Thomas Golisano mastered the transition from entrepreneur to CEO
Paychex Inc. has more than $2 billion in annual revenue and, despite a hitch during the recession, has grown at a steady and predictable rate for nearly its entire 41 years.
Not bad for a business that founder Thomas Golisano started with $3,000.
Golisano, who grew up in West Irondequoit as the youngest of three children, had had a mindset for business since his early days. After working full-time opening packages of cash in the basement of Lincoln First Bank, Golisano decided he wanted something more and turned to SUNY College of Technology at Alfred, where he earned a tuition-free associate’s degree in business.
After graduating, Golisano became a sales representative at Burroughs Corp. and then at a regional payroll processor for larger businesses, Electronic Accounting Systems Inc.
It was there that Golisano got the idea for providing payroll services for businesses with 100 or fewer employees. After EAS turned down the idea twice, Golisano left in 1971 to start Paymaster, the company that would become Paychex.
When he founded the company-using his own cash and then consumer loans, money borrowed from friends and his personal credit cards-his initial goal was to get a base of 300 clients. But the startup grew much faster.
By 2000, Paychex was Rochester’s most valuable company, surpassing Eastman Kodak Co., Xerox Corp. and Bausch & Lomb Inc. in market capitalization. The company’s total value-determined by multiplying the share price by the number of shares outstanding-was nearly $19 billion, approaching the combined value of the Big Three.
"He’s provided the example that the entrepreneurial way to success in our area is alive and well," said Mark Zupan, dean of the Simon Graduate School of Business at the University of Rochester.
Many entrepreneurs struggle in the transition to CEO of a large company. During Golisano’s tenure as chief executive, however, Forbes magazine called Paychex one of the best-managed companies in America and Fortune repeatedly ranked the firm among its "100 Best Companies to Work For."
Golisano also produced for shareholders. In 2003, Forbes named him one of the 10 best-performing bosses in the nation. He had generated a 29 percent annualized return for shareholders since taking Paychex public.
At the time Golisano stepped down as president and CEO in 2004, Paychex had become one of the nation’s two largest payroll providers and had more than 500,000 clients.
Golisano’s knack for growing organizations has extended beyond Paychex. When the Golisano Children’s Hospital at the University of Rochester asked him a few years ago to consider a gift on top of his original $14 million donation, to allow the hospital to give private rooms to all of its patients, Golisano said he needed to think about it.
Shortly after that the recession rolled in, and both Golisano and the hospital decided to hold off on the expansion for the time being. Golisano took the chance to help the hospital re-evaluate the project.
"Tom told us that this might be a real opportunity for us to take whatever time we need while we waited for the economy to recover and think about whether this is the best arrangement and configuration and if we were doing the best thing for children and families," said Nina Schor M.D., pediatrician in chief at Golisano Children’s Hospital and chair of pediatrics at URMC.
"At his insistence, we really went back to the drawing board and refined our model, where we would put the hospital on our campus, and I think we came up with a plan several orders of magnitude better than we first came up with."
Golisano had more help in mind for the hospital. When it came time to announce his gift last year, he shocked UR officials by donating $20 million-$2 million more than he had previously promised to jump-start construction of the $134 million facility.
The large lead gift helped the university break ground earlier on the hospital and gave it a boost on private fund-raising, Schor said.
Golisano’s philanthropy has had other wide-ranging effects on the community, with major gifts to Rochester Institute of Technology to establish the Golisano Institute of Sustainability and contributions to the B. Thomas Golisano Foundation, which benefits organizations working with the developmentally disabled.
Golisano has made countless other gifts to fund major initiatives of other groups in the Rochester area and now also in his adopted home state, Florida.
"When you look at the number of jobs he’s created and the impact on our community, whether it’s the Children’s Hospital or the Sustainability Institute at RIT, it’s been a great impact on our area," Zupan said. "Those would easily be major ventures that people could be building other places, but we get to have them in Upstate New York because of Tom Golisano."
But Golisano’s total benefit to the region extends beyond the impact of Paychex or his philanthropy, Zupan said. Through his ingenuity and willingness to assist budding innovators, Golisano helped renew a sense of entrepreneurship first brought to the region by George Eastman, he added.
At the Simon School, Golisano helped nurture a newly formed entrepreneurship program, meeting with classes and encouraging students to follow through with their business ideas.
"That major is now a campuswide initiative at the university, and it’s in large part due to the support he gave," Zupan said.
10/12/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email [email protected].