Market presence and power, as described in Habits 12–14, can deliver huge intangible benefits to a business and business results. Operating more behind the scenes but just as important—if not more so—is another intangible pillar: company management. Like marketplace factors, you’ll have to sense the quality, competence, and trustworthiness of management from a qualitative, sensory assessment—not from formulas, tools, and specific resources.
At the end of the day, what you’re really trying to figure out is this: are the senior and most influential managers achievement oriented and all in for the shareholders, or are they power oriented and all in for themselves? As you try to figure it out, take it against this backdrop: achievement can lead to power, but power rarely leads to achievement.
No corporate manager has given a better example of this than Apple’s Steve Jobs. Although difficult to work for at times (especially if you weren’t on board with his sense of the customer), his vision, his creation of Apple’s culture, his product sense, and his message to the public and to his employees was all about “This is what we can do” and “This is how, Mr. Customer, we will solve your problem.” He wasn’t just a manager; he was a leader.
At Apple, little was said or done about the usual trappings of power, such as promotions, titles, stock options, corporate jets (they didn’t have one), and so forth. Managers were there to make products and satisfy customers, not enrich and empower themselves. Jobs created a $500 billion company (and others along the way), but he died with only about 20 percent of the wealth of rival Bill Gates and lived relatively modestly. Gates was a pretty good and fairly visible manager himself, but most of today’s corporate big wigs are nameless, faceless entities seemingly wrapped up in title, executive compensation, and perks.
Which kind of management team would you prefer? The answer should be obvious. Is management of a given company a plus, or a minus? Here are a few tips to getting into the habit of sensing a management style:
WHAT WOULD STEVE JOBS DO?
Little wonder that I’ve used Steve Jobs as an example of leadership excellence, for I wrote a book on the subject. See my What Would Steve Jobs Do?—How the Steve Jobs Way Can Inspire Anyone to Think Differently and Win (McGraw-Hill Professional, 2011). What Jobs did should set the standard for anyone examining corporate leadership towards the production of shareholder returns.
For those who’ve been around the block in the corporate world, management excellence may seem to be an insufferable oxymoron. Yet, Warren Buffett views management as an X-factor that can make all the difference, and he feels he can judge a lot about a company from a short meeting with its senior management.
Evaluating management excellence can be tricky. You don’t sit or work with these managers on a daily basis; in fact, much of what they do is deliberately kept secret. Yet, a sensitive antenna can pick up a lot over a period of time. But if you learn about a company in the morning and want to invest that afternoon, appraising management can be pretty difficult.
Solid information about a company’s management can be pretty hard to find. Financial portals provide links to the bios and executive compensation of management, but these are really of little value except to detect excessive greed and power. Does management “get it?” For that, you might have to put on your marketing hat, put on your street shoes, look at the achievements in the marketplace, and read and listen to those who may have greater insight—including the managers themselves in conference calls.
Now, what are you looking for?
In What Would Steve Jobs Do? I laid out a six-step formula designed to guide current and prospective managers towards the excellence and success so obviously created by Jobs and just as obviously not apparent in most of corporate America. The management and leadership of a company you own or want to buy can be similarly reviewed against these six steps:
DON’T CONFUSE LEADERSHIP WITH ADMINISTRATION
Some might quip that these six steps really lead to innovation, not good overall management. Steve Jobs was most famous as an innovator or more precisely, as a leader of innovators (even from day one as he led the more tech-savvy Steve Wozniak towards the early Apple designs). But in today’s marketplace, to achieve corporate excellence and growth, especially over a longer term, corporations must innovate and create a culture within which they can innovate. The rest is administration, and there are a lot of people out there who can do that for you.
Good management follows all six steps or attributes in balance to achieve good results:
• Customer
• Vision
• Culture
• Product
• Message
• Brand
One at a time:
Customer
Does management “get” the customer? Do they walk a mile in a customer’s shoes and create products and experiences that really meet customer needs and solve customer problems? Do they delight the customer and create the sort of excitement and/or loyalty that keeps them coming back? Or do they just fill a lot of shelves with boxes or seats with passengers or tanks with gasoline?
Most companies outsource their market research to, well, market research firms. These firms use proven models to produce commonplace reports that aren’t well understood by most managers, if at all—if they even see them. Steve Jobs and other good executives believe in getting their own views of the marketplace through observation, and through direct experience of the company’s and competitors’ products. John Deere executives, for example, spend time with farmers and in dealerships.
Customer focus can be determined to a degree from company communications. Do communications and advertisements stress how company products benefit customers? Do communications talk about customers and customer “wins,” or are they focused on the victories and challenges of the business itself?
When a CEO really takes ownership for what he or she is putting out there, it works, and you can usually tell from the kinds of products and messages put forth. Apple is the clearest example, but there are others such as Ford, John Deere, Chipotle, and others where it seems obvious that someone at the top is looking through the eyes of the customer.
Vision
Customer input and sensitivity does little good unless you can develop a vision around it. Jobs did a couple of things exceptionally well: (1) he developed a holistic vision, one of a complete product that would meet all customer needs in a win-win way (think iPod and iTunes); and (2) he communicated that vision elegantly, simply, and clearly to his people (“a phone, an iPod, and an Internet communications device all in one”: the iPhone).
Again, you can see in the marketplace where such complete and forward thinking takes hold. Does a product come with all the supplies and support that you need to make it work (baseline) or really delight (the goal) the customer? Do food products come with good packages and recipes? Hotel rooms come with Wi-Fi and a free soda? Does your Home Depot shopping experience come with helpful floor advisors who really know what they’re doing?
Good management teams get the whole product right.
Culture
No vision will go anywhere unless there’s a culture in place to make it happen, without error and on time. The marketplace is full of “camels designed by a committee”—products that seem to be the result of risk-adverse, bickering factions within a big company. When insecure management teams suppress risk taking and don’t really understand the vision but instead spend their time trying to build and protect their empires, look out below. Or, in the absence of market-focused leadership, when the company seems to be run by the finance department with lots of quality and production short cuts, again, look out below.
Think Ford or GM products in the early 1980s, HP Touchpads, even today’s Campbell’s Soup cans with inconsistent labeling, some with and some without pop tops, and numerous seemingly overlapping flavors—what’s going on inside of Campbell? And what’s going on when you can’t get a support agent on the line within ten minutes, and then when you finally get to him or her, the agent can’t do anything to help?
Good management teams empower their employees to do the right thing, independently and without fanfare. They aim their employees toward the customer-directed visions, and they get their products to market on time and with minimal mistakes and rework. Bad ones don’t.
Product
You may not see the customer, vision, and culture attributes directly, but you will see (and feel and use) the product. Do the company’s products really make sense vis-à-vis what the customers need? Do they leave an impression? Do they support the brand and the brand image? Are they designed, built, packaged, and augmented to do what they’re supposed to do?
The quality of a company’s physical products or experience tells a lot about the competence and orientation of management.
Message
Does the company have a clear message? Is it articulated to you, the customer? If it isn’t, it probably isn’t articulated clearly inside the organization, either. Communication is essential in today’s rapidly moving business environment, and managers who don’t communicate or cloud their communications with jargon and buzzwords simply aren’t getting it done. Look and listen to ads and websites and to management conference calls.
And kudos to Mr. Jobs for standing up at Macworld all those years and announcing new products himself—a real and personal commitment to the marketplace and, more subtly, to the employees inside the company. I’m amazed how few other corporate leaders have done this.
Brand
This one is not as much about the brand of the company—the Coca-Cola or John Deere or Tide or Cheer or whichever moniker the company or its products operate under—but it is more about the patterns and behaviors of the management team.
Good management teams are predictable, and are predictable in positive ways. They give clear, simple public explanations for earnings, guidance, and new product plans, with few surprises. They exude competence, and they have candor. They can admit mistakes, and are present in bad times as well as good. (According to Buffett, managers who confess mistakes publicly are “more likely to correct them.”) They don’t rely on acquisitions for growth or to rescue a slowing or declining business. They don’t do reorg after reorg after restructuring, trying to tinker their way to success. They articulate their visions and strategies, and these truly are visions and strategies (not just cost cutting). The management teams grow by doing things right, by achieving excellence from within their organizations. That’s the key—achievement.
Good management teams think and act independently, for the long-term health of the business. They resist the temptation to pour energy and resources into achieving this quarter’s results. Buffett calls this approach “avoiding the institutional imperative,” which means turning aside the short-term pressures of Wall Street, its analysts, and institutional investors to do what’s right for the long-term health of the business. Great management teams have a vision, a mission, and a plan—and they follow them, avoiding distractions. And leadership plays a big part. Unlikely to follow the lead of others, they play to win and to beat the competition, not just to keep up with it.
Good management teams adopt an “achievement” brand, not an arrogant, self-serving “power” brand. Arrogant managers who hide problems think they can solve them all, or, worse yet, think they are invincible and have no problems, are bound for trouble. “Kicking butt” is not always the right answer.
DIALING FOR DOLLARS
You don’t—at least in most cases—work for the company you’re investing in. So how do you get a chance to listen to what management says and how they say it? How do you pick up the nuances of vision, culture, brand, and so forth? Naturally, it’s difficult, and unless you manage a $100 million hedge fund it’s obvious you can’t just pick up the phone and call. But there is a way for the average investor: conference calls. It’s easy and free to listen in on most publicly traded company conference calls on the Internet, through company websites or most financial portals. Transcripts are usually made available on the same sites afterward. The great thing about conference calls: While the initial management message is scripted, the answers to analyst questions aren’t. Analysts ask great questions, and you can hear surprisingly honest answers and the tone around them. Someday, maybe they’ll appear on YouTube, too, and we can assess the body language.
Get Into the Habit
• Realize from the beginning that understanding management and leadership effectiveness is a “read between the lines” exercise.
• Look for signs of achievement, not signs of power. As Bill Clinton once said, “Power by example, not examples of power.”
• Look for signs of customer focus, solid and rational vision, winning culture, winning products, clear, crisp, useful messages, and a solid reputation and management “brand.”
• Again remember—you’re acquiring a sense. If you think you’d like to work for the company, you’re on the right track.