Marina Gorbis's Blog, page 1450

What if a Company Maximized Jobs Over Profits?

All over Silicon Valley, venture capitalists are asking entrepreneurs “How scalable is your business model?” What they really mean is, “Can you grow without having to hire people?”

In our digital economy, value creation and job creation don’t always go together.  Consider that Whatsapp just sold for $19 billion with only 55 employees.  It used to be that business growth led to job growth.  But as machines get smarter, labor becomes a reluctant necessity.  Companies only hire as a last resort.

But what if the purpose of a company was to employ people?  Instead of hiring enough people to make the greatest profit, it would make enough profit to hire the greatest number of people.

Put simply, these “job entrepreneurs” maximize jobs instead of profits.  There is a precedent in this. “Social entrepreneurs” seek to maximize purpose over profits.  They take a social problem, like health, poverty, or the environment, then work on finding a business model that can remedy the problem. They seek to make enough profit to make the greatest social impact.

Job entrepreneurs take a similar approach. They start with a group of people they seek to employ, then work on finding a sustainable business model that leverages their talent and experience. This isn’t about job placement. There are many organizations that help people find jobs in other companies. Job entrepreneurs bring people directly onto their own payroll.

One pioneer in the “job entrepreneur” movement is Dave Friedman. Two years ago, Friedman left his position as a Fortune 100 executive to start a new venture.  His goal was to employ people on the autism spectrum – individuals who have traditionally been unemployable.

Friedman considered creating a traditional startup, but he realized that his goal was different. He didn’t want to maximize profits but rather employment.  Many advised him to setup a non-profit. But Friedman didn’t want to rely on grants and donations. He believed the business needed to generate a sustainable profit to foster discipline and efficiency. He also wanted his employees to know that their jobs weren’t just charity, bringing a source of authentic empowerment.

Some advised Friedman to create a social enterprise, but the models didn’t really apply.  Friedman wasn’t changing how the product was made (e.g. organic or sustainable) or where it was sold (e.g. low-income buyers).  He was focused on changing who gets hired.  Like social entrepreneurs, WHY mattered more than HOW MUCH.  But in this case WHO mattered more than HOW or WHERE.

Without an existing model to guide him, Friedman set out to make his own.  He had a powerful belief that people on the autism spectrum represent an exceptional yet hidden workforce.  But he needed a business model that would turn what others saw as a deficit into a source of competitive advantage.

Friedman found his answer in what he calls “Process Execution” jobs.  These are labor-intensive activities such as website maintenance, data entry, and software testing. Many companies struggle to fill these positions. But the repetitiveness and attention to detail are well-suited to the talents and abilities of people with autism.

As much as possible, Friedman downplays the fact that his employees have autism.  He is not looking for charity.  He wants to compete on the same playing field as other companies providing similar services.  But on the inside, AutonomyWorks is unlike any of its competitors.  Friedman has redesigned the way work is structured, organized, and managed to suit his employees.

With these changes, Friedman has found that not only can AutonomyWorks match traditional competitors, but it can produce better quality at a lower price.  By generating profits, he is able to hire more people and fulfill his mission.  In the process, he has empowered an overlooked workforce and relieved families of the costs of supporting autistic relatives.

Another company following a similar model is Shinola, a Detroit-based manufacturer originally known for its shoe polish.  Shinola has recently reinvented itself to create jobs for unemployed auto workers.  Like AutonomyWorks, Shinola started with jobs and worked backward to the business model.  In this case, auto workers have unique skills in light manufacturing and upholstery.  So Shinola produces watches, leather goods, and handcrafted bicycles.  A traditional entrepreneur wouldn’t set out to make this combination of products.  But for a job entrepreneur in Detroit, it makes all the sense in the world.

So what does it take to be a job maximizer?

Choose Your Talent. Who do you want to employ? AutonomyWorks focuses on people with autism. Shinola focuses on former auto workers. There are many other segments of the labor force who are underemployed or underutilized.
Find Your Market. What products or services can these workers best make or provide?  This is where the entrepreneurial magic comes into play.  You need to find something that suits your people and also generates a sustainable profit.  Friedman recommends looking for markets where work has been off-shored or automated, and that have low capital requirements.
Design Your System. What innovations do you need to meet the unique needs and bring out the best in your workers?  This might involve rethinking hiring, process design, management, or organizational culture.  The key is turning people’s disadvantage in society into your company’s competitive advantage in the marketplace.

Over the last twenty years, we have successfully created an entirely new economic sector in which social entrepreneurs maximize purpose over profit.  It’s time to turn this entrepreneurial spirit on a new goal:  job creation.  We need more people like Dave Friedman and more companies like Shinola — job maximizers and employment entrepreneurs.

The Four Keys to Being a Trusted Leader

Self-aggrandizement and even plain old greed has become standard fare in the executive cafeteria. And yet CEOs wonder why their employees and the public exhibit such a high degree of mistrust toward business and business leaders. The truth lies in the way many CEOs talk and behave. 

Real leadership – the kind that inspires people to pull together and collectively achieve something great – can only be exercised when an executive is trusted. And trust arises when someone is seen acting selflessly. This may not sound like news – indeed the centuries-old concept of servant leadership is based on it. But if it also sounds vague and hard to apply to your own leadership setting, let’s break it down further. People in an organization perceive selflessness when a leader concerns him or herself with their safety; performs valuable service for them; and makes personal sacrifice for their benefit.

I still have the watch my grandfather received when he retired after 50+ years working for a trucking company as a staff accountant in western Pennsylvania. I wear it regularly. Today, of course, very few people make it to a ten or even five-year anniversary with a company – why did my grandfather stay 50?  He appreciated the safety of that workplace – and despite what you might want to believe, safety is up to leaders to provide or deny. Safe is not cutting people as soon as there is a dip in the economy.  Safe is not giving raises to a few executives while colleagues languish with small or non-existent increases.  Safe is not producing extraordinary profits while failing to develop a clear career path and development plan for every employee.  What safe is, is a place where people come to work not worried about whether they will have a job tomorrow, where compensation is fair, where employees feel that they have gotten a little bit better at their job every day, where they feel there is opportunity to advance and learn, and where their bosses treat them like they are important contributors to the betterment of the organization.  Safe makes a great company.

If safety doesn’t fit well into our current performance-based business culture, then the notion of leader service fits even less.  The executive mindset is to “win/perform.”  Most executives that I work with love their company and want it to succeed, but very few of them think of themselves as being “in service” to those whose work must make that happen.

The service mindset is uniquely different from the performance mindset.   It isn’t built by an external set of rules or process, but grows from a set of deep-rooted values that are lived minute-by-minute by leaders.  One of the CEOs I work with used a visual device to signal the values he wanted to pervade the senior ranks.  He inverted his Organization Chart, so that the larger group of names –  the people directly serving customers – were displayed at the top of the chart.  The Executive team including the CEO were shown below, signifying that their whole purpose in the organization was to support and serve that crucial, client-serving level.  Not only did this help with executives’ priority-setting, it was motivating to everyone. People do better work for a CEO who they feel is working for them, too.

The idea of personal sacrifice in today’s business environment usually translates to giving up “work/life balance” by travelling a lot and working late – and certainly no one in the ranks who is doing that likes to see the boss putting in fewer hours. (Whether you believe it or not, people know when you aren’t “all in.”) But the sacrifices that matter most are the ones that involve sticking one’s neck out for a colleague or taking a stand that puts one’s political capital at risk. One CEO that I coach used to work for a mid-sized company that had been sold three times in less than two years.  When the third purchaser began the integration process, the new owners wanted him to cut headcount by targeting the staff level making an average $45K/year. But the CEO suggested that the better path to profitability was to trim the executive team, and keep those lower-paid workers in place.  The new owners saw the logic but took it in an unexpected direction by unceremoniously dismissing our hero. Not the best result, but he’ll be okay in the longer term.  In fact, he’ll do better than ever. His sacrifice to keep others working earned him a waiting list of talent eager to work with him in his next organization.

Selflessness, Safety, Service, and Sacrifice.  If finding great people to work with you is key (which it probably is) and you can’t do it all by yourself (which you can’t), then keep these concepts in the forefront of your mind. They will help you build an extraordinary team and produce winning results for your business – and when the time comes for you to retire (with a gold watch or not), you’ll be proud of how you led.

Thriving at the Top
An HBR Insight Center




Developing Mindful Leaders for the C-Suite
Meet the Fastest Rising Executive in the Fortune 100
If President Obama Can Get Home for Dinner, Why Can’t You?
To Get Honest Feedback, Leaders Need to Ask

Women’s Unwillingness to Guess on Standardized Tests Hurts Their Scores

In an experiment, females were nearly twice as likely as males to skip test questions if they didn’t know the answers, even though the penalties for incorrect responses were so small that test-takers would have been better off answering every question, says Katherine Baldiga of The Ohio State University. The experimental test was structured like the SAT, with a point given for every correct answer, a quarter-point deducted for a wrong answer, and zero points awarded for an unanswered question (the SAT is slated to undergo structural changes in 2016). Question-skipping, which can be partly attributed to females’ greater risk aversion, resulted in significantly worse scores on the experimental test.

Developing Mindful Leaders for the C-Suite

Time Magazine recently put “The Mindfulness Revolution” on its cover, which could either be seen as hyping the latest business fad, or as signaling a major change in the thinking of executive leaders. I believe it’s the latter.

The use of mindful practices like meditation, introspection, and journaling are taking hold at such successful enterprises as Google, General Mills, Goldman Sachs, Apple, Medtronic, and Aetna, and contributing to the success of these remarkable organizations. Let’s look at a few examples:

With support from CEO Larry Page, Google’s Chade-Meng Tan, known as Google’s Jolly Good Fellow, runs hundreds of classes on meditation and has written a best-selling book, Search Inside Yourself .
General Mills, under the guidance of CEO Ken Powell, has made meditation a regular practice. Former executive Janice Marturano, who led the company’s internal classes, has left the company to launch the Institute for Mindful Leadership, which conducts executive courses in mindfulness meditation.
Goldman Sachs, which moved up 48 places in Fortune Magazine’s Best Places to Work list, was recently featured in Fortune for its mindfulness classes and practices.
At Apple, founder Steve Jobs — who was a regular meditator — used mindfulness to calm his negative energies, to focus on creating unique products, and to challenge his teams to achieve excellence.
Thanks to the vision of founder Earl Bakken, Medtronic has a meditation room that dates back to 1974 which became a symbol of the company’s commitment to creativity.
Under the leadership of CEO Mark Bertolini, Aetna has done rigorous studies of both meditation and yoga and their positive impact on employee healthcare costs.

These competitive companies understand the enormous pressure faced by their employees — from their top executives on down. They recognize the need to take more time to reflect on what’s most important in order to create ways to overcome difficult challenges. We all need to find ways to sort through myriad demands and distractions, but it’s especially important that leaders with great responsibilities gain focus and clarity in making their most important decisions, creativity in transforming their enterprises, compassion for their customers and employees, and the courage to go their own way.

Focus, clarity, creativity, compassion, and courage. These are the qualities of the mindful leaders I have worked with, taught, mentored, and interviewed. They are also the qualities that give today’s best leaders the resilience to cope with the many challenges coming their way and the resolve to sustain long-term success. The real point of leverage — which though it sounds simple, many executives never discover — is the ability to think clearly and to focus on the most important opportunities.

In his new book Focus, psychologist Dr. Daniel Goleman, the father of emotional intelligence (or EQ), provides data that supports the importance of mindfulness in focusing the mind’s cognitive abilities, linking them to qualities of the heart like compassion and courage. Dr. Goleman prescribes a framework for success that enables leaders to build clarity about where to direct their attention and that of their organizations by focusing on themselves, others, and the external world — in that order.  Cultivating this type of focus requires establishing regular practices that allow your brain to fully relax and let go of the anxiousness, confusion, and pressures that can fill the day. (Editor’s note: here is Daniel Goleman’s related HBR article, The Focused Leader.)

I began meditating in 1975 after attending a Transcendental Meditation workshop with my wife Penny, and have continued the practice for the past 38 years. (In spite of this, I still do mindless things like leaving my laptop on an airplane, but I continue to work on staying in the present moment.) All of our family members meditate regularly. Our son Jeff, a successful executive in his own right, believes he would not be successful in his high-stress job were it not for daily meditation and jogging.

Meditation is not the only way to be a mindful leader. In the classes I teach at Harvard Business School, participating executives share a wide range of practices they use to calm their minds and gain clarity in their thinking. They report that the biggest derailer of their leadership is not lack of IQ or intensity, but the challenges they face in staying focused and healthy. To be equipped for the rapid-fire intensity of executive life, they cultivate daily practices that allow them to regularly renew their minds, bodies, and spirits. Among these are prayer, journaling, jogging and/or physical workouts, long walks, and in-depth discussions with their spouses and mentors.

The important thing is to have a regular introspective practice that takes you away from your daily routines and enables you to reflect on your work and your life — to really focus on what is truly important to you. By doing so, you will not only be more successful, you will be happier and more fulfilled in the long run.

Thriving at the Top
An HBR Insight Center




Meet the Fastest Rising Executive in the Fortune 100
If President Obama Can Get Home for Dinner, Why Can’t You?
To Get Honest Feedback, Leaders Need to Ask
Don’t End Your Career With Regrets in Your Personal Life

The Importance of Giving Credit

Virtually everyone has experienced or witnessed instances in which credit was assigned in an unfair manner: managers unabashedly took credit for the work of their invisible hard-working staff; quiet performers were inadequately recognized for their contributions; credit was assigned to the wrong individuals and for the wrong things.

If a company reliably assigns credit to deserving individuals and teams, the resulting belief that the system is fair and will honestly reward contributions will encourage employees to give their utmost. On the other hand, if credit is regularly misassigned, a sort of organizational cancer emerges, and individuals and teams won’t feel the drive to deliver their best because they won’t trust anyone will recognize it if they do.

From my experiences leading teams in government, academia, clinical medicine, and the private sector, I have evolved a set of rules to help manage some of the issues with the assignment of credit. These rules are my own and don’t reflect any official policies of the organizations where I’ve worked.

Keep people honest. It is important to demand that individuals be honest about their true contributions to projects and initiatives. And their claims should be cross-checked. Individuals whose careers developed in organizations where they had to fend for themselves will often err on the side of overstating their contributions. A star performer on one team that I led was often taking more than her share of credit and it was rubbing her colleagues the wrong way. When I drilled into the root cause, I discovered it was bad behavior she learned in her previous job, where unabashed self-promotion was required to rise. Guiding her to be honest about her true contributions and to highlight the contributions of others sent a strong message about our organizational culture.

Recognize those who recognize others. In addition to verifying individual accomplishments, there is a lot of value in recognizing and highlighting cases when individuals take the time to recognize others. It sends a signal that generous and honest attribution of credit is something that the organization values. Early in one of my jobs, I took a few moments to send e-mails to thank individuals who had helped make a project of mine successful and copied my boss. My boss, in turn,scheduled time with me to thank me for taking the time to recognize others. In doing so, he sent an important message that he valued this type of behavior, and it became a habit: Ever since then, I’ve religiously sent similar e-mails to members of successful teams I’ve led.

Look out for and elevate the quiet performers. The best contributors are often the quietest. For whatever reason, they are not worried about credit and are happy to take a back seat. But people in the guts of an organization often know that some of these individuals are the lynchpins who sustain a project or unit. Taking the time to identify and reward the quiet heroes can generate good will across an organization because it creates the sense that there is real integrity.

Remember that there’s plenty of credit to go around. A mentor early in my career once told me that “credit is infinitely divisible” — in other words, there are no limits on how many individuals can be recognized for contributing to an outcome. That said, credit quickly loses meaning when everyone gets it, including people who didn’t do anything. Highly specific attributions of credit always trump blanket statements of praise. And the value of praise and credit is always higher when leaders and organizations deliver criticism with equal discipline.

Getting the assignment of credit right is important to everyone. It is a driver of high performance. It is a key to making people feel fulfilled and motivated. The very best leaders and organizations get this and spare no effort to get it right.

Are CEOs Really India’s Leading Export?

Satya Nadella’s appointment as Microsoft’s CEO was greeted with headlines such as “Why Microsoft and Everyone Else Loves Indian CEOs,” echoing Time’s 2011 lead heralding “India’s Leading Export: CEOs.”  But have Indians really risen to the top of many of the world’s largest corporations?  A systematic analysis of mid-2013 data on the world’s largest firms by revenue, the Fortune Global 500, shows that at that time only three non-Indian firms were led by Indian CEOs: Arcelor Mittal (Lakshmi Mittal), Deutsche Bank (Anshu Jain), and PepsiCo (Indra Nooyi).  That was exactly the same as the number of non-Brazilian firms run by Brazilian CEOs, and short of the 5 non-South African firms led by South African CEOs.

Does the paucity of Indians at the top of non-Indian Fortune Global 500 corporations mean that the late C. K. Prahalad’s assertion that “Growing up in India is an extraordinary preparation for management” was wrong?  Not necessarily.  Indians have indeed gone out and achieved great managerial success abroad.  The proportion of Silicon Valley tech startups led by Indians has risen from 7% in the 1980s and 1990s to at least 13% and by some estimates more than 25% (even though Indians make up less than 1% of the US population).  One estimate pegged the annual income of the Indian diaspora at about one-third of India’s GDP, with much of that coming from Silicon Valley.

The real myth is not the success of Indians abroad but rather that the world’s largest firms are so global that their national origins no longer influence who they select for CEO.  Only 13% of the Fortune Global 500 companies are led by CEOs who hail from outside the country where the firm’s headquarters is located.  Also, the foreign countries where Indian CEOs do lead Fortune Global 500 firms are illustrative of how openness to foreign CEOs varies widely from country to country.  European firms, on average, are the most likely to have foreign CEOs.  U.S. firms lie in between European and Japanese firms.

Firms’ propensity to hire foreign CEOs is also highly correlated with their home countries’ general openness to trade, capital, information and people flows as measured on the Depth Index of Globalization that I compile with my IESE Business School colleague Steven A. Altman.

India’s fame as a CEO exporter must be juxtaposed against the paucity of non-Indians running major Indian corporates.  After the untimely demise of Karl Slym, who briefly headed Tata Motors, none of India’s eight Fortune Global 500 firms is led by a non-Indian CEO.  In fact, only three of the 112 Fortune Global 500 companies based in any of the BRIC countries are led by a non-native CEO!  As firms from these countries seek to differentiate and build brands in advanced economies rather than competing mainly based on low home-country cost bases, the troubling signal this sends to foreign talent about their career prospects will become increasingly important.

Returning to Microsoft’s selection of an Indian CEO, it is interesting to note that one source estimates that more than one-third of Microsoft’s workforce is of Indian descent.  Microsoft also earns about half of its revenue outside of the United States.  The appointment of a non-native CEO of any origin is still an unusual occurrence, but Microsoft’s selection of an Indian was, all else equal, not entirely surprising.  And it sends a very positive message to high-potentials throughout Microsoft: this is a company where the best candidate, regardless of national origin, can rise to the top.

Sometimes It’s OK to Procrastinate

Go Ahead, Put It OffNew Voices: Is It Time for 'Active' Procrastination? British Psychological Society

There are two types of procrastination, passive and active. The first is the type our superegos, parents, and significant others are always warning us against: Getting stuck in uncertainty and failing to act quickly. But sometimes, unknown to our internal and external critics, we engage in actively putting things off, writes Anna Abramowski. Although we're fully capable of completing a task quickly, we choose not to, because we're focusing our attention on another goal that's more important to us. Unlike passive procrastinators, the active variety tend to be self-reliant, autonomous, and self-confident. In other words, active procrastination is nothing to be ashamed of. It can lead to inspiration and innovation. Best of all, Abramowski says, it can help us break out of from "productive mediocrity" — accomplishing a lot of tasks that don't add up to a hill of beans. —Andy O'Connell

What If Schedules Didn't Matter?Working Mothers See Penalties When They Adjust Work Schedules After Having ChildrenWork in Progress

It’s a sad commentary on corporate culture that women who try to balance employment and child-raising still feel like they're violating workplace norms. In a study of 2,000 employees, a team of sociologists found that women who worked part-time or took extended leave after having children felt stigmatized more often than did childless women who took comparable time off. Of course, women with children get a double whammy: They not only feel they’ve transgressed against workplace standards, they also carry the burden of having violated gender norms about what it means to be a good mother. Men, regardless of whether they had children, did not report feeling as though they were punished for working nonstandard hours.

That brings us to the issue of hours worked and compensation. Businessweek's Sheelah Kolhatkar recently analyzed research from Harvard economist Claudia Goldin, who found that "companies offering true, stigma-free flexibility and linear compensation — meaning the same pay per hour worked, regardless of when it is worked — have the lowest gaps in pay between men and women — and, in many cases, more women employees overall." In other words, letting go of ideas about what "normal" work looks like and where it takes place could boost equality — and possibly make mothers (and fathers) happier and more productive.

Inconvenience, Please The Problem with Easy TechnologyThe New Yorker

A piano, a frying pan, a typewriter, and a paintbrush are demanding technologies — they take time and practice to master. Automatic transmissions, instant mashed potatoes, and iPhones are convenience technologies, which require less effort to yield predictable results. Making something more convenient is one of the time-tested paths to innovation, disruptive and otherwise. Conveniences open up life’s pleasures to a wider range of people. But in this thoughtful piece, Columbia Law professor Tim Wu makes the case for inconvenience, pitting the advantages of doing more against the benefits of learning more. "It isn’t somehow wrong to use a microwave rather than a wood fire to reheat leftovers," he says. "But we must take seriously our biological need to be challenged, or face the danger of evolving into creatures whose lives are more productive but also less satisfying." —Andrea Ovans

The Long View Facebook's FutureWorking Knowledge

What will Facebook look like in 10 years? Harvard Business School's Mikolaj Jan Piskorski offers his predictions, and they don't involve hoards of teens abandoning the social network forever. Piskorski argues that the site will go from a retrospective medium, which we use to post about things that have already happened, to a prospective medium that will gather our real-time data and make it useful for both users and advertisers. He sees Facebook as "less of a website to visit than an invisible conduit to the most important aspects of people's lives." That conduit will, of course, entail the gathering of boatloads of personal data. It’s on this point that "Facebook will need to execute as flawlessly as possible," or everything could go awry. If the site's "main driver is to use the technology for invasive and intrusive paths toward profit, Facebook's future may well be questionable." 

Dispatch from the Winner-Take-All Economy25 Highest Paying Companies for Interns 2014Glassdoor

The highest-paid interns are raking in something north of $80,000 (or they would be if you annualized their monthly stipends), underscoring the intensity of the war for talent, particularly among companies in the high-tech and energy sectors. Fully 18 of the firms that make Glassdoor’s list of the highest-paying companies for interns are based in San Francisco (suggesting a transfer of wealth not so much to the next generation of Google, Apple, Amazon, Twitter, and eBay employees as to Bay Area landlords). Topping the list is big-data-mining software firm Palantir, which is trying to entice the best young minds with $7,012 a month, though at least one Palantir intern claims that "very few people are there just for the money." Easy to say with more than $20,000 in your pocket at summer’s end. —Andrea Ovans

BONUS BITSThe View from Above

The Top of America (Time)
Has Privacy Become a Luxury Good? (The New York Times)
How the Elevator Transformed America (The Boston Globe)

‘My Years with General Motors’, Fifty Years On

For fans of management books, this month marks a big anniversary. It was fifty years ago that Alfred Sloan’s now classic My Years with General Motors hit bookstores, and immediately appeared on The New York Times’ nonfiction bestsellers list.

With recent editions out in Polish and Portuguese, Alfred Sloan’s memoir still commands attention for one compelling reason: because Sloan’s General Motors seemed to achieve the impossible. When Sloan took over the firm in the early 1920s, General Motors was a mess. Its founder, William C. Durant, had created the corporation by cobbling together more than a dozen smaller car and part manufacturers, with little obvious logic. Worse still, not one of the company’s assorted products could begin to compete with Ford’s Model T on price or quality. Most were losing money.

Yet in little more than a decade, each GM product line was turning a profit, and the corporation as a whole had established itself as the world’s premier automaker and the nation’s largest single employer. Moreover, Sloan did this by means of organizational mastery, without the major engineering breakthrough that other GM insiders believed was their only hope. Ford still may have produced the best car for the money, but Sloan’s GM trounced Ford Motors by producing the best product lines for the market.

It is harder, though, to pinpoint exactly what lessons today’s managers might take from what has been called “the best business book you’ll never read.” Fifty years on, Sloan’s My Years at General Motors might seem to have all the freshness of an insect in amber. The world it describes has largely vanished. In 1964 the biggest companies in the U.S. were in oil, autos, and steel, with Standard Oil, General Motors, U.S. Steel, Ford, and Gulf Oil heading the list. American manufacturers exported radios, televisions, and other appliances around the world. The country had a middle class. The ratio of a CEO’s pay to a laborer’s was tiny compared to today. At McDonald-Douglas, the company’s president received wages just 10 times the amount of the floor sweeper (today it would be a 1,000 times). The “organization men,” as sociologist and writer William Whyte called the troop of managers who populated these bureaucracies, expected lifetime employment in a single firm. In some ways, the large American manufacturers were the Downton Abbeys of American capitalism – hierarchical organizations, often located in manicured suburban settings, with elaborate written (and unwritten) rules of behavior. Moreover, they operated on a scale that is unthinkable in a business climate that prizes “nimbleness”: in 1960, GM had 500,000 employees on its payroll.

Yet, despite the wholesale changes in the business landscape, there are timeless lessons in My Years at General Motors. Sloan’s book describes in fascinating detail and (thanks to ghost writer John McDonald) clear prose the working out of a competitive vision — relentlessly, obsessively, and through all its permutations. More than any other volume, My Years reveals what it takes to build a company around a compelling strategy.

To appreciate Sloan’s book, consider the titanic achievement of his predecessor, Henry Ford. The history of the automobile industry can be understood as a series of dreams. When Henry Ford was young, the horseless carriage was a plaything of the wealthy. His dream was to “put America on wheels” by building a high-quality and affordable car — a dependable machine that would “take you there and bring you back.” Ford, an inventor with no formal training, had a brilliant mind for mechanical invention. He made his dream a reality when he built his colossal manufacturing plants and produced the Model T. It’s hard to overstate Ford’s achievement. He pioneered the largest industry of the twentieth century and, when he boosted his workers’ pay to a sky-high $5 per day in 1914, he became a worldwide hero. By 1920, America was on wheels. But that was the problem — once Ford had attained his dream, and the country had millions of Model T’s on the road, he simply made more.

Alfred Sloan’s dream took in what Ford missed in his single-minded pursuit of value for money: the importance of marketing. Sloan recognized that a market for something other than the Model T existed because American consumers regarded cars as something more than a utilitarian vehicle. Knowing he couldn’t beat Ford at his own game, Sloan aimed to change the game itself. His dream was to create a “car for every purse and purpose.” Despite his own origins as an MIT-educated engineer, he took inspiration from the “Paris dressmakers.” He introduced annual model changes in the mid-1920s and brought designers from Hollywood to shape new cars. My Years does not tell the story of improved efficiency, for sure. In fact, the marketing of cars, as Fortune reported in 1938, became one of the “most inefficient parts of the whole American economy …. [N]early one-third of the price you pay for a new automobile goes to cover the cost of getting it from the factory to you.” The price tag included costs for dealer’s expenses, sales commissions, convention fees, advertisements, brochures, promotional movies, and a whole lot more. But all of this ballyhoo exposed Ford’s Achilles heel: once America was on wheels, it was no longer enough to make the best car at the best price.

The lasting value of Sloan’s book is not really the dream, but the ambition, detail, and scale with which he commercialized it. Sloan was the consummate organization-builder. His vision was evident in the very structure of the new multidivisional firm, which divided the American automobile market into five price segments. The heads at Chevrolet (the low-priced unit), Pontiac, Buick, Oldsmobile, and Cadillac (the high-priced unit) had authority over their divisions. A central office kept track of finances and the allocation of resources. “Strategy” led “structure,” as historian Alfred D. Chandler (who researched Sloan’s book) put it.

Ford had disdained organization and vowed to have “no line of succession or of authority, very few titles, and no conferences.” At Ford, all decisions came from the top. At General Motors, decision-rights were far more decentralized. Richard Grant, the former salesman who headed Chevrolet, fought aggressively to erode Ford’s profit in the low-price sector by sending salesmen door-to-door looking for homes with a Model T in the driveway. Whenever one was spotted, which was often, a Chevrolet salesman would get out and offer the owner a test drive in the new GM model. Chevrolet sales soared. GM was a behemoth, but its decentralized structure gave divisional leaders like Grant the freedom to direct strategy for their own product lines.

The power of Sloan’s strategy was not to last, of course. As Ford found out, dreams held too long can become tombs. Quality engineering and efficient production were never GM’s main focus, and over time the deficiencies began to show. In the late 1960s, a Mercedes-Benz 250 was safer, cheaper, and better engineered than the bloated and highly touted Cadillac Eldorado; after the oil crisis hit of the 1970s, Chevrolet lost out to the fuel-efficient and reliable Japanese imports. As with GM’s cars, so went its organizational vision.

Just four years after Sloan published his memoirs, a handful of scientists and venture capitalists in Mountain View, Calif., came together to create Intel, a semiconductor chip manufacturing company. Its founding marked the beginning of a business culture that strove to avoid the costly entanglements of large fixed-plant organizations like GM — a world that came to be populated by entrepreneurs rather than “organization men.”

What Shake Shack Knows About Growth that McDonald’s Has Forgotten

The idea that organizational growth comes from doing a few things well is popular and proven.  But debate remains on how to direct your firm’s focus as you grow.

There are many options.  With a technology focus, you might manage to launch a successful breakthrough, but your success will be short-lived because sustaining a technological advantage today is so difficult.  A sales focus fails to deliver a profitable market leadership position because it favors short-term revenue growth and customer acquisition over sustainable margins and customer loyalty.  Companies have been right to give more attention to customers in recent years, but when understanding customers, developing value propositions, and applying brand values are considered responsibilities only of the marketers in your organization, your company lacks the alignment and integration needed to produce a complete and coordinated superior customer experience. And, as a customer-focused organization, you may be embracing a concept that’s popular now, but ultimately you’ll run up against the reality that it is neither financially nor operationally feasible for a scaled enterprise to satisfy all desires of all customers.

The bottom line: if your growth plan is not grounded in your brand identity, it will likely disappoint in delivering the results you seek.  The problem with the areas of focus above is that none of them actually define what your company is and what it stands for. They are merely the means for executing and expressing your core, your essence — in other words, your brand.

Great brands use their brand identities as their one true focus because that’s the only way to ensure continued relevance and resonance with customers — and continued value to shareholders.

Organizations that grow by staying true to their core brand values and identity are successful in the long term because they don’t get swept up by changes in tastes, events, and trends. And with a strong brand focus, it is much easier to make swift decisions that are consistent with the values the company hopes to embody for its customers. So the leaders behind great brands drill down to their core values and execute on them relentlessly, even when it means saying “no” to attractive short-term opportunities. Over time customers learn exactly what the brand stands for and come to trust that the brand will deliver it every time.

A tale of two brands illustrates the value of brand focus. McDonald’s, the $27.5 billion corporation with over 34,000 locations worldwide, recently reported its fifth consecutive quarter of disappointing sales. Shake Shack, the burger-and-shake chain with 34 locations, continues to open profitable units around the world. The CEO of McDonald’s admits the company has “lost some of our customer relevance,” while Shake Shack enjoys such strong appeal that the lines to get into its locations are as legendary as they are long.

While the difference in the scale and complexity between the two organizations is significant, the importance of having a focused brand is the same.  Leading the list of reasons for the golden arches’ recent poor performance is the company’s seemingly scattershot approach to innovation.  It has chased multiple priorities such as McCafé, its value menu, and new products including so-called healthier ones that actually aren’t even that healthy. These disparate efforts have compromised operational excellence. One analyst observed that “as with its admittedly overcomplicated menu that now has over 180 items, the company’s priority list seems just as long.”  If the company had kept its focus on its brand essence — appealing to the child in all of us — it would have managed to diversify in more integrated and distinctive ways, and it would have steered clear of menu items, promotional strategies, and operational developments that detract from delivering a playful experience.

McDonald’s diffused focus starkly contrasts with the singular brand focus behind Shake Shack’s success.  Shake Shack has become one of the category’s most remarkable success stories in recent years by committing and staying committed to its brand mission:  being “the best burger company in the world.” Its CEO, Randy Garutti, explains his organization’s commitment to the principle “Do what you want to do really well in its most basic version.”

From selecting new restaurant sites, to hiring and developing employees, to creating the unique look of each location, the folks at Shake Shack use their brand values as a compass and their heritage as a guide for everything they do.  Speaking about the chain’s first location in New York City’s Madison Square Park, Garutti reports that he and his team make decisions by “running everything through the filter of when we built this little restaurant behind us.” Out of an expressed commitment to an extraordinary burger experience, they find themselves frequently rejecting otherwise-enviable growth opportunities, such as catering or operating a food truck, because they fail to square with the company’s brand identity.

Shake Shack’s brand focus has also led the company to make some unpopular decisions.  For example, last year it replaced its frozen, crinkle-cut French fries with fresh, hand-cut ones.  Although Garutti and his team knew that some customers would pan the change, they went forward with it because the new item is fresher and higher quality and tastes better – each a defining attribute of the Shake Shack brand.  And the company has only continued to grow and attract more fans.

Whether your company is large or small, or has been around for decades or days, focusing on the core of your brand — and staying committed to that focus — is the key to successful, sustainable growth.

America’s Long and Productive History of Class Warfare

Six days before the election, the Republican nominee for president attended a fund-raising dinner at a posh New York restaurant. Two-hundred of the country’s richest and most powerful men were on hand. The next day, they were confronted with this atop the front page of one of the city’s leading newspapers:

This particular scan is from the historical-cartoon site HarpWeek, but the drawing has long been in the public domain — it ran in the now-defunct New York World on Oct. 30, 1884. The candidate was James G. Blaine (the droopy-eyed fellow in the center of the picture who is about to dig in to some Lobby Pudding), and the man who subjected him to this harsh treatment was Joseph Pulitzer, who had bought the World the previous year and was rapidly building it into the most popular and powerful newspaper the nation had ever seen.

The cartoon that Pulitzer had Walt McDougall and Valerian Gribayedoff draw was just the beginning — although what a beginning it was, featuring the likes of Jay Gould (seated just left of Blaine) and William Cornelius Vanderbilt (son of Cornelius, seated just to the right of Blaine with the awesome bifurcated beard, although according to historian Richard John he wasn’t even at the dinner) feasting on political spoils at Delmonico’s while a poor family begged for scraps. As James McGrath Morris recounts in his wonderful biography of Pulitzer:

The World revealed every aspect of the dinner, even though the organizers had done their best to bar the press. From the Timbales à la Reine and Soufflés aux Marrons upon which the men feasted to the thousands of dollars pledged to buy votes, no detail was left out. Even more damning, the main story began with a one-paragraph account of men who had been thrown out of work at a mill in Blaine’s home state and were now applying for assistance or emigrating to Canada.

Some of this was partisan politics: Pulitzer, himself on the ballot as a Democratic candidate for Congress, supported Blaine’s opponent, Grover Cleveland. New York was the most important battleground state, and the World’s assault was widely credited with handing the presidency to Cleveland a few days later.

It wasn’t just that, though. In an era when America’s first industrial magnates were amassing unheard-of riches and using it to mold the political system to their liking, resentment of that wealth and power was widespread. Pulitzer’s attacks on the rich helped bring in readers, so many that before long he too had become a multimillionaire with a yacht, a house not far from Vanderbilt’s on East 55th St. in Manhattan, and a membership in the Jekyll Island Club.

By that point Pulitzer had toned down his paper’s attacks on the rich — yet another example of American capitalism’s remarkable ability through the years to coopt its critics by sharing its spoils with them. But the ferociousness of his initial assaults, and of many others aimed at the tycoons who dominated the country’s late-19th-century Gilded Age, gives the lie to the complaint voiced these days in some circles that current resentment of the rich is somehow unprecedented or un-American — or even reminiscent of Nazi Germany.

Have these people never heard about Teddy Roosevelt excoriating the “malefactors of great wealth,” or his cousin Franklin getting Congress to raise the tax rate on top incomes past 90%? Americans have been pillorying the rich on and off for more than 200 years, and our economic system has survived and mostly thrived. In fact, the political and labor-relations compromises occasioned by what you might call class warfare have on balance surely made the country stronger.

What’s been unique, or at least highly unusual, has been the environment in which entrepreneurs and business executives were able to operate from the late 1970s through the early 2000s. Taxes dropped, high-end incomes exploded, and hardly anybody complained at all. Far from complaining, in fact, the news media for the most part celebrated the recipients of those exploding incomes for their boldness, creativity, and economic importance. It was a pretty stinking awesome time to be a plutocrat: You got to make billions of dollars, pay far less in taxes than you would have a quarter-century before, and get your face on the cover of Forbes or Fortune (or maybe even the top of your head on the cover of HBR).

Fourteen years ago, with the dot-com bubble fizzling but the rest of corporate America seemingly still going like gangbusters, the great management journalist Geoff Colvin wrote a column in Fortune titled “Capitalists: Savor This Moment.” An excerpt:

The business culture is triumphant. Not just for those in authority but for most of society, business is at the center, and that’s pretty much okay with everybody. It doesn’t feel remarkable to us for the same reason fish don’t notice water; we live in it. But step outside the moment and look at commerce’s role in the culture. It’s unprecedented.

Colvin’s conclusion was that this just couldn’t last. He wasn’t sure what would replace it, and even now it’s not obvious what will.  By the numbers it’s still a pretty awesome time to be a plutocrat, but clearly the mood has changed. It’s important to remember, though, that the anomaly is not the current mood of skepticism of business and the rich. It’s what preceded it.