#360 Robert Kierlin: Founder of Fastenal

The podcast delves into the core philosophy behind Fastenal's success, emphasizing the importance of a unified organizational goal, specifically growth through customer service. It highlights how Bob Kierland, Fastenal's founder, built a thriving $38 billion company by focusing on cost control, decentralization, and empowering employees. Kierland's leadership principles, such as treating everyone equally, fostering creativity, and delegating effectively, are discussed as key drivers of the company's long-term success. The episode also touches on the value of continuous learning and maintaining humility, which Kierland believes are crucial for sustaining growth and innovation.

• Organizations thrive when all members pursue a common goal.
• The idea of "keeping the main thing, the main thing" is simple yet challenging due to human nature's tendency to complicate things.
• Bob Kierland, founder of Fastenal, built his company's thesis around this idea.

"Organizations succeed to the extent that all of their members pursue a common goal."

• Pursuing a common goal is fundamental to organizational success.

"It goes back to the idea of keeping the main thing, the main thing and how this is a very simple and powerful idea that's excessively hard to practice over a long time because it goes against human nature."

• Maintaining focus on a common goal is difficult but essential.

• Fastenal's success is attributed to its obsession with cost control.
• Keeping operating costs low allows for higher employee wages, better service, and more revenue, creating a virtuous cycle.

"Anyone who claims that expense management frugality is not a competitive advantage should pull up a long-term chart of Fastenal's stock price and see how a company that sells nuts and bolts and keeps costs low somehow has been able to eat their competitors' lunch for decades."

• Cost control is a significant competitive advantage for Fastenal.

"By keeping operating costs very low, Fastenal is able to pay their employees incrementally higher wages and thus more effectively develop and retain talented salespeople."

• Low operating costs lead to better employee retention and service quality.

• Fastenal grew from a small store to a multi-billion dollar global organization.
• The company's success is attributed to high-quality employees and a commitment to a common goal: growth through customer service.

"Since its founding in 1967, Fastenal has grown from a small fastener store in Winona, Minnesota into a multi-billion dollar global organization."

• Fastenal's growth trajectory is impressive and rooted in its core philosophy.

"Whenever asked, company founder Bob Kierland attributes Fastenal's success to the company's high-quality employees and their commitment to a common goal: growth through customer service."

• High-quality employees and a common goal are central to Fastenal's success.

• Fastenal's success is driven by its belief in people and their potential to achieve extraordinary things.
• The company emphasizes the importance of giving people opportunities to succeed.

"Underlying that simple answer is an unshakable belief in people, that ordinary individuals can accomplish extraordinary things if given the opportunity."

• Belief in people and their potential is a cornerstone of Fastenal's philosophy.

"The content of this book derives from what people have taught me, sometimes in classes, but more often through their example."

• Learning from others' examples is crucial to the company's philosophy.

• Technological changes have altered the "how" of industrial distribution but not the "why" of success.
• Success still stems from ingenuity, risk-taking, and hard work.

"Although the applications of new technologies such as the Internet, smartphones, barcodes, vending, and automated stocking have changed the how of industrial distribution, they have not changed the why of a distributor's success."

• Technology changes the methods but not the core principles of success.

"Success still stems from the ingenuity, risk-taking, and hard work of people working together as a team."

• Core principles of success remain unchanged despite technological advancements.

• Fastenal operates with radical decentralization and autonomy.
• Each store functions as a standalone business with full P&L responsibility.

"Fastenal embraces a spirit of radical decentralization and autonomy. Each of its 2700 stores operates as a standalone business with a clear leader and full P&L responsibility."

• Decentralization and autonomy are key to Fastenal's operational success.

"We grow from the ground up based on the actions and decisions of thousands of people who run their businesses like they own it."

• Growth is driven by the entrepreneurial spirit of individual store managers.

• Fastenal promotes from within, with a high percentage of general managers rising from entry-level positions.
• The company values wisdom, savvy, and entrepreneurial spirit over formal education.

"More than 95% of our current batch of general managers have been promoted from within. Nearly all of our senior leaders have worked their way up from entry-level positions."

• Internal promotion and employee development are central to Fastenal's strategy.

"We don't care where we went to school. We care what they can't teach in school: wisdom, savvy, entrepreneurial spirit."

• Fastenal prioritizes qualities that cannot be taught in school.

• The book "The Power of Fastenal People" is influenced by autobiographies of successful founders like Les Schwab.
• Bob Kierland shares traits with founders admired by Warren Buffett and Charlie Munger.

"One of Charlie Munger and Warren Buffett's favorite founders is this guy, Les Schwab, who I've done two episodes on."

• Bob Kierland's philosophy aligns with principles admired by Buffett and Munger.

"These ideas come from my experiences in life and are offered to younger people with the hope that by understanding them here, they can avoid needing years to learn from their own experience."

• The book aims to share experiences and lessons to help younger generations avoid common pitfalls.

• Fastenal's unique success is attributed to its people-centered approach and uncommon ideas about people.
• The company emphasizes the importance of defending and supporting these ideas.

"Fastenal has no unique product and no unique process. But it has some ideas about people that are at least uncommon, if not unique."

• Fastenal's success is rooted in its unique ideas about people.

"This book has only one purpose: to support ideas that don't seem either common or accepted."

• The book aims to defend and promote uncommon ideas that drive Fastenal's success.

• Warren Buffett admires Fastenal's financial performance and straightforward business plan.
• Fastenal CEO Will Oberton met Buffett, and they discussed the importance of sticking to the basics.

"Warren Buffett is an admirer. Having praised Fastenal in an interview, he loved its robust financial performance and its straightforward business plan."

• Buffett's admiration highlights Fastenal's effective business strategies.

"We talked about the importance of sticking to the basics."

• The discussion with Buffett reinforces the importance of fundamental business principles.

• The CEO is highly involved in various aspects of the company, demonstrating a commitment to hands-on leadership.
• He actively participates in deliveries, sales, and customer service calls.
• The CEO even obtained a Commercial Driver's License (CDL) to assist when truck drivers are unavailable.

"The CEO actually earned went through the process of getting a CDL, which is a commercial truck driving license, so he could pitch in when drivers, truck drivers are sick."

• Demonstrates the CEO's willingness to step into any role necessary to ensure company operations run smoothly.

• Keeping operating costs low is a significant competitive advantage.
• Low costs allow for higher employee wages, better retention, and improved service quality.
• This creates a virtuous cycle: low costs lead to higher revenue, which in turn supports further cost reduction and hiring of top talent.

"By keeping operating costs very low, Fastenal is able to pay their employees increased incrementally higher wages and thus more effectively develop and retain talented salespeople."

• Highlights how cost management fuels a cycle of growth and quality improvement.

• Effective leadership involves training others to become leaders.
• Long-term success is achieved by continuously developing leaders from within the organization.
• Training should be a primary focus for leaders.

"As the leader of your company, if you're not spending 90% of your time teaching, you're not doing your job."

• Emphasizes the importance of leadership training as a core responsibility.

• The belief that founders must be replaced by professional managers is challenged.
• Entrepreneurs can develop leadership skills and continue to lead their companies effectively.
• Examples include Sam Walton, who led Walmart from its inception through its growth.

"The belief that entrepreneurs must eventually be replaced or supplanted by skilled management is false. Entrepreneurs can learn leadership just as well as anybody else."

• Asserts that founders can grow into effective leaders without needing to be replaced.

• Keeping an organization simple is crucial but challenging.
• Simplicity involves aligning everyone with a common goal.
• Organizations should focus on their purpose rather than their structure.

"Keeping your organization simple is not simple, but it is very important."

• Stresses the importance of simplicity in organizational structure and focus.

• Success is tied to all members pursuing a common goal.
• Subgroups within the organization can create distractions and hinder progress.
• Unity of command is essential for organizational success.

"Organizations succeed to the extent that all of their members pursue a common goal."

• Highlights the necessity of a unified focus on a common goal for organizational success.

• Treating all employees equally is vital to maintaining focus on the common goal.
• Special privileges for certain groups can create divisions and reduce overall effectiveness.
• Examples from other successful leaders, such as Les Schwab and Sam Walton, reinforce this principle.

"If the engineers can take off to watch their kids in a softball game, so can the lathe operators and the data entry people."

• Emphasizes equal treatment to maintain team cohesion and focus.

• Incentives should align with the common goal of the organization.
• Financial rewards should be immediate to reinforce desired behaviors.
• Avoid incentives that encourage suboptimal behaviors or focus on subgroup goals.

"You need to install a reward system that keeps everyone focused on the common goal."

• Underlines the importance of aligning incentives with the overall organizational goal.

• Encouraging and utilizing creativity throughout the organization is crucial.
• Every employee's input and creativity should be valued and leveraged.
• This approach leads to better solutions and a more dynamic organization.

"He’s got this radical belief in encouraging and using everybody’s creativity throughout your entire organization."

• Advocates for a culture that values and harnesses the creativity of all employees.

These notes cover the key ideas and themes discussed in the transcript, providing a comprehensive overview of the principles and practices that contribute to organizational success.

• Bob, similar to Munger and Buffett, emphasized the importance of decentralized decision making over a command and control structure.
• Central planning limits creativity and growth within a company.
• Bob's experience in the Boy Scouts illustrated the negative impact of over-management on creativity and skill development.

"Too many business organizations practice central planning to the extent that the creativity of their people is effectively 95% curtailed."

• Central planning stifles creativity, leading to reduced innovation and growth.

"Businesses that become large and, quote, unquote, better managed saw their markets and profits eaten up by nimble startup firms with great ideas and efficient execution."

• Large, centrally managed companies are often outperformed by more agile, creative startups.

"If 95% of the people in your company do not participate in the creation of ideas, they will spend their time thinking and talking about cars, sports, and office politics."

• Lack of employee involvement in idea generation leads to disengagement and unproductive behavior.

"Decentralized decision making. Decentralized decision making. Decentralized decision making."

• Repetition emphasizes the critical importance of decentralized decision making in fostering creativity and growth.

• Empowering employees to make decisions based on customer needs fosters long-term customer loyalty.
• Allowing store personnel to order items based on local customer requests improves service and satisfaction.

"The people in our stores are able to special order items that their customers request that are usually unavailable within our warehouse system."

• Store personnel have the autonomy to fulfill special customer requests, enhancing customer satisfaction and loyalty.

"If a customer asks for a product that we don't currently sell, we encourage our people to find a possible source to satisfy this customer's request."

• Encouraging employees to source requested products leads to potential new product lines and company-wide offerings.

• Companies should focus on a few core principles and a common goal rather than extensive management manuals.
• Regularly checking if actions align with the common goal ensures focus and efficiency.

"You need rules, but you can probably put them on three sheets of paper and give them to each new employee."

• Simplified rules focused on a common goal are more effective than extensive manuals.

"Growing our company through customer service."

• The common goal should be clear and central to all company activities.

• Emphasis on teaching employees rather than just training them.
• Developing leaders who act as coaches rather than traditional managers.

"You train an animal, you teach a person."

• Teaching is more effective than training in developing skilled and motivated employees.

"If you're not spending 90% of your time teaching, you're not doing your job."

• Leaders should focus on teaching and developing their team to align with the company's common goal.

• Leaders should empower their teams to make decisions rather than controlling every action.
• The role of a leader is more akin to a coach in basketball than a manager in baseball.

"The leader, however, tells the team members what the group has to accomplish and challenges them to find the best way to do so."

• Leaders set goals and empower their teams to find the best ways to achieve them.

"Stay out there on the front lines where the action takes place. You learn more when you see everything up close."

• Leaders should be present and engaged with their teams, learning from direct experience.

• Soliciting ideas from all employees increases the chances of finding the best solutions.
• Simple questions can uncover valuable insights from employees.

"If half of the people are not asked for their new ideas, you only have a 50% chance of finding the best solution."

• Engaging all employees in idea generation is crucial for finding optimal solutions.

"What's your single best idea to improve our company? What is the stupidest thing that we're doing as a company?"

• Simple, direct questions can yield significant improvements and innovations.

• Observing and learning from the examples set by others, both good and bad, is crucial for personal and professional growth.
• Consistent reflection on experiences helps in understanding and applying valuable lessons.

"While I attended college, I worked for a manufacturing company that employed about 300 people. I spent a lot of hours in the office on Saturdays."

• Personal experiences and observations provide valuable lessons in leadership and management.

• Bob, the founder of the firm, was deeply involved with his employees, knowing each one and appreciating their contributions.
• Bob's goal was growth through customer service, which required the full development of every employee.
• Fastenal's advantage, as emphasized by Bob, lies in its people and their constant development.
• Decentralized decision-making at Fastenal allows flexibility to respond to future changes and supports growth.

"He knew each employee and appreciated his or her contribution."

• Bob's personal approach to leadership included knowing and valuing each employee.

"If Bob's goal is growth through customer service, he has to fully develop every single employee that delivers that service."

• Bob's strategy for achieving growth through excellent customer service hinges on developing his employees.

"Anytime you stop thinking about the future, some people with better ideas will come along to eat your lunch."

• Emphasizing the importance of forward-thinking in leadership to stay competitive.

• Fastenal has been growing rapidly, doubling in size every two and a half years.
• The company's flexibility and decentralized decision-making enable it to adapt and innovate.
• The introduction of industrial vending machines by former CEO Will Oberton revolutionized Fastenal's business model.
• These vending machines have significantly contributed to Fastenal's sales and operational efficiency.

"Fastenal has been growing at a rate where it doubles in size every two and a half years."

• Fastenal's rapid growth rate necessitates forward-thinking and innovation.

"Will Oberton developed an industrial vending machine system, helping Bob realize a lifelong goal."

• Oberton's innovation in vending machines aligned with Bob's long-term vision for the company.

"Fastenal's vending machines had been a hit with customers generally helping them save 30% on supplies."

• The vending machines have been successful in reducing costs for customers and improving efficiency.

• Bob discusses the importance of valuing the unique qualities of every individual.
• Overcoming the fear of delegating is crucial for better leadership and organizational growth.
• Delegation leads to better outcomes as it leverages the hidden talents of employees.
• Suppressing ego is essential for effective leadership and delegation.

"Our first step to becoming a better leader is to start valuing everybody for the unique humanness."

• Recognizing and valuing individual uniqueness is the foundation of good leadership.

"My bias was a common fear of delegating. This came from not appreciating what talents lie hidden in other people."

• Bob identifies his initial reluctance to delegate as a bias stemming from underestimating others' abilities.

"You have to learn to suppress your ego."

• Effective leadership requires the suppression of one's ego to better appreciate and leverage others' talents.

• Bob provides four practical suggestions for suppressing ego:
  1. Treat everyone as equals.
  2. Learn to stay silent sometimes.
  3. Be willing to get dirty.
  4. Do good things anonymously.
• He also advises keeping team goals aligned with the main organization's objectives.
• Continuous learning and humility are emphasized as key aspects of leadership.

"Treat everyone as equals."

• Equality in treatment fosters a positive and productive work environment.

"Be willing to get dirty."

• Leaders should not shy away from performing any task necessary for achieving the common goal.

"Keep reminding yourself how little you know."

• Maintaining humility and a mindset of continuous learning is crucial for leadership.

• Bob outlines ten basic rules for leadership:
  1. Challenge rather than control.
  2. Treat everyone as your equal.
  3. Stay out of the spotlight.
  4. Share the rewards.
  5. Listen rather than speak.
  6. See the unique humanness in all persons.
  7. Develop empathy.
  8. Suppress your ego.
  9. Let people learn.
  10. Remember how little you know.
• These rules aim to overcome pride and ego, which are barriers to effective leadership.

"The simplicity of each rule must overcome the thick walls of pride that prevent its implementation."

• Simple leadership principles are often difficult to implement due to human pride.

"Follow these rules and provide leadership to your world."

• Adhering to these maxims can help one become an effective leader.

• Bob emphasizes that the example set by leaders will live on beyond their lifetime.
• Effective leadership can influence and inspire future generations.
• Leadership should aim to make the world a better place, both at home and at work.

"The example that we set in the workplace will live on after us."

• The impact of a leader's actions extends beyond their immediate environment and time.

"If you have earned respect through your leadership, others will imitate your actions and you will influence people beyond your generation."

• Earning respect through leadership leads to a lasting influence on others.

"Make the world a better place because of what you do."

• The ultimate goal of leadership is to contribute positively to the world.

• For further insights, reading the book is recommended.
• The podcast also highlights the importance of building relationships for long-term success.
• Events organized by the podcast aim to foster valuable connections among founders, investors, and high-value individuals.

"Your life is an example for all to imitate."

• Leaders should strive to set a positive example through their actions.