The CEO Next Door

Stay focused by letting go.

One of the great hallmarks of the people leading the companies we studied was they had enough self-assurance to let go of businesses and internal processes that were no longer working. Each year, for example, Koch Industries performs a value assessment on each of its 100-plus business units. If the division's present value -- basically its return on capital and equity -- is smaller than the price it could fetch in the current market, then the unit gets sold off. Simple as that. Someone like Charles Koch views that as a more compassionate way to do business than a prolonged death.

Medline Industries, a $1.6 billion medical-products manufacturer and supplier, is able to innovate while remaining focused on its core business by being "a little entrepreneurial," as CEO Charles Mills describes it. We saw this with other companies we looked at: Take lots of small chances, but don't make a bet so big that it would upend you if it didn't work.

Balance short-term goals with long-term horizons.

Tracy from Dot Foods told me, "Volume is vanity and profit is sanity, and we're far more interested in being sane than we are in being vain." The idea is that some companies get so wrapped up in their future visions of grandeur they lose sight of profitable short-term growth.

That's also a principle used to guide expansion. In the early 1990s, O'Reilly Automotive, a chain of auto-parts stores, had 127 stores. Within a decade, it had more than 1,000 stores in 18 states. That's adding 100 stores a year for 10 years straight. We asked David O'Reilly if he thought he'd have 5,000 stores in all 50 states one day, and he said, "Sure. We just won't make that prediction. We're much better knowing where we'll be in 2 years than in 5 or 10."

Ignore what most companies do; they're usually lousy role models.

We all learn by example. So when we see a self-important, pompous CEO surrounding himself with an army of assistants to make him feel bigger than he really is, the junior execs below him aspire to this.

The people leading the companies we examined either were taught well or had seen what happens when things are run poorly. Before being named CEO, Hudson watched Sonic almost unravel. Brian Devine, Petco's CEO who previously helped build Toys "R" Us, saw that whole operation come unglued as Wal-Mart ate its lunch. Once you've opened the door of a furnace and your eyebrows have gotten singed, you're not going to let that happen again. nFC

Sidebar: Jason Jennings's Quiet Heroes

Charles Koch * Koch Industries Inc.
Wichita, Kansas
Annual Revenue: $40 billion

Brian Devine * Petco Animal
Supplies Inc., San Diego, California
Annual Revenue: $1.87 billion

David O'Reilly * O'Reilly Automotive Inc.
Springfield, Missouri
Annual Revenue: $1.78 billion

Charles Mills * Medline Industries Inc.
Mundelein, Illinois
Annual Revenue: $1.60 billion

Jim Cabela * Cabela's Inc.
Sidney, Nebraska
Annual Revenue: $1.59 billion

Pat Tracy * Dot Foods Inc.
Mount Sterling, Illinois
Annual Revenue: $1.57 billion

Jim Goodnight * SAS Institute Inc.
Cary, North Carolina
Annual Revenue: $1.53 billion

Cliff Hudson * Sonic Corp.
Oklahoma City, Oklahoma
Annual Revenue: $581 million

Robert Silberman * Strayer University
Arlington, Virginia
Annual Revenue: $117 million

Ryan Underwood (runderwood@fastcompany.com) is a Fast Company staff writer.