Wrong target? In the underperforming CVI program, there are as many suboptimal definitions for the causes (and therefore, explanations) for the company´s value ills as there are separate crony political power centers within the organization.

It´s like the Scott Adams Dilbert (c) comic in addressing whatever happens to be this season´s aspirational corporate goal. In this instance just precede whatever happens to be this week´s list of activities with a phrase such as, "We achieve maximum shareholder value by doing the following...." followed by that list of today´s make-work activities.

Of course, that´s an exaggeration of the problem of inadequate value improvement scope, but not by much. All of the examples that follow are actual, from VBM Consulting´s experience in recent years (no names).

There´s the unnecessary administrative division that claims to ´create value´ because its costs are slightly lower than comparable money-losing operations elsewhere.

Then there´s the sales group that contorts whatever definition for ´value maximizing´ happens to be in fashion that quarter in whatever manner is necessary to prevent the bottom 20% of the sales efforts from succumbing to a mercy killing.

Next, there are the members of the development group who have been so thoroughly brainwashed in the erroneous belief that value only comes from growth that they repeatedly pursue value-destroying initiatives.

Had enough? You get the picture. There isn´t enough memory space on the Net to chronicle all the ways that these and similar inadequate actions reduce shareholder value rather than increase it.

What DOES work in the real world is a value scope that covers all five of the potential sources of missing shareholder wealth.

Value-creating growth. Fundamental expense structure reform and new efficiencies. Value-optimal capital structure, financing and business portfolio strategy. Risk management. Guiding perceptions of the emerging new group of value-influencers who have emerged after The Bubble, when businesses were forced to forget the fluff and focus on what works in all aspects of business. Including management´s paramount responsibility, to maximize shareholder value on a continuing basis.

None of the five sources of value is enough on its own. Over-rely on one path to the exclusion of the other four, and the errors of partial value reoccur.

But addressed together, all five value sources comprise the beginning of a serious corporate value improvement agenda. 1

Note:

1

"An introduction to Five Delta" limited distribution presentation, © 2003-4 VBM Consulting Limited all rights reserved )is available to present and past clients of VBM Consulting without charge and corporate registrants to the VBMC Resource Ctr. Email outperform@vbm-consulting.com referencing that analysis and providing full contact details at company address, including email, postal address, phone. We are pleased to send out the analysis following confirmation of eligibility.
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