For those who care, Yahoo has announced that it is acquiring startup blogging site Tumbir for more than $1 billion. A new acquisition by Yahoo did not surprise Wall Street, but the decision by Yahoo CEO Marissa Mayer to keep Tumbir independent and leave its founder David Karp, a high school dropout, in charge did. This reminded me of an experience I had several years ago which I think is worth sharing because it epitomized to me an example of management excellence.
For a number of years, I represented a large, international chemical company which was dragged into a number of major lawsuits, each worth hundreds of millions of dollars, arising out of alleged groundwater contamination. Each year, all outside counsel from around the world would be called together in Houston to meet with the company’s CEO, COO, CFO and General Counsel; they were all understated, but extraordinarily impressive and competent.
What reminded me of the Yahoo/Tumbir story was what the COO told us one year. He summarized what the company had done in the previous year in terms of acquisitions. In this particular year, a paint manufacturing company had been acquired. When asked about managing the new company, the COO remarked: “We don’t acquire a company unless we have confidence in its management. It is part of our due diligence. Our philosophy is that it is a mistake for us to try to manage a newly acquired company. We believe that although it is important to integrate the company, it is better to let existing management continue to run the company. If we didn’t think that approach would work with a company we are considering acquiring, we wouldn’t acquire it.”
The CEO then went on to comment on his management philosophy. He said: “We are engineers. We don’t view ourselves as great thinkers. We are good operators. We have learned that (a) if our plants operate and have little down time and (b) if we avoid worker injuries, we make money. As a result, we spend a lot of money maintaining our plants and a lot of time training our employees how to avoid being injured. With respect to worker safety, we have learned that we need to constantly retrain our employees because they change jobs and we are constantly making new hires. So our management approach is simple. We reinvest a lot in plant and equipment and we invest a lot in worker safety; and if we do that, we make money.”
By this time, I was very impressed—and listening intently. Since that time, I’ve retold this story many times to highlight what I feel was an example of management excellence.
We then heard from the CFO—someone who seemed too young to be as well-spoken as he was. I asked him about his difficulty in implementing Sarbanes-Oxley. I expected a diatribe, but, instead, got a thoughtful answer. He said: “We’ve figured out how to comply. The worst thing now would be to change things and force us to go back to base one. They should just leave us alone.” During a coffee break, I asked him if he was familiar with anyone from Enron and whether his company had invested (and lost) any money with Enron. He said “no.” He then amplified as follows: “They were in my office every few weeks. It was always someone different and always a different deal. One time it was energy; another time it was water. I could never understand what the deals were. I will never recommend a deal to the board if I don’t understand it; as a result, we never invested in any of Enron’s deals and we never lost any money.”
At the end of the day, I was proud of this client and extremely impressed. It is a six sigma company in every respect including the professionals who manage it.
Corporate management is important; it is a difference-maker. If a company manages its operations well, it will manage its environmental affairs well because it will integrate environmental issues into its overall operations. It will not favor sales over compliance. It will take all laws seriously. It will concentrate on basics—e.g., plant maintenance and worker safety equal profitability. Ego will be secondary to performance. The buzz words of B-School will give way to real metrics which define success in all aspects of its operations.