One mistake many companies make is emphasising short-term profit at the expense of long-term value.
In squeezing every dollar out of a business today, the companies often reduce much greater value they could have created tomorrow.
By focusing only “shareholder value,” they also often neglect other constituencies–namely, customers, employees, and communities.
The best companies create value for all of these constituencies, not just shareholders.
They make a reasonable profit, not a “maximized” one.
And they continually sacrifice short-term profit opportunities in the service of long-term investments and other values, some of which have nothing to do with money.
I was reminded of this recently when I rewatched “Casablanca,” the 1942 Warner Brothers movie starring Humphrey Bogart and Ingrid Bergman.
It’s mostly a love story and war story, of course. But there are plenty of business lessons in there, too.
The trend of maximizing profits at the expense of other values is part of what’s wrong with the American economy these days.
So it’s worth highlighting the business lessons of Rick’s Cafe Americain.
Rick's is successful in very large part because of its excellent and loyal staff. For example, there's Sascha at the bar...
Later, we'll see why Rick's staff are so loyal and why they do their jobs so well. But first we meet Rick himself.
Then a bigshot German banker knocks on the door and wants to come in and gamble. The bouncer looks over at Rick.
The bigshot German banker gets agitated. Rick goes to the door and rejects him personally. He doesn't want this particular customer's money. (The movie was made in the middle of World War 2, don't forget).
Back at Rick's, Sascha the bartender tells Rick a German gave him a check and asks if the check is all right.
As Rick walks to the safe to get the money, Renault tells him that they are about to arrest one of his customers. Renault chose the cafe for the arrest, he says, because everyone would be there to see it. Again, Rick's is so successful that it's the heart of the community.
Annina tells Rick that she has no money to buy a visa. Rick is unmoved. Then Annina tells Rick that Captain Renault will give her the visa if she has sex with him. That's all Rick needs to hear.
Annina's husband Jan is in the casino, trying to win the money at roulette. But he's losing everything.
Once again, for Rick, it's not just about making money. It's about creating value. It's about using Rick's as a force for good. And this makes employees like Carl care much more about their work than if it were just a financial transaction.
Later that evening, the real trouble starts. The Nazi contingent in the cafe, led by the story's villain, Major Strasser, begin to sing a German anthem.
Well, running an place like Rick's is an expensive proposition, especially when you have all those employees and there's no cash coming in. So it's time for a money meeting with Carl.
So, it's the moment of truth. Will Rick furlough all his employees until he persuades Captain Renault to reopen the cafe? Will he frantically cut costs to save his money?
So those are the business lessons of Rick's Cafe: Great companies sacrifice short-term profits to take care of their employees and do the right thing. In so doing, they build long-term value that is often worth more than money.
What can a 70-year old story about a cafe in North Africa teach us about how to fix today's American economy? A lot.
And the wages these companies pay their employees--the human beings who make them successful--have hit an all-time low.
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