Name: The Outsiders
Rating: 3.6 (42 reviews)
Author: William Thorndike

What’s in it for me? Insights you won’t get in conventional business books.

Quick: who’s the greatest CEO to ever have steered a business? Most people who are well-schooled in business history will think immediately of one name – Jack Welch. Welch, during his long and very profitable tenure at General Electric, was all about actively overseeing every aspect of operations, keeping open channels of communication with Wall Street, and keeping a laser focus on stock prices. He was, in many ways, an exemplary CEO.

But the greatest?

The most precise way to measure a CEO’s success is through the compound return they deliver to shareholders and the return their peers deliver to their shareholders, measured in the S&P 500. By those metrics, Welch isn’t so impressive. Welch outperformed the S&P by 3.3 percent when he led GE. Henry Singleton outperformed the S&P by an extraordinary 20.4 percent.

You’re likely thinking, “Henry who?” Don’t worry, in this mini-Blink, we’ll share a snapshot of Singleton’s management strategy, as well as one more case study, designed to share the best business lessons from CEOs you’ve never heard of.

The idiosyncratic CEO: Henry Singleton

The story of Henry Singleton spans a century, more or less. Born in 1916, he cofounded Teledyne, a semiconductor manufacturer which became a conglomerate focused across a range of industrial and aerospace products. He steered it – profitably – from the red-hot markets of the ’60s all the way through the ’90s downturn. How profitably? Let’s just say a dollar invested in Teledyne in 1963 would have been worth $180.94 in 1990, outperforming an investment in a comparable company ninefold.

Here’s what Singleton did differently:

He diversified discriminately. Unlike his competitors, who bought failing companies to “turn around,” Singleton favored high-performing companies which were market leaders.

He was all about niche opportunities. He was a generalist – but he didn’t want a portfolio of generalist businesses. It was said of Singleton that he preferred high-margin products sold by the ounce rather than the ton.

He leveraged stock. In the early ’60s, he perceived that Teledyne’s stock was overvalued, at nearly 60 times earnings. He used the overvalued stock to buy more subsidiaries.

He didn’t synergize; he decentralized. Conventional conglomerates had huge management staffs, were based in centralized headquarters, and tried to find synergies and opportunities for integration among their subsidiaries. Singleton viewed each subsidiary as a separate component and drove managerial responsibility as far down into each component as possible. At its peak, Teledyne had over 40,000 employees – 50 of whom were management.

He pioneered large-scale share buybacks. In the late ’60s, the market cooled on conglomerates and Singleton believed Teledyne’s share price was undervalued relative to its revenue. So, at a bargain rate, he bought them back. In fact, between 1972 and 1984 he bought back 90 percent of outstanding shares, spending $2.5 billion in the process. Money well spent – Teledyne saw a 40-fold increase in earnings per share.

Singleton didn’t take on day-to-day responsibilities. His approach to time management was typically idiosyncratic. He took on no responsibilities so that he could respond to each day’s challenges and opportunities as they arose, and eschewed long-term planning, preferring to strategize on the fly. It would seem that, with a flexible and innovative CEO at the helm, even an outfit as unwieldy as a conglomerate can keep its agility and outperform its competitors.

The neophyte: Katharine Graham

Katherine Graham never wanted to be a CEO, much less a media magnate. When her husband Philip Graham died unexpectedly, Graham stepped into his role as CEO of the Washington Post Company. Though her father, Eugene Myer, owned the Washington Post, Graham had little experience of the business. In fact, as a 46-year-old mother of four who hadn’t been in regular employment since the birth of her first child, she felt completely out of her depth.

Interestingly, it was her outsider perspective that helped her steer the Washington Post Company with competence and flair – a combination that saw her deliver a 22 percent compound annual return to shareholders, outperforming the S&P (7.4 percent) and peer companies (12.4 percent) during her tenure.