Background of Bachmann
Bachmann attended Wabash College and spent summers interning with Edward Jones. He did simple tasks such as cleaning the basement, taking out trash, and acting as a messenger. After graduating from Wabash, Bachmann enrolled in graduate school at Northwestern. After receiving his MBA, he returned to St. Louis and joined Edward Jones full-time at the company's headquarters. Bachmann quickly realized that to be respected within the organization he had to earn his stripes by working with customers and selling securities. Thus, he moved to Columbia, MO, and spent seven years as a retail-investment representative. He then returned to St. Louis where he served as a general partner responsible for long-range planning and corporate finance. Bachmann was promoted to managing partner in 1980, where he served for 24 years before stepping down in 2003. During his tenure he was able to grow the firm from 300 to 9,000 employees.
John Bachmann's strategy for Edward Jones, which he outlined in his famous 1971 memo, was about focus. He recognized early on that individual investors were an under-served market. Edward Jones didn't have the resources for Investment Banking and institutional research, but saw the value in working with the individual investor.
The company developed a value system that spoke to its target customer, an investment mentality based on safe, long-term growth. In line with this strategy, Edward Jones sold its seat in the futures market, implementing a policy to not trade in any stocks that were trading below $4, and no longer kept an institutional desk. All these actions institutionalized Edward Jones' customer strategy and led to a tighter alignment with the end market.
Edward Jones developed a unique, differentiated strategy for its offices and reps. It puts people out one at a time with one administrative support which allows them to differentiate themselves in the marketplace. The Edward Jones office takes on a similar feel to a law office and not a competitive broker. If a new representative is deemed necessary, they will place them across the street rather than have them in the same building." It appears counter intuitive, as it leaves out opportunities for efficiencies, but Bachman claims that you get a different kind of worker-a high achiever who does not necessarily work well within groups, but is capable of bringing in more revenues, and is driven by having accountability for his location. In growing the business, the firm also concentrated on making significant investments in two areas: training people and and technology. The firm recognized early on that these two areas would have the most significant impact on increasing productivity.
Bachmann stresses the strong belief in the importance of responsibility-based management, which is a system based on trust that gives employees freedom, clarity, and inspires their drive to achieve. He characterized the old command and control model as "stupid," even if it still exist in many firms today. Due to this philosophy, Edward Jones' received No. 1 ranking in Fortune's annual "100 Best Companies to Work For in America" in 2002 and 2003.
Bachmann was proud of Edward Jones' ability to remain a private partnership, and this capability is result of the success of the strategy. Edward Jones management had strategy that created a business (from a capital standpoint) that was self sustaining, which allowed the firm to stay as a partnership without the need for outside capital. According to bachman, partnerships keep pressure off short-term focus."
Edward Jones had a huge competitive advantage early because the competition did not take them seriously. Competition perceived them as rural, agricultural, backwoods.
In referring to the memo he wrote in 1971, Bachmann states, "Nothing has changed from then to now. We still live by those same ideals, we have just fulfilled many of the goals we had set out."
Bachmann said much of the credit for the company's success belongs to the investment representatives.
"We're a story about 9,000 entrepreneurs (In 2002) , men and women who still want to do things for themselves," he said. "They have accountability for their locations in terms of making them a successful enterprise and that appeals to very high achievers."
Another key to success is finding the right niche. For Edward Jones, that is not online trading or serving institutions or selling proprietary investment products. It's the storefront single-broker operation that has served the company since well before Bachmann started there.
"Michael Porter says there's more than one right way to succeed in an endeavor and we have found the right way to be successful," Bachmann said.
Bachmann oversees the fourth-largest privately owned company in the St. Louis area, with $149.2 million in income on $2.1 billion in revenue in 2001.
THE BOOK THAT CHANGED HIS LIFE
In 1973, picked up management guru Peter Drucker's newly published Management: Tasks, Responsibilities, Practices and later adopted it as the bible for Edward Jones. Hired Drucker as a consultant in 1981, a relationship that continues to this day.
Sources
http://www.bizjournals.com/stlouis/stories/2002/06/17/focus1.html?page=2
http://www.businessweek.com/magazine/content/02_23/b3786097.htm
For history of Edward Jones visit
http://smis-usa.blogspot.com/2008/02/edward-jones-history.html
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