Chemical Investors' Gary Zintgraff probably knows as much as anyone about creating growth. The question is, how much does he know about running a business?
It is too bad," says a man who knows him well, "that Gary Zintgraff's idols are Jimmy Ling and J. R. Ewing."
Zintgraff, the chief executive officer of Chemical Investors Inc., does admire James J. Ling, the upstart Oklahoma native who opened his first business, a Dallas electrical contracting company, with $2,000in 1947. By 1969 Ling had parlayed his grubstake into control of Ling-Temco-Vought Inc., the country's 14th largest corporation, a conglomerate with $3.75 billion in sales. Zintgraff has studied Ling's biographies, analyzed his financial strategies, and made a pilgrimage to Dallas to meet the master. "Thirteen years after Ling completed his first public offering," says Zintgraff, "he put LTV onto the Fortune 500. On February 15, 1978, when Chemical Investors went public, I started my own 13-year clock."
To date, Zintgraff is keeping to the schedule. In 1982, just six years after he founded Chemical Investors with about $15,000 of his own money and $200,000 from other investors, the company ranked No. 9 on the INC. 100 list of the fastest-growing public companies, a distinction not available during Ling's time. It stayed near the top at No. 18 this year, with sales that reached nearly $40 million and a compound annual growth rate of 142%.
But former insiders say that CI's spectacular growth diverts attention from serious problems in the company's development. They point to the fact that in seven years Chemical Investors has never reported a profit from operations and that none of its subsidiaries has achieved prominence in its market. CI's growth has come not from sales but from an aggressive acquisition strategy that Zintgraff could have taken they say, that Zintgraff's management style has prevented him from consolidating his gains. "Gary thinks managing a business is acting like J. R. Ewing," says J Wood, one of numerous managers and executives who have been charmed, then disillusioned, and finally driven off -- or, in several cases, fired -- by the man most of them consider brilliant but flawed.
The Jim Ling in him has allowed Zintgraff, a displaced Texan, to create a company whose growth rate any ambitious CEO could envy. But the J. R. Ewing in him has driven off the kinds of people who might save him from his own excesses, if indeed he needs saving. With Zintgraff you just can't be sure. He is both more and less than the classic model of the hard-bitten entrepreneur.
Born and reared in San Antonio, Zintgraff wears snakeskin cowboy boots and a Stetson hat with his three-piece, pinstriped suits. After four years in the Navy, his chemical engineering degree got him a job with Eli Lilly & Co., the pharmaceutical giant whose laboratories are in Indianapolis.
Lilly, people say, is a staid corporation, where advanced academic degrees and patience are rewarded by steady progress up the technical-management ladder. Zintgraff claims neither of those assets. While he was at Lilly, however, Zintgraff noted that although big pharmaceutical companies like to make things in big, production quantities, many of the ingredients they use are needed only in small amounts. He thought about starting a company that could produce and supply these low-volume, high-margin pharmaceutical intermediates to the majors.
It was the Walter Browne chess game, Zintgraff says, that persuaded him to make the entrepreneurial leap. In 1975, Browne was rated among the eight top chess players in the country. He came to Indianapolis to take on the Eli Lilly Chess Club, where he played, according to Zintgraff, 75 simultaneous games against as many opponents. He won 74 of them. Zintgraff beat him, the only American to do so that year. "Winning that game," Zintgraff says, "gave me a little extra confidence, enough to go out on my own." He still has Xerox copies of the score sheet from that game, with Walter Browne's signature at the bottom acknowledging his resignation on the 31st move.
The chess-match story is no trivial anecdote. Zintgraff takes his games very seriously. At home he keeps a cabinet full of commercially produced war games and some that he has created himself. He subscribes to war-game magazines. He has books depicting and dissecting the strategies used in every major military battle, ancient and modern.
"I love to compete. I really do," Zintgraff says and the ultimate competition, the game with the highest stakes, is business. "I like the analysis -- analyzing where we are as a company, what other People are doing . . . I'm willing to try some new things in business, things that are new to me. That's exciting. That's what gets you in there early in the morning, on the weekends, and at night. That's what you think about all the time . . . I like it. That's fun. That is fun."
Accordingly, whatever his original investors may have thought back in 1976, Zintgraff evidently did not have in mind the slow, laborious building of a single company that would, God willing, one day achieve singular excellence in the narrow market for pharmaceutical intermediates. His first act was to incorporate the holding company, Chemical Investors Inc. Incorporation of the operating company, Custom Chemical Laboratories Inc., followed. Then, in rapid succession, he created a second subsidiary, Liquid Crystal Dynamics Inc., and an independent company, Specialty Chemicals Inc. He decided to sell Chemical Investors stock to the public before any of its subsidiaries had completed their first year of business.
"We decided at the beginning," Zintgraff says of himself and his first-round investors, "that to do things right was going to require more money than we had. We decided we would sell stock." No underwriter would touch the issue, of course, because in 1976 CI was a newly formed holding company with subsidiaries that themselves had no significant operating history. So Zintgraff managed the sale himself.
Operating under Indiana securities law, which allows such efforts within the state's borders, Zintgraff recruited and trained a sales force of nearly 450 farmers, housewives, retirees, and others attracted by the 6% commission he offered. He remembered that Ling had peddled stock in his first company from a booth at the Texas State Fair, so he did the same in Indianapolis, even though, he recalls, "the only space we could get was in front of the swine barn."
