The U.S. Business Hall of Fame

(FORTUNE Magazine) – IT'S IMPOSSIBLE to go far in business without a healthy supply of courage. Alden J. Laborde, the founder of two large companies that serve the offshore oil industry, quit a comfortable job to peddle his plans for a movable drilling rig. George J. Mecherle, founder of the State Farm Insurance empire, braved the taunts of established businessmen to bring fresh ideas to a tradition-bound industry. Arnold O. Beckman left a cozy niche in academe to nurture Beckman Instruments. Henry M. Flagler, the Standard Oil pioneer, risked a huge chunk of his fortune to develop the state of Florida. They have all been elected this year to the U.S. Business Hall of Fame, along with two other business executives with uncommon intestinal fortitude --Reginald H. Jones of General Electric and William F. Laporte of American Home Products. Started in 1975, the Hall of Fame is sponsored by Junior Achievement, a U.S. organization that teaches young people about private enterprise. The laureates are chosen by FORTUNE's board of editors from two broad categories: those who are alive but have left the jobs in which they made their mark, and those who have died. This year's laureates will be inducted at a banquet in Cleveland on April 3, joining 86 men and three women elected previously. REGINALD HAROLD JONES (born: 1917) A keen-eyed troubleshooter and strategist shepherded GE through hard times. In the 33 years he spent climbing to the top at General Electric, Reg Jones distinguished himself time and again as an extraordinarily talented troubleshooter. It was GE's good fortune to have him as its chief executive from 1972 to 1981, an eminently troublesome period for American business. His masterful command of strategic planning and financial controls enabled GE to survive the hard times in fine style. Though besieged by inflation, energy shortages, and two major recessions, GE under Jones made profit gains in all but one year and produced high returns on invested capital. Born in England, Jones came to the U.S. at 8 and grew up in New Jersey, where his parents both worked in a rubber-manufacturing plant. He attended the University of Pennsylvania's School of Education on a scholarship, planning to become a social science teacher, but found himself repelled by what he considered the ''permissiveness'' of John Dewey's educational precepts, which were much in vogue. He transferred into Penn's Wharton School, whose business curriculum was not the least bit permissive, and upon graduating in 1939 he was hired by GE as a trainee. After handling mainly financial assignments, Jones in 1956 was appointed general manager of the air-conditioning division, which had been losing several million dollars a year. ''We had a compressor, which was just not very successful,'' he recalls. ''We had a five-year warranty on the compressor, and we were replacing three and four compressors over the course of the five years.'' He encouraged the company's engineers to develop a new compressor, built a modern plant in Texas to produce it, and stopped the losses. In his next assignment, as general manager of the supply company division, a distribution arm for appliances and electrical products, he turned red ink into black once again by cutting back personnel and overhead. In 1970 Jones was asked to cope with one of GE's biggest problems, the money- hemorrhaging computer operation. He served on a study team, which concluded that GE couldn't afford to commit enough resources to compete effectively with IBM. He then directed the sale of the computer operation to Honeywell on terms so favorable that GE recouped much of its $400-million investment. It was probably this feat that ensured his selection as chief executive. ''I never expected to be chairman of General Electric,'' Jones insists. He explains that he considered himself a reliable operating and financial man--a ''Mr. Inside''--but that he thought someone else would be better at handling the outside duties that are imposed on the top man at a modern major corporation. Yet his statesmanlike performance as Mr. Outside, especially as co-chairman of the Business Roundtable, won him the enduring admiration of his fellow chief executives. In a FORTUNE survey held in Jones's final year on the job, his peers overwhelmingly voted him the best of their lot. ARNOLD ORVILLE BECKMAN (born: 1900) A professor who disdained business built a leading instrument company. He was a mild-mannered chemistry professor who started a little instrument company on the side to make some pin money. The sideline developed into a preoccupation, and Beckman boosted the company's revenues to $600 million over more than four decades before selling it to SmithKline for $1 billion. The son of an Illinois blacksmith, Beckman financed his education by playing the piano in dance orchestras and movie houses. He attended a high school affiliated with Illinois State University, and completed five semesters of college chemistry before he even started college. While still in high school, he taught a chemistry class at the university for a couple of weeks when the professor was away. He earned his bachelor's and master's degrees at the University of Illinois, and after completing his Ph.D. at Caltech in 1928, he joined the faculty. In 1934 Beckman was approached by a friend, Glen Joseph, a research chemist for a California fruit cooperative, who asked him to develop a better device for measuring the acidity of lemon juice. Beckman produced an acidimeter, or pH meter, that was less fragile and more sensitive than any on the market. A few months later Joseph came back and begged for another meter, explaining that his colleagues at the lab were hogging the original. ''I thought,'' Beckman recalls, ''that if he could use two of these instruments in his rather modest laboratory, there might be a market.'' He consulted several laboratory supply houses and was told that he might be able to sell 600 meters at $195 each over a ten-year period before saturating the market. In the midst of the Depression, that was good enough for Beckman. In May 1935 he set up quarters in a garage, and he proceeded to sell 600 meters in just two years, and 350,000 after that. By 1939 he was netting $22,000 a year, and he gave up teaching to devote himself full-time to Beckman Instruments. He says it was a ''very difficult'' decision--especially since he had regarded business with disdain. His company went on to develop for commercial use a host of much-needed scientific instruments--among them an ultraviolet spectrophotometer for analyzing the chemical components of foods and other substances, a protein sequencer for separating and identifying amino acids, and a potentiometer, used in radar and other electronics. Although he stepped aside as chief executive in 1965, Beckman remained very much in the picture as chairman. He was heavily involved in the merger negotiations with SmithKline--now SmithKline Beckman--and came away with $185 million worth of the merged company's stock. The deal went through early in 1982, and the timing couldn't have been better for the shareholders of Beckman Instruments. Within months Congress imposed stringent new regulations curtailing Medicare payments to hospitals, and this caused a sharp drop in sales of expensive hospital equipment, the principal Beckman specialty. WILLIAM FREDERICK LAPORTE (born: 1913) A marketing whiz with a great head for figures produced astounding returns. During his long reign as chief executive of American Home Products, William Laporte turned in one of the most impressive managerial performances in modern business history. The company's revenues, earnings, earnings per share, and dividends rose every year during his tenure--from 1965 to 1981--and return on shareholders' equity never dipped below 25%. A little-known company with a lot of famous brand names, American Home Products currently derives revenues of $4 billion a year from prescription and nonprescription drugs (notably Anacin), foods (Chef Boy-ar-dee), and household products (Woolite, Easy-Off). Born in New York City, the son of a bank executive, Laporte earned his MBA at Harvard in 1938. Early in his final year there he was offered a job by Alvin Brush, the chairman of American Home, who was a friend of the family. Laporte wrote a major paper on the company and received ''a good mark'' from his professor, Georges Frederic Doriot--himself since enshrined in the Business Hall of Fame. After six months as a trainee, Laporte became assistant to the president of American Home's Anacin subsidiary, and he received seven promotions in all before assuming the top job when Brush died. Laporte was a brilliant marketer. At his direction the company's salespeople were trained to be extraordinarily aggressive in pushing prescription drugs, which account for nearly half of revenues and more than half of profits. Although fanatically cost-conscious, Laporte did spend heavily to advertise his products, especially on TV. ''We used to almost eat our meals in front of the television,'' he recalls, ''checking on our ads, checking on the programs we sponsored, seeing what our competitors were doing. We were early advertisers on television, and we were big.'' Financial analysts and the business press have twitted Laporte for his stingy outlays on drug research and development. But the company had no pressing need to develop products when it was able to thrive on licensing agreements with foreign drugmakers such as Britain's Imperial Chemical Industries, maker of Inderal, the cardiovascular drug that became American Home's best seller. ''We have always spent what we felt would be productive,'' Laporte asserts. With so many foreign drug companies marketing their own products in the U.S., American Home has increased R&D by 116% over the past five years. Demanding and often intimidating, Laporte imposed strict financial controls on his managers and would pounce promptly and fiercely on any whose profits fell shy of expectations. With no hobby but mathematics, he spent much of his leisure time crunching the numbers in American Home's internal financial reports, and he would often detect problems that the divisions didn't know existed. In retirement he likes to fiddle with his IBM PCjr, but he restricts his analysis to his personal finances--much to the relief of his erstwhile subordinates. ALDEN JAMES LABORDE (born: 1915) An Annapolis grad with a mind of his own revolutionized the offshore oil industry. % He modestly denies any suggestion that he is a genius, but a lot of grateful oilmen would disagree. Alden Laborde made two major breakthroughs in the offshore oil business, and he is one of the very few individuals to start two Big Board companies. Ocean Drilling & Exploration Co., which operates offshore drilling rigs, sprang from Laborde's development of a radically new rig that could be moved from site to site. Tidewater Inc., which provides marine transport services to the offshore oil business, was built around Laborde's design for an efficient supply ship. Laborde grew up in the Cajun country of Louisiana, earned his engineering degree at the U.S. Naval Academy, and served as a combat officer during World War II. After the war he worked as a maintenance engineer for Sid Richardson, the Fort Worth oil titan, and in 1948 he joined Kerr-McGee Corp., supervising support systems for the company's venture into offshore drilling along the Louisiana coast. In those days the offshore oil industry was hopelessly primitive. Exploration was conducted from fixed platforms constructed on pilings. ''When you drilled a dry hole, as you usually do in this business,'' Laborde recalls, ''you had this useless structure out there that you had to bring in and discard.'' Laborde figured that it would be possible to build a mobile drilling rig. He designed one consisting of a platform supported by columns on top of a barge. The barge could be flooded so that its hull rested on the ocean floor, and when the drilling was finished the barge could be refloated and towed to a new site. When Kerr-McGee spurned the idea as impractical, Laborde quit and began hauling his sketches around to other oil companies, seeking financial backing. Charles H. Murphy Jr., head of Murphy Oil, anted up $500,000 of the $2.3 million needed to build the first rig, and Laborde raised the rest from individuals and institutions. In early 1954 Shell Oil contracted to use the rig--dubbed ''Mr. Charlie'' in honor of Murphy's father--to drill in 40 feet of water near the mouth of the Mississippi. By the 1960s oil companies were itching to drill in much deeper water, so Laborde devised a semisubmersible rig, which didn't touch bottom but was held in place with anchors. ''That opened up the whole ocean,'' he drawls. Today the company has 38 rigs serving the world's major oil companies, and it also produces oil and gas. Its revenues last year were $785 million. Laborde started Tidewater Inc. in 1954 because he needed a new type of ( vessel to serve his offshore rigs. He placed the pilot house far up in the bow, leaving the rest of the ship open for storage of bulky materials. ''It was a crazy-looking thing, and people chuckled about it,'' he says. But as the offshore industry boomed, so did demand for Tidewater's services. The company, run by Laborde's brother, John, now has 290 vessels operating worldwide, and its revenues last year topped $300 million. HENRY MORRISON FLAGLER (1830-1913) The son of a Presbyterian minister in upstate New York, Henry Flagler left school at age 14 and traveled to Ohio, intent on building a great fortune. He became a grain dealer and did a lot of business with John D. Rockefeller, a successful commodity agent in Cleveland. After Rockefeller went into the oil business, Flagler joined him. Flagler served as Standard Oil's vice president and shared an office with Rockefeller, who always gave him much of the credit for the company's success. It was Flagler who suggested devouring all the little refineries that would form the Standard Oil trust. In the mid-1880s, Flagler turned his attention to the state of Florida, which he had visited with the first of his three wives. Over three decades he spent $50 million of his Standard Oil fortune to transform the state from wilderness to playground. In St. Augustine he built a luxury hotel and another for visitors of more modest means. Then he refurbished the railroad from Jacksonville to help lure guests. He continued to build and buy hotels along the east coast while extending his railroad to serve them. The Florida East Coast line ultimately covered all 366 miles from Jacksonville to Miami. Flagler also built a railroad down the Florida Keys despite staggering engineering problems. He developed Palm Beach as a resort for the rich, and built Miami into a city. The city fathers offered to change the name to Flagler, but he said he preferred the Indian name, which means ''very large.'' GEORGE JACOB MECHERLE (1877-1951) Although he started late and reluctantly, George Mecherle founded one of the world's largest insurance companies--State Farm. The son of a German immigrant farmer, he operated a farm himself until he was past 40, then gave it up when his wife became crippled by arthritis. He sold auto insurance in and around Bloomington, Illinois, but it bothered him that farmers were charged the same as city drivers, even though they had fewer accidents. When he asked his % bosses to give the farmers a break, they refused, and one executive assured him that if he started his own insurance company he would find that his idea was impractical. Mecherle, a fierce rummy player, launched State Farm in 1922, betting: ''If I can sell one policy, I can sell a million.'' He offered discounts of up to 30% to farmers and other low-risk drivers and billed his customers for six months of insurance at a time rather than compelling them to pay for a year in advance. He insisted that his agents work exclusively for State Farm. In return the company handled their paperwork and collections, leaving them free to sell. The company was a success from the start, and within 20 years it became the largest auto insurer. Mecherle diversified his company's coverage, and today it is the largest property and casualty insurer in the U.S., taking in $11 billion a year in premiums. State Farm Life, with assets of $5 billion, placed 17th on the latest FORTUNE list of the largest life insurance companies. BOX: Roster of Past Laureates WILLIAM MCPHERSON ALLEN LEO HENDRIK BAEKELAND WILLIAM MILFRED BATTEN STEPHEN DAVISON BECHTEL SR. OLIVE ANN BEECH WILLIAM BLACKIE WILLIAM EDWARD BOEING ANDREW CARNEGIE WILLIS HAVILAND CARRIER FREDERICK COOLIDGE CRAWFORD HARRY BLAIR CUNNINGHAM ARTHUR VINING DAVIS JOHN DEERE WALTER ELIAS DISNEY GEORGES FREDERIC DORIOT DONALD WILLS DOUGLAS PIERRE SAMUEL DU PONT GEORGE EASTMAN THOMAS ALVA EDISON HENRY FORD BENJAMIN FRANKLIN ROSWELL GARST AMADEO PETER GIANNINI FLORENCE NIGHTINGALE GRAHAM WALTER ABRAHAM HAAS JOYCE CLYDE HALL EDWARD HENRY HARRIMAN HENRY JOHN HEINZ JAMES JEROME HILL CONRAD NICHOLSON HILTON EDWARD CROSBY JOHNSON II JOHN ERIK JONSSON HENRY JOHN KAISER CHARLES FRANKLIN KETTERING LESLIE BERNARD KILGORE ROBERT JUSTUS KLEBERG SR. RAYMOND ALBERT KROC EDWIN HERBERT LAND ALBERT DAVIS LASKER ROYAL LITTLE FRANCIS CABOT LOWELL HENRY ROBINSON LUCE IAN KINLOCH MACGREGOR JOHN JAY MCCLOY CYRUS HALL MCCORMICK MALCOM PURCELL MCLEAN FORREST MARS ANDREW WILLIAM MELLON CHARLES EDWARD MERRILL JOSEPH IRWIN MILLER GEORGE STEVENS MOORE JOHN PIERPONT MORGAN HOWARD JOSEPH MORGENS ADOLPH SIMON OCHS DAVID MACKENZIE OGILVY WILLIAM SAMUEL PALEY JOHN HENRY PATTERSON WILLIAM ALLAN PATTERSON JAMES CASH PENNEY ABE PLOUGH WILLIAM COOPER PROCTER SIMON RAMO MONROE JACKSON RATHBONE DONALD THOMAS REGAN JOHN DAVISON ROCKEFELLER JAMES WILSON ROUSE DAVID SARNOFF JACOB HENRY SCHIFF CHARLES MICHAEL SCHWAB ALFRED PRITCHARD SLOAN JR. CYRUS ROWLETT SMITH CHARLES CLINTON SPAULDING ALEXANDER TURNEY STEWART JOHN ELDRED SWEARINGEN JR. JOHN EDGAR THOMSON THEODORE NEWTON VAIL CORNELIUS VANDERBILT DEWITT WALLACE LILA ACHESON WALLACE GEORGE WASHINGTON THOMAS JOHN WATSON JR. GEORGE WESTINGHOUSE FREDERICK KING WEYERHAEUSER ELI WHITNEY CHARLES KEMMONS WILSON JOSEPH CHAMBERLAIN WILSON ROBERT ELKINGTON WOOD ROBERT WINSHIP WOODRUFF OWEN D YOUNG