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M-words Every C-Suite is Required to Love

The C-Suite’s primary responsibility is to ensure that shareholder value is maintained, shareholder value is increased where possible, and that potential negative impacts to shareholder value are reduced or minimized. Despite the apparent internal “self-serving” practices that have been brought to light via an environment of increased scrutiny, a corporation could not exist without shareholders and shareholder value.

As the C-Suite embarks on it’s duties and responsibilities there are certain goals that should remain consistent: to maximize potential benefits and rewards and to minimize potential threats and loss. If this is not an apparent goal, something is very wrong.

Minimize Costs
Cost minimization includes monetary outlays, such as those explicitly required throughout the supply chain:

• raw materials
• shipping costs
• inventory or storage costs

and those implicitly incurred during product creation or service delivery:

• production
• service steps

Cost minimization also includes the negative impacts that are incurred from risks. Common risks include reputation risk, agency risk, operation risk, and strategic risks.

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A well managed organization may never experience negative impacts that result in a decline in net income; however, one risk event can have a severely negative effect on an unprepared organization. To avoid this, the C-Suite’s must hope for the best but, prepare for the worst. They can usually accomplish this by completing scenario analyses, which are great exercises that explicitly identify the impact(s) of the hypothetical worst case scenario.

Maximize Profits
Granted, maximizing profits may entail a little of the former “minimize costs” however, if you’re not generating revenue, no matter how much you minimize costs your profits will be minimal as well. Therefore, we must agree that profit maximization includes both the minimizing of costs as well as the maximization of revenue, which can generally be accomplished by the following actions:

• introduction of new product(s)
• discontinuation of non-profitable product(s)
• reintroduction of current product(s)
• increasing market share
• exploiting current market share

Products must be significantly value additive in some manner so that customers enjoy the product and continue to patronize the organization, which brings me to the last point…

Maximize Value
Maximizing value should not be confused with maximizing profits. Although value maximization may ultimately lead to increased profits they are not mutually exclusive. Maximizing value includes activities that ultimately increase the real or perceived customer value: 

• Correct placement of human resources to ensure that you have the right people in the right positions.
• Reviewing the strategic alignment of the organization to identify system inefficiencies.
• Implementing processes and procedures to effectively exploit core competencies.

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Value implies an efficient use of resources; activities that ensure perpetuity and sustained market value. The C-Suite should be absolutely fanatic about this one! Perceived value is what generates the increased corporate value over and above the basic worth of book assets. When the culture is such that people can operate from their place of passion and new creative and inventive ways are embraced, competitive advantages are born, leadership is fostered, and corporate missions are sustained.

To have an effective organization, the C-Suite must have a little of all three components as they work together, to “harmonize” the organization. Maximizing benefits and minimizing costs should be your C-Suite’s best friend.

About the Author

Maisha Smart, MBA founded Finance and Marketing to help small businesses excel, by bridging the gap between finance and marketing processes. Some of her favorite activities include fine arts, a good debate, and social engagement.

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