Business

Why you can't run a business without the right people

Berkshire Hathaway and its boss Warren Buffett

ON the first of February this year, MCE Public Relations reached its 10th birthday. It was a Monday. On the Wednesday of that same week my dad, also Paul McErlean, passed away. He'd been ill for a few months, having been diagnosed with cancer last summer.

He was four months short of his 88th birthday. He died at home with his family around him and in many respects, the days that followed were very uplifting, despite the grief. Hundreds of people came to the house and the funeral. Some had great stories to tell of his warmth and generosity, others came just to support us a family. He was given a great send-off, there was singing, laughter and even some of his favourite poetry. Big Paul (as he was known in his bakery days) would have enjoyed the craic.

Needless to say, the anniversary of the business passed that week without me thinking about it and in general, it was difficult enough to focus that month. I have all my colleagues at work to thank for their support during that time and for sailing the ship so well with me only half aboard.

In saying that, I was wondering about the content of this column for a few days last week and was casting around looking for good subject matter. Apple, seeing the sales of its iPhone beginning to plateau, last week spent $1bn (out of its $233bn cash pile) to invest into a loss-making Chinese taxi app, Didi Chuxing, the main competitor to Uber in China.

I also read an account of the Berkshire Hathaway annual general meeting at the weekend. If you haven't heard of Berkshire Hathaway, it is the company controlled by Warren Buffett. Often referred to as the Sage of Omaha, Buffett is one of the world's most successful business people and certainly one of its most fascinating. The AGM has become more of a pilgrimage with 40,000 people attending to listen to Buffet (85) and his long term partner Charlie Munger (92) expound on all things business.

Berkshire Hathaway shareholders are among the most satisfied in the world. If you had bought a Berkshire Class ‘A' share in 1985 for $2,000 and just ignored it for the next 30 years, you'd have a share worth $216,000 today. That's some return. Berkshire, like Apple, is constantly hungry for growth but is has always used external businesses to buy that growth - through its investments. In other words, it has bought large shareholdings in the likes of Coca Cola, Wells Fargo bank and many others over the years. Most recently, it spent $32bn acquiring an aeroplane engine manufacturer called Precision Castparts.

Apple, on the other hand, has traditionally opted to incubate new ideas in-house, though it has made also some small purchases over the years. Taking a position (the level of shareholding was not revealed) in a Chinese taxi app is a real departure for Apple though. What I found interesting in the Apple purchase and what it has in common with any Berkshire investment is the assessment of the people involved with the business. Apple chief executive Tim Cook, said how important the management team at Didi Chuxing was to the decision to invest and Berkshire won't make an investment without being certain about the people involved also.

It was this concern with people that brings me back to dad. My grandfather, Henry McErlean, died in 1941 when dad was just 13. The McErlean business was only in its infancy and dad was brought home from St Columb's College in Derry to St Malachy's where he finished at 16 so that he could work in the family business with his older brother, Deus. I've written about ‘Big Dessie' (if you were over six foot in those days, you were ‘big') before. He was the family entrepreneur and the driving force behind what became a thriving bakery business for the next nearly 50 years.

A few months have now flown passed since dad died and I've had time to think about his effect on me and for the purposes of this column, what that has meant in business terms. And the one thing that sticks out is people. The amount of bakers who came to the house after his death was amazing, especially since he'd finished in McErlean's about 30 years ago.

We heard a story about how he'd sorted fixing a crashed mother-in-law's car for one of the young bakers (without the mother-in-law ever knowing the crash had happened). And we heard any amount of compliments about his mentoring of his young apprentices and his efforts to build the home-baking industry – which he did very successfully, until the multiple supermarkets and their in-house baking processes entered the fray.

The point I'm making here the importance of people. Apple and Berkshire have continued to grow through an investment or acquisition model that needs to be fed on a regular basis. Most businesses, particularly smaller ones, just grow organically. That was McErlean's too. Big Dessie bought land, built a factory and then extended the factory on the same site. He also bought and leased shops around north and west Belfast to supply the bread to.

He and my dad went to Germany to buy the ovens for the new factory and managed the people to bake the bread and distribute it to the shops with a fleet of McErlean's vans to do it in. Back then, there was no venture capital or alternative forms of finance, you did it by yourself with your bank.

But you didn't have a business without the right people to run and work in it. And in modern market economies, that's a lesson successful companies, large and small, have come to know. And how to value and respect those people is just one of the great life and business lessons I think I've learned from my dad. And I'm very grateful to him for it. May he rest in peace.

:: Paul McErlean (paul@mcepublicrelations.com) is managing director of MCE Public Relations

:: Next week: Claire Aiken

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