Keeping management simple

Charles F ("Chuck") Knight looks back on his long tenure as CEO and chairman of Emerson Electric (1973-2004) and explains the source of the company's success.

by McKinsey Quarterly Online

Between 1973 and 2000 the company's revenues went up from $938 million to $15 billion. It also acquired and succesfully integrated more than 200 companies during this period. The management's job is not to take care of stakeholders, explained Knight: "To us, management's job was to successfully identify and implement the investment decisions that you have to make in order to meet the company's targets for growth and profitability, so as to create shareholder value - and it's nothing more than that." You have to do a 'good job' of in-depth planning, a 'great job' of implementation and follow-up and run an 'action-oriented' organisation, he added.

Emerson Electric operates a process-based management system, which revolves around regular planning meetings for all groups within the company at which they set specific targets for profitability and growth. Later they hold quarterly meetings to assess whether they are meeting their financial targets.

"So if something's going haywire, we see it very quickly and can do something about it," said Knight. This 'fact-based' approach to business means people know exactly what is happening and what they have to do. There is also no office politics. "If people mess around with politics they are history," said Knight.

Newly acquired companies are given time to get used to the planning system. They usually come to see that it makes sense, added Knight. He said that Emerson is a 'fun place' to work where talent is encouraged and developed. Three directors competed to succeed Knight and the two who did not make it decided to stay with the organisation.

"That's not the way it is at most companies. A big part of it, believe it or not, is friendship." Knight served 27 years as CEO and his predecessor had 23 years in the job. He expects his successor, David Farr, to be given the same length of time to lead the company. "Our tenure and our shared beliefs are the key to the company's success," he said.

Source:
Managing for growth: an interview with former Emerson CEO Chuck Knight
By R. Michael Murray Jr. amd Warren L. Strickland
The McKinsey Quarterly Online, 28 November 2006
Review by Morice Mendoza

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