what makes a great company?

I had an opportunity for breakfast with Bill Sullivan, CEO of Agilent, this morning, a week after the announcement about Agilent's intention to split the company into two groups, one for Life Sciences and the other for Electronic Measurements.   I wrote a couple of days ago about the Market Capitalization issues here, but did not deal with the obviously key ingredients of why this makes sense for each of the groups after the split.

We spent a fair amount of time actually on the components of how you build value over time, which clearly has happened beautifully at Agilent over the past decade or so.

I used a slide (see below) that I have used in a number of talks about THE HP PHENOMENON.  Bill had some visceral reaction to it -- I have to say it felt a bit like talking to "the old Dave Packard" even though Bill is not nearly so tall as Dave was.  He espouses the very same values!

The point of this slide, especially when done as a PowerPoint "build" in a talk, where I move clockwise (can we still say 'clockwise' when no one remembers analog clock dials?) from the upper left corner:

1. REV, PROFITS, GROWTH are the metrics that every management team uses, faithfully

2. Share Price mostly, and ROI / ROE / ROA are Wall Street analysts metrics.  For some top managers, this is the manipulable set of numbers that drive their bonuses without creating any 'true value'.  This is where you see the "lay a bunch of folk off, outsource to some cheap locale, cut R and D, and drive your margins up' scenarios -- for awhile.

3. Ethics / Environment / Community role is the Reputation of the Company in YOUR TOWN.  Are you proud to say you work there?  Do the local community service groups look to your company for leadership in civic affairs?  Or does your company, like some, argue for years about whether their effluent is why the river caught on fire or killed all the fish.....  You've seen those "Best Company to Work For" surveys, right?  They're not just about the benefits and pay scales.

4. EMPLOYEES, which is what most managements say is "our best asset" -- what do they think about and worry about?  Most often, it is the quality of their job, the level of satisfaction, the challenge, and the learning that goes with it, plus the dignity with which they are treated that matters to them more than share price or corporate profits.  Now, this all folds together, as Packard used to say --- without profits, there are no jobs, and with no jobs it is hard to have job satisfaction.  But without high employee morale and loyalty and going that extra mile, there isn't much long-term satisfaction.

5. The CENTERPIECE here -- PRODUCTS and SERVICES -- is really what the CUSTOMER cares about.  Do they get value from buying your Products and Services?  If not, they won't be repeat buyers, and the whole thing goes to pot.  They could care less about your share price, ROA or revenue growth. Bill shared a wonderful story--he said he's multiple times had customers tell him that his competitors are all at the customer site when the sale is about to happen; but Agilent, and Bill specifically, are there afterward, making sure that it all works well.  That breeds long-term satisfaction.

6. INVENTING, REFINING, INNOVATING is what drives CONTRIBUTION in Products/Services, so this is the wellspring for all renewal efforts, and all long-term corporate survival tactics.  Shortchange INNOVATION, which seems to be the game at all too many large corporations, and the only thing left is to try to SAVE your way to SUCCESS, or try M&A, or a SALE.

The point is that each of these six perspectives are correct views to hold, and some fairly large constituency holds each of them to be TRUE.  HP historically, and AGILENT today believe strongly that these all need to be in BALANCE.  None of them are 'the long pole in the tent" -- they all are valid and they must all be done well.

Not exactly the way Wall Street views it, but Midwestern common sense would argue strongly for it

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