FACTORS

On Thursday, July 20, 2006, Holtz issued this statement regarding the promotion and defense of shareholder value. Holtz said:

"Screw the owners. Customers come first."

"As I listened to the principles of SVE (Shareholder Value Enhancement), I grew increasingly alarmed and concerned."

"Can you really see employees jumping out of bed in the morning, fired up to get to work so they can enhance shareholder value?"

"Decisions made with shareholders top-of-mind are often very, very bad decisions."

BACKGROUND

HCT is a consulting firm that focuses on encouraging clients to take a risk with online communication. Even though its website says "About Us," we are pretty sure it's just the one guy, Shel Holtz.

Before creating the name "Holtz Communication + Technology" in February 1996, Shel was a communications consultant for Alexander & Alexander Consulting Group in San Francisco, California. There he led an unspecified "practice."

Shel's written a few books on the blogging craze. These include "Blogging for Business," "Corporate Conversations," and "Public Relations on the Net."

That said, we do recognize that Holtz wants to capitalize on the Blog Bubble. But his statements seem to clearly demonstrate a disconnect with the mandate of the boardroom.

Like many of the top "corporate blog evangelists," Holtz' recommendations all center around the ill defined buzzphrase "customer relationship." Holtz argues:

"The point is that shareholder value is created as an outcome of what the company does. The better an organization fulfills its mission, the more money it should make. But if making money is the mission itself, companies are likely to fail miserably at it. Hence, anybody who suggests that companies shouldn't desire strong relationships with their customers is, frankly, an idiot. Solid customer relationships may be costly, but having no customers is far more expensive. The return on solid customer relationships is exactly what shareholders crave: repeat business, referrals, growth and profitability."

His argument fails miserably as it skirts around one key word, i.e. "cost." A successful company invests in things variously, customer relationships included, IF the return is greater than the cost. That is inextricably related to the primary "duty" to protect a shareholder's investment and enhance shareholder value.

Repeat customers implies a lower cost of customer maintenance. This is not necessarily true. There are numerous situations where repeat customers are a huge and unnecessary burden on a company. One need look no further than Jeff Jarvis and Dell.

Bottom line: the key to a long-term and low-cost customer relationship is product quality.

WARNING

We are not certain but Holtz may have infected a number of nationally recognized brands with this thinking. His clients have included CIGNA, AT&T, IBM Global Services, Sears, the Alzheimer's Association, Kimberly Clark Corporation, Scholastic Inc., Alcan, EDS, Aetna, Tennessee Valley Authority, BellSouth, John Deere, Deloitte & Touche, Manulife Financial, Hewitt Associates, General Mills, Prudential, Rockwell, Allstate Insurance, USAA, Applied Materials and Monsanto.