People: The Center of Financial Success
August 2, 2010
Selecting the right priorities, understanding the laws of business (the Five Business Drivers), and knowing instinctively how to make money is one thing. But making it happen is something else. Leaders have to deliver results day in, and day out, over the long haul. And profitable and sustainable growth, according to Ram Charan, is what gives an organization energy, builds confidence, and generates the resources to go forward; but none of this happens without people (customers and employees).
Whether you're a CEO, the head of your department, or just getting your business career started, you must be a leader of the business and a leader of people. Think about it, unless you're a one-man or one-woman shop, you cannot possibly execute all of your priorities by yourself. A leader of the business knows what to do. A leader of people knows how to get it done. It's no wonder that at the center of our Five Business Drivers model is People.
Jack Breen is an excellent example of an executive who recognized the importance of a strong people strategy. In 1978 Jack moved from the industrial sector to become the Chief Executive of The Sherwin-Williams Company, a position he would hold for more than twenty years. Jack began his tenure faced with major problems, sales figures had been steadily declining; increased market competition was taking its toll at both the retail and executive levels; and the company was fighting a takeover. After 112 years in the business, it seemed as though the company was on the verge of losing its identity.
"When I came to Sherwin-Williams, the company was in very dire financial straits," said Breen. "I helped preserve the independence of the company and its determination to remain autonomous."
There's no doubt that Jack likely outlined priorities on sales figures, cost savings, cash generation, and other financial measures, but there's a lesson to be learned from one of his top priorities… spend a full month working in Sherwin-Williams stores. Jack knew that he had to first learn the business, and the way to do this was to visit with customers, then talk to employees and learn from their eyes what they thought were the issues. Jack's early efforts to connect with his customers and employees helped him sort out and sift out where to focus his energy.
So how did things work out for Jack? When he retired in 2000 the company had this to say about him, "His tenure has been marked by his unquestioned commitment to delivering quality products to the market place (customers), strong rewards to investors (customers & employees), and career enhancing and wealth building opportunities to employees."
And the proof is in the numbers, under his leadership, the Company achieved twenty-two consecutive years of earnings improvement. Revenues grew from $1.1 billion to over $5.0 billion in 1999 and net income improved from $5 million to $304 million. Sherwin-Williams' stock price (adjusted for five stock splits) increased from 62.5 cents per share to $27.00 per share.
While it's true that business acumen has a lot to do with numbers and reports, don't forget that people are at the center of cash, profits, assets, and growth. Those who understand how to exercise their business acumen to harness the efforts of other people will have an edge - an edge that will help them execute the right business priorities - priorities that will generate financial success.