Do you want to find out if the company executives are moneymakers or value destroyers? Anne-Marie Fink’s ‘The Moneymakers’ (www.landmarkonthenet.com) offers ready tips in the form of a framework with eleven rules.
True moneymakers, for starters, are that rare breed of leaders who perform consistently, as Fink describes. “A leader who is a moneymaker is very profitable all around – for shareholders as well as the company and its employees.”
The first of the eleven rules that a moneymaker follows is to think like an investor to establish an edge, the author begins. “Knowing what levers to pull to deliver results, these exceptional leaders consistently generate economic profits and earn high returns on their investments.”
Acknowledging threats to your business is the first step in counteracting them, she advises leaders. “We pay more to own a business when its managers take steps to deal with their business’ shortcomings, whether by shutting down uneconomic endeavours, increasing spending to address quality issues, or responding aggressively to competitors’ market share gains,” writes Fink, based on her experience in J. P. Morgan Asset and Wealth Management.
The second chapter opens with ‘cockroach theory,’ which recommends selling a company’s stock at the first sign of trouble, because “problems at a company are like cockroaches – there’s never just one. If you see one (in your bathroom at night or in a quarterly earnings statement), there are likely many more.”
With information ‘roach motels,’ problems won’t check out, observes Fink. “Recruit new truth tellers and cultivate the ones you have. Fight your natural instinct to marginalise them as complainers. Put them in charge of fixing whatever problems they identify,” she instructs.
A valuable insight in the book is that, invariably, leaders who ‘tell it like it is’ draw the largest crowds at investor conferences. Their willingness to highlight the mistakes they’ve made, the risks they’ve taken, and the weaknesses in their business models earns them great esteem among investors and great results in their businesses, reasons Fink.
Rule three cautions leaders to avoid the trap of profitless growth. “Not all growth is good. Revenue and income growth that use more resources than they generate do not advance economic profit and do not create value.”
The trick, as the author lays out, is to remain focused on ROI (return on investment), rather than take a top-down approach of improving only the numerator of the equation, the profits. So, when managing ROI, focus on the I, she notes.
“Because so few focus on the denominator, minimising the capital and assets that go into your business is the surer way to improve your returns. Moneymakers make every investment dollar produce the maximum return.”
Some of the boldly contrarian maxims in the book include: ‘Don’t be a customer fanatic,’ ‘Shrink to grow,’ ‘Good performance requires inefficiency and duplication,’ and ‘The best companies to invest in are the worst to work for.’
On the last, Fink elaborates that happy employees don’t make for high-performance workplace; rather, high-performance workplaces make for happy employees. Rewarding a large group on a shared metric may align interests, but it has a more pernicious impact, she warns. “It decouples pay from performance… Poor performers are sheltered from their ineffectiveness, receiving rewards based on their team’s (or larger group’s) performance.”
Just as running a marathon is torture for a couch potato and satisfying for a trained marathoner, high-performance organisations are not for everyone, the author analogises. “The right people generally self-select for them, and many of these organisations have rigorous processes to cull out people who do not fit the culture. In the end, they are left with people who really enjoy the environment.”
