Risky business Featured

7:00pm EDT December 27, 2007
You wouldn’t have hired Alec E. Gores when he got out of college — and he’s OK with that.

“I had a lot of things people didn’t see because they were worried about my grade point and all the other things,” Gores says.

Though Gores, the founder, chairman and CEO of The Gores Group LLC, ended up getting a job at General Motors, even the executives there didn’t see what his strengths were right away.

“My strength was I was tenacious, aggressive, and I was willing to learn,” he says.

Today, Gores, a self-made billionaire, doesn’t want to forget that tenacity. He knows that passion is the lifeblood for TheGores Group, a private equity firm that focuses on acquiring controlling interests in mature and growing businesses, so he refuses to let himself get complacent.

“It starts at the top, so I’m open-minded, especially when hiring new people,” he says. “You also have to continue to be nimble, even though you’re big, you have to be willing to make mistakes and keep challenging your people because if it becomes about running everything by committee, you’ve lost it.”

So Gores has made a career out of risks, hiring passionate people who may not have found a home elsewhere and buying companies that weren’t making it alone.

By keeping himself challenged, keeping employees challenged by letting them take risks and make mistakes, and bringing in young talent for a fresh perspective, Gores has been able to shake the complacency out of The Gores Group on a regular basis. As a result, it has continued to grow, acquiring 70 companies since its inception in 1987 while expanding to include offices in Colorado and London. Currently, it controls more than a dozen firms with billions in combined annual revenue.

Keep yourself challenged

Gores knows a horror story that scares him more than any challenge he can have his people take.

“I worked with this guy a long time ago that had this word processing company worth $500 million,” Gores says. “Along the way came personal computers and this guy was so stuck in his technology that he was not open-minded to other technology. One of his engineers even saw the PCs coming along and he played around with putting their software on a PC. This guy, with his ego, basically fired him.

“Well, the rest is history. They went out of business a year or two later because the PCs came along, and that one mistake, not being open-minded and listening to your people, stays with me. If I get stuck in my way, thinking we’re the best instead of thinking, ‘Jeez, this business is changing, and we need to continue to look at the challenges and competitors and make it better, then I’m not doing what I’m supposed to do.”

Gores is constantly working to take on a bigger challenge than he’s ever met before to keep himself from getting complacent. He doesn’t go beyond the reach of his company’s financial capabilities, but he’s always looking for something that his competitors aren’t doing.

“Once you get successful, you’re stuck in this mindset and you think you have the best toy,” he says. “You are very close-minded because you think the world is never going to end, so it’s that fear that you have to have that this world is going to change, and you better be ahead of the game, and you better think like a start-up.”

To do that, Gores has to be the one leading the charge when it comes to taking risks. He constantly listens to pitches from managers on things the company has never done before.

“Status quo doesn’t exist for me,” Gores says. “I’m always keeping it challenging, I never want to do the same thing I dida year ago. We have to continue to challenge the people that are here so that they’re reaching to a point where it really hurts.”

That means that Gores tells himself something every day that most leaders don’t want to think about: He’s not the smartest guy on the planet.

“I don’t let that get in the way and start making a lot of assumptions that may not be true,” he says. “That’s a challenge because you almost are too smart, and you’ve been through too much, and that can keep you from going to the next step. But if you’re always challenging people to continue to take risks and reach and get better to make the company better, you have to do the same.”

When you are willing to hear those new pitches or sign off on something that the company has never done before, Gores says you don’t have to send out company memos every week telling people not to be complacent. When people see the senior leader producing challenges, it breeds more creativity.

“Whether it’s buying a company bigger than we ever bought or more broken than any before it, it’s always pushing, and that’s done by action,” he says. “I’m pushing the organization to do bigger things every day, so that’s the culture that exists here without me saying, ‘Gee, I want you guys to go out and do this.’They just know they have to do it. My job is to create these opportunities that push people.”

Tell employees to make mistakes

Though he likes to take risks, Gores had to come to terms with something that makes most leaders nervous: If you’re going to think like a start-up, you’re going to make mistakes. As much as that can hurt, he has two policies when it comes to that. He encourages his nearly 50 employees at The Gores Group and the thousands working for the companies run by The Gores Group to think without fear of a mistake while also telling them not to make the same mistake twice. The result is loyal employees who push the envelope.

“We make sure people understand that taking risks is good, making a mistake is good, as long as you don’t repeat the mistake,” Gores says. “I don’t want people that say, ‘I did a perfect job, and I never made a mistake.’ That concerns me. You create an environment where, when people make a mistake, they don’t get fingers pointed at them; you help that person fix the mistake.”

With a system where people aren’t just allowed to make mistakes, but they will be supported in their effort to fix their wrongs, The Gores Group is able to nip problems quickly because employees don’t try to cover up. That, in turn, helps reciprocate the company’s risk-taking capabilities because those people see the loyalty they get if they make a mistake.

“We’re not hiding someone’s mistakes under the rug, so that makes people open about making a mistake and taking a risk,”Gores says. “This open environment with people helping each other retains people because they know we have loyalty to them. Everyone wants to grow financially, but they also wantto grow personally, so our job is to make sure we create that growth for those individuals. Taking risks, making mistakes and the way the team comes together, those are all the things that keep people here. Most people don’t want status quo, most people want change. And I’d rather they grow here and make mistakes than go some other place.”

As with his own push for new challenges, Gores doesn’t want people being silly, so there are still checks in place for big decisions. Still, in order to think like a start-up he can’t have employees with feet of clay so he gives them the ability to pull the trigger on things to keep them from becoming stagnant.

“It ’s not like just go and do something stupid, it’s being calculated about it,” Gores says. “It’s making a decision. When you’ve looked at a decision and all the facts, sometimes you just don’t make the right decision, but as long as you’re not just running with your head cut off, it’s about encouraging people to make good decisions. If they made a bad decision, but they worked hard to look at all the facts, that’s OK.

“My whole career has been built on making mistakes, but you have to learn from those so the next time you do better. What’s important about this is if you made a mistake, you can’t get stuck in it. You can’t bring yourself down; you can’t think about it all the time. You have to let it go, you made that mistake, now go make up for it somewhere else.”

Grow young talent

If you’re thinking that what Gores wants his people to do isn’t for the faint of heart, you’re right. In order to keep challenging the status quo, Gores hires young talent and quickly throws them into the action. He remembers how aggressive he was when he got out of college and how there was no outlet for that passion.

“When I see a person that wants to come out of the box — a young person out of college who’s been here for two years —most people will try to hold that person back,” he says. “But I’m always pushing our people to throw these young people in the pool instead of coming up with 20 reasons why you can’t get them to the next level.”

That doesn’t mean that Gores gives young employees thepower to push the nuclear bomb button as part of first-day orientation, but he asks his managers to look for hunger in newemployees and tells them to feed growing employees as muchas they can handle it.

“I’m looking for young people that are hungry, that are willing to work very hard, and I want them to shake it up a little,” Gores says. “I want them to ruffle some of the people who have been here for a while. In many ways, the younger people that come in can challenge the others because they want to take on some things that maybe those of us who have been around too long won’t take on because we make too many assumptions.”

Once new employees get into the fold, Gores knows that even the most adventurous new talent may be reticent to speak up, so he makes sure that both he and his senior managers prod the talent to give his or her two cents.

“You tell them all the time that their job is to keep pushing and shoving to get themselves in — and that pushes people that have been here, so they’re growing, too,” he says. “It’s difficult for someone that’s young to be as open as you are whenyou’ve been through 20 to 30 years of experience, so teaching them to speak up and be open is important. Every now and then, you grab one that’s been here for two or three months; tell them, ‘Don’t be afraid to be aggressive, this is what you have to do.’”

In throwing those young people in the fire and letting them grow up in the company, Gores also found that there is a collateral benefit, they appreciate the vote of confidence and find a home with the firm.

“Loyalty goes both ways,” he says. “It’s all about retaining people, the experience, the good will that we get as a firm by keeping individuals here from the time they are out of college until the time they’ve been a professional for 20 years. We have a great track record of people who start young, they’re loyal to us, they stay with us over the years, and we’ve found ways to keep them motivated so they don’t want to go anywhere else.”

HOW TO REACH: The Gores Group LLC, (310) 209-3010 or www.gores.com