Why is Wealth Important? LO8895

Eric Bohlman (ebohlman@netcom.com)
Mon, 5 Aug 1996 17:03:33 -0700 (PDT)

Replying to LO8871 --

On Fri, 2 Aug 1996, Robert Bacal wrote:

> On 1 Aug 96 at 16:43, orgpsych@csra.net wrote:
>
> > An organization should exist to provide value to some one or some
> > group. Too often, though, the purpose of existence is to provide
> > moeny to people (such as shareholders).
>
> I disagree with this only because it seems to be reductionist and not
> systems thinking. Two points. A company that only provides value to
> shareholders will soon provide no value to its shareholders, because it
> will be bankrupt. Second, lest we forget that those shareholders are often
> people like you and I--retirement funds, for example,mutual funds, etc,
> almost any investments, mean that you and I are the shareholders.

As I see it, a commercial organization consists of two coupled
macro-processes. The first one takes (monetary) input from investors and
returns monetary value to them. The second takes input (money and ideas)
from customers and returns value (products or services that meet their
needs) to them. The second process is the "engine" that drives the first
one; the value that one provides to investors is created by providing
value to customers (*not* taken from the customers; in a market economy, a
transaction can actually create, rather than move, value if A and B each
have something that the other party wants more than they do).

Many of the problems that American businesses are experiencing are caused
by a failure to realize that the two processes are in fact coupled, and
that the second process is the driver. Too many managers have been taught
to act as if the first process (return to investors) is the "real"
company and the second process (serving customers) is just a secondary
nuisance. But the first process *cannot* happen on its own; it needs an
input of "energy" from the company's operations. The stereotypical
American company starts with financial goals and expects to meet them
without operations doing anything other than "business as usual." The
stereotypical Japanese company starts with operational goals, develops the
operations to meet them, and expects that the financials will follow.

-- 

Eric Bohlman <ebohlman@netcom.com>

Learning-org -- An Internet Dialog on Learning Organizations For info: <rkarash@karash.com> -or- <http://world.std.com/~lo/>