The Millionaire Mentality

Many years ago, I hired a man -- call him George Miller, it's close enough -- to superintend operations on some oil properties I owned outside Los Angeles, California. He was an honest, hardworking individual. He knew the oil business. His salary was commensurate with the responsibilities of his position, and he seemed entirely satisfied with both his job and the pay he received. Yet, whenever I visited the properties and inspected the drilling sites, rigs and producing wells, I invariably noted things I felt were being done in wrong or inefficient ways.

There were too many people on the payroll, and there weren't adequate controls over costs. Certain types of work were being done too slowly; others were being performed too rapidly and hence without proper care. Some equipment items were being overstocked while there were shortages of others.

As for George Miller himself, I felt he was spending too much time doing administrative work in the Los Angeles office and not enough out in the field -- on the drilling sites and rigs. Consequently, he wasn't able to exercise the necessary degree of direct personal supervision over the operations.

All these things served to keep costs high, to slow production and hold down profits. But I liked Miller and was certain that he possessed all the qualifications of a top-notch superintendent. After some weeks, I had a man-to-man talk with him. I informed George bluntly that I thought there was considerable room for improvement in the manner in which he was handling his job.

"It's funny, but I need only to spend an hour on one of the sites, and I spot several things we could do better or cheaper and increase production and profits," I told him. "Frankly, I just can't understand why you don't see them, too."

"But you own the properties," the superintendent declared. "You have a direct personal interest in everything that happens on or to them. That's enough to sharpen any man's eyes to ways of saving -- and thereby making -- more money."

Truth to tell, I'd never thought of it in quite that way before. I mulled over what George said for several days and then decided to try an experiment. I had another talk with Miller.

"Look, George. Suppose I farm the properties out to you," I suggested. "Instead of paying you a salary, I'll give you a percentage of the profits. The more efficient our operations, the bigger those profits will be -- and the more money you'll make."

Miller gave the proposition some thought and then accepted the offer enthusiastically.

The change was immediate -- and little short of miraculous. As soon as George realized that he, too, had a "direct personal interest" in the properties he really hit his stride. No longer merely a salaried employee, the superintendent became keenly concerned with cutting costs, boosting production and increasing the profits in which he was to share. He viewed operations on the drilling and well sites in an entirely different light, instantly recognizing -- and correcting -- faults which had theretofore eluded him.

Miller shucked unnecessary personnel from the payroll, pared operating expenses to the bone and used his considerable native ingenuity to devise better methods for getting the work done. Where he'd previously spent two and sometimes three days each week in the Los Angeles office, he now made only brief appearances there once or twice a month (continued on page 160)Millionaire Mentality(continued from page 113) and chafed impatiently until he could return to the drilling sites.

I inspected my properties again some 60 days after George Miller took over under the new relationship. I checked the operations minutely, but could find nothing wrong. Indeed, I noted little if anything I could have improved upon personally. Needless to say, in a very short time both Miller and I were making far more money than we had before he started working on a profit-sharing basis. The incident taught me one of the many lessons which have led me to believe that most men fall into one of four general categories.

In the first group are those individuals who work best when they work entirely for themselves -- when they own and operate their own businesses. Such men do not want to be employed by anyone. Their desire is to be completely independent. They care nothing for the security a salaried job offers. They want to create their own security and build their own futures entirely on their own. In short, they want to be their own bosses and are willing to accept the responsibilities and risks this entails.

Next are the men who, for any of a large number of reasons, do not want to go into business for themselves, but who achieve the best, and sometimes spectacular, results when they are employed by others and share in the profits of the business.

There are many widely different types of men in this category. They range from topflight salesmen who prefer working on a commission basis -- earning in proportion to what they produce, with neither floors nor ceilings on their incomes -- to the finest executives in the business world.

George Miller was one who fit into this category. So -- at the uppermost end of the scale -- did the late Charles E. "Engine Charlie" Wilson. I'm certain that Charles E. Wilson would have achieved great success had he gone into business for himself. But he preferred working for someone else--first for the Westinghouse Electric Company and then for the General Motors Corporation. Wilson's rise from an 18-cent-an-hour job to the $600,000-a-year presidency of General Motors is a classic saga of American business. Charles E. Wilson was always an employee--but he amassed millions through stock-ownership in the companies for which he worked, thus sharing in the profits he helped to create.

My third category includes individuals who want only to be salaried employees, people who are reluctant to take risks and who work best when they are employed by others and enjoy the security of a steady salary.

People in this group are good, conscientious and reliable workers. They are loyal to their employers, but are content with the limited incentives of a regular paycheck and hopes for occasional raises in salary. They do not possess the initiative and independence -- and, perhaps, the self-confidence and drive -- of individuals in the first two groups.

Lastly, there are those who work for others but have the same attitude toward their employers that postal clerks have toward the Post Office Department. I hasten to make clear that I intend no slight or slur against postal clerks, who work hard and well. But they are not motivated by any need or desire to produce a profit for their employer. Postal deficits are traditional and they are met regularly by the Federal Government. I doubt very seriously if there is one postal clerk in 100 who cares whether the Post Office Department makes a profit or operates at a deficit. This is, perhaps, as it should be -- in the Post Office Department. But, obviously, such attitudes are fatal to any business operating in a free-enterprise system.

Yet there are far too many men who hold -- or would like to hold -- management positions in business whose outlooks are virtually identical with those of the average postal clerk. They don't really care whether the company that employs them makes a profit or shows a loss as long as their own paychecks arrive on time.

I've encountered countless specimens -- graduates of the nation's leading schools of Business. Administration among them -- who, incredibly enough, are utterly incapable of reading a balance sheet and couldn't even give an intelligent definition of what is meant by the term "profits."

Whatever exalted titles such men may hold, they still remain nothing more than glorified postal clerks. They feel little or no sense of responsibility to their employers or the stockholders of the company for which they work. They are interested solely in their own personal welfare.

Outwardly, some of these men seem to possess the essential qualifications for management jobs. They are obviously intelligent and apparently experienced. But not even a 180 I.Q. will necessarily make an individual a good businessman or executive. And, as Roger Falk so correctly points out in his book. The Business of Management, many a man who is supposed to have, say, 10 years' experience has really had only one year's experience repeated 10 times over.

Large numbers of these postal clerk types spend years -- even decades--trying to reach the upper rungs of the success ladder and wondering why they can't attain them. They can't understand why they aren't given top jobs or can't "get rich."

The reason they fail? Actually, it's all in the mind.

Like it or not, there is a thing that can be called The Millionaire Mentality. There is a frame of mind which puts an individual a long way ahead on the road to success in business, whether it be in his own or as an executive.

In short, The Millionaire Mentality is one which is always and above all cost-conscious and profit-minded. It is most likely to be found among men in the first two categories I have cited.

This Millionaire Mentality is rarely found among individuals in the third group. But then, they seldom have ambitions to be anything more than employees in the lower or middle echelons of a business organization.

The Millionaire Mentality is entirely nonexistent among men in the fourth category. Unfortunately, however, these are usually the very people who have the wildest delusions about their own value -- the ones who do the least and demand the most. They view the company for which they work as a cornucopia from which good things should flow to them rather than as something to which they owe loyalty and which they should strive to build.

There were times in the past when I tried to excuse the failings of these postal clerk types on the grounds that they hadn't had the advantages I'd enjoyed in life. I reasoned that they did not have the same amount of formal education I'd received, hadn't traveled as widely nor had as much business experience as I. Then I gradually learned that when their personal interests were involved, these economic illiterates suddenly became as shrewd as the most successful financier.

I once took control of a company which had great potentials but a very disappointing earnings record. It didn't take me very long to pinpoint the trouble. Three of the company's key executives were virtually casebook examples of the postal clerk, men who were neither cost-conscious nor profit-minded.

The monthly salaries of each of these men ran into four figures. One month, shortly before payday, I instructed the accounting department to "short" each of their paychecks by five dollars -- and, if they complained, to send them directly to me.

As I more or less expected, all three of the executives concerned presented themselves at my office within an hour after their checks were delivered on payday. To each, in turn, I delivered a little speech that was hardly calculated to brighten his day.

"I've been going over the company's books," I announced sourly. "I've found several examples of what I consider unnecessary expenditures which have cost this company's stockholders many tens of thousands of dollars in the last year. Apparently, you paid little or no attention to them. Certainly, I've seen no evidence that you tried to reduce the expenses or correct the situations which caused them to rise as high as they did. Yet, when your own paycheck is involved, you instantly notice a five-dollar underpayment and take immediate steps to have the mistake rectified." Two of the executives got the point, took it to heart and quickly mended their ways. The third did none of these things -- and was soon looking elsewhere for work.

It should go without saying that no business can long survive unless it makes a profit. It should also go without saying that businessmen and business executives must be constantly alert for ways to reduce costs and increase efficiency, production, quality and sales so that the company he owns -- or for which he works -- can operate at a profit.

These would appear to be the most basic of all basic business axioms. Yet it is a sad fact that many businessmen and executives barely comprehend them -- and there are even those who don't comprehend them at all!

An all-too-familiar attitude was expressed to me recently by a young executive who complained bitterly that his departmental budget had been slashed by $20,000.

"Did the cut reduce the efficiency of your department or curtail any of its productive operations?" I asked him.

"No, I guess not," he replied after a moment's thought.

"Then why complain?" I inquired.

"We could have found something to spend the money on!" was this alleged executive's answer. "After all, you have to think big and spend money to make money!"

I'm glad this young man wasn't on one of my payrolls. I would have disliked terminating our conversation by firing him on the spot.

I've heard this concept that "you have to think big and spend money to make money" bandied about ever since I began my own business career. I doubt if there is any other business concept more widely misinterpreted.

I agree that anyone who desires to achieve success and wealth in business must have imagination and be farsighted. He must also be willing to spend -- and risk--money, but only when the expenditure is justified and the risk is carefully calculated.

In my opinion, it's more important for the man with The Millionaire Mentality to be able to think small than to think big -- in the sense that he gives meticulous attention to even the smallest details and misses no opportunity to reduce costs in his own or his employer's business. I explained my views along these lines not long ago to a newly graduated aspirant for a junior executive position.

"Do you mean that a man has to be a penny pincher to be a success?" he wanted to know.

I replied that what might seem to be penny-pinching at one level might well loom as a large-scale economy at another. I mentioned the example of the giant U.S. corporation that recently made a study of the contents of the wastebaskets in its administrative offices.

Each night for a week, a team of workers emptied the waste receptacles and sorted out the usable items of company property which had been tossed into them by the firm's employees during the day. By computing the value of such minor items as paper clips, rubber bands, erasers, pencils, and so on which had been discarded during the week and multiplying the total by 52, company officials discovered that more than $30,000 was being wasted--literally thrown away -- each year!

Another firm operating a fleet of trucks saved $15,000 annually on its gasoline bills just because an alert executive noticed that drivers were filling their fuel tanks to overflowing at the company gas pumps and that gasoline remaining in hose nozzles was allowed to drip onto the ground.

In one of my own companies, a bright junior executive burned much midnight oil to devise a shortcut in a production operation which saved less than half a cent per unit, but added up to a total yearly saving of over $25,000 -- more than twice his own salary. Last year, he also reduced overall costs by 20 percent and increased production by 12 percent in his own department. This young man quite definitely has what I term The Millionaire Mentality. He is, incidentally, no longer a junior executive. I do not hesitate to predict that he will reach the top and make his millions in record time.

In this day and age, almost every business firm has to fight a constant battle against rising costs. More than ever before in history, the emphasis has to be on reducing costs and increasing production.

There is absolutely no room in today's business world for even the most junior executive who has a postal clerk's outlook--but there is an insatiable and evergrowing need for executives who possess or will develop Millionaire Mentalities. Faced with spiraling costs and shrinking profit margins, many firms have begun to weed out the former and give greater latitude and opportunity to the latter.

In my own companies, we have instituted a program of "early retirement" to rid ourselves of the personnel deadwood which has been allowed to collect over the years -- and which, inevitably, collects in almost any business firm.

Several hundred executives and employees have been compulsorily retired well before reaching the normal retirement age. The criterion for selecting those to be retired has been their actual value to the companies. In brief, the question asked in each case was whether the individual was productive, cost-conscious and profit-minded.

True, the cost of retiring these people and of paying them pensions years before they were due to receive them is very high. But we have found that the cost is significantly less than the cost of keeping them on our payrolls, where they not only draw full pay, but cause more harm than good, producing losses instead of profits.

The man with a Millionaire Mentality is not a penny pincher and money-grubber. If he is an executive, he watches costs and tries to reduce them--and strives to increase production and sales and thus profits -- in every way he can because he has the interests of the company, its shareholders and employees at heart. He knows that the healthier the company, the better its profit picture, the more those shareholders and employees will benefit.

It is more than a figure of speech to say that an executive holds the stockholders' investments and the employees' jobs in his trust. To discharge those trusts, he must direct every effort to insure that the company makes a fair profit -- one not only large enough for it to continue in business, but also large enough for it to take advantage of opportunities for expansion. An executive who understands this and acts accordingly is already well on his way to establishing the frame of mind that produces The Millionaire Mentality. He is also assured of success. He is on his way to the top.