A Helpful History Book For CEOs

I came across an impressive book, which would be very helpful to any CEO. It is an interesting historical effort and was referenced in a footnote of a best selling business book “Good to Great”. It proved to be a better book on management in my opinion, than the popular business publication.

Barbara Tuchman wrote “The March of Folly”. In the work, she reviews four historical debacles. The reasons for these past failures, was primarily due to “wooden-headedness and cognitive dissonance”.

Ms. Tuchman's essential definitions:

“Wooden-Headedness”: the source of self deception, assessing a situation in terms of preconceived fixed notions while ignoring or rejecting any contrary signs – acting according to wish while not allowing oneself to be deflected by the facts, the refusal to benefit from experience.

“Cognitive Dissonance”: reject objective evidence and rigidly hold on to strongly held beliefs regardless of rationality of disproof.

“Folly”: the obstinate attachment to a disserviceable goal.

This book gives meaningful perspectives on:

• How to manage,
• Why open and cross-functional communication is important,
• Hubris,
• The true meaning and benefits of “hard-work, homework, hands-on”.

The most interesting of the debacles is the British handling of the American Colonies prior to the Revolutionary War. Not one member of the British Parliament, their staff and the King’s staff had ever been in the Colonies. They did not send anyone to evaluate it.

The British Generals who had been in the Colonies were essentially opposed to a land war, but there was no “cross functional” type communication and their advice was not heard.

The King and the Parliament believed America was small, populated with criminals and other worthless people. In fact it had a population of 2.5 million, was an economic locomotive populated with many well-educated and independent people.

The taxes the British levied totaled only 50,000 pounds sterling annually. Imports from Britain into the Colonies totaled 3 million pounds sterling annually, one-half of which were lost when Americans boycotted British goods.

Completing their homework in a hands-on manner would probably have caused Britain to handle the situation differently and retain America as one of its Colonies.

“Good to Great” by James Collins is the book that referenced “The March of Folly”. Worthwhile reading, it studies how companies built themselves into great companies.

Characteristics of successful companies:

• Disciplined focus,
• No hubris,
• Openness in that everything is discussed,
• A self-effacing CEO only interested in the company’s success - who is not a tyrant,
• Accountability for tangible results,
• Staff the right people – wrong people get fired,
• Only deal in brutal facts and truth, simplicity,
• A culture of freedom and responsibility,
• Have defined what the company is “best” at.

Managing & The Firestone Debacle

David Wessel's article in the Wall Street Journal on January 10, 2002, titled “The Hidden Cost of Labor Strife” describes how incorrectly reducing labor costs results in higher operating costs.

Fortune Magazine often cites various examples of correctly reducing costs in difficult times, while encouraging employees to remain sympathetic, helpful, supportive of your decisions.,

At Emerson Electric, we never had employees be sympathetic and helpful when we sought wage cuts, job rule changes or downsizing. However we never encountered labor strife and rarely a strike. Chuck Knight was a ferociously difficult CEO with his officers. But he was very reasonable and fair, with lower level salaried or hourly employees.

As a result, we never offered harsh and unreasonable terms in any negotiation. We were trained to manage with a union including candid, frequent communication. We stopped trying to decertify unions essentially because of the poor return on investment. If the union chose to strike, we had built a strike hedge and organized non-union employees to staff the plant. We never lost a strike.

This Wall Street Journal article is based on the findings of two Princeton University professors. Firestone Tire offered harsh, one-sided rule changes, wage cuts with new 12-hour shifts in an effort to reduce its Decatur, IL costs. They defeated the strike. Workers were forced to return to work and accept the new terms. As a result, this plant produced the bulk of the defective tires that resulted in 40 deaths.

Fortune Magazine cites the reasons companies are rated 'Best to Work For': (1) Employees are treated with dignity and respect, (2) The CEO is personable and uses “random walk” to talk to employees informally. Employees said they want to see the CEO, touch him and talk to him, (3) Knowing what is going on in the company and how it is doing. The reasons for decisions. Communicating the why for a downsizing and the alternatives. (4) In bad times management and employees are treated the same. (5) All of which leads to “trust” of management, an important factor. (6) Money or salary was not a prime factor.

Interestingly, terminated employees in a downsizing within these 'Best To Work For' operations, were often understanding and productive, even while working their last day on the job.

Companies considered by employees to be the 'Best To Work For' tend to be best performers.

See Fortune's "100 Best Companies to Work For”