Meet the Street: Open Season at City Hall - TheStreet

Meet the Street: Open Season at City Hall

Author Oren Harari discusses what companies can learn from New York Mayor Mike Bloomberg's management style.
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Much as they did at his previous Park Avenue headquarters, the walls have come down at Michael Bloomberg's new place of employ.

The new mayor of New York moved his office out of the traditional mayor's quarters and into an open bullpen area surrounded by 30 of his closest aides, hoping to replicate the interactive and egalitarian style of management he used to create his tremendously successful financial information business.

Oren Harari, author of

Leapfrogging the Competition

, a book on Bloomberg's management principles, says that such approaches have become common at many successful companies, and reflect an ability to move quickly and innovatively, which investors would do well to look for in the companies they invest in.

Harari, who is also a professor of management at the graduate School of Business at the University of San Francisco, here expounds on Bloomberg's approach and how companies have been able to apply it successfully.

TSC: Does it make sense to you, having the mayor of the City of New York, sitting in a bullpen, albeit one beneath a grand chandelier?

Harari:

The key to all of this is that having a wall-less or modular architecture only makes an impact when there's a clear vision and a mission and an agenda, so to speak. And the architecture isn't just for show. You could have some autocratic leader breaking down walls, with people still scared to talk to him.

But we know this is

not

the way Bloomberg operates. So we know we don't have that to worry about.

TSC: So what does Bloomberg's iconoclastic approach to his business imply now for New York?


Oren Harari
Professor of Business Management,
University of San Francisco

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Harari:

The whole point is, if there are no walls, that means that people feel free to go to whoever they need to, to talk to whoever they need to, to access data from whoever they need to -- rather than being concerned about politics, bureaucracy, following lines of communications, and being uptight about turf and rank.

What Bloomberg is saying with that architecture is, "Hey, our capital is information and knowledge. If we can create an environment where the flow of that is frictionless, we can get information to whoever needs it internally. We can add some value to it, and then immediately pump it out to our clients

when Bloomberg was running his company. And then we can charge money for that." That's where his customer loyalty resides. The structure facilitates it.

It's a very important point. The architecture alone doesn't do it, because if you still have to go through procedures, I don't care what architecture or what kind of cubicles you got. But if the architecture truly supports an iconoclastic, innovative, free culture, then

that's

the kind of company that you know is speedy, innovative, imaginative, customer-sensitive and, basically, a company you want to invest your money in.

TSC: So is the innovative, hands-on running of a company like Bloomberg, and like Dell and Intel, as you've pointed out in your book, something that an investor should pay attention to?

Harari:

The investor should care about this for a real simple reason. Obviously, the traditional metrics that we should be concerned about, things like balance sheets and

P/E ratios, income statements, credit ratings, cash flow -- all of that stuff is critical.

The thing that investors are really concerned about is

future

earnings,

future

growth,

future

viability. How do you predict the future? You don't predict the future necessarily by today's numbers. While they're a good clue about what the company did yesterday, there is always a delay in a free market. Today's numbers are basically a scorecard of the decisions you made in the past.

The best way of looking at how a company is preparing for tomorrow is to look at these intangibles, like: how fast, how speedy and how imaginative are they? Can they quickly develop knowledge and disseminate that knowledge within their networks and then do something really interesting with that knowledge?

And I think that's what Bloomberg was all about -- and that's the kind of environment he is trying to bring to City Hall.

TSC: Does the odd, X-shaped configuration that Michael Milken brought to his trading desk come to mind?

Harari:

Actually, it does. Although I believe that Michael Milken was unfairly pilloried, he paved the way for some real innovations and really cool stuff at some other companies, like

CNN

and

MCI

.

He took the whole spirit that Bloomberg did, and that was even more radical in the '80s. He put together a configuration where his key people could directly, immediately, do the most low-tech thing in the world: open their mouth and talk to each other, and quickly huddle, and make fast decisions ... and move on.

This is a signal I look for. I don't care how big a company is or how many tangible assets they have on their balance sheet. If it takes forever for people to get together, to make a decision, if people have to be worried about the politics before they made any simple decision or movement -- that's not a company I would invest in.

TSC: Are there other companies besides Intel and Dell which have taken this direct approach?

Harari:

Absolutely:

Microsoft

,

Palm

,

Schwab

,

Fleming

,

Nike

.

TSC: Most of those are technology companies.

Harari:

That's true. Most technology companies have had no choice but to keep up with the fast pace. But that does not mean that other companies cannot adopt the same basic principles, coupled with a guiding principle that leadership is willing to allow employees to test; to encourage a clash of ideas that might even overtake the guiding principle.

We'll just have to wait and see what agenda Mr. Bloomberg sets for the City of New York. His remarks in his inaugural address about recommitting New York as the "Capital of the World" are too broad. Even his commitment to drawing down the budget is too broad.

We'll just have to wait and see what vision he couples with the removal of the walls at City Hall.