Page 4 of "Why 20 Million of You Can't Be Wrong"
Small companies, it was once thought, would always be at a disadvantage in the marketplace because large companies were, well, big. They had deeper pockets. They could build bigger factories and stores, hence take advantage of economies of scale. They had access to more capital. But consider how different things are now:
One, we live and work in a knowledge-based world, with human capital more important than physical or financial capital. The point is a cliche. But note that it extends well beyond the industries--high tech, professional services, entertainment, etc.--with which the idea is usually associated. Trucking companies don't just need trucks and drivers, they need software engineers who can develop economical route algorithms. Specialty retailers don't just need stores, they need knowledgeable salespeople who can answer questions and steer customers toward what they need. Even machine operators in factories aren't just tightening bolts anymore, they're programming and monitoring the computers that run things.
Two, this environment puts a premium on attracting and retaining good people. It isn't just the cost of hiring replacements that matters when valuable people leave, though those costs can add up. It's that their knowledge and experience leave with them. Though companies have grown complacent about keeping employees over the last few years--where were they going to go?--that situation is about to change. Baby boomers are aging. Younger workers are scarce. "We're looking at a shortage of over 10 million people by 2010," says Roger Herman, a consultant whose 2003 book Impending Crisis (co-authored with Tom Olivo and Joyce Gioia) documents the claim. Which companies will get and keep the people who are available? Time was, a job with a big corporation was out-and-out preferable to a job with a small one. It paid more. The benefits were better, as was the job security. Intangibles like reputation mattered too: You could tell your neighbors you worked for IBM or Xerox and they'd know you had a job with a respected company. But let's go back to our counting.
What if the next big thing isn't so much a new technology as it is an entirely new way of thinking about business?
Three, a lot of those big-company advantages in the labor market have vanished. Job security: pffft. Reputation: double pffft. (The big brokerage firm Edward Jones ranked No. 4 in Fortune's 2004 listing of the 100 Best Companies to Work For. The list appeared just days before the scandal broke about Jones getting payments to tout certain mutual funds. Oops.) The pay and benefits with most large corporations are still pretty good, so long as you keep your job. But cubicle life? Thanks to Dilbert, the corporate workplace has become a national joke. Thanks to Enron, et al., the corporation itself now seems suspect.
And four, finally, we got a glimmer of an alternative: Hey, work life doesn't have to be like that. It started in the early heyday of Silicon Valley. The engineers began coming to work in casual clothes. They played foosball during breaks and held beer bashes on Friday afternoons. But it wasn't just fun and frills. Employers were offering employees the chance to move up rapidly, to learn new stuff and take on new responsibilities. They were asking them to get involved in the business--to think and act like owners, not just hired hands. Companies began passing out profit-sharing checks and stock options, not just to top executives but all the way down the line, and soon there were tales circulating of millionaires in the making. The dot-coms, of course, carried all these notions to the point of caricature, discrediting them in the eyes of the press. But guess what? The fundamental ideas didn't go away. On the contrary, growing companies of all sorts have been developing share-the-wealth, expand-your-horizons, have-a-good-time-and-build-the-business cultures right along.
Examples? Take a quick cross-country tour. Start in Tucson, where 60 or so employees of Community Psychology & Education Services Inc. (CPES) have gathered for a quarterly meeting to review the company's financial performance. Granted, this particular meeting looks like an out-of-control third-grade class. Presenters such as regional director Bob Bennetti are shot with Silly String by kibitzers in the front row. Whoops and blasts from noisemakers greet every slide. But there's a serious purpose here, made more palatable by the fun and games. CPES provides services to people with developmental disabilities and mental illnesses--a tough, high-turnover business, and one where every nickel counts. (The state's reimbursement rates aren't exactly opulent.) These employees--managers, supervisors, and frontline workers--are learning where they can economize (vehicle maintenance) and where they can't (their clients' diets), and how they all are doing at keeping costs low, revenue up, and service quality impeccable. Shareholders all, they know they will benefit when the company does well. And it has, growing from $5 million in revenue a decade ago to an estimated $22 million this year.
Then visit Scot Forge, an hour or so northwest of Chicago, where Leo Szlembarski and his co-workers turn raw steel into giant rings, gearwheels, and other forged products. There isn't much silliness at Scot, unless you count the loud tartan blazer worn by CEO John Cain, but there is a lot of sociability--picnics, parties, monthly lunches where everyone gets a $2 bill for every two million dollars' worth of product the company ships. A trivial amount, you say? Sure, it's a token, a token of the fact that here, too, the employees own a chunk of the company. They receive, typically, from $3,000 to $12,000 a year in dividends and profit sharing on top of their regular pay; and they can build up some nice nest eggs in company stock (which has risen steadily in value). Szlembarski, a lathe operator with 34 years at Scot, tells a visitor that a lot of blue-collar employees there retire with $700,000 or $800,000 in their share accounts--and that he himself has "a little more."
Last stop: Waterbury, Vt., where the Green Mountain Coffee Roasters plant seems to make much of the town smell like fresh-brewed java. Roger Garufi runs one of the "frac" lines at GMCR, turning out fraction-of-a-pound packages of coffee designed for restaurants. Garufi arrived at Green Mountain about four years ago. Since then--in addition to his regular job--he has helped design and teach a three-session, seven-hour course on what it means to be a shareholder of the company, which nearly all employees are; has helped plan a so-called Appreciative Inquiry conference charged with exploring the future of GMCR; and has begun scoping out opportunities for advancement because, as he says, "I plan on retiring here." Garufi's co-worker Randy Lewey repeats approvingly a phrase the company uses in its literature: Green Mountain, he says, is "a destination workplace."
A destination workplace. In this economy, such a reputation is not just a nicety, it's a huge competitive advantage. CPES enjoys a turnover rate well below the industry average--and can enlist its dedicated employees for extracurricular projects like creating a community center for its clients. Scot Forge keeps the skilled blacksmiths and machinists it needs (and who are increasingly hard to find)--and it regularly gets them involved in figuring out how to do jobs faster and cheaper while maintaining quality. Growing companies with such involvement and rewards transform themselves from places where people collect paychecks to places where people pursue personal goals and have good times along the way. Try that at Megacorp Inc.