What the CEO wants you to know (2023)

https://commoncog.com/what-the-ceo-wants-you-to-know/

by Tomte • 2 years ago

59 44 2 years ago

commoncog.com

sonicanatidae4• 2 years ago

Serving Customers has been the last thing on most companies minds for the past decade or 2.

Dewey, Cheatum and Howe is a better example of the current "business" model of most companies.

Source: I live in the real world, not the world of fiction painted in this book.

stemlord• 2 years ago

It's what the CEO wants you to know not what you objectively should know

maximinus_thrax• 2 years ago

https://en.wiktionary.org/wiki/Dewey,_Cheatem_and_Howe

Thank you for this, TIL.

Also, I agree with your point, but the title of the book is still accurate, the content of the book is literally what the CEO wants you to know, not what you should know.

sonicanatidae4• 2 years ago

Dewey, Cheatum & Howe, was a common trope in The Three Stooges, which I watched a lot of as a kid. :)

TeMPOraL• 2 years ago

On the contrary - they are serving customers, the same way I serve dinner for my family. Diced, sliced, with juiceless bits thrown away, and leftovers given to chickens.

sonicanatidae4• 2 years ago

If you served dinner like they served customers, you would be apathetically serving cut up pieces of your family to the members that remain, while charging them an exorbitant price, then taking them to court if they dare post a bad review.

jimbob45• 2 years ago

A sales rep who negotiates a 30-day payment term instead of a 45-day payment term is cash-wise. The company can get the money sooner and is able to put it to use elsewhere.

Well yes but at the cost of the customer’s goodwill. Now you’ve potentially lost the customer in the long-term for an extremely low short-term benefit. “Premature optimization is the root of all evil” should apply to business as much as it does coding.

hef19898• 2 years ago

Wait until you hear of full pre-payments for some B2B sales.

nradov• 2 years ago

That really depends on the customer's liquidity and cost of capital. Some customers will be happy to take shorter payment terms in exchange for other concessions. Everything is negotiable. And many customers will agree to net-30 terms in writing, but then refuse to actually pay that quickly and dare you to cut them off.

DonsDiscountGas• 2 years ago

Deals with customers are always going to involve tradeoffs like this; if the 30-day payment term is standard but you offer an increase to 45-days that will earn some goodwill at the expense of those 15 days, for example. If a customer has a very different time-value of money than you do, giving them a discount for prompt payment could end up working well for everybody. It's also not a short-term benefit if they are a recurring customer.

I can't seem to find the article now, but I remember reading about somebody buying food for their restaurant and getting 50% discounts for paying immediately instead 30 days later. There are some obvious drawbacks to this, but it's also easy to see how the restaurant can come out ahead with a discount that large.

AndyKelley• 2 years ago

Charan makes a rather controversial assertion in the introduction to this section: if your company isn’t growing, then it is dying. The argument goes something like this: in a world that grows every day, a company that is standing still or doing ‘just fine’ is falling behind. A company that is overtaken by a competitor eventually gets boxed in. It loses many of its advantages over time. Charan’s conclusion: growth is imperative to business

Counter proposal: how about we don't destroy our own planet.

kogus• 2 years ago

If I could change one thing about corporate culture, I think it might be this attitude of "success necessarily produces growth". There is nothing wrong with reaching a successful size and staying there.

A good company charges money to solve a problem. The company only needs to be as big as the problem. Anything beyond that is just an exercise for investors. There is nothing wrong with that per se, but it should not be viewed as the only way to be successful.

Having said all that, I don't think Charan's assertion is "controversial" at all. In fact it seems to be the default assumption in virtually every publicly traded company.

skeeter2020• 2 years ago

Not weighing in on either side of this debate, but from a systems perspective it can be incredibly difficult to keep a complex system in a fixed state. Businesses are no different, so if something is working to get you "up" to the local maxima (let's say this is the "right" size) it's really hard to predict when & how to keep you there, and instead keep doing the same thing that seems to be working. It's hard to find examples of companies that are static, outside of the largest public or government enterprises; most are cycling between growing and shrinking.

janalsncm• 2 years ago

I agree with you, but it might be worth noting that a business which is not increasing profits in absolute terms is shrinking due to inflation. In other words if their costs increase 5% and their revenue increases 5% then a 5% increase in profits is expected.

mistrial9• 2 years ago

in the West this is related to money lending IMHO

fouric• 2 years ago

Counter proposal: how about we don't destroy our own planet.

How about we not pollute HN with low-effort, content-less, anti-intellectual, flamebait knee-jerk reactions? Let's leave those on Reddit, please.

OldGuyInTheClub2• 2 years ago

I take Charan with a huge lick of salt. He was a consigliere to GE's C-suites for years. He is a sort-of Erdős-for-business.

https://money.cnn.com/magazines/fortune/fortune_archive/2007...

office_drone3• 2 years ago

That just makes it sound like he knows what he's talking about

OldGuyInTheClub2• 2 years ago

I see your point. I was thinking about his wandering lifestyle and single-track mind. Maybe "Erdős wannabe" would have been more appropriate.

n4r9• 2 years ago

Wow, getting strong vibes of Christoph Waltz' character in The Consultant.

darth_avocado• 2 years ago

I for one would really like to know why the CEO gets paid so much, why are the employees not getting paid proportionally, why RTO is absolutely necessary, why the stock buybacks are necessary when investment in the business is going down, etc.

piva003• 2 years ago

why the stock buybacks are necessary when investment in the business is going down

Boeing is a very recent egregious showcase to how fucked up this behaviour can get.

I'd like to live in a world where shareholders' returns are not the goal, just a side-effect of good business.

I still cannot understand why stock buybacks aren't limited, actually I do not understand why it exists at all but since I'm not educated enough can't really argue with substance against it, it just doesn't sit right that a company (like Boeing) can spend a lot more cash flow on stock buybacks than R&D... R&D creates something of real value, stock buybacks just enrich shareholders (and hence, a company's C-suite), it's so self-serving that I really do not understand how it's even legal.

titanomachy2• 2 years ago

Can't comment on Boeing specifically, but if a company has a bunch of cash on hand and doesn't have enough plausible projects to invest in that could return better than the benchmark rate, then I think it makes sense to return it to investors.

Even in a well-run company (Apple?) it's reasonable to imagine that cash on hand could exceed the company's present capacity for new research projects. Scaling up an R&D department could take quite a bit of time, and it might not make sense to sit on that cash while they do it.

wdh505• 2 years ago

Reasons for buybacks:

1)Buybacks can shake out the short term investors. 2)It can also signal that the company thinks its own stock is cheap. 3)It "has no effect assuming the market is perfectly efficient".

And these reasons are repeated ad nauseum. I could see this be a thing if a hostile takeover is on the horizon, but poison puts are common when issuing debt, so no hostile takeovers have happened in a while. Basically I see a buyback as a way to take cheap money accessible by a company for investment, and the company uses it to finance shareholders to get a return elsewhere because the company isn't creative anymore. (Companies hit hard walls regarding physics when they keep r&d over their few cash cows over and over, and r&d is too risky to go to an area that they don't already have internal proficiencies).

pizzafeelsright• 2 years ago

Why don't you tip 1,000%? Why not just a flat $200 tip when you dine out?

office_drone3• 2 years ago

why the stock buybacks are necessary when investment in the business is going down

The business theory answer is that buybacks are used when there is no better investment opportunity.

Let's say the stock trades at 10 times earnings. Can you fund an internal project that's going to return 10% a year? [0] Can you buy another company that will return 10% a year? If not, then a buyback gives the best return to the company's owners (aka shareholders) because they owner larger slices of the same pie.

[0] Plus a small cushion for risk. And not just "we project this will return $HUGE amount" but something that can realistically happen.

ryandrake• 2 years ago

So, basically, when a company buys their own stock back (or issues a dividend), they are saying "We can't think of a single thing better to do with this money than simply hand it back to investors who might be able to put it to better use!" Doesn't give me a lot of confidence in the company, to be honest.

neilv• 2 years ago

A sales rep who negotiates a 30-day payment term instead of a 45-day payment term is cash-wise. The company can get the money sooner and is able to put it to use elsewhere.

I don't understand using a sales rep as the first example.

Don't you just tell the salesperson how their compensation is tied to deals signed, revenue, and the speediness of payments?

Doesn't that formula alone tell you what the behavior will be?

Agreed on the value of educating employees about what's important to the business, but isn't sales an exception, due to convention of how their compensation is structured?

creaghpatr• 2 years ago

Comp is typically aligned to Revenue rather than payment schedule, unless the rep is involved in the A/R process which is unusual but not unheard of. The incentive comes from deal language standards for which exceptions must be approved by senior leaders for things like delayed payments or other arrangements.

In the above scenario, the more likely situation would be the rep goes to bat internally for a 45-day term so they can close a larger or more favorable deal that management will be incentivized to approve.

xarope• 2 years ago

I'd say it's more common nowadays, otherwise it's easy to sell tons of stuff with 90 day invoices, take your bonus, and run off 6 months later with massive outstanding AR.

titanomachy2• 2 years ago

The new manager believed he could gain significant market share by cutting prices. He was successful—at first. Sales grew over the next three months, and so did the unit’s share of the market. However, the competition responded in kind... all the price cutting caused revenues, profits, and cash generation to shrink throughout the industry, hurting Global Building along with everyone else.

Sounds like the system working as intended to me.

klabb3• 2 years ago

Isn’t it wonderful when business is more anti-market than straight up socialists and everyone’s like “yeah, that’s obvious”. Feels kafkaesque for sure.

ndgold• 2 years ago

In every business the basic building blocks are always the same:

1. Satisfying customer needs better than the competition 2. Generating cash 3. Producing a sufficient return on invested capital 4. Growing well

What the CEO wants you to know (2023)

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