Basic Management Concepts

Basic Management Concepts

In 1978, I was working for a nice, privately held, medium-sized business in the telecommunications business. The company had done well. We were growing. Making money. Having a good time. Then, it got really interesting. The owner sold the business to a billion-dollar conglomerate out of Cleveland. We became part of Reliance Electric Company.

Reliance Electric was run by B. Charles Ames. Ames earned an MBA from Harvard. He had been a Partner at McKinsey & Company. He was named president in 1972 and CEO four years later. He knew how to manage a large, complex business like Reliance. Uniquely, he let every manager in the company know exactly what he expected in terms of commitments and how the organization was going to operate, coupled with some very specific ground rules for managers. He wrote it all down in a 22-page document titled Basic Management Concepts.

This is the first in a series of posts that will describe what Ames thought about basic commitments, how the organization was going to operate, and his ground rules for managers. Ames believed these ground rules applied to any kind of organization in any industry — to small companies and large, complex, multi-division ones alike.

Reliance was sold to Exxon Corporation for $1.23 billion in 1979. That was approximately 20 times the $64.2 million earned that year. Ames went on to run Acme Cleveland Corporation and the Uniroyal Goodrich Tire Company. He took his commitments, how the organizations were going operate, and ground rules for managers with him. They worked again and again.

My purpose is to share these principles in order to help managers become better managers. While I have attempted to follow Basic Management Concepts during my career, everything here is from B. Chuck Ames. None of it is mine. I think, however, he will be okay if I share it with you.

Our Basic Commitments. Ames believed we had two basic commitments. And, he did not use the word commitment lightly. To Ames, these commitments were inviolate:

  1. To earn an attractive gain for shareholders
  2. To provide attractive work opportunities for employees

As the CEO of a publicly traded corporation, Ames had every reason to have a commitment to give his shareholders a better return on their investment, through dividends and stock appreciation, than they could have realized via an alternate investment. This commitment can be applied just as diligently to privately held firms, where owners are risking their invested capital—and occasionally personal wealth, as well.

Further, Ames believed the managers of the corporation had a commitment to ensure that all employees were treated fairly and were offered opportunities for personal and professional growth that matched their interests and capabilities. In general, this explains why companies and organizations must continue to grow. That is, growth provides growth opportunities for people. Public or private. No growth, no personal growth opportunities.

The next installment of Basic Management Concepts will describe the metrics that Ames applied to fulfill these basic commitments.

B. Chuck Ames and his wife Jay currently manage the Ames Family Foundation. They divide their time between a home in Vero Beach, Florida, and a second home in a suburb of Cleveland.