The Cargill Approach to Fear

This Cargill article from Fortune magazine is an oldie but a goodie and focuses on a few elements of the Cargill culture that keeps them thinking about the long-term and away from fear-based decision making.

First about their organizational structure - they are still a family-controlled private company.  It is not led by a family member and they have nearly equal 1/3 representation on the board which keeps the family from running amok:

Cargill introduced a limited employee stock ownership plan in the '90s that allowed some family members to cash out. However, roughly 100 descendants of the founders still own around 90% of the stock, worth some $52 billion as of the last official tally. Generally, they've been content to plow profits back into the business and watch the value of their asset grow. Dividends are calculated on a rolling two-year cycle and paid at a rate that Page describes as de minimis. "The capital's not only private," he says, "it's patient and permanent."

I love the CEO's comment at the end of this quote about the capital being patient and permanent.  A common theme for those organizations that are brave in the face of fear.

So how does this patient capital have an impact on business strategy?

"As far as how our corporate strategy works," says Conway, "we don't say, 'We think the world's going to look like this, let's define our strategy for that world.' We say, 'We don't know what the world's going to look like. We need a strategy or a set of strategies that can be successful almost irrespective of what the world looks like.'"

The article goes on to describe how this has played out with a few examples including taking a leading role in converting Vietnam's agriculture economy and introducing new cash crops that can grow well in that environment.  This effort not only provided Vietnam with a new export option (a byproduct was taking them from a largely net importer to primarily net exporter) but solved a big issue for the world supply chain for cocoa.

How does the play out in the face of adversity?

As mighty as Cargill may be, it is not immune to setbacks. In fact, the company's fiscal 2012 is off to a dismal start. Revenues rose 34% in the quarter ended Aug. 31, but earnings were down 66%. That after earnings rose more than 60% in the first quarter of fiscal 2011.  Page blames a perfect storm of unforeseen events: spring flooding in the Midwest (Cargill spent $20 million to prevent the Missouri River from washing out its corn-milling plant in Blair, Neb.); the salmonella outbreak in its turkey plant, which led to a partial shutdown and layoffs ("instead of a business that was making money, we have one absorbing the costs of the recall"); a significant wrong bet on a single, unnamed commodity; a "risk-on, risk-off" market environment that otherwise neutralized Cargill's vaunted trading expertise; and, above all, the global recovery that wasn't. "We underestimated the degree to which the world was gonna back up," says Page.  Remarkably, though, Cargill didn't slow down. The company maintained what Page calls a "big acquisition agenda,"

Even with a culture that eschews fear it doesn't mean that their management team is immune from fear-based decision making or contributing other factors to a culture of fear:

Page may not be under pressure from the family shareholders, but that doesn't mean that he is unworried about the future. The real threat to Cargill's long-term prosperity, Page says, is that forces beyond the company's control will infringe on its freedom to operate across markets. Cargill is clearly concerned with the way the global conversation is bending on food security. "You don't want to end up with policies that are counterproductive to feeding everyone," says Page, "and we don't want to end up with a business model that doesn't have any freedom to operate."