Emerson B. Houck D'56, Th'58, T'58
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"Loyalty is always reciprocal.
If we expect it of our
employees we must first be
willing to grant it to them." —J.K. Lilly Jr.
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35 Years, 12 Principles
During his 35 years at Eli Lilly and Company, Em Houck kept moving. "I
went where our chairman wanted me to go," he says. "I was sort of a troubleshooter."
It's probably Midwestern modesty that allows Houck to refer to his distinguished
career as troubleshooting. Starting a few weeks after his graduation
from Tuck, he served Lilly as executive director of medical research, executive
director of engineering, director of human resources (in two divisions), and
director of administration for the Australian affiliate. "Jane and I knew it was
time to come home from Sydney," he says, "when our youngest child identified
Captain James Cook as an American founding father!
"I was one of a few guys who moved between functional areas in a very functionally
organized company," Houck says. "But as an analytical person—I am
an engineer, after all—my management decisions were generally supported by
facts." Analytical and forward-looking, too. At Lilly Research Laboratories, he
oversaw the installation of one of the first IBM System/38 computers. "It was
state-of-the-art at the time and helped us get clinical trial data on our physicians'
desks by 4 a.m. the next day."
But more than great corporate war stories, Houck's experience as a manager
has given him a lifetime of wisdom. Both before and after his retirement in 1993,
he has shared his management skills as president, trustee, board chair, treasurer,
and advisor for an array of schools, hospitals, and foundations, as well as his
church. A recipient of Dartmouth College's Alumni Award and former member
of the Alumni Council, Houck was asked to write about his 12 principles of
management for his 50th college reunion book, to be published in 2006. Tuck Today is pleased to present that article. (And for more of Em's writing, be sure to check out his Go Huskies! Beat Felix the Cat!, a charming history of school mascots.)
Some Thoughts on Management
I have spent most of my adult life in, as Peter Drucker has called it, the practice of management, in directing organizations of varying degrees of complexity toward a desired outcome. That Drucker would select the word "practice" is indicative of the fact that he, as I do, considers management to be a profession. A profession derives from a body of transferable knowledge, uses tools and techniques that can be mastered, and rests upon sustainable principles. I approach this topic from that perspective.
When I first entered Tuck Hall—has it really been a half century ago?—I was struck by the wisdom contained on the plaque just inside the front door, words of Edward Tuck, dedicating the school to his father: "...always act with perfect confidence in the wisdom of doing right as the surest means of attaining success..." Do right. Discover what is right and act that way and you will do well. Whatever you are managing will do well. Believe in that. Internalize it. That became my Cardinal Principle of Management from which all else flowed.
Clearly the determination of what is right is all too often easier in the saying. Pressures exist to compromise, to select forgiving timeframes, to, as John Dickey once said "...fall prey to that most seductive of all human delusions, that the end justifies the means." Clearly, too many executives have indeed lost sight of this principle in recent years and we have been treated to the spectacles of the Enrons, Imclones, Adelphias, Tycos, Putnams, etc. Such disgraces, unfortunately, harm not only those directly affected but shake confidence widely in the free enterprise, market driven system that has generally served us so well.
Early in my career at Eli Lilly and Company I was fortunate enough to meet Mr. Eli himself and his brother, known as JK, Jr., to differentiate him from their father, JK, Sr. Mr. Eli was a dignified man, always dressed in a three piece suit, never seen outside without a hat, semi-retired, in his eighties, but still blessed with a firm handshake, sound mind, erect bearing and clear voice. He spoke to a group of sales managers, fifty plus. His words had a profound impact on me: "Gentlemen, I leave you with one thought that I have shared with you before but I want you never to forget and always to keep central to your actions and those of your men. Two errors can occur where our medicines are concerned. One is that the doctor will not prescribe our product when it would have been the best thing for his patient. That's where salesmanship comes in. It is our job to make sure the doctor knows about our drugs and when they should be used. The second occurs if our product is used when someone else's would have helped the patient more. That's where honesty comes in and that's your job, too. Always assume that the next patient the doctor sees is the person you love best: your mother, father, wife, or child, or perhaps, even, yourself." Principle Number Two, Honesty.
Some time later I came across a document that JK, Jr. had written in 1919 as a young man just graduated from the University of Michigan with a degree in pharmacy. His father had asked him to explore the nature of employment and what would later be called "industrial relations", "personnel", and, more recently, "human resources." Young JK, product of a wealthy family, entrepreneurs in the growing pharmaceutical industry, showed a wisdom well beyond his years, an insight far ahead of his time, and a sensitivity admirable in any era, with his report, now a precious relic in the company archives and still a cornerstone of corporate philosophy. Among other things he wrote: "Loyalty is always reciprocal. If we expect it of our employees we must first be willing to grant it to them." From this came the company's policy of never laying off employees for economic reasons, first tested during the Depression. JK Sr., gathered all of the employees together, and said "Last night Mrs. Lilly and I discussed the situation and we have decided, with your help, we can get through this with no layoffs." Mrs. Lilly and I. Their personal fortune at stake. No layoffs. No wonder the company was never unionized. Principle Number Three: The Reciprocity of Loyalty.
I have become convinced of the importance of keeping a proper balance of talent and prestige among the various functions necessary to run a business. Some firms have become overly impressed with Research or Engineering, developing great pipelines of exotic products. But, are they products that the market wants? Do they fulfill a human need? Can they be profitably produced? Other companies have seen Marketing as their talisman, demand generation as their god. But they have no products to sell or no production capacity if they do, or they are undercapitalized. In the sixties the Chrysler Corporation was taken over by financial whizzes. That, of course, was equally unsuccessful. Principle Number Four: Balance Between Functions.
Principle Number Five is almost a corollary: Communication. Communication between the functions is essential. Research and engineering must be working on products that marketing can sell and designing them so that production can make them and cost accounting systems must exist such that the true profitability of products and lines may be determined. Cash flows, facilities, and properly trained people in sufficient quantity must be available. And everyone must understand the importance of timely new product introduction, of the complex interrelationships between time to market, price points, quantity of sale and cost to produce. Communication, however, only begins with that necessary between functions. It is also important to communicate to employees, shareholders, customers, the local community - all of the company's constituencies - with clarity and timeliness.
I once thought if I worked really hard I could get everything done. Wrong! I soon learned that the inbox is never empty, it is essentially infinite for any successful manager. There is always more to do than one can possibly accomplish. The answer, of course: Prioritize. Allocate your time and energy and that of your organization only to those things of highest value to the accomplishment of the mission. Since prioritization involves value systems it is almost always controversial. Polonius' well known advice to Laertes is useful here: "To thine own self be true..." Do not role play or pretend that your values coincide with those of the organization if they clearly do not. The dangers of not doing being true to yourself have been well explored in other areas of literature and drama as well. General Frank Savage's fate in the excellent movie Twelve O'clock High was a memorable teaching tool for those of us in Tuck School in 1957. Principles Number Six and Seven: Prioritize and Act According to Your Own Value System.
My own equation for success (I am, after all, an engineer) is Effectiveness=Efficiency x Prioritization, which says simply if you work on the important things (Priority) and allocate the appropriate amount of scarce resources to them (Efficiency) your output will be desirable (Effectiveness). One of these scarce resources, perhaps the scarcest of all, is time. I kept a quote of Napoleon's to General Ney on my desk: "Go, sir, and gallop. Remember I can give you anything you need except time." Decision making needs to be timely. Data needs can be close to infinite, data gathering has cost, the passage of time can make the best of decisions irrelevant. It is important to know which pieces of information are essential to a decision, which are marginal, and which are useless. Whereas every fact has value to a scientist, an executive should use sensitivity analysis to determine what he must know, where his judgment can fill gaps, and what he cannot afford to bother to know. Principle Number Eight: Value Time.
Another overarching philosophy to instill in any organization is that of Improvement. A culture needs to be created that no matter how good any operation or group performance is it can always be better, that suggesting so is not a criticism. Improvement comes in two basic forms: one is Incremental, tiny improvements made every day, adding up like drops of water in an ocean; the other is Breakthrough, dramatic improvement, quantum leaps. Each has its place, they are not mutually exclusive, but each impacts the organization in different ways and must be managed differently. Principle Number Nine: Continual Improvement.
Next is the value of measured growth. It is a rare entity in this world that prospers by staying the same. In our Darwinian economy one must grow to avoid stagnation. Slow growth saps the organization of the vigor and dynamism that new employees, energies and ideas can bring. It also impedes career development, leading to the loss of the brightest, most ambitious and highly skilled younger people. Too rapid growth, on the other hand, can be equally disastrous. It can lead to pronounced weakness at middle management and entry levels and hiring rates that compromise qualifications, and training. The organization is so busy absorbing and assimilating the new people and projects that it cannot properly tend to its primary function. Principle Number Ten: Measured Growth.
Leadership is not management, but it is an essential component. Leaders must have a clear vision of what the enterprise can be in its finest manifestation and the ability to articulate that in terms that will stimulate everyone in the organization. The leader must not lose sight of his goals, as we were so forcefully reminded in The Bridge Over the River Kwai when the British Colonel forgot that building that bridge was for the morale of his troops, not for the bridge itself.
Appropriate leadership style is situational. In normal circumstances the best managers take the time to hear all relevant inputs to a decision before it is made and the time to test for understanding of and commitment to the decision after it is made. He will assure himself that all of the required resources are available, that progress milestones are established, and that responsibilities are clear. In extreme cases, genuine emergencies, there may not be the luxury of taking this time but these are, by definition, rare. Examples would be a hospital emergency room or operating theater or a military unit in combat. These are not times when reasoned debate is encouraged. In most managerial situations, however, it should be. (It will be noted, however, that in successful ORs, ERs, and combat squads prior training has created precise understanding of roles, responsibilities and desired outcomes. These should be established for every managerial decision.) Principle Number Eleven: Leadership.
Of course, the good manager must have a mastery of the tools of his trade, be able to read and interpret financial statements, marketing research reports, and the like. He must also be a good judge of character, know when smoke and mirrors are being used instead of facts and data, must be energetic and personable. No one has all of these ingredients in their entirety. Wise managers realize this and buttress themselves with subordinates with complementary skills and the willingness to challenge their leader. I once attended a lecture when I was visiting Stanford given by a Professor of Management who had been on JFK's staff. He contrasted the poor decision making process that led to the Bay of Pigs fiasco with the much improved process during the Cuban Missile crisis, concluding that at the time of the former Kennedy's inner circle treated him with so much deference and respect that they failed to share their reservations about his course of action, reservations that might have influenced him dramatically. Later, however, they understood that he wanted to hear contrary viewpoints and encouraged challenging opinions prior to the decision. This approach led to vastly superior results. Principle Number Twelve: Surround Yourself with Challenging Talent.
Emerson Houck D'56, TH'58, T'58
January 2005
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