Life in the Fast Lane
Highlights from our annual Inc. 500 conference
It felt like history in the making as chief executives and senior managers from around the country gathered in Norfolk, Va., for the 13th annual conference of Inc. 500 companies past and present. Perhaps it was the setting. After all, we weren't far from the place where English settlers launched the first for-profit business in the New World, back in 1607. "If Inc. magazine had been around then," noted Governor George Allen in his welcoming remarks, "the Virginia Company wouldn't just have been the number one company on the Inc. 500. It would have been the only company on the list."
Adding to the sense of occasion was a special preconference briefing at the White House, attended by some 150 Inc. 500 CEOs. Afterward, they traveled to Norfolk, where they were joined by more than 1,100 other attendees for three days of speeches, seminars, and roundtables led by some of the most accomplished business advisers, investors, observers, and practitioners in the country. And when the talking was done, they boogied until the wee hours of the morning at the black-tie party following the awards ceremony. One Inc. 500 CEO played with a band called the Pink Flamingos, while others did snake dances around the room. "Man, there's no chance anyone would mistake this for a Fortune 500 event," said a Flamingo. Truly historic.* * *
"Will program for food."
-- Former Entrepreneur of the Year Mitchell Kertzman's credo when he launched the company that eventually became Powersoft, which he sold in February for $950 million* * *
Final Grade: Mike Molony of Pet Ventures (#220 in 1992) was surprised to run into Craig Skevington of FACT Inc. (#236 in 1994), whom he'd last seen nine years before at an executive M.B.A. course at the Wharton School. As part of the course, they'd had to write business plans, which they then used to launch their respective companies. Molony says his got a higher grade -- which may or may not explain why his company made the list two years earlier.* * *
"I generally hire people with the same character qualities I have. The problem is, I always end up fighting with them."
-- Comment of a frustrated CEO during a seminar on hiring the best employees* * *
Reinvention was the hot topic at this conference, as we kept running into Inc. 500 CEOs who were moving from one business to another. Case in point: Jan Koal of Right Byte Computer Center (#327 in 1993), a computer store in Pullman, Wash. After last year's conference, he began to provide computer training for another Inc. 500 company. He says he now spends most of his time in his new business -- education.* * *
"They say, 'We don't like to talk to you when you have your CEO voice on."
-- Rhoda Makoff of R&D Laboratories (#304 in 1994), on why her daughters won't call her at work* * *
The most disturbing statistic came from Michael Treacy, who predicted that a typical $1-billion company would be staffed by about 1,000 people within a few years, compared with about 7,000 today. That leaves 6,000 unemployed, but don't count on the Inc. 500 to hire them. Many attendees said they were so frustrated with managing that they wished they could figure out how to run their companies without employees.* * *
"At any given time 3 million people are starting companies in the United States. That's more people than are getting married and more than are having children."
-- Paul Reynolds, professor of entrepreneurship at Marquette University, on a more hopeful effect of corporate downsizing
"There was a wonderful moment when my six-year-old daughter said, 'So, Mom, are all bosses women?' And I said, 'The good ones, honey."
-- Marion McGovern of M2 (#223 in 1994)* * *
"I work with billion-dollar companies," said Michael Treacy, coauthor of The Discipline of Market Leaders and the opening keynote speaker at this year's Inc. 500 conference. "I have to say it's good to finally meet all the SOBs who are giving them so much trouble."
He went on to remind his listeners of their competitive advantages. "Believe me when I tell you that large companies don't worry about competition from each other. Dow doesn't worry about Du Pont, and Du Pont doesn't worry about GE Plastics. They all worry about the companies that come from nowhere. . . . The greatest opportunity in business today is having a clean sheet of paper." It was a point not lost on an audience made up mostly of CEOs whose companies didn't exist a decade ago.* * *
Pass It On: Seated at the same table during lunch one day were two men who had each founded a natural-gas company in Oklahoma and then taken it to the Inc. 500. One of the companies, Ward Petroleum, had made the list in 1991 (at #125), 1992 (at #61), and 1993 (at #62), while the other, Gale Force Compression, earned its spot (#110) in 1994. An amazing coincidence? Not exactly. The two men are father and son. "You could say that my son Bill bumped me off the list," said Lew Ward of Ward Petroleum.* * *
"People ask me when I'm going to retire. I tell them I'm retired now. I don't consider what I'm doing to be work. Mowing the lawn -- that's work."
-- Norman Brodsky of Perfect Courier (#47 in 1984), who is on his sixth start-up* * *
The Open-Book Choice: Steve Wilson of Mid-States Technical Staffing Services (#212 in 1991) surprised some attendees of his session on open-book management when he talked about creating a three-year strategic plan. "How can you plan so far ahead?" asked one person. "What about the opportunities you can't foresee?" "I know this is going to shock some of you," said Wilson, "but we impose limits on growth. Our philosophy is that too many opportunities can kill you as easily as too few. We're not looking to maximize sales here. We're looking to maximize profit."* * *
"The downsizing of government is inevitable. It's not a matter of how much. It's a matter of how megamuch."
-- Harvard Business School professor Michael Porter, who gave a keynote address, "The Competitive Advantage of the Inner City"* * *
Sign of the Times: The session "Burnout in the '90s" was standing room only, with the audience overflowing into the hallway outside. Next door a session on banking drew eight people.* * *
"Of course, some subcontractors don't live up to our expectations, so we help them find work elsewhere -- preferably with our competitors."
-- Ernie Wilding of Spray-Tech (#248 in 1992), on dealing with suppliers* * *
A Bias for Action: Gary Trinetti of Cleveland-based Garick Corp. (#256 in 1986) could hardly contain himself as he listened to Michael Porter's plea to help save inner cities by setting up for-profit businesses there. By the time Porter finished, Trinetti already had a plan to start a chain of inner-city garden-supply stores and was busy putting together a list of possible joint-venture partners. "This is perfect for Cleveland," he said.* * *
The Most Unusual Resume belonged to David McCue of McCue Corp. (#87 in 1994), in Salem, Mass. A British citizen, he came to the United States to study opera and wound up starting a company that makes equipment for the retail industry.* * *
"They never say yes. They never say no. They just take a lot of notes."
-- Ken Marshall, CEO of Object Design (#1 in 1994), on the reluctance of venture capitalists to be the first investors in a deal* * *
Baking a Bigger Pie: Ken Marshall ran a session showing how Object Design used strategic alliances and venture financing to build its market capitalization to $500 million. "How could you justify the dilution of management's stock, including your own?" asked one attendee. Said Marshall, "We figured we'd rather own 20% of $500 million than 80% of $50 million."* * *
"Lawyers in Japan actually make it easier for you to do business, rather than simply cost you time and money. They are truly the most helpful people in the world."
-- Scott Montgomery, vice-president of marketing at Cannondale, a manufacturer of high-performance bicycles, who spoke about doing business abroad* * *
Finding the Best New Employees is largely a matter of talking to the ones who already work for you, said hiring specialist Ed Ryan, founder of MPR. "At any given time, 7 out of 10 employees should have come to your company through networking. This should be far and away your best source of employee referrals."* * *
"In my experience, cash cows rarely take pleasure in being milked."
-- Mitchell Kertzman of Powersoft* * *
Stop Us Before We Start Another Business: Herb Myers and his wife, Sloan, of Boxlight (#408 in 1994), in Poulsbo, Wash., said that, in the beginning, they operated their direct-sales business out of their closet. When it outgrew the closet, they relocated it to the garage. The garage soon filled up, and so they built a warehouse on a 30-acre tract they acquired. Then they just kept on building and wound up in the office-park-development business.* * *
Full-Service Banking: Emma Lou Brent of Phelps County Bank talked about her homegrown "yellow pages" listing the bank's business clients. When a customer applies for a loan to buy, say, office furniture, the loan officer checks the yellow pages for the name of another customer who sells office furniture and then makes the referral.* * *
"There's a story about a little boy who gets to be four years old and still hasn't talked. His distraught parents take him to specialists, who say there's nothing wrong with him. Finally, one morning, they're eating breakfast and the kid blurts out, 'Mom, the toast is burned.' The mother is ecstatic. 'You talked! You talked! I'm so happy! But why has it taken so long?' The boy says, 'Up to now, things have been OK."
-- Don Peppers, coauthor of The One to One Future, arguing that an absence of customer complaints should be a cause for concern, not celebration
THE 500 SURVEY
As usual, we took the oppor-tunity to poll the Inc. 500 attendees on a variety of topics. Here are some of the more interesting results:
Which of the following are issues that the federal government should be addressing?
Excessive government spending 88%
Tax reform 78%
Reducing the federal deficit 78%
Welfare reform 73%
Education reform 44%
Reducing the trade deficit 26%
Health-care reform 25%
Trade restrictions 16%
Note the low priority of health-care reform -- at a time when Inc. 500 companies are being clobbered by rising health-care costs. Guess that says something about their confidence in Washington's ability to improve the situation.
Would your company join the drive to reform welfare by participating in a program to hire people who want to get off public assistance?
Yes 74% No 7% Not sure 19%
In private, CEOs were adamant in their support for such a program -- with one caveat: "I want legal indemnification if I have to fire someone who just doesn't work."
To which political party do you belong?
Republican 69% Independent 16%
Democratic 6% No answer 9%
Given the answers to the other questions, I have to say that this one did not come as much of a surprise.* * *
"If you feel you don't have a life, maybe you never wanted one in the first place."
-- Victoria Bondoc of Gemini Industries (#341 in 1994)* * *
"Control comes from performance, even for CEOs. If you do the job well, you have all the control you need. If you don't, it doesn't matter how much stock you have. You won't be in control of your company."
-- Mitchell Kertzman of Powersoft* * *
"You need to have personal goals as well as business goals. Without them, your company may grow, but how will you know if you're growing along with it?"
-- Norman Brodsky of Perfect Courier (#47 in 1984)* * *
Forgive us, but we were surprised and pleased when the White House asked about putting together a special preconference briefing for members of the 1994 Inc. 500. Lip service aside, Washington has until now largely ignored the growth companies that (along with start-ups) provide almost all the new jobs commonly ascribed to small business in general. And so we found ourselves in the nation's capital, listening to the case for the Clinton record as presented by Small Business Administration head Phil Lader, presidential assistant Laura Tyson, and Commerce Secretary Ron Brown. They put on a good show. The CEOs in attendance gave high marks to Tyson and Brown for deftly handling some tough questions. Then again, it's doubtful that many votes were changed.
Creating a Culture of Urgency
This year's award for Outstanding Stand-up Performance by a CEO goes to Hatim Tyabji of VeriFone, a $309-million company that makes transaction-automation products. He spoke about how his company uses technology to change the way people work. Among the highlights:
Wire your customers: VeriFone has hooked 500 customers into its internal electronic-mail system, which includes daily updates on both customers and competitors. The response? "Customers say, 'You know more about our company than we do."
Wire your organization: All administrative functions, from capital spending authorizations to travel reservations, are performed on-line. Sales and marketing information is on-line, too. So are daily reports of company profitability and the schedules of key managers.
Educate everyone: The company provides courses by modem and in learning centers at major locations, but employees are responsible for their own training.
Don't rely exclusively on technology: "E-mail alone doesn't work. Voice mail alone doesn't work. You need human rapport. Technology is baloney if you try to substitute it for face-to-face communication." So, every six weeks, VeriFone brings its far-flung staff together for weeklong meetings, and Tyabji himself visits up to 200 customers a year.
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