What are you chasing — profits or stock value?

It is always a mystery how the stock market functions for many commoners like us. When one analyses the stock market, you realize that the company with the highest profitability is not necessarily the one with the fastest growing stock price or even the most valued company in terms of value of its stock. One wonders why? Facebook is a great example of its perceived market value being multiple times its revenue, to unrealistic levels as some of us might think.

Vikram Pandit a young MBA from a regional B-School started his career with a Public Sector Undertaking (PSU) in early 90’s. He was a bright lad, gold medalist in his batch, got 2 jobs on campus while many went jobless in his batch (market wasn’t that hot those days) and started a career in Mumbai (then Bombay) as a Marketing Executive. His starting salary was INR 2250 per month (mere $43 per month). He loved his job, it gave him great learning, he worked with passion & dedication. After 7 years in the PSU, his salary rose to INR 7000 per month (mere $135 per month). He was married by this time. His batch mates had joined private firms, were earning 10–15 times Vikram’s compensation. They would constantly prod him saying, market is better now, why are you in a PSU, your compensation is so low, you were a gold medalist, you deserve much more etc. Vikram kept his head on his shoulders and continued to focus on his work and invest in his learning. After 7 years, Vikram made his first move to Private Sector. He spent the next 8 years investing in adding to his skills and capabilities grew gradually doing different roles as Brand Manager, Category development, Sales, Channel management, supply chain & logistics etc. His compensation was still far behind his batch mates and friends from his B-School. The gap narrowed a bit, but his not so accomplished batch mates in B-School still earned 3–5 times his compensation. Vikram’s close friend Gautam often asked him, what are you up to? You are a Sales & Marketing professional, so capable & competent but I do not see you manage your career as well as you manage your category. Vikram would calmly reply, I am heavily investing in my career, what makes you think I am not? Gautam would quote Vikram’s compensation and say, look at your compensation viz. others in our batch, look at me? You are much smarter, but I make three times what you make.

After 15 odd years in professional life, Vikram makes a big career move. He took an assignment as Sales & Marketing Head of a large MNC and 2 years thereafter becomes its CEO for India. Another 2 years later, 19 years into his career he grows to become the youngest CEO of the same company’s Global Operations. After these 4 years, Gautam meets Vikram. Here is how their conversation goes:

Gautam: Wow my friend; this is a meteoric rise for you in your career? You’ve made it BIG!! Many of us have been dreaming to get this far. What all did we not do — took a lot of risk, changed jobs, took pay hikes to get closer to the CEO role etc.., but my friend you made it really smooth.

Vikram: You often remarked that I was not investing in my career enough. I was always investing in my career, it is just that you did not see my strategy.

Gautam: What were you up to?

Vikram: While everyone else in our batch was busy running after higher paying jobs, I was investing in building my Brand.

Gautam: I do not get it…, what do you mean?

Vikram: You and other batch mates who you compared me with, were busy making higher compensation, which for me is akin to chasing higher profits; while I was investing in my capability and skills which for me is akin to creating Brand-Vikram or my stock value. I focused on balance between reasonable profits (good compensation) and heavier doses of learning / capability acquisition (building my stock value as a professional) and that has paid off. I waited patiently for 15 years and took the plunge when I was ready. I built my Brand and here I am.

Gautam: You often mentioned this to me Vikram, but we all thought short term. We did not invest in ourselves; we were in a hurry to reach to top; we kept trying to out run each other and we are still doing the same. You picked your own race, you determined the rules and you led yourself past the finish line. You built your BRAND, your STOCK VALUE. I see that profits are also handsome now.

As I reflect on this true story of a friend, career is a marathon, not a sprint. In a marathon it is about building a brand and creating longer term value for oneself. Profits will come more consistently and predictably if there is a recognized BRAND. Two thoughts to ponder about….

  1. What are you chasing — profits or longer term stock value?
  2. What is your BRAND that you are building?

PGC is a boutique Management Consulting firm engaged in the business of enabling its clients to transform their Org, Culture & Capabilities.

PGC is a boutique Management Consulting firm engaged in the business of enabling its clients to transform their Org, Culture & Capabilities.