THE NATIONAL BUSINESS HALL OF FAME
(FORTUNE Magazine) – OF ALL the skills of leadership, listening is one of the most valuable -- and one of the least understood. Most captains of industry listen only sometimes, and they remain ordinary leaders. But a few, the great ones, never stop listening. They are hear-aholics, ever alert, bending their ears while they work and while they play, while they eat and while they sleep. They listen to advisers, to customers, to inner voices, to enemies, to the wind. That's how they get word before anyone else of unseen problems and opportunities. FORTUNE recently elected six new members to the National Business Hall of Fame -- each blessed as much with forehearing as foresight. Robert McDermott and Stanley Gault grew their small companies into behemoths by listening carefully to customers' desires for more products and higher quality. Levi Strauss, after hearing the forty-niners of California's gold rush complain about flimsy trousers, designed his globe-conquering Levi's. Rebecca Lukens, Edwards Deming, and Walter Annenberg listened to their own instincts, even when those instincts seemed at odds with popular wisdom. Annenberg made TV Guide into one of the most successful magazines ever, despite critics who told him it couldn't be done. Deming understood from statistics that it costs less to make quality products than defect-ridden ones, but it took decades for American industry to listen to him. Lukens trusted her own self-confidence and became the First Lady of iron and steel. The Hall of Fame is sponsored by Junior Achievement, a nonprofit group that educates young people about business. A gallery of laureates, with educational displays, can be found in Chicago's Museum of Science and Industry. FORTUNE's board of editors elects members from two groups: those who have retired or moved on from the positions in which they made their mark, and those who are dead. This year's laureates will be inducted into the Hall of Fame on April 14 at a banquet in New York City.
Robert F. McDermott born 1920 USAA By paying attention to customers, McDermott turned a lowly insurance company into a top gun.
If Diogenes had gone searching for a good listener instead of an honest man, would he have looked among generals? Or at an insurance company? Not likely. Generals prefer to be listened to, and insurance executives can have deaf ears at claims time. How can it be then that Robert McDermott, a one-star general who spent half his career in the Air Force and half at USAA, is one of the best listeners around? Maybe he learned as a boy in Readville, Massachusetts, hearing his father practice classical trombone for concerts with the Boston Symphony. (Robert also took up the trombone but preferred swing music as played by Tommy Dorsey and Glenn Miller.) Or perhaps he honed his hearing to dodge enemy fire while flying 61 missions in a P-38 bomber over Europe in World War II. However he got his keen ear, McDermott turned it into a potent managing tool. He joined USAA in San Antonio as CEO after retiring from the Air Force in 1968 at the age of 48. Back then, USAA was mainly an automobile insurance company whose policyholders were mostly active or retired members of the armed forces. (The company is owned by its policyholders, who are called members.) Taking the pulse of his new command, McDermott noted with displeasure that 43% of employees left the company each year and that it took 55 steps, each performed at a different desk, to activate a new policy. He set out at once to improve both company morale and service to members, facets of the business he believes are linked. He put the company on a four-day workweek and built a new headquarters on a 286-acre campus with tennis courts, picnic grounds, four cafeterias, a company store, and several fitness centers. He began emphasizing employee training; USAA employees now get 70 hours of training a year, vs. 28 hours for the insurance industry overall. Annual turnover dropped to 7%, and with better employee training, payment could be issued on most claims the day they were received. McD, as he is called, also built up USAA's research staff until it was spending 30,000 hours annually querying members about their satisfaction and ideas for new services. McD diversified into mutual funds, banking, and credit cards. The company, which owned and managed $207 million in assets when McDermott arrived, grew to $31 billion by the time he retired last year. In the same year it climbed to No. 21 on FORTUNE's directory of diversified financial companies -- and to No. 1 on FORTUNE's list of most admired insurance companies. A graduate of West Point, McDermott believes his military career prepared him well for private enterprise. After World War II he worked on General Eisenhower's staff for a year and then went to Harvard for an MBA. In 1954 he was posted to the newly opened Air Force Academy in Colorado Springs, where he taught economics. He was soon promoted to dean of the faculty, a post he held until retirement. When an adviser to President Lincoln once complained that Ulysses S. Grant, the only general who seemed a match for the Confederate army, drank too much, Lincoln reportedly said, ''If I knew what brand of whiskey he drinks, I would send a barrel or so to some other generals.'' Thinking of General McDermott, he might say, ''Buy every kid a trombone.''
Stanley C. Gault born 1926 Rubbermaid Inc. He opened his door to employees and new ideas, and Rubbermaid became a cornucopia of original products.
As a former senior vice president of GE, retired CEO of Rubbermaid, and current CEO of Goodyear, Stan Gault has a curriculum vitae as distinguished as anyone's in corporate life. Yet it does little to reveal the range of skills that enabled him to transform Rubbermaid from a little-known maker of dustpans into one of America's most admired corporations. To better understand Gault, consider the resume he had compiled by the time he was 22 and applying to GE for a job: He was born in Wooster, Ohio, where his father was one of five founders of Wooster Rubber Co., a tiny manufacturer of toy balloons that eventually became Rubbermaid. Growing up in the Depression, Gault took part-time jobs delivering newspapers, mowing lawns, and tending gardens and coal furnaces. In high school he sat on the student council and played drums and piano in a band. At 17 he joined the Army Air Corps and became a gunner in a B-29 bomber over the South Pacific. After the war, Gault attended Wooster College, where he majored in geology, became booking agent for all campus musical performances, played piano in a dance band, and was senior class president. Oh, yes, he also sold GE appliances in his uncle's store. Says Gault, with understatement: ''Growing up, I learned to work with many people in different circumstances.'' GE, knowing a dynamo when it saw one, hired him in 1948. Gault rose at GE until he was in line to become CEO. In 1980, when it became apparent he wouldn't get the plum (it eventually went to Jack Welch), Gault stunned the corporate world by accepting the helm of little Rubbermaid. Some onlookers thought that by moving to a much smaller company at the age of 54 he was going into semiretirement; in fact, as a chief executive, Gault was about to unleash his managerial talents completely for the first time. He immediately reorganized Rubbermaid by centralizing functions like purchasing (to gain economies of scale) and by divesting weak operations. Then he sped up product development, making the company a fountain of new wares. In Gault's 11 years as CEO, annual sales grew from $300 million to $1.5 billion, and net income from $27 million to $163 million. Gault was a devoted open-door manager who invited all employees to call him Stan and tell him about problems and ideas. He also listened to his customers, though they didn't always know to whom they were talking. Upon hearing a New York City doorman complain about a Rubbermaid dustpan, Gault questioned him and concluded that because the lip of the dustpan was too thick, it left a line of dust on the floor. He had the product redesigned. Five weeks after he retired from Rubbermaid in 1991, Gault was drafted to rejuvenate Goodyear. He agreed to a three-year contract, which concludes in December. Goodyear, which lost $38 million in 1990, earned $390 million last year, and its stock price has risen from $13.50 a share to $44. At Goodyear, too, Gault's door is always open and he seems never to tire.
Walter H. Annenberg born 1908 Triangle Publications Inc. Annenberg had a hunch that television viewers wanted to read about TV; out of it came the U.S.'s biggest magazine.
When Walter Annenberg got the idea for a new magazine in the Fifties, critics said it couldn't work technologically, and even if it did, no one would buy it. The magazine was TV Guide, and the critics seemed to have common sense on their side. Annenberg wanted to staple glossy outer sections of nationally distributed articles about television shows to inner sections containing local station schedules. With dozens of different local listings across the country, TV Guide looked like a logistical nightmare. Besides, who would buy a magazine containing information printed every day in the newspaper? Annenberg paid no heed to the critics. He had the national section printed at several sites and then distributed to ten regions where it was combined with local listings. He filled TV Guide with a week of programming and made it compact. It fit easily on top of a TV set, and it enabled viewers to stop fussing with their newspaper listings.
In the 1960s, TV Guide passed Reader's Digest to become the best-selling magazine in the country. At its peak the circulation was 20 million copies a week. Annenberg's company, Triangle Publications, was worth about $4 million when he and his seven sisters inherited it from their father, Moses Annenberg, in 1942. He sold it for $3 billion in 1988 to News Corp., the media conglomerate owned by Rupert Murdoch. Annenberg struggled in his career not only to build his company but also to clear his family name. His father had created Triangle in part from the Daily Racing Form, a newspaper for horse racing fans, and from a wire service that reported racing results to bookmakers, most of whom were taking illegal bets and had links to organized crime. His father was convicted of tax evasion in 1939 and served two years in prison. After attending the University of Pennsylvania for a year, Annenberg went to work at the Philadelphia Inquirer, then owned by Triangle. He took over the company after his father's death and soon began branching out. In 1944 he started Seventeen magazine, later published and edited by his sister Enid Haupt, and in the 1950s he began buying radio and TV stations. Annenberg's old friend Richard Nixon named him ambassador to the Court of St. James's in 1969. At first he was ridiculed for his clumsy speech, as when | he told the Queen that he had moved into his residence with ''some of the discomfiture as a result of the need for elements of refurbishment and rehabilitation.'' But by the time he left London, he was widely praised for his warmth and his contributions to such institutions as the Royal Opera House and the British Museum. After returning to the U.S., Annenberg continued to give generously, recently making a $500 million donation to help reform public education. That is by far the largest gift to American education by a private individual.
W. Edwards Deming born 1900, died 1993 Independent consultant Deming altered the balance of international industrial power with a method for improving quality in products.
Ed Deming worked alone. He had no cadre of employees, no fleet of trucks, and no fancy offices. What he did have was profound insight into the workings of corporations and an unflagging energy to teach what he knew. With these he influenced the world of business far more than most corporate chieftains. Since the early 1950s, Japanese companies distinguished by the quality of their products have received the Deming Prize, a precursor of the Baldrige awards in the U.S. Deming was one of the creators and the chief disciple of statistical process control, a technique for continually upgrading quality in goods and services. In most companies, quality control meant inspecting finished goods at the end of the production line and repairing or throwing away defective items. That was too expensive, said Deming, and provided little incentive to do things better. He recommended monitoring the product all along the assembly line to discover both chronic problems and ways to constantly improve. His teachings were a key element in the rise of Japanese industry after World War II; Japanese companies that listened to him transformed their reputation for manufacturing from laughable to laudable. After losing battle after battle to Japan, American corporations in the 1980s discovered Deming's principles and are using them to stage a comeback. Thus, Deming played a central role on both sides of the great commercial struggle of the 20th century. Deming was raised in Powell, Wyoming, the son of a struggling lawyer. The family lived for a time in a tarpaper shack, and young Deming worked to help pay for food. He studied electrical engineering at the University of Wyoming and earned a Ph.D. in mathematical physics at Yale. In the 1930s he took at job at the Department of Agriculture, where he became enthralled by The Economic Control of Quality of Manufactured Product, a book by Walter Shewhart, a statistician at Bell Labs. It was a dense read, but Deming perceived its revolutionary importance and spent the rest of his life expanding -- and putting into practice -- Shewhart's ideas. In 1950 the Union of Japanese Scientists and Engineers invited Deming to lecture; his teachings were immediately popular at such companies as Nissan and Matsushita. Besides having a prize named after him, he was decorated by the Emperor. American businesses finally began listening to Deming in the 1980s, when Japanese cars and electronics products were flooding the U.S. market. Soon Deming, who lived his entire career in Washington, D.C., was crisscrossing the nation, holding seminars and preaching the quality gospel to U.S. companies. When he died in December at 93, he was still working a full schedule.
Levi Strauss born 1829, died 1902 Levi Strauss & Co. Strauss heard gold miners complaining about their trousers and created a pair of pants that became a legend.
Levi Strauss proved that great ideas can be found in humble places. An entrepreneur with a keen ear might get a brainstorm just by listening, say, to the grumbling of laborers on a lunch break or to the murmuring of farmers on a porch at the end of a hard summer's day. It was voices like these that gave Levi Strauss the idea for those amazing pants. He was the fifth of six children of a dry goods peddler in Buttenheim, Bavaria. When their father died of tuberculosis in 1845, all six children migrated to the U.S. Two of Strauss's brothers set up a dry goods company in New York City, and a sister, Fanny, and her husband, David Stern, established a similar business in San Francisco. Strauss headed for Kentucky, where he spent almost five years walking the country roads hawking thread, scissors, yarn, combs, buttons, and fabric. In 1853 the Sterns persuaded Strauss to move to San Francisco, a city still in the grip of gold fever. He loaded up with goods for the prospectors and boarded a ship in New York. By the time he reached California, he had sold everything to his fellow passengers except some bolts of canvas that he had intended to peddle to the forty-niners for making tents. Once in California, Strauss joined the Sterns in the gold fields selling dry & goods. After hearing from the miners that they weren't interested in buying his tent canvas and that panning for gold in the rocky streams was hard on trousers, he hit on a golden nugget of an idea. He made his tent canvas into pants. Levi's, as they were called from the start, were a hit. Strauss soon switched to using a heavy cotton fabric called serge de Nimes -- later shortened to denim -- that his siblings in New York purchased from a mill in New Hampshire, made into pants, and shipped to California. In 1872, Jacob Davis, a tailor in the mining fields of Nevada, began putting copper rivets in trousers to keep the pockets from tearing under the weight of tools, nuggets, and calloused hands. Davis, who purchased cloth from what had by then become Levi Strauss & Co., proposed a joint patent. Strauss accepted, and Davis moved to California to head manufacturing of the new, sturdier Levi's. Levi Strauss ran the company until his death. He became a leading philanthropist, endowing 28 scholarships at the University of California and contributing to Jewish, Catholic, and Protestant orphanages in his adopted city. He never married, and left to his nephews most of his estate of $6 million -- his monetary estate, that is. To the rest of the world he left pants that seem to suit about everyone.
Rebecca Webb Lukens born 1794, died 1854 Lukens Inc. Widow Lukens took over an ailing iron mill and forged the foundations of a modern steel giant.
As America's first female CEO of an industrial company, Rebecca Lukens was a woman more than a century ahead of her time. For her, the critical year was 1825. Lukens, a devout Quaker, was raising three children and was pregnant with another in Coatesville, Pennsylvania, when her husband became mortally ill. On his deathbed, he urged Rebecca to take over his job of operating the Brandywine Iron Works and Nail Factory, founded by her late father. She agreed and went on to run it for 24 years. Lukens not only rescued the mill from near bankruptcy but also built it into the country's premier manufacturer of boilerplate, high-quality iron essential to the making of steam boilers in what was the dawn of the age of steam. Her ironworks survives today as Lukens Inc., No. 395 on the FORTUNE 500 industrial list (1993 revenues: $862 million) and the oldest continuously operating steel mill in the U.S. Lukens was an unusual woman from the start. Her father taught her to ride and often took her to his ironworks. A book lover, she sometimes read secretly in her room until dawn. When she was a teenager, her parents sent her to a boarding school in Wilmington, Delaware, where she developed a love of chemistry. About that time, she recalled later, ''vanity began to whisper to me that I was of some importance, and my beloved tutor often warned me against its siren power.'' Fortunately, she listened to the whisper and ignored the tutor. A hands-on executive, Lukens made many purchases and sales. When revenues slumped during the panic of 1837, she laid in a little inventory and then assigned her employees to do maintenance on the factory or gave them work on her farm. She laid off no one. When cash flow ran dry, she paid workers with farm produce. Near the end of her business career, she wrote: ''There was difficulty and danger on every side. Now I look back and wonder at my daring.'' Boilerplate has become a synonym for mindless copy. But the woman who made the real kind first is a true original.