Sunday, May 27, 2012

Company Visions & the Mainstream Media

By Carl (Drew) Eisenbeis

After reading the, “Building Your Company’s Vision” article in the course packet, I was left with several impressions. The one, which I seem to recall the most, is when the author says, “When people in great organizations talk about achievements, they say very little about earnings per share.” This line had me think to my current and past positions – and it was spot on! I had never determined success based on how much the investor(s) or donor(s) put forth, but by how well we did what our goals were set out to do. Given that I’ve only worked in the technology and media fields so far, our goals have not been to appease investors, but find solutions to problems and satisfy clients.

With that said, I thought about how the mainstream media often report on the success of a company based on it’s stock price. It’s as if the Holy Grail to a successful company is the stock price. A recent example is the Facebook IPO and all the news stories that followed. An article from MoneyControl.com (linked below) discusses how the investors will be following Facebook’s revenues and ad streams ever so closely. As an investor, they may want to follow closely to to make sure their money making the expected returns. But I have a feeling/opinion (no proof) that Mark Zuckerberg will value his company slightly different. I have a feeling Zuckerberg will be valuing the social success of his product, Facebook, over what the IPO or stock price is doing. Facebook’s mission statement, linked below, discusses giving people the power to share so the world is more open. Zuckerberg has historically always pushed forward (often past public opinion) to change his product for the better of his mission.

Will the mainstream media cover Facebook’s success on the basis of its stock price or the output of the product? Time will tell, but overall I'd personally like to see more news stories that talk about a company’s success and don’t involve investors or stock prices. It’s also interesting, from observations, that investors care more about the stock price of a company than the company itself. According to an article on TradingFives (linked below) there are twelve basic rules for investors, I was disappointed that none of the rules had information about deep research into a company. From the readings assigned for class, it seems that if an investor knows the company’s vision statement, an investor will be able to predict how the company will react given certain conditions. The example from the readings that comes to mind is 3M when they sold off their main divisions because they grew became something that didn’t fit with the core of the company. The company likely upset many investors, but was actually staying true to its core.

There is so much more to a company than the stock price, and it seems investors and the mainstream media often just follow the stock price for many companies and use that as a basis for the success of the company. The readings for this week have show to me that a company is significantly more complicated than their stock price, and the people actually driving innovation at the company are likely not caring about the stock price.

MoneyControl.com Article:
http://www.moneycontrol.com/smementor/mentorade/starting-up/why-facebooks-ipo-changes-things-for-everyone-708741.html

Facebook Mission Statement:
http://drdianehamilton.wordpress.com/2011/01/13/top-10-company-mission-statements-in-2011/

TradingFives:
http://www.tradingfives.com/articles/12-basic-stock-investing-rules-every-successful-investor-should-know.html

1 comment:

  1. I read your post and I agree that Jim Collin’s statement, “When people in great organizations talk about achievements, they say very little about earnings per share” is a memorable statement. It also reminded me that Collins is referring to and isolating great organizations, not the majority of organizations that exist. I recall when I worked in the private sector for a company in the D.C. area, my team spent months developing and implementing a work order tracking system for all the business centers from Boston to L.A. When I gave my report to the president of the company he simply said, “Good. How much is it going to save us?’ When I could not immediately provide a solid dollar figure he replied to the effect that I just wasted months of company time and money. It was a great learning experience.
    I think most organizations evaluate success based on the bottom line. It’s quantifiable and easier to evaluate than other criteria. In fact, Jim Collins also used this metric in his book “Good to Great” (which I believe is a good book that discusses strategy concepts). The first criteria for being considered a great organization was - “Great performance” was defined as a cumulative total stock return of at least three times the general market for the period from the transition point through 15 years” http://www.jimcollins.com/article_topics/articles/good-to-great.html

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