Inc.com | by Mike Hofman | January 2008
How companies just like yours mushroomed into powerhouses in their industries. A conversation with Keith R. McFarland.
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.
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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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Are these companies great at hiring people?
Yes, but more to the point, they are great at developing people. One statistic that blew me away came from Fastenal, the nuts and bolts distributor. The average tenure among the top 25 employees there is 23 years, which means that the people who ran the company in 1985, when it was small, are running it today, when it has $2 billion in sales. And Fastenal employs 1,500 in Roseau, Minnesota, where the local population is roughly 2,700. What Fastenal and these other companies recognize is that to get really big, they have to create a culture that is so easy to learn and live by that ordinary workers can thrive.
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