Bootstrapping for Billions

Two multi-billion dollar companies are compared to see why the term "bootstrapper" stiil applies to these businesses.

Do the rigorous cultures of two giant companies reflect their resource-scarce roots, the demands of today's brutally competitive economy, or both? Will every company be a bootstrapper soon?

Early morning before work. As a blaring radio thumps out hit tunes, employees at Computer Associates International Inc. pump away on the sleek instruments of torture that pass for exercise machines in the company's gleaming fitness center. Users of the machines, which rest at the head of a broad spiral staircase, look through plate glass and out on the company tennis courts, as well as the company track -- site of the company's annual Summer Olympics. Nearby, another group of workers gyrate across the buffed blond hardwood floor of the aerobics studio, while down the hall a knot of gym rats trade elbows under a glass backboard on a regulation-size basketball court.

After cooling off, employees can devour a continental breakfast provided free by the company. "I feed my people every day," boasts Charles B. Wang, chairman and chief executive officer of the 8,000-employee software giant, which is based in Islandia, N.Y. Perhaps hoping to lure the next generation into his employ, Wang also offers a Montessori day-care center, as well as a summer camp, for the children of workers.

As excessive as all that may sound -- Computer Associates also has three sports physiologists on staff, and its sumptuous cafeteria offers up a smorgasbord of good food at subsidized prices -- Wang contends that perks like those have actually nurtured a hardscrabble mind-set at the company. By tending to his workers' basic needs, Wang goads employees into being scrappy, flexible, and imaginative, thus propelling Computer Associates to its status as the world's second-largest software company, behind that of Bill What's-His-Name.

In other words, Computer Associates lays out the goodies all in the name of bootstrapping.

On the surface, the word bootstrapping sounds utterly absurd when used in connection with Computer Associates, which was founded in 1976. With $2.1 billion in sales, and with profits that grew 63%, to $401 million, in the latest fiscal year, the company can cut back on a lot of croissants before its bankers come knocking. And Wang, with his silken double-breasted suits and starched white shirts, hardly compares with the image of the dream-struck engineer tinkering away in the second bedroom of his home.

Nonetheless, Wang -- who cofounded the company with three other people, one product, and no venture capital -- has labored to retain the kind of company in which he can launch a major project simply by spotting the right candidate/victim as he patrols the halls. And Computer Associates has made more than 50 acquisitions, opportunistically devouring other software companies that have pulled up lame, and closing deals -- some surpassing $500 million -- in as few as 10 days.

"I still think of us as a small company," claims Wang (pronounced Wong). "I feel as though we are fighting for survival every day."

Wang may be kidding himself, but his belief serves an essential purpose. Once strictly the province of fledgling ventures run out of musty garages, bootstrapping is fast becoming the strategy du jour among savvy companies like Computer Associates, which are caught in an economy demanding faster, better, and cheaper merely as the ante for survival.

Today big-company bootstrappers abound. Consider Dallas-based Southwest Airlines Co., with more than $1 billion in annual revenues, which typically turns planes around twice as fast as the major airlines do, and whose financial-planning department numbers all of five. Take a look at ABC Supply Corp., of Beloit, Wis., a $600-million distributor of building materials that saves money by buying and refurbishing used equipment and last year returned an unbelievable 65% on capital employed.

Or perhaps best yet, to understand how bootstrapping cuts across industry and region, compare Computer Associates with Nucor Corp.

A $2.5-billion steelmaker, Nucor is run by a corporate staff of 23, operating out of a strip mall in Charlotte, N.C. Its mills harbor no health spas, and its subsidized cafeterias tend to feature sloppy joes and vegetables that have been boiled into submission. Nucor's Crawfordsville operation -- with revenues of $500 million a year, its largest plant -- sits out in the rolling cornfields of west central Indiana, where from a distance the mill rises from the landscape like a cathedral in a medieval town. The plant is a place of fire and dust: smudged figures move through a clanging din in which steel is heated to 3,000 degrees and then cast and rolled into 20-ton coils.

At Nucor, just four levels of authority separate top management from production workers. Research and development is ongoing and informal, driven spontaneously by workers' observations, not by some distant lab. Compensation rewards productivity. And productivity, Nucor management believes, flows from innovation. "If somebody comes up with a new idea, we seldom say no," says Nucor chairman and chief executive officer Kenneth Iverson. Some Nucor plants, Iverson says, undergo as many as three or four major equipment changes in a given year. Last year -- before profit sharing -- the average steelworker at Crawfordsville grossed $55,000, with 60% of that coming from an incentive-based bonus.

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