One of the new movies on offer this holiday season is the Michael Keaton film “The Founder,” which depicts how Ray Kroc’s relentless drive turned a small California restaurant into the ubiquitous McDonald’s chain.
Earlier this month, the Wall Street Journal published an op-ed James Allen and I wrote called “The Company Founder’s Special Sauce” (subscription required, or view the digital reprint on Bain.com). In it, we noted that Kroc epitomized many of the traits of the Founder’s Mentality. Indeed, his autobiography, Grinding It Out, was one of many books by founders I read during our years of research for our book, The Founder’s Mentality.
The movie’s title is a loaded one: It was Kroc, not his initial partners, Mac and Dick McDonald, who came to be widely regarded as McDonald’s founder, but it’s not hard to see why. Kroc’s passionate, obsessive personality is typical inside those companies that defy the odds and grow to scale. Our research found that of all newly registered businesses in the US, only about one in 500 will reach a size of $100 million in revenues and a mere one in 17,000 will attain $500 million and also sustain a decade of profitable growth.
Such companies—and America’s ability to keep producing them—form the heart of what makes the US economy so successful and resilient. We could use more of them. Bain & Company’s research shows that over the past 15 years, founder-led companies delivered shareholder returns that are three times higher than those of other S&P 500 companies.
As we noted in our Wall Street Journal op-ed, such performance can last long beyond the tenure of the actual founder if what we call the Founder’s Mentality is nurtured and preserved. What is the Founder’s Mentality? After analyzing examples of sustained success at 7,500 companies in 43 countries, visiting many in person, we found that great founders imbue their companies with three measurable traits—traits that are on clear display in Kroc’s story.
The first is insurgency: The founding team declares war on its industry on behalf of underserved customers. Keaton, as Kroc, captures this well: “It’s revolutionary,” he says as he reverently describes the McDonald brothers’ fast-service approach.
The second trait is an obsession with the front line that serves those customers and an attention to detail that borders on compulsive. “We demonstrated this emphasis on details, and saw it pay off, in our approach to hamburger patties,” wrote Kroc in his autobiography, devoting a full page not just to patties, but even to how high they could be stacked and the amount of wax on the paper slips between them—all of which added up to faster service.
Third, these companies are steeped in an owner’s mindset, relentlessly focused on cash and determined to eliminate complexity wherever it appears. Kroc, for example, created an army of mini-founders by perfecting the franchise model, which motivated managers to behave like owners. Too often in business, the owner’s mindset becomes distorted. Managers seeking short-term profits to please Wall Street or increase their own bonuses engage in indiscriminate cost-cutting that alienates customers or employees. Companies with the Founder’s Mentality constantly reassess internal spending, but their goal is to root out bureaucratic barriers to speed and free up underused cash that they can redeploy to improve the customer experience.
An owner’s mindset governed by a sense of insurgency and a frontline obsession is the special sauce that leads to sustained, long-term growth and could turbocharge the US economy. Bain’s research found that the best companies—the top 20% of performers, founder-led or not—exhibit these traits four to five times as often as the bottom performers.
The bad news: Only about 7% of companies, founder-led or not, manage to maintain these traits as they grow to scale. Yet those that do create more than 50% of the net value in the stock market in any given year.
Of course, many companies no longer have their driven founder at the helm. But if more companies were run with the Founder’s Mentality, customers, employees and shareholders would benefit mightily—and it might just super-size the economy.