Highlights from our annual Inc. 500 Conference

Once again, it was an occasion for dispelling preconceptions. "I expected to find a lot of companies built around novel ideas," Pennsylvania secretary of commerce Andy Greenberg told me at a reception on the second night of this year's Inc. 500 conference in Pittsburgh. "I'm amazed that so many of them have built their businesses by doing a terrific job of executing very ordinary ideas." Meanwhile, many of the Inc. 500 CEOs were expressing surprise of their own -- at the beauty of Pittsburgh and its extraordinary transformation from a stronghold of the Old Economy into a bastion of the New.

This year's conference featured more than 30 sessions led by distinguished chief executives, business observers, and experts, on everything from employee education to going public to a spouses-only roundtable on the hazards of being married to someone who's married to the business. But we skipped the softball game between the Inc. staff and Inc. 500 CEOs. Last year they beat us 19 to 11. This year we accepted an invitation from the Pittsburgh Pirates to attend a party and watch a game against the Atlanta Braves at Three Rivers Stadium. The home team won, 4-1.

"I've matured a lot since I first made the Inc. 500. I used to spend every waking hour trying to conquer the world. I still want to conquer the world, but now I'm working on it part-time." -- Norman Brodsky, founder and CEO of Perfect Courier (#47 in 1984)

An exchange between a conference attendee and speaker Jerry Ehrlich, winner of the 1992 Entrepreneur of the Year Award and CEO of Wabash National, in Lafayette, Ind.:

Attendee: "What would you say is the crucial difference between an employee-training program that works and one that doesn't?"

Ehrlich: "The sincerity of top management."

Attendee: "But how do people know you are sincere?"

Ehrlich: "Because we spend 10 times as much on employee education as we do on advertising."

Upon their arrival in Pittsburgh, Beverly and John Zeiss of Critical Care Associates (#52 in 1991), in Montclair, N.J., were greeted by a Pennsylvania official eager to get them interested in contributing to the state's economy. "We already contributed to the Pennsylvania economy earlier this morning," replied John Zeiss. Seems they had been nabbed doing 95 miles per hour as they crossed the state line in their Porsche 928. For the record, Beverly was driving.

"Flying a plane is the only time I ever put work totally out of my mind. There's something relaxing about knowing you'll get killed if you don't focus your mind on the matter at hand." -- Eric Kriss, founder of MediVision (#35 in 1989) and CEO of MediQual Systems (#57 in 1988)

For the third year in a row, we heard a lot of talk about the changing attitudes of entry-level employees. It pays to be skeptical of one generation's judgments about another, but even the youngest chief execs at the conference (some have yet to see the far side of 30) said they thought that kids coming out of college today are less motivated and less interested in getting ahead.

"Most people sell their business at absolutely the worst time. Running a company that's doing well is just too darn much fun -- why would anyone want to give it up? But this is exactly when you should think about selling. How are you going to sell a sick dog whose founder doesn't even want to run it any longer?" -- Max Carey, founder and CEO of Corporate Resource Development (#395 in 1987)

Something old:
The perennial problem of bringing professional managers into a young growing company. One founder referred to his "$3-million mistake" of turning over the reins to a big-company manager. Another described how his company almost went bankrupt when a newly recruited president from Westinghouse decided to revamp the business. Both founders admitted they felt intimidated by the language, formal training, and confidence of big-company execs. "It took me a while to realize that big-company people with their M.B.A.'s often don't understand the fundamental rules of business," one of the founders noted, "like making sure your sales are greater than your expenses."

Something new: A growing sense that some form of equity participation is essential to a company's long-term success, the inherent risks notwithstanding. Dennis and Michele Flynn of Heritage Asset Management Group (#407 in 1991) told us about their experience in sharing equity with three key managers. One of the arrangements went sour and got the company embroiled in extended litigation. Do the Flynns have any regrets? "Yes, we regret we didn't have a better shareholder agreement."

"At Wabash, everybody sinks or swims together -- everybody, even our salespeople. They aren't on commission. They participate in the same compensation system as everybody else." -- Jerry Ehrlich, CEO of Wabash National

The folks from American Teleconferencing Services (#157 in 1991) came loaded with imaginative ideas about motivating employees. Our favorite: with every W-2, the company sends out a one-page accounting of what it spent on the employee in addition to wages or salary -- including the cost of company parties and outings, gifts, health insurance, training, and special perks.

"On busy days in our telemarketing centers, I bring in buffet lunches, so people don't have to get up from their stations to go to lunch. But I haven't yet gotten them to accept the catheter idea I proposed." -- Jim McCann, CEO of 800-FLOWERS

Talk about virtual corporations. When it comes to managing people, Dick Weigen couldn't care less. Three years after first appearing on the list, Weigen's $3.5-million Corporate Book Resources (#275 in 1989) remains the only Inc. 500 company with no employees.

The hottest markets in the world today, according to Jeff Ake, vice-president of sales and marketing of Electronic Liquid Fillers (#194 in 1988), which derives more than half of its revenues from international business: Korea, Hungary, the United Kingdom, and China.

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"By seeing the seed of failure in every success, we remain humble. By seeing the seed of success in every failure, we remain hopeful." -- Mel Ziegler, founder of Banana Republic and keynote speaker

Sharing detailed financial information with employees -- a practice we call open-book management -- is becoming more commonplace every year. Breakout sessions devoted to the subject were standing-room only. At Jack Stack's session, "The Great Game of Business," we asked how many attendees came from companies that distributed financial statements to employees at all levels of the organization. Well over half of the 130 people present raised their hands. It is doubtful that anyone would have raised a hand five years ago.

"The computer business is changing so quickly these days that sometimes we feel as if we're in the fresh-produce business." -- Safi Qureshey, cofounder and CEO of AST Research, in Irvine, Calif.

Don't look back: David Rasmussen of Turbine Consultants (#138 in 1990) made the Inc. 500 by outmaneuvering big companies such as General Electric and Westinghouse. That was easy, he says, given the huge overhead those companies carry. What concerns him is his current challenge: going head-to-head with the next generation of small, lean competitors.

"I made $5,000 last year . . . " -- pause -- ". . . which is really good." -- Daniel Harris, a student entrepreneur associated with the National Foundation for Teaching Entrepreneurship, updating attendees on the progress of his business since his presentation at last year's conference

Overheard at breakfast:
CEO #1: "What does your company do?"

CEO #2: "We're one of three real estate companies that made the list."

CEO #1: "Gee, it's great to meet someone who's doing well in real estate."

CEO #2: "Yeah, well, we specialize in bankruptcy and managing foreclosedproperties."

"Maybe you should try hiking on Denali, in Alaska. It's amazing how fast you forget about your business when you're dodging grizzly bears." -- Michael Marvin, founder and CEO of MapInfo (#23 in 1992)

Sign of the times:
With all the emphasis on fitness these days, Jim McCann thought his company, 800-FLOWERS, should offer a healthful alternative to a junk-food basket it had been selling, so he created a Healthy Harvest health-food basket. Today the junk food is outselling the healthful stuff 9 to 1.

"Selling is 90% art and 10% skill. Marketing is 90% skill and 10% art." -- Charlie Snyder, CEO of the Solem Division of J.M. Huber Corp.

Best one-liner of the conference, from Ron Seide, director of marketing of Kingston Technology (#1 in 1992): "What did it take to be #1 on the 1992 Inc. 500? I don't know, but it sure helped to have a really bad 1987."

"I'm very proud of those guys. They're good friends, and I wish them every success. But the truth is that they wouldn't be in business today if we had treated them right to begin with." -- Safi Qureshey, cofounder and CEO of AST Research, speaking about David Sun and John Tu, the founders of the #1 Inc. 500 company Kingston Technology and former employees of AST Research

Shaving Time

Even before the conference began, I received a lesson in time management from keynote speaker Harvey Mackay, who had telephoned me to discuss his upcoming speech. As we talked, I kept hearing a strange humming sound in the background. I finally asked him about it. "Oh, that," he said. "That's the clippers. I'm at my barber's having my hair cut." At your barber's? Then how, I asked, do you keep checking details on your schedule with your assistant? "Judy is sitting right here," he replied. "Whenever I get my hair cut, I rent the barber chair next to me so she and I can keep on working."

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What a Difference a Decade Makes

Cecil Ursprung, 1991 Entrepreneur of the Year and CEO of Reflexite, in Avon, Conn., asked attendees at one session how the business environment has changed from the 1980s to the 1990s. Here's the list they came up with:

slower growth

tougher competition

more difficult to get bank financing

less room for price increases

loss of economic boom sectors, especially real estate and defense

harder to make money

more regulation

more litigation

increasing taxes

And bear in mind that this list was compiled by leaders of some of the country's most successful growing companies.

No Secrets

Ken Hendricks, founder and CEO of ABC Supply (#1 in 1986), on why he shares financial information; from a breakout session titled "Turning Losers into Winners":

"If we're so weak our competitors can take the information and use it against us, or our employees can go out and use it to compete with us, then we might as well get out of the business, because we really don't have anything in the first place. People aren't stupid. If you're doing something right and it works, then sooner or later they're going to figure it out and come after you. Can your people respond? Can you keep innovating? Can you stay ahead? These are the real questions you should be dealing with."