While I did not realise it then, I know today that I had learned nearly all the essentials of business management and leadership by the time I was 17. My teacher was my grandfather. He was a most unlikely teacher – being a high-school educated dairy farmer. But the lessons learned by watching and working with him in the 1950s, are as powerful and relevant today, as ever.
His 340-acre farm was in upstate New York – in the little town of Putnam Station, about 10 miles from the (more famous) village of Ticonderoga. He was the third or fourth generation of his family to try to make a living on that property. It was never easy. With modest meadows for growing crops and hilly pastures for supporting livestock, it was challenging to support a family.
On top of that, my grandfather was not really cut out to be a farmer. He was a “people person”. At one time he was the town postmaster. At another, he was half-owner and manager of the general store. Eventually, after prodding by my grandmother to make the farm more profitable, in the late 1920s he bought a small herd of dairy cattle.
Being a dairy farmer in the midst of the Great Depression was no picnic. The only viable business model for these small Putnam farmers was to put their daily milk output into 40-quart cans, which were then picked up by a truck from the Dairymen’s League co-operative, for processing and retail distribution by dairies and creameries. Even by the 1950s, milk still sold wholesale for only two cents a quart. And that is what every local dairy farmer did ... except for my grandfather.
He decided to bottle his milk, put it in cases in the back of his pick-up truck, and sell it door-to-door in Ticonderoga. With his convenient delivery, amazing personal service, and returnable glass bottles, his retail price was 15 cents a quart. So there was my first great management lesson – business models really make a difference.
Strategy is all about being better by being different, and he was a different kind of dairy farmer from his neighbours. In particular, he intuitively grasped the idea of adding value for the customer, and finding a way to be compensated for that.
It is such an important lesson – timeless in its applicability. No amount of technological change or globalisation alters this fundamental truth about business. But there was a lot more to learn.
The second lesson was about customer service. We not only delivered to the door, we often (depending on customer preferences) put the milk in the kitchen fridge. We knew every customer’s name and background. He extended credit when people couldn’t pay. He expanded his product line to include cream, eggs, and poultry – the chicken “division” was run by my grandmother. My grandfather was a true entrepreneur – an owner-operator always willing to innovate, to try new things.
Third was operational synergies. We “recycled” the cow and chicken manure as fertiliser for the hay meadows and corn field, which meant his yields were always the best in town, thereby lowering the need to buy additional cattle feed and keeping costs down. We reused the milk bottles (indeed, most customers left their payment in an empty return bottle). We rotated crops to keep the fields productive.
Fourth, was hard work and discipline. My grandparents worked incredibly hard. If you really want to grasp what it means to be responsible “24/7” – then be a dairy or chicken farmer. The cows have to be milked twice a day, 365 days a year. You have to collect the eggs and clean the henhouse daily. I worked with my grandparents almost every summer for eight years, rising early and retiring worn out; milking cows, cleaning stables, delivering milk and harvesting hay. The discipline and hard work were memorable, and satisfying. They shaped my work habits for a lifetime in leadership roles.
Fifth was integrity and ethics. The customers trusted my grandfather and gave him their business. He trusted them – sometimes too much, creditwise. I can remember my grandmother worrying about people who owed him too much money, but my grandfather didn’t have the heart to deny them milk for their kids. He was as honest as the day is long, and would never take advantage of a customer or supplier. Any dispute went in the customer’s favour. He sold them products they needed, at a price that was fair – how’s that for a timeless and winning business idea?
Sixth was cashflow. Almost everything in this operation was on a cash basis. He knew his daily revenue by adding up the cash each night, and we spent many hours rolling coins, and wrapping bank notes, for deposit at the local bank.
Most of the year our immediate family lived 2,500 miles away in an urban setting, but when we spent summers on the farm, my brother and I handled the direct-to-customer delivering while my grandfather drove the truck. We were like walking cash registers. We would start the day with our known cash supply (bills in one pocket, coins in the other), then take in the payments, give change, and account for our cash at the end of the day. Easy to see how cash was the lifeblood of the operation.
Seventh was interpersonal skills. My grandfather was outgoing and gregarious. Everyone knew him, and greeted him warmly; and vice versa. He was a living demonstration of the importance for any business of managing relationships as well as tasks. He wasn’t a better farmer than anyone else, but he had an entrepreneurial and interpersonal dimension that few others did.
As a final lesson – my grandfather was all about fun. He was fun to be with. He made life fun for those around him. As hard as he worked, he had fun doing it. His joy was infectious.
As I said – I had learnt all this by age 17. But the wisdom and relevance of these eight lessons seem even more powerful today. We wouldn’t be reading and talking about a global financial crisis if more leaders had learnt these lessons in recent years.
Robert Joss has been Philip H. Knight Professor and Dean of the Graduate School of Business at Stanford University since 1999