Is shareholder value the most important measure of organizational success?

Nicholas de Wolff

by Nicholas de Wolff, founder of deW Process

While it is certainly the most important measure, it should NOT be the most important goal. Companies that become exclusively bound to tracking their shareholder valuation tend to suffer in the long term. Strategy should be driven by business insights and market needs, productization by technical/technological/creative innovation, and internal infrastructure by professional integrity.

A simple enough analogy would be that we may measure a car’s performance by the mileage (among other indicators), but we do not govern our purchase or subsequent use of the car by that one yardstick alone (though it may – and should – certainly factor in to the equation).  The mileage consideration should influence our purchasing decision and use habits, but how many members comprise our family, whether we own a Great Dane or not, where we like to go, and a host of other priorities bear equal if not greater weight. Indeed, if we consider these issues foremost, we are likely to have a more beneficial mileage impact, in the end.

If a company focuses on market intelligence, competitive analysis, innovation, responsible fiscal oversight, strong employee morale, and creative strategy to drive its goal-setting, shareholder value will rise in response, and the measure of that value will be a good indicator of an organization’s success.