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Edward Jones Protagonist Talks About Strategy & Values

The Globalization Club at HBS hosted John W. Bachmann, senior partner of the Edward Jones securities firm and immediate past chairman of the U.S. Chamber of Commerce Tuesday, April 11. Bachmann was also the featured protagonists of two RC cases on Edward Jones.

Mr. Bachmann spoke on a variety of topics, including his background, the evolution of Edward Jones, and the development and refinement of the company’s strategy.

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 replica breitling. 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. Bachmann noted, “We didn’t have the resources for Investment Banking and institutional research, but we 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.

The strategy was executed by investment representatives, and Edward Jones developed a unique, differentiated strategy for its offices and reps. Bachmann explained replica watches uk, “We put 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, we would place them across the street rather than have them in the same building.”

He admits its counter intuitive, as it leaves out opportunities for efficiencies, but he countered, “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 their location.”

In growing the business, the firm also concentrated on making significant investments in two areas: people and training, and technology. The firm recognized early on that these two areas would have the most significant impact on increasing productivity.

Bachmann also conveyed a strong belief in the importance of responsibility-based management, which he defines as 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. Many agree with Bachmann’s philosophy, evidenced by Edward Jones’ 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, which he attributes to the success of the strategy. Conversely, the viability of the business has allowed it to stay a partnership.

“We 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,” he said, continuing, “Partnerships keep pressure off short-term focus.”

Bachmann also felt Edward Jones had a huge competitive advantage early because the competition did not take them seriously. He said, “They perceived us as rural, agricultural, backwoods.” He stated he was just fine with that.

In referring to the memo he wrote in 1971, and referenced in HBS cases, Bachmann stated, “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.”

John Bachmann concluded the talk by sharing advice with attending students. He advised the importance of understanding an organization’s core values. He noted that often the best way to understand the values of a company is not by reading its mission statement, but rather through close inspection of its compensation structure.

He also warned, “Don’t go into it for the money. I had the lowest starting salary of anyone in my MBA class, but Edward Jones gave me an opportunity to do what I liked.”

The event ended, as all Globalization club events, with a spirited raffle for a coveted prize: the brand new Apple Video iPod. A lucky student received the prize from Mr. Bachmann to conclude a very successful session, as well as a year of exceptional speakers organized by The Globalization Club.

April 24, 2006
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