Glenn Rifkin
(Page 5 of 6)

While being interviewed for this article, for example, Mr. Branson was vacationing on his private Caribbean island, called Necker. Along with him for his sojourn, he had brought 20 employees from various Virgin companies. And these were not senior executives, but the rank and file -- a housekeeper from Johannesburg, a switchboard operator, a reservations clerk, a pilot -- who were invited because of excellent performance. This is a regular perk for Virgin employees, and Mr. Branson, rather than feeling intruded upon, delights in the company. 

"The idea is to have fun, but by talking to employees, you learn a lot as well," he says. Reminded that it is the rare chief executive who takes employees along on vacation, Mr. Branson laughs and says, "I can assure you, it's no sacrifice." But it sends a powerful message and creates enviable loyalty in his growing work force. In fact, Virgin employees are as likely to say they "work for Richard" as for Virgin. 

Mr. Branson also hosts an annual summer party for all Virgin employees at his country home outside London. This year the party lasted seven days, and more than 25,000 employees and family members attended. Nearly all were greeted at the door by Mr. Branson, who is likely to be the first in the swimming pool. He also attends as many orientations for new staff as possible in order to set the tone and send the message. "I say: 'Get out there and have a good time. Really enjoy yourself, because most of your life is spent working, and you ought to have a great time doing it.' It's much nicer paying the bills when everybody is having a good time." 

And all the while, Mr. Branson is Virgin's most enthusiastic cheerleader, offering constant praise to employees for their efforts. He recalls how his mother and father always looked for the best in their children, and he does that now with his own son and daughter. "I will praise, praise, praise," he says, "and only criticize if they are going to kill themselves crossing the road. People know when they've done things wrong; they don't need to be told. When I write my letters to employees, you'll never see a line of criticism." 

STAYING THE COURSE

But if Mr. Branson is part father figure, part psychologist and part camp counselor, he is also an astute and demanding businessman. He can be ruthless, manipulative and controlling, according to various press reports about him. He insists, for example, that Virgin have no less than 50 percent stake in any company bearing the Virgin label and that his managers retain control of the operations. 

He has also orchestrated shrewd business deals that helped finance Virgin's growth without using the company's money. Mr. Branson says such deals are possible only because of the strength of the Virgin brand. For example, the recent creation in Britain of the Virgin bank, which is an operation separate from Virgin Direct, was financed to the tune of $500 million by other investors, and Virgin retained a 50 percent stake without coughing up a penny. "We're launching new companies that are 100 percent funded by external investors based on the power of the brand," he says. 

It would seem that the very power of the brand would be kept under tight control, lest it become diluted. Yet, being an inveterate risk taker and thrill seeker, Mr. Branson needs big challenges to keep him interested. Taking on Coke and Pepsi was one way to do that. 

Virgin Cola, according to Mr. Branson, is ready to overtake Pepsi in Britain, and he insists the soft drink will outsell Pepsi outside North America in his lifetime. About Coca-Cola, he is more restrained. He does not expect to topple Coca-Cola, arguably the world's best brand, anytime soon. But this does not bother Mr. Branson in the least. He says that Virgin Cola will grab a market share of 1 percent or 2 percent in the United States and that this will be "enough to pay the bills and get a base to start building on." The real challenge, he adds, "is taking on the biggest brand in the world and seeing what we can do with it." 

Acknowledging the gamble on cola, Mr. Branson suggests that he is taking an even bigger risk in putting the Virgin name on the British Rail, Britain's most run-down and neglected network. With no money invested in its infrastructure in the past 30 years, the public train system was simply grinding to a halt when Virgin decided to run it privately. The company is investing $2 billion on new high-speed trains and a renovation of all the tracks. But it will be four years before the restoration is complete, and so the Virgin label must endure being associated with an inferior product for a long stretch. 

The company, Mr. Branson says, could not pretend that Virgin had not taken over ownership. Efforts to improve existing conditions have already paid dividends in the first 12 months, with on-time performance improving from 78 percent to 90 percent and 16 percent more people using the trains, resulting in a £25 million profit, compared with a loss of £20 million the year before. 

Nevertheless, Mr. Branson admits that "this is the biggest risk we've taken with the brand in Britain." Disgruntled passengers who never bothered to complain when the British Rail name was on the trains feel justified in airing their frustrations now that Virgin graces the engines. Though Virgin has failed at other business investments and escaped with its reputation intact, sustained problems with the railroad could tarnish the brand. 

But Mr. Branson, ever the optimist, foresees a positive outcome. "You can't be afraid to take risks," he says. "I believe that if my balloon goes down in 10 years' time, the success we've made with Virgin trains will be a greater part of my legacy than Virgin Atlantic. There may be short-term damage, but in the long run, it was the right thing to do." 

Though the Virgin brand is so inextricably tied to his name, Mr. Branson insists that the brand will live on even if one of his risky adventures does him in prematurely. "It will be a different kind of brand, probably more mature than it's been before and slightly less risque," he says. "But there is no reason commercially that it shouldn't go on in strength." 

The more crucial lesson, he says, is retaining the values he has instilled even as the company grows larger and larger. "You've got to treat people as human beings -- even more so as the company gets bigger," Mr. Branson says. "The moment I start to think 'I've made lots of money, I'm comfortable, I don't need to bother with these things anymore,' that's when Virgin will be at real risk."