Shareholder gain prevents organizations improvements

If you have read things I write, you might have a sense of what I value on Leadership and People development. As a change agent, I work on creating environments where people are empowered, supported and collaborate for a long term benefit of the organization. There are two schools out there that look on how to measure the success of an organization.

• One school, the one of Jensen and Meckling, says that the goal of an organization is to maximize the return to shareholders.
• The other school, the one from Peter Drucker, says that the goal of an organization is to create a customer.

You can read here more about both of these, and also why Jack Welch called the first school " The dumbest idea in the World"
It is one of the walls that change agents hit very often in big organizations. Change is demanded in team levels and portfolio level, but going above that is a big challenge. Most of the challenge comes from the fact that people on those layers are measured by how they maximize shareholder value. They are not capable to break walls and make tough decisions that would support the teams. Decisions sometimes are seemingly easy and sometimes what we call "political". But still, leaders on these high levels do not make the decisions that would benefit the organizations in long terms and would make their people happier. The article above explains a lot the walls CEOs and other C level leaders have. It also gives some ideas on what to do.
Today I accidentally ran into this video. Yes, it is Hillary Clinton speaking but please, for the length of this video, forget that she is in the middle of an election. Listen to her from the Lawyer and Economist point of view.

https://www.facebook.com/businessinsider/videos/10153521312779071/

The recap of this video: they did a survey with the big American corporations and asked the leaders: If you could make an investment today that could be anything, R&D, machines, training for people... and you know that in 5-10 years from now you will get good revenue, BUT it will lower your stock by 1 penny, would you still do this investment? The answer is unanimously: NO This is because they do not want to deal with the pressure that shareholders and market will put on them for that. The way the current capitalist system operates does not leave room for these leaders to make the right choice on investments.

It is not a supportive message for anyone that is trying to bring a change on their organizations. It just tells to people like me that no matter how much you try, no matter how much you can use Drucker's theory on team level, you can go no further. Because after that, the Jensen&Meckling theory rains strong and decisions will be made to maximize shareholder value, not to protect and reinforce the organization values. Organization values will always be put on the second place if we can increase the stock by 1 penny.

And yet ...

Drucker is one of the people where I go when my brain is hungry. So is Russell Ackoff. Another great mind that has inspired me a lot is Edwards Deming. Louise wrote a blog about him and how he brought Lean to Toyota. More than that, I do value his ideas on leadership and management. One of his quotes is mentioned very often on Agile circles.
The fact is that the system that people work in and the interaction with people may account for 90 or 95 percent of performance
It is easy to try to solve a problem by pointing to someone. It is easy to complain about a manager that behaves in a way that we don't expect managers to behave. We believe that only by removing that person from the picture, things will get better. And yet, we forget about the system, we forget what Deming says.
For everyone that feels frustrated by the behavior of their manager, their CEO, their CIO or any CxO, stop for a second and remember this video above. What we are asking from these people is to make something heroic, to take a big stance and face a whole market, a whole room full of shareholders and be strong enough to accept that it might even lose that CxO role in order to protect the organization's values.
Are we doing things like this on our roles? Are we able and capable to consider losing our job for a cause? Are we being the leaders we want our leaders to be?
From what I have seen, not a lot of people are up for that. Scale that and math will tell us that not many CxOs are ready to do that either.  Until we measure the success of our leaders by the shareholder value, they will make decisions to increase that number. Only if we change that metric, our leaders will be able to make better decisions continuously. Those leaders that believe in Drucker's school and make tough decisions on a system where they are measured by shareholder maximization, are the leaders that I believe in and the reason I will continue to talk about change and about better ways to make decisions on high levels of organizations. Let's all try to be the leaders we want our leaders to be. Let's be client focused, invest on people and system improvements, let our values lead our decision making... and shareholder value will eventually increase.. as Jack Welch said.