By Chris Graeme
COMPANIES EXIST to make profits, if they don’t, they are not companies. They exist to generate wealth.
Only then can they perform the vital task of providing employment and wealth in society.
Companies are not primarily in business for philanthropic, charitable, social responsibility or job creation purposes, although those things can be and are important.
This was the essential message of Millennium bcp President and Chief Executive, Paulo Teixeira Pinto, in his keynote speech ‘Strategies for Value Creation’ at the American Club last Wednesday in Lisbon.
The one-time Secretary of State for the Council of Ministers under Cavaco Silva’s premiership said that value creation was vitally important for all companies.
“Today, these are almost forgotten words, but the truth is that companies cannot exist without creating value – turning a profit. If a company doesn’t create value then it isn’t a company.”
Value creation was not just the realm of the board of directors, it was necessary at all levels of a company and in all departments. “A bank certainly cannot exist without value creation and no company ever downsized its way to greatness. If you want to grow your way to greatness you must put value creation first,” he said.
The question is, what is value creation and how do you achieve it? On the one hand it means getting the most out of the least possible, whether capital investment or human resources.
One buyer famously asked: “How many employees do I need to make this company work?” The answer is usually half of what you’ve got!
Working for a company means value creation and all companies have the same mission: turning “stones into bread.”
There are four fundamental rules:
• The immediate objective is the profitability of the company and its growth. A company that isn’t lucrative isn’t a company.
• Innovation is vital and the best ideas are often the simplest. Things are changing quicker and quicker with each passing year and the Stone Age didn’t end because of a lack of stone!
• Power and governance of the company must be transparent and incorrupt.
• Be aware of circumstances and challenges in the outside world. A company that ignores this does so at its peril and has no place in society.
Lastly, any well-run, competitive and innovative company must have short, medium and long term strategies in order to grow and have clear ideas about how it is going to do so.
“You can’t be stuck in a ‘we’ll see’ dilemma, but must be prepared to anticipate the future market and react as well,” he said.