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Why We Work: a Documentary

Fiduciary Responsibility Extends in All Directions

“Management is doing things right; leadership is doing the right things.” – Peter Drucker

Why do you go to work? Is it because you’ve found your life’s calling and can’t imagine doing anything else? Or is it because you just need a steady paycheck, and you don’t care who provides it? Do you consider your current position as merely a convenient source for on-the-job training before you bust out and go it alone? Did you inherit father’s company? Or is it because you’re flirting with the receptionist?

We all participate in the daily grind for different reasons, and the ones above aren’t even mutually exclusive. Sure, most of us need the paycheck, but we also like to think that we’re doing Good Work and not just, y’know, putting in the hours. If you’re an engineer, a programmer, a system architect, or a product manager, you probably didn’t get here by accident. You probably like what you do, at least at some level.

Now let’s ask an entirely different question. Why did you buy the particular car you’re driving? Was it because you’re a big fan of the automaker? Or was it just a boring transportation appliance to you? Was it the least-objectionable rattletrap you could afford, or was it a dream purchase that you’ve been saving for years to acquire?

Some folks are fanatical about cars, and others just don’t care at all. Similarly, some of us love our jobs while our coworkers (cow-orkers?) are simply grinding away their lives, watching the clock, and counting the hours until payday arrives. It takes all kinds.

As Kevin Morris pointed out last week in his “Fiduciary Irresponsibility” article, there are differing attitudes toward corporate management, too. Are you serving your customers, serving your employees, or serving your shareholders? Kevin makes the case that the U.S. legal system encourages – indeed, potentially requires – that our corporate governors think of the shareholders first, last, and always. Their fiduciary responsibility is to those providing the fiducials – the investors.

Whether you agree with that assessment or not, it’s yet another good example of the “what gets measured gets done” school of management. Financial results are quantifiable, so it’s easy to gauge success or failure. Keeping your employees and/or customers happy is a lot harder to evaluate.

In the end, there are two kinds of companies: those that turn out products and those that throw off capital.

We’re all customers of both kinds. One day we’re buying products; the next day we’re investing our life savings. Both types of companies produce a product that we like, it’s just that sometimes the “product” is nothing more than a quarterly dividend payment into our IRA or 401(k) account.

Take banks. When you’re saving your money, you’re likely more concerned about the interest rate than you are about the bank’s workplace camaraderie, employee-development courses, real estate holdings, or long-term acquisition plans. You’re in it for the bucks, frankly. It’s a one-dimensional vector for you as a saver. The bank’s employees, however, likely judge their workplace by a very different set of criteria.

Yahoo! provides a slightly more complicated example. The company has been through a series of management overhauls as it tries to decide what it wants to be. Yahoo’s products and services (whatever they are – I’m not sure anymore) just don’t seem to be as popular as they once were. Employees are nervous and investors are waving pitchforks and threatening to storm the castle, while customers seem largely unconcerned. Which group do you mollify?

“We have been extremely disappointed with Yahoo’s dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability,” says one of the above-mentioned investors. Do you see any mention of product rollouts, engineering projects, R&D, marketing, employee retention, career development, or customer satisfaction in there? Me, neither. As investors, these people are interested in exactly one quantifiable figure of merit. It’s a money-making machine – nothing more. 

I’ve been there. I was once the CEO of a public company with shareholders, a board of directors, lawyers, and quarterly financial results audited by very expensive accountants. They were some of the overhead of being a public company and had nothing to do (in my opinion) with the “real” business of running the firm. Yet I spent more of my time dealing with the accountants, lawyers, auditors, board members, and lunatic shareholders than I did with fellow employees sitting 10 feet away. How crazy is that?

Not crazy at all, if the shareholders were to be believed. I may be a bit slow on the uptake, but I eventually realized that they (the shareholders) gave zero figs about product development, R&D, marketing, employee retention, customer feedback, or any form of engineering. Those were expenses that contributed nothing to the bottom line. Or more specifically, those things didn’t contribute to their stock portfolio. Many, perhaps most, of our shareholders were retirees who cared only about how we contributed to the health of their nest egg. Product innovation? Forget about it. To them, the company was a revenue-generating machine, pure and simple. And my job – my fiduciary responsibility – was to keep that machine oiled and running reliably for the rest of their natural lives.

It’s pretty hard to do that while simultaneously making the customers happy by staffing up technical support, opening field offices, or extending product warranties. And it’s triply difficult to do those things while making your employees happy, too. What gets measured gets done, and every quarter we had an undeniable measure of how we were doing along one of those three axes. The other two? Mostly guesswork.

That seems horribly mercenary, but it’s not so unusual – or unfamiliar. If a college buddy needs to borrow the rent money, you lend it to him. Later on, if you find out he blew the cash on hockey tickets and beer, that makes you unhappy (especially if he didn’t invite you to the game), and you’re probably less likely to lend him money again. To him, that was a good use of the funds for “employee morale.” To you, that was a betrayal of your largesse. It was your money, after all. Shouldn’t you have some say in how it’s used?

That’s a complicated question with socio-political ramifications. Some say that a company should be managed for the benefit of its employees above all else, while others point out that doing so risks alienating customers and/or investors and turns the company into a cushy make-work farm.

You could argue just as vigorously that a company should be managed for the benefit of its customers, but that risks sacrificing employees every time sales takes a downturn.

Finally, some will advise placing the investors/shareholders first because it’s their money you’re playing with, and the capital you generate can be used to purchase goods and services or to help to bootstrap another deserving company.

You could write a long and erudite book justifying any one of those strategies. Many people have. That’s why the management – the people at the top – can make such a difference in how a company is governed and how it performs. There are no right answers. It’s a judgement call, and the managers’ judgement, combined with outside forces, determine the course of the company. At a minimum, it’s a tricky balancing act. At worst, it’s an impossible puzzle with only different modes of failure to choose from. And we thought engineering was hard. 

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