Trouble is, mere adequacy never, ever results in maximum shareholder value, the performance mandate for ALL pacesetter corporations. The company that settles for second- or third-best while the competition grabs the gold regresses in relative value terms, the only measures that really matter at the end of the day.

The corporate decision-maker who settles for ’adequate’ is often oblivious to the fact that his action may actually DESTROY corporate value, instead. This beleaguered manager’s ostrich act has a purpose, however: admitting a wrong decision can end careers, especially at those draconian firms where even the hint of a past error is tantamount to volunteering for the sack.

But this bluff is short-lived. Sometimes it is a competent analyst or group that reveals the value destruction behind the grand but hollow claims. Other times, the lie is revealed by the corporation’s enduring depressed market value. Woe to the pedestrian ’value’ consultants who find themselves in a position to influence the corporation’s value for years then blow it. The fact that the company’s price/earnings multiple remains far below the index for comparable companies says it all when it comes to whether Pedestrian Consultants has created or destroyed value, trendy consultant baffleprose notwithstanding.

On an individual manager basis, the ’coverage’ pitfall occurs as a role is filled primarily because of incumbency or seniority considerations, alone. Competitors grab the scarce Corporate Key Contributors who make the value difference (as described in Chapter 3 of VBM Consulting’s book THE VALUE MANDATE), leaving rivals to experience the consequences of being left with the dregs who are left behind.

Pearson, which owns the Financial Times, sold its TV operations even though they were still highly profitable, primarily because they lost value outperformer Greg Dyke to the BBC. Many other companies would appointed a lesser talented successor and hope for the best. Not Pearson, which realizes that ’second-rank’ and ’maximum shareholder value’ are incompatible.
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