Creation of Value is a true responsability

Posted on March 30, 2009


dominoAny business leader working in Profit-organization is focused on value creation. However in these difficult times it could be useful to define precisely what it means, and check if we are not loosing sight of the reality.

According to several MBA books, creation of value is defined as a positive NPV (Net Present Value). Mainly driven by shareholders consideration, organizations have developped an incredible ability to satisfy them. And when the goal of these investors is becoming more and more short termist, organizations are following their expectations.

If, at the end, other parties are potentially receiving value ( customer, employee, community), “the Goal” of business is and stays money . If we can admit, in free markets, that it is legitimate for anyone who is ready to risk his own money to expect substantial return, we can feel uncomfortable if it is done with the destruction of value for other parties.

The current financial crisis exacerbates the conscequences of individual decisions. Within our global economy, and the associated restructuring and offshoring of operations, millions of people have lost their job and the possibility to find others opportunities are decreasing day after day. This, in return creates greater fragility of our economy and our ability to consume, hence decreasing our potential for growth.

Every leader has a responsibility whilst making an individual decision. Creation of value happen today in a world fully connected. If we are not thinking outside the shareholder paradigm, the conscequences of our actions could destroy more value that our generation has created.