The Wisdom of a Well-Dressed Older Gentleman in an Airport

I used to travel a lot for work. I made a habit of seeking out well-dressed older gentlemen in airports and striking up conversations with them. They always have the best stories and so much wisdom you'd otherwise pay a small fortune to receive at some conference or seminar. In fact, I have spoken to more than one keynote speaker for hours as a result of this practice.

Management's Job

The one conversation that has stuck with me more than any other was with a retired Fortune 500 CEO coming back from speaking at Harvard Business School. He said he would always start the class by asking the students what they thought management's #1 job was. Invariably, they would respond,

"To increase shareholder value!"

"Yes, sort of, but not exactly. That's only part of the answer. An important part, but a small part. What else?"

To this, the class was almost always unsure.

His answer is so powerful, so obvious, and yet so rare to see in real life. The job of management is to represent everyone's interests.

Investors

A company—particularly a large company—has many stakeholders. The most obvious are the shareholders. They risk their hard-earned money by investing in the company, and in so doing they hope to see not only the preservation of that investment but also its appreciation. Not all investors are billionaires. Many millions of hard working people delay instant gratification by investing a portion of their income instead of spending it right away. They do this because they calculate and believe and trust that one day, they will be able to take that money back at a greater value than inflation and use it to survive in the days when they are no longer able to or desire to participate in the workforce. The preservation and appreciation of their investments represent a critical component of the entire system of capitalism. It is absolutely the role of management to look after the interests of shareholders and increase the company's value.

Customers

But investors are not the only stakeholders. Every company has customers. A company's value often comes from its revenues and its revenues come from the customers. Customers vote with their wallets every time they choose to do business with a company. So it is management's job to make sure the customers' needs are valued. It is management's job to make sure the customer has a seat at the table when decisions are being made about products, services, and prices.

Employees

But investors and customers are not the only stakeholders. Every company has employees. Sometimes the company is small enough that management acts as both the shareholders and the employees. In this case, it is very easy for management to represent everyone's needs. However, as a company grows, there can very easily be a disconnect between the people doing the work and the people making the decisions. The military has found that the scope of command maxes out at about 12 people. No one can effectively manage more than 12 people. If you are in a flat organization where 50 people all report to the CEO, you probably have witnessed that cliques form. These cliques control access to the CEO through politics or the trading of favors. No matter what your org chart looks like, whether a hub-and-spoke or a pyramid, once the number of employees exceeds 12, it is very likely that management will no longer naturally be aligned with the needs of the employees. Therefore, they must make a conscious effort to understand the needs of employees and represent those interests when making decisions.

Contractors

But there are more stakeholders than just investors, customers, and employees. Most companies have contracts with other companies. These contractors include janitorial staff, leasing companies, suppliers, manufacturers, distributors, resellers, and in some cases (like Uber) a large swath of the people who actually interact with the customers. Contractors' interests are even harder to represent than the interests of the employees. It is so easy to fall into the trap of thinking of contractors as "they." But "they" are just like everyone else in the company. For the company to be successful, these relationships have to be nurtured. Someone has to take the time to think about them and ask them what is best for them. They need someone who has a seat at the table when decisions are being made thinking about their interests.

Employees' Families

But the responsibility doesn't stop with investors, customers, employees, and contractors. The employee has stakeholders, too. Spouses, significant others, older parents, children, and pets often rely on her. These families need her to be in a good mental state. They need her to be home enough to be present in their lives. They need her to have appropriate space from work. They need her health insurance and retirement plan. And yes, they need her to make money.

Community

But even investors, customers, employees, contractors, and employees' families doesn't cover everyone affected by the company. The company is in a community, and how they behave as a member of the community can have very real impact on the community itself. Does the company pay its fair share of taxes? Does it contribute resources (both time and money) to local charities? Does it sponsor events? Does it represent a vision into a better life for children in disadvantaged circumstances and act as a "guide star" to that better life? Does it use its power and influence to reinforce good actors in the community and hold bad actors accountable for their actions?

Environment

But the list of stakeholders extends beyond investors, customers, employees, contractors, employees' families, and the community. Because companies can be so large, even the smallest changes in their behavior can have an enormous and lasting impact on the environment. Trees, clean water, and animals don't have a seat at the table when decisions are being made, and they don't even have a voice, so it is management's job to represent their interests as well.

Be Everyone's Voice

This gentleman really changed my attitude towards companies. At the time, I was an officer in the military and I grew up in the home of two teachers. Because none of my life's touchpoints had ever interacted with the inside of a company, all I knew was the bad things that are said about bad companies on 60 Minutes. In the rural Deep South, conversations around town made it seem that all companies really just care about making a profit—which is the Devil. So I was extremely distrusting of companies.

This one conversation had a deep and lasting impact on my life. I realized that even though companies absolutely do have to make money and increase shareholder value, they can and should be about so much more. If management takes its responsibility seriously, it is a very impactful job that can change the world for the better.