JUNE 2006           

 

GENEROSITY: A CHARACTERISTIC OF SUCCESSFUL ENTREPRENEURS         

By Tony Mulkern

             

              The nation and the world have been astounded by the recent pledge from Warren Buffett to donate some $31 billion of his fortune to the Gates Foundation, which is devoted to improvements in education and health throughout the world.  This largest charitable donation in history, even by adjusting past philanthropy to today’s dollars, brings the foundation to $60 billion, and Bill and Melinda Gates have already given away some $20 billion.

 

              While the charitable donations of Buffett, Gates, and other billionaires are instances of extraordinary bigheartedness, they are instances of something which I have longed observed is a common characteristic of successful entrepreneurs—their tendency toward generosity.  Other examples of entrepreneurial generosity abound, and though not as large in dollar numbers may provide even more useful lessons. 

 

              In 1996, Kingston Technology of Fountain Valley, California, an entrepreneurial leader in computerized memory products, sold 80 per cent of it shares for $1.5 billion.  A few months later, founders John Tu and David Sun made headlines when they announced that they were setting aside $100 million from the sale as bonuses for employees who had made their success possible.  As further evidence of how they share their success, in 2002 Kingston Technology was listed by Fortune as one of the “100 best companies in the US to work for” for the fifth year in a row. 

 

              Recently, a client of ours in the $25 to $50 million range surprised three of his key managers with a gift of Rolex watches worth $10,000 each just to thank them for their efforts over the years in helping to grow the firm. His CFO raised an eyebrow at the expense, but it is a part of his pervasive management style of sharing his prosperity to express his appreciation.  

 

              Throughout the Los Angeles area and the nation, countless entrepreneurs share their success by giving generously of their time and money to numerous civic and charitable causes, such as hospitals, children’s services, shelters for the homeless or battered, drug treatment centers, and so on.  The seemingly endless gala fundraisers and black tie silent auctions that are a part of American large city social life are full of such people.

 

              Many independent business people I have known in over 20 years of consulting who seem less generous, even stingy, in spirit typically are also less successful.  One might argue that their lack of financial success accounts for their lack of generosity.  While this is no doubt true to a degree, I believe that it also works the other way around—their lack of generosity of spirit limits their success.

 

              The generosity of Kingston founders is not likely something that spontaneously occurred after success.  It is more likely a part of what enabled them to hire and retain workers who were motivated and engaged and striving hard everyday to make the company into something remarkable even in the early days when success was far from assured.  Clients of ours who exhibit this spirit of generosity find a way to give it expression even in leaner times, when there are few luxuries.  A way is found to share what is available, including the truth about what is going on and how valuable everyone is and how tough it feels if anyone has to be let go.

 

              Clearly, generosity can produce great returns. Tu and Sun subsequently bought their stock back for $450 million, and in 2004, Kingston Technology achieved $2 billion in record revenues.  The loyalty our client has gained through his generosity seems to have concrete results, as the firm enjoys record growth.

 

              Nonetheless,  I believe in these and many other cases generosity is not practiced with this kind of calculation in mind.  Otherwise, it ceases to be real generosity, which seeks no returns.  If it is practiced as a kind of “investment” it is usually seen as such, especially by employees, who resent the pretense of bigheartedness when what is at play is cold hearted quid pro quo, i.e., “I will give you this for that.”  Yet the fact remains, if you want outstanding and sustained success, generosity seems to be a key ingredient.

 

              You might say, “Well, I am just not that kind of person, even if I would like to be.”  Does this mean that there is nothing that can be done about it?  Not quite.  Generosity is a virtue, and as the ancient Greek philosopher Aristotle once said, “Virtue is a habit,” not an unalterable state of the soul or personality.  Habits can be cultivated.  In short, if you want to be a generous person and presently are not, start acting generously, and eventually you will become one.  How?  Here are some suggestions for doing this in your business:

 

  • Share your vision, your passion, your story, and your sense of possibilities.  Generosity is about sharing.  The most important thing you can share is yourself, what excites and thrills you about your company.  You want energetic, committed, and motivated employees.  Not matter how skilled your people are, they need to know why you are excited about what you do before they will get excited enough to truly want to contribute to your success.
  • Be lavish in giving praise and credit. In Good to Great, Jim Collins mentions that among CEOs of great companies, they tended to look in the mirror when things went wrong and to look out the window when things went well.  They looked to the people that made the big wins possible and gave them the credit.  Keep it real and keep it sincere, but it is a mistake to be miserly in praise out of fear that they will only want more money if you give them a big head.
  • Build others’ self worth—it is the source of their accomplishment.  None of us rise above our image of our selves. As boss and entrepreneur you have enormous leverage to either build up your employees’ confidence or destroy it.  When you do the latter, you defeat yourself, because low self-image produces meager results.  The best leaders I have known have been consistently willing to drop whatever they are doing when a direct report needs advice, coaching, or mentoring. 
  • Share your feedback and honest opinions—it is the key to development.  Sometimes the feedback may not seem welcome, if it is less than favorable.  Providing others with the honest information they deserve, however, in a coaching and supportive way is another way of sincerely giving of yourself.  There are many ways to be stingy, and holding back your honest assessment of someone’s performance is one.
  • Reward beyond what the “market requires” when you can afford to, and sometimes when you feel you can’t.  Market rates for pay and benefits are really measures of mediocrity.  No doubt there are times when they make good economic sense, but I have met few entrepreneurs who were happy to have employees contribute only a “market rate” or median level of performance. 
  • Encourage others to share their creativity and ideas.  One of the most generous things you can sometimes do for others is to accept what they want to give to you.  You cannot follow every idea you are given, but you can treat each one as a gift that took thought, effort, and courage to express.
  • Be generous with customers.  If you take joy in surprising customers with the extras and in making their days unexpectedly better, the spirit will be contagious.  To always stick to the letter of the contract, agreement, or stated policy is essentially to model stinginess. 
  • Even when you have to terminate, do it with generosity of spirit.  In his book Winning, Jack Welch describes how as CEO at General Electric he always treated a need to terminate someone as an opportunity to find alternatives and to encourage the growth of that person.  It takes more time, but it also results in less bitterness, lawsuits, and resentments from co-workers. 
  • Give hope. This is perhaps the greatest gift you can give to anyone, for if is what all human accomplishment springs from, and many employees operate with a sense of little purpose and little hope that they will ever have one. What do you see as the future of your firm?  How do you see your employees as part of that future?  What opportunities for education and development can you offer them which will allow them to be a part of that future? 
  • Finally, encourage generosity by sharing your thankfulness for your employees, your company, and for the beauty, bounty, freedom of this country and all it stands for.  Gratitude is the other side of generosity, and the most generous people I know are also the most grateful. Many company sponsored events such as holiday parties and picnics seem to be wasted opportunities.  Instead of being occasions for encouraging everyone to count their blessings, they too often seem like surrenders to employee cynicism by becoming celebrations with no theme or point.  Don’t be afraid to be corny.  If it is sincere, "corny" is good. And it is certainly much better than "cool but stingy" in expressions of thankfulness.

 

HAPPY JULY 4TH!

AND GOD BLESS AMERICA!

  

 

 

 

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Copyright, Mulkern Associates, 2006
 
   
 

 
Mulkern Associates is a privately held consulting firm of Anthony J. Mulkern