Friday, November 15, 2013

Fundamentalism and Fundamentals

Merriam-Webster defines fundamentalism as a 20th century Protestantism movement emphasizing the literally interpreted Bible as fundamental to Christian life and teaching.  This is similar to Islamic teaching, assuming we substitute “Bible” with “Koran,” the book of sacred writings used in the Muslim religion.

The dictionary adds “the beliefs of this movement, adherence to such beliefs” and/or “attitude stressing strict and literal adherence to a set of basic principles.”

Ancient stories of ghosts, spirits, goblins and other superheroes don’t impress me much!

So…  I’m going to write about business.  More specifically, business fundamentals.


The strict and literal adherence to a basic set of business principles:  valuation and earnings!

Merriam-Webster defines fundamentals as “forming or relating to the most important part of something.”

In business management strategy, managing business fundamentals usually implies a dedicated focus on valuation and earnings, also referred to sometimes as “market cap” (or value) and “EBITDA.”

We’ve all probably seen CEOs who - regrettably - focus on managing business fundamentals as described above, seemingly oblivious to the state of disrepair of their corporation, or where they are headed.  In making this statement, I’m implying that some business leaders are focused on managing fundamentals only, or primarily.

The challenge in this regard is that an organization exists because of the sum total of all its parts! Not because of financial results, which is an output derived from the collective input of the employees, and the products/services that the business offers!

Simple questions for business leaders to ask of themselves should include:

Are we attracting AND retaining our most valuable employees?
- We should ensure that under-performing employees are culled regularly, allowing them to succeed elsewhere.  Does this mean that top-performing employees, who quit, have culled us?
- Do we view compensation as our only/primary investment in our employees, ignoring competitive market forces, employee work-life balance and general employee satisfaction?
- Are we growing organically, or simply replacing some departing clients with some new clients?
- Are we operationally sound, and reinvesting in our own infrastructure to support the business?
- Are our competitors out-maneuvering us on the innovation front; are we even still competitive?

I could go on and on, but I think you get the picture.

The CEO who devotedly focuses on managing business fundamentals is also often completely oblivious to employee EQ and SQ (and other psychological traits).  Not uncommonly, “business fundamentals” practitioners are frequently entirely absent generally good communication skills.  One can observe this in their interaction with others, their written style and delivery, presentation style, etc.

Of course, the opposite of the above may be true as well.  Very frequently the best orators are the poorest business strategy executioners.  Think of your favorite politician (I’ll resist the temptation to lead with an example).  Politicians are exactly the opposite of business managers, focused on fundamentals.

Politicians generally get elected because they tell good stories; motivate people, successfully sell hope, etc. Hardly anyone can under-perform a politician in terms of execution.  In fact, sometimes politicians can be outperformed by anyone else, by simply arriving!

If your CEO’s best virtue happens to be his/her political skills, your business is in trouble.  But if, on the other hand, your CEO’s best virtue happens to be a laser-like focus on business fundamentals (only), your business may also be doomed in time.

In the instance of the latter example, it will simply take a little longer for the soft business underbelly to be exposed, because fundamentals can look good on paper, reporting period after reporting period… for quite considerable time!

A good CEO, regardless of the size and type of ship he/she is captaining, needs to represent a fine balance between the bookends described above:  Not overly political, and also not narrowly, primarily focused on business fundamentals.

Think of your boss, or her boss. 

Then, think of you, where you are at, and where you are headed! 

As usual, any real change… begins with you!