A few years after Ewing Kauffman launched Marion Laboratories in 1950, his sales manager urged him to invest $15,000 on an idea to gain business. Kauffman doubted the investment would pay off.
Instead of saying no to Jean Sperry, the sales manager, Kauffman followed one of his abiding principles as an entrepreneur: Give employees the autonomy to make key decisions.
"It was a lot of money, but we could afford it," Kauffman recalled decades later. "But I didn't think it would work."
As Kauffman suspected, the investment fizzled. But that's not the end of the story.
By the early 1960s, Kauffman had built Marion Labs into a solid pharmaceutical business. To reach the next level, he knew he needed to take more risk.
He asked his executive team for ideas to expand the company's product line. They identified two drug candidates. Sperry championed one of them, Pavabid, amid lively internal debate.
Initially, Kauffman preferred the other drug. But Sperry was so sure of Pavabid's potential that he told Kauffman, "Let me introduce it. If it's not successful, I'll resign."
Impressed with Sperry's commitment, Kauffman approved the new drug. It wound up becoming the company's first blockbuster — and Marion Labs went public in 1965.
Kauffman's faith in Sperry had come full circle.
"If you give people responsibility, you must be willing to give them authority," Kauffman said, as cited in his biography "Prescription For Success" by Anne Morgan. "You have to permit them to make a mistake sometimes in order for them to develop themselves for the future."
Listen To Customers To Get Smarter Like Ewing Kauffman
Ewing Marion Kauffman (1916-1993) started Marion Labs from his basement at age 33 with $5,000 in startup capital. Based in Kansas City, he sold tablets and injectables to physicians' offices.
In 1950, doctors in rural areas bought drugs in bulk to dispense to patients. Writing a prescription for a patient to fill at a retail pharmacy had not yet become the standard practice outside of big cities.
A gifted salesperson, Kauffman operated Marion Labs as a one-man show at first. He knew that country doctors worked late, so he'd call on them after they finished seeing patients and sometimes have dinner with them.
Rather than launch into a spiel, Kauffman liked to listen. Doctors would compare the therapeutic benefits of different products and weigh the pros and cons of single-dose pills compared to more frequently taken, shorter-acting drugs. They would also propose ideas for new analgesics and he'd take note.
By 1959, Marion Labs hit $1 million in annual sales. As the company grew, Kauffman paid close attention to hiring and cultivating employees who could grow along with it.
"Mr. K had a strong love for the sales department," said John Harrington, a Marion Labs executive who worked closely with Kauffman for many years. "He'd invite every new sales school class — around 20 salespeople — to his home in Mission Hills (Kansas). He'd give a tour of his home and say, 'Others helped me become successful so that I could live in a house like this.'"
Kauffman: Lavish Care And Concern On Employees
Kauffman understood how to breed loyalty among his sales team. By treating them with respect, he set the stage for them to thrive.
Just weeks after Harrington joined Marion Labs in 1976 as a 21-year-old salesperson, he broke his shoulder. He was so new that he had not yet qualified for employer-provided health insurance.
"Mr. K made sure all my medical bills were paid," Harrington recalled. "He kept tabs on me to see how I was doing," even though he barely knew Harrington at the time.
When Kauffman promoted Harrington seven years later, Harrington moved from New Jersey to Kansas City. He lost money selling his New Jersey home.
Kauffman heard what happened and approached Harrington, who said, "Mr. K, that's my problem, not yours."
"No, it's our problem," Kauffman replied. He proceeded to write a check for $30,000 — a low-interest loan — to offset Harrington's financial loss.
"Some day, others will need you the way you need me now," Kauffman told Harrington, who paid back his boss over the next four years.
"He wasn't a benevolent guy who threw money at people," Harrington said. "But one of his principles was treat others the way you want to be treated."
Spur Salespeople To Up Their Game Like Kauffman
Kauffman balanced the need to treat people well with holding them accountable. He often proclaimed, "Those that produce, share in the rewards. Those that don't, have to leave."
Poor performers did not last long. Kauffman would tell them, "We can't afford to have people who can't produce."
Yet for those who shined, opportunities abounded. Kauffman favored a generous profit-sharing plan and an extensive employee benefits package.
Dave Pickhardt joined Marion Labs in 1969. Attending his first sales meeting, he lined up with other salespeople to give Kauffman their business card. On the back, they were told to write their sales goal.
"He looked at what I wrote — I added 20% to what my territory had done before — and asked how would I accomplish that," Pickhardt recalled. "He was very interested. Then when you'd get home, you'd get a letter from him reminding you of your goal and encouraging you to do even more. Getting that letter, I knew he'd be watching me."
At the time, Marion Labs had a market value of about $156 million. Kauffman and his family owned 31% of the company, yet he remained a scrappy entrepreneur who stayed close to his sales force. Eventually the firm merged to form Marion Merrell Dow. That firm is now part of global pharmaceutical giant Sanofi.
"He was a master of intrinsic and extrinsic rewards," Pickhardt said. "He made you feel good about being a Marion associate."
Kauffman focused on building the next generation of leaders. He liked to accompany managers in the field, joining them on sales calls and supporting their professional development.
"The best coaches have muddy shoes and muddy sweatshirts," he liked to say. They battled in the trenches helping their team succeed.
Forge A Lasting Legacy
Kauffman's colleagues cite his warmth, humor and concern for their well-being as standout qualities. Both Harrington and Pickhardt appreciated Kauffman's devotion to his associates and his frequent acts of kindness and generosity.
"I care for people," Kauffman said. "I may not like them, and you can't like everybody, but I do care for them."
When Major League Baseball introduced four new teams in 1969, Kauffman birthed one of them: the Kansas City Royals. In 1973, his team took the field at a newly built ballpark, Kauffman Stadium, where it still plays today.
But his legacy doesn't stop there. He established a private, nonprofit foundation in 1966 that fosters entrepreneurship. Today, it has $3 billion in assets.
Ewing Marion Kauffman's Keys
- Founded Marion Laboratories, growing it from a one-man outfit in 1950 to $930 million in revenue in 1989 when Dow Chemical acquired it.
- Overcame: Temptation to retain poor performers by holding them accountable for clear sales goals and jettisoning those who didn't meet them.
- Lesson: "When you do what's right, good things happen."
