The Way to the Top Read online

  Prior planning always paid off—and never more so than when the time came to realize my longtime dream of making Conoco an independent company again. Conoco had merged with DuPont in 1981 to avoid a hostile takeover. By 1998, the original justification for the merger had evaporated, and there were compelling reasons for us to break free of DuPont.

  But regaining independence was a massive undertaking that required the most meticulous planning. That we succeeded in realizing our objective was due entirely to our attention to detail.

  We had to marshal compelling arguments to persuade DuPont’s board that it was in the shareholders’ interest to allow us to separate. That meant extensive in-house planning and research. But we didn’t trust our own brainpower alone. We brought in outside investment bankers and financial experts—first, to help us make our case to the board, and then to lay the groundwork for the Initial Public Offering (IPO). We also hired our own legal counsel to help us negotiate our way through the transition, rather than relying on DuPont’s legal department. Extensive planning preceded every step in the process.

  In the end, our planning was rewarded even beyond our greatest expectations. When the Conoco stock began trading on the floor of the New York Stock Exchange on October 22, 1998, the IPO was greatly oversubscribed. In fact, at $4.4 billion, it was the largest IPO in U.S. history up to that time.

  On the morning after, my wife, Linda, and I rang the opening bell of the New York Stock Exchange to celebrate Conoco’s triumphant return as an independent, public company. Conoco was once again free to pursue its growth objectives as the fifth-largest energy company in the United States.

  It was one of the proudest moments of my life. Amid the euphoria, I paused to remember the Five Ps—because it was planning that put us there.

  Five Ps

  Gerald D. EDWARDS

  President and CEO of Engineered Plastic Products, Inc.

  It is natural to let our egos guide our business decisions. After all, as entrepreneurs, we spend years fueling and feeding our egos with each storm we weather and each setback we overcome. You count your exploits and realize that your business has survived and flourished because of you: your hard work, your intelligence, your powerful skills of negotiation, and your acute business acumen.

  Then one day you awaken to the realization that you have survived first by the grace of God Almighty, and second with the help of talented, dedicated employees. You need to downsize your ego.

  In other words, put your egotistical thoughts on a diet. Only through humble eyes can you see the world as it really is and savor the taste of success. Humility will guide you to use the things you don’t know to your advantage. You will begin to seek out the brightest and best talent you can find without feeling threatened. You will begin to feel comfortable even if you aren’t the smartest member of your management team. You will begin to hire people that complement you by adopting this valuable philosophy: show me a person smarter than me, and I’ll hire them.

  Downsize your ego

  James P. EVANS

  CEO of Jenny Craig, Inc.

  In 1982, my former boss, the President and COO of Hyatt, gave me this advice: Forget all the marketing stuff. Worry about the people you hire. Focus on getting the right people in the right place on your team, and the rest will follow.

  Get the right people first

  Steven T. FLORIO

  Vice Chairman of Advance Magazine Group

  One day, when I was about twelve, I was down in my carpenter grandfather’s basement workshop when he said, “You should start earning your own money. You clean up this wood shop and I’ll pay you what it’s worth.”

  So I spent the next three hours making that place shine. I swept up all the wood shavings; I wiped down every piece of equipment and made it gleam. I stacked all the wood neatly.

  Then I found my grandfather and we went back to the shop. He looked around for what seemed like a very long time. Then he nodded slowly and said, “Fantastic!”

  You can imagine how proud I felt.

  Still nodding his approval, he reached into his pocket and handed me my wages—a quarter! Twenty-five cents.

  A quarter?! I couldn’t believe it. Even in 1960 a quarter for three hours of work was nothing to an American kid.

  He said, “I want you to learn something about the world.

  “In the real world, cleaning up is useful, but it’s not worth much. Anyone can do it. It’s worth, maybe, a quarter.

  “Now, if you had built something useful with these tools, a bookcase maybe—something that was functional—that would have been worth a bit more.

  “But if you had envisioned something new, something no one had ever thought of before, and if you had built that, pouring your heart and your soul into it, well, that would have been worth a lot of money. Remember that.”

  And I have. To this day, I still carry that quarter.

  It reminds me of the importance of envisioning and building something excellent, something that will last long after you are gone.

  And that kind of vision and love of craft is not something you can get from most businesses. You certainly don’t get it from a business plan or a five-year projection. You get it from your heart. It’s got to be something you feel in your heart. That’s where it all begins.

  Build something of lasting excellence

  J. Roger FRIEDMAN

  President of Lebhar-Friedman, Inc.

  My father, Arnold D. Friedman, started Lebhar-Friedman, Inc., a publishing company, in 1925. We usually had lunch every Wednesday. It was during these meetings that he spoke about values and imparted advice gleaned from his success, advice based on principles that still apply today.

  The first of these values was honesty. “Treat other people as you would want to be treated yourself,” he said. “Never cut corners. A business arrangement or deal can only be successful and long-lasting if it benefits both parties.”

  He also cautioned me: “Admit when you are wrong. Be more flexible and not so rigid. If you become fixed in your beliefs and opinions, you will be ossified and eventually unable to move.”

  He valued equilibrium. “Have a sense of balance in your life,” he said. “There are far more important things in life than business . . . there is your family, your home, your health, and you must be able to enjoy the pleasures of life. We are only going to pass through this world once!” In other words, when things got difficult and problems arose, my father would always say “Illegitimi non carborundum est” (“Don’t let the S.O.B.’s wear you down”).

  Then there was the lesson taught by a friend at General Foods, an individual by the name of Clarence Francis. Mr. Francis attributed his success, as my father did and I do, to the fact that he never hired people he didn’t like. Life is too short to have individuals within your business family whose company you do not enjoy and with whom you do not want to spend any time. Individuals we hire should have the same values, the same ethics, and a similar outlook on life.

  Last, but not least, my father had a great sense of humor, and I was fortunate to have inherited that valuable trait. Many times in business dealings involving large sums of money and a number of people, a sense of humor turned out to be my greatest asset in sealing a deal or just easing the tension at a difficult moment.

  My father’s outlook on life was based on his southern upbringing, his belief in fairness and a “do unto others” philosophy. These values are as relevant today as they were seventy-eight years ago.

  Treat people how you want to be treated

  George G. GELLERT

  Chairman of Atalanta Corporation

  When I visited Taiwan many years ago, the person taking me around town was introduced to me as a chauffeur. Nonetheless, I enjoyed his company very much and I was very pleasant with him. That evening, through a more skilled translator, I discovered that he was actually the owner of the company I had visited. That was the beginning of a great business relationship, and a great illustration of the best business
advice I have ever received: whenever you meet somebody, whatever his or her position may be, be gracious and friendly because you never know.

  Treat everyone politely

  Frances GERSHON

  CEO of U.S. Toy Company/Constructive Playthings

  My father was a cantor, and he thoroughly loved performing in the synagogue and creating an aura of prayer among the congregants. He told me to choose an occupation (as he did) that I would enjoy and find fulfilling.

  I chose to become an early childhood teacher because I loved working with young children and making their first school experience a happy, positive one. I hoped I instilled in them a love of going to school. But after several years of teaching, I realized that there was no store in the Kansas City area specializing in playthings and equipment to meet the needs of the fast-growing day care business. I decided to fulfill that need.

  After fifty years on the job every day, I still love coming to work at U.S. Toy/Constructive Playthings. Helping to choose the best products for our catalogs and stores is most gratifying to me. I continually search for new and challenging items that will not only help young children to develop mentally and physically but will also be fun for them. I hope that I have made a worthwhile contribution to their lives by providing them with the teaching tools for enjoyable learning.

  If young people can choose a profession or business that will give them such satisfaction, they will be successful, both monetarily and mentally.

  Follow your bliss

  Kristina GOBBLE

  President of EMK Design

  Don’t expect a profit for the first five years. This idea has helped me relax and let my investment in my business grow over time. Finance gurus often suggest letting investments sit for five years before evaluating whether to abandon them and the same has been true for my business. I have been a sole proprietor for over six years and I have found that most of my business growth has come in the last two years. I have also seen my word-of-mouth referrals increase three-fold during the last two years, which tells me that the “five-year rule” applies to business as well as investments.

  Be patient

  Rick GOINGS

  Chairman and CEO of Tupperware Corporation

  This concept has served as an important influence in my operating philosophy throughout my career. In essence, it speaks to empowerment within an organization. It has guided me to discuss expectations with my management team, agree on deliverables and a timeline, and then get out of their way and let them perform.

  It also speaks to the dynamics of how, I believe, the best companies are led. There is a leader presiding over the organization, but decision-making rests with units of leadership scattered throughout the company, rather than with the CEO. These are the companies that are able to continuously renew their business model and achieve sustainable competitive advantage.

  The stars can’t shine until the sun goes down

  Fatima GOLDMAN

  Executive Director of Federation of Protestant Welfare Agencies, Inc.

  My first job straight out of college was as a family counselor in a day care center in the Bronx. The early teacher and children congregated in the large open lobby area until all the classroom teachers arrived to take the children to their respective classrooms.

  One morning I arrived feeling grumpy and irritated so I walked through this boisterous group of three to five year olds without acknowledging anyone. One four-year-old, rightfully indignant at my behavior, piped up, “So, you don’t even say good morning to the kids?!”

  Never enter your office—or any place for that matter—without greeting those whom you pass. A simple and sincere “Good morning” goes a long way.

  Say “good morning”

  B. Thomas GOLISANO

  Chairman and CEO of Paychex

  In 1967, a sales manager at Burrough’s Corporation mentioned a very valuable concept to me, a young sales rep. He said, “If you want to make $100,000 a year, all you have to do is find a hundred people who can make you $1,000 or a thousand people to make $100.” (Keep in mind, this is in 1967 dollars.)

  It was this piece of advice that inspired me to become an entrepreneur and create my own business, Paychex.

  Find paying prospects

  Jim GOODNIGHT

  Founder, President, and CEO of SAS

  SAS has been a privately held company for more than a quarter century. But during the dot-com boom, we dabbled with the idea of going public. We have an extremely viable product, a great customer base, and a solid business model. Before we took the IPO plunge, however, we asked our employees what they thought about the idea. Surprisingly, nearly 90 percent said that we shouldn’t do it. So we didn’t. And then the dot-com bubble burst and the economy slowed.

  So the best business advice I ever received didn’t come from one person, but from the collective voice of our eight thousand employees.

  Talk to your employees

  M. J. GORDON

  Chairman of Tootsie Roll Industries

  In 1946, after serving for almost three years as an Army officer in World War II, I was about to report for work in our family’s extremely competitive women’s hosiery manufacturing business. My father sent me off with this advice: “Son, remember to buy low and sell high.” In addition, he told me that if I really wanted to secure high prices regardless of competitive conditions, I should seek a business protected by a strong trademark, a patent, or a secret process. I took those words to heart. In order to sell at a high, branded price, I invented a new brand called Ironwear Insured Hosiery—insured against runs regardless of cause.

  Insuring women’s hosiery against runs had never been done before. We were pioneers. At the factory, we used indelible ink to stamp a registration number on the thigh portion of each stocking in a pair. We inserted with each pair a registration card with the same number. The store clerk filled in the expiration date on the card for each pair sold. The first pair purchased at one time was guaranteed for seven days from the purchase date, the second pair for fourteen days, and the third pair for twenty-one days. Ironwear hosiery, which contained a patented double-knit feature that prevented runs at the gartering point, was an instant success, and kept growing among our customer base of older, heavier women whom our salesmen respectfully referred to as “the ploppers.” Returns of damaged hosiery amounted to less than 1 percent of sales.

  In 1962, after serving on its board for ten years, I became Chairman of the Sweets Company of America, makers of Tootsie Rolls and Tootsie Pops. I renamed the company Tootsie Roll Industries, Inc. From 1962 to 1977, I ran both the candy company and the hosiery company (which had expanded to branded sweaters and leotards). Both companies were growing. In 1977, I decided to sell one business and concentrate on building the other. It was then that I considered my father’s advice about protection from price erosion. Tootsie Roll had a product loved by children since it started in 1896, and an old established brand. Listed on the New York Stock Exchange since 1922, it had a secret process for making both Tootsie Rolls and Tootsie Pops. The women’s knit-goods business, on the other hand, operated under the name Hampshire-Designers’, Inc., was on the American Stock Exchange, and was only partly branded. It had many strong competitors making similar basic products.

  The choice was easy. I sold the knit-goods business and concentrated on building Tootsie Roll Industries. And it paid off handsomely. Sales grew from 20 million in 1962 to about 400 million in 2003. Net profits grew from $750,000 to over $66 million in 2003. By buying low and selling high in recent years, we were able to reach a high of over 18 percent net profits on sales, in an industry that averages about 5 percent net profit on sales.

  We did benefit from selling high, but the real skill is in buying low and keeping expenses down so as to maximize the margin between your selling price and costs. To do so, it is vital that the CEO shares responsibility with his purchasing head in all buying of key materials. In both the knit-goods and the candy company I developed methods to keep
our purchases of raw materials, packaging, and energy as low as possible. One of the techniques we use to find out how low the vendor will go is to offer a price a little below the lowest price at which we believe that anyone has purchased the item. We evaluate the pitch of the vendor’s screams to get a clue as to how far from bottom we are and then bargain hard to get to the lowest price he or she will take.

  In addition, we will hedge part of our raw materials in the futures commodity markets when we see prices that are fairly low historically. Sugar, vegetable oils, corn (for corn syrup), and other agricultural products have future markets where we can gamble one or two years out to lock in favorable prices on items we use. Again, we can’t be hogs, seeking to get the lowest prices ever, because hogs usually get slaughtered. But prudent advanced buying, especially during price dips, pays off in lowering our costs. We can also lock in fuel or energy prices for future delivery to fix prices either to take advantage of historically low prices or to protect against future shortages.