In one of the meetings my Grandpa mentioned how Lee Iacocca changed his name from Lido to Lee, when he moved to work in the South for Ford.
He later told me this was one of the first and best business books he read, so I searched it out, found his copy and read it on a trip to Florida and back.
The book
The Story
Iacocca was born to Italian immigrants Nicola and Antonietta Iacocca on October 15, 1924 in Allentown, Pennsylvania. Nicola Iacocca ran a successful restaurant and taught Iacocca how to run a business.
He went to college at Lehigh University, and after graduating got a scholarship to Princeton where he took electives in plastics.
After he graduated he got a job at Ford as an engineer, at the time Ford's policy with new engineers was to have them work in every area of the company. Iacocca soured of this and moved into the sales side of the company.
Here he worked his way up to the product development team and became the 'Father of the Mustang,' then was eventually promoted to be President of the Ford Motor Company.
There, despite record profits year after year he was fired by a paranoid Henry Ford II.
After taking time off to recoup he went to work for Chrysler, which he quickly realized could not rise out of its hole without help.
He hired many great people away form Ford, changed the whole communication and cost structure and eventually got loan guarantees form the government to allow Chrysler to continue operating.
Within a few years Chrysler had turned around, paid off the government loans and was the only profitable car company.
Communication
Communication seems to me to be Iacocca's biggest management principle, here are a few examples:
In his 'Key to Management,' chapter Iacocca talks about a Quarterly Review System. He believes that when managers meet with their people each quarter, review the last quarter, and set goals for the next, it keeps both parties up to date with the progress in the company and allows for good communication between the two parties. Iacocca told stories of how using this method employees would usually admits when they hadn't met their goals and discussed why, in stead of acting ignorant of their previous promises.
When Iacocca first came to Chrysler he could not believe the disorder and lack of communication between the departments. The Cars would be designed that could not be produced. When they finally could be, they would be produced without any thought of how many would be sold. Iacocca eliminated a bunch of levels of management and all the barriers between departments - forcing people to work together.
One of Iacocca's most unique techniques is how he deals with the unions. He talks about not looking down upon workers, and talking them them at the same level - he even appointed the head of the union to the board of directors.
Consumer Sovereignty
I believe the story is a great example of consumer sovereignty. Over and over in the book Iacocca was able to improve his business and take market share away from his competitors, only by pleasing consumers.
Better yet, Iacocca realizes this and talks about it at numerous points in the book.
The Loan Guarantees
The Chrysler loan guarantees form the government are supposed to be a hard argument. Iacocca shows, and I agree with him, that much of the problems in the car industry came from excess government regulation and extremely high gas prices (which I would argue were also a result of the government's intervention) - two things out of Chrysler's control.
These two things are true, however it does not mean the government needs to intervene. If a car was totaled and damaged to the point where it was almost beyond repair, you wouldn't pay someone unheard of sums of money to try to repair, you'd start over with a whole new company.
Likewise, had Chrysler simply gone out of business or found private market financing it probably would have merged stronger and more efficient.
Also, Iacocca uses a precedent argument, saying the government had bailed companies out before Chrysler, and this supposedly makes it OK. This argument is inane - during World War II the government imprisoned all Japanese-Americans without any form of a trial, that doesn't mean it would be OK to do it again.
Mercantilism
Other than the Loan guarantees section the book is mostly good - until the last part. The last part, which Iacocca calls Straight Talk, is about how to make 'America great again,' most by initiating a trade war with Japan.
Iacocca talks about the strengths of Japan, as if they were weaknesses of America, this mercantilist argument was destroyed 500 years ago.
According to the Law of Association, even if one person is better at all things then the next person it makes sense for him to delegate some things to the next person.
For example, Lebron James may be the best lawn mower in the world, but it makes no sense for him to mow his own lawn when he could better use the time to work in basketball.
In the same way it makes sense for countries to use free trade to get goods where they can be more efficiently made.
Also, in this section Iacocca talks about how unions cause inflation because they tie their wages to the CPI, and their wage raises cause rises in the CPI down the road.
This is incorrect, the only thing that can cause inflation is an increase in the money supply. If union members start making more the money has to come from somewhere, so either owners are making less (that would be stockholders, many of which are not millionaires) or consumers are paying more.
Conclusion
I really enjoyed the book, despite the economic shortcomings, and would recommend it to any who either want an intro to great management or likes the drama of business.
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Good story on Iacocca. I would have respected him more had he not gone to the government with his hand out. It's appaulling to me that he uses the excuse that "other" companies were bailed out before Chrysler. He turned into just another corporate welfare queen. Sad.
Posted by: TJ | August 06, 2009 at 06:12 AM