Assets And Liabilities

Consider the transformation of Graydon D. Webb.

Five years ago, Webb painted the steps and finished the carpentry work on his first G.D. Ritzy Inc. (#12) restaurant; then, on opening day, he flipped burgers and scooped ice cream. Today, Ritzy's chairman and chief executive officer wears fancy shoes with his expensive suits and talks so Wall Street stock analysts.

Or consider Lorraine Mecca.

In 1979, Mecca hired her cousin, who was unemployed and owned a van, to help her start a microcomputer wholesaling business. She did the inside work. He delivered the goods. Last year, under Mecca's management, sales of Micro D Inc. (#38) hit $114.3 million and its payroll numbered 197.

Usually we look -- and often marvel -- at how far the companies on the INC. 100 have traveled in so little time. From idea to upstart to institution, each built an organization and began to exert an influence on events and people in its community, its market, and beyond. Apple Computer Inc. changed the world before it was five years old -- and, it should be pointed out, before Steven Jobs, its prime founder, turned 28.

But behind the numbers used to meter the company's growth and change -- sales attained, market share gained, employees hired, acquisitions made -- stands, usually, a single soul. He, or she, hasn't built the company alone, of course; he has put together a team. And each team member may be brilliant, penetrating, decisive. But the individual who has had to energize the company, to absorb, judge, and direct the enormous changes it has undergone, is still that one person. If the changes wrought in the company impress us, how much more impressive is the founder's capacity to have dealt with it all, from painting the steps to romancing the stock analysts?

"I've had to mature," says one CEO. "When I first started this thing, I was 30, but I wanted to act like I was 25 to show [employees] the energy that it takes to start a business. Now I'm 36, but I feel my responsibility is to act like I'm 50."

"I used to be a leader to the people in the company," responds another, "but now I'm just an enigma."

"How have I changed?" answers a third. "Let me count the ways."

Last fall, this magazine began to do just that: to examine the ways in which heads of INC. 100 companies have had to change as their companies grew. For starters, we called these CEOs on the telephone -- an admittedly blunt instrument for probing such delicate matters -- and asked how growth had changed relationships between them and others in the company. Virtually all the answers focused on communications.

That may not be surprising. Of course, it is harder to stay in close touch with hundreds of people than with two or three, or even a dozen. "It's embarrassing for me," said a frustrated company head, "not to be able to call people here by their first names. I haven't even been in some of our 25 offices."

"Communications," however, isn't only a logistical matter. Logistical barriers can be overcome by holding a beer blast, starting a newsletter, scheduling a retreat. Rather, when CEOs say communication is a problem, they are frequently thinking of other, more fundamental, issues.

A manufacturing company on this year's list, whose managers asked for anonymity, suggests what is at stake. After seven years of growth, the company's top management was still lean, and two of the founders were still heading it up, one as CEO and the other as senior vice-president. But things were nonetheless going to hell, and had been for several months. Everyone knew why; no one would say.

One day, the CEO, the senior vice-president, and the number-three manager got together, as they frequently did. Only this time, one of them finally ventured, "Look, I think we've got a problem with the vice-president for operations." The CEO, to the surprise of his mates, admitted, "I've kind of felt that way for a long time." And the third one eventually suggested, "Don't we just need to fire him?" For a moment nobody said a word.

"That," says one of the three present at the meeting, "is a very, very unhealthy condition. If you can't get together and call a spade a spade . . . I mean, who the hell were we kidding? We were a 200-person organization, an $18-million company. We got to a point where we were just kidding ourselves. We were communicating, but we would avoid communicating the obvious."

The company fired its nonperforming operations chief. Then, less than a year later, the CEO was asked to leave as well.He was an excellent design engineer and a tenacious entrepreneur, the company's board decided, but he wasn't a good chief executive. He couldn't cope with the complexity created by the company's growth, and either he didn't know it or he wouldn't admit it. The communication structure was fine -- but the company had outgrown the leadership capacity of the man at the top.

It is issues like these that worry CEOs. When you get off the telephone and pin them down in person, as I did with five of the current INC. 100 founders, you find that "communication" is just a enphemism, or a quick and convenient answer to a simplistic question. What really costs them sleep, even the slickest, apparently most self-assured of them, are the fundamental problems of leadership, of knowing how their jobs are changing and understanding what needs to be done today as opposed to yesterday. And underlying these problems is the nagging, lurking question of whether they will be able to keep up with the change and growth in the companies they founded -- and if they can't, whether they will have the insight to know it and say so before someone else has to tell them.