What Matters? Management Matters

May 17, 2024

It’s the quiet ones.

The determined ones.

The ones that tell you what they’ll do . . .

and then do it.

It’s seldom the loud ones.

The ebullient ones.

The ones with showmanship, or salesmanship.

It’s why only Steve Jobs can pull off the black turtleneck, or Jensen Huang the leather jacket.

For most mortals, they must grind.

In grindingly difficult industries.

It’s the convicted ones,

the ones that spell out targets beforehand,

and execute mundanely and daily against them.

The market does resemble that tired analogy, it is ultimately a weighing machine,

and few things tilt the scales more than your ability to execute and deliver as a management team.

Think the value of a company is the sum of its discounted cashflows? Then what discount rate would you apply for incompetence?

From Wall Street to Main Street, how you execute and how you deliver determines how you’ll be rewarded. The ones who invest the coins (i.e., your stakeholders) look for consistency and credibility.

Need an example?

Look to Suncor and Rich Kruger’s turnaround of that Canadian energy giant. A former Exxon Mobil executive, Rich Kruger succeeded Mark Little in 2023 amid shareholder pressure to revamp the management team. A year into the role?

He’s delivering.

In a wonderfully dull way . . .

Like institutional managers, we don’t like volatililty. Emotional, intellectual, or operational ones. Put forth a roadmap, promise what you promise, and deliver against it. That’s all.

It’s like a drumbeat, and dare we say? The more boring the cadence, the better.

Bravo. Who touts revamping their operational management system on an analyst call when you’re supposed to be hyping earnings, autonomous trucks, and future plans? It’s tedious, it’s excruciating, and it’s brilliant. Boringly excellent. Well mission accomplished.

That’s a good thing though, you managers out there. Leave your improv and jazz records at home. We don’t need Dizzy Gillespie, we need his tax accountant. Occasionally you can throw the community an extra crumb or two, but by no means is that necessary.

What is necessary though is execution, and creating a culture of responsibility and ownership throughout the organization that performs on task.

In each of your sectors, you’re dealt essentially the same cards, you operate under the same general conditions, and experience the same macro headwinds and challenges as your competitors. Though the amount of resources differ between the firms, you and your predecessors’ ability to execute are responsible for the position you find yourself in.

The resources available (i.e., the opportunistic capital afforded by the market), will largely be based on your reputation, and if your firm’s shut-out from the market, rest assured . . . it’s on you.

Your reputation good sir or madam, preceded you.

While our society abhors monopolies, we celebrate oligopolies. So long as there are a few hungry hippos left, we’re content. So in your own personal and private lake, those who execute well will have the opportunity and capital to eventually consolidate and dominate. If not, it’s on you.

If you’ve found religion and decided to tack, if your Board has found a semblance of sense to change captains and navigators (e.g., Suncor’s pivot from Mark Little to Rich Kruger) after an ill-fated venture, then accept that time heals all wounds . . . but only if the new stewards execute.

In sum, a firm and a management team’s reputations are built quarter-by-quarter, capital is won by excellence, and mediocrity begets what’s deserving . . . market apathy. Now this isn’t by any means an “ode to management,” it’s a clarification of that Bill Belichick mantra . . .

“Do your job.”

It’s an admission that the Pareto principal applies to life and business. You know, the 80/20 rule. In this case, it’s the 20% we care about. Having great assets are one thing, but do you have the team to turn those assets into shareholder returns, or will they be forever squandered.

In truth, only 20% of the management teams out there are good, and far fewer are excellent. The vast majority are mediocre, and some are plain terrible. You can tout all the wonderful attributes of a company, the boundless resources, the vast expanse of greenfields to be appreciated and traipsed through, but if your guide is mediocre, and meanders or becomes entangled in those fields . . . you’ll never make it.

So as you dive through earnings season and ponder the quantitative results, pay attention to the qualitative. Pay attention to the words, pay attention to the consistency of the speaker’s actions, and their ability to deliver what was promised. Results matter, promises made and promises kept matters.

Management matters.

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