To an extraordinary degree, our view of business—indeed, our whole concept of what business is—has been shaped by publicly owned companies, which actually make up a small percentage of the entire business population, and by fast-growing technology ventures, which is an even smaller group.

The shareholders who owned the businesses I was looking at were also interested in being great at what they did, creating a great place to work, providing great service to customers, having great relationships with their suppliers, making great contributions to the communities they lived and worked in, and finding great ways to lead their lives. They’d learned, moreover, that to excel in all those things, they had to keep ownership and control inside the company and, in many cases, place significant limits on how much and how fast they grew. The wealth they created, though substantial, was a byproduct of success in these other areas.

The soul of a business grew out of the relationships a company developed as it went along. Soul can’t exist unless you have active, meaningful dialogue with stakeholders: employees, customers, the community, suppliers, and investors. When you launch a business, your job as the entrepreneur is to say, ‘Here’s a value proposition that I believe in. Here’s where I’m coming from. This is my point of view.’ At first, it’s a monologue. Gradually it becomes a dialogue and then a real conversation.

Common threads among the companies I’d already identified as having mojo:

• First, I could see that, unlike most entrepreneurs, their founders and leaders had recognized the full range of choices they had about the type of company they could create. They hadn’t accepted the standard menu of options as a given.

• Second, the leaders had overcome the enormous pressures on successful companies to take paths they had not chosen and did not necessarily want to follow.

• Third, each company had an extraordinarily intimate relationship with the local city, town, or county in which it did business—a relationship that went well beyond the usual concept of “giving back.”

• Fourth, they cultivated exceptionally intimate relationships with customers and suppliers, based on personal contact, one-on-one interaction, and mutual commitment to delivering on promises.

• Fifth, the companies had unusually intimate workplaces. They were, in effect, functional little societies that strove to address a broad range of their employees’ needs as human beings—creative, emotional, spiritual, and social needs as well as economic ones.

• Sixth, I was impressed by the variety of corporate structures and modes of governance that these companies had come up with. Because they were private and closely held, they had the freedom to develop their own management systems and practices.

• Finally, the passion that the leaders brought to what the company did. They loved the subject matter. Though they were good businesspeople, they were anything but professional managers. Indeed, they were the opposite of professional managers. They had deep emotional attachments to the business, to the people who worked in it, and to its customers and suppliers—the sort of feelings that are the bane of professional management.

A good client is a good corporate citizen, honest and good to the community. Some of these companies don’t care about the communities they do business in, and they don’t do win-win. I want to work with clients who see us as their partners. I’d rather lose money than lose a good client.

A recovering entrepreneuraholic.

Terroir.

Tried to create a small town environment on a national level.

“Fritz Maytag, for one, was a strong supporter of the view that “the business of a business is business,” as he puts it, an idea that he attributed to Friedman.
But if you read what Friedman actually wrote on the subject—for example, in The New York Times Magazine of September 13, 1970—you will note that he was talking only about publicly owned corporations. He challenged the notion that a corporation, which is an artificial person, can have such responsibilities. Real people may feel they have social responsibilities, he argued, but corporations can’t and don’t. What’s more, the people who run those corporations are employees of the owners—that is, the shareholders—and therefore duty bound to use the corporation’s resources to further the shareholders’ interests. When executives use the company to promote their own political or social agenda, they are, in effect, taxing the shareholders without their consent.
As Friedman acknowledged, however, that argument does not apply to closely held private companies. “The situation of the individual proprietor is somewhat different,” he wrote. “If he acts to reduce the returns of his enterprise in order to exercise his ‘social responsibility,’ he is spending his own money, not someone else's. If he wishes to spend his money on such purposes, that is his right.

To be really successful, a company had to focus on providing one of three types of value to its customers: the best price, the best product, or the best overall solution. Each type of value called for a completely different kind of organization, culture, and mind-set, so you would inevitably get in trouble if you tried to excel at more than one.

Building a sense of community—that is, a sense of common cause between the company, its employees, its customers, and suppliers. That sense of community rests on three pillars. The first is integrity—the knowledge that the company is what it appears, and claims, to be. It does not project a false image to the world. The second pillar is professionalism—the company does what it says it’s going to do. It can be counted on to make good on its commitments. The third pillar is the one we’ve been discussing—the direct, human connection, the effect of which is to create an emotional bond, based on mutual caring.

Intimacy: a relationship so close employees never doubt that the company, its leaders, and the other people they work with care about them personally and will stand by them through thick and thin as long as they hold up their end of the bargain.

All chiefs and no Indians.

Everyone knows they’re all interrelated and where, as far as possible, everybody is in charge and nobody is looking over anyone’s shoulder and there are no time clocks.

I wish for each one of you, with all my heart, those satisfactions that add up to a great deal of happiness.

Three imperatives these companies pursued:

• The first involves articulating, demonstrating, and imbuing the company with a higher purpose.

• Second, reminding people in unexpected ways how much the company cares about them. Noam Brodsky had a knock-your-socks-off policy. When there was an opportunity to reward people, he wanted the reward to take their breath away, which meant doing what they didn’t expect when they didn’t expect it.

• Third, collegiality. Feelings that employees have toward one another, the mutual trust and respect they feel, the enjoyment they get out of spending time together, their willingness to work through any conflicts that might arise, their collective pride in what they do, and their collective commitment to doing it well.

To do what is ‘right’ even when it does not seem to be profitable, expedient, or conventional.

Changing a Command-and-Control style of operating to a Teach-Equip-Trust style.

We’re only as good as our last frame job.

A happy customer is the best job security you can get.

I want the Y employees—people who want to put in the extra effort, who want responsibility and job satisfaction. For them, you need to run a tight ship. Like insisting that people show up on time. The good people resent it when other people come in late.

Managing isn’t just about learning how to motivate people. It’s also about learning how not to demotivate them.

To be successful over the long term, the company has to have and maintain:

• steady gross margins that it protects;

• a healthy balance sheet, as reflected in the current, cash-to-debt, and debt-to-equity ratios, among other measures; and

• a sound business model governing how the company delivers value to customers and earns a profit in the process.

Sales are nice. Profits are nicer. But you live or die on cash flow.

Stewardship: paying attention to the financial needs of the business.

Given both the complexity and the emotional ramifications of the issues involved, it’s no wonder that most owners of private companies put off dealing with succession as long as they can—often until some event forces them to face up to their mortality. By then, their options may be limited.

A company has to move from being entrepreneurcentric to being visioncentric. The goal is that, by the time we’re gone, the vision will be secure.

The entrepreneur is like an artist, only business is the means of his expression.

Mojo is more or less the business equivalent of charisma.

You need to feel in your gut that whatever you do is the most interesting, exciting, worthwhile thing you could be doing at that moment. Otherwise, how do you convince anyone else?

You can’t measure the value of what a company does by looking at how big it is and how much profit it generates. A company’s record of growth and the consistency of its financial returns may tell you something about the skill of its management team, but they say little about whether or not the business is contributing anything great and unique to the world. Instead, the small giants focus on the relationships that the company has with its various constituencies—employees, customers, community, and suppliers. Why? Partly, no doubt, because the relationships are rewarding in and of themselves, but perhaps also because their strength reveals the degree to which people are inspired by the company, and its ability to inspire them is the best measure of how they perceive the value of what the company does. If they are as passionate about it as the founders and leaders, the financial results are likely to follow.

The small giants also know those relationships are fragile. They depend on a level of trust and intimacy that’s easily lost. All it takes is a little neglect. If you allow yourself to get distracted, if you stop working on whatever it is that ties you to the people you do business with, the intimacy will vanish, the trust will dissipate, and the bonds will erode.

For any competitive individual—and entrepreneurs are competitive by definition—it becomes quite tempting to chase after growth at a certain point in a company’s life. The financial indicators are, after all, the most convenient, and objective, measures of success available. It’s easy to fall into the trap of thinking that if you’re maximizing growth, you’re also maximizing success.

Getting caught up in the growth game helps to assuage one of the least recognized and most underrated hazards of company building: boredom. That is, I believe, what leads many entrepreneurs to embark on acquisition binges, take their companies public, launch new ventures, become angel investors, and get involved in various other pursuits. Once you move beyond the exhilaration of the start-up stage and the growth phase, you find yourself facing the kind of management challenges that a lot of entrepreneurs consider, frankly, boring. If they’re smart, they bring in other people to help. Meanwhile, they themselves try to figure out what to do next, what to do that they really enjoy, what to do that can recapture the excitement they have already begun to miss. The problem is, the move that feels right to them may turn out to be harmful to the company.

Traditional management may be an exercise in rationality, to use Bernie’s language, but entrepreneurial management requires “the soul of an artist,” and—for its practitioners—the business itself is an evolving work of art.

In business as in art, the end result is an experience, and the quality of the experience reflects the relationships between the different participants, as well as the specific medium of expression.

Sensible, well-paced growth is essential to advance your culture. Because culture needs to grow. The worst thing you can do is to try and maintain culture.

The real threat to the culture was not dilution but stagnation, which could be avoided by taking advantage of the opportunities created by growth to continually improve the culture.