Corporate Values – Profitability

Not long ago the CEO of Citi announced by the famous e-mail that the group was profitable again. It was one of the factors in the turning-point in the falling financial market.

“… the locally incorporated consumer arm of the American banking behemoth, reported record profits of $703.6 million… The bank said its diversified business model managed to maintain a ‘stable and steady’ growth in its operations … ” (straitstimes)

There is no doubt that Citigroup valued profitability. But what inherent corporate value of Citigroup made that it got into trouble, like many other banks: Profitability at any cost?

One of the advantages of using this value is that is it honest and straightforward:

“We are in business to make a profit, as profit is the means by which we sustain growth, provide superior service to our clients, 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 a number of reasons (Friesens Corporation):

– It ensures our long-term prosperity and growth

– It enables us to track and maintain the best people to work with us

– It allows individual staff members to grow in their career within the Organization

– It enables us to contribute to the well-being of the community in which we operate

One way to shade the statement is the following way; fairness. But is fairness not a separate corporate value?

Fair profits

… Our first responsibility is to our customers … who rely on us to provide services. In Meeting their 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 vendors must have an opportunity to make a fair profit.

Another issue is the dilemma of the focus, short-term versus long-term in a “balanced” way:

Sustainable Profitability

Our business is based on a balanced perspective between short and long-term vision. We aim to grow … through profitable investments.

Our goals are to:

… provide a dynamic and responsive organization that ensures a rapid response to opportunity and competition. Invest in a balanced portfolio of short, medium and long-term business opportunities of measured risk

Not in the first place.

We will establish a reputation in excellence with every business relationship. Our relationships with customers will come before profits.

Nor at any cost…The example of where this went wrong:

Enron’s unrelenting emphasis on earning’s growth 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 employees profitable by themselves or is it the way in which the operate as a team, how they learn, whether they are passionate, professional or responsible?

Profitability is often part of the corporate value statement, but always in the context of the above or similar examples.

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