While writing my bachelor’s thesis, I wonder: Who else (besides me and my own development) will ever benefit from it? Is there any company that would ever look at these findings and based on them will be able to improve the performance? I went with questioning myself even further and was pondering: Are companies and managers following the current scientific developments when they are about to tweak their strategy, or is doing business more about “trial and error”, “common sense” and “rule of thumb” kind of thing?
My considerations (and doubts) about the actual worth of research findings in this tough, complex and dynamic business world began earlier and have been significantly validated during the International Week in Switzerland. I had a unique opportunity to confront my idealistic, theoretical perception of creating strategies with a quite harsh reality of practice. So this is how the story goes.
One of the companies I have visited during IW in Switzerland was Glencore. Just as the majority of you reading this article, I also had never heard about this company before and had no idea what to expect from it. My quick Google scan resulted in promising information: “Glencore is an Anglo–Swiss multinational commodity trading and mining company. As of 2014, it ranked tenth in the Fortune Global 500 list of the world’s largest companies and it is the world’s third-largest family business”. It was enough to really look forward to their presentation, but still a visit at Lindt or Rolex would for obvious reasons seem more appealing.
My first association with a “family business” was a cosy, nice company, based on traditional values and close relationships. However, the reality was different. We arrived at the headquarters of Glencore in a small village Baar nearby Zurich, mainly the mountains around sweeten up the view. I faced a monumental, white, very corporation-like building and was welcomed with a quite cold, very official greet. “Business world, here we are”, this is what I thought. We all sat around a long table, like in a typical board of directors meeting room and the presentation started.
Each employee from a different department was telling a short story about their experience with Glencore, explained how the business operates and what their main responsibilities are. Glencore operates within two main activity areas, namely exploitation and sale of commodity goods like metals, minerals, energy and agricultural products. Glencore describes their market operations as follows:
“Glencore Xstrata is one of the world’s largest global diversified natural resource companies. As a leading integrated producer and marketer of commodities with a well-balanced portfolio of diverse industrial assets, we are strongly positioned to capture value at every stage of the supply chain, from sourcing materials deep underground to delivering products to an international customer base.”(Source: www.glencore.com)
Since Glencore is a company which trades goods that are not differentiated and cannot be branded, their competitive advantage must be hidden behind something else than the product itself. This intrigued me to listen carefully what the company is about.
The employees were quite generic and very proper with their explanations about the firm’s operations. The sales department seemed to be the most crucial one, since, as I learnt later on, good sales techniques and outstanding communication between partners is the actual added value of this company. It resembles a Wolf of Wall Street type of trading, only not of stock and shares, but of commodities.
The real challenge of all the theories I have learnt so far during Business Administration studies started at the moment when the CEO of Glencore, Ivan Glasenberg, entered the room. All the talkative sales people seemed to become quite silent at once. The respect and the authority towards the CEO could be easily spotted at the first glance. “It seems that the transformational or inspirational leadership style, that we learn so much about, is not really the style preferred here”, this is what crossed my mind. He entered during the Questions and Answers session, but now he was the only one giving all the answers. The CEO took lead of the discussion and in a very relaxed and open manner was sharing his opinions about the business world. This was a precious moment when I was able to get the real feeling about the company and learn about things which cannot be read on the company’s website. First of all, the CEO highlighted that the company works on a short-term planning, since future cannot be predicted. “But what about long-term approach and sustainable development, this is what I have learnt during my last strategy class?!”, I thought being puzzled. I referred to all the theories I was soaked with and dared to ask a question: “ how can you create a mission or vision statement without a long-term approach?” The CEO grinned and replied to me: “Well, miss McKinsey, we don’t have any particular mission statement. Our main principle is to deliver value to the shareholders and investors”. “But how do you motivate your employees without giving them any vision of the future they go towards?”, my automated response was. “We offer our employees financial stability and this is an ultimate motivation. When you know that you can provide your family with a stable income, it is motivating enough.” Another question asked by others concerned Corporate Social Responsibility (CSR). On the table we could find a promotional flyer stating: “Glencore: The myths and the facts”, including a list with myths such as: Glencore does not pay tax, Glencore exploits its workers and host communities, Glencore does not protect the environment etc. Since the company created such a flyer to deny all these myths, it seems that it used to have a rather notorious reputation regarding CSR. The CEO reflected on that matter in a quite vague way, saying that Glencore is engaged in some CSR activities but it is not the company’s main concern.
I had to take some time to process it all. Short-term approach, no mission, pure shareholders focus, only a few CSR activities, money as ultimate motivation – the complete opposite of theories I have learnt so far! I would put it simply: they do the business the old way and they are very successful in doing so. On the other hand, being concentrated solely on money and financial performance all the time, without any clear story or superior value around the whole business seems to be very limited. It is an extremely interesting study case.
A few lessons I have learnt from this experience are:
1) Business to Business and Business to Consumer are entirely different kettle of fish. When doing B2C you have to be really sensitive with the overall image you create, but B2B is more about stable relationship with your partners.
2) B2B is where the real money is made. Revenues of US$ 221.073 billion in 2014 is a lot.
3) Family business can simply mean that most of the stock shares is held by the employees of the company. That is why they are committed to do their job well. They have a direct stake in it.
4) Scientific theories are just theories, practice has its own drives and peculiarities.
5) I would still rather work for a company that reflects more of a modern, sustainable, stakeholder-oriented, value-creating, idealistic approach of doing business.
Glencore is a huge, powerful company and their stable growth and the fair dividends they pay attract a lot of investors. They do not follow modern scholar’s theories, but they make a lot of money. I suppose they found their own golden mean. However, let the future judge how successful and sustainable it will be in the long term.