The history of the BE 100s has been carved from boom-and-bust business cycles, individual fortitude, and institutional innovation. In the 1970s, bootstrapping CEOs forged businesses that largely targeted black consumers: haircare products, media, entertainment, and community supermarkets. The 1980s gave rise to financiers who used mergers, acquisitions, and financial engineering to scale the BE 100S. By 1988, the late Reginald Lewis, dealmaker extraordinaire, led the pack through his junk bond-backed leveraged buyout of Beatrice International and the creation of the first $1 billion-plus black enterprise. A decade later, large numbers of black-focused businesses like haircare companies would go the way of the Jheri curl, making way for, among others, a bevy of tech titans and automotive suppliers.
Today, BE 100S CEOs must contend with a rapidly evolving, globally competitive environment that favors the bold and slaughters the meek. At no other time in business history have so many black entrepreneurs operated in billion-dollar arenas or played such significant roles in business and technological advancement. Thomas Boston, Ph.D., CEO of the Boston Research Group Inc., a firm that studies the success patterns of the fastest-growing small businesses, says, “One of the biggest differences between those companies that were really successful and those that weren’t is what I call ‘value innovation.’ They weren’t adjusting their prices at all. They weren’t concerned about their marketing strategy. What they were concerned about was how they could add value to their existing customers and clients in a new and innovative way.”
Simply put: To meet customer demands and competitive pressures, CEOs must run a tight ship. To focus on such issues, our editors assembled a roundtable of black CEOs across an array of industries. They are:
- Thomas D. Boston, a member of the BLACK ENTERPRISE Board of Economists.
- William G. Mays, angel investor and CEO of Mays Chemical Co., the nation’s largest black-owned chemical distributor
- JoAnn H. Price and Laurence C. Morse, co-founders and partners of Fairview Capital Partners Inc., the nation’s largest black-owned private equity firm
- Russell T. Wright, chairman and CEO of Dimensions International Inc. one of the nation’s largest black-owned defense contractors
- Shawn D. Baldwin, president and CEO of Capital Management Group Securities L.L.C., a provider of investment banking services, and manager of one of the few black-owned hedge funds
- John F. Carter, president and CEO of Carter Brothers L.L.C., the largest black security firm in the U.S.
- John A. James, chairman and CEO of James Group International, a leading black-owned logistics and supply-chain management firm
- Rodney P. Hunt, president and CEO of RS Information Systems, one of the nation’s largest black-owned information technology and consulting firms
Moderated by BE President and CEO Earl “Butch” Graves Jr., this discussion produced a platform that will help black businesses become even more competitive. The planks are as follows:
RECRUIT PEOPLE SMARTER THAN YOU
To propel your business into hyperdrive, you have to identify the right pilots. William G. Mays says the process takes more than evaluating résumés and calling references. For black-owned businesses to gain intellectual firepower and well-connected corporate Rolodexes, entrepreneurs need to reach outside their comfort zone.
“My experience has been that black entrepreneurs do not want to be outshined and therefore, when they start to grow their companies, they don’t try to hire the very best talent,” Mays says. “They don’t want that person to be perceived as more knowledgeable, smarter, or more skilled. I see time and time again where the entrepreneur is skilled in one or two disciplines but not willing to bring on folks skilled in other areas.”
John A. James prescribes to the age-old philosophy of the late A.G. Gaston. “One of his principles was that if you really want to grow, go out and find somebody who you cannot afford to pay and hire him anyway. I think there’s a lot of truth in that,” he says.
WITHOUT VISION, THE COMPANY WILL PERISH
Whether a chief executive is running a bare-bones operation or a corporate behemoth, he or she can’t overcome business challenges with an employee mentality. Our roundtable participants were in unanimity on one edict: every CEO must have a clear vision for his company. Moreover, it must be effectively and consistently communicated to each employee. It may sound a bit simplistic, but heads of the world’s largest companies have spent days in collegiate think tanks scratching their heads over vision statements.
“As a CEO you have to manage the company, but you can’t spend all your time on that. You have to have time to envision where the company is going at the next level,” says Thomas D. Boston. “What does the business model look like as we grow to the next level and in which direction? What should we be developing and what should we be phasing out? It really takes a lot of time to think through that. And you can’t do that if you’re engaged in managing that company on a day-to-day basis.”
CREATE A POWERHOUSEMANAGEMENT TEAM
Identifying top-flight individuals is only part of the equation. Bringing them together as a cohesive unit is another. As a private equity veteran of 25 years, Laurence C. Morse has thoroughly examined companies for
“To present a compelling value proposition in the marketplace and develop a product or service that’s truly unique requires more than the intelligence of a single individual,” says Morse.
“We are in the business of backing teams of people whose business itself is to build companies. No matter what’s happening in the marketplace or the business cycle, what we have found is that the focus is team-oriented: both in the venture practice as well as in the companies they’re attempting to grow,” he says. “What becomes obvious over time is that there are folks who have built networks of relationships along each of those dimensions.”
KNOW YOUR LIMITATIONS
As CEOs work to fortify their operations, Russell T. Wright suggests they engage in one meaningful act: take a long look in the mirror. He learned that powerful lesson when his father handed him the keys to Dimensions International in 2003. “One Sunday morning I got the call from my father saying ‘I’m going to turn the business over to you.’ I asked why. He said, ‘Because at my age, I’m risk-averse. I’m too afraid to pull the trigger, and I think I may impair the business because of my age.'”
The elder Wright thought Dimensions’ new CEO would be more prone to make the bold moves needed to advance the company and “if it all happens to go bust tomorrow, you’ll just start over.” Wright agreed: “To a large degree he was absolutely right. Bec
ause risk can be managed, it can be quantified. We took a risk and acquired SENTEL. We almost flipped over in that acquisition. It was 85% our size.”But Wright’s philosophy isn’t restricted to age. Experience counts as well. “You bring in better talent to move the company to the next level,” he says. “If I were to take DI public, I’d get a Wall Street-savvy CFO because I need that knowledge base.”
NETWORK OR DIE
Roundtable participants agreed that black entrepreneurs and corporate professionals must build a solid network. “I don’t think we sit in a room enough and talk about how we work together to go after the other piece of the pie,” says John F. Carter, an advocate for small groups of BE 100S CEOs playing golf
together like he does with head honchos of majority institutions. “It gives you another way of judging that person. I’m not a great golfer, but I play golf with every single person I hire as management. I want to see how they’re going to be for five hours with no cell phone. You get to understand them. I don’t think we do enough of that. We see each other at a conference and talk for a minute, but you don’t get to know someone that way. If we don’t know each other, we’re not going to trust each other enough to do deals.”
Rodney P. Hunt believes the development of a powerful network is needed to expand the deal pipeline between African Americans as well as majority corporations. “I think to a larger degree we don’t know enough about what’s going on outside our own business base to see where those opportunities are.”
FORM BLACK-ON-BLACK PARTNERSHIPS
One issue was a source of contention for most of the CEOs assembled: Why do African American companies have such a difficult time developing partnerships with one another? If fact, BE’s CEO Butch Graves maintains that the lack of such collaborations has retarded the expansion of black wealth: “The average dollar in the Jewish community turns over six times before it leaves that community. In the African American community, it turns over less than half. In other words, it never lands before we’re spending it with somebody else. We have not solved that puzzle yet.”
For more than a decade, Shawn D. Baldwin says he has courted black banks, investment banks, and broker-dealers as merger partners but “came up goose eggs.” Eventually, Baldwin says, he was able to acquire a broker-dealer and a hedge fund from majority institutions. “I think sometimes our egos get in the way,” he says. “To a large degree, we can’t get beyond putting ourselves aside for the well-being of the company.” Hunt agrees: “Why not get five or six minority-owned companies or women-owned companies together and form a half-billion-dollar company?”
DEVELOP AN EXIT STRATEGY
There’s no maxim that rings with more truth in business than: Start with the end in mind. It goes to the heart of the most important and introspective question an entrepreneur can ask: So why did I start this business in the first place?
Entrepreneurs need only look to billionaire entrepreneur Bob Johnson as a model. “Because there are people who are very successful in business, they just want to be in that business and that, in a sense, is their employment contract,” says Fairview Capital’s JoAnn H. Price. “There is nothing wrong with that. But it is important that we have someone who understands that it’s
not just important to own the business. It’s important how you exit the business and how you are able to return capital to investors. Bob Johnson has created a lot of very wealthy people. When he went to the bank, a lot of people went to the bank with him.”GO GLOBAL
Black businesses must operate in a flat world, and that means reaching across international borders. For James to grow his logistics business, he must find viable offshore partners–a reality that leaves him conflicted.
“I’m in competition with companies for global business. So I can go and team up with a lot of other companies my size, minority or otherwise, but it won’t give me the global footprint I’ve got to have to compete,” the CEO says. “But how do I bring in either mergers or other kinds of relationships with other black enterprises and at the same time reach out to get this global footprint that I need?”
For Morse, the answer is simple: “At some point, you will either die of atrophy or be eaten alive. When you look at it that way, it’s a matter of survival and increasing prosperity. That to me kind of allows a lot of baggage to be left behind.
Nothing stops you from engaging in dialogue with those global competitors because they’re interested in you as being successful and getting the business.”
MENTOR THE NEXT GENERATIONOF ENTREPRENEURS
The roundtable viewed access to capital and contracts as major hurdles for black entrepreneurs. However, they felt those problems could be remedied through the creation of informal mentorship-protégé programs across sectors and generations. Younger entrepreneurs can benefit from the old guard’s acumen, contacts, and investment, while established companies can gain fresh perspectives, technological innovation, and entrée to new markets. A graduate of the Small Business Administration’s 8(a) program, Hunt now offers subcontracting and mentorship opportunities to smaller, minority-held companies through a link on the RSIS Website. One such partnership, a joint venture named Energy Enterprise Solutions L.L.C., transformed 1 Source Consulting Inc. (RSIS’s partner company) into a BE 100S company. This was, in part, thanks to Hunt’s mentorship.
What many of the entrepreneurs like Hunt, Mays, and Carter have done is develop their own supplier programs in which they have contracted–and, in some cases, financed–a number of minority vendors. In fact, one proposal on the table was that each BE 100S CEO adopt entrepreneurs as their protégés or bring at least one business owner as their guest to such events as the annual Black Enterprise Entrepreneurs Conference. BE