Management Objectives

It's good, once in a while, to be reminded of the fundamental principles of our day-to-day jobs, which we often have no time to reflect upon because we are too busy resolving immediate problems.

The principle that came up this week was "Management's fundamental objective is to maximise the value of the company". Rather obvious! Very easy to apply to the cases we are studying, involving investment decisions on discrete projects, but how to apply it to a company as a whole?

Imagine that, as the series of projects and initiatives that comprise the company's activity move forward, management identifies obsolete assets and under-performing staff. For the assets, just sell them off. But the staff? That brings into play management's business philosophy: is a company a social phenomenon or merely an economic one? And if the company falls into a recession cycle for its product.

Investment analysis is the easy part of management. Knowing when and how to disinvest, while maximising the company's value, is much harder.