Market View: Who’s running the show?

Oct. 7, 2004
Mega retailers are telling food processors with respected, old brands what to make and how to make it.
By John Stanton, Contributing EditorThere have been a lot of things in business that have puzzled me, but nothing moreso than the importance recently placed on the “financial/accounting” function. In some businesses, the chief financial officer has more influence on the business than the CEO. I have heard CEOs say, “That’s a good idea. Let’s check with finance.”I am an apostle of author and management guru Peter Drucker, who has said the two most important functions of a firm are marketing and innovation. He didn’t mean the marketing and R&D departments but rather the function of keeping the focus on the customer and being able to give him what he wants.I look at a food company and I see the value of R&D. This function is trying to develop foods that people will pay for and that they will love. Their job has the potential to bring money into the company. Actually, marketing and sales take these products to the consumer and bring the money in, but they work in concert. Marketing and sales should also bring in new ideas for R&D so there will be a constant flow of both money and products.Take that money from product development and marketing and sales and turn it over to the accountants and they suddenly act like it was their money from the beginning. They seem to contribute no real value except to figure out what to do with the money that these other departments earned.Then they make the people who made the products and sold the products feel like they are constantly trying to spend the company’s money. They check all the expenses of R&D/production and marketing/sales people like we are crooks. I don’t object to audits but I do object to audits that presume we are wasting money.What do these accountants do for the firm to bring in money? Admittedly, they sometimes invest it to make more money. But never do they acknowledge that they are paid with money that others earned. They are kind of like the welfare employees of the firm who take the handouts of the laborers.I am not as naïve as I sound. I know we need accountants and financial people. We can’t just have a big cash drawer with everyone taking whatever they need. And I know we need people to do taxes and fill out forms for Wall Street and government regulators. But I wonder: Have we given the reins of our companies over to people who have no idea how to make or sell the products and services that provide them the basis to do taxes and fill out forms?Have we as an industry let Wall Street people and even our boards of directors to believe that moving money from this account to that account is more important than making and selling products that delight our customers. I don’t see much hope in getting the reins back. Not many in power will willingly turn over power to another. After all, they might not be able to have their colleagues in accounting and finance approve their private planes and other perks instead of increasing R&D budgets or spending more on advertising.Maybe this is all a tempest in a teapot. Maybe our companies can get along just fine with the finance people fawning over Wall Street while ignoring Main Street, but I don’t think so. The business press reels with articles about why brands are losing power and why private label brands are growing every year. Once our great brands told retailers how much consumers loved their products. Now mega retailers are telling food processors with respected, old brands what to make and how to make it. Grocery stores instruct us on how much they will charge us to put our products in their stores. Like they are doing us a favor.I know there are many reasons for the demise of the great brands, but I can’t help but believe that it is exacerbated by people who have never met our customers, never made products, never put products on shelves and maybe never shopped for our products. I know they’ve never spent more than one hour in our factories, and that would be with an entourage. (Have you ever seen how financial people walk through a factory? They look like fish out of water, longing to reach the end of the visit so they can get back to the quiet of their offices and their spreadsheets.)I’m not sure I see a solution. Solutions should come from the boards of directors, but they seem more interested in stock prices than in delighting customers, more interested in aggrandizing the CEO than in making our products perfect for our customers. Since the greatest changes come in times of desperation, we might be getting nearer to changes.

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