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By Root 1000 0

data and projections and, perhaps, skipping over the soft subjects. Bob Koski didn’t take offense—he took the money from one of them, which was the most important thing at that moment—and with some family and friends as other investors, launched the business. But since the company’s first days, Koski never stopped emphasizing the importance of the soft over the hard, that is, of freedom as a condition and a guarantee of continuous outstanding performance:

Sun Hydraulics’ philosophy in the company’s original business plan.10

A most useful way for shareholders to evaluate the quality of longer-term investments in companies like Sun Hydraulics is to gather clues about how a company tends to think and behave … Personally, I think manufacturers that manage solely with hard asset numbers are making a big mistake. Companies that manage by nurturing soft assets, like corporate knowledge and relationships, will do better in the long Term … We believe that our competitive edge is based in the creativity, skill and commitment of our employees.11

These are the opening lines of Sun Hydraulics’s 2003 annual report for investors, though the company called the report by a different name: Observations from Bob Koski and Clyde Nixon (the chairman of the board at the time). Knowing that words are not enough to convince potential investors, Koski asked them to come and see for themselves: “If you are, or, might wish to be, a serious ‘investor’ in Sun Hydraulics, come to Sarasota, Florida, Coventry, England, or Erkelenz, Germany, and meet your investment: the people that are the heart and soul of our company.”12 Personal observation is what Koski believes to be the best way—as opposed to the cold numbers—to evaluate his company’s soft assets. Admittedly, though, it is not easy for shareholders scattered around the continent or even the globe to visit personally, which explains the lengths and effort that Sun Hydraulics takes to describe these soft assets in the company’s annual report.

Bob Koski did not experience the benefits of the freedom-based environment in DuPont himself. He’d merely read about it. Like him, many other liberating leaders learned about this environment from other companies, admired it, and used the lessons to trigger their own freedom-building action plans. Bob Davids, for example, befriended Robert Townsend—the former CEO of Avis—and carefully studied his experience, which he then used in liberating his own companies. Jeff Westphal visited Gore and Harley-Davidson and used his observations to plan his liberation campaign at Vertex.

Harley’s Rich Teerlink, though, had an even stronger connection to a freedom-based company than simply visiting one: He worked at one. While an executive at Herman Miller, the furniture maker, he observed its freedom-based environment every day and could discuss liberating leadership with Max De Pree—the CEO and an eminent author on the subject. After Teerlink became Harley’s CEO and successfully transformed it from an almost bankrupt company assaulted by Japanese bikes to a Wall Street darling, he analyzed the reasons for his success. Armed with his freedom values, he determined that it was not simply Total Quality Management or the Kaizen tools that turned the company around but the freedom that its frontline people had to take quality and improvement actions. We will explore how Teerlink liberated Harley-Davidson in chapter 6, but his firsthand admiration for Herman Miller’s culture was instrumental to his decision to build a similar environment at Harley.

Bill Gore’s case is more puzzling at first. The company that inspired Bob Koski—DuPont—was the origin of both Gore’s exasperation and admiration experiences. Exasperation because—as we mentioned earlier—after working for DuPont for seventeen years in the 1940s and ‘50s and experiencing its dysfunctional bureaucracy, he decided to leave to build his own company. But also admiration, because when DuPont needed to spur innovation, it would set up a temporary freedom-based organization similar to the one that Bob Koski had read about.