Talking the value talk is easy. Anyone can do it, and most do.

Walking the value walk is far more difficult. This exceptional accomplishment is achieved by very few, and that includes those scores of companies that spew propaganda that they “manage for value” and that they have instituted some form of rote ‘value´ programs.

Look again at the voluminous support materials associated with those ‘value´ programs in name only. The stale bromides are literally boxed away, never looked at again and never, ever applied to practical business issues.

One of the fastest and surest ways to reveal the Company´s much-ballyhooed ‘value´ program as a complete fraud occurs when value destruction is tolerated or even encouraged by company top management.

And the most damaging breakdown of Zero Value Destruction Tolerance occurs when the breakdown happens in the executive office itself.

With grand fanfare, top management proclaims that Managing for Value (MFV) is ‘How we do business at our company´.

But daily behavior blows this self-serving PR fluff to bits. Actions by top management communicate that the company is merely using ‘value´ as a masquerade for bad old business-as-usual.

Management´s wild subjective guesses are repackaged by company lackies as ‘value-based analysis´ through manipulated spreadsheet analysis that dissolve under tough, objective examination. Crony bureaucracy administrative departments destroy value because of embedded budget fat that persists each quarter, unreformed and untouched.

Eight layers persist in the organizational structure, even though the same company in fully lean mode could and should suffice with just four. Deadwood are kicked up to expensive but ceremonial vice chairman positions, where they sometimes can still multiply their value destruction when they undermining prosperous parts of the business.

Money-draining projects and acquisitions continue to be supported, years after those initiatives stopped being value-creating. After all, we can´t have any of the top guys losing face, because they authorized these turkeys way back when. Promotions, R&D and business development initiatives are padded with value-deteriorating extras: extra expenses, non-productive people, money losing initiatives that bleed value but are not terminated. 1

Managing the company to achieve maximum appreciation of shareholders´ wealth positions? Think again.

Every major action by senior management communicates the opposite to those in the financial community who shape future shareholder wealth.

Value-setters in the financial community fear either that (1) management selective applies ‘value´ only when it doesn´t impede freedom to continue to ‘wing-it´ or worse, that (2) despite all of the rhetoric, top-most management lacks a clear understanding of the critical actions and characteristics that distinguish the Value Champion from the pretenders.

The antidote is simple and direct: Impose a regime of Zero Based Tolerance as complete and all embracing as exists in the private sector. 2 No instance of value destruction is permitted, in any part of the business. The theory: failure to ruthlessly eliminate value destruction spreads that plague like wildfire.

Overt, visible instances of value destruction are straightforward. Shutting down or radically restructuring the losing subsidiary, division, unit, promotions/business development group or sales team is a fairly direct matter. If implementing management bluffs at meaningful cost and performance reform instead of doing the job right, then they are part of the problem rather than the solution.

Hidden sources of value destruction are more difficult to see, and thus more difficult to eradicate. At any one time, the top three layers of management tend to be distracted by a dozen-odd distractions, all of which claim to be mandatory but almost none of which have any direct impact on enduring shareholder value.

Cut them out, along with the wasted staff and budgets. In fast-changing times, inertia can quickly change the identity of the project/asset/employee from value-creating to value-diminishing. There is no in-between category.

Fail to keep up, and the company falls behind the competition and eventually succumbs.

Yes, Welch´s Number-One-or-Number-Two rule does apply. Not surprisingly, the survivor-champion is also the company that exhibits zero tolerance for value destruction throughout the organization.

Notes:

1

“The Value Engine” chapter in The Value Mandate: Maximizing Shareholder Value Across the Corporation by VBM Consulting partners Clark and Neill.

2

“Zero tolerance” is a phrase that is widely attributed to William J. Bratton, former chief of transport police in New York City and later, the City´s chief of police. Emergence of the phase coincided with a visible statistical reduction in the level of crime. At this writing, Bratton is the new Chief of Police of Los Angeles.
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