Getting it Right

A.G. Lafley has been CEO of P&G since 2000. We know P&G gets it to some extent, because they copied SmartGirl.com when they started their teen-girl community.  They also have Tremor, doing sampling and word-of-mouth marketing with the teen community.  But who knew that they "get it" all the way up at the top?

Lafley talks about stakeholders, not shareholders. Just as I recommend!  And the Wall Street Journal called him on this (The CEO as Global Corporate Ambassador). "What does this mean exactly? Who isn’t a stakeholder? What about the shareholders?" Etc.

I don’t know much about Lafley, but this article made him into a star in my eyes. He recognizes that the company is about its employees, its customers, and the communities it pollutes or offends or assists or just interacts with. In short, Lafley recognizes that everyone matters, even if they don’t hold the purse-strings… because ultimately, they do hold the purse-strings.

The arrival of the Internet has given stakeholders a loudspeaker, and allowed them to broadcast opinions that can impact the bottom line. What used to be simply ethically correct or just the "right thing to do", like helping those displaced by Hurricane Katrina or meeting face to face with animal rights activists, has become essential to running a good business. If you want long-term, loyal customers and free advertising (read: good Word of Mouth)

Steven Milloy of the "Free Enterprise Action Fund" doesn’t get it. He thinks it’s a conflict of interest for the CEO of Goldman to be board chair for the Nature Conservancy (because protecting the environment is not in the best interests of the companies they invest in!). He’ll attend GE’s annual shareholder meeting to take the company to task for acknowledging global warming. "The role of these companies is to increase society’s wealth by generating shareholder wealth," Milloy claims.

Yeah, but companies make money by building a customer base. America is built on choice—remember the anti-trust laws? If we don’t like what one company is doing, we can shop elsewhere. Finally, thanks to the Internet, we can tell each other which companies are doing good; and everyone can do their part to make sure that companies that do bad also do poorly. Either Milloy doesn’t recognize this, or he is in denial about the power of customers. We’re not your hostages anymore!

Milloy probably thinks of himself as a great patriot, protecting American ideals. When you think about what America is really about, though, it’s Lafley who gets it right. America is not about making money at the expense of your customers. Long-term, a company that works for all its stakeholders is going to do better for its shareholders, and likely to have more of them as well.

Comments

[russ]

But iz, I don't WANT corporations to take action on my behalf. I want them to save me as much money as they can, so I can spend money as I wish, rather than how they guess I want. Otherwise it's Chistmas all year long. A bad Chistmas where you never get anything like what you really want.

[Iz]

Russ,
I'm not saying they should be taking actions on your behalf just for the sake of it. I'm saying they should be making decisions that get them MORE CUSTOMERS, and that any actions that do so are a good move. Being loyal to your customers, and listening to them, is a good move because it builds the business.

Libertarians like yourself can shop elsewhere, if you're offended that they're catering to other considerations besides price in the course of building their customer base.

As long as there are more people who care about other things beside price than people who care only about price, it's wiser for them to address both considerations.

[Russell Nelson]

I'm fine with businesses doing things to make their customers happy. I just want to point out that being happy because somebody else is spending money that belongs is your pocket is not likely to make you as happy as if YOU had spent the money. Businesses will do whatever they need to do to attract our business. It is *our* responsibility to restrict them to their expertise, and not distract them into making donations outside their knowledge base. Should EMS donate to ADK or to the Nature Conservancy? Neither! They should sell me stuff for as little money as they can and let me make my own donation.