The talk of the Inc. 500

This year's Inc. 500 conference--our 16th annual such event--was in many ways a lot like its predecessors. Close to 1,000 people, including the founders and CEOs of some of the country's leading growth companies, converged on Salt Lake City to hear speakers such as Charles Rivkin, president and chief operating officer of the Jim Henson Co.; Inc. columnist and Built to Last coauthor Jim Collins; and Stephen Covey, author of The Seven Habits of Highly Effective People. They also came to participate in more than 45 breakout sessions and roundtables devoted to cutting-edge management practices. Capping off the conference was a black-tie ceremony at which we presented the newest members of the Inc. 500 with awards for making the list.

What always makes these events so electrifying is the buzz that comes from the attendees as they network with one another about every imaginable aspect of building a business. This year there was buzz all right, but it was less about building businesses than about selling them. Cashing out was the undisputed hot topic, thanks to the combination of extraordinarily high valuations and unusually intense pressures to sell in industries undergoing massive and rapid consolidation. The second-most-talked-about issue was (what else?) the labor shortage, but even that played into the dominant theme. Several attendees told us that finding good people had become so difficult that they'd finally thrown up their hands--and sold their companies.

Other outtakes from the 16th annual Inc. 500 Conference:

FLYING COACH WITH CLASS Michael May, CEO of Empower Trainers & Consultants Inc., talked about his company's practice of having everyone fly coach. Then, at the end of the year, the company figures out how much more it would have cost to have people fly first-class and donates that amount to a community charity.

CASHING OUT Marcia Plotkin said she'd never heard the term exit strategy before she and her husband, Steve, attended their first Inc. 500 conference, 10 years ago. They wound up selling their business, U.S. Connect Philadelphia (formerly Real World Systems), in 1996. "The first buyout offer came from Inacom," said Steve. "We looked at the numbers and said, 'Oh, my God.' Then came the offer from Ikon. We said, 'Oh, my GOD!' We spent the entire weekend walking around saying, 'Oh, my God!' "

HOW TO HIRE SALESPEOPLE Try asking sales candidates what they'd do if they were dealt two pairs in a hand of draw poker. The best salespeople, says Mark Roesner of American Fluid Technologies, will say they'd throw away one pair and go for three of a kind.

"As a regular exercise, ask people to name your company's purpose. The answers will shock you, shock you."
--Keynote speaker Stephen Covey, on the role of the mission statement within an organization

SO SORRY How tough is the competition for labor? Steve Singer of Direct Marketing Services pays recruiting bonuses to employees who bring new hires on board. Some employees have been known to blanket the cars in competitors' parking lots with help-wanted leaflets. "We have to call up and smooth things over" with the competitors, says Singer.

MANAGER-OF-THE-MONTH CLUB Neal Rabin of Miramar Systems wants all his employees to be able to think managerially, and he also wants to identify those with the potential to become good managers. So he has people work in teams, with team members rotating as project managers. He calls them "one-month managers."

"Open book. Open ears. Open mind. Open door. Open eyes. Everything at our company is open."
--Dusit "Dusty" Charern, President and CEO, Quality Research

THE SILENT TREATMENT Withholding feedback, observed consultant Charles Coonradt of the Game of Work Inc., is the most severe form of psychological punishment we can inflict on one another. People would rather get negative feedback than none at all. So why don't they just ask for it? They hate to admit they need it, or they're afraid of hearing the worst, or they think no news is good news. As for the people who should be giving the feedback, they're busy, or they hate confrontation, or they have nothing nice to say. Coonradt was asked how much feedback is appropriate. Only the recipient can answer that question, he replied, not the giver.

"Good job candidates are harder to get than money."
--Hiring guru Dr. Pierre Mornell, author of Hiring Smart!

PERSONAL R&D That's the term Eric Kriss, formerly of MediQual, used to describe the investment he makes in educating himself about technological changes in his industry. He said he devotes about a quarter of his time to personal R&D, which includes everything from reading the trade press to wandering aimlessly on the Web, "playing with a lot of software," as he puts it. "Like all R&D, it involves wasting time, because you never know whether it's going to pay off."

AND THEN IT HIT ME Curtis Jewell was a top insurance salesman for Nationwide Insurance during a period when the company was upgrading its computer systems. When he saw how much Nationwide was spending on consultants, he says, "I decided that's where I wanted to be." So he founded Excel Management Systems, a computer-systems-design company in Columbus, Ohio, which made it to the Inc. 500 in 1995 and 1997.

THE BUSINESS OF LIFE Keynote speaker Stephen Covey has his family draw up a mission statement, and session leader Norm Brodsky talked about creating a family five-year plan with his wife. Is it becoming a trend to use business mechanisms in personal life? Or is the practice peculiar to Inc. 500 presenters--like the close personal relationships with Peter Drucker and Nelson Mandela that so many of this year's speakers seemed to share?

THE ACID TEST Eric Kriss ran two sessions at the conference and didn't mention Drucker or Mandela even once. He did drop one name, though: Ken Kesey. Turns out Kesey--yes, that Ken Kesey--was Kriss's playground director when he was growing up in Palo Alto. Maybe that's where he got his first exposure to the "vision thing."

"We tell our employees not to drink or cuss when they're on the job, but we also tell them that if they're going to drink on the job, they should make it scotch or bourbon, not vodka, so the clients will know they're drunk, not stupid."
--Harry Carter, President of Computer Sales & Services, in Columbia, S.C.

LIFE IN THE FISHBOWL Kriss told a story about the day an employee walked into his office and asked if the company was in trouble. "No," said Kriss, "why do you ask?" "Well," said the employee, "it's your car. People think we must be doing badly for you to be driving a seven-year-old heap like that."

REVERSE SABBATICALS Richard Doyle, chairman and CEO of Mass. Bay Brewing Co., said he knew some people who might benefit from "reverse sabbaticals," during which they'd be required to do real work in a real company for six months. We think he had consultants in mind.

FOUND WISDOM Stephen King, president of Virtual Growth Inc., said he borrowed his most effective marketing technique from Amnesty International USA, for which he served as chief financial officer for a time. Amnesty International was very good at a fund-raising approach known as "mail, phone, mail." You mail a letter, quickly follow up by phone, and then follow up again with a more specific personalized letter. That same technique worked wonders when King started Virtual Growth, an accounting firm, in December 1995. He got so much business that he hasn't needed to do a second campaign until now.

Built to Last

"How many of you have heard that there are two types of business leaders--the founder/entrepreneur and the executive/manager--and that you can't be both? Well, it's a myth. To build a great company, you must be both."

"Charisma is not an asset. It's a liability to recover from. Juan Trippe of Pan American was the quintessential example of a charismatic leader. He thought that the ultimate proof of his leadership ability would be for the company to go bankrupt after he died. To that extent, he was an unqualified success."

"People always ask me, how do you teach core values? The answer is, you don't. The goal is not to get people to share your core values. It's to get people who already share your core values."

--Jim Collins, coauthor of Built to Last

The job glut

We've never been able to resist the opportunity to poll the Inc. 500 founders who attend the conference. This year we learned that if a presidential election were held today, the overwhelming majority would vote Republican. No surprise there.

We also found out that, in starting their companies, both men (61%) and women (55%) were motivated most by the desire to "build or create something." Where they differed was in their attitudes about building wealth, with 52% of the men and only 25% of the women citing it as an important motivator. (Building wealth came in second on the men's lists but ranked sixth among the women.)

Then we asked, Has the current labor shortage affected your company's ability to attract and retain qualified employees? The response: 78% answered yes.

So we weren't shocked to learn that 56% of the respondents were upgrading compensation. What does come as a surprise is that 29% reported that they now recruit on college campuses, long considered a practice only large companies could afford.

The biggest surprise of all? Seven percent of the Inc. 500 reported hiring entry-level workers from welfare. That's amazing, considering the likely cost of training them, an expense many small companies cannot afford.

A stand-up guy

After an informal poll of Inc. staff members, the unofficial but much-coveted award for Outstanding Stand-up Performance by a CEO went to Doug Mellinger, founder of PRT Group (who was featured on the cover of our January issue). Some highlights from his breakout session:

On equity: "The biggest lesson I've learned in the past two years is the difference between the amount of equity you own and the value of the equity. I used to worry about losing control, keeping 51% of the stock, and so on. It's all rubbish. What counts is building the value."

On the value of titles: "I didn't think much about them when we were starting out. I gave everyone the title of executive vice-president. It made things easier if they were going to see a client. But all that changed when we got larger. I think at about $10 million, I decided we had to take titles seriously."

On the value of sharing equity: "Every person in the company owns stock. Some have had it from the first year on. One manager is worth millions today, at least on paper. He's been promoted and demoted at least five times. He accepts the philosophy of always hiring the best people for any job."

On investment bankers: "They have no concept of money. It's all monopoly money to them. Everything goes to 'use of proceeds,' so they spend money like water. You fly the Concorde. You stay in the best hotels. You go to five-star restaurants and order five of everything on the menu, whether you think you're going to eat it or not. It's insane."

On employee activities: "We will support anything, but we won't create it. People have to come up with their own ideas." --Bo Burlingham