Survey of All-Time Champs Reveals Ups and Downs
In 1986, seven companies achieved something that, frankly, seemed inconceivable: they made the Inc. 500 list for the fifth time. To honor those that have accomplished that striking and unusual feat, several years ago we created the Inc. 500 Hall of Fame. As of 1999, 52 companies had been inducted, including 12 that made the list six times.
To find out how the Hall of Fame CEOs and their companies were faring, Inc. attempted to contact all 52 of them this past summer. We reached 48 companies, and 30 of those we contacted responded to a detailed written survey. The results? All 48 are still in business, have merged with another company, or have been acquired. Some have ripened into very large companies that employ thousands. SAS Institute, based in Cary, N.C., is a conspicuous example. The software giant, which copped Hall of Fame honors in 1986, now employs 7,000 people worldwide and reports revenues of $1 billion.
Not content to rest on their laurels, at least six Hall of Fame companies have gone public. (See " Cruising to an IPO -- with Mixed Results.") And at least 13 Hall of Fame entrepreneurs have started additional companies. (See " Winning Mandate: An Encore.") But the long stretch of fast growth experienced by Hall of Fame companies hasn't relieved their CEOs of many commonplace entrepreneurial burdens. 43% of the survey's respondents bemoaned "bad hires," and 57% cited hiring as their most unexpected challenge to growth. "When you're fast growing, you don't take as much care with hiring as you should," says Ross Youngs, CEO of Univenture, a maker of CD storage products in Columbus, Ohio, that entered the Hall of Fame in 1997. "Now we don't take gambles. We have multiple eyes on any major candidate." Despite the nagging problem of recruiting qualified employees, Youngs predicts that Univenture's revenues will hit $25 million this year, up from $15 million just two years ago.
Indeed, the rapid growth of Anstec, an IT and professional services firm in McLean, Va., only aggravated its hiring woes, says former CEO and founder Satyendra "Shri" Shrivastava. In the mid-1990s, Anstec particularly struggled to find qualified marketing and finance managers, Shrivastava says. "It was very difficult, and we had to hire people who were second-best," he says. "But sometimes second-best didn't work out. We had some bad apples in finance." Shrivastava responded by training his son, Sumeet, to run Anstec, and the bad hires didn't last long. Shortly after Anstec made the Hall of Fame in 1995, its founder started a second company, Anstec Technologies, which provides E-business services. The moves paid off. Shrivastava sold Anstec in 1999 to a larger competitor, Keane Inc., which kept his son on as managing director of the Anstec unit. Meanwhile, $4-million Anstec Technologies is continuing to grow.
Yet another measure -- employee turnover -- shows that the Hall of Fame companies have struggled exceedingly with staffing problems. Turnover at Hall of Fame companies has averaged 17% a year, according to the survey, compared with this year's Inc. 500 average of 15%. At some Hall of Fame companies, turnover is nothing short of horrific. John Fain, CEO of Metro Information Services, a six-time Inc. 500 veteran, says an average of 35% of the salaried consultants at his Virginia Beach, Va., information-technology-services company leave each year.
Almost half of the respondents to the Hall of Fame survey said they had stuck to their company's original mission, through thick and thin. A whopping 83% said they had achieved growth in the areas they'd anticipated it to come from -- many in computer-related fields, although traditional businesses like a travel agency, a restaurant chain, and a plastic-lawn-chair manufacturer are also represented in the Hall of Fame.
Asked about the biggest personal toll their company's fast growth had taken, half of the CEOs who answered said "family time." In fact 13% of them said that business pressures had led to a divorce. Jim Ansara, the CEO and founder of $220-million Shawmut Design & Construction, based in Boston, says that in 20 years he's suffered every conceivable entrepreneurial malady -- from bad hires to financing mishaps -- except divorce. "Although," he admits, "I came very close." Ansara's biggest challenge? "My inability to stay focused and maintain my intensity as I enter my forties has been an unexpected challenge," he says.
At least the CEOs are well compensated for their sacrifices. The median pay (including salary, profit sharing, and bonuses) of 18 Hall of Fame CEOs who answered the survey questions about compensation was $400,000, twice the comparable figure among this year's Inc. 500. Those 18 CEOs reported receiving an average raise of 95% over a five-year period.
Perhaps it's no surprise that one of the oldest and most successful companies in the Hall of Fame, SAS Institute, has been listed in The 100 Best Companies to Work for in America. The annual turnover rate at SAS: just above 4%. Chalk that up to company perks such as on-site day care and a 35-hour workweek. But the low turnover rate may also be related to the perseverance of company founder James Goodnight, who is still CEO after 24 years.
Window on the Hall of Fame
The following is a tally of responses from 30 Hall of Fame CEOs to questions in a recent Inc. survey:
In which industry sector is your company's business?
Has your company's mission changed?
In what ways have you funded your company?
Bank line of credit 67%
Commercial loan 33%
Initial public offering 20%
Angel investment 17%
Venture capital 13%
What has been the most unexpected challenge to growth?
Fighting competitors 13%
Finding and keeping customers 3%
What has been your biggest mistake in managing growth?
Bad hires 43%
Financing mishaps 13%
Ugly partnership 7%
Lack of infrastructure 6%
Failure with a product, a market, or a customer 10%
To which categories of employees do you grant stock options?
Upper management 33%
Long-serving employees 20%
Top recruits 10%
What are the biggest ways in which your company has taken a personal toll?
Family time 50%
Time for hobbies 23%
Time for friends 20%
Time for charity 17%
Vacation time 13%
How many hours do you work in an average week? 54**
What's your annual compensation?
What's the average rate of turnover per year of your workforce? 17%
How many vacation days do you take each year? 19**
*Based on 18 responses
**Average of all responses.
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