So You Wanna Have a Well-Run Empire

Then Start By Hiring Really, Really Good People, Says Billionaire Mort Mandel

According to philanthropist and business leader Mort Mandel, the biggest problem facing anyone running anything—a nonprofit or for-profit company, a government, an institution of any kind—is that there are too few high achievers out in the world. Everyone is competing to find, hire, and keep the same few people—the people who make all the difference.

Mandel, who along with his brothers built a multibillion-dollar company out of a $900 initial investment and has run a successful charitable foundation for 60 years, credits his success to these “A” people. At a Zócalo/Drucker Institute event at MOCA Grand Avenue about leadership and business with Drucker Institute executive director Rick Wartzman, Mandel—author of the book It’s All About Who—explained his blueprint for organizational success, based on the seemingly simple idea that you can’t do anything without a great team made up mostly of “A” people, with some “B” people, and as few “C” people as possible.

How, asked Wartzman, can you tell an “A” person from a “B+”?

Mandel admitted that the system was a bit of an oversimplification. Yet “A” people have certain qualities in common: They’re usually charismatic, articulate, and generally intelligent. When it comes to hiring, Mandel prizes intellectual firepower above all else—then values, passion, and work ethic—and, last and least, experience. Why? Because it’s the only quality on the list that can be taught.

Management consultant Peter Drucker was a huge influence on Mandel’s philosophy. In the 1960s, Mandel was a client of Drucker’s, and when he asked how to grow his company faster, Drucker told him, “‘Put your best person with your biggest opportunity’”—even if it means having a dentist run a brass foundry. “I bought it, and I’ve done it all my career,” said Mandel, going back to 1965. He’s had the equivalent of dentists running brass foundries, but he has yet to have someone fail due to a lack of experience.

Why, asked Wartzman, can’t more organizations manage to hire great people, even if they pay lip service to similar philosophies?

It’s impossible, said Mandel, to run an organization with only “A” people—and “B” people have an important role to play. However, it’s the “C” people that bring a company down, and in most institutions they hang on “because it’s painful to terminate people.” Mandel said he always asks people if they have any employees they wouldn’t hire if they knew what they know now. Almost everyone says yes, but explains that the person can’t be fired. “Who are your clients?” asks Mandel in response to such a statement. “Is it more important to serve your clients or to be nice to your employee?”

Mandel said he hates firing people—everyone hates firing people—but sometimes it has to be done. “The mission of people who lead any organization, for-profit or not-for-profit, is to do the best they can for their clients,” he said. “Therefore they should get as many ‘A’s as they can get and have no ‘C’s. That’s the goal, and it’s not easy. No one ever said leadership was easy.”

Mandel believes that customer service is the secondary lever that organizations can pull in order to become great. But he doesn’t mean simply using the expression “customer service”—it’s about defining what that means and measuring your criteria for serving clients successfully. Mandel pointed to Lexus as a company that understands customer service; he abandoned his Ford station wagon for a Lexus and was stunned by the level of service. “They treat me like royalty,” he said—and it’s the same for all their customers. “What’s so secret that every car dealer doesn’t do it?”

Wartzman asked Mandel to talk about what he learned in the nonprofit world that helped him run his for-profit company, and vice versa. Mandel explained that he brought classic organizational skills to nonprofits, but what was more valuable was what he learned from the nonprofit world. For example, he said, as a young CEO at his own company, he learned a valuable lesson after becoming chairman of a local United Way chapter. After he was appointed, he asked the outgoing chairman to critique his first board meeting. Mandel thought it had been a great success, and his colleague agreed that a lot had been accomplished. However, he pointed out, Mandel hadn’t chaired the meeting—he’d dominated it, not giving any board members credit or ownership. The revelation “hit me like a ton of bricks,” said Mandel, who realized that he’d been dominating every meeting he ran. At his own company, his employees had no choice but to agree with him; in the nonprofit world, people didn’t have to like everything he said. He realized he should change all of the meetings he chaired—and became a better colleague as a result.

Where do Mandel’s philosophies, asked Wartzman, fit into corporate culture today? Is there any hope for leaders when their success seems to ride on meeting short-term goals?

“I’m discouraged by the power management has given to the financial analysts,” said Mandel, pointing to compensation structures for executives that tie their future to a single quarter’s earnings report. He and his brothers owned a majority of their company and never had to worry about being fired. But most business leaders have to do whatever it takes in the short-term to keep their jobs. Often, they are trapped by their boards.

Asked about what he might do about an “A” employee who was failing, Mandel said that he has only terminated two “A” employees.  Usually, such employees can be counseled in some way. They have the mental capacity and self-confidence to learn—and to change.


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