Small Giants, Burlingham

Entrepreneurs embody the American dream.  They take on enormous risk and devote time and money to offer goods or services that will, it is hoped, be valuable enough to sustain a business.  In the process they provide jobs, revenue, and training to the community where they operate.

            Some of the most important questions answered by this book are addressed up front.

What role does Mojo (the business equivalent of charisma) play in making a company great? Would any business choose to be small over being big?

            According to Burlingham, many leaders of companies are making the decision to stay small, with wonderful success. Burlingham wanted to find out if there were companies in America that were “Small Giants.” Companies that he defined as great, but chose to not necessarily grow at any cost. He listed six criteria to be considered when becoming a small giant. First, the owners have reached a crossroads, meaning they had an opportunity to expand, to grow, sell out, or go public and chose not to do that. Second, they are recognized by their peers as being the best at what they do. Third, they have been singled out for their contributions to and their impact on the community. Fourth, they have been consistently profitable for 15-20 years. Fifth, they have what he calls “Human-Scale”. The company still maintains a size that allows the entry level employees to know top members of management. Sixth, they have Mojo, meaning that people want to work for the company, buy from the company, sell to the company, etc.

            As Burlington points out, all these great Small Giants have six key characteristics in common:

1.    The Leader Factor.  The leader/owner knows who they are, knows what they want out of the business, and why.

2.    The Community Factor. The companies are rooted in the community in which they do business. They have become part of the fabric and are bonded to the community. Burlingham describes this as The Mona Lisa Principle. The Mona Lisa is housed in the Louvre Museum in Paris, France, and viewing this piece of art would not be the same experience in another museum, in a different city, and in a different country.

3.    The Customer/Supplier Factor. These businesses have a personal tie or connection to their vendors, customers, etc.

4.    Employee Factor. The customer comes second – the employees come first. In other words, in order to be a great organization, you first need to have engaged employees that are on the front lines servicing your customers. If your employees are unhappy, your customers won’t be treated as well.

5.    The Margin Factor. All the companies have a sound business model and they have protected their gross margins. Volume and top line revenue are not everything.

6.    The Passion Factor. The owner/leaders are in love with their companies and what they do. They keep the passion year after year. They have the soul of an artist, but happen to be in business.

            These Small Giants have set a high standard and are more than just building blocks of our economy. They impact the quality of life for the community and often these communities take on the values of these businesses.  It is more than just providing jobs. Every company can aspire to be a Small Giant and the more that achieve it, the better our country will be. Size and growth rate aside, these small giants share some very interesting characteristics. They are all utterly determined to be the best at what they do. Most have been recognized for excellence by independent bodies inside and outside their industries. All have had the opportunity to raise a lot of capital, grow very fast, do mergers and acquisitions, expand geographically, and generally follow the well-worn route of other successful companies.

            To stay on the road less traveled; these companies have remained privately owned, with the majority of the stock in the hands of one person or a few like-minded individuals. They were founded by and still are run by unique entrepreneurs who recognized the full range of choices they had about the type of company they could create and allowed themselves to question the usual definitions of success.

            In his book, Burlingham has created goals that are more important than getting big fast. He wanted to showcase companies that were considered to be the best at what they did by their peers and competitors - that is, the people in the best position to judge.  Burlingham looked for companies that had been recognized outside the industry for their contributions to the greater good. He also focused on companies that had been around long enough (10 years or more) to experience all of the ups and downs of business and had managed to remain profitable through thick and thin. Finally, Burlingham realized that because of choices the companies were making, he would be looking at businesses that were private and closely held. After all, these were businesses that had decided not to make maximization of return on investment their number-one goal. That is tough to do if you have outside investors.

            I wondered why he picked businesses and not schools. After some research I found an interview with Burlingham in which he explained that he did so because businesses are the building blocks, not just of an economy, but also of a whole way of life. What they do and how they do it have an impact that extends far beyond the economic sphere. They shape the communities we live in, the values we live by, and the quality of the lives we lead.

            If businesses do not hold themselves to a high standard, our entire society suffers. There are no businesses that hold themselves to higher standards than these Small Giants do. What’s more, this is a standard that every company can aspire to, and many can achieve. As more companies become Small Giants, it cannot help but make our world a better place.

            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 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.

            How does Burlingham define mojo and how do Small Giants generate it? Burlingham would define mojo as the business equivalent of charisma. When a leader has charisma, others want to follow him or her in executing the mission of the organization. When a company has charisma, you want to be associated with it in as many ways as you can. You want to buy from it, sell to it, work for it, wear its hats and t-shirts, and be part of whatever its doing. Small Giants generate their mojo by working very hard on the relationships they have with all the groups of people they come into contact with - employees, customers, suppliers, neighbors, and so on. The Small Giants realize that those relationships have a huge impact on a company’s success and must be maintained. If a leader gets distracted and starts to neglect the relationships, the mojo is lost, and the business is usually headed for trouble.

Do you want to buy from a company that treats you as another party in a commercial transaction or from a company that cares about you and what you want and will go the extra mile to see that you get it? Small Giants are fanatical about customer service. They do not want a customer to be satisfied. They want the customer to be delighted.

            The owners of various companies featured in this book turned down the opportunity to go national; they felt that doing so would adversely affect the experience they could offer.  Instead, they expanded into new business ventures that allowed them to offer more to the neighborhoods they serve. An example of that is Hammerhead Productions, an effects company founded by four guys who were at the peak of their careers.  The guys wanted to be able to work in a friendly environment and pick their own projects, so they formed Hammerhead. Now they have the leverage to turn away projects that don’t feel right.  Sure, they want to make money, but not at the cost of doing work they don’t respect or under circumstances they won’t enjoy. They cultivate personal, one-on-one relationships with customers with the goal of understanding and providing them with whatever it is that they are looking for. That’s the benefit to the buyer: The Small Giants care.

            I think that there are many advantages to staying private these days, including the increased government regulation of the public equity markets. But more significant, from a Small Giants standpoint, is the emergence of a new generation of entrepreneurs with a business perspective dramatically different from that of the generations of 1980’s and ’90s. The definition of shareholder value depends on who the shareholders are. If you’re a shareholder who has invested your savings in a public company because you hope to make money on your investment, you want the value of your stock to increase as much and as rapidly as possible. That is why the vast majority of people invest in public companies, so it’s natural to think of shareholder value in that context as a direct reflection of return on investment. Small Giants get the freedom to make that choice when they choose to stay private - and that is another reason why I believe a lot of owners are going to decide to keep their companies private in the future.

            Small Giants’ leaders are likely to be practitioners of servant leadership. This concept was actually developed by a fellow named Robert Greenleaf . Some of the companies in the book follow this leadership style unconsciously; they are dedicated followers of Greenleaf. Some leaders practice it without ever having heard of Greenleaf and just believe that the basic idea is that the role of a leader is to serve. Traditionally, we look at leaders and we think that they are just people who other people follow. Greenleaf’s idea was that a really good leader serves his followers and thereby serves the people. That sense of service needs to imbue everything that the leader does. This may seem oversimplified a little bit, however the goal is to make the lives of the people who he or she is responsible for leading, better. Servant leadership is a philosophy of leadership which has many adherents and has been written about extensively.  I was not surprised to find that many of these Small Giant companies consciously practiced servant leadership.

            When work is just about the bottom line, the bosses treat their employees like profit-making machines, the employees loath coming to work, and the customers must endure meaningless headquarters-approved sound bites uttered by the unhappy employees.  How awful for everyone involved.  When the employees actually care about why they are at work, then each person is more likely to care about the customer and the product.

            The Clif Bar company shows commitment to their community by paying their employees to do a few hours of volunteer work.  The most intriguing part is that they let their employees pick the charities they’ll each get paid to help. Instead of streamlining the process, the Clif Bar executives want to give employees the freedom to support the causes they value.

As Mr. Burlingham explains, this sort of thing happens because Small Giants are companies whose first priority is serving the people inside of the company. The customers come second.

The idea is that they treat their people so well that they will fight for the things that matter the company as a whole.  They’re not just coming in to get a paycheck. Each employee is doing their best for their family at work.  It makes a huge difference.

            Our country was founded on big ideals, and there is something inherently American about being a Small Giant. We are blessed to live in a free society; this allows us to take risks, dream, and dare to do things our own way, forage our own path.

            Don’t listen to the politicians.  America does not need more government control.  We need more hardworking, character-driven Small Giants who are excited about sharing something special and profitable with their communities.  These are the people defining the American dream and the American spirit.  These are the leaders we should be following.  The concept of more, just to have more, needs to stop being the American way.  More is only better when it is accompanied by strength of commitment to our own convictions.  We, as humans inherently know right from wrong, good from evil.  Applying this knowledge in the business arena is no small feat; it is only for Small Giants.

Reference:

Burlingham, B. (2005), Small Giants, Companies that Choose to be Great Instead of Big,             Penguin Group, New York, New York.

Goldsmith, M., Bennis, W., Robertson, A., Greenberg, C., Hu-Chan, M.  Global Leadership:        The Next Generation, (2003), Financial Times Prentice Hall, New York, New York.

Kouzes, J. & Posner, B.  (2012), The Leadership Challenge 5^th Edition, Jossey-Bass, San   Francisco, California.