Breaking Through

How companies just like yours mushroomed into powerhouses in their industries. A conversation with Keith R. McFarland.

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Ten years from now, who will fly in the private jet--you or the guy next to you at the trade show? Which company in your industry is most likely to grow by leaps and bounds and why? These are the questions Keith R. McFarland tackles in his new book, The Breakthrough Company, published this month by Crown Business. McFarland is a management consultant and the former CEO of Collectech Systems, a collection agency for telecom companies. An acolyte of Peter Drucker, McFarland once asked the management guru how to tell which companies in an industry were likely to grow large. "I don't know," Drucker replied. "You need to write that book." And so he has. McFarland did in-depth studies of nine Inc. 500 alumni that had reached more than $250 million but less than $2 billion in annual sales by 2004. The idea was to examine companies big enough to have overcome major obstacles but still small enough that McFarland could see the patterns that led each company to its breakthrough moment. Why do some companies grow so dramatically, while others just shuffle along? McFarland recently shared his findings with Inc. executive editor Mike Hofman.

How do you create a breakthrough company? Where do you start?

First, I'd say that it's not about being in a hot, sexy market. It's not about having the coolest, hippest product. We came up with an index of companies that grew to a certain level both in terms of their annual revenue and in terms of their financial performance, compared with the rest of their industry. And the breakthrough companies we identified came from all different worlds. Sure, some of them make software, but others provide professional services like leasing office space or staffing or processing payroll. Chico's sells women's clothes, and Fastenal distributes tools and nuts and bolts. This tells me that within every company in every kind of industry, there are the seeds of breakthrough.

What about the people who run these companies? What are they like?

The high-performing companies we looked at had one thing in common--they were almost all run for many, many years by their founders. But these entrepreneurs don't share a common personality type, and they do not create businesses where there is a focus on the personal characteristics of the entrepreneur. They don't see themselves as responsible for the vision of the company. Rather, they seek to create an environment where people understand the strategy and can spot strategic opportunities as they crop up. Breakthrough leaders are less concerned with people's personal loyalty to them and more concerned about building a place where everybody is loyal to the company first--even if that means disagreeing with the big cheese. The founders of breakthrough companies appear to be good at getting out of the way. In every case we looked at, the leader was proud of the organization but decidedly humble about his role within it.

Are you saying they are wallflowers?

No, this isn't to say that these guys are overly humble or timid. They are all different types. Tom Golisano, who runs the large payroll processing company Paychex, has a big, commanding personality. In contrast, Mark Smith, founder of Adtran, a telecommunications company, whom I interviewed shortly before he died, was an engineer and spoke with an engineer's pattern of speech. He was very careful in the language he used when he spoke. In general, these men are as different as you can imagine. But they share a perspective about business, an insight about how people work. They all see that it is very important that the company not be about them.

Let me give you an example: One breakthrough company is Staubach, the commercial brokerage business run by Roger Staubach, the same Roger Staubach who was the quarterback of the Dallas Cowboys for many years. I went to interview him for this book, and I walked into his office, and the first thing out of my mouth was, "Roger, where are your Super Bowl rings? Where's your Heisman trophy?" And he said, "No, we're building something much bigger here than Roger Staubach." I thought that was a throwaway line, but then I heard variations of it again and again. The CEOs who run these breakthrough companies take a different view of their role than other CEOs I know.

What does that mean in practice?

They are very tolerant of people within the company who insult the business and who insult the strategy they have come up with. By that, I mean that when employees say something in the business is screwed up, the entrepreneurs don't tell them to shut up. They also let people pursue ideas for new businesses even when they think they are wrong. The companies are made up of people who really, really want the best ideas to get out there.

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