Old Wisdom

Minnesota’s business prosperity is not what it once was, and not just because of the current recession. Recently David Beal, the now retired business reporter for the St Paul Pioneer Press, analyzed the 2009 Pioneer Press 100, the paper’s ranking of the top Minnesota publicly traded companies. His conclusions do not make for happy reading.

This year for the first time in the list’s 27 year history no new company joined the list via an IPO stock offering to the public. From 2000 to 2009 only 29 companies going public made the list. But in 2009, it was easier than ever to make the list as the current fall in equity prices lowered the threshold for entry to only $12 million in valuation from a level of $45 million just one year ago.

In early 1970’s there were 350 or so publicly traded companies in Minnesota. Now there are less than 150, down from 260 in 1998.

Now, being publicly traded doesn’t necessarily make a company inherently better. No, privately held companies can still very profitably produce goods and services, hire employees, pay taxes and otherwise contribute to the community.

In fact, most employees work for small and medium size companies which are not publicly held. And, privately held, largely family owned, companies produce the lion’s share of GDP in most countries around the world. (Over 93% of GDP in Italy for example.)

But the great engines of Minnesota’s economic growth and reputation were those companies that went public and continued to grow – 3M, Honeywell, Northwest Airlines, Pillsbury, General Mills, Dayton’s, Medtronic, Supervalu, Best Buy, United Health, etc. Their profits partially ended up in financial support of important community institutions.

Though Cargill demonstrates how a closely held company can grow to strategic size, most privately held firms will hit a glass ceiling in mobilizing the financial investment necessary for reaching the big leagues of global market presence.

Minneapolis has lost its own investment banking firms that take local companies public. And, the liability risks of compliance with Sarbanes Oxley legislation is a deterrent to some in taking their company public.

But the decline in vitality of Minnesota companies attaining all the conditions favorable for a successful IPO indicates that something else has changed for the worse as well.

I think a kind of strategic leadership instinct is missing.

It is the common sense wisdom that was common place in an older generation of Minnesota business owners and executives.

In my work for the Caux Round Table on blending business success with ethics and social responsibility, I have run across pieces of sound advice from members of that generation. This home grown wisdom is now needed more that ever.

For example, I have an article from 1972 written by Wheelock Whitney, whose local investment bank (now owned by ING out of The Netherlands) once took many local companies public, that talks of the need for hard-working, sharp-minded boards of directors who are not rubber-stamps for management.

I have a 1975 letter from Whitney MacMillan, then CEO of Cargill and in the process of taking that family company to world class success, setting forth in one page the core ethical stance of the company: it would do business with honesty and integrity. Period.

And, I have several articles by Ken Dayton, who with his brother Bruce led the Dayton company to great wealth and profitability. Ken wrote on how business must take the lead in helping communities reach high standards of cultural achievement and social justice. Ken wrote too on the role of directors in providing strategic guidance to management.

What is the common theme put forth over three decades ago by Wheelock Whitney, Whitney MacMillan and Ken Dayton: high standards.

This is the very kind of “soft power” or “soft assets” that I wrote about in my July column.

From high standards comes growth and success. Lowering the bar for achievement, going with the flow, following the cautious advice of counsel, not sticking your neck out, covering for what the team or the boss is comfortable with – none of these approaches can ever build a great company.

Just read Jim Collins again in his book From Good to Great.

Mediocre standards and a focus on personal survival can indeed sometimes produce a business that survives, but not one that thrives, especially in hard times.

I think that every day we need to ask ourselves: is this the best that I can do?

Or, in the team setting: is this the best that we can do?

What can we do more and better for customers, for innovation, for better cost control, for more dedicated and motivated employees, for our brand equity, for the community? These are the standards of genuine business success.

What is a bit surprising to me is that the answer to how best to do business has been here all along. Like Dorothy returning to Kansas from Oz, Minnesota business people can learn much from our own legacy.

We don’t need to spend money on the latest consultancy fads or gurus or technologies. No, just seek out the human wisdom of what worked in the past to make Minnesota a great place to live, work and build a company.