Tuesday, April 11, 2006
As I've gone around promoting Small Giants, I've gotten a lot of great questions. One of the most interesting came from Bill Taylor, the cofounder our sister publication, Fast Company, at my very first book signing event. My friend and former Inc. colleague Tom Ehrenfeld was there, picked up on the exchange, and subsequently persuaded Bill to write down his question and got me to write down my reply. Tom posted them recently on the excellent business blog at 800-CEO-READ. I thought you'd be interested in reading them.
Here's Bill Taylor's question: It's easy to understand what your Small Giants gain by choosing not to grow as fast as they might. But did many of the entrepreneurs you chronicle -- or did you yourself -- think about what these companies give up by staying small? I'm not thinking about money, I'm thinking about impact -- the chance to have a big effect on the world. Imagine if Herb Kelleher of Southwest had decided to stick to flying routes within the southwest. Or if John Mackey, the cofounder of Whole Foods Market, had decided to stop at a couple of stores in Austin, rather than spread across the country -- and, in so doing, raise the bar for nutritional standards, the treatment of animals, the future of organics. Isn't it almost selfish, in a sense, or at least a missed opportunity, if you're a passionate company-builder who believes in what you're doing and thinks it's important, to do less than what's possible, to have less of an impact than you might have otherwise?
And here's my reply: First, let me be clear about one thing: In no way do I mean to suggest that a company can't be great if it grows fast, gets big, goes public, does acquisitions, and so forth. The two companies you cite are prime examples of great, publicly traded companies, although it's worth noting that they are striking exceptions to the rule. They have been able to resist the pressures to compromise their values only because they have so far managed to deliver consistently great returns to shareholders, who have thus been willing to let the company's management teams operate as they see fit. Most other companies that have started out with similar values -- The Body Shop, Ben & Jerry's, and People Express come to mind -- have eventually been forced to make compromises that have utterly transformed their cultures and ways of doing business.
It's also important to recognize that there are always trade-offs. Although Southwest and Whole Foods are both great corporate citizens, neither one is rooted in a community anymore, and they've both lost some of the workplace intimacy they had when they were smaller, not to mention the intense relationships with customers and suppliers. My point is simply that there are sacrifices -- lost opportunities -- no matter what you decide to do. Company owners have to choose which opportunities they want to focus on and which pressures they want to deal with.
That said, it may be true that a couple of the Small Giants' owners/leaders have given up an opportunity to have a greater impact on the world by choosing to remain private and closely held and by staying (relatively) small. I say "a couple" because extremely few people are capable of building a Whole Foods Market or a Southwest Airlines without losing control of the company along the way. In any case, I certainly wouldn't describe the decision to remain small and private as selfish. For one thing, most of these people work extremely hard to make the greatest contribution they can to their employees, their customers, their communities, and the world. Saying their decision is selfish implies that people who try to get their companies as big as possible, as fast as possible, are somehow being selfless, or at least less selfish. We both know that the motivations of company-builders, even the greatest ones, are far more complicated than that, and that altruism or selflessness seldom enters into the equation.
By the way, Tom has his own blog at www.startupgarden.com. Also, be sure to check out Bill's new column called "Under New Management" that appears once every four weeks in the Sunday Business section of the New York Times.