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The most valuable asset a leader can possess


What’s the most valuable attribute that a manager can possess and develop?

The last time this question bobbed up, the answer was ‘rare sense’ – the ability to think straight, clearing away the dusty cobwebs of tradition, fighting clear of the stifling conventional wisdom (which masquerades as ‘common sense’), and developing the fact-based insight which produces business breakthroughs. For ‘fact-based’ insight, read ‘effectiveness’ – and that’s the attribute which all managers should strive to develop and deploy.


Peter Drucker long ago made the vital distinction between ‘efficient’ and ‘effective’. You can perform an activity swiftly and economically – that’s efficient. If you’re doing the right thing well, that’s effective. The wrong thing, however, is ineffective by definition. Rare sense comes in here. It guides you towards the right objective, whose achievement will be highly effective.

But if you’re doing the wrong thing, your apparent efficiency will be running into the sand. Rare sense rules that out – and its very rarity almost guarantees success.


Paradoxically, the rare insight is often dead simple. For example, it took no great genius to see that steel, while remaining in world-wide demand, had become deeply unpopular as an investment – so that steel companies had become cheap basket cases. Nor was it less than obvious that China’s gigantic investment plans would result in an insatiable steel demand going beyond any extrapolation from previous sales. Put the cheap companies and the abundant demand together, and you get the perfect set-up for an effective executive entrepreneur like Lakshmi Mittal.


Starting from a family background in steel, Mittal built himself a small plant in Indonesia in 1975. He then launched his race to the top from a Mexican deal in 1992. Eight more key purchases, as far afield as Canada, Kazakhstan, Germany, the US, Romania, the Czech Republic, Poland and South Africa, took Mittal to the biggest buy of all – the $4.5 billion purchase of International Steel Group. Joining with ISG created the world’s largest steel producer; but it’s Mittal’s formula for managing his acquisitions that’s interesting, important and a living testament to the meaning of effectiveness. To follow the formula, two principles need to be kept firmly in mind:

  • Buy cheap. As a rule of thumb, never pay more than a dollar for a dollar of sales: and if you can buy that dollar for 10 cents, so much the better (ten times better, in fact).
  • Stick to businesses that you thoroughly understand. In Mittal’s case, that’s obviously the one industry, but Warren Buffett has done very nicely, thank you, by investing (cheaply, of course) in the 100% purchase of disparate firms where the business model is simple and transparent.
  • Work out a modus operandi that can be constantly improved and applied to all the businesses. This is the effectiveness template.


In Mittal’s case, the pattern is designed to turn buys from lemons to rich orchards, but the basic principles apply to general management in all companies.


As Business Week describes the process, it has Six Simple Steps: SWAT Team, Liquidity Fix, Debug, Product Mix, Integrate and Prune.

They need some spelling out:

1. Take charge at once, putting your own tried, true and trusted people in command. Use ‘project management’ techniques to analyse the situation, break the requirements down into discrete sub-projects, and set objectives and deadlines.

2. To start with, the most important area for the SWAT team to hit is money. Get an accurate picture of debts and cash. If these situations have got out of hand (they almost certainly have), establish new relations with the creditors. Rather than lose their money, they will (as Mittal has found) agree to instalment plans to settle old debts, so long as new bills are paid promptly.

3. Get the ‘technics’ sorted out fast. Major technical problems are bound to be causing trouble. More than hardware will be involved. Mittal’s people, for example, cut downtime by replanning the maintenance schedules. Go through the entire supply chain looking for similar easy and better options – the ‘low hanging fruit’.

4. Start winning higher prices, charging more for the existing product range if the traffic will bear it, but also moving to up-market products if possible. Mittal’s higher-value ploy involves cold-rolled steel, galvanised sheet, etc. And imitate Michael Dell, who founded his huge PC success on cutting out the middle-man to sell direct. Even as an undergraduate, Dell couldn’t see the sense in giving away so much of the added value to a mere go-between.

5. Integration, which is sometimes dignified as ‘synergy’, is among the prime justifications for mergers and acquisitions – and cause the biggest disappointments. Mittal doesn’t attempt to make two plus two equal five. He simply looks for easy opportunities to cut costs; that low-lying fruit again. Forming regional groups cuts purchasing costs: stopping plants from vying with each other to supply the same customer is another easy win.

6. The correct strategy towards the non-steel businesses that steelmakers tend to collect is obvious. Shut them down, or sell them off. You don’t want catering companies or hotels (two examples cited by BW) getting in the way. Nor do you want excess staff numbers – but handle the pruning carefully to avoid trouble on the shop floor.


Note that none of the Six Simple Steps have anything specific to do with steel. As noted, they form a framework into which any firm can fit. I call it the Set-Up – and it’s very hard to see how any business can be effective if it strays far from the Six Simple Rules. Can you answer these six questions in the affirmative?

  • Do you employ a core of top-class executives who are trained in team working skills, expert in project management, and eager to move from one task and team to another?
  • Do you have a strong, remunerative and lasting grip on the accounting and the cashflow?
  • Do you analyse, simplify and improve all operations all the time to cut costs and speedup processes?
  • Do you turn the cost reductions into much higher value by ‘top-line management’ – increasing total revenues by both volume and value?
  • Do you know how to reorganise to simplify and (again) lower costs?
  • Do you concentrate the business and the management on what the company has to do – and does well?

You could add a seventh rule: Cut Out the Nonsense. Business Week quotes the damage done by barter, which accounted for 70% of Mittal’s Polish plant’s sales – but, of course, none of its cash flow. Barter also breeds middlemen and corruption. Eliminating barter is just sound business practice – and that effectiveness, rather than steel-making or any other kind of genius, is what has made Mittal worth $22 billion.

In his case, effective management means pursuing a very strong, simple ambition (that of creating the biggest multinational steel group) with the aid of deep knowledge of the market and a set-up that enshrines good practice. That is so rare a combination that its use may even qualify as a piece of genius for its rarity alone. Too many managements either have vague or confused ambitions (that is, if they have any at all); have only limited knowledge of their marketplaces; and persist with set-ups that breed bad practice.


Ineffectiveness in the organisation reflects the ways of ineffective individuals. The three major faults that are described above only appear in places where people are doing the wrong things in the wrong way. For instance, top managements have only a restricted amount of time together – that is, meeting to discuss issues as a team. According to a recent survey, team time averages 21 hours a month, or 250 hours a year. Yet teams gratuitously waste this limited time by…

…lumping operations in with strategy
…focusing on discussions rather than decisions
…failing to establish the real value of agenda matters
…keeping subjects on the agenda indefinitely
…failing to put real choices on the table
…using untidy, ineffective decision-making processes
…doing little to make the decisions stick

These ineffective negatives reverse the effective positives recommended by consultant Michael Mankins in an article for the Harvard Business Review (September 2004), entitled Stop Wasting Valuable Time. An accompanying table shows where the time goes.

Out of the 250 available top team hours…

  • 62 go on reviews of operating performance
  • 27 are spent dealing with temporary crises
  • 22 deal with administrative issues and policy
  • another 22 cover workforce issues
  • 18 are required for corporate governance
  • 14 cope with financial policy
  • 12 handle investor communications and guidance
  • 11 are taken up with team-building
  • 10 are devoted to succession planning
  • 6 go on litigation
  • 6 are taken up with community service and social responsibility
  • 3 are used for other purposes

You may have noticed a conspicuous missing item – ‘strategy development and approval’ which is by all odds the most important task of the top management team for the long term. Are the 37 hours a year allotted enough to inspire and plan a dynamic future? Mankins doesn’t think do. He told his HBR readers that ‘research reveals that as much as 80% of top management’s time is devoted to issues that account for less than 20% of a company’s long-term value’.


This will come as no surprise to aficionados of Pareto’s Law of the significant few and the insignificant many. The Law is practically a definition of effectiveness. By ignoring the many and concentrating on the few (very commonly occurring on the 80-20 divide found by Mankins), any manager and any management will vastly increase effectiveness. You can safely bet that Mittal’s time is heavily concentrated on the long-term essentials of his steel empire.

Of course, there’s a paradox here. One of those essentials is increasing operational effectiveness. That’s how a cheap buy of a bad company is rapidly turned into a true bargain. The Six Simple Steps are basically short-term: but they create strategic management pay-offs without which the overall objectives cannot be met. An effective set-up combines short, medium and long-term practices to optimise continuous performance.

How can you improve (or Mittalise) the typical top management, as reported by Mankins? First, make optimising the use of team time a top priority. Second, use a ‘rigorous and disciplined’ process for setting an agenda that concentrates on the important, not the urgent. Third, give the lion’s share to strategy. Fourth, structure the meetings to produce real decisions. Fifth, make sure that you’re free of all seven faults listed on the previous page.

Finally, know that it takes sustained and tough self-control to stop an effective set-up from backsliding. In one case, switching board meetings, on my advice, from operations to strategy lasted a mere two months.

They were then cancelled altogether. That’s one way of stopping meetings from being ineffective. But the object of the exercise is to achieve true and lasting effectiveness. And that demands doing things right, and certainly not failing to do them at all.

Robert Heller