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Monday, March 24, 2014

Customers, Investors, or Employees, Who Should Come First?

Much has been said and written about the dilemma of who should be your company’s first priority: customers, investors, or employees?

To be sure, this is a real dilemma for any company, including startups.

A company has three main constituents: customers, investors/shareholders, and its employees. Obviously it needs all three, and moreover, it needs all three to be happy and satisfied in order to succeed.

And yet, you can’t have three #1 priorities. So who should you rank as #1?

This is not just semantics or a mission statement exercise only. This ranking affects your long-term priorities, operational plans, trade-offs, and daily decisions.

In the 90’s the mission statement of “maximizing shareholders value” was very popular among US companies. This became the mantra of company leaders and executives. Needless to say, it didn’t inspire and motivate employees, nor did it delight customers. Eventually, it didn’t lead to higher value for investors either.

Later on, that mantra was replaces with “customer focused”. Everyone became, or wanted to be, customer-focused. Granted that makes a lot more sense than “shareholder focused”. However, treating customers like kings and employees like pawns is not a recipe for sustainable success.

For example, in the US retail sector, Sears is ranked amongst the worst in employee satisfaction rating and is losing money. On the other hand, Nordstrom is ranked high in employee satisfaction and is also highly profitable. This is just one example out of many.

I believe that employees should always come first. My rational is very simple. Happy and motivated employees perform better. They develop better products to meet customers’ needs, provide better service to customers, and find innovative ways in which to make the company perform better, and be successful.

This in turn makes customers happy since they get better products and service. Happy customers purchase more, remain loyal to the company, and recommend its products and services to their friends.

This makes the company successful and profitable, which of course, delights its investors and shareholders.

Thus, my ranking is:

1.   Employees
2.   Customers
3.   Investors

What’s yours?

1 comment:

  1. me too the the same. and you mentioned that motivated employees do better(motivation in which way? )could you please clear my doubt please clear my doubt


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