Fran Tarkenton: Knowledgeware’s $60 Million Champion

Francis Asbury Tarkenton was born on February 3, 1940 in Richmond, Virginia. Although many know about Tarkenton’s records as a football player, few know about his records as a businessman and supersalesman. Endowed with an exceptional talent for seizing business opportunities, he started a management consulting firm in 1970 in Atlanta. He later founded an insurance brokerage and invested in real estate and a variety of other businesses. By 1985, Tarkenton’s businesses generated sales of about $11 million. The following year, he invested $3 million in a software company with a history of heavy losses, but great future potential. Within two years under his leadership, the company, Knowledgeware, increased sales and turned a profit. He soon took the company public and forged a partnership with IBM while sales climbed to $58 million by the end of fiscal 1990. This year’s sales are expected to hit $120 million. At the time of this writing, Tarkenton’s shares of Knowledgeware were worth over $60 million. His company’s record of doubling sales every year pushed the value of his original investment beyond 1,000 percent in less than six years! In this candid interview with Personal Selling Power, Tarkenton shares his innovative ideas for selling, managing, running a fast growing business and dealing with the high and low points of life.

PSP: I’ve watched Knowledgeware’s stock over the past few weeks and have seen your stock go up and up.

Tarkenton: I’ve operated other businesses and sold them, but this business has been a big home run for us. It is rather amazing. Yesterday our stock closed at $33.50 per share. If you multiply that times 12.5 million shares, you get the market value of the company which is somewhere in excess of $418 million.

PSP: And you own 13 percent, that makes your shares worth $54 million. (Note: Each time Knowledgeware’s shares go up one point, Tarkenton’s stake goes up $1.65 million.)

Tarkenton: That’s correct.

PSP: How many salespeople do you have working for your company?

Tarkenton: We have a domestic sales force of 100 direct salespeople across the country plus 100 systems engineers. In addition, there are 75 distributor salespeople in international sales. Financial analysts estimate that we’ll do about $120 million in sales this year. We’ve doubled our sales every year for the last three years.

PSP: How many countries do you sell to worldwide?

Tarkenton: We export to about 35 countries. Twenty-four percent of our revenues are from international sales. A company with a growth rate like ours is supposed to burn a lot of capital. The best part of our business is that we have no debt. We now have some $42 million in cash which is about $10 million more than when we went public in October 1989.

PSP: When you merged with Knowledgeware in December 1986, the company had a loss of about $2.5 million, then you lost another $2.5 million in 1987. How did you get other people to buy the idea of investing in this company?

Tarkenton: When you are an ex-football player and a television personality, it does not matter how much business experience you have. Bankers or investors won’t trust you with their money. I could not get any capital funding for this idea. So I put $3 million of my own cash into the business and started to run it. This is a company that started from scratch and now we have over 800 people working here.

PSP: How did you approach the investment decision? Did you lose sleep over it?

Tarkenton: I am not a gambler. Before I make a big decision, I get as much information as is humanly possible. I talk to a great number of people from a variety of backgrounds and see if there is a market for the products that we are building. In this case, the marketplace was telling me that there is a growing need for these products and we would have a good chance to sell them at a profit. Since I had only three other salespeople at the time, I went out on the road selling the product. This proved to be fortunate because I quickly realized that our product offering was not as complete as the market needed and I also understood that we were somewhat ahead of the market. Selling the product gave me a chance to stay close to the customer.

PSP: What if your investment had failed?

Tarkenton: I did not want to jeopardize the livelihood of my family. I did not mortgage my house, I did not take out a loan. I knew that my four other businesses would have carried me to absorb the loss. There is a difference between taking a risk and gambling. I didn’t gamble on this idea because a loss would not have affected my lifestyle.

PSP: What do you see as the most important challenge in marketing software products?

Tarkenton: Many times a software company is started by technically-oriented people. These people have their own view of what the product should be like. Then they go out and build the product according to their own vision. They often fail to talk to the customer and the marketing people to find out what the market really wants. As a result, the company fails. In our company, the Senior Vice President of Marketing sits right next door to the Senior Vice President of Research and Development. We do not develop a product unless we’ve tested the viability of that product in the marketplace.

PSP: When you are in a rapid growth pattern like you are now, do you find it harder to make decisions?

Tarkenton: The thing I have learned over the years of running companies is that there is no such thing as a safe decision. Why? Because we never know what tomorrow is going to be. A good decision demands preparation. I don’t believe that anybody has a franchise on intelligence or on good ideas. We have to constantly test ourselves because of our own prejudices. That’s why we discuss every major decision as a group to benefit from the synergy.

PSP: In your book, How To Motivate People, you talked about the “synergy effect.” How do you apply that today as the CEO?

Tarkenton: We’ve taken this to several levels beyond. We built a uniquely different organization based on involvement. I believe that the essence of leadership, whether you are a sales manager, a marketing manager or the CEO, is to provide an environment in which everybody is involved, so that everybody has an ownership of their jobs. Everybody at Knowledgeware is paid to be creative, innovative and involved in helping one another. We want people to make decisions and to work together in a way that makes their teammates better. In addition, the leader has to take a backseat role, so that the people who work here at Knowledgeware realize that they did the job.

PSP: So you reward the performer, not the leader.

Tarkenton: Exactly. I like telling a story of my friend Sam Walton. He is one of the truly great business people in American history. In 1961 he had no business, last year, he did $30 billion in sales. When I asked him how he did it, he said, “I did nothing. My people did it.” You don’t see Sam Walton stand up and say, “Look at me, I am the leader, I am the one who turned this thing around,” like Lee Iacocca does.

PSP: So you see the role of the leader as the facilitator or encourager.

Tarkenton: Right. My job as a leader is to empower and enable the rest of these people to perform at high levels. That means I’ve got to trust them. That means I have to give them the responsibility to make decisions. In pro football there is probably not one quarterback who calls his own plays. Why? Because the coach doesn’t trust the quarterback to call the plays on the field. When I played football, I got everyone involved. When I am deciding what is in the sales or marketing plan I am telling you that I don’t trust you. I think that the major players in corporate America have talked about building a customer-driven, team-oriented business. But most of them don’t walk their talk. In many cases, there has been empty rhetoric.

PSP: How is it different in your company?

Tarkenton: We start with a different philosophy of marketing. We know that our customer is our most important asset. Healthy growth comes from the reputation we build of how we take care of our customers. Salespeople often think that their biggest job is to close a sale. That’s not the ultimate thing. The ultimate goal of a salesperson is to create a happy customer. We found that happy customers will multiply your sales faster than any other marketing tool can. Our single focus, from the janitor to the CEO, every hour and every day, is to make the customer happy. Our second focus is on the people who are going to serve that customer. We give them complete ownership of their jobs. We enable, empower and involve them.

The third focus is on teamwork. We don’t want a step-on-other-people’s-heads kind of competition, but we encourage an environment where everyone contributes to making their teammates better. Everything we do here is to reinforce those three things.

PSP: Do your employees get a share of the company’s profits?

Tarkenton: Every person in this company below the managerial level has received about $5,600 in profit-sharing every year for the last two years. This includes everyone — the janitors, the computer operators, the secretaries — everyone below management level. Seventy percent of the income of the top five executives is contingent on the profitability of this company. In addition we have a series of recognition programs. For example, we send every salesperson who hits 100 percent of quota to Hawaii for five days. They can take their spouse, or significant other, at our expense. That’s about a $10,000 cost to us. In addition, every person who works in our company has the opportunity to participate in the Sterling Club as a reward for making the customer happy. These are the people who help create a happy customer, like the people in customer service, marketing, finance and administration, and research and development.

We don’t send them out to the lake for an afternoon picnic, we send them to Hawaii just like we send our salespeople.

PSP: How do the members of the Sterling Club qualify for this incentive?

Tarkenton: We look for specific examples where these people have made our customers happy. We look for instances where someone did something beyond the call of duty to satisfy a customer. We also look for examples where a person helped one of their co-workers succeed in his job. Last year, 51 people qualified for the Sterling Club and they could take their spouses to Hawaii. Three of them were Moses Miles, a computer room operator; Skip Sells, from the shipping and receiving department; and Nathalie Campbell, who works as a receptionist. Believe me, the word spreads quickly when we practice what we preach about teams, enabling, empowering and making customers happy. We want to reward and reinforce the kind of behavior that helps other people succeed and makes customers happy. In essence, we want 800 people to pull together as a team; we want to think every day of how we can serve our customers better. If we can do that, we’re going to be more competitive and more profitable than any other company in this field.

PSP: In your book you wrote, “Everybody starts out with great ideas, and great principles, and great management, and we ask our managers to be winners and expect them to develop winning teams, but we train them all along the way to be wimps.” How do you avoid that at Knowledgeware?

Tarkenton: Many corporate executives are confused about their roles as the leader. Some still think that a leader has to be very tough, very strong and powerful. Someone who can make people shake in their boots. They think that fear is going to make people more loyal and dependent. I don’t want our people to grow dependent on me to make decisions. I want them to work in independent teams and come up with their own solutions. They don’t have to come and ask me or their superior to make decisions for them.

PSP: Who decides the company’s mission?

Tarkenton: We all do. Once a quarter we gather all of our people together and we discuss the status of our company. Our managers are in constant communication with every level. They get input from their teams and they continually ask questions and listen. Eventually, their vision gets to the five top managers who get all that information together so we can make a more thoughtful consensus decision of where we are going.

PSP: How did you learn these techniques for motivating employees?

Tarkenton: I’ve consulted with businesses for 21 years and I’ve learned a great deal from dealing with hundreds of companies. I learned more from their mistakes than from what they were doing right. I’ve played sports since I was six years old and have learned from a great number of coaches. Most coaches are dictatorial and authoritarian. Bud Grant wasn’t. He probably had the greatest influence on my life because of his leadership. He enabled his own coaches and enabled the players by giving them the ball to play with. He trusted his coaches and he trusted the players because he trusted himself.

PSP: Do you think there’s a relationship between the trust a person has in himself or herself and the trust he is willing to invest in other people?

Tarkenton: Absolutely.

PSP: Can you name business leaders that practice this style of managing?

Tarkenton: Obviously there is Sam Walton of Wal-Mart, then Jack Welch, chairman of General Electric, and the third would be Don Keogh, the president and COO of Coca-Cola. I’ve served on the board of Coca-Cola Enterprises and was very impressed with his style. There is also John Akers, the chairman of IBM. Many people don’t realize that last year IBM made more money than any other company in the world. When you’re already successful, as they are, it is even harder to be willing to still do things better.

PSP: What surprised me when I read your annual report was that your salary was only the third highest in the company. Why is it that you didn’t get the top salary?

Tarkenton: When I brought these two people into the company, we were struggling. They didn’t have a lot of money, but I had a big equity share. They were working for a salary and they were very important to me, so I paid them more than I received.

PSP: You said earlier that the leader should take a backseat role. It sounds like you walk your talk.

Tarkenton: I remember Bob Woodruff, the founder and former chairman of the Coca-Cola company, often said, “It’s amazing what you can accomplish in life when you don’t care who gets the credit.” We tend to forget that.

PSP: How do you attract good salespeople to your company?

Tarkenton: We have no problem finding good people. We are attracting the best and brightest people in the computer software industry simply because of the company culture we’ve created. They have more freedom here to do their own thing, they can make more money here than somewhere else and they enjoy working in a caring, loving place. Let me give you a very small example. We have many people working here who have or have had relatives over in the Persian Gulf. We know that communication with their loved ones is critical and sometimes very difficult to arrange. We have a policy where the relatives of our employees can call over here collect at any time of the business day or even at night to talk to their family member. We don’t just say “we care about our employees,” we practice what we preach. I am not going to tell you that the job of doubling your work force every year is not difficult. It is a tough challenge. But we have a large number of people who want to come to work here.

PSP: How do you see the dangers of a growing business? For example, People-Express had a very participatory management with the ticket agents handling the luggage. They were very customer-oriented, but their success was very short-lived.

Tarkenton: Well, there are a number of reasons why businesses fail. One key reason is the lack of financial resources. I don’t believe in debt. We are running a company that is financially very conservative. We’re very profit oriented. Another reason for failure is that arrogance kills. When you keep telling the world that you are great and that you’ve got all the answers, then your company is on its way to demise. The third key is failing to grow on the people side of the business. If we ever stop thinking of better ways to reinforce the qualities that we want, like teamwork, enabling people, serving our customers, then we’re on our way down. You’ve got to watch the sensors that are built into your business and ask yourself every day, “How can we improve on the fundamentals of our business?” That’s how I come to work every day.

PSP: How many hours do you work a day?

Tarkenton: Every hour I’m not sleeping, I’m working. I’m thinking. Let me explain that. I don’t spend every hour of the day at this desk. I don’t think you have to be at your desk in your office to be working. I may be on the golf course. I may be on a trip with friends. I may be anywhere. But that’s all part of the process of productive thinking. I believe that the time one spends away from work is just as important as the time spent at work.

PSP: Where did you learn how to sell?

Tarkenton: I made my first sale when I was seven years old. I worked in Washington, D.C. at the Safeway store on Saturday mornings. In those days people walked to the grocery store. When the ladies came out with their bags, I would get their bags into my little wagon and they’d give me a nickel or a dime to take their grocery bags home. That was my first sales job. When I was nine, I delivered newspapers for the Washington Times Herald. We’d have sales campaigns where we would knock on people’s doors and try to get them to subscribe to the newspaper. When I was in college, I sold insurance for the Franklin Life Insurance and one summer I became the leading salesperson for the entire state of Georgia. When I started playing football at the age of 20 I made $12,500 a year, and during the off-season I worked for Wilson Trucking out of Sioux Falls in South Dakota for $600 a month. My job was to go out and knock on doors and persuade shipping clerks to ship their freight with us. Later I went to work for the Holden Printing Company in Minneapolis selling commercial printing. Then I came back to Georgia and worked for Coca-Cola for a few years before I started my own business in 1969.

PSP: You don’t have any vices, you don’t smoke, you don’t drink.

Tarkenton: I don’t smoke but I chewed tobacco for a long time. I stopped that about a year and a half ago. That was the most difficult thing that I’ve ever had to do. I chewed for a long time. I was addicted to it. I just finally decided that enough was enough. I stopped cold turkey.

PSP: What are some of your big regrets or disappointments in life?

Tarkenton: My marriage. I would have liked to have been able to make it work. We had a wonderful, 20-year marriage. If that could have been forever, it would have been nice, but it wasn’t. Or the Super Bowl. We lost three of them. I would have loved to be on a winning Super Bowl team.

PSP: I read that when you were out playing football, your dad died.

Tarkenton: He was in Savannah, Georgia and we were playing against the Dallas Cowboys in a playoff game when he died. I found out after the game. He was only 63 years old. Of course, the death of a parent is devastating, that’s something that you never really get over. So we all have our moments in life that are tough. We sometimes get to the point where we think our problems are bigger than somebody else’s, but I don’t think my problems are any worse. The fact is that other people don’t really care to hear about my problems, that’s why I don’t wear them on my shoulder. Looking at my life objectively, I feel that I am a blessed human being.

PSP: How do you avoid getting intoxicated by fame and success?

Tarkenton: I don’t know if I have a real answer for that. I’ve never felt intoxicated by my successes.

PSP: How do you explain that?

Tarkenton: I’ll give you my theory about that. Since I was 13 years old, I was considered a star athlete. I was on the Varsity football team, basketball team, and baseball team at Athens High School in Georgia. I was looked at as a star in my worlds. So when I played quarterback in the NFL, it wasn’t a new experience for me. For 18 years I realized that there are incredible moments of success where you get cheered, but you also have moments where you get booed or hung in effigy. Sometimes there are nasty articles written about you, sometimes there is great praise heaped on you. As you age in professional sports, there is no sympathy for you. They’ll boo you and yell for the next quarterback. They’ll say, “We’re losing now because the quarterback didn’t make the right pass.” If you are sensitive in this business, you can come out jaded and bitter. Or you can learn from these experiences and grow beyond. These experiences force you to say, “Don’t get too impressed with who you are or what you are.” You have to remember that success can be fun, but the real fun comes from enjoying what you do. I’ve told our people here that building Knowledgeware has been more enjoyable than playing 18 years of professional football. It is fun to master challenges, to see people work together and achieve success as a team.

PSP: What about the role of dreams in reaching success?

Tarkenton: I always wonder about what could be. All the time. Dreams can be very powerful. They don’t have to happen at night when you’re sleeping.

PSP: Like what?

Tarkenton: Oh, I dream about coming back and winning a Super Bowl sometime. That’s a real dream.

PSP: Is that a night dream, or a day dream?

Tarkenton: That’s a night dream that turns into a day dream. Those are less frequent than they used to be, but they’re certainly there. I have a lot of times when I wonder where our company can be and should be and will be.

PSP: What numbers do you imagine?

Tarkenton: I think we will be a billion dollar company in a matter of a few years. I think we certainly have that capability.

I just like to see what kind of marketplace we’ll be in, what kind of products we’ll have and how we’ll be organized and structured. I am constantly massaging the possibilities. Why? Because I really want to experience the fullness of life.

PSP: What is your vision of yourself? What do you want to become? What are you going to do in the next decade?

Tarkenton: I don’t know. We often wonder about business people who talk about five-year plans. I think that’s pure folly. We budget for the year and then at the end of six months we budget for the next six months. We’ve found that we can’t predict the future.

I don’t know what exactly I’ll be doing a year from now or five years from now. I would assume that I will still be chairman of Knowledgeware, I would assume that the company is going to grow and prosper. I love my life and love living and learning. I love the excitement and anticipation of what tomorrow is going to bring. The key about approaching the future is to be open to its possibilities and not to lock yourself into a five-year plan.

PSP: Someone once said that “Age is only a question of receptivity.” If we have a receptive attitude, and a childlike sense of wonder about the newness of life, we’ll stay young, no matter how old we grow physically.

Tarkenton: I think you’re right. I am a little boy and I still remain that way at age 51. My excitement of tomorrow is just as high as it was when I was dreaming as a six-year-old kid that someday I would be a professional athlete. Of course, the dreams are not about athletics, but of life. I love my relationships at work and my family life. I find my greatest thrills by interacting with people. If I can help the people around me to make their lives better, then I am a happy soul. Of course there is pleasure associated with making money — oh, I’ve got my Lear jet and other nice things — but the ultimate source of happiness is in helping others.