Not long ago the CEO of Citi announced by the famous e-mail that the group was once again profitable. It was one of the factors at the turning point in the financial market crash.
“…the locally incorporated consumer arm of the US banking giant, reported record profits of $703.6 million…The bank said its diversified business model managed to maintain ‘steady and steady’ growth across its operations… “(straitstimes)
There is no question that Citigroup valued profitability. But what inherent corporate value of Citigroup got it into trouble, like many other banks: profitability at any price?
One of the advantages of using this value is that it is honest and direct:
“We are in business to make a profit, as profit is the means by which we sustain growth, provide superior service to our customers, and provide long-term opportunities for our employees.”
But doesn’t this apply to any business?
Fundamental for (any) business
Being profitable is a requirement… and essential for several reasons (Friesens Corporation):
– Ensures our long-term prosperity and growth
– Allows us to track and retain the best people to work for us
– Enables individual staff members to grow in their career within the Organization
– Allows us to contribute to the well-being of the community in which we operate
One way to shade the statement is as follows; justice. But isn’t equity a separate corporate value?
fair earnings
… Our first responsibility is to our clients … who trust us to provide services. To meet your needs, everything we do must be of high quality. So… We must constantly strive to reduce our costs in order to maintain reasonable prices and profits. Our suppliers must have the opportunity to make a fair profit.
Another issue is the dilemma of approach, short term versus long term in a “balanced” way:
Sustainable Profitability
Our business is based on a balanced perspective between the short and long term vision. Our goal is to grow… through profitable investments.
Our objectives are:
… provide a dynamic and responsive organization that ensures a rapid response to opportunity and competition. Invest in a balanced portfolio of business opportunities in the short, medium and long term with measured risk
Not in the first place.
We will establish a reputation for excellence with every business relationship. Our customer relationships will come before profits.
Not at any cost… Example of where this went wrong:
Enron’s relentless emphasis on growing profits at any cost without a system of checks and balances resulted in ethical lapses that ultimately led to the company’s downfall. Jeffrey Skilling, former CEO of Enron, communicated his priorities to employees: “profits at all costs” (Tracinski, 2002-allbusiness.com/management/corporate-culture/8944612-1.html)
But is it a corporate value? Are the employees profitable on their own or is it the way they function as a team, how they learn, are they passionate, professional or responsible?
Profitability is often part of the corporate values statement, but always in the context of the above or similar examples.