Hard Questions

Here's how Inc. 500 CEOs answered 10 difficult questions, including "Should I take my company public?" "How can I keep my employees?" and "Should I expand into international markets?"

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The toughest part of managing isn't figuring out what to do. It's knowing what to ask

1. How do I know I've outgrown my start-up team?
2. How do I continue doing what I love?
3. Which customers do I want to keep?
4. Should I take my company public?
5. How can I keep my employees?
6. Now that we're not a start-up, how do I promote teamwork?
7. How can I adapt as my market changes?
8. Should I expand into international markets?
9. How can I dominate my competitors?
10. How can I stay focused on the big picture?

1. How do I know I've outgrown my start-up team?
To hear Wells Richards tell the tale, his decision to fire a purchasing agent last autumn was clearly a company-defining experience. It sent an explicit message to his employees that top performance was the only way to ensure one's place at the company, it gave him credibility as a tough manager, and it made his mother mad as hell.

Richards, CEO of SIMOD Corp. (#247 on the 1998 Inc. 500 list), a five-year-old Pearl, Miss., telecommunications and data equipment distributor, had fired his sister. "She was shocked, and my family was shocked," recalls Richards. "It was probably the hardest thing I've ever done, but business is business."

It was a wrenching decision. "It's much easier to fire someone who is not doing their job," says Richards. "But she was trying, and she meant well."

Richards had found himself struggling with a problem not uncommon to CEOs of growing companies. When you start a company, it's difficult to identify the skills and talents your employees will need not only to help launch the company but to grow it exponentially. You're often content with hiring just about anyone who will take the leap of faith with you --relatives, friends, whoever answers the help wanted ad. And just when you think you're in a groove with your current team, internal and external forces may compel you to reevaluate your choices.

One of Richards's first hires, for instance, impressed him with an enthusiastic handwritten response to a newspaper ad. When the fellow showed up for a 7 a.m. interview, Richards hired him on the spot. "He was great for the first year and a half," the CEO recalls. Never mind that the fellow had a problem working with women and that his lunch hour took precedence over all else. "When the company was small, none of that really mattered," says Richards. But when business began booming, the employee could no longer avoid female coworkers, and his sacred lunch hour began interfering with customers' demands.

Often, members of a start-up team feel they've earned the right to a status quo working environment. "He felt he didn't have to change," recalls Richards. "But as we grew, he had to get out of our way."

Even conscientious employees can hold you back. Richards's first bookkeeper was a 20-year-old woman who worked part-time while pursuing an accounting degree. But as the company grew, Richards began to understand the folly of retaining an inexperienced employee in that role. "We were running $6.5 million through the company and doing it off QuickBooks," he recalls. "It was a nightmare." A more seasoned accountant would have realized the limitations and pressed Richards to invest in a more sophisticated software program instead of using one designed for very small businesses. "I should have dumped QuickBooks when we were at $2 million," he says. He replaced the woman with a more technology-savvy chief financial officer a year and a half ago but kept her on as the CFO's assistant. According to Richards, she quit several months later.

As for Richards's sister, a clear case of culture clash led to her departure. By the time SIMOD was four years old, Richards and his partner, Brad Cohen, had realized the need to integrate clear systems and procedures into the company's day-to-day management. It's a stage that every growing company reaches sooner or later, and one that can be extremely disruptive to employees who are accustomed to a more laissez-faire atmosphere.

Richards's sister, two years older than he, had grown accustomed to "having her fingers in every pie" and to micromanaging processes that were no longer in her job description. "She was protective of me, and she was looking out for my back, but it upset everybody," Richards recalls. As SIMOD's staff expanded and as business became more complex, it became increasingly important to Richards that everyone follow the management protocol he had created. After his sister left, he and Cohen called a companywide meeting to explain his actions. "I hope this sends a clear message to everyone," he said at that time. "In the end I probably won't have any friends." Clay Watters, one of SIMOD's top sales representatives and the company's first employee, confirms that everyone understood. "There's no favoritism here," he says. "The general message is if you do your work like you're supposed to, you'll be here for a long time."

And if you don't? Richards is clear about that as well. "I can fire you just as easily as I hired you," he claims. "I don't lose sleep over it." --Donna Fenn

2. How do I continue doing what I love?
On a 20-acre estate not far from downtown Portland, Oregon, Ray DeMarini is carving out a field where he can hit softballs. For a few hours every workday afternoon, he'll be there swinging at softballs served up by his own private pitcher, driving them to a fence 320 feet away.

No, DeMarini won't be playing hooky from his gig as founder and president of DeMarini Sports Inc. (#146 on the 1998 Inc. 500 list). Quite the opposite, in fact. He's building his field of dreams precisely because he's decided that the most important role he plays is as DeMarini's R&D arm. Founded in 1989, the company claims the distinction of making the most expensive softball bats in the world. This year, with sales poised to double from nearly $10 million in 1997, DeMarini has decided to give up day-to-day operations to focus on swinging bats every day in an effort to come up with new models. "My strength is my ability to see what will be hot products tomorrow," says DeMarini, who has been using a public park for his daily drills. "There are people more qualified to run the company."

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