Talk about a close call.
When Hurricane Katrina hit New Orleans in late August 2005, Dan Wilson must’ve been holding his breath. After all, his Columbus-based auto glass replacement company had just opened a new warehouse in the area.
“The water came within two feet of the facility. Two feet,” says Wilson, who retired last month as president and CEO of Belron US Inc., the parent company for Safelite AutoGlass. “That’s about as close as you want to get. And the facility we had just moved out of was underwater.”
Still, it was a mixed blessing. Even though the new warehouse escaped water damage, many business functions had to be relocated temporarily due to the poor conditions in New Orleans following the storm surge and mass levee failures. In addition, at least 30 of Safelite’s 75 employees in the area were left homeless by the flooding.
“So we not only felt it from a business standpoint, we understood it from a personal standpoint,” Wilson says. “Many people lost everything. It was a calling on the company to see what we could do.”
Safelite set up a donation pool for employees impacted by the hurricane and seeded it with $40,000. Then Wilson put out a plea for help across the company. The response was immediate. Employees volunteered space in their own homes to take in displaced associates. Some traveled to New Orleans. Others offered clothing, school supplies, blankets, towels or dishes. Still others wrote checks.
“The $200, $300, $400, $500 checks people were writing to help individuals get back on their feet was amazing,” Wilson says. “It really described a lot about the culture and the heart of the company.”
In fact, the outpouring of generosity by employees served as a catalyst for the company to establish an ongoing vehicle through which the company and its employees now give regularly: the Safelite Charitable Foundation.
Here’s how Wilson created a culture of philanthropy at Safelite AutoGlass and why giving away nearly $700,000 as a company last year could just be a start.
Get employees involved
Safelite’s record of charitable giving dates back to when its headquarters moved to Columbus 18 years ago and has come in a wide variety of formats.
The $760 million company has pledged corporate funds to the American Red Cross following natural disasters. It has sponsored numerous charity golf tournaments. It has entered employees in various walks, runs and even a London triathlon to raise money for charity. Its own charitable arm gave more than $230,000 in grants to Central Ohio organizations in the past year. And, Wilson says, hundreds of its employees volunteer their time on charitable boards and committees.
“We’ve encouraged our associates to participate and contribute their time,” Wilson says.
“We give them time off to do it without deduction from their compensation.”
In addition, if an employee wants to support a cause and there’s an event associated with that cause, Safelite will post bulletins throughout the company inviting other employees to participate, as well.
“We don’t attempt to put those kind of things down,” Wilson says. “We attempt to promote them.”
Safelite also supports employees’ philanthropic efforts through grants from the Safelite Charitable Foundation for the causes supported by employees.
“That’s a key driver for us,” Wilson says. “If you’re involved and you’re committing your time and it makes sense, we’re going to bend over backward to support you as one of our associates.”
Employees have responded in kind. This past year, for example, the push for fostering a philanthropic culture at Safelite netted a staggering increase in giving to the United Way campaign at this 7,000-employee corporation. A full 71 percent of Safelite’s 1,523 Columbus-based employees enrolled in the campaign for 2008. That’s up from a 15 percent participation rate during 2007.
“This was one of our very best years in terms of both participation and dollar contribution for United Way,” Wilson says. “A lot of our people are front-line people, call center people. They may not be able to afford very much, but it wasn’t how much they gave. It was that they did give. That’s what we were after.”
Wilson credits the huge jump in participation to a number of incentives that helped make giving more fun. For example, there was a cornhole tournament, a putt-putt golf tournament, a White Castle-hamburger-eating contest and a silent auction with items donated by Safelite executives. The company also made use of friendly competition to motivate giving, pitting employees on different floors of the company’s three largest Columbus facilities against each other to raise participation rates. The winning floor which recorded an 82 percent participation rate among its 500 employees won the right to wear jeans once a week for two months.
“It’s amazing to see how our associates respond to a challenge,” Wilson says. “We try to set the vision and provide the right setting, and they’ll climb to the top of the mountain and go well beyond anyone’s expectations to contribute.”
Make it a habit
Wilson doesn’t regard charitable giving as an expense. He views it as an investment. That’s why, even in the midst of a Chapter 11 bankruptcy reorganization eight years ago, Safelite didn’t elimi-
nate the line item earmarked for philanthropy.
“While we didn’t give as much then as we do now, we still gave,” Wilson says.
“We’ve been through good times, bad times, financial ups and downs, but we’ve always had that as a key element of our corporate fabric,” says J.R. “Randy” Randolph, a vice president at Safelite, who also chairs the employee committee overseeing the Safelite Charitable Foundation. “I’ve been with this company for 15 years, and it’s always been a part of the fabric of the company and has just gotten stronger and stronger.”
Even when the company was sold to a competitor last year, Safelite never wavered from its commitment to charity.
“The acquisition of our company by Belron S.A. was something that created even further alignment around the need to participate in charities,” Wilson says. “We saw that as a continuation and a major opportunity for us.”
Belron S.A. has been a long-time supporter of an organization called MaAfrika Tikkum, which helps disadvantaged and impoverished communities in South Africa, the country where Belron was founded. Each August, Belron sponsors a large corporate team at the London Triathlon to raise money for that charity. This past August, as a way to help integrate the Safelite and Belron cultures, the parent company invited Safelite employees to participate in this overseas event.
“We had a lot of people who wanted to volunteer for that triathlon,” Wilson says. “But we narrowed it down to six.”
Those six were among a contingency of 500 Belron employees from all over the world including the CEO of Belron S.A. who competed in the triathlon.
“That’s a good example of the parent company reaching out to us to participate,” Wilson says. “We got involved in what their efforts were, and it made an impression throughout our organization.”
That’s exactly the sort of thing Wilson hopes to do to expand Safelite’s charitable giving throughout all its U.S. locations.
“For us, the next phase is how do we take this culture and permeate it further into our company?” he says, noting the Safelite Charitable Foundation only raises and gives funds in Central Ohio right now. “Our company is in all 50 states. Probably a third of our payroll is in Ohio, so a big piece of our company is still outside the Ohio area.
“I think we’re doing a pretty good job here. But if we are successful in getting this vision of more community involvement and more associate participation throughout the company, if we can get the rest of the company engaged in an equally meaningful way, it’s going to raise our opportunity and our potential to do even more.”
Wilson says fostering a philanthropic culture benefits everyone involved.
“When you see how your people react and how they respond to an invitation of involvement for charity, that’s a lot of reward,” he says. “It’s as much a reward for them as it is for anyone who is receiving the proceeds or giving the proceeds or matching the proceeds. So I think there is a payback for everyone.”
What’s the payoff for Belron? It’s multitiered, really. “No. 1 is doing the right thing and being a good corporate citizen,” Wilson says. “I think our people see it, and it adds to their level of pride ... and the commitment they have for their employer.”
Those in the New Orleans area made that plain to see in the days following Hurricane Katrina.
“A lot of our associates lost everything, but they showed up for work the next day,” Randolph says. “When people care that much about the company, it’s hard not to care that much about the people.”
And, he says, “It does make Safelite a better place to work. I think the associates appreciate that.”
Locally, Safelite also gets the residual benefit of the positive PR that comes with being involved in charity events.
“If it’s a bigger event like the Race for the Cure, where it involves a group of people, we’ll definitely try to represent the company’s brand position,” Wilson says.
Safelite employees often wear items with the company logo at such events.
“But that’s not the primary reason we’re doing it,” Wilson says. “A lot of that has to do with their own individual pride and their own association to the company that’s participating with them financially.”
Then there’s the benefit employees receive from expanding their horizons through charitable work.
“When I look at the people who are participating in these various charities, I think, without a doubt, their involvement has broadened their experience, their exposure, their view of the world,” Wilson says. “None of that is bad.
“Plus, quite frankly, I think we’re doing a lot of good. We feel like we’re committing our time and our money in the right kinds of things. I think we’re making a difference. And if you begin to make a little bit of a difference, in time, you can make a big difference.”
HOW TO REACH: Belron US Inc., parent company of Safelite AutoGlass, (614) 210-9000 or www.safelite.com
The need for dramatic change was evident the moment Tom Hoaglin walked into the room.
An enormous stain on the carpet greeted the new chairman, president and CEO of Huntington Bancshares Inc. the first time he visited the executive office in the bank’s downtown Cleveland branch.
“It was a very prominent stain,” says Hoaglin, who was traveling to several branches outside his Columbus-based headquarters shortly after being named CEO in February 2001. “It would have been in view for any customers who were coming in. So I said, ‘What are we doing about the carpet?’ The answer was, ‘We can’t do anything because it’s not in Columbus’ budget to do it.’”
Hoaglin sensed right then and there that big changes bigger than he originally thought when he took the top job at Huntington were going to be needed, and quickly. Corporate-controlled budgets that hog-tied employees in the field like this were going to be among the first to go.
“We’re charging them with running an operation to grow their business, to develop clients in their marketplace,” Hoaglin says. “They have to have control of that.”
It was one of many changes to come under Hoaglin’s leadership at the then-struggling regional bank.
“When I came to Huntington, I developed, in short order, a sense of urgency for improving the financial performance of the company,” Hoaglin says. After all, net income had fallen $93 million in the previous year, total assets were down $500 million, yet expenses were rising. The stock was plummeting in response and a snarling pack of shareholders were losing patience with management.
Hoaglin knew treating the symptoms of impending disaster wouldn’t be enough. He needed a cure. That meant systemwide changes.
In the six years he’s been at the helm, Hoaglin has decentralized decision-making throughout the 8,500-employee organization. He’s rebuilt the corporate culture. He’s sold Huntington’s Florida operations and consolidated scores of additional banking offices in Ohio, Michigan, West Virginia and Indiana. He even cut the shareholder dividend.
Still, Hoaglin has earned respect, rather than resentment, both inside and outside the Huntington organization. Perhaps that’s because all those changes yielded results.
Net income has climbed 40 percent since Hoaglin’s arrival, hitting $461.2 million at the end of 2006. Total assets have grown nearly 24 percent in that same time frame to $35 billion and Huntington’s stock price has rebounded accordingly.
Here’s how Hoaglin made change a positive force at Huntington, rather than something to be feared.
Walking the walk
Facilitating change is always easier if you feel a connection to your associates.
“I knew there were some tough decisions ahead,” Hoaglin says. “I knew associates were going to need to have a sense of trust and confidence in their CEO when it came time to hear the difficult changes we were going to have to make. If you believe the person in charge or if there’s some credibility or trust there, then you might be more inclined to say, ‘Well, I may or may not like this, but let’s give it a chance.’”
Hoaglin set about building employee trust with some seemingly simple, yet resounding, actions.
“I learned that sometimes when you’re trying to change a place, symbolic actions are important,” he says.
That’s why he sold Huntington’s corporate plane. “It had become a symbol of excess inside the company,” Hoaglin says. “How can you have credibility with associates or employees when you say, ‘Tighten your belts. We need to cut expenses,’ and then you keep something like that?”
Moving out of the opulent, 34th floor executive suite was another symbolic gesture.
“Employees looked at that and said, ‘Gee. He’s serious about making changes. When he talks about everybody getting with the program and doing things differently and cutting expenses, he’s living that,’” he says.
Hoaglin’s trust-building approach to change paid off quickly for the bank.
In July 2001 just five short months after becoming CEO Hoaglin dropped a big bomb.
“When we announced we would sell out of Florida, our associates especially our Florida associates were quite stunned, but [they knew] there was a reason for doing all this,” he says. “When it came time to hear that difficult news that we basically had to shrink in order to position ourselves for growth, people by and large felt OK about it. They understood it was part of an overall game plan that could lead to a better performance later.”
And it did. “We took the capital that was no longer required for Florida and we bought back company stock: 9 or 10 percent of the stock that was outstanding,” Hoaglin says. “The effect of that was to increase our stock price. Shareholders and employees looked at that and said, ‘Gee, something’s working. We’re getting better.’ That kind of thing, over time, yields greater credibility.”
Scaring off old ghosts
While Hoaglin was building his credibility with employees, he also uncovered a disturbing cultural theme: fear.
Hoaglin says employees had been afraid to speak up or offer opinions under the previous management. They didn’t question authority or corporate policies even to better serve customers.
“There was a feeling, rightly or wrongly, that it was better not to make decisions because you might get in trouble,” Hoaglin says.
He had to find a way to unleash employees and convince them it was OK to speak out and make judgment calls even bad ones sometimes.
“What we did was to say, ‘Every Huntington associate is valued and respected. If we respect you, we acknowledge the background you have, the experience you have, the judgment that you bring to your position. We want you to make decisions to take care of customers. We’d rather have you make a bad decision than to make no decision.’”
Still, not all employees were convinced that this new CEO meant what he said. After all, Hoaglin’s predecessor, Frank Wobst, had led the bank with a much different approach for the previous 20-plus years. The old culture was deeply ingrained in many employees.
“This isn’t something that changes overnight,” Hoaglin says. “It takes years to do. It takes a CEO hammering over and over again that this is OK and this is what we want. But fast-forwarding five or six years, while some people in the organization are still more reticent than others, by and large we’re a company that does feel better about going ahead and making decisions and being unleashed.”
Empowering employees had a profound effect on the bank, too.
“We started to grow again,” Hoaglin says. “Huntington hadn’t been growing for a while, and that really triggered a very positive change.”
Another way Hoaglin shined a favorable light on the changes he had to make was by getting employees involved on the front end.
“I think it’s really important to spend whatever time it takes to get buy-in for the changes you are going to make, as opposed to simply saying, ‘Here’s what we’re going to do. Like it or lump it,’” he says.
That’s why Hoaglin devoted nearly three years to letting employees help develop a new image for Huntington.
“We spent a lot of time on that because we felt it would be a great way to unite all associates across the company,” he says. “As opposed to a CEO waking up and saying, ‘This is what our vision is going to be, this is what our core values are going to be, now do it,’ we got lots and lots of people around the company engaged in it. Different levels of the organization, different geographies, different lines of business were coming together and saying, ‘I think the value should be this.’ It was a lengthy process, but when we got to our conclusions, they felt very good about it.”
Employees were also able to articulate the values and vision more effectively to their team members since they’d been directly involved in the process.
“We stood a much greater chance of getting an enthusiastic embrace of those than we otherwise would,” Hoaglin says.
After all, history is often the best teacher and Hoaglin knew mandated changes hadn’t lasted under the old Huntington regime.
“Huntington went through a major exercise to reduce expenses in the late ’90s,” he says. “There were probably some great reasons for doing that, but it got perceived rightly or wrongly, fairly or not as a top-down driven thing. The CEO wanted this done. People down through the organization didn’t buy in to it. They did what they had to do in order to get it done, but they didn’t really believe in it or support it. So after it was all over, expenses came back.”
That’s a scenario Hoaglin doesn’t want to see repeated on his watch.
“You want people to feel as if they had some degree of input to the change,” he says. “They may or may not like the decision, but at least they got their two cents in.”
Weeding out the wary
Even when employees are involved in change, not everyone follows along happily.
“Some people embrace change,” Hoaglin says. “Others are clearly opposed to it and it’s not difficult to figure out who those people are.”
Then there are the reluctant ones. Hoaglin says watch them closely.
“They say the right things, but they may not be leading their teams enthusiastically because deep down inside they don’t want this change to happen or don’t believe in it,” he says. That’s where it gets really hard, trying to ferret out where the breakdown is and who is really on board and who isn’t.
“Over time, you figure out if you have people who just shouldn’t be in the organization not because they don’t have talent, but because they just don’t buy in to whatever it is you’re trying to do.”
When Huntington was changing to a decentralized decision-making model, for example, some leaders who resisted the move ultimately had to be let go.
“As enthusiastic as associates out in the field were about this change, we had people who previously had a lot of power who weren’t real enthusiastic about it,” he says. “You preach and teach, and coach and give people opportunities to embrace the changes.”
But in the end, “a few handfuls,” by Hoaglin’s estimate, just weren’t able to get fully comfortable with the new Huntington and had to move on.
“It’s hard,” he says. “But when an organization confronts change, people watch the leader. It could be watching the unit supervisor or manager or it could be watching the CEO. And everything starts to break down if the right behavior isn’t modeled, if the actions don’t connect to the words.”
Hoaglin is proud of what his company has accomplished in the past six years.
“We have made the changes that were necessary to improve our performance and improve our service,” he says. “Now we are on solid footing and we’re acquiring.” Huntington’s purchase of Sky Bank is set to close later this summer. That, too, will mean changes.
“As you get bigger, it’s harder and harder to make sure your culture stays intact,” Hoaglin says. “There will be changes about how you communicate across a larger organization, how you extend that feeling of connection across a larger employee base. But the changes we are going to have to confront in the future won’t have to do with how decisions are made or where decisions are made, or what the business model is or what your customer value proposition is. We’ve got those in place and we’re on the right track.”
HOW TO REACH: Huntington Bancshares Inc., (614) 480-8300 or www.huntington.com
He’s chairman and CEO of a bank holding company with $5.5 billion in assets, yet Dan DeLawder routinely hands out his home telephone number and cell phone number to customers of Park National Corp.
They’re printed right on his business card — along with five other ways to reach him. His willingness to be contacted 24/7 shows just how strongly DeLawder believes in personal accountability, and it’s a philosophy that has driven his company’s success. “We have a safe and secure balance sheet with strong earnings,” DeLawder says, noting that Park National is ranked fifth in the nation among large, publicly traded banks for its strong financial performance. “That allows us to do some things that other businesses might not be able to do.”
Take, for example, the string of banks purchased by Park National Corp. since 1985. None of them has changed names or been subject to consolidation or shake-ups in the executive ranks due to their acquisition by Park. It’s a long-standing tradition at this Newark-based corporation to let acquired banks maintain their own identity and personnel at all levels after merging or being acquired.
That’s why 12 separate bank names appear in Park’s financials, and the corporation bankrolls 12 marketing directors, 12 human resources directors, 12 controllers, 12 bank presidents and 12 separate boards of directors. Those numbers are expected to increase to 14 each when Park closes on a deal this quarter to acquire Vision Bank Florida and Vision Bank Alabama.
It’s an unorthodox approach in an industry that typically thrives on ultra-streamlined operations and the muscle derived from sheer size and name recognition.
Still, DeLawder wouldn’t have it any other way.
“We could save a lot of money by collapsing our charters into one and having one name, one identity, one brand and get some real marketing benefit from that,” he says. “We could have just one board of directors and just one president and save a lot of money. We spent well over $1 million in board fees alone last year.
“But we think that would jeopardize the level of success we have enjoyed. It would jeopardize the ownership, if you will, of the community bank. It would be just like everybody else.”
DeLawder calls Park’s practice of allowing acquired banks to operate in a fairly independent fashion “earned autonomy.” But it’s also a way to hold each bank accountable for its individual performance. No one is going to hide under the Park National Corp. umbrella.
Here’s how and why it works.
A radical idea
Earned autonomy wasn’t the result of a well-thought-out plan, DeLawder says. It was more of an experiment.
“In 1985, we had our first opportunity to have another bank join us,” DeLawder says. “That was Fairfield National in Lancaster. When we first joined with them, we weren’t real sure what to do, honestly. We looked around and saw the Bank Ones and the National Cities and the large banks of Central Ohio who acquired banks and immediately changed the name, changed the management, laid off a bunch of people and really changed the complexion of the organization they bought.”
Park’s executives did not feel comfortable with that approach. So Bill McConnell, who was Park’s chairman at that time, made a proposition that has since become the hallmark of the company’s acquisition strategy. “He said, ‘We don’t think all wisdom resides in Newark, Ohio,’” DeLawder says. “He said to the bank, ‘We may be the acquirer here, but we think you have a lot to offer our organization. We’d like to have you retain your identity, keep your board intact and keep your people intact, so those who want to stay can, and let’s see how this works.’ “We didn’t have much of a plan beyond that. But the business model we implemented in 1985 worked, and it continues to work to this day.”
Of course, it helped that McConnell knew the management of Fairfield National well before the acquisition and that its headquarters was just 30 miles from Park National’s corporate office, allowing close monitoring. In addition, Lancaster is a very similar community to Newark, as they are both county seats. “There is ownership of a community, a parochial attitude, if you will, that we are very sensitive to,” DeLawder says, noting that most of Park’s acquisitions have been county seat banks. “They have their identity. They’re known as the local community bank. They were before they joined us, and they continue to be known in that same fashion after they joined us because we retained their identity, and the board, and the leadership, and the associates. “We’ve never laid somebody off. Never. We’re very, very sensitive to that. Frankly, if you start reducing staff, you impact the performance level of the bank. There’s a direct relationship between people and production. Respecting the management there and the people was very important for us.”
Presidents at each of Park’s 12 affiliate banks carry full responsibility for day-to-day decision-making, as well as setting an annual budget and running daily operations.
“Each one has the responsibility for hiring and retaining and paying their people,” DeLawder says. “We oversee, in a macro view, compensation levels, but the presidents determine how much they pay customer service representatives.”
Local executives also set loan rates and other pricing.
“Now we watch that all very closely,” he says. “We compare those numbers very carefully. But that’s a responsibility they have at a local level.
“It’s like running your own little business. I don’t pontificate and tell them what they’re going to do next year. They tell us. They have ownership. And then we hold them accountable for it.”
DeLawder and Park National President David Trautman together review financial highlights — such as net income, total assets, return on equity, return on assets — from each affiliate bank on a monthly basis. These reports are also shared with the bank presidents, so each bank can look at how it does compared to the other banks.
But there are no incentive programs to reward the highest-performing branch or affiliate.
“We’re all wearing the same jersey,” says DeLawder. “We’re all on the same team. To start having individual office or bank-identified winners suggests there are losers, so we don’t go there. We’re all in this together.”
DeLawder and Trautman talk by phone with each president about the monthly numbers and meet face-to-face with them once a quarter. They praise individuals when they meet or exceed expectations — or redirect them if they are straying too far. “In our world, the easiest way to get a bank in trouble is to make bad loans,” DeLawder says, recalling a time when he had to replace a bank president and chief lending officer for unsatisfactory performance. “We allow our presidents to have enough rope to hang themselves with and, in this particular instance, they did.”
That, however, is the exception rather than the rule. Most bank leaders thrive on the responsibility and freedoms afforded them within the Park National family.
“They control their destiny,” DeLawder says. “So they take great pride in continuing to operate as the local community bank of choice. Large banks get all the attention ... but people in places like Newark, Ohio, still look to the bank as their resource, their partner. That has a lot of value.”
Earning a reputation
Although earned autonomy has been a winner in almost every case — and even the one that backslid has rebounded under new leadership — DeLawder says there was one other instance when an acquisition deviated from Park’s typical plan.
In 1994, when Park purchased First Federal of Zanesville, it was effectively folded into the corporation’s existing Zanesville affiliate, Century National Bank because Park already had a strong presence in that town. Because of that, First Federal’s CEO, who was also a member of the bank’s board of directors, retired. “He chose not to stay,” DeLawder says. “That’s been a rare instance. Every other bank that has joined us has been a free-standing community bank, and every board member has continued on.”
That track record has become something of a selling point when Park approaches potential acquisition candidates.
“After you do two or three like this, it becomes something you can point to with pride,” DeLawder says. “Others are more anxious to join you because of that style.”
Just last year, in fact, executives at Vision Bancshares Inc. wanted to raise additional capital to support increased growth but had all but abandoned the option of selling their company because they wanted to remain independent. Enter Park National. “The banks in Alabama and Florida chose to join us because they like our model,” DeLawder says. “We’ll retain their identity, their management, their leadership.”
The benefits of the earned autonomy model, however, go both ways.
“Several banks have joined us that have brought practices to us that we hadn’t known of or practiced before,” DeLawder says.
Treasury management, introduced to Park by Fairfield National and now practiced by all affiliate banks, is one example.
“We are different today than we were in 1985,” DeLawder says. “We’re better.”
The ultimate payoff
As with many businesses today, the proof of success is in the people.
So while Park National Corp. has been able to add numerous high-performing community banks to its fold over the years, it’s also been able to add top people “We’ve had the benefit of having really good people around this place who tend to stick around,” says DeLawder. “Once they get a job here, they tend to stay. You couple that with a very good, secure balance sheet, very good asset quality, strong capital and strong earnings ... you’ve got a combination that allows you to do some things that some businesses aren’t able to do. Businesses that are undercapitalized or who have a scarcity of quality people have growth limitations.”
Not Park. The corporation’s assets have grown from $2.34 billion to $5.5 billion, while its net income has increased from $41.6 million to $94.1 million in the past eight years.
And although Park’s employee numbers have grown 86 percent during that same timeframe, that doesn’t mean the corporation is opposed to streamlining where needed.
“We are able to centralize some operations that are transparent to the customer,” DeLawder says. “For example, we have one investment manager, not 12. That way, we are able to gain some operating efficiencies and maintain robust levels of profitability. That’s important.”
Park’s return on equity and return on assets — the two most typical benchmarks used to measure financial health in the banking industry — are among the best. Its return on equity is traditionally in the 80th percentile or better among banks of similar size throughout the country, DeLawder says, and in the 90th percentile for return on assets. “It’s the model,” he says. “We think each of our banks does so well because, while they recognize they have one owner and that’s Park National, they all have ownership of what they do. It’s a psychological ownership. That is so important. And we stay out of their way — as long as they do well. That’s the caveat, and they all understand that.”
They also understand — and appreciate — that the road Park took to get where it is continues to be unique.
“Are we out of step with the rest of the world? That concerns us from time to time,” DeLawder says. “But look at our performance numbers, and they tell a good story. This model is still performing quite nicely.”
HOW TO REACH: Park National Corp., (614) 221-1884 or www.parknationalcorp.com
The CEO of Cheryl&Co., a $34-million-plus division of 1-800-flowers.com, insists the amount of goodwill her Westerville-based company generates is an equal measure of its ongoing success. And she puts her money where her mouth is.
Roughly 3 percent of Cheryl & Co.’s annual sales are donated - either through in-kind contributions of its baked goods or actual cash outlays to various community nonprofit organizations.
“That’s over $1 million,” Krueger says. “It’s a big number. I’ve seen lots of publicly traded companies that give 100th of 1 percent. For the size of our company, we do a tremendous amount.”
And what return does she get on that investment?
“We don’t measure it. We can’t measure it. And, really, we don’t do it for that reason,” Krueger says. “I do it because it’s morally the right thing to do. I think human nature is such that people really appreciate companies that are trying to do the right thing. We don’t do it because we think we’ll get sales benefits or marketing benefits out of it. I’m interested in knowing that, at the end of the day, we are trying to help others.”
Krueger started driving home the importance of corporate philanthropy the day she opened her first store in 1981. She was adamant about selling freshly baked cookies but couldn’t bear the thought of simply throwing away any that hadn’t sold by closing time each day.
“So we gave them to either the Mid-Ohio Food Bank or other places in town that could use them ... like LifeCare Alliance or Faith Mission,” she says.
In the mid-’80s, Krueger’s corporate giving became a bit more personal. Her longtime friend and early business partner, Caryl Walker, was diagnosed with and eventually died of cancer.
“We did a Norman Rockwell [cookie] tin to help raise money for the American Cancer Society in the late ‘80s,” Krueger says. “I’ve also done a lot of speaking engagements over the years, and all of my donations for my speeches go to The James [Cancer Hospital & Research Institute].”
In January 2003, when The Ohio State University won the national football championship, Krueger teamed up with OSU coach Jim Tressel to raise money for cancer research through sales of a commemorative, autographed cookie jar. Tressel lost both of his parents to cancer.
“We’ve now donated over a quarter of a million dollars to the Tressel Family Fund,” Krueger says. “For a company our size to donate that kind of money, that’s a big deal. It’s a very big deal. We’re really proud of it.”
Krueger, whose own father has struggled with cancer, even donates her personal time to The James, serving as vice president of the hospital’s development board.
“I admire Cheryl for the way she gives back to the community,” says Mary Eckenrode, a Cheryl&Co. associate who oversees the company’s outreach programs. “That’s a really big thing of Cheryl’s, and I think that says a lot about the character of the person who owns the company.”
With 25 to 30 requests for donations coming into Cheryl & Co. in an average week, Krueger has been forced to carefully limit the causes her company can support.
“I’d rather be meaningful to a few than spread out to many,” she says. “We try to pick where we can do the most good.”
The other two priorities in her company’s giving program are helping women entrepreneurs and children’s causes.
“The causes we’ve chosen are near and dear to our company philosophy and, quite frankly, to my heart,” she says.
That’s key in starting and running a successful corporate giving program, she says.
“So many of our people here in our organization have been struck by cancer,” she says. “We’ve had members of our team whose parents have had cancer, whose siblings have had cancer, who themselves had had cancer. So people rally behind it because it touches almost all of our lives in some way, shape or form.”
Another key to finding true success in corporate philanthropy is to give consistently.
“You have to stay committed through good or through bad,” Krueger says. “You can’t be in a philanthropic mood one year then not the next. You can certainly cut back if you need to, but you still have to be committed.
“I think it’s great that these companies show up for the big catastrophes and want to give to that, but I’m hopeful those companies are also giving on a regular basis in their local areas. I worry about whether they’re doing it to really help the people or are they doing it just to get the publicity. If they’re doing it all the time, it has more credibility in my eyes. Not to say the gift isn’t appreciated, but the sincerity of the gift is also what I look at. And that, to me, is measured by how consistent your giving is and whether you have a plan for your giving.”
It all starts with the CEO, she says.
“It makes me sad to see companies like Enron and Tyco that did such a disservice to the business community by manipulating the numbers and by the CEOs taking exorbitant expense accounts when they could’ve used those monies to help others,” Krueger says. “I think it’s just terrible. I choose not to live my life that way.
“I choose to run a company that prides itself on giving to the community as much as we can and still returning to our shareholders because I still have a responsibility to the shareholders who invest money in the company to give them a return on that investment. But we’re going to do it the honest way.
“At the end of the day, I think there are two kinds of people,” Krueger says. “There are givers and there are takers. And I think the CEO sets the tone.”
HOW TO REACH: Cheryl&Co., (614) 891-8822 or www.cherylandco.com
Panic is never good.
It makes us act rashly. It makes our hearts race and our palms sweat. It leads us to believe a situation is more dire than it typically is.
So stop panicking about the economy. It's not worth it.
Sure, some belt-tightening is in order during business slowdowns, but some of you are scaling back too much in your rush to prevent the sky from falling. In doing so, you are actually endangering your company further.
It's easy to work yourself into a frenzy over a poor financial outlook. After all, positive cashflow is everything. And when you've just revised your sales projections downward and you need to put company expenses in line with that new figure, the hatchet inevitably comes out.
Hold on. Before you start figuring up the body count, try being innovative.
Instead of laying off your six lowest-producing sales people, for instance, switch them from base-plus-commission to 100 percent commission -- but pay them a higher percentage of each sale. That way, you don't have poor performers weighing down your balance sheet month after month, and those who can improve their sales will be adequately rewarded.
If you lose a few people under the new system, so be it. You were going to cut their jobs anyway.
Another option is barter. When money is tight, trading your product or service to cover a budgetary necessity -- office supplies, commercial printing, courier services, even rent -- could help perk up your bottom line.
If, after exploring options like these, layoffs are still necessary, step carefully. Remember:
* Every staff cut puts an additional burden on other workers who are expected to pick up the slack. Not only is that a morale killer, but suddenly those you counted on most are spending time on tasks they didn't sign up for -- and may not be qualified to do.
Frustration mounts. Their production slips and doesn't recover. It can't. You've simply put too much on their plate. You've set them up for failure. Your company will pay the price.
* If you cut down your work force to the point that every single person is indispensable -- so there is absolutely no redundancy in any position -- you're running too thin. People get sick. They take vacations. Accidents happen. You need to be sure your company can survive all of the above -- simultaneously.
* Smart companies find ways to eliminate most, if not all, the job tasks of the positions they're cutting. Slashing production staff by a third? Better phase out your slowest selling products along with those jobs. Eliminating the HR staff since you're under a hiring freeze?
Better outsource your benefits administration, since the stream of 401(k) and health insurance inquiries from "surviving" employees -- as well as the paperwork that goes along with payroll, government reporting, employee evaluations, etc. -- won't just disappear with the HR staff.
Recessions are scary, no doubt about it. But if fear causes you to cut back too far too fast, you may wind up worse off than if you'd done nothing at all. And that, my friends, just might be reason enough to panic. Nancy Byron (firstname.lastname@example.org) is editor of SBN Magazine in Columbus.
On the surface it looked like Bob Juniper, the tenacious, audacious president of Three-C Body Shop, had struck pure gold.
A highly controversial advertising campaign hurled his stagnating collision-repair business into the limelight in 1993, giving both him and his Columbus-based company instant notoriety. Within the next two years, Three-C's sales grew 110 percent to $6.1 million-a jaw-dropping 5,765 percent higher than the $104,000 the company had been grossing when Juniper bought the business from his father in 1984. As if that wasn't enough, by 1996, Three-C had earned its second consecutive appearance on the Inc. 500 list of the nation's fastest-growing private companies.
Juniper should've been on top of the world. Instead, he was hanging by a thread. Three-C's aggressive growth, and the unforeseen costs that went with it, had gotten out of control.
"I got 120 days behind on all our bills at one point," Juniper says. "I remember a time when my balance was $200,000 negative in my bank account and I was cutting checks for a $30,000 payroll that day.
"I can't tell you how we made it ⊃ I never sat down and planned this out. It just sort of happened. Somehow I kept all the balls in the air."
Be careful what you wish for
Juniper admits he asked for a lot of the growth that came his way at Three-C.
"I was always on my dad to expand the business," Juniper says. "So I saw potential at an early age. But he really wasn't interested in growing the business."
In fact, on days when the Southwest Columbus body shop got too busy, his father would routinely post a "No estimates today" sign by the road.
"He would run the customers off," Juniper says, marveling briefly at the thought. "Dad kept a steady, even flow to the business."
The younger Juniper had a different philosophy. When he took over Three-C, the "No estimates" sign went out with the trash. Let the customers come; there's no such thing as too busy, he figured.
"If it took 18, 20, 24 hours to get it done, that's what we did," Juniper says.
The move pushed revenues up almost 600 percent in the next six years, sending Three-C's annual gross past the $700,000 mark in 1990. When the business plateaued the following year, he started dabbling in radio advertising.
A "generic," name-awareness campaign boosted business approximately 10 to 15 percent, he says. Then Juniper copped an attitude.
Sore that Three-C had been shut out of a couple direct-repair insurance programs-ones where agents refer customers to body shops that charge only preset, discounted rates-Juniper started writing radio ads blasting the insurance industry. His reasoning? Direct repair was siphoning business away from Three-C. Now it was payback time.
The ads were a hit with consumers. By the end of 1993, the first full year the campaign ran, Three-C's revenues had hit $2.9 million-a staggering 141 percent higher than the 1992 gross.
"That was our biggest percent growth year ever-and it almost crushed the company," Juniper says.
When revenues grew another 55 percent the following year, he knew Three-C was in serious trouble. He just didn't know how serious. His award-winning sales figures hid all the red ink. And he was running too fast to notice.
"I had money in my pocket; bills were being paid; I figured it was OK," he explains. "I had a hunch [we were losing money], but no proof."
Juniper clearly wasn't prepared for Three-C's eye-popping growth spurt. In fact, he was hardly prepared to be a full-time businessman. His forte was knowing the collision-repair industry-not understanding the bottom line.
He hadn't a clue how to measure the financial success of his business. He knew little about building a management team. He didn't understand how to control growth-he just hung on as it happened.
As Three-C's business accelerated in the early '90s, Juniper hastily added staff to keep up. That pushed his company's infrastructure beyond its limits. He needed more phone lines, a second fax, more bathrooms, a new computer system.
"We outgrew everything twice," Juniper says. "It wasn't just once. We spent so much money on those things."
Three-C's overhead was mushrooming out of control.
"When you're growing rapidly, you don't pay as much attention to the expense line as you should," Juniper admits. "You kind of throw money at problems."
That habit threw Three-C into a dangerous cycle in which Juniper was borrowing from next month's cash flow to pay this month's bills.
"As long as you're growing, it never catches up with you," he says. "You're always paying your bills with the bigger cash flow."
When Three-C's sales started flattening out again, however, reality caught up with Juniper and delivered a stinging slap in the face. Three-C's highly acclaimed revenue figures weren't telling the whole story. The company was losing money.
"We ran losses in '92, '93 and '94," he says. "'94 was the big loser," pushing the company more than $200,000 into the red.
It was a rude awakening for Juniper whose business success was still being lauded by the local and national press. Problem was, no one had really been tracking the company's financial health until Juniper hired an accountant in 1995. By then, a lot of the damage had already been done.
"I robbed Peter to pay Paul and hoped it all worked out," Juniper says. "The increased cash flow helps you survive it, but I clearly rolled the dice."
"There was no sense of accounting cutoffs, accounting procedures, nothing," says CFO Norm Hicks, who spent nearly 10 years as controller of the Credit Bureau of Columbus before wading into Three-C's financial quagmire three years ago. "Through '94, Bob was growing and operating Three-C without the information he needed. All the accounting work was being done out of a CPA firm in Youngstown and the communication was not there. The financial information was not timely and the quality was poor. I told him he'd been operating from the gut and from the heart."
Looking back, Juniper knows it's true.
"When you have rapid growth, you're never quite sure if you're making money or losing money," he says. "You're just so focused on surviving it."
Not a moment too soon
Borrowing money to pull through his financial crunch was not an option for Juniper.
"I ran red ink for several years, so it was hard to go to the bank and show them those massive losses," he explains.
Looking internally for ways to cut costs and better control his cash flow seemed his best bet.
"I had to become a better businessman," he says.
Juniper began by negotiating 60- and 90-day extensions with some of his suppliers to help him through the months ahead. Then he worked with Hicks to convert Three-C's commercial checking account into a sweep account so the company could earn interest on it.
Staffing was another issue. After seeing his workforce swell from 11 employees in 1992 to more than 65 just three years later, Juniper knew there were "some bad eggs in there. A lot of times you can't do a lot about it because you're growing so fast you can't afford to let anyone go," he says. When Three-C's growth diminished, however, so did Juniper's tolerance. He cut roughly a dozen slackers from his payroll and instituted a regimented, three-tiered training program for his remaining staff to step up productivity and lessen mistakes.
All the while, Hicks was setting up a financial information reporting system for Three-C and teaching Juniper what the numbers meant.
"With as fast as Bob was growing, he really needed to have a handle on cash management," Hicks says. In addition, Hicks emphasized the need to get Juniper's entire management team into budgeting.
"Bob was the only one in the company that knew what it was costing-somewhat-to operate the business," Hicks says.
The discipline paid off. In 1995, Three-C turned its first profit in three years. It was less than 1 percent of gross-a "pittance" by Juniper's measure-but it was a start.
Next, Juniper did some thing he once thought unthinkable. He began turning away work. Specifically, he dropped those jobs he determined to be less profitable. A computer program helped him analyze job profitability based on any number of factors including the type of repair needed, the size of the repair and the source of the referral. He actually turned the tables on two insurance companies as a result, deciding not to repair cars from their policyholders unless the customer was willing to pay some additional out-of-pocket costs. Three-C's profit margin jumped from 41 percent to 47 percent as a direct result of that decision, Juniper says.
Just because Three-C was doing more profitable work didn't mean the company was getting paid for it any faster. So Juniper instituted a collect on delivery policy with all insurance companies.
"They screamed and yelled," Juniper recalls, "but we won't release cars until they pay."
That little accounting trick paid off big, too.
"We had $400,000 in accounts receivable at that time and I was writing off $2,000 to $3,000 per month in bad receivables," Juniper says. Within 90 days, he had less than $30,000 in outstanding customer bills remaining on the books.
By the end of 1996, the company was making roughly $500,000 in profits-a record year, according to Hicks. Now, Juniper says, banks are beating down his door.
"We're pretty strong now financially," Juniper says, adding that Fifth Third Bank has expanded his line of credit to $200,000, though he draws upon it "very sparingly."
"It's a 150 percent reversal," agrees Hicks. "We knew the potential was there. We certainly had the volume ⊃ It was just a question of how quickly we could turn it around."
Back in the driver's seat
Three-C's brush with financial ruin may have scarred Juniper a bit, but it hasn't suppressed his passion for growth. Not by a long shot.
He has reassessed his financial goals, but they remain far from modest: $10 million in sales by the end of this year and $20 million three to five years from now.
"I want a nice 25 to 30 percent gradual, smooth increase," Juniper says in all seriousness. Perhaps his idea of comfortable growth remains helplessly warped from the fast-lane mentality to which he became accustomed. Then again, perhaps it's the adrenaline rush that drives him.
"Maybe you kind of get addicted to it," he concedes. "Maybe you think you can do it a little bit better the next time around."
The next time has already begun. In the last year and a half, Three-C has expanded into Westerville and Reynoldsburg, added a production site in Lancaster, started construction on another site in Chillicothe and has plans to roll out a new claims-center prototype in Polaris, Easton or Tuttle Crossing. A fourth production site is also in the works for Delaware.
As if managing Three-C's growth isn't enough, Juniper partnered this year with Dan Schmidt, president of Infiniti of Columbus Inc., to open a separate business called Schmidt Collision Center Inc. It's a venture that could see explosive growth, too, as more car dealerships look to outsource body shop repairs. So far, three local dealers have signed up to channel work to the center, but Juniper is proceeding with caution. He's learned from his mistakes at Three-C.
"We want to grow Schmidt in a more controlled way," he states.
As for his main business, Juniper says he's better equipped to control growth there, too, now that he finally understands the type of work he really wants to attract.
"The first time around we didn't have the infrastructure and the information," he points out. "This time, we do. If it gets a little uncomfortable I can go into pick-and-choose mode and slow it down a little.
"I'm going to make sure I can turn it off this time," he vows. "Last time, I literally couldn't stop it. But I'm a smarter business person for it. I got an education you can't buy ⊃ Maybe it just has to happen this way."
Imagine what will happen to that nearly forgotten property of his, Graceland Shopping Center, if the proposed Morse-Bethel connector road ends up running through its parking lot. That lifeless chunk of outdated real estate could become a pot of gold.
Not only would Casto get paid by Columbus for the land he'd give up to make way for a couple miles of city-poured asphalt, but also the resulting thoroughfare would bring a new crowd of potential shoppers zooming by his storefronts daily.
You know he's drooling at the thought. In fact, I have to wonder if he had a hand in stirring up the Second Coming of this crusade to bridge east and west. It certainly seems he has the most to gain by such a connector.
Apparently Casto was ahead of the mayor in studying the plausibility of using Graceland in the on-again, off-again connector campaign. Rumor has it he brought his own study to a closed-door meeting at City Hall to discuss the connector this summer. Within days, Mayor Greg Lashutka had asked his friends at the Mid-Ohio Regional Planning Commission-or "MORP-C," as insiders like to call it-to take a more detailed look at a couple options for using Casto's land. Never mind that there's already one proposal pending at the ballot box in November.
But what are the chances of the so-called Rathbone Road connector plan passing at the polls next month when another, seemingly more humane plan is already in the works? Given the choice between tearing down 40 homes in a quiet, tree-lined neighborhood or dropping a road through the center of a vast, empty shopping center parking lot, I know I'd choose the latter. It's the only way I could sleep at night. But then, let's not forget the choice of no connector at all.
It will be interesting to see if Casto hits the jackpot on this one. The $500,000 MORPC study isn't due out until later this month-just in time to let voters know what alternative plan is likely to await them on the May ballot if the November proposal fails.
Should next month's Rathbone Road connector plan get tanked, should one of the Graceland options pass MORPC's logistical test, one real question remains: What will happen to Graceland's current merchants? Will those few who have stayed loyal to the aging shopping center all these years get squeezed when Graceland's property value skyrockets? The bigger mainstays like Drug Emporium and Big Bear might be able to weather the significant rent hike that's apt to go along with a better-traveled location (though with the recent financial difficulties of Big Bear's parent company, even that isn't necessarily a given). One has to wonder, however, if longtime tenants like The Fontanelle Restaurant, the Singer Sewing Center, Graceland Jewelers and Hobbyland will be forced to find space elsewhere. I hope not. I like to think loyalty counts for something. If Casto's connector eventually gets the nod, we're sure to find out where his loyalties really stand.
Nancy Byron, editor of SBN Columbus welcomes your comments by fax at 842-6093 or by e-mail at email@example.com.
Schwartz, 50, says the family trip he took to Florida those last two weeks of the year was an annual wintertime escape-not a purposeful retreat from the somber task of packing up and locking the door on the once-prosperous downtown legal firm that had supported three generations of attorneys in his family.
"I'm sure it was monumentally depressing," he says of the day Schwartz Warren & Ramirez officially ceased operations. "But I wasn't going to deprive my mother, who'd been very supportive of me, of that trip."
After all, it was Schwartz's late father, Stanley Schwartz Jr., whose powerful connections and business finesse made the law firm one of the most prestigious in town-and kept it there for more than four decades. What a heart-wrenching, even humbling decision it must have been for the younger Schwartz to have to pull the plug on it all. To cancel his traditional year-end pilgrimage to visit his mother-even as the final chapter in the law firm's history came to a close-would've been unthinkable.
"You need your family there to support you," he says. "Without that, it makes an emotionally difficult situation even harder to handle."
It wasn't a single egregious event that forced Schwartz Warren & Ramirez out of business nearly two years ago. Rather, the apparent reluctance of the management team to address ongoing personnel, financial and leadership issues allowed the firm to erode until it was virtually incapable of continuing.
"There was no backbone to take steps to allow the firm to survive," says Kenneth J. Warren, a former managing partner of the firm who is now a private practice attorney in Dublin. "No one was willing to do what was necessary."
"I probably would take more decisive action sooner if I was in that situation again," echoes Schwartz, who was one of the eight partners remaining at the firm when it dissolved.
The lesson is twofold: Business problems never solve themselves; and if you can't rectify them swiftly and completely, realize you may be digging yourself into a hole that eventually could become a grave.
Losing good talent
Schwartz became a partner in the family law firm, then known as Schwartz, Kelm, Warren & Rubenstein, in 1987.
"Those were, perhaps, happier times economically," Schwartz says. "It was a good time for law firms. We had done very well."
Well enough to be recruiting ace attorneys from the East Coast-and to be representing Les Wexner's personal investment company.
"The talent was as good as you could have in Columbus," Warren says.
As recently as 1990, the firm had more than 40 lawyers-making it among the 10 largest law firms in the city-handling cases for corporate giants such as The Limited, Bank One-Columbus and Consolidated Stores Corp. Business was booming. How could it go so wrong so quickly?
Schwartz pins the turning point on two key events in the early '90s.
First, his father, who had been with the firm for 43 years before retiring as its managing partner in 1990, died of lung cancer. Then attorneys started leaving en masse.
"The death of my father in the beginning of 1992 really deprived us of a great deal of leadership," the younger Schwartz says. "From the time he died and into the next year, there were leadership issues and people leaving and situations that never really stabilized."
The first sizable group of attorneys left the firm in early 1993, he says. According to Columbus Bar Association directories, 13 attorneys-including four of the 20 partners-with Schwartz, Kelm, Warren & Rubenstein in 1993 left the firm by 1994.
"To some extent we were able to replace those people," Schwartz says. "In retrospect, all those losses hurt."
Schwartz says he's unsure why many of these attorneys left, but Warren points to a common thread: money.
"Like a lot of organizations, in order to keep good talent, your compensation structure has to be acceptable," Warren says. "You have your categories of superstars, OK performers and the less than stellar. When people are educated as to what they may otherwise attain [outside the firm], there becomes an awareness that a lot of people are being carried. When we started to have an exodus of people, with them went sizable amounts of business. So as the base got smaller, the compensation issues got exacerbated."
Rather than trying to prevent additional departures, the firm's focus turned to recruiting new attorneys and promoting associates to replace the partners who left. But without a plan to decrease turnover, recruiting soon became a futile effort.
"Whenever you're shrinking, it's a negative," Schwartz says. "With a lot of defections, people became concerned about that."
By the fall of 1996, only eight partners remained at the firm, which had been renamed twice after the departures of Richard Rubenstein in mid-1994 and Russell Kelm in late 1995. The client list at Schwartz Warren & Ramirez reflected that shrinking pool of expertise.
"You need to have a team of specialists," Schwartz explains. "That hurt the ability of any of us to continue to work for our clients in a lot of cases."
The Limited-perhaps the firm's most notable, perennial client-was even lost amid the rapid turnover.
"A law firm is a unique business," Schwartz says. "It's a service business. Your assets go down the elevator every night. When everybody decides to go their own direction, there's nothing left."
Living beyond their means
As worries of the firm's survival mounted, the partners' attention turned to controlling expenses.
"We had too many people at the rate we were paying-too many attorneys, too much support staff," says Warren, who served as the firm's managing partner during the tumultuous years of 1994 and 1995. "We had to make drastic cutbacks."
That didn't happen. The ax got swung, but not broadly enough in Warren's opinion.
"We let a couple associates go in an effort to try to be sure everybody was busy all the time," Schwartz says. But that only aggravated the problem since clients followed those associates out the door, too. And since the firm's receivables were being used to cover expenses in the two years before its closure, the combination of layoffs and resignations sent the firm's finances into an all-out tailspin.
"We were relying on people to be working and producing to pay off our expenses," Schwartz says. "When people start leaving, they're not working and producing."
Nevertheless, few at the firm seemed willing to acknowledge the true gravity of the situation.
"People said it was a seasonal problem, that revenues were going to increase," Warren says. That, he adds, was wishful thinking. It was clear that fixed costs like rent and computer equipment needed to be slashed, too.
"We had very expensive space leased in the nicest building in downtown Columbus," Schwartz says. "That made it that much harder for us. We tried to renegotiate our space at the Huntington Center, but if you have so many square feet to run a firm of [that] size and you lose people faster than you renegotiate, it does not solve the problem."
"We needed to get out of the space we were in-by whatever means necessary," agrees Warren. "The rent was killing us. And we had a lease for a computer system that was almost one-third more than we needed. The expense was too much."
When the firm signed its rent-to-own deal on the computer system in 1992, it seemed wise to invest in the best system available. In hindsight, that was a big mistake.
"A lot can be done without leading-edge technology," Schwartz says. "Especially if customers aren't buying technology from you. Nobody comes to me for my technology. My clients are buying legal advice and services. To some degree, it helps me produce that, but the technological baseline of the legal profession is the quill pen ... Now I won't buy leading-edge technology. Pioneers get arrows in their backs."
So it was. The law firm's computer system depreciated so much that, when the partners finally unloaded it, they got 3 cents on the dollar, Schwartz says.
Looking back, Schwartz wonders if focusing on revenues might have been a better way to go. If the firm could've brought in more business-or charged clients more money-perhaps Schwartz Warren & Ramirez would've had a better chance of staying afloat.
"The real problem was the top line, not the middle line," he now says.
"If we would've downsized, sure there would've been some costs-getting out of the real-estate lease and the computer lease-but we could've [emerged] with a group of 10 to 12 timekeepers that would've been very successful ⊃ and who might have been able to think about growing the firm again," he says.
Big shoes left unfilled
In the fall of 1996, the inevitable decision was reached to dissolve the firm. Schwartz admits approaching several competing law firms before that to discuss the possibility of a merger, but nothing panned out.
"It was not a happy day," Schwartz says grimly. "I attribute my ability to get through that to the support of my family-my wife and my mother. Their support made it possible to move on."
"It was nothing that was unexpected," says Warren, who resigned as managing partner in late 1995 and nearly jumped ship before being enticed to stay with the firm in "of counsel" capacity until the bitter end. "There was a difference of opinion about what to do with the firm. I had gone to the mat over the decision ⊃ but no one was willing to take the drastic steps that some of us felt needed to be taken."
That lack of leadership ultimately sealed the law firm's fate.
"One of the key issues was succession planning," Warren says. "There was no able successor to Stanley Schwartz [Jr.]; no able successor to continue the business-myself included."
In the six years after Schwartz Jr.'s retirement, Rubenstein, Warren and Ted Ramirez all rotated through the managing-partner position Schwartz Jr. had held for more than 30 years. None of these potential replacements wielded the same influence as their predecessor, who was revered as one of the leading corporate lawyers in the country and ran in the same civic circles as the late Mel Schottenstein, former Huntington Bancshares President Zuheir Sofia and, of course, Wexner.
"Stanley was the one that really grew [the firm]," Warren says. "Stanley had the insight, the expertise and the vision to take it on to the next level.
"When you've not groomed an heir, you open yourself up to competition-and even ill will," he adds.
It was a memorable lesson.
"I will never share power again," vows Warren, who launched his own practice after his former firm's demise. "I will never give someone else the power to override a decision I see as needing to be made."
"I'm truly sorry that we didn't do something more proactive sooner," concedes Schwartz, who now serves as a partner at Benesch Friedlander Coplan & Aronoff. "In retrospect, we probably should've faced up to the situation caused by my father's death a lot sooner than we did. We could've saved a lot of people a lot of grief."
Mopping up after a business closure is messy work. There are state, county, city and IRS forms to file. There are clients and suppliers to notify. There are outstanding bills to pay-lest they turn into lawsuits and even personal liabilities, depending on how the business was organized.
Schwartz says the staff and office expenses of Schwartz Warren & Ramirez "were fully paid until we shut down." But the day the law firm vacated its space at the Huntington Center did not coincide with the end of its lease term. Within two months, Huntington Center Associates had filed a breach-of-contract complaint in Franklin County common pleas court against the firm. Court records indicate the case was settled more than a year later, with the firm agreeing to pay the Huntington Center $1.5 million plus interest and court costs.
"I've had to write some checks," Schwartz admits. "I and some others had to make some payments," though he declines to divulge additional details.
"In a situation like this, the first person out the door has the smallest loss. The last people absorb the largest loss," he says. "The prudent thing for anybody would've been to be the first person out. There were a number of reasons I couldn't do that-loyalty to my father's memory, loyalty to a number of people I worked with. I didn't want to do that."
Though his loyalty cost him, Schwartz says he's learned some valuable lessons through it all.
"A law firm shouldn't borrow money and should minimize fixed expenses," he says. "You have to spend prudently."
To Warren, the message is more about planning ahead.
"Prepare for succession," he advises. "The goal of any managing group is to make sure there is a succession plan. Make sure someone has been groomed so you don't miss a beat."
It was a risky move, without a doubt. Yet no one talked Greg Nelson out of buying a bankrupt, small-town auto dealership that had been forced by a court to close amidst charges that its owner was defrauding customers.
"I don't think Greg is the kind of person you talk out of anything-or talk into anything, for that matter," says Nelson's legal counsel, Harvey Dunn, a partner with Schottenstein Zox & Dunn. "A new car dealership was something he always wanted to have."
As it turned out, that unshakable self-confidence came in handy in making this particular deal.
Even though Nelson didn't find out about the 1989 sale of Chamberlin Motors in U.S. Bankruptcy Court until after a deal had been tentatively closed, and even though he had no prior experience in new car sales, no one was going to stop him from trying to enter a bid.
According to John Cannizzaro, a partner in the Marysville law firm of Cannizzaro, Fraser & Bridges, who represented another potential buyer during the Chamberlin Motors auction, Judge Donald E. Calhoun Jr. vacated the prior sale, giving Nelson a shot at buying the shuttered Marysville dealership.
"He outbid everybody," Cannizzaro recalls.
Although his own client, Roby Inc., went home empty-handed, Cannizzaro says he was impressed by Nelson's immediate interest in learning about his new investment.
"He seemed very earnest," Cannizzaro says. "After he had outbid everyone, Greg asked me my opinion about what it was like in Marysville; about what was important to the folks here. I thought that was insightful on his part. I told him people here want to be treated fairly. Marysville is a small, close-knit community so a lot of things depend on your reputation. If you have a good reputation it will carry you. The dealership he took over did have a tarnished reputation in this community, so he had to win a lot of people over."
That was just one of the challenges Nelson would face in turning around the Chrysler dealership he paid nearly $1 million for.
"There was almost-2-year-old product on the grounds and in '89, '90 and '91, Chrysler was in a little bit of a lull, too, so we didn't have the product and we didn't have the reputation," Nelson says. "It's one thing to start a business from scratch, but instead of starting on the ground floor, we started in the basement."
Fortunately, Nelson found the stairs quickly. Though he was a novice to the new car industry and a newcomer to Marysville, he was a veteran entrepreneur. He had already built and sold off two Columbus area companies: Mobile One, a $2 million cellular phone business, and Columbus Classic Cars, a $6 million exotic and high-end used car dealership. Those past successes were proof enough for Nelson that he could make this venture work, too.
The soft sell
Nelson's plan seemed simple enough. He knew he was an outsider. He knew the dealership's image had been tainted. He also knew he was the only game in town when it came to certified Chrysler maintenance and repair. That was key.
"We had to establish ourselves in the service department first," Nelson says. "I knew a lot of the people in the area here already had Chrysler products. I figured if we won 'em over in service, we could win 'em over in sales."
Nelson hired service technicians and sent them to school for additional training. He reinforced "the importance of the customer" with them weekly. Then he started advertising in local publications. When customers came in, he did his best to make sure they left satisfied.
"If they weren't happy, I'd eat a repair bill or step up to the plate and pay for a previous problem that occurred under the previous owner," he says. "Small-town people expect that."
The word spread quickly.
"When he came to town, I was already driving Chryslers and it seemed he did a real nice job taking care of people and customers," says Ken Kraus, director of administration for the City of Marysville. "Nobody is perfect, but if there is a problem he takes care of it and he takes care of it right now."
"The previous owner seemed more concerned with getting the money in than providing service," agrees Cannizzaro, who also drives Chrysler products-four of which he's bought from Nelson Auto Group. "Greg is more concerned with making the customer satisfied. He figures the money will come later. That's, I think, what helped him turn it around."
"Greg is just good with people," adds Dunn, whom Nelson considers a mentor as well as his attorney. "Besides being a good businessman, he's honest. People can trust him. He's well liked. He has a very, very fine reputation. He's well respected by the community he serves and he's well respected by Chrysler."
Indeed. Nelson Auto Group has won every award Chrysler Corp. can give a dealer, Nelson boasts, including four 5-Star Service Quality Awards and two 5-Star Awards for Excellence. In addition, the business community has lauded Nelson's success with an Ernst & Young Retail Entrepreneur of the Year Award in 1998 and a Better Business Bureau Business Integrity Award in 1994.
"I think it took him a period of time, because of what happened to the previous dealership, to get the trust back," says Union County Commissioner Don Fraser. "People wanted to see who Greg Nelson was and what he was about. People wanted to see if he was going to be around."
It's been nearly 10 years now since Nelson bought that small, failed car dealership a dozen miles northwest of Columbus. Today, Nelson Auto Group's 115 employees operate out of a sleek, custom-built facility that's more than double the size of the dealership's original home.
"One thing's for sure," Nelson says. "We're in business for the long haul."
Shoring up the service department may have helped Nelson win business from existing Chrysler owners-even some who may have been alienated by the previous dealership-but it didn't bring new customers flocking into the showroom. Nelson needed to boost his image throughout the community, and not just as a businessman. He needed to build a reputation as a good corporate citizen.
Nelson threw his dealership's support behind local groups such as the 4-H Club, FFA, Little League and the Humane Society. He's even provided cars for the high school Homecoming parade.
"Just about any worthwhile charity in the community we got involved with," Nelson says.
A long hallway just off his dealership's showroom floor attests to his civic commitment. It's lined with plaques of appreciation, awards and banners from assorted county and state fair livestock purchases.
"You can't come into a small town and just take from it," Nelson says. "You have to give back."
That attitude has not gone unnoticed.
"The one thing that really sticks out in my mind is the fair and him coming in and buying the livestock to help the junior 4-H clubs," says Lori Harris, membership service coordinator for the Union County Chamber of Commerce. "I think that's a big thing. He might not even look at it that way, but to me, it seems like people like to see that. They like to see business owners taking part that way."
Kraus says some organizations have become almost too accustomed to Nelson's giving nature.
"Much to Greg's chagrin, it's almost like people expect it now and they don't give him the credit that's due for being such a supporter of community events," Kraus says. "Some people understand he's still running a business and he can't give the shop away; they recognize he can't give every time. But if it's a good, communitywide event ⊃ he's probably there in some sort of support role."
Nelson's involvement has clearly won him some fans-and some respect. He's confident it's brought him more sales, too.
"They started to buy from us," he says.
"He supports the community very well," Dunn concludes, "and that's another contributing factor to his success."
Smoothing out the bumps
Pulling the dealership out from under its previous cloud of controve rsy turned out to be the easy part. Getting the finances turned around was another matter.
"We lost a lot of money the first, second and third year," Nelson says. "It was almost curtains. I had to get cash advances from my credit cards to make payroll sometimes."
Still, he persisted. Though his balance sheet showed the dealership was as much as $280,000 in the red one year, sales at Nelson Auto Group kept increasing. That kept his hopes alive. In 1992, the dealership showed its first profit under Nelson's ownership. That went back into the business to help replenish what had been lost in previous years, as did the company's profits from 1993 and 1994.
"It took almost as long to make money again as it did to lose the money," Nelson recalls. "We didn't get even for six or seven years."
Part of that was due to his increased investment in product lines. In 1992, Nelson added Jeep and Eagle to his inventory. In 1994, he added Dodge trucks. In 1995 came the crown jewel of his collection: Lamborghinis.
"I had sold a lot of used Lamborghinis under Columbus Classic Cars and, because of that, I had a following of people with exotic cars," he explains, fully aware that the racy Italian sports cars lining his showroom floor are a grand deviation from the family sedans and mini-vans that have become his dealership's mainstay. "These are people I've been doing business with for eight or nine years and people I want to keep doing business with. I just can't turn it off."
In 1997, the payoff was grand. Nelson Auto Group was named the No. 1 Chrysler multi-line dealership in the region, selling roughly 2,000 new cars. That's 660 percent of what Chrysler expected the dealership to sell that year, based on its size, location and past volume. In addition, Nelson Auto Group was named the top-selling Lamborghini franchise in the nation, selling 18 of the $250,000-and-up import cars last year.
Now that Nelson has established his dealership as a high performer, his next challenge is maintaining that crown.
"When you get up there and get things rolling fairly well, it's not easy to stay there-especially when he's very subject to the winds of the economy," notes Kraus. "It's probably harder to stay on top than to get there because you've created the expectation. He spoils his customers and if there's any slippage he'll probably hear about it."
Dunn says Nelson-who is eyeing $80 million in sales by year's end and shooting for $100 million in 1999-appears ready for that test.
"Greg is a real entrepreneur," Dunn says. In fact, Dunn says he never questioned whether Nelson could pull off the turnaround.
"A lot of the proof is in the pudding in Greg's case," he says. "He's become one of the biggest Chrysler dealers in the area and the No. 1 Lamborghini dealer in the country virtually overnight. He knows how to sell and he's a good guy. You don't get people to come from all over the country to Marysville, Ohio, to buy a Lamborghini if you don't have a good reputation."
That reputation means a lot to Nelson, too.
"Having a good name is most important in my life," Nelson says. "My word is gold. That's why I've done business with the Les Wexners and the John McCoys of the world. I can do it on a handshake deal. They know they can trust Greg Nelson. If you work really hard and treat people with respect, good things will come to you."
Business owners have a lot of rights. They have the right to set their own prices. They have the right to develop a code of conduct-even dress codes-for their employees. They have the right to protect their place of business, their employees and their customers from harm.
They don't, however, have the right to discriminate while exercising these rights. Yet that's exactly what The Kroger Co. is doing by banning a 7-year-old Columbus boy, Georgio Lee Chacon, from its play areas because he's HIV-positive.
Kroger's actions are particularly shocking because I've come to expect better from this growing supermarket chain. Its Columbus stores have done a lot to build the reputation of being good corporate citizens. This short-sighted move could quickly spoil all that.
Kroger claims it's acting out of concern for customer safety by banning Georgio-and all children with infectious diseases-from its play areas. That's a bunch of baloney. First, enforcing such a policy relies heavily on the willingness of customers to disclose private, medical information to play area workers-something Georgio's guardian generously did, but which many others might not-especially after seeing how Georgio's situation was handled.
Second, though 7-year-olds can play rough and even scrape a knee or bump a head hard enough to shed some blood, the chance of transmitting HIV to another person from such a cut is miniscule. Young Georgio would have to bleed profusely into another's open wound or into their eye for infection to even be a possibility. Casual contact won't do it. Runny noses, spitting, even contact with an infected child's urine won't do it. It takes blood-to-blood contact. Kroger's unwillingness to see that-as well as the incredible odds against blood-letting injuries occurring in a supervised play area stocked primarily with books and video games-is shameful.
By banning Georgio, Kroger has fueled the lingering stigma of paranoia surrounding this potentially deadly disease. It has also alienated hundreds of Central Ohio residents believed to be infected with either HIV or AIDS, as well as other shoppers who may find Kroger's reaction ignorant and distasteful enough to take their business elsewhere.
It doesn't have to be that way. Kroger still has a chance to show a little compassion in a very public way and reverse its decision. Such a move would surely win Kroger some community service points and allow it to dispel some enduring myths about HIV transmission and AIDS. That's certainly the right thing to do. I only hope Kroger opts to exercise that right.
Nancy Byron, editor of Small Business News-Columbus, welcomes your comments by fax at 842-6093 or by e-mail at firstname.lastname@example.org.