Customers can't live without us. When Jim Zona, CEO of Pittsburgh Plastics (#400, 1995), was trying to sell his company's shoe-insole inserts to retail outlets, he'd have someone stop in a store and ask if it carried Gel-Soles. Two days later he'd have somebody else stop at the same store. After a few days he'd have a salesperson call on the store to see if it wanted to carry his product. "And they'd say, 'Come on down," recalls Zona. "Once we got in those stores, we'd tell everybody to go there to buy the product."
Sure, we can do that. To get started and bring in much-needed capital, Steve Burkhart, cofounder of Advanced Micro-Electronics (#486, 1995), a Vincennes, Ind., computer-maintenance company, put a bid on the service contract for a local university. The problem was that he didn't have a clue how to price the contract or what would be involved in maintaining all the computers on campus. "We just didn't know a lot of things at that point," says Burkhart. He bid $41,000 with payment due up front. Since everyone else bid more than $100,000, Advanced Micro got the job. The college never asked for references. The college is still a customer, and Burkhart is still bidding on projects he claims to know nothing about. "Right now we're trying to put together a bid for seven GE plants in Mexico. We don't have a clue how to do international business," he says.
I've got a closet full of people. In 1990, when Robert Luster started Luster Construction Management (#407, 1996), a San Francisco-based consulting firm that caters to large construction projects, he couldn't afford to hire any employees. "But," he says, "I had 25 individuals I'd already interviewed that as I found a job I could hire." That's how Luster says he built his business. He had permission from the 25 applicants to use their résumés, which he would bring to prospective construction-project clients. "In professional services," says Luster, "they're not so much interested in the company as in the individual you can deliver."
All that posturing was done with one aim: to paint a picture of a company that was more established than it was. Luster simply did what every good company owner tries to do when starting out on a shoestring--exude confidence, determination, and ruthless optimism. And, yes, often with the goal of trying to get the upper hand in a business relationship. But--and there's a big "but" there--you have to be clear, and make clear to the people with whom you are doing business, that you are not going to do anything to get that upper hand, that you will not cross the line and start lying to your customers. Because once you cross that line, it's difficult to stem the tide of your own lies. It takes a rigorous commitment to keep foremost in your mind the difference between putting on a good face and blatantly lying about your credentials.
Once you cross that line, it's a slippery slide to where you, like Molina, start referring to your most ill-conceived strategies as "actually pretty innovative" rather than recognizing them for what they are. Molina says he developed his "innovative" strategy when his vendors grew tired of late payments from him and required cash on delivery. His technique involved using a check embosser to imprint amounts on a blank check, and typing "certified check" on it so the delivery person would leave the inventory for which he was supposed to get cash or a certified check. That would give Molina a couple of days to actually get some money in the bank. "When the vendor got their check, they'd call and say, 'Hey, this is a regular check,' and we'd say, 'Oh, I'm sorry. Just send it back and we'll send you a cashier's check.' And then they'd say, 'Oh no, we'll just cash this one."
So what's wrong with such lying anyway? Well, we'd like to believe folks like DeAngelo, who contends that "once you get a reputation for being a cheat, a liar, a stealer, you're not going to last very long in any industry." Sadly, that doesn't always seem to be the case.
More likely than not, the real concern is one voiced by the anonymous CEO who asked me, "Aren't you concerned that some people will take some of these ideas and say, 'Hey, why didn't I think of that?" And ultimately, that is the price you pay. Once you're recognized for what you are, then your employees, your customers, and your vendors will think nothing of turning around and lying to you to get what they need. That's the real fear: that the lies we tell will come back to be the lies we're told.
Special-assignment editor Jeffrey L. Seglin is a 1998-99 Visiting Fellow at the Center for the Study of Values in Public Life at Harvard University.
(The following readers' comments appeared in a subsequent issue of Inc.)
Readers' Debate
Does stretching the truth set a 'dangerous precedent' for a start-up CEO?
The most recent Black and White column ("True Lies", Inc. 500 issue) contended that entrepreneurs who are starting companies are required--expected, even--to stretch certain truths about their fledgling businesses. In an effort to nab prime retail space, Nick Molina, the cofounder of Let's Talk Cellular & Wireless, admitted to manipulating his company's financials and providing photos that made the start-up retailer appear bigger than it was, not to mention posing as a doctor to reach a leasing agent in a prestigious mall. But he didn't really cross the line, argued the column, till he began outright lying, which is something different from the "posturing" entrepreneurs must engage in. Readers seemed to have drawn their own distinctions:
"Posturing, embellishing, or 'selling the sizzle' are as old as business," begins Jim Baxter, owner of Benefit Designs, an employee-benefits company in West Springfield, Mass. "On the other hand, manipulating financials, holding vendor money, bending agreements, and other less-than-honest actions are unacceptable. Those actions ultimately create less trust in the marketplace."
Even within the company, employees will mirror such behavior, with potentially ugly consequences, notes William Bennett, vice-president of marketing at Alliance Underwriters, in Woodstock, Ga. "Beginning early on to stretch the truth or to lie outright sets a dangerous precedent and gives license to other employees around you," he says.
Indeed, the prospect of having to keep so many stories straight should keep any CEO focused on the truth, suggests Eric Barnes, president and general manager at Capital Funds Group, in Berkeley, Calif. "I represent investors who look for established companies needing expansion capital," he explains. "The rule of thumb they have demanded I put out to prospective companies is simple: Tell the truth. All the time. Overstate your negatives. Understate your positives. In this way, nothing ever comes back to haunt you. It's not a bad idea in one's personal life, either."
