Executive Interviews: Interview with Robert Salomon on Staying on Top, Always
July 2009 - By Dr. Nagendra V Chowdary

Robert Salomon
Associate Professor at the Stern School of Business, New York University.

• Similarly, what according to you are the top-10 companies in the world during the last 4-5 decades? What are the unique characteristics of these top-10 companies?
  I certainly have been impressed with Apple, for the reasons detailed above. Likewise for Henry Schein. Although Schein is not in a sexy industry (medical supply distribution), it has consistently run a profitable business while at the same time consolidating what was once a fragmented, momand- pop market through an industry roll-up strategy. I have also been impressed over the years with Lincoln Electric. They have a business model that may not work well in every industry or in every country, but it is an interesting approach that incentivizes employees (from top to bottom) to do what’s in the best interests of the firm. Finally, I have admired how Toyota has been able to consistently combine quality engineering with product innovation. In general, when I evaluate companies, it is not only in terms of the bottom line, although that is important. I thinkwe need to evaluate companies holistically. The ultimate test is not as simple as simply calculating shareholder returns. Truly great companies are those that consider the impact of their actions to a variety of stakeholders, in addition to shareholders. So when I evaluate companies, I look for those that have products of services that improve social welfare, those that treat their employees fairly, and those that are good corporate citizens, while also earning respectable returns.

• Quite often, great companies, visionary companies, world-class companies, persistently successful companies, etc., are used synonyms. Rather, there’s confusion amongst these nomenclature. Are they really same or do each of them have a different connotation?
  I am not one who gets too hung up with semantics. Truthfully, I do not spend too much time thinking about differences in connotation, to the extent that such differences exist.

• Many authoritative works have been published – In Search of Excellence (Tom Peters), Built To Last(Jim Collins and Jerry I. Porras) and Good To Great (Jim Collins), Enduring Success : What We Can Learn from the History of Outstanding European Companies(Christian Stadler),etc – onwhat it takes to be a great company and everyone has defined the greatness differently. How do you define the greatness of a company? Is it in terms of number of successful years of existence, market share, profitability, geographic presence, mindshare, etc?
  As I mentioned in response to a previous question, profits are important. And consistent profitability (with returns that exceed the industry average) is one characteristic of a truly great firm. But it is not the only one. Truly great companies are those that can be held to a higher standard. They include those that not only consider the impact of their actions for shareholders, but also for stakeholders. They should consistently earn above-average returns, have products that improve social welfare, treat their employees fairly, and be good corporate citizens.

• For creating great companies what do you require the most – visionary leaders or visionary managers or a just combination of both of them?
  For me, the quality of any company begins with the product or service. High-quality products/services beget high quality firms. This is not to say, however, that management is not important. Once the product/service is in place, how a company is managed is critical to its viability, development, growth trajectory, and long-term success.

  With respect to visionary leaders or visionary managers, I must respectfully beg forgiveness in that I am not an expert in leadership, so I am not sure I am qualified to answer such a question. However, I ama firm believer that the rank and file is much more important to the profitability of a company than its leadership. Leaders can set the strategic direction and create a vision for the organization, but it is the lower-level employee who must run the organization on a day-to-day basis and execute the strategic plan.

• What kind of innovation – product, process, business model or organizational innovation – do you think is required for companies to be great companies or persistently successful companies?
  Innovation is critical to strategic renewal and survival in dynamic and competitive markets. However, I am relatively agnostic as to whether the innovation need be product, process, or administrative for firms to be successful. It is contingent upon the economic environment, the industry demands, and the type of organization.