By the time Sam Walton died, he had taken Wal-Mart from a single store in Bentonville, Arkansas, and turned it into a retail colossus with $44 billion in annual sales with 40 million people shopping in the stores per week. But it takes more than a compet.i.tive nature, a strong work ethic and a sense of optimism to build a company big enough to equal the twenty-third-largest economy in the world.

Walton wasn't the first person with big dreams to start a small business. Many small business owners dream of making it big. I meet a lot of entrepreneurs and it is amazing how many of them tell me their goal is to build a billion-dollar company. The odds, however, are significantly stacked against them. There are 27.7 million registered businesses in the United States today and only a thousand of them get to be FORTUNE 1000 companies, which these days requires about $1.5 billion in annual revenues. That means that less than .004 percent of all companies make it to the ill.u.s.trious list. To have such an impact, to build a company to a size where it can drive markets, requires something more.

Sam Walton did not invent the low-cost shopping model. The five-and-dime variety store concept had existed for decades and Kmart and Target opened their doors the same year as Wal-Mart, in 1962. Discounting was already a $2 billion industry when Walton decided to build his first Wal-Mart. There was plenty of compet.i.tion beyond Kmart and Target, some of it much better funded and with better locations and seemingly better opportunities for success than Wal-Mart. Sam Walton didn't even invent a better way of doing things than everyone else. He admitted to "borrowing" many of his ideas about the business from Sol Price, the founder of Fed-Mart, a retail discounter founded in Southern California during the 1950s.

Wal-Mart was not the only retail establishment capable of offering low prices either. Price, as we've already established, is a highly effective manipulation. But it alone does not inspire people to root for you and give you the undying loyalty needed to create a tipping point to grow to ma.s.sive proportions. Being cheap does not inspire employees to give their blood, sweat and tears. Wal-Mart did not have a lock on cheap prices and cheap prices are not what made it so beloved and ultimately so successful.

For Sam Walton, there was something else, a deeper purpose, cause or belief that drove him. More than anything else, Walton believed in people. He believed that if he looked after people, people would look after him. The more Wal-Mart could give to employees, customers and the community, the more that employees, customers and the community would give back to Wal-Mart. "We're all working together; that's the secret," said Walton.

This was a much bigger concept than simply "pa.s.sing on the savings." To Walton, the inspiration came not simply from customer service but from service itself. Wal-Mart was WHAT Walton built to serve his fellow human beings. To serve the community, to serve employees and to serve customers. Service was a higher cause.

The problem was that his cause was not clearly handed down after he died. In the post-Sam era, Wal-Mart slowly started to confuse WHY it existed-to serve people-with HOW it did business-to offer low prices. They traded the inspiring cause of serving people for a manipulation. They forgot Walton's WHY and their driving motivation became all about "cheap." In stark contrast to the founding cause that Wal-Mart originally embodied, efficiency and margins became the name of the game. "A computer can tell you down to the dime what you've sold, but it can never tell you how much you could have sold," said Walton. There is always a price to pay for the money you make, and given Wal-Mart's sheer size, that cost wasn't paid in dollars and cents alone. In Wal-Mart's case, forgetting their founder's WHY has come at a very high human cost. Ironic, considering the company's founding cause.

The company once renowned for how it treated employees and customers has been scandal-ridden for nearly a decade. Nearly every scandal has centered on how poorly they treat their customers and their employees. As of December 2008, Wal-Mart faced seventy-three cla.s.s-action lawsuits related to wage violations and has already paid hundreds of millions of dollars in past judgments and settlements. A company that believed in the symbiotic relationship between corporation and community managed to drive a wedge between themselves and so many of the communities in which they operate. There was a time when legislators would help pa.s.s laws to allow Wal-Mart into new communities; now lawmakers rally to keep them out. Fights to block Wal-Mart from opening new stores have erupted across the country. In New York, for example, city representatives in Brooklyn joined forces with labor unions to block the store because of Wal-Mart's reputation for unfair labor practices.

In one of the more ironic violations of Walton's founding beliefs, Wal-Mart has been unable to laugh at itself or learn from its scandals. "Celebrate your successes," said Walton. "Find some humor in your failures. Don't take yourself so seriously. Loosen up and everybody around you will loosen up." Instead of admitting that things aren't what they used to be, Wal-Mart has done the opposite.

The way Wal-Mart thinks, acts and communicates since the pa.s.sing of their inspired leader is not a result of their compet.i.tors outsmarting them either. Kmart filed for Chapter 11 bankruptcy protection in 2002, and then merged with Sears three years later. With about $400 billion in annual sales, Wal-Mart still sells more than six times as much as Target each year. In fact, looking beyond discount retailing, Wal-Mart is now the largest supermarket in the world and sells more DVDs, bicycles and toys than any other company in America. Outside compet.i.tion is not what's hurting the company. The greatest challenge Wal-Mart has faced over the years comes from one place: itself.

For Wal-Mart, WHAT they do and HOW they are doing it hasn't changed. And it has nothing to do with Wal-Mart being a "corporation"; they were one of those before the love started to decline. What has changed is that their WHY went fuzzy. And we all know it. A company once so loved is simply not as loved anymore. The negative feelings we have for the company are real, but the part of the brain that is able to explain why we feel so negatively toward them has trouble explaining what changed. So we rationalize and point to the most tangible things we can see-size and money. If we, as outsiders, have lost clarity of Wal-Mart's WHY, it's a good sign that the WHY has gone fuzzy inside the company also. If it's not clear on the inside, it will never be clear on the outside. What is clear is that the Wal-Mart of today is not the Wal-Mart that Sam Walton built. So what happened?

It's too easy to say that all they care about is their bottom line. All companies are in business to make money, but being successful at it is not the reason why things change so drastically. That only points to a symptom. Without understanding the reason it happened in the first place, the pattern will repeat for every other company that makes it big. It is not destiny or some mystical business cycle that transforms successful companies into impersonal goliaths. It's people.

Being Successful vs. Feeling Successful

Every year a group of high-performing entrepreneurs get together at MIT's Endicott House just outside Boston. This Gathering of t.i.tans, as they call themselves, is not your average entrepreneurial conference. It's not a boondoggle. There's no golf, there's no spa and there are no expensive dinners. Every year forty to fifty business owners spend four days listening, from early in the morning until well into the evening. An a.s.sortment of guest speakers is invited to present their thinking and ideas, and then there are discussions led by some of the attendees.

I had the honor of attending the Gathering of t.i.tans as a guest a few years ago. I expected it to be another group of entrepreneurs getting together to talk shop. I expected to hear discussions and presentations about maximizing profits and improving systems. But what I witnessed was profoundly different. In fact, it was the complete opposite.

On the first day, someone asked the group how many of them had achieved their financial goals. About 80 percent of the hands went up. I thought that alone was quite impressive. But it was the answer to the next question that was so profound. With their hands still in the air, the group was then asked, "How many of you feel successful?" And 80 percent of the hands went down.

Here was a room full of some of America's brightest entrepreneurs, many of them multimillionaires, some of whom don't need to work anymore if they don't want to, yet most of them still didn't feel like they had succeeded. In fact, many of them reported that they'd lost something since they started their businesses. They reminisced about the days when they didn't have any money and were working out of their bas.e.m.e.nts, trying to get things going. They longed for the feeling they used to have.

These amazing entrepreneurs were at a point in their lives where they realized that their businesses were about much more than selling stuff or making money. They realized the deep personal connection that existed between WHAT they do and WHY they were doing it. This group of entrepreneurs gathered to discuss matters of WHY, and at times it was quite intense.

Unlike the typical Type-A-personality entrepreneurs, the t.i.tans were not there to prove anything to each other. There was a feeling of immense trust rather than ruthless compet.i.tion. And because of this feeling, every member of the group was willing to express vulnerability that they probably rarely let show the rest of the year. Over the course of the event, every person in the room would shed a tear or two at least once.

It doesn't interest me to write about the idea that money doesn't buy happiness, or in this case, the feeling of success. This is neither profound nor a new idea. What does interest me, however, is the transition that these entrepreneurs went through. As their companies grew, and they became more and more successful, what changed?

It is easy to see what they gained over the course of their careers-we can easily count the money, the size of the office, the number of employees, the size of their homes, market share and the number of press clippings. But the thing they had lost is much harder to identify. As their tangible success grew, something more elusive started to dissipate. Every single one of these successful business owners knew WHAT they did. They knew HOW they did it. But for many, they no longer knew WHY.

Achievement vs. Success

For some people, there is an irony to success. Many people who achieve great success don't always feel it. Some who achieve fame talk about the loneliness that often goes with it. That's because success and achievement are not the same thing, yet too often we mistake one for the other. Achievement is something you reach or attain, like a goal. It is something tangible, clearly defined and measurable. Success, in contrast, is a feeling or a state of being. "She feels successful. She is successful," we say, using the verb to be to suggest this state of being. While we can easily lay down a path to reach a goal, laying down a path to reach that intangible feeling of success is more elusive. In my vernacular, achievement comes when you pursue and attain WHAT you want. Success comes when you are clear in pursuit of WHY you want it. The former is motivated by tangible factors while the latter by something deeper in the brain, where we lack the capacity to put those feelings into words.

Success comes when we wake up every day in that never-ending pursuit of WHY we do WHAT we do. Our achievements, WHAT we do, serve as the milestones to indicate we are on the right path. It is not an either/or-we need both. A wise man once said, "Money can't buy happiness, but it pays for the yacht to pull alongside it." There is great truth in this statement. The yacht represents achievement; it is easily seen and, with the right plan, completely attainable. The thing we pull alongside represents that hard-to-define feeling of success. Obviously, this is much harder to see and attain. They are distinct concepts, and sometimes they go together and sometimes they don't. More importantly, some people, while in pursuit of success, simply mistake WHAT they achieve as the final destination. This is the reason they never feel satisfied no matter how big their yacht is, no matter how much they achieve. The false a.s.sumption we often make is that if we simply achieve more, the feeling of success will follow. But it rarely does.

In the course of building a business or a career, we become more confident in WHAT we do. We become greater experts in HOW to do it. With each achievement, the tangible measurements of success and the feeling of progress increase. Life is good. However, for most of us, somewhere in the journey we forget WHY we set out on the journey in the first place. Somewhere in the course of all those achievements an inevitable split happens. This is true for individuals and organizations alike. What the Endicott entrepreneurs experienced as individuals was the same transition that Wal-Mart and other big companies either have gone through or are going through. Because Wal-Mart operates at such an immense scale, the impact of their fuzzy WHY is felt on a greater scale. Employees, customers and the community will feel it also.

Those with an ability to never lose sight of WHY, no matter how little or how much they achieve, can inspire us. Those with the ability to never lose sight of WHY and also achieve the milestones that keep everyone focused in the right direction are the great leaders. For great leaders, The Golden Circle is in balance. They are in pursuit of WHY, they hold themselves accountable to HOW they do it and WHAT they do serves as the tangible proof of what they believe. But most of us, unfortunately, reach a place where WHAT we are doing and WHY we are doing it eventually fall out of balance. We get to a point when WHY and WHAT are not aligned. It is the separation of the tangible and the intangible that marks the split.

12.

SPLIT HAPPENS.

Wal-Mart started small. So did Microsoft. So did Apple. So did General Electric and Ford and almost every other company that made it big. They didn't start by acquisition or spin-off, or achieve ma.s.s scale overnight. Nearly every company or organization starts the same way: with an idea. No matter whether an organization grows to become a multibillion-dollar corporation like Wal-Mart or fails in the first few years, most of them started with a single person or small group of people who had an idea. Even the United States of America started the same way.

At the beginning, ideas are fueled by pa.s.sion-that very compelling emotion that causes us to do quite irrational things. That pa.s.sion drives many people to make sacrifices so that a cause bigger than themselves can be brought to life. Some drop out of school or quit a perfectly good job with a good salary and benefits to try to go it alone. Some work extraordinarily long hours without a second thought, sometimes sacrificing the stability of their relationships or even their personal health. This pa.s.sion is so intoxicating and exciting that it can affect others as well. Inspired by the founder's vision, many early employees demonstrate cla.s.sic early-adopter behavior. Relying on their gut, these first employees also quit their perfectly good jobs and accept lower salaries to join an organization with a 90 percent statistical chance of failing. But the statistics don't matter; pa.s.sion and optimism reign and energy is high. Like all early adopters, the behavior of those who join early says more about them than it does about the company's prospects.

The reason so many small businesses fail, however, is because pa.s.sion alone can't cut it. For pa.s.sion to survive, it needs structure. A WHY without the HOWs, pa.s.sion without structure, has a very high probability of failure. Remember the dot-com boom? Lots of pa.s.sion, but not so much structure. The t.i.tans at Endicott House, however, did not face this problem. They knew how to build the systems and processes to see their companies grow. They are among the statistical 10 percent of small businesses that didn't fail in their first three years. In fact, many of them went on to do quite well. Their challenge was different. Pa.s.sion may need structure to survive, but for structure to grow, it needs pa.s.sion.

This is what I witnessed at the Gathering of t.i.tans: I saw a room full of people with pa.s.sion enough to start businesses, and with knowledge enough to build the systems and structures to survive and even do very well. But having spent so many years focused on converting a vision into a viable business, many started to fixate on WHAT the organization did or HOW to do it. Poring over financials or some other easily measured result, and fixating on HOW they were to achieve those tangible results, they stopped focusing on WHY they started the business in the first place. This is also what has happened at Wal-Mart. A company obsessed with serving the community became obsessed with achieving its goals.

Like Wal-Mart, the Endicott entrepreneurs used to think, act and communicate from the inside out of The Golden Circle-from WHY to WHAT. But as they grew more successful, the process reversed. WHAT now comes first and all their systems and processes are in pursuit of those tangible results. The reason the change happened is simple-they suffered a split and their WHY went fuzzy.

The single greatest challenge any organization will face is . . . success. When the company is small, the founder will rely on his gut to make all the major decisions. From marketing to product, from strategy to tactics, hiring and firing, the decisions the founder makes will, if he trusts his gut, feel right. But as the organization grows, as it becomes more successful, it becomes physically impossible for one person to make every major decision. Not only must others be trusted and relied upon to make big decisions, but those people will also start making hiring choices. And slowly but surely, as the megaphone grows, the clarity of WHY starts to dilute.

Whereas gut was the filter for early decisions, rational cases and empirical data often serve as the sole basis for later decisions. For all organizations that go through the split, they are no longer inspired by a cause greater than themselves. They simply come to work, manage systems and work to reach certain preset goals. There is no longer a cathedral to build. The pa.s.sion is gone and inspiration is at a minimum. At that point, for most who show up every day what they do is just a job. If this is how the people on the inside feel, imagine how those on the outside feel. It is no wonder that manipulations start to dominate not only how the company sells its wares, but even how they retain employees. Bonuses, promotions and other enticements, even instilling fear in people, become the only way to hold on to talent. That's hardly inspiring.

This diagram depicts the life of an organization. The top line represents the growth of WHAT the organization does. For a company, that measurement is usually money-profits, revenues, EBITA, share price or growth in market share. But the metric can be anything, depending on what the organization does. If the organization rescues lost puppies, then the metric would be the number of puppies successfully rescued. It is inherently simple to measure the growth of WHAT an organization does. WHATs, after all, are tangible and easy to count.

The second line represents the WHY, the clarity of the founding purpose, cause or belief. The goal is to ensure that as the measurement of WHAT grows, the clarity of the WHY stays closely aligned. Put another way, as the volume of the megaphone increases, the message traveling through it must stay clear.

The volume of the megaphone comes solely from growth of WHAT. As this metric grows, any company can become a "leading" company. But it is the ability to inspire, to maintain clarity of WHY, that gives only a few people and organizations the ability to lead. The moment at which the clarity of WHY starts to go fuzzy is the split. At this point organizations may be loud, but they are no longer clear.

When organizations are small, WHAT they do and WHY they do it are in close parallel. Born out of the personality of the founder, it is relatively easy for early employees to "get it." Clarity of WHY is understood because the source of pa.s.sion is near-in fact it physically comes to work every day. In most small businesses all the employees are all crammed into the same room and socialize together. Simply being around a charismatic founder allows that feeling of being a part of something special to flourish. Although there may be some efficiencies to be gained, for small businesses that are perfectly comfortable staying small, the need to articulate the WHY is not as important. For organizations that want to pa.s.s the School Bus Test, to become billion-dollar organizations or work at a scale large enough to shift markets or society, the need to manage through the split is paramount.

The School Bus Test is a simple metaphor. If a founder or leader of an organization were to be hit by a school bus, would the organization continue to thrive at the same pace without them at the helm? So many organizations are built on the force of a single personality that their departure can cause significant disruption. The question isn't if it happens-all founders eventually leave or die-it's just a question of when and how prepared the organization is for the inevitable departure. The challenge isn't to cling to the leader, it's to find effective ways to keep the founding vision alive forever.

To pa.s.s the School Bus Test, for an organization to continue to inspire and lead beyond the lifetime of its founder, the founder's WHY must be extracted and integrated into the culture of the company. What's more, a strong succession plan should aim to find a leader inspired by the founding cause and ready to lead it into the next generation. Future leaders and employees alike must be inspired by something bigger than the force of personality of the founder and must see beyond profit and shareholder value alone.

Microsoft has experienced a split, but is not so far down the line that it can't be put back on track. There was a time not too long ago that people at Microsoft showed up at work every day to change the world. And they did. What Microsoft achieved, putting a PC on every desk, dramatically changed the way we live. But then their WHY went fuzzy. Few people at the company today are instructed to do everything they can to help people be more productive so that they can achieve their greatest potential. Instead, Microsoft became just a software company.

If you visit Microsoft's headquarters in Redmond, Washington, you will find that although their WHY has gone fuzzy, it is not lost. That sense of a cause, that desire to change the world again, is still there, but it has become unfocused, wrapped up in HOW and WHAT they do. Microsoft has a remarkable opportunity to clarify their WHY and regain the inspiration that took them to where they are today. If they do not, if all they do is manage the WHAT and continue to ignore the WHY, they will end up looking like America Online, a company so far past the split that their WHY is indeed lost. There is barely a hint of the original WHY left anymore.

America Online used to inspire. Like Google today, it was the hot company to work for. People clamored to move to Virginia to work for this amazing company that was changing the rules of business. And it was true that, like all inspiring companies, AOL set in motion changes that profoundly altered how we do almost everything. They inspired a nation to get online. Their cause was clear and their decisions were governed by their WHY. Their goal was to get more people online, even if their decisions in pursuit of that goal wreaked havoc on their business in the short term. With their WHY in focus, AOL pulled ahead of their compet.i.tion by deciding to change from hourly pricing for Internet access to unlimited monthly pricing, a decision that created so much traffic it shut down their servers. Given the impact, the decision was neither practical nor rational, but it was the right choice to help bring their cause to life. That their systems shut down with the additional traffic only pushed them to work harder to cope with it, to ensure that America could, in fact, get and stay online.

In those days, having an AOL e-mail address was a point of pride-a sign of being one of those who was a part of the Internet revolution. These days, still having an AOL e-mail address is a symbol of having been left behind. That the meaning of something as simple as @aol.com has changed so dramatically is additional proof that the company's cause has long since departed. Absent a clear WHY, size and momentum are all AOL has to keep them going. The company is not inspiring anymore, not to those who work there and not to those on the outside. We don't talk about them like we used to and we certainly don't feel the same way about them either. We don't compare them to Google or Facebook or any of the other industry-changing companies of today. Like a ma.s.sive freight train with brakes applied, it will still take miles for this train to come to a complete stop. It's simple physics. At best AOL's size will help them putter along, but without a more compelling purpose, cause or belief, the company is simply a collection of stuff. It will probably end up being chopped up and sold off for sc.r.a.p (technology or customers), which is a sad reality considering how inspiring AOL used to be.

It is not a coincidence that successful entrepreneurs long for the early days. It is no accident that big companies talk about a "return to basics." What they are alluding to is a time before the split. And they would be right. They do indeed need to return to a time when WHAT they did was in perfect parallel to WHY they did it. If they continue down the path of focusing on their growth of WHAT at the expense of WHY-more volume and less clarity-their ability to thrive and inspire for years to come is dubious at best. Companies like Wal-Mart, Microsoft, Starbucks, the Gap, Dell and so many others that used to be special have all gone through a split. If they cannot recapture their WHY and reinspire those inside and outside their organization, every one of them will end up looking more like AOL than the companies they were.

What Gets Measured, Gets Done

In the fall of her freshman year in college, Christina Harbridge set out to find a part-time job. Intrigued by the prospect of working in the antiques business, she answered a newspaper ad in Sacramento to do office work for a "collector." Harbridge soon found out, however, that the job was filing papers for a collections agent, and even then she wasn't entirely sure what that meant.

The collections office consisted of a huge room with dozens of phone stations, each staffed by a debt collector making call after call to a long list of businesses and individuals who owed money. The setup of the room meant there was no privacy-everyone could hear everyone else's calls. Harbridge was immediately taken by the harshness of the tone that all the collectors used with those from whom they aimed to collect unpaid debts. "They would hound them, and practically threaten them," she said. "They would do anything it took to get information from them."

Harbridge recognized that the owner of the company and the collectors were all kind, gracious people. They helped each other out, listened to each other's problems and even joined together to sponsor a homeless family during the holidays. But when they were on the phone to collect a debt, these same people turned pa.s.sive-aggressive, rude and often mean. It's not because they were bad people, it's because they were incentivized to be that way.

Their officious behavior made perfect sense. "What gets measured gets done," as well-known sales coach Jack Daly says. And in the world of debt collecting, the callers were given bonuses based on how much money they collected. This has resulted in an entire industry that threatens, badgers, hounds and provokes. It didn't take long until Harbridge found herself adopting the same att.i.tude whenever she talked with debtors. "I began treating people on the phone the way everybody else in the office treated them," she said.

Feeling like WHAT she was doing was completely out of balance with her WHY, Harbridge decided there had to be another way. "I got it in my head that I was going to start an agency that collected by being nice," she said. People in the collections business thought Harbridge naive, if not crazy. And maybe she was.

In 1993, Harbridge moved to San Francisco and started her own collections firm, Bridgeport Financial, steeped in the belief that agents would have more success treating people with respect than badgering them. Harbridge built her company on her WHY-that everyone has a story and everyone deserves to be listened to. Her approach was to have her agents try to establish rapport with the debtor on the other end of the phone in the course of a three-minute conversation. The goal was to learn everything they could about the person's circ.u.mstances: Did they have the means to pay the debt? Would they honor a payment plan? Was the reason for the failure to pay reflective of a short-term situation? "We would get people to tell us the truth," she said. "Sure, we had a legal department, but we tried to avoid using it." Harbridge knew, however, that no matter her intentions, if she measured the results the same way as others, the same awful behavior would result. So she came up with an entirely new way to incentivize her people. She found a way to measure WHY.

At Bridgeport Financial, bonuses were not given for the amount of money that was collected; they were given based on how many "thank you" cards her agents sent out. This is harder than it sounds. Sending out a card thanking someone for the time they spent talking on the phone requires a few things. First, Harbridge had to hire people who believed what she believed. She had to hire good fits. If her employees didn't believe that everyone deserves to be listened to, it wouldn't work. Only good-fit hires would be capable of creating an environment on the telephone that would actually warrant sending a thank-you card, even though the purpose of the call was to ask for money. Harbridge measured WHY her company existed, not WHAT they did, and the result was a culture in which compa.s.sion was valued above all.

But what about the other results? What about her financial results, the ones most businesses pursue first? Bridgeport Financial collected 300 percent more than the industry average. What's more, most of the people and companies who were initially being pursued ended up doing more business with the original company that sent the collections agency after them in the first place. This is almost unprecedented in the collections industry.

Harbridge's business succeeded not just because she knew WHY she was doing what she was doing, but because she found a way to measure the WHY. The company's growth was loud and her cause was clear. She started with WHY and the rest followed.

Most organizations today use very clear metrics to track the progress and growth of WHAT they do-usually it's money. Unfortunately, we have very poor measurements to ensure that a WHY stays clear. Dwayne Honore has for the past ten years run his own commercial construction company in Baton Rouge, Louisiana, a trade he learned from his father. A leader with a deep sense of purpose, he devised some years ago a brilliant system to ensure that his values are reinforced in his company's culture. He figured out how to measure something most people can only pay lip service to: work-life balance. Honore believes that people should not spend all their time at work, but rather they should work to spend more of their time with their families.

Every employee at Honore Construction is required to clock in in the morning and clock out in the evening. But there's a catch. They must clock in between 8:008:30 a.m. and out by 5:005:30 P.M. Stay any later and they are taken out of a bonus pool. Because employees know they have to leave by 5:30 p.m., wasted time has dropped to a minimum. Productivity is high and turnover is low. Consider how much you get done the day before you go on vacation. Now imagine every day is like that. That's what Dwayne Honore figured out how to do. Because he figured out how to measure a value he holds dear, that value is embraced. Most importantly, because Honore's actions pa.s.s the Celery Test, others can clearly see what he believes.

Money is a perfectly legitimate measurement of goods sold or services rendered. But it is no calculation of value. Just because somebody makes a lot of money does not mean that he necessarily provides a lot of value. Likewise, just because somebody makes a little money does not necessarily mean he provides only a little value. Simply by measuring the number of goods sold or the money brought in is no indication of value. Value is a feeling, not a calculation. It is perception. One could argue that a product with more bells and whistles that sells for less is the greater value. But by whose standard?

My uncle used to make tennis rackets. His rackets were made in the exact same factory as a name-brand racket. They were made of the same material on the same machine. The only difference was that when my uncle's rackets came off the a.s.sembly line, they didn't put the well-known brand logo on the product. My uncle's rackets sold for less money, in the same big-box retailer, next to the name-brand rackets. Month after month, the name-brand rackets outsold the generic-brand ones. Why? Because people perceived greater value from the name-brand rackets and felt just fine paying a premium for that feeling. On a strictly rational scale, the generic rackets offered better value. But again, value is a perception, not a calculation, which is the reason companies make such a big deal about investing in their brand. But a strong brand, like all other intangible factors that contribute to the perception of value, starts with a clear sense of WHY.

If those outside the megaphone share your WHY and if you are able to clearly communicate that belief in everything you say and do, trust emerges and value is perceived. When that happens, loyal buyers will always rationalize the premium they pay or the inconvenience they suffer to get that feeling. To them, the sacrifice of time or money is worth it. They will try to explain that their feeling of value comes from quality or features or some other easy-to-point-to element, but it doesn't. Those are external factors and the feeling they get comes completely from inside them. When people can point to a company and clearly articulate what the company believes and use words unrelated to price, quality, service and features, that is proof the company has successfully navigated the split. When people describe the value they perceive with visceral, excited words like "love," that is a sure sign that a clear sense of WHY exists.

Good Successions Keep the WHY Alive

There were three words missing from Bill Gates's goodbye speech when he officially left Microsoft in June 2008. They are three words he probably doesn't even realize need to be there.

"I'll be back."

Though Gates abdicated his role as CEO of Microsoft to Steve Ballmer in 2000 to lend more time and energy to the Bill and Melinda Gates Foundation, he still maintained a role and a presence at the Microsoft headquarters in Redmond, Washington. His plan was always to completely leave the company in the care of others, but like a lot of founders, Gates forgot to do one thing that would allow his plan to work. This one oversight could have a devastating impact on Microsoft and may even require him to come back someday to right the ship he built.

Bill Gates is special. Not just because of his brain or his management style. Though important, those two things alone are not the formula for building a $60 billion corporation from scratch. Like all visionary leaders, Bill Gates is special because he embodies what he believes. He is the personification of Microsoft's WHY. And for that reason, he serves as a physical beacon, a reminder of WHY everyone comes to work.

When Gates founded Microsoft with Paul Allen in 1975, he did so to advance a higher cause: if you give people the right tools, and make them more productive, then everyone, no matter their lot in life, will have an opportunity to achieve their real potential. "A PC in every home and on every desk," he envisioned; remarkable from a company that didn't even make PCs. He saw the PC as the great equalizer. Microsoft's most successful software, Windows, allowed anyone to have access to powerful technology. Tools like Word, Excel and PowerPoint gave everyone the power to realize the promise of the new technology-to become more efficient and productive. Small businesses, for example, could look and act like big businesses. Microsoft's software helped Gates advance his cause to empower the "everyman."

Make no mistake, Microsoft has done more to change the world than Apple. Though we are drawn to Apple's well-deserved reputation for innovation and challenging the business models of more than one industry, it is Microsoft that was responsible for the advancement of the personal computer. Gates put a PC on every desk and in doing so he changed the world. As the physical embodiment of the company's WHY, the "everyman" who fulfilled an amazing potential, what happens now that he's gone?

Gates himself has always held that he receives a "disproportionate" amount of attention for his role at Microsoft, much of it, of course, due to his exceptional wealth. Like all inspired leaders, he recognizes that his role is to lead the cause, but it is others who will be physically responsible for bringing that cause to life. Martin Luther King Jr. could not have changed America walking across a bridge in Selma, Alabama, with five prominent civil rights leaders. It took the thousands of people marching behind them to spur change. Gates recognizes the need for people to produce real change, but he neglected to remember that any effective movement, social or business, needs a leader to march in the front, preaching the vision and reminding people WHY they showed up in the first place. Though King needed to cross the bridge from Selma on his march to Montgomery, it was what it meant to cross the bridge that mattered. Likewise in business, though profit and shareholder value are valid and essential destinations, they do not inspire people to come to work.

Although Microsoft went through the split years ago, changing from a company that intended to change the world into a company that makes software, having Gates hanging around helped Microsoft maintain at least a loose sense of WHY they existed. With Gates gone, Microsoft does not have sufficient systems to measure and preach their WHY anymore. This is an issue that will have an exponential impact as time pa.s.ses.

Such a departure as Gates's is not without precedent among companies with equally visionary leaders. Steve Jobs, the physical embodiment of the rabble-rousing revolutionary, a man who also personifies his company's WHY, left Apple in 1985 after a legendary power struggle with Apple's president, John Sculley, and the Apple board of directors. The impact on Apple was profound.

Originally hired by Jobs in 1983, Sculley was a perfectly capable executive with a proven track record. He know WHAT to do and HOW to do things. He was considered one of the most talented marketing executives around, having risen quickly through the ranks of PepsiCo. At Pepsi, he created the wildly successful Pepsi Challenge taste test advertising campaign, leading Pepsi to overtake Coca-Cola for the first time. But the problem was, Sculley was a bad fit at Apple. He ran the company as a business and was not there to lead the cause.

It is worth considering how such a bad fit as Sculley even got the job at Apple in the first place. Simple-he was manipulated. Sculley did not approach Jobs and ask to be a part of Apple's cause. The way the real story unfolded made the fallout almost predictable. Jobs knew he needed help. He knew he needed a HOW guy to help him scale his vision. He approached Sculley, a man with a solid resume, and said, "Do you want to sell sugar water your whole life or do you want to change the world?" Playing off Sculley's ego, aspirations and fears, Jobs completed a perfectly executed manipulation. And with it, Jobs was ousted from his own company a few years later.

Apple thrived on Steve Jobs's fumes for a few years as businesses started buying up Macintoshes and software developers continued to create new software. But it wouldn't be long until the company would begin to falter. Apple just wasn't what it used to be. It had gone through the split and ignored it. The WHY was getting fuzzier and fuzzier with each pa.s.sing year. The inspiration was gone. Literally.

With a capable executive like Sculley running the business, there was no one to lead the cause. New products would be "less revolutionary and more evolutionary," reported FORTUNE magazine at the time, "some people might even call them dull." Weary of Apple's "right brain" ways, Sculley reorganized the company repeatedly, each time trying to get back what Apple clearly had lost. He brought in a new executive staff to help. But all they were doing was trying to manage HOW the company worked when it was the WHY that needed attention. Needless to say, morale was dismal. It wasn't until Jobs returned in 1997 that everyone inside and outside the company was reminded WHY Apple existed. With clarity back, the company quickly reestablished its power for innovation, for thinking different and, once again, for redefining industries. With Jobs at the helm again, the culture for challenging the status quo, for empowering the individual, returned. Every decision was filtered through the WHY, and it worked. Like most inspiring leaders, Jobs trusted his gut over outside advice. He was regularly criticized for not making ma.s.s-market decisions, such as letting people clone the Mac. He couldn't; those actions violated what he believed. They failed the Celery Test.

When the person who personifies the WHY departs without clearly articulating WHY the company was founded in the first place, they leave no clear cause for their successor to lead. The new CEO will come aboard to run the company and will focus attention on the growth of WHAT with little attention to WHY. Worse, they may try to implement their own vision without considering the cause that originally inspired most people to show up in the first place. In these cases, the leader can work against the culture of the company instead of leading or building upon it. The result is diminished morale, ma.s.s exodus, poor performance and a slow and steady transition to a culture of mistrust and every-man-for-himself.

It happened at Dell. Michael Dell, too, had a cause when he started his company. From the start, he focused on efficiency as a way of getting more computing power into more hands. Unfortunately, it was a cause that he too forgot, and then didn't communicate well enough before he stepped down as CEO of Dell Corp. in July 2004. After the company started to weaken-customer service, for one, plummeted-he came back in less than three years.

Michael Dell recognized that without him present to keep energy focused on the reason Dell Corp. was founded, the company became more obsessed with WHAT at the expense of WHY. "The company was too focused on the short term, and the balance of priorities was way too leaning toward things that deliver short-term results-that was the major root cause," Dell told the New York Times in September 2007. The company had in fact become so dysfunctional that some managers were compelled to falsify earnings reports between 2003 and 2006 in order to meet sales targets, suggesting a corporate culture that put undue pressure on managers to meet bottom-line targets. In the meantime, the company had missed significant market shifts, most notably the potential of the consumer market, and lost its edge with component suppliers as well. And in 2006, Hewlett-Packard swept past Dell as the largest seller of PCs worldwide. Dell had gone through the split and failed to recognize the reason it wasn't the company it used to be.

Starbucks is another good example. In 2000, Howard Schultz resigned as CEO of Starbucks, and for the first time in its history and despite 50 million customers per week, the company started to crack.

If you look back at the history of Starbucks, it thrived not because of its coffee but because of the experience it offered to customers. It was Schultz who brought that WHY to the company when he arrived in 1982, ten years after Gordon Bowker, Jerry Baldwin and Zev Siegl first started selling coffee beans in Seattle. In the early days it was about the coffee. Schultz, frustrated that the founders of Starbucks couldn't see the larger vision, set out to put the company on a new course, the course that ultimately turned Starbucks into the company we know today. Schultz had been enamored of the espres...o...b..rs of Italy, and it was his vision of building a comfortable environment between work and home, the "third s.p.a.ce," as he called it, that allowed Starbucks to single-handedly create a coffee-shop culture in the United States that had until then only existed on college campuses.

That was the time when Starbucks stood for something. It reflected an underlying belief about the world. It was that idea that people bought, not the coffee. And it was inspiring. But Starbucks, like so many before it, went through the inevitable split. They, too, forgot about WHY the company was founded and started focusing on the results and the products. There was a time when Starbucks offered the option to sip your coffee out of a ceramic cup and eat your Danish off a ceramic plate. Two perfect details that helped bring the company's belief to life in the place between work and home. But ceramic crockery is expensive to maintain and Starbucks did away with it, favoring the more efficient paper cups. Though it saved money, it came at a cost: the erosion of trust. Nothing says to a customer "We love you, now get out" like a paper cup. It was no longer about the third s.p.a.ce. It had become about the coffee. Starbucks's WHY was going fuzzy. Thankfully, Schultz was there, the physical embodiment of the WHY, to remind people of the higher cause. But in 2000 he left, and things got worse.