My Favorite Company
The choices of the Inc. staff
Scratch a sportswriter, it's been said, and you'll find a fan inside, a little boy or girl who wants to stand up and cheer for their favorite team.
It's true for restaurant critics, too. For all their vaunted objectivity, each has a favorite boîte that lingers in the mind long after the review has been written.
Business writers are just the same. Focusing as we must on today's story, we search for the new and topical. But there is always, in the back of our minds, a favorite company from stories past. Perhaps the product was state-of-the-art or the employees exceptionally motivated. Perhaps the CEO brought a boa constrictor to work.
No matter. They make us want to stand up and cheer.
I'm being cross-utilized today. What this means, for those of you not familiar with the fashionable human-relations argot, is that at the moment I'm doing a job I wasn't hired to do in the first place -- namely, writing. The editor of this story is ordinarily a writer, but he's being cross-utilized too, so he gets to review my prose.
The popularizer of this hazardous practice of switching jobs with one's colleagues is Don Burr, founder and CEO of my favorite company, People Express Airlines Inc. That's right, People Express. The company everybody -- "everybody" here referring to Wall Street analysts, travel agents, and business travelers -- loved to hate.
Now I could make an argument about the genius of People's original marketing strategy to treat an airline seat like any other commodity, knocking the price down so low that flying was often cheaper than driving or taking the bus. After all, it was this strategy that made air travel accessible to millions who had been excluded because of cost. (And I confess to a weak spot for companies that are in the business of democratizing anything -- be it transportation or personal computing.)
Or I could point to People's pioneering approach to human resources, an attempt to suppress the very foundation of most economic organizations: hierarchy itself. Several years after the last People Express flight, a whole generation of company builders still look to People Express as a model in their efforts to unleash the creative energies of their work force. But when I cite People Express as my favorite company I'm thinking of something else entirely, something much more personal. I'm thinking of what Don Burr and his gang down in Newark taught me about the importance of remaining, always, a fan of business -- an enthusiastic devotee of how the game is played. What Don Burr brought to his organization is an acute understanding that money -- profits, maximized shareholder value, call it what you will -- simply isn't sufficient to engage us, as managers or as workers. That capitalism at its best is about building, about enrichment, about value, about passion and commitment.
From a very personal point of view, people like Don Burr make my job lots of fun. I loved watching Burr play his own particular game of capitalism, just as I love watching Steve Jobs, Ben Cohen, Yvon Chouinard, and Paul Hawken play theirs. It's not so much that I want them to win, mind you, as I just want them to go on playing.
I've often asked myself, what good is it having your own company if you can't bring your pet boa constrictor to work?
OK, maybe I hadn't asked it all that often before the summer of 1987, when I spent a few days with Burton A. Burton, the president of Casablanca Fan Co. Visit a few companies, and you begin to notice how every company reflects its founder's personality in one way or another. Maybe the people are secretive because the founder is shy. Or maybe they are fearful because the founder is a tyrant. But Casablanca is blessed with a founder who is just plain eccentric and unafraid to show it. As a result, a lot of things happen that it seems no one can really explain. I like that.
The day I visited the company, Burton A. Burton -- yes, it's his real name, and yes, he scrubbed many a latrine in the Marine Corps because his drill sergeants thought he was being a wise guy -- discovered a boa slithering along his car. He decided to bring it to work with him, storming into that day's management meeting boa in hand, terrorizing his managers. "I hate those things," one of them said, as Burton unwound the snake on the conference table.
You have to like Burton Burton, and not just because of his name. Because he peddles around the company on a fat-tire Schwinn bike, à la Pee-wee Herman. Because at sales meetings he invariably starts a craps game that some believe is his unique way of doling out incentive bonuses. Because when I asked him if I could come out to City of Industry, Calif., to visit, he warned me in a low voice: "Just don't wear a tie if you're serious about spending any time with us."
Who knows what he meant? Or why he felt so entranced by a big earth mover he saw that he dragged a group of managers away from work to gaze at it? Or why he hired a former vice-president of the Las Vegas Sands Hotel to be his general manager? Or why, when a telephone salesman showed up in his office, Burton handed him a firecracker, slapped him on the back, and sent him on his way?
And can anybody explain the floats? Burton insists that the company sponsor a float in the Rose Bowl parade -- even during years when Casablanca is cutting its advertising budget. Once he designed a float populated with a Bengal tiger and trapeze artists. When it came time to turn the corner, the float got stuck, right next to the main grandstand, where the media people sit. For nearly 20 minutes, the float held up the parade, filling up TV screens and prompting the announcers to repeat the Casablanca name over and over. Burton swore to me that it was not a publicity stunt. He says he doesn't know what happened. Maybe he doesn't.
That's another thing about Burton: it doesn't help to ask him questions. "What's so special about the car?" I asked, getting into his Buick Grand National. My stomach left me shortly thereafter. "Zero to 60 in 5.2 seconds," Burton said with a wink. "How come you don't live here?" I asked him while he was showing me the Malibu mansion he built for around $5 million. He shot back a look of utter disbelief. "Gee," he said, shaking his head, "I didn't really build this house to live in it."
Researcher/reporters don't get out much. Unlike full-fledged writers, who collect frequent-flyer miles with the same intensity that 11-year-olds collect baseball cards, we spend our days poring over statistics in dimly lit public libraries, inhaling trade journals and regional business magazines, and talking on the phone to people we've heard about, read about, and may someday write about.
Traveling, for us, comes in pushing away from our computer terminals, kicking up our feet, and trying to see the places/faces/rear-window views of people whose lives we briefly enter. It's a fairly presumptuous intrusion: give me not just information, but a series of spoken snapshots if you can, please.
My file drawer holds those images: southern poultry farmers tending rows of downy chicks in barns plunked amid tobacco fields, engineers tinkering over blueprints of satellites that will one day shoot manufacturing stations into the stars, a recording studio that aims to be the hippest and serve the funkiest. But my favorite mental postcards come from an Inc. 500 company out in Winslow, Wash., a town of 2,196 on Puget Sound. It's there that Julie Just and the five-person staff of Just Fish Inc. buy and trade Pacific rock fillets, sockeye salmon, and halibut.
It's not that I like fish all that much. It's only that the picture our conversations evoked of Julie Just in green waders, ragg sweater, and rain slicker, heading down to the docks in the early-morning mist to greet the fishing boats, pick out the best of the catch, ice them up, heave them into a refrigerated truck, and send them off to a processor -- well, it sounded so romantic.
When Just told me about her deals with fishermen north in the Alaskan waters, where everything seems so rugged and lush and practical, for a few moments I slipped away from the office. Sorry, Leslie isn't here. She's out. On assignment. Drifting, in a canoe perhaps.
I've seen all kinds of great companies in my six years at Inc. -- companies with inspiring management systems, brilliant marketing strategies, ingenious financing schemes, terrific R&D programs, and so on. Even the greatest companies have an Achilles' heel, however, and it almost always involves the role played by the CEO. I often find myself looking at the company, wondering: what would this place be without the wonderful person who founded it, provided the vision, created the structure, and still guides it? The answer, usually, is disaster. Most would be totally transformed within six months.
One major exception is Springfield Remanufacturing Center Corp. (SRC), the former International Harvester division that appeared on our August 1986 cover ("The Turnaround"). Its management system is based on the premise that business is essentially a game -- one, moreover, that almost anyone can learn to play. As with most games, however, people won't bother to learn it unless they get it. That means, first, they must understand the rules; second, they must receive enough information to let them follow the action; and third, they must have the opportunity to win or lose.
And that's exactly how the company is run. Every week the department heads hold a meeting at which they go over the income statement, comparing actual performance with monthly goals. Each department head then goes back and does the same thing with the supervisors, who repeat the process with the workers on the shop floor. From top to bottom, people in the company really do understand what the business is about -- what it takes to be successful, what role everybody plays. Management and workers set the targets, work together to meet them, and share in the rewards. You've got to see it to believe it.
As a result, the company has had extraordinary performance through good times and bad. A leveraged buyout, it has reduced its debt-to-equity ratio from 89-to-1 to about 1.8-to-1, while its net operating income has gone from negative numbers to 6% in 1988. Yet no one is indispensable to the company, not even Jack Stack, the guy who put the whole thing together. SRC is, in my opinion, the best-managed company in the United States and a model for what American business will have to become in the twenty-first century.
For a business journalist it was the assignment of a lifetime: for three months during the spring of 1985 I traveled around the country, tape recorder in hand, preparing a special section for Inc. called "The Spirit of Independence: Voices from America's Economic Frontiers." Many of the 120 people I spoke with were nationally known figures: Mary Kay Ash and T. Boone Pickens, Joel Hyatt and Frank Borman, William Hewlett and David Packard. Others came from academe, from the Inc. 500, or from the world of politics. Invariably they were high-powered and articulate, and justifiably proud of their accomplishments.
But they weren't the people I would remember best from those three months. Nor were their stories -- interesting as they were -- as compelling as the tale I heard from the three cofounders of a dingy 10-year-old aluminum-forging plant just outside Los Angeles.
In Hollywood they'd call the story of Independent Forge Co. high concept: three factory workers who bought a factory of their own. But no screenwriter would expect an audience to believe what Rosie Ruiz, Irma Diaz, and Kwok Ming Wong went through to create what they called "our own little thing."
Every entrepreneur I met talked about their motivation for setting out on their own, their frustration at the lack of opportunity or the lack of control over their own destiny that made them finally take the plunge. But these three partners had endured those frustrations for 17 years, relegated to the dirtiest jobs in the factory, discriminated against because of race and sex. Every entrepreneur I met had battled to raise the capital they needed. But none of them had managed to save what they needed out of a salary just over minimum wage, working overtime and weekends, giving up vacations, scraping together the $30,000 they needed to buy their own forging machine and set up shop.
For their first three years in business Ruiz, Diaz, and Wong went without salary, living on bread and rice, scouring their neighborhood door-to-door in Wong's battered pickup truck, looking for small jobs to make ends meet. Their first big break, a $94,000 order from Northrop, seemed a miracle -- Ruiz called the buyer herself and said there must have been a mistake: "There were just so many zeros."
I don't think I've ever seen any business owners prouder of what they'd accomplished than Rosie Ruiz and her partners. But they refused to think of themselves as heroes. The credit for the growth of Independent Forge to some $3.5 million in sales didn't belong to them alone, Ruiz insisted, but also to their adopted homeland. "We're all very, very fortunate to live in this country, because your dreams can be fulfilled here."
Corny? Sure. As corny as one of those old Frank Capra movies of the '30s. But when I've had enough of reading about Michael Milken or RJR-Nabisco, I like to remember the three of them, standing in the middle of their busy factory, as true a picture of the triumph of the American dream as I've ever seen.
I always run a little bit late. Despite my best intentions, the eternal hope that next time will be different, there I am racing to meet another deadline. Years ago I tried to compensate for this problem by working into the night. Or I'd drive envelopes to air-freight counters at distant airports -- praying they'd reach their destination on time.
Finally, somebody came along who understood my predicament. His name was Fred Smith.
I can't remember the exact circumstances of the first time I used Federal Express. But I can recall the relief I felt when the driver appeared. He was enthusiastic and purposeful, the sort of fellow you'd want inspecting your basement for gas leaks. No big deal, he told me. The envelope would get there "absolutely and positively." He zipped through the paperwork and off he went, out into the night. The next morning the package had indeed arrived.
Over the past decade Federal Express has come to my rescue more times than I can count. In an age when most attempts at customer service raise my blood pressure, the mere sighting of a Federal Express truck calms me down. The drivers treat my problem as their problem. They manage to locate me on unmarked roads. They repack boxes. And, of course, they know the quickest way to any airport.
Sometimes I wonder what my world would be like if Federal Express didn't exist -- or just as bad, if I had to endure service like that of my local dry cleaner. Luckily, I haven't had to worry about this. It seems that Fred Smith -- or someone who works for him -- is worrying for me.
Magazine writers don't usually get asked for endorsements, and I wasn't. Nonetheless, one day several years ago a friend returned from San Francisco with a flier she had been handed on the street. It quoted me as saying that Blue Chip Cookies Inc.'s "white chocolate cookie surpassed anything I've ever eaten." My blurb topped the page, even ahead of Clint Eastwood's: "Great cookies . . . I love 'em."
Well, they were good, and I had said it, but not, I thought, for print. I had merely mentioned my enthusiasm in a personal note to the president of the company, along with some other business.
I bring this up to make the point that while Mrs. Fields Cookies is my favorite company, it's not because it makes my favorite cookie. It is also not because I had any more fun than usual in researching either of the stories I've written on the company. The Fields research was fine, but my prize for most fun during research has to go to two other stories.
One of those I wrote about the odd collaboration of people who tried to build the country's first civilian space-launch vehicle. Their rocket, called Percheron, blew up, but they had a good time anyway. The company, if you could call it that, consisted of some bright California engineers recruited by a charismatic college dropout and financed by a Presbyterian Texas land developer predestined, he believed, to create a commercial space industry. Their enterprise would have been ludicrous except that they were so serious about it, and the rocket they designed and built actually did work, up to a point. They established a significant precedent: that NASA and the Pentagon didn't have a lockup on space.
Tied for most fun to research was another motley crew. This one worked in a telephone boiler room selling outrageously overpriced promotional gadgets -- coffee mugs, key chains, ballpoint pens, and so forth -- to the likes of cafe, beauty-shop, and feed-and-seed store owners, small-business proprietors who knew they were getting screwed but were always good for one more sale. This was greed exploiting greed. The owners bought the junk because they were getting "free" gifts -- TVs, microwaves, diamond and emerald rings -- just for placing the order. The salespeople, closed into an airless, windowless room, manipulated their marks -- people who, after all, could hang up anytime they wanted to -- with the skill of superb actors. It was pure selling, devoid of any ethical or moral concern. But the sellers were as effectively and crudely manipulated as the people they cheated. Cash defined their lives. It was dangled, withheld, and awarded by an employer who understood money's power to subjugate souls. The company, in other words, knew how to get the performance it wanted out of employees, effectively if not admirably.
Mrs. Fields Cookies is my favorite company for somewhat the same reason -- which is that Debbi and Randy Fields, whatever you think of their cookies (a little too sweet) or their recent corporate earnings (not sweet enough), between them have a genius for getting employees to do something most employers find so, so hard. Approximately 8,000 people sell Mrs. Fields cookies over company-owned store counters. The amazing thing about them is that almost every one of them smiles at customers.
The Fields system doesn't work all the time on everyone, of course, but it works far better than most -- which means that on customer service, Mrs. Fields pretty consistently outperforms the average U.S. company, and not just those selling cookies. It's not something business schools teach, but how much sweeter the world would be if they did.
STEPHEN D. SOLOMON
When I was growing up in a suburb of Philadelphia, my father and I were avid baseball fans. He took me to old Connie Mack Stadium to see virtually every night doubleheader the Phillies played. We would arrive by 4 p.m., two hours before the first game, to watch the warm-ups from the bleacher seats. The sharp crack of bat against ball echoed off the empty seats so loudly that it seemed the entire city could hear it.
That exquisite sound was the anthem of my favorite company, Hillerich & Bradsby Co., headquartered in Louisville. They, as every kid in America knew, made the best baseball bat in the world.
The Louisville Slugger, it was called, and as a boy I wanted one badly. But not just any Louisville Slugger; I had my eye on the 34-inch, flame-tempered Henry Aaron model. What a bat! A big, rounded barrel for contact with the ball, tapered to a narrow handle that fit comfortably in my hands, the wood grain singed dark brown to make it look menacing even in the sweaty hands of a 12-year-old.
In my imagination, I knew how that bat was made. Old craftsmen bent for hours over their lathes making each one, pausing long minutes to consider every angle before making a single shaving. Their eyelids were heavy with sawdust, their hands thick with calluses from working their chisels. They stayed long past dark, talking of batting averages and fastballs.
Although 10 bucks was a lot of money for a kid in the early '60s, I eventually hoarded enough stray coins to buy my bat. But I never did visit Hillerich & Bradsby to see if old craftsmen made the bats the way I imagined. Nor did I ever know how large the company was or how it was managed.
In truth, none of that mattered. For me, it was the product that counted, its quality and its mystique. The product was the company.
Today, as I quiz the companies I visit about their subordinated debentures and the arcana of acquisition strategy, I try to remember my 34-inch, flame-tempered Louisville Slugger. I measured that company by the way its bat felt in my hands; that's how I measure companies today.
Five years ago I visited a brash Silicon Valley start-up in a small, undistinguished office near the Great American amusement complex outside San Jose, Calif. There I found the usual hype about exploding markets and huge future sales, but also something more unusual -- a sense of mission. At a time when much of Silicon Valley was talking about the "inevitability" of offshore production and the need for some national industrial policy, executives at fledgling Cypress Semiconductor -- led by president T. J. Rodgers -- were shaping a vision of an industrial company that would make people buy American, not from patriotism but because the product was better.
I listened dutifully to Rodgers talk about the company's niche markets and the technical excellence of its team. I'd heard hundreds of similar presentations, but I was struck by the Cypress team itself, a remarkably tight collection of industry veterans and upstart technologists. Like Lenin in October 1917, Rodgers believed that a handful of such good people, with a set strategy and sense of revolutionary mission, could overcome the ancient regime of semiconductor czars who had lorded it over the Valley for the past decade.
On my return to Cypress five years later, it was clear that Rodgers's handful of industrial Bolsheviks were well on their way. They had long ago vacated their tiny offices for a sprawling campuslike complex, complete with a highly automated wafer-fabrication line. Sales had broken the $135-million mark and were climbing. But most impressive of all, of the 10 managers I had interviewed in 1984, only one was no longer there.
In Duluth, such consistency might seem commonplace, but in Silicon Valley -- where people change jobs as often as they change their Porsches -- it was nothing short of astounding. The same low turnover rate applied to the company's production workers as well, Rodgers told me, thanks in part to a bonus plan equaling 10% of profits -- a bonus paid in equal dollar amounts to assembly workers, engineers, and top managers alike.
But money by itself doesn't explain the loyalty. In an era of pervasive self-doubt, particularly about the ability of Americans to compete directly in world markets, Rodgers and his team project a confidence that borders on arrogance. In their new microprocessor -- being developed with architecture licensed from fellow upstart Sun Microsystems Inc. -- they insist Cypress has a product that not only leaves the Japanese in the dust, but soon could push the company's sales beyond such stalwarts as Advanced Micro Devices Inc., where Rodgers and many of the top management used to work.
By the time I left, it seemed clear that Cypress could indeed become the vanguard of a new revolution, with smaller, entrepreneurial U.S. chip firms muscling out both domestic and Japanese producers from key markets. The press and Wall Street, no doubt, will be slow to see the trend. And if the pressure grows too great, it's likely both the domestic chip establishment and its Japanese counterparts will turn to their respective governments for help against the revolutionaries.
Given Cypress's determination and team orientation, I would place my bets on the Silicon Valley Bolsheviks.
MARTHA E. MANGELSDORF
As a business reporter, I strive to be an objective professional. I might succeed -- if it weren't for muffin cups.
My trouble with muffin cups started right after college. I was working for a newspaper in Waterbury, Conn., when I stumbled across Fluted Paper Products Co., the nation's leading manufacturer of the wrappers that keep muffins and cupcakes from sticking to pans. This little local company, I soon discovered, maintained its lead by beating two Fortune 500 paper companies in the marketplace -- and that was enough to make a great story for me.
But it wasn't enough to make Fluted Paper my favorite company. That took Rick Stakel Jr., the company's president. Here was someone who could obviously talk enthusiastically about baking cups for hours -- and use the phrase "muffin mania" with a straight face when describing his market. In short, this man really knew the muffin-cup business -- and loved it.
I met Stakel only once, and I know little about him or his business. But I remember his enthusiasm, so I can't help sharing some of it. I keep tabs on his company -- now called Baker's Choice Products Inc. -- at the supermarket and would never buy any other brand. Sometimes my loyalty even overcomes my judgment: when I saw one of the company's sidelines, fluted paper hot-dog trays, on sale a few months ago, I bought some -- even though I never buy hot dogs.
Now I'm no lunatic. I don't really care about muffin cups and I certainly don't care about hot-dog trays. What interests me is people; muffin cups only matter because I saw how much they mattered to someone else. And that is something Fluted Paper Products taught me: that even the most mundane, mass-produced goods and services -- the ones you never think twice about -- take on meaning once you make the connection between them and someone who cares about them.
Unfortunately for my professional objectivity, I didn't stop making that connection with muffin cups. In fact, since I began working at Inc. -- where much of my job is listening to CEOs wax passionate about businesses I never dreamed could exist -- I've sometimes felt that my view of the economy is disintegrating. What had looked like a monumental mechanical structure now always seems on the verge of splintering into a million little niches, each given life by some energetic CEO. It's as if I used to see the economy only from the outside, and now I also get a glimpse of what's going on inside. Maybe the price I pay for the view is a little less objectivity -- and the cost of a few hot-dog trays.
ROBERT A. MAMIS
What a Great Leap Forward it will be when the People's Republic of China takes over Hong Kong in 1997. Among other gains, the PRC will be able to craft one of its leading exports, folding umbrellas that bartenders stick in the cherries of exotic drinks, from modern plastic rather than ancient wood. But turning a profit from nonutilitarian objects is not as easy as it looks, and the PRC would do well to study our own industry.
The American ability to earn a living from lawn flamingos and Elvis figurines has been the envy of many a nation, including the Japanese, whom the United States soundly trounced in that arena of trade in the 1950s, forcing them to move on to cars and TVs. Indeed, so central has the manufacture and marketing of uselessness been to native commerce that perhaps some day a typical junk factory will be re-created at the Smithsonian, representing as significant a contribution to enterprise as the ice-cream parlor and the mass-assembly line. If so, an air of economic miracle must be strongly implied, such as presently exists at H. Fishlove & Co., on North Major Street in the drab light-industry outskirts of Chicago.
Fun-loving Hyman Fishlove started making novelties in 1914, and the company he founded is now the world's leading supplier of windup clattering teeth, among other joke items. In the museum version, the setting will appear unchanged and uncleaned from the day the factory was opened (example: light bulbs of the type in which you can see the filament). There will be only one desk, on whose surface, cluttered by handwritten invoices occasionally stamped "paid," all fiscal and lunchtime activity takes place. At the front door will be a pile of crates, either coming in or being shipped; the sole employee who can specify which is which, is out sick for the week. The machinery, even though it fabricates only modest-sized goods such as a fake faucet you stick on your forehead (at a party, presumably), will reach from floor to ceiling, powered by OSHA-flouting belts and pulleys, and will be in need of immediate repair. The principal will be posed on the telephone, as usual not talking business.
That much of the atmosphere can be captured for our grandchildren. What can't be shown, though, is how the founders of such enterprises managed to feed their families for decades -- including through the Great Depression, when even Henry Ford had trouble -- purely on the backs of gewgaws. In the end, I hope seat-of-the-pants operations like H. Fishlove & Co. can keep plugging along for another 80 years, somehow, because that will mean all's well with our system.
PAUL B. BROWN
Maybe it's the mint juleps. (I'm the only person I know north of the Mason-Dixon line who actually likes the drink.)
Maybe it's the location. (Having spent my entire life in and about Manhattan, I'm a sucker for small towns.)
Or maybe it's the CEO. (He's one of the few people I know who gets smarter the more he drinks.)
But whatever the reason, my favorite company is Maker's Mark Distillery, near Loretto, Ky.
Now I'll concede picking anything near Loretto, Ky. (population: 900), is not an obvious choice. First off, you can't get there from here -- or from just about anywhere else for that matter. Loretto is an hour's drive from Louisville, through some the prettiest rolling green and brown farmland you'll ever see. And even once you're there, there's not much there there. A general store, post office, and school. That's about it.
Except for Maker's Mark, a $9-million company that makes -- according to just about every trade journal and professional society -- the best bourbon there is.
What I like about the company is apparent once you drive onto the grounds. They are immaculate. The 200-acre lawn is always freshly cut. The office buildings -- which are nothing more than a handful of restored two-story houses -- are always recently painted, and even the horses that roam about on the hill are sleek and well groomed. If you are going to make a class product, you should look classy, even if the odds of one of your actual customers stumbling on the place are remote. Image is important, and that's something T. (for Taylor) William Samuels Jr., the company's president, understands.