Big Bonus Is Nice, but It’s Thought That Counts
This is the season when we hear again the tale of small-business man Ebenezer Scrooge, the featured character in Dickens’ “A Christmas Carol” and a cautionary figure for business people everywhere.
Although few business owners in the United States or anywhere else would identify with the wizened symbol of cold avarice painted by Dickens, Scrooge ran a small business involving a warehouse and ledgers and accounts. Probably he played a part in the distribution of goods for London, the great smoky city that was bustling in 1843 with commerce from the colonies and finance for Britain’s industry, which then led the world.
That was a long time ago, yet Scrooge’s story still speaks to business people. And what it says is: Repent. Try to be more like Kingston Technology in Fountain Valley and not like so many companies these days.
The reference is to the computer memory firm that last week captured the imagination and the yearnings of a nation when it set aside $100 million for bonuses for its employees.
The money comes from $1.5 billion that Kingston founders David Sun and John Tu received from Softbank Corp. of Japan when it bought Kingston in September.
The bonuses were to “share our success with everybody” who helped build up the value, Sun told employees.
It was a move so uncharacteristic of American business that, after Greg Miller reported the Kingston story on the front page of last Sunday’s Times, television crews flocked to the company’s headquarters.
It wasn’t the amount of the bonus--which amounted to 6.6% of the $1.5-billion sale price--but the fact of the sharing that drew attention. News coverage called Kingston a throwback to a kinder, gentler age when companies didn’t treat employees as burdens to be borne cheaply--the way Scrooge treated his clerk Bob Cratchit at the beginning of Dickens’ tale.
But nostalgia is too easy, and misses the better and more instructive point. Kingston is a symbol of the dynamic present, not a mythical past. An entrepreneurial firm founded in 1987, it has grown to more than $2 billion in sales and 523 employees by employing the dreaded tactic known as outsourcing.
Kingston handles design and quality control on its computer products, which add memory so that personal computers meet the demands of more complex software programs. But Kingston farms out everything else, from manufacturing of circuit boards to sales and distribution, to other companies.
That way, though large in sales and stature in its industry, it has been able to remain small and human-scale in focus.
That fact is worth noting because Kingston reflects a broad spectrum of U.S. business these days--increasingly entrepreneurial, working in small but fast-growing firms that start with fewer than 20 employees.
A new study funded by 27 institutions, ranging from USC and the University of Michigan to the Swedish National Board for Industrial Development, finds that 35 million U.S. households have a family member involved in a small business--6 million in new start-up companies.
That’s arresting evidence. It indicates that more than 25% of the U.S. work force is involved in entrepreneurial business.
And the smallest firms are growing fastest and are creating high-wage jobs, reports David Birch of Cognetics Inc. a Cambridge Mass., consulting firm.
“High-wage” is a relative term. On average, companies with fewer than 20 employees pay 10% less than large companies--those of more than 5,000 employees--used to pay. But with no security in the large firms anymore, there is now more opportunity in the small companies.
The result is a thriving small-business climate. Business failures are down, according to Dun & Bradstreet. And “people going into their own business are so numerous they’re hard to count,” says William Gartner, head of the entrepreneur program at USC’s School of Business Administration.
Why is all that not better recognized? Why are Americans so gloomy and critical about business these days? Because the large firms are downsizing, caught by the same economic shift that allows individuals to set up shop with a small computer, a few dollars and a lot of nerve.
From 1991 to ‘95, large firms eliminated 1.5 million jobs, while small companies created 3.7 million good-paying jobs.
But the big-company decline has received more attention because downsizing often has been carried out against a background of grabbiness, neglect and rudeness--special stock options for executives, pink slips for the rest; wretched excesses such as the $90-million package for Michael Ovitz that attracted public scorn just as Kingston inspired public cheer and hope.
Kingston is the more accurate reflection of today’s business, however, and not only among small companies. Sun Microsystems and Microsoft, with 17,000 to 20,000 employees apiece, and many others of the high-tech elite treat employees very well indeed.
They know it’s only good business to do so: Employees are hard to find, expensive to hire and train. If you work with the ones you have, you’re ahead of the game. “As long as there is a market for Kingston products, we’ll always be here,” says David Sun, “because right now I have 500 people you cannot beat.”
Good business also can be a trend. Not only Kingston but Aaron Feuerstein, the owner of Malden Mills in Lawrence, Mass., who paid employees while his mill was being rebuilt after a fire, are setting a new example for U.S. business of giving something back.
They are part of a noble tradition: George Eastman, founder of Eastman Kodak, built a model firm for its time, and bequeathed cultural institutions to the community. David Packard of Hewlett-Packard saw employees as key to building a great company and so broke down barriers and listened to employees’ ideas.
Fittingly for the season, that’s just the lesson to be drawn from Dickens’ tale of Scrooge, who was failing as a businessman. At the beginning of the story, Scrooge was keeping his employee Bob Cratchit cold and in the dark--and getting poor productivity as a result. Then the Ghost of Christmas Past shows Scrooge how generous his first employer, Mr. Fezziwig, was to his clerks and how well they worked. So Scrooge gives Cratchit a raise and the firm prospers.
Moral, then and now: People work better when there’s something in it for them.
