Beatrice Foods in the 1970s provides an example. Financial executives in the company told me then that Beatrice had earlier chosen to make growing earnings-per-share, quarter to quarter, year in and year out, the company's primary goal.

It was clear about how to do this, and accomplished the goal for well over 30 years--a singular achievement rarely matched by any business anywhere. Despite this remarkable accomplishment, the company ended up wracked by dissension and felt prey to an attack from a hostile bidder.

The company's purpose in selecting this goal was to obtain a premium stock-price multiple. The company then planned to use its stock to acquire other attractive businesses at a more reasonable cost.

In the 1950s, the company achieved its hopes with regard to its stock price. Dozens of acquisitions followed. Soon, however, Beatrice Foods found itself unable to find high-profit, high-growth food businesses of sufficient size to expand the company's growth rate.

Gradually, all kinds of unrelated businesses were added. This worked well in the early 1960s, the heyday of conglomerates. When investment fashions changed to favor more focused companies, the diversified the company became, the lower the Beatrice stock-price multiple of earnings became. Still, the nonfood acquisitions continued, paid for in stock.

The rate of drop in the company's stock price multiple matched its growth in earnings per share, so that the stock price itself stayed in the same trading range, year in and year out, from 1977-1984.

The many senior managers who had sold their companies for stock in Beatrice during those years grew quite unhappy in the face of this stagnation. When a hostile takeover bid was received, many company managers supported it. As a result, the company was sold to a group headed by the CEO of a company that Beatrice itself had recently taken over through a hostile takeover bid.

The original irresistible force for Beatrice was the lure and power of a growing stock price and premium stock price multiple to make growing into a large company inexpensive. In focusing on consistent earnings growth, the company had found one factor that could contribute to the stock price performance.

Because the company did not truly understand the irresistible forces that create a premium stock price, the success with earnings growth was offset by the company's indiscriminate and misunderstood use of acquisitions to create that earnings growth. Beatrice executives misunderstood what it took to obtain their stock price results, and worked very hard to achieve a difficult objective . . . but to no avail.

When the stock price stalled, the company should have reexamined its approach to improving stock price. It probably would have done better in growing stock price if the company had provided less earnings per share growth, and stayed a simpler, more focused company that investors could have better understood.

Beatrice Foods chose an inappropriate means (earnings growth from any source) to achieve its ultimate goal of building a large successful company. Instead it should have concentrated directly on all the ways that the irresistible force of the stock market could provide the company with a premium-priced, growing stock price.

This is a common problem among companies that wish to improve. They misidentify what needs to be done because they are confused about their purpose.