How Big Is Big Enough?

 

At about the same time, he and Jody began questioning their entire approach to business. "We were working like dogs," he says. "Sometimes I'd work all night putting up sites. I was getting burned out, and I was completely out of shape sitting there eating at the computer all day. I began realizing I was a prisoner of the business. We said to ourselves, 'There's got to be more to life than trying to make as much money as possible whether you can spend it or not.' What we really wanted was freedom. So we completely changed our way of thinking -- from having our whole life be about building the business to having the business be a way to sustain the kind of life we wanted."

That meant, among other things, closing the garden store. "We had a really good niche market here," Goode says. "But we realized we could do even better if we shut down the store and concentrated on the Internet. That would also give us freedom to go camping or take a vacation. We hadn't had one in seven years." First, however, they had to hire some employees and build a team.

The team is indeed a key component of each of these companies. The CEOs all credit their success to having a small, cohesive, committed work force. It is precisely the effectiveness of their teams that the CEOs fear might be lost if the companies were to grow too fast.

Goode's team consists of a webmaster, an office manager, and six other people whom he trusts implicitly to run the Works Corp. while he's away. He says he feels lucky to have found them. He strives to treat them as partners rather than employees, a word he has banned at the company. For example, everyone, including Goode and his wife, is paid a base salary plus a percentage of monthly revenue above a certain threshold. This year that amount is $175,000 per month. The percentage a person gets increases with each year of service. If revenue is less than $175,000 in any given month, no one gets revenue sharing. In addition, there are bonuses whenever the company has monthly sales higher than it had in the same month the year before.

As for increases in base compensation, they are determined not by individual performance but by the achievement of company goals. Thus, everyone gets a raise of 50 cents an hour when Goode is able to fulfill a goal he set for the company, such as buying an apartment complex. (Goode wants to acquire two.) When the company pays off what it owes on the timber property up north, everyone will get a $1-per-hour raise. The idea, Goode says, is to eliminate the confusion and misunderstanding surrounding decisions to grant wage increases. If there are no raises in any given year, everybody knows why. In the same egalitarian spirit, the cabin on the timber property is available for use by anyone in the company. Meanwhile, Goode is subdividing the property into lots that he will give to people when they reach their 10th anniversary with the Works Corp.

A skeptic might question whether such measures can really break down the traditional walls between employer and employees. After all, there is still one major difference between Goode and the members of his team: He's an owner and they're not. Nevertheless, he says, the people at the Works Corp. feel, think, and act as if they own the company, and that esprit de corps is what he thinks he would jeopardize by bringing in a lot of new employees.

Robert Catlin of Signature Mortgage also relies on a small, tight-knit team, consisting, in his case, of 16 employees. "When you're small, you can do all kinds of things that build relationships and create a tremendous amount of loyalty," he says. But in contrast to Goode, his decision to stay small had to do less with lifestyle than with efficiency. Formerly a vice president of another Inc. 500 mortgage company, Rock Financial, he'd concluded that a "little power group" of 14 to 16 employees could accomplish as much as a company with 50 to 60 employees, provided he got the right people and created the right environment for them to work in.

So Catlin went out and hired people he'd known, in some cases, for more than 20 years. Several employees are his golfing buddies. Every year he takes the entire team -- together with husbands, wives, and significant others -- on a retreat. In recent years, they've been to San Diego, Las Vegas, and the Dominican Republic. He also pays well. He has clerk-typists with a high school education who earn up to $60,000 a year, including bonuses. The bonuses are tied to productivity, which is extraordinary across the board. Last year, Signature originated more than $18.4 million in mortgage loans per employee, far above the industry average. "You get so much more out of people when you keep it intimate," says Catlin. "I take that for granted, and I shouldn't because I see how the big companies flounder."

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Bo Burlingham

Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants: Companies That Choose to Be Great Instead of Big. The book was a finalist for the Financial Times/Goldman Sachs Business Book of the Year Award in 2006. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business and A Stake in the Outcome.