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The four clarities

Module 6: Knowledge framework for growth

In 1950 Ewing Marion Kauffman started a pharmaceutical company in his basement in Kansas City with a $5,000 loan from the bank and $4,000 investment from friends.

Marion Labs specialised in bringing to market drugs that had been discovered but not marketed by other companies. When it merged with Merrell Dow, it was outperforming other drug company stocks by 250 per cent and had the highest sales and the highest profit per employee of any company traded on the New York Stock Exchange. It had almost a $1B in sales, a market cap of $6.9B, and 3,400 employees.

As one of Kauffman’s values was “those who produce should share in the rewards”, he shared equity with many of his employees – at the merger, over 10 per cent of them became millionaires.

Kauffman didn’t set out to create a growth company; at first he just wanted to make a good living for his family. But over the years the company grew, went public, and in the early 80s the company had five years of record sales (40+%/year) and record earnings (50+%/year). The three years before it merged with Merrill Dow, it grew headcount to 3,400 employees and was on the list of “America’s Ten Best Companies to Work For” each year.

How did this company become so successful? Kauffman and the senior management team said it was because the company was aligned around these Four Clarities:

1. Clarity of Purpose: mission, values and vision

Everyone in the company knew what the mission was

Everyone in the company knew what the mission was, why the company was in business, and every person could recite the company’s values. At the “Marion on the Move” regular update meetings, Kauffman consistently reminded employees of the vision, and how important they were to the company’s being able to achieve that vision. He called Marion an “uncommon company” and told them it was their right to be uncommon, too.

2. Clarity of Direction: strategy, objectives, goals

Kauffman and the executive team told the employees where they intended to take the company. Long before going public in 1965, Kauffman shared equity with employees, and continued to do so for the next 24 years. The company developed clear strategies, goals, objectives, and action plans with employees, measured progress and reported results on a regular basis, and Kauffman publicly thanked those who had achieved extraordinary results.

3. Clarity of Structure: roles, responsibility, authority, interdependencies

The VP for HR and the Director of Organisational Development worked with the managers to make sure that each person understood his or her role, responsibilities, levels of authority, and accountability. They were also careful to point out the interdependencies between and among units, anticipate any breakdowns in communication or execution that might occur between those units, and facilitate solutions when breakdowns did occur.

Point out the interdependencies between and among units

4. Clarity of Measurement: technical competence, interpersonal cultural fit, compensation and rewards

The VP for HR and Director of Organisational Development also worked with each manager to determine whether each person’s technical competence was at the level required. If not, they developed a plan to get the employee to the appropriate level, with the understanding that if the employee was not able to perform at that level, they would need to leave the company. They carefully checked to make sure candidates were an interpersonal and values fit with the company before hiring them, and quickly addressed any issues regarding culture and values fit if they did occur.

The Executive Team developed a very generous compensation and benefits program, and a bonus plan that included all associates from the manufacturing plant’s assembly lines to the executive suite. It also implemented a more effective sales incentive program that challenged the sales force but still made it possible for them to achieve goals that would boost their salaries and bonuses. The compensation programs also included spot awards, stock options and some outright grants of stock.

A bonus plan that included all associates from the manufacturing plant’s assembly lines to the executive suite

 

Every CEO needs to think hard about these Four Clarities and whether you have this kind of clarity within your own company. These insights were one of the factors contributing Marion Lab’s success, and they could be one of your secrets as well, if you implement them within the context of your company.

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