Linking customer and shareholder value.

• Author: Hall, Robert
• Position: Marketing Solutions - Brief Article

It is old news that regulators, auditors and investors are looking for better ways to assess real value. CEOs are caught in a difficult vise. On one hand, they must be more transparent and objective in reporting the value being created by their enterprise. On the other hand, if the accurate numbers reflect flat or even declining performance, then the questions about where the problems are and what is being done to fix them are at a level of specificity that few have previously experienced.

A lot of what we have known about financial performance over the past few quarters turns out to be not so. It is a particularly tough time to have the market debating whether you are patently dishonest or just plain stupid.

I believe much of the current noise regarding the reported financial results is just symptomatic of an underlying cause. Customers are the source of value, and most organizations do not have a set of metrics that accurately reflect where value is being created and where it is being destroyed. That is not new news. What is new is the market chaos. The many recommended solutions--more stringent accounting rules, more oversight by the SEC, demand for greater competence and independence by the auditors, and so on--do little to treat the underlying cause.

The role of marketing

If customers are the source of revenue, cash flow, profits and, ultimately, equity, then it is crucial that all parties to the relationship--including shareholders, management, employees and, yes, customers--know where value currently is being created and destroyed, what is planned for in the future and how well it is working out.

If any one of the parties has a distorted view of the value, it will cause behavior that is damaging to all and difficult to alter. However tempting it is in the short run to conceal unpleasant truths, falsehoods lead to distrust in the relationship. As the sign at the entry of a school for wayward boys read: "The truth shall make you free, but first it will make you miserable."

Who will lead the way for creating a set of metrics and associated processes that illuminate for shareholders, management, employees and customers where and how value is being created (and destroyed)? I believe marketing heads must take on the role.

They must work with their CEOs to create a new scoreboard for...