It starts the first day on the job, with a pep talk from the manager and a 12-minute videotape -- Metro is People! -- which is shown to every new employee. "It may be hokey," Crumley admits, "but we don't show it to cynics." And it continues with a constant barrage of employee-motivation techniques that stress values such as teamwork and customer service. Managers regularly take pains to explain to all employees some of the business details of the company, including revenues and expenses, and to outline its long-range plans. And the rewards for staying with the company and helping it grow are clearly spelled out: a profit-sharing plan that distributes two-thirds of the company's pretax income, an extensive education program for employees, even use of the company's mountain condo.
The visitor to Metro's headquarters finds an abundance of employee enthusiasm, which is not lost on customers like Tom Brochu, a systems project supervisor for Union Camp Corp., in Franklin, Va., who has turned to Metro several times during the last four years. "Uniformly, their attitude is, How much more can I do for you?" he says. "They have an uncanny devotion to their clients' needs. And it's not just something their managers preach about. They have an energy and enthusiasm through the company that is astonishing."
It's one thing to do that in a small company, where the owners are on hand to inspire and cajole. But what happens when growth means opening completely new operations in distant cities? Fain and Crumley had always had a 600-person company in mind, even from those first days in the spare room. But how could they get there without losing the original fervor of two entrepreneurs building a team, sharing risks and rewards?
That's where cloning comes in. Forget the idea of a branch office, the two founders said. Each new operation would be set up as a separate, decentralized profit center. At the top we two co-directors sharing responsibility for the start-up, just like Fain and Crumley did, one on the technical side, the other tending to marketing. And their charge would be to run the business as if they owned it -- hiring, marketing, planning, the works. Only the personnel and administrative policies would be controlled from the home office.
If the organization of the new offices was to be entrepreneurial, so, too, was the compensation. The directors don't really make any money until the division is making money; as in a real-life start-up, the first challenge is to get bread on the table. Between 40% and 50% of the directors' compensation depends on how good they are at generating revenues and cutting expenses. And to keep them hungry, that percentage increases along with sales and market share.
It hasn't always worked. While Metro has promoted most of its technical co-directors from within, it has had to go outside the company for all but one of the marketing people -- and two of the five hires didn't work out. In both cases, the new co-directors wanted to see the rewards of profitability before the profits were posted.
"Now, we just pay even closer attention to the screening," Crumley says. "But we won't change the policy. Unless you pay them like businesspeople, they won't think like businesspeople. We don't let them smell the roses until they grow them."
5 YEARS ON THE INC. 500
PACIFIC ENVELOPE CO. ANAHEIM, CALIF. ENVELOPE MANUFACTURER
Bob Cashman should have been a happy man. Pacific Envelope (#380), the business he'd run since 1975, was thriving, with better than 80% penetration into his Orange County, Calif., market. Sales were more than $10 million, up 7,000% in just one decade, with steady profits. Walking through his plant each day, he was convinced he'd put together one of the best operations in the industry: efficient machines operated by loyal employees who had become his second family.
But Cashman was bored. He missed the risk, the old days when he'd had to push a broom to help keep Pacific Envelope alive, when cash flow was a daily worry and a new customer was cause for celebration. Sometimes it was hard, even for him, to connect the chief executive officer he was at 54, mild mannered and balding, with the energetic entrepreneur he had been back then. And his restlessness worried him. If he was losing the fire in the belly, he wondered, then what would keep the fire in the company alive?
Like thousands of Korean War veterans, Cashman had settled in southern California after his combat duty, finishing his education at the University of California at Los Angeles rather than back home in Iowa. After stints selling insurance by direct mail and writing reports on potential acquisitions at ITT Corp., he took over a small envelope-manufacturing company -- a former supplier from his direct-mail days that still owed him money on a $100,000 loan.
The company wasn't much. After he foreclosed on the assets and assumed the debts, Pacific Envelope started out at nearly $250,000 in the hole. But he loved the clatter of machines, the smell of the stock, the fun of actually making something with paper, not just shuffling it. Cashman set up his desk on a pallet on the shop floor and taught himself manufacturing, while his wife, Georgia, ran the office and directed sales. On weekends, he'd put on his overalls and come in to do maintenance on the machines.
There was just one problem: he couldn't make enough envelopes to make any money. He was even then the only manufacturer in the county, with a cost advantage over competitors who had to truck their envelopes down the freeway from Los Angeles. And as direct mail became a mainstream business tool, the demand for envelopes was booming. But he didn't have the machinery or the employees to capitalize on the situation. He could sell everything he could make, but his machines were too antiquated for him to increase his volume. A new, high-performance machine would cost $250,000, with a 40% deposit required. But he couldn't find anyone who would let him borrow against a machine that wasn't built yet -- "not the banks, not the high-security guys, not even the break-your-legs guys."
