading to burnout, family problems and possibly worse. Always letting the customer ride you can lead to a very exhausted horse.
Instead, in our reasoning, we have said that we should strive to optimise the lives of the consultants first. We believe that motivated and competent consultants are essential to providing great services. A consultant that is uninspired and tired cannot do that. Great services almost always lead to satisfied customers. It’s no guarantee, of course, but it certainly increases the probability. Happy customers means longer relations as well as more important and interesting assignments, which in turn feeds back to consultants’ satsifaction and stable company profits, which is great for the owners (i.e. the consultants). Although it may sound egoistic at first, I think there is some logic to this.
Why do we say “the lives” (of the consultants)? Why not something more catchy (geeky?) like “employee happiness”? First of all, to me happiness is often a fleeting feeling that I experience quite seldom, e.g. when looking at my sleeping son. Secondly, not everything that makes you feel great is good for you and in the long run and vice versa. Cocain is an example of the first and exercise of the opposite. Exercise is certainly inevitable for a long and healthy life, but you may expericence a slight resistance when you change clothes for that Sunday night run in the dark and -7 C. Optimising for happiness is not bad but still a sub-optimisation to my mind. Instead, I think we need to create sustainable, systemic conditions which maximize the potential for moments of happiness as well as encourage people to take care of their bodies and minds.
So this is our reasoning. It may not be true for you. But if you work in a consultancy, try to notice where your company optimises for something else and how that affects you, your motivation and your performance.