Nichols, ITW’s CEO from 1980 to 1996 when he retired, came out of retirement in 2002 to succeed Bob Pritzker at the Marmon Group. Applying 80/20 thinking, Nichols made one significant organizational change at Marmon after the Pritzkers left: dividing the company into ten business sectors, each with a president reporting to him.17 This enabled him to oversee the sprawling organization while facilitating growth and acquisitions at divisional and product levels.
In 2006, Ptak took over as Marmon’s chief executive officer, and Nichols became vice-chairman. Ptak had been a Marmon director since 2003 and a colleague of Nichols at ITW for decades. A certified public accountant, Ptak is also a director of Morningstar, Inc., the provider of independent investment research.
In 2008, Berkshire bought control of Marmon from the Pritzker family under an agreement to buy the rest in a series of purchases that were completed in 2014. The $8 billion deal was sealed quickly, with neither haggling nor due diligence.18 Buffett, who met Jay Pritzker in a business transaction in 1954 and followed his career avidly, said that simplicity was just as Jay would have wanted it.19
Ptak continued to run the Marmon Group as before, relentlessly applying the 80/20 principle. In 2012, this led him to a further adjustment. The divisions (eleven by then) were organized into three new autonomous companies, each led by a senior Marmon veteran. In accordance with the Marmon Group’s history, under Ptak it prospers, with shareholders’ equity rising from less than $5 billion in 2006 to nearly $7 billion in 2012. Critics, convinced that the Marmon Group would collapse without the Pritzkers, had been proven wrong.
What secrets explain the Marmon Group’s success? The Berkshire traits: an entrepreneurial family operation of autonomously run divisions engaged in rudimentary businesses with permanent time horizons, known for budget consciousness, earnestness, and integrity. In the years before and after Berkshire’s acquisition of the Marmon Group, Nichols and Ptak have sustained these values:
Budget conscious. The Marmon Group is budget conscious. Neither Jay nor Bob believed in conducting extensive studies, holding lengthy meetings, or engaging in protracted deliberations about business matters. Corporate headquarters employs few people. Ptak boasts that the Marmon Group’s overhead, 22.5 percent in 2012, is among the lowest in manufacturing.20
Earnest. The Marmon Group keeps its promises.21 Managers joining the company knew they could count on whatever the Pritzkers said upon acquisition. They were the kind of people, in turn, who treated someone’s word as their bond. In their markets, they were known as people to be trusted. The Marmon Group won such a reputation for earnestness as well—and Nichols and Ptak had done for themselves and their colleagues at ITW.
Reputation. The Pritzkers exuded integrity—they believed that making money was far less important as a measure of success than demonstrating integrity. Jay Pritzker appreciated that there is often a tension between what is best for a business long term and what might seem good for shareholders short term.22 Their buy-and-hold strategy was part of this investment in reputation. The Pritzkers acquired companies to keep and run them, not to divest assets and lay off workers. People wanted to do business with Jay and Bob Pritzker—and the Marmon Group continues to attract such interest.
Kinship. The Marmon Group is a family business, run by brothers Jay and Bob Pritzker, who had an exceptional ability to work well together.23 This ability was handed down to them by their father. Indeed, they emulated the business model he had established, including the turnaround approach. For example, the elder Pritzker bought Cory Corp., an appliance maker, in 1941 for $50,000 and sold it in 1967 to Hershey for $23 million.24 The brothers passed the gene onto their children as well, some of whom joined the family business.
The Pritzker family also ultimately exhibited some of the downside of family businesses. Feuding erupted among children and grandchildren after Jay died and Bob retired. Squabbles addressed what to do with Marmon. Eleven heirs seemed poised to split it up and sell it off. As is its wont, Berkshire came to the rescue.
Self-starters. The Marmon Group is the epitome of an entrepreneurial culture. Bob and Jay Pritzker were quintessential self-starters. So were other family members. Another brother built from scratch the Hyatt Hotel chain, which Jay’s son, Thomas J. Pritzker, later ran.25 The Marmon Group business model remains oriented this way: turnarounds call for innovation, risk taking, creativity, and tenacity.
Hands off. When the Pritzkers passed from the scene, Marmon’s managers—hundreds of them—continued to operate their businesses without a hiccup. The Marmon Group always followed a hands-off management policy giving managers wide autonomy. The Pritzkers never let headquarters call operational shots; in fact, headquarters employed no marketing, sales, engineering, or operations personnel. The Marmon Group managers focus on their businesses. They are not moved around to groom for upward corporate mobility. Those eager for more responsibility simply grow their businesses.