Are you a “Top Down” or “Bottoms Up” kind of person?
I’ve been a manager many times throughout my job history. There’s a trap that most managers fall into – the trap of control. Basically, you want to lead your organization and guide them to shared success. What better way to do that than to optimize them around a shared objective? After all, once everyone is on the same page with what you’re trying to accomplish, then you can all march in lockstep to making it happen. And as an added bonus, since you’re one person trying to manage many, there’s a convenience to having one simple goal. You can say the same thing to everyone.
Unfortunately, this approach only goes so far.
You can rally a team this way, you can achieve goals this way, you can even have fun this way… for a time. But, in my experience, it’s not sustainable.
Less obvious, but more effective (in my experience) is the bottoms up approach. This means that your team or company isn’t about the goal of maximizing shareholder value, delighting customers, earning profit, raising the stock price, etc. It means that your company exists primarily to keep its employees happy.
Blasphemy? Yes. The good kind.
How many companies can you think of right now where management is being very clear about the shared goals they all must achieve (a good thing… right?) and yet a significant chunk of the employees are somewhere between discontent and miserable?
Happy employees don’t want to leave a company. Happy employees know the company needs to be profitable to move forward. Happy employees know a company needs financial stability so they can get paid and keep their jobs. Happy employees are happy to work together cause they’re not worried about covering their ass or looking good for an employee review process that pits them against each other.
Given that there are only three shareholders at Jackson Fish who also happen to be the only full-time employees, it’s easy for us to talk about focusing on employee happiness as opposed to shareholder value. Our test will come someday. But we’re not without some current examples.
We’ve come across projects that would have been great for us as shareholders, but not great for us as employees who had to do the actual work. Guess what… we passed. The employees won out over the shareholders.
In the meantime, the folks at WholeFoods and The Container Store are saying the right things:
“Simultaneously we hit upon the philosophy that I think will be the dominant philosophy in business in the 21st century,” Mackey says. “It’s this principle that the purpose of business is not primarily to maximize shareholder value.” That’s a little like saying the purpose of religion isn’t to achieve salvation.
What are your thoughts?
Join the discussion 4 Comments
Coalsmith
July 2, 2008 at 6:34 am
Most organizations have a critical need for technology and knowledge workers. They provide the technology, innovation, product development, and other resources essential to twenty-first century business success. When the Geeks understands how their work relates to the business context, they have a better chance to become an integral and committed part of providing business solutions. To the Geek, it is an opportunity to engage in a favorite pursuit–that of solving a puzzle. To the Geeks, almost everything is a puzzle. They are willing to expend high energy and what ever time is necessary to solve the puzzle. When the puzzle solutions lead to new products or new customer service computer software, it is rewarding for the Geeks and profitable for the business.
Brad Hefta-Gaub
July 2, 2008 at 6:20 pm
As “I grew up” in business, I was taught that management’s job was to maximize “Stakeholder” value. That’s often confused with maximizing “Shareholder” value, since “Shareholders” are one of the most obvious subgroups of the Stakeholders of a company. But employees, customers, and the community, are also important stakeholders in any business.
Different business structures lend themselves to having different ratios of importance placed on the stake held by each of these groups. Private, VC backed companies are often (almost always) structured such that the shareholders interests are placed above all other stakeholders.
Some people argue that this should also always be true for public companies as well. Although I would argue that there are some public companies which due to the nature of their business and scale, that they duties to other stakeholders begin to supersede the interests of the shareholders. An example of this would be a large oil (er.. “energy”) company; or a tobacco company; etc.
I’m sure some free market capitalists will jump in here and say that the market will properly govern the interests of these other stakeholders and that by keeping an eye out on the shareholders interests will always optimize the interest of all stakeholders. Although I’d like to believe that is true, history has proven time and time again, that the markets are slow to react, and the fallout can be devastating when management chooses to sacrifice some stakeholders (customers, employees, etc) for the sake of shareholders alone (Enron, WorldCom, the current sub-prime fiasco, are all good examples of this).
So, where does this leave us…
Well, first of all, I applaud the Jackson Fish Market team, I think they’re on to something… a fresh view of how technology and online businesses can be structured. Their approach is not unique: 43things.com and Groundspeak.com are local (Seattle) examples of companies who have bootstrapped their way into very interesting businesses. Unfortunately, in technology, this approach to business is rare enough to be worth noting when you see it.
But, I would also encourage all business people, including the JFM team, to take a more balanced view to STAKE-holder value as they make their business decisions.
Great post Hillel!
David Anderson
July 8, 2008 at 12:48 am
I spent eight years working (in the US) for Mitsubishi Electric. After a few years of puzzling over seemingly inscrutible business decisions, I gradually came to accept this model of how they run the Japanese side of their business — that their #1 objective is to provide meaningful employment for their employees. When you look at the ways in which this objective is consistent with turning a profit, but often inconsistent with maximizing profit, you start to understand something.
lfmorgan
August 5, 2008 at 6:01 am
was hoping to find what it means to find A Balance of Top Down and Bottom Up That Works Best—hey we CAN think straight if we try hard enough! Too much audacity fro the bottom up is our biggest problem and not enough ass kicking Top Down to quell it properly! I retired early (at 62) becasuse I could to escape the flood of audacity fom the bottom up – now we have the possibility of borrom up Obama–yuk! And yeah, its very sad that I am just speaking for myself still!!!!