Fed seems ready to reduce rates
washingtonpost.com
RR: Hope you and your wife enjoy the weekend in the mountains.
regards,
-Scott
btw, keep an eye on SYK...its been my family's largest holding for a long time...My father likes to invest in great management...here's an article on Stryker's leader and his operating philosophy...
chiefexecutive.net
Recession? What Recession?
By MICHAEL A. VERESPEJ
Chief Executive Magazine
June 2002
Southern gentleman John Brown achieves 20 percent earnings growth annually—no matter what.
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Immaculately dressed, John W. Brown looks and acts like a perfect Southern gentleman.
He insists that you enter the room—or go through the door—first. He, not an administrative assistant, fetches you a cup of coffee. He’s gracious, soft-spoken and speaks in the reassuring tones of a counselor who’s there to help you with your problems. “I am pretty low-key,” he insists.
But underneath that demeanor is a fierce competitor who, even at 67, continues to demand that Stryker Corp. achieve the same staggering target—20 percent annual growth in net earnings—that he set for the company when he became its president and CEO 25 years ago.
It’s a target that the $2.6 billion Kalamazoo, Mich., global manufacturer of surgical devices, orthopedic implants and hospital beds and stretchers has met all but five quarters. Those quarters followed Stryker’s December 1998 purchase of Pfizer’s Howmedica division, an acquisition that doubled Stryker’s size. For $1.65 billion—more than twice its own annual revenues—Stryker bought Howmedica and assumed the acquisition’s debt. By January 2000 earnings were back on track.
Last year Stryker’s net income increased 21 percent, matching the compounded annual growth rate of the past decade and pushing its 25-year compound growth rate to near 24 percent. In this year’s first quarter, net earnings were 27 percent higher than in the first quarter of 2001. “They are hitting on all cylinders right now,” asserts Katherine Martinelli, medical technology analyst in the New York office of Merrill Lynch. “Their earnings are well above the industry average of 13 to 14 percent.”
Brown’s formula for consistent growth, typically associated with emerging companies rather than a 61-year-old business, is simple—on paper. He oversees a decentralized organization, and each of Stryker’s 14 divisions focuses on a specific market. He instills in employees an unrelenting drive to maintain growth, no matter what the economic conditions, and he demands that everyone focus on numbers that both the corporation—and individuals within it—must achieve.
Brown also surrounds himself with smart people who do what is necessary to reach those goals; many of them boast long careers at Stryker. “Their management team has a deep bench with a lot of talented people, not just John Brown,” says Martinelli.
Top management is made up of a six-person team led by Stephen Si Johnson, who goes by Si, group president of the MedSurg unit, whose products include everything from hospital beds to image-guided surgical systems. In March, while Brown recuperated from elective surgery for almost three weeks, Johnson served as acting CEO. Johnson, who came to Stryker just three years after Brown took command and has since risen through the ranks, admires his boss’ persistence and ability to make people feel important. “In the midst of being very demanding, he is very respectful. I have never walked out of here thinking he didn’t care about me,” says Johnson.
Just as important, Brown lets his leaders lead. The CEO leaves the day-to-day running of the business to division heads who operate the way they see fit. “It is tremendous autonomy, but responsibility with a capital R,” says Brown. “We monitor everyone. An Enron-type thing would never happen at this company.”
That decentralization allows Stryker to build an organization around product segments. That way the division’s president and all of his or her direct reports can focus on making their particular segment better. They also become experts in their niche, which helps them to sell to specialists, often the physicians themselves, who buy medical equipment. Stryker’s salespeople are even known for taking specific design changes back to the company’s product engineers.
Decentralization works because Brown has made Stryker a very numbers-oriented company. Executives admit the culture does not appeal to everyone. “If you desire a highly structured organization, this is not the place for you,” concludes MedSurg’s Johnson. Instead, the people who thrive at Stryker are entrepreneurial but also willing to be measured on financial goals. Everyone in management has a division-specific number by which they are measured and rewarded. Indeed, anyone with a title of vice president or higher can earn a bonus equal to one-third to one-half of his or her salary.
What’s more, for the most part, Stryker’s 3,000 salespeople are paid on commission. As a result, some of them end up making more than their bosses. “It doesn’t bother me,” insists Brown. “I don’t have to cajole them. They want to work because of the financial opportunities.”
But Brown also ensures that the Stryker team is focused on its goals through a regimen of meetings.
A self-proclaimed workaholic who toils 12 hours a day, Brown conducts a phone meeting every Monday at 7 a.m. with Stryker’s division heads. “We reaffirm our sales projections for the month and identify any sales or quality issues that we need to resolve,” he says. Each division also produces a monthly financial report on progress toward its goals.
In January and February, each division has a two-to-three-day meeting to review its products, marketing and strategy. The following day is the chairman’s breakfast. “Everyone who achieved 100 percent or more [of his goal] gets to eat breakfast with me,” says Brown. “The others go to another breakfast. They are well fed. But it is not,” he emphasizes, “the one where you want to go.”
Each August, there is a two-day meeting to review year-to-date progress. “We take a 48-hour, 360-degree look at the business and develop goals for the rest of the year and for the coming year,” says Brown. Three months later, each division presents its operating budget for the next year to the board of directors.
In addition, Brown authors a monthly report for the board that is both a financial overview of the corporation and a review of each division. He also writes a more informal management letter focused primarily on sales that praises achievements and identifies areas for improvement.
If a division stumbles, Brown says he will “help”—that is, step in to see “if the strategy is askew, whether they have just been unlucky or whether they have made mistakes.” When called on, Brown offers “one or two simple ideas,” explains Johnson, but he refuses to release employees from their financial goals. “They have a very disciplined approach,” adds Merrill Lynch’s Martinelli.
Brown’s personal story offers insight into his management style. Growing up in rural Paris, Tenn., just over the Kentucky border, Brown and his family often had to scrape to have what he likes to call “the bare necessities of life” such as food, clothing and shelter. “Coming from a modest background makes you focus on the essentials,” says Brown. “It helps in my focus because I do know what life is like in a ditch. I don’t get caught up in the fanfare of whether fame and fortune will come.”
Brown became president of Stryker in 1977 after running a surgical instruments unit of Bristol-Myers Squibb. He came up with the growth goal shortly thereafter. The family business founded by orthopedic surgeon Homer Stryker, who invented hospital stretchers and cast cutters, wanted to go public. Investment bankers told Brown that to be viewed as an emerging growth company, Stryker—one-third of which is still held by the Stryker family—had to grow earnings profitability at 20 percent per year.
Having the same annual target has given the entire workforce of 13,000 a unifying goal. And that goal still satisfies Wall Street as well as Stryker’s board.
But Brown’s unwavering focus has earned him a tough-guy reputation, despite his courtly Southern demeanor. “I think I’m a nice guy and I am pretty easy to get along with. But others tell me that I can be intense and that my bite is worse than my bark.” Just ask his competitors.
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