But thinning branches of the family tree yielded a decision that almost toppled the deep-rooted company in 1977.
It was an announcement R. Douglas Cowan vividly recalls.
''At that time, three branches of the Davey family tree held equal stock interest in the company,'' says Cowan, chairman and CEO of The Davey Tree Expert Co. ''They brought us all into a special management meeting, announced that Jack Joy would be new company president, and said, 'Oh, by the way, we're selling the company!''
The revelation jolted the loyal work force. The feared consequences sparked an employee movement within the ranks. Leading the charge were senior management members Joy (who'd been with Davey Tree since 1957), Jim Pohl (then vice president of finance) and Cowan (who joined in 1974 as corporate controller).
On the workers' behalf, they asked the Davey family to sell the company to its employees. But, believing the employees couldn't raise enough money, the family considered bids from outside buyers.
''We knew we had to do whatever it took to ensure that Davey Tree stayed in our hands. If we didn't buy the company and try to make it work, somebody else would, and we weren't willing to let that happen,'' Cowan says. ''So we immediately assembled an employee acquisition team to pull the financing together.''
Heartened that the proposed employee stock ownership plan (ESOP) would enable the worker/owners to deduct both the interest and the principal of the loan (and swayed by rumblings that many workers might defect and start their own companies), the family accepted the proposal.
On March 15, 1979, 113 employees with five or more years of service partnered in the $6.8 million purchase to become owners of Davey Tree, with more than 400 of the company's 2,500 employees participating in the ESOP.
''If you were an employee and you met certain criteria, you were a member of the ESOP even if you weren't part of the buying group,'' says Cowan, explaining that the 113 workers were part of the initial ''stock subscription offering'' (buying program) and 400 were part of the ''stock granting program'' (the ESOP).
That was in 1979. Considering Davey Tree's compounded growth rates of about 8 percent and a $275 million sales increase in two decades, the employee-owners have cultivated quite a money tree.
The new caretakers
Comparing the numbers before and after the acquisition, Cowan says net profit has mushroomed from $1 million to $12 million. In the late '70s, sales volume was about $50 million and there were 2,500 employees. By 1985, sales neared $200 million, with 5,000 employees on board. Year 2000 revenue topped $323 million.
Today, the company -- which provides tree, shrub and lawn care, grounds maintenance, vegetation management and consulting services throughout the United States and Canada -- has 6,000 workers, 450 of them in Northeast Ohio. In the September/October 2000 issue of Business Ethics, the magazine ranked Davey Tree as the 20th largest employee-owned company in the country, based on the number of employees.
Of its total work force, approximately 58 percent are employee owners who, through a 401(k)/SOP and direct ownership, own 92 percent of the company.
''As the loan was repaid, the ESOP become a combination 401(k)/SOP, in which employee contributions are partially matched with Davey stock,'' Cowan says.
David Adante, executive vice president and chief financial officer of Davey Tree, says these noteworthy numbers prove that employee ownership makes all the difference.
''Davey Tree owes a great deal of its success to its ownership arrangement,'' Adante says. ''As owners, the people who work at Davey feel responsibility for the company's prosperity. We work harder because we have a vested interest.''
That was the driving factor for employee owners who, in turn, increased the price of Davey Tree stock 25-fold. At the time of purchase, adjusted for splits, it was 47 cents a share. Today, it's $11.60 a share. Cowan says that if a worker invested $40,000 in 1979, the stock's worth would be close to $1 million today.
''I had to sell some property I owned and I borrowed money on top of that. It was a real gamble, but it's really paid off,'' says Clay Cole, a residential operations manager. ''A lot of people went out on a limb, but it was worth it.''
Indeed it was, says Cowan.
''To date, our company has created about 25 'paper millionaires,''' he declares.
Pruning for profit
When the employees climbed out on a limb to buy the business 22 years ago, the prime rate inflated to 20 percent within six months, burdening the balance sheet.
''We had four times the liability that we had equity, so we really buckled down to get rid of the debt,'' Cowan says. ''To reduce the debt-equity relationship of $16 million to $4 million to the pre-takeover figure of $10 million to $10 million, all expenditures were scrutinized, and more than a dozen marginal and unprofitable tree-care territories were shut down.''
By 1983, it was almost back to one-to-one. That same year, the company reorganized to simplify operations, capitalize on leadership expertise and develop management succession. Three executive vice presidents were appointed to manage three consolidated divisions: the Davey Tree Surgery Co. (a West Coast subsidiary established in 1928); the parent company in Kent and everything east of the Rockies; and all finance, administration and technical sections.
Then, in 1992, operations reorganized around Davey's core customer groups: utilities, residential and commercial.
''Before that, we had regional VPs in charge commercial, residential and utility customers in each region. That strategy was preventing us from maximizing on national market penetration,'' says Cowan. ''The way we're organized today is the only way we should be organized in this marketplace.''
Now, about 50 percent of Davey's total volume of business is attributed to its utility market services, which include distribution line clearance and transmission right-of-way maintenance, substation maintenance, and utility pole inventory and management.
Combined revenue of commercial and residential services -- tree, shrub, lawn care services and grounds maintenance for corporations, universities and commercial clients, and tree, shrub and lawn care for homeowners -- accounts for 45 percent of sales.
The remaining 5 percent of Davey's income is derived from technical and consulting services, formed in 1992 as the Davey Resource Group (DRG). A new sprout on this branch is Davey's natural resource consulting and environmental planning division. Launched in May 1997 as the conservation science group, this team comprises aquatic biologists and entomologists, wetlands scientists, vertebrate biologists, conservation biologists and environmental planners.
''To reach our revenue goals, DRG will have to develop its capabilities and penetrate the market as quickly as possible. Continued success will then allow us to reinvest in people, education, computer-based technologies and research,'' Cowan says.
In the meantime, Cowan hopes DRG will establish the company as ''the Harvard of the horticulture industry.''
''We want to offer the best training and education programs in the industry,'' he says, ''in addition to premier consulting services that enhance our core businesses and our national image.''
Cultivating the crop
Managing a company with 6,000 employees in the United States and Canada might be challenging for some CEOs, but Cowan says it's no problem when employees own the company.
''You hear CEOs say that a company's responsibility is first and foremost to the stockholders. In a legal sense, that's true, but if your most important focus isn't on the employees, you're going to have problems eventually,'' he says.
''We try to stay focused on our employees -- and it helps that they're our stockholders,'' he jokes.
Davey Tree's theory is that when employees are taken care of, customers get the best possible service. Customers then reward the stockholders. Encouraging employees to please those customers isn't even an issue when an employee is his own boss, Cowan says. Here, employee compensation systems are structured to reward a go-the-extra-mile attitude and foster the entrepreneurial spirit.
''As long they're a profit partner with us and do what they need to do, these folks make pretty good money,'' says Cowan.
For example, in its residential market mix, Davey has about 75 distinct branch operations around the United States and Canada. District managers receive monthly financial statements that reflect credits and debits for their sales and expenses. There's an overhead charge, and at month's end, the manager's compensation is essentially 50 percent of the bottom line profit. So it is to his or her advantage to make the branch as profitable as possible, Cowan says.
''Our salespeople are expected to sell X dollars per year of certain services, and we have volumes of information on sales by salesperson and by territory,'' says Cowan. ''But we don't track how many calls they make or monitor their close ratios. Frankly, we don't care. What we care about is the volume of sales and the quality of the services.''
Incentive differs for employees in the utilities and commercial markets, because much of that work is bid at the corporate level. In addition to their salaries, local managers receive incentives for lowering costs and enhancing safety and other concerns of that nature. They, too, receive monthly statements that reflect the performance of their operations.
''They have to be self-starters because we can't watch them every day,'' says Cowan.
As for Davey's tree surgeons, they're paid competitive hourly rates, plus overtime.
Seeds of knowledge
Although seeds of new best-business practices have replaced a few former Davey policies, employee enlightenment is part of the company heritage that remains a priority, says Cowan.
Back in 1909, Martin Davey Sr. founded The Davey School of Practical Forestry, a three-month training school for employees. Today, it's a one-month course taught at The Davey Institute, and it's called The Davey Institute of Tree Sciences.
In addition to learning John Davey's original tree surgery procedures (he invented that term and the techniques), students also scale the same trees he once climbed in Kent.
Cowan says that today, Davey Tree budgets about $2 million for education, training and employee communications. The Institute also offers other extension courses to its employees and arborist training through the Davey Tree Web site, where more than 640 people registered in the online education programs.
In the works is Davey's distance learning degree program in conjunction with Kent State University. Cowan says the two-year technical degree in urban forestry would be issued by Davey Institute in conjunction with the university.
The founding father would be proud, Cowan says.
''He was a simple man who crusaded for the proper care and conservation of trees, and all he ever wanted to do was alter a nation's attitudes about tree care,'' Cowan says, noting that Davey went into debt to write and publish his scientific how-to treatise in 1901, entitled ''The Tree Doctor.''
At the time of his death in 1923, demand for John Davey's tree services had brought annual sales to $800,000. When his sons and grandsons took over the company, they followed his principles to the letter: pay bills promptly, treat employees fairly, reward them well, deliver quality service, closely monitor expenses, and make a reasonable profit, among other caveats.
When it comes to profit, the employee owners make no secret about their desire to keep their company all in the family. Ten years after the initial employee purchase, Davey Tree had a second employee stock subscription offering in 1989, and another is currently being planned.
And a recent bylaw amendment prohibits stock from being bequeathed beyond one generation, after which it must be sold back to the company.
''We routinely receive inquires from venture capital groups and other companies in the green industry, but their only interest is to get bigger and make a lot of money, so we steer clear of them,'' Cowan adds.
Most important, says Cowan, even though the firm is now employee-owned, its founder's traditions are still in practice today.
''Our corporate personality is probably one of extreme humility. That's one of the endearing qualities about our company -- everybody's pretty down-to-earth and unimpressed with themselves.''
How to reach: The Davey Tree Expert Co., (330) 673-9511
Victoria Reynolds is a contributing editor to SBN Magazine.
- 1964 -- Came to America from Iran
- 1986 -- Joined University Hospitals
- 1988 -- Recipient of the Cleveland YWCA Career Woman of Achievement Award
- 1992 -- First woman in America to lead an independent academic medical center as president and CEO of University Hospitals and University Hospitals Health System
- 1993 -- Appointed to Hillary Rodham Clinton's National Health Care Reform Task Force
- 1993 -- Recipient of CWRU's Weatherhead School of Management Distinguished Alumnus of the Year Award
- 1994 -- Appointed by Ohio Gov. George Voinovich to serve on the 15-member Commission to Study the Ohio Economy and Tax Structure
- 1996 -- Recipient of the Cleveland League of Women Voters Belle Sherwin Democracy in Action Award
- 1996 -- Recipient of the Ohio Federation of Business and Professional Women's Clubs Women Mean Business Award
- 1997 -- First woman and first CEO of a not-for-profit organization selected to chair the Greater Cleveland United Way Campaign
- 1998 -- First woman chosen to receive the Business Statesmanship Award from the Harvard Business School Club of Northeast Ohio
- 1999 -- First woman chosen to receive the Business Executive of the Year Award from the Sales & Marketing Executives of Cleveland
- 2000 -- Featured by Crain's Cleveland Business as one of the nine most influential agents of change in Cleveland over the past 20 years
- 2000 -- Recipient of Woman of Achievement Award by Women's City Club of Cleveland
- 2000 -- Inducted into Inside Business magazine 2000 Business Hall of Fame
- 2000 -- Recipient of the March of Dimes Golden Mile Award for leadership in saving babies
Five years ago, at the age of 30, Scott Wakser left a high-salaried sales position with a national medical device manufacturer to set out on his own.
He had one mission: to show his former employer, and a handful of national, billion-dollar companies, that he could compete in their exclusive arena.
Today, Wakser is president of DiaMed Inc., a company which has grown to more than $6 million in sales, and is doing exactly what Wakser and Vice President Doug Sharpe said it would when they founded it in 1995. By staying local and focusing on customer service, the medical supply distributor has carved out a niche in an industry that has historically been dominated by a small handful of national players.
"I've always had the entrepreneurial spirit," Wakser says. "I didn't see myself working for someone else my whole life. When I was growing up, I had my own lawn service. I've always been a hustler that way."
While Wakser and Sharpe have focused on building business one physician office at a time in a limited territory that includes Ohio, Michigan and Western Pennsylvania, the two received confirmation of their success late last year when they won a $2 million contract from University Hospitals of Cleveland.
DiaMed is now the exclusive vendor of physician supplies to UH's 170 physician offices. And that hasn't gone unnoticed.
When Wakser and Sharpe left their sales positions at New Jersey-based Q-Med Inc., which develops, manufactures and sells medical devices and systems, to start DiaMed, they were told, "We'll have you out of business in six months," Wakser recalls.
"At the time we started, they [our competition] laughed at us," he says. "Twenty-four months later, they tried to buy us."
Physician Sales & Service Inc., a $1.3 billion medical supply distributor, based in Jacksonville, Fla., approached DiaMed with a $2 million purchase agreement in 1997, he says. The partners refused, but Wakser keeps the agreement in an easily accessible desk drawer, pulling it out on occasion as if to remind himself how quickly things can change.
Today, he says simply, "They respect us."
What makes DiaMed's success noteworthy is not necessarily the exclusivity of its industry, but the fact that the small North Canton company does not sell on price or product.
"We sell the same thing that the billion-dollar businesses sell," Wakser says. "There's no difference. Price does not create loyalty. The difference is what you will do."
So far, Wakser has shown his customers that there isn't much of a limit to what he will do for them. Rosanna Boveington, lab manager of Ohio Family Practice in Fairlawn, has used several suppliers over the years, but five years ago switched to DiaMed for the majority of her practice's supplies.
"When I need something, I call and talk to the same person every time. That's very important," she says. "If I have a problem, Scott sometimes comes himself."
It was that personal attention that Wakser noticed was missing from the industry when he decided to leave Q-Med. He and Sharpe gambled on the idea that enough of the industry's clients would sacrifice a big name for the personal attention they had never received.
"I thought, 'What a great idea,'" he says. "We would be the guys to service the equipment, to train the doctors how to use it, to show how to bill the products, and to really focus on service.
"Make the customer feel like a king, that was our goal."
While many entrepreneurs make that promise in the start-up stage, few are personally overseeing its execution five years down the road.
One of the ways Wakser personally monitors every customer's satisfaction with DiaMed is by sending out, reading and responding to customer surveys. He asks every customer to grade DiaMed's performance on a quarterly basis in areas such as customer service, sales representatives' knowledge and responsiveness and product quality and delivery.
The last question asks whether the customer would recommend DiaMed to an associate. Wakser says that if any of the questions come back with a poor rating, he calls the customer to attempt to rectify the problem.
But that's not to say he takes sole responsibility for maintaining high customer satisfaction levels. Visitors and clients will spot customer service programs in nearly every area of the company, starting with the friendly voice that answers the phone, "Hello. DiaMed: the company that cares."
Other customer-satisfaction measures include:
- A training program in which every new employee works a shift in every department of the business.
"I've worked the warehouse, and everyone here has packed a truck," says Wakser.
This training corresponds with his belief that every position is as important as the next one.
"I'm no more important than the delivery guy. He's the guy who's going to see the customer five times as much as I am," he says. "If you can't focus on 'we,' you have no company."
- All new customer service reps are given mirrors for their desks. This one's simple: Wakser believes that a smile is heard through the phone, and he wants to make sure his employees are smiling when they're talking to customers.
- The first office visitors approach upon entering DiaMed is Wakser's. His office, while small with barely room for two guest chairs, is the first in the building.
"I want everyone to know they have a right to see me and to talk to me," he says.
While the showroom houses an assortment of products including diabetic shoes, scooters, wheelchairs and walkers, for most customers, it's easier to shop from the convenience of their homes. DiaMed staff brings the products to the customer, then helps them with assembly, usage information or insurance coverage needs.
Wakser plans to continue to grow the retail side of the business, which accounted for $1 million of the company's sales in 2000, again selling the products on service, not price.
"We believe that within the next five years, we will be the dominant force in medical distribution in this area," Wakser says. "We know this marketplace. That's all I want to understand. I stay with what I know, so I don't lose my focus." How to reach: DiaMed Inc., (330) 966-7264
Going up against the big boys
Scott Wakser looks at his company's size as an advantage, not a weakness, in going up against his billion-dollar competitors for contracts. Here are three ways he uses DiaMed's size to his advantage:
1. As a smaller company, he is able to respond to the needs of his clientele more quickly, because he doesn't have bureaucracy to go through, he says.
2. A more focused organization can bring better service to the table, he says. A large company has lots of contracts, so each customer is one in a million. As a smaller company, the bottom line is that each company's business is imperative.
3. Selling by reference. Sell through other customers. Wakser develops a referral list that includes letters from happy customers on why they have chosen to do business with him.
"Whenever I have a good client, I always ask them to write a letter about why they chose us, and why they continue to do business with us."
Many owners cite the work ethic and the good deeds of their employees when explaining their company's success.
And while no owner would dare say his or her employees have no impact on the bottom line, few could admit to having the role Scott Robertson has in hand-picking the people who work for his company, Robertson Heating Supply.
Robertson not only attributes his company's success to his employees, he believes so strongly in the impact each person can have that he personally takes part in the interview and selection process of each employee. And with 240 positions, including 100 he labels as key management, that's a big responsibility.
Robertson, who majored in personnel management in college, has been president of the family-owned company since taking over from his grandfather in 1991.
"Over the years, we have built the company with people who are high on integrity and honesty -- down-home type people who are customer-friendly," he says.
He says finding the right people takes more time and requires more of a commitment from managers, but the results are worth it.
"Our top managers understand that an employee's attitude will far outweigh what we can teach," he says. "We can change or improve an employee's knowledge of a job or of the industry, but we're less likely to be able to change your attitude or work ethic."
Maintaining a turnover rate of less than 5 percent is just one of the benefits the time-consuming search process offers.
Robertson Heating Supply's sales jumped from $55 million in 1994 to nearly $80 million last year. And with a fully automated distribution system in the works, including a distribution center in Alliance that is completely bar coded, Robertson expects sales to continue to rise.
The company was founded in 1934 by John Robertson, Scott's grandfather, out of a warehouse in Alliance. Since then, the plumbing and heating wholesale company has expanded into 27 locations in Ohio and Pennsylvania, including two retail lighting centers in Columbus and Belden Village. Since 1994, the company has acquired two wholesalers and opened three wholesale outlets in Wooster, Sheffield Lake and Toledo.
Robertson says most of his family still works for the company on a part-time basis -- including his father, Ed, as vice president -- while he and his sister, Sue Neil, a corporate secretary, work full-time. How to reach: Robertson Heating Supply, (330) 821-9180
In a world of pure imagination, all things are possible, and if Ken Keuchel had an alter ego, it would probably be Willy Wonka.
Keuchel's 27,000-square-foot manufacturing area at Spunfab Ltd. in Cuyahoga Falls is as awesome as the fictional character's chocolate factory. But instead of a bizarre Wonkavator that churns out Everlasting Gobstoppers, Keuchel's extraordinary gadgetry produces a specialty product called a hot-melt adhesive web, which supplies unlimited markets.
The process starts with fine polymer pellets, ground and melted in an unusual, two-story extrusion apparatus. The hot, liquefied substance is squeezed through a series of holes in an extruder, which sprays the filaments onto a conveyer system.
These molten fibers fuse to form a sheer, web-like fabric. After being stretched to a specific thickness and cut to various widths, this nonwoven dry adhesive web is supplied in a roll, tape or sheet form.
Now imagine the markets. Spunfab's lightweight webs can bond materials such as textiles, foams, wood, metal, glass and plastics. Manufacturers at home and abroad (primarily European markets including the United Kingdom, Germany, France, Italy and the Benelux region) use them to bond and laminate everything from the foam rubber in ballistic tank covers to the reinforcement panels in Victoria's Secret bras.
Shoemakers use Spunfab webs in hiking boots and sport shoes. Garment manufacturers apply the bonding and antifray capabilities in garment construction, such as belt loops, trim and appliqu. Automotive uses range from bonded seat components to door panels. Spunfab's webs are used for bonding fabric and leather to foam and felt, aluminum to vinyl, backing scrims to fabric, wood, veneer and cork -- the possibilities are infinite.
With limitless choices in his unlimited market, Keuchel is like a kid in a candy store. But as president of Spunfab, his greatest challenge lies in a systematic approach to securing these markets, while controlling his growth.
"It's easy to grow when you're small, but every business evolves, and when you get to a certain size, you need larger growth opportunities to continue at the same percentage growth," says Keuchel, 38.
Since starting Spunfab in 1987, Keuchel has had to constantly rethink his growth strategy.
"You can become overwhelmed and grow too fast by approaching things wildly, and it's hard to restrain yourself from going after all the possible sales," he says. "But you really have to take control and find a systematic approach to growth, or things get out of hand."
Let's go fly a kite
Imagination is the highest kite you can fly, and Keuchel says that if not for his father, Spunfab wouldn't be a high-flying firm.
Herb Keuchel, a Spunfab consultant, has been playing the polymer game since the early '60s, having previously owned a successful polymer engineering and research consultancy. After selling his company in 1979, he independently developed a patented engineering process for nonwoven fabrics.
In 1987, several customers in the industry prodded him to get back into business to service their technical and product development needs.
"Dad told them he wasn't interested in manufacturing, but he might know somebody who was," says Keuchel, who was at that time finishing his graduate studies in polymer engineering at the University of Akron.
"That's when my father called me and said, 'I've got a new process you can use to make adhesive, nonwoven fabrics,'" Keuchel recalls. "He said he'd help me transition the process, try it on a few customers he had lined up, and if it worked out, we'd take it to the next phase and I'd have myself a manufacturing company."
There was one snag. The graduate student had already accepted a position at General Electric Co. in New York.
"When I called them to quit a month before I started, they wished me well, sent my name plate to me and said they'd re-extend the job offer if I ever wanted it," Keuchel says. "I kept the name plate and put it on my door here."
Keuchel's connections with the University of Akron benefited Spunfab's early launch and ongoing research and development endeavors. Today, he continues to rely on the university's Applied Research Facility in the Polymer Science Building for analyses and other needs. But like Willy Wonka, he has his own fancy technology, fascinating to Spunfab visitors.
"People who come here are fascinated by the breadth of application in our lab. We're doing an intimate apparel application next to a carbon fiber composite application, a medical application next to a ballistic tank cover, and so on. The range of processes and products blows them away," Keuchel says.
Considering Spunfab's 10 different markets and its international dynamic, one might assume the company boasts several hundred million dollars in sales. Keuchel won't reveal his revenue but does say he captures one-third share of the markets he serves. The challenge is in choosing which markets to target and managing the overwhelming response resulting from product releases and trade show exhibits.
One week, Keuchel will exhibit at a nonwovens conference, and three weeks later at a textiles conference. The following month, he's exhibiting at an automotive trade show. There are cloth and fabric trade shows, composites shows, filters shows. With so much ground to cover, a strategic focus is crucial.
"We have to approach each of these markets systematically and cover them, but we can't just grab every application out there,'" he says.
When contemplating requests to supply certain markets, Keuchel consults his checklist: Why should we consider that market? Can we readily produce that product? If not, what technology must we invest in, and what's the cost to get into that market? Do we have the in-house expertise to develop that process? What about competition? Would the margins be there? Can we actually fulfill this market need?
"We could enter several markets that might literally double our business just by approaching them, but if we hooked a big fish and lost that one customer after acquiring debt to accommodate it, we could possibly lose our entire business," he says. "It might look like a good growth opportunity, but sometimes we just have to forego it."
Keuchel's philosophy resulted from hard lessons learned. Initially, he targeted traditional markets for his adhesive webs, such as garment and automotive industries. As his trade show activities increased, so did the opportunities he saw. Textiles. Filters. Industrial applications. Medical markets. Even wet suits. Excited, he reached for the brass ring -- and fell flat on his face.
At Keuchel's first composite show exhibit, he was hammered about making composites for compounded bicycles, carbon fiber-reinforced airplane parts and the like. He admits he was completely unprepared for the composites industry, lacking an understanding of its applicable technology.
At his first filters show, similar demands involved FDA-approved products, for which he was unprepared.
"We had to scramble to look at our existing product line and determine if we could actually develop products for the filters market. That wasn't very smart, and we learned from that," he says.
If only he had thoroughly surveyed the filters market and understood it better, he says he would have proactively obtained FDA approval for certain products, and could have closed on sales at the show.
"Now I firmly believe in walking a show first for a couple of years to understand the market and be prepared for that industry," he says. "It's a matter of selecting the right trade show and knowing that once I exhibit in that market, I'll have to deal with the response from that particular industry.
"If I can't, I've excited potential customers who will just find someone else to fill their needs."
Fine-tuning and forecasting
Some entrepreneurs take big risks by "shotgunning" a new product. Keuchel says that tactic backfires.
"What happens if you introduce a new product and it turns out you can't really produce it yet? You lose your reputation, that's what," he says.
That's why Keuchel takes on one customer, with one application, watching the product "go through the system" for three or four production runs.
"We may do that for six months, fine-tuning our process, getting experience with several runs before we decide to turn it over for standard production and target a broader customer base," he says. "This also makes you more confident in your ability to make it on a larger scale."
The practice resulted from a lesson learned in Spunfab's development of an electrometric fabric for the wet suit industry. Customers literally wanted to stretch the fabric beyond its structural capacity, and Keuchel was swamped with orders to revamp the product.
"We got a couple of black eyes in the wet suit and orthopedic markets, because when you're the only producer of that product and a customer invested in equipment for you to try and make it, you have a bad reputation at that point with that customer if you can't do it," he says. "We've since perfected that product, but it took us two or three years to do so."
Keuchel also learned it's crucial to forecast -- not just product cycles, but capacity. He painfully recalls when Spunfab ran out of capacity five years ago. In moving to his current facility, he discovered he hadn't planned well enough. The new building wasn't completed on time, but because he had already sold his former building, he had to vacate.
"In the process of shutting down the machines there and starting them up here, our business increased by 25 percent, but we couldn't supply those new customers because we had a hard time supplying our existing ones," he says. "It hurts to think of all the business we lost during that time."
Consequently, Spunfab operated hand-to-mouth for about a year.
"Now I constantly analyze to make sure we have excess capacity, so I'll never be out of capacity again," he says.
Keuchel says he currently sits on expansion plans that will enable him to expand by 50 percent in a four-to five-month period, and obtain the necessary machinery within two months.
"All these lessons were important because the whole point is that if you excite a market but cannot supply it, that opens up opportunities for competitors," Keuchel counsels. "Even though you've done the legwork and you've laid it out, if all of a sudden you land a big fish but can't supply them, you're sunk."
"As your company matures and grows to a certain size, you have two choices: You can either hire a professional manager or you can make yourself into a professional manager," Keuchel says.
It takes a wise man to admit his weaknesses, and as Spunfab matured, so did he.
"We were experiencing tremendous growth and I recognized a gap in trying to be a scientist and a businessperson," he says. "I understood the products and the processes, but I lacked business ability."
To meet his own needs, Keuchel completed the owner/president management program at Harvard University, spending three weeks a year there between 1995 and 1997. The payoff came in '97, when Keuchel earned the Governor's Excellence in Exporting Award for a five-year revenue growth in exports. And in 1999, Spunfab won a Cascade Development Corp. award for revenue growth over five years.
"Back then, we were averaging about 26 percent growth per year. We've slowed our growth since then, so averaged over the last five years, it would be about 14 percent per year," he says.
All along, Keuchel's quest has been to secure myriad markets while controlling his growth. Now, with polished processes, a firm market foothold and 58 employees, he doesn't have to pull the lever on unrestrained growth.
With a chuckle, Keuchel admits, "Given the economy of 2001, that's controlling the growth for us!" How to reach: Spunfab Ltd. (330) 945-9455; www.spunfab.com
Victoria Reynolds is a contributing editor for SBN Magazine.
To err is human. How well we recover -- and learn -- from our mistakes, however, can mark the difference between success and failure.
SBN often asks business leaders to divulge how their biggest missteps impacted their companies. Our reason for doing so is simple: Often there's more to learn from a mistake than a success. And, for some reason, lessons learned the hard way tend to stick with us longer.
That's why, for the second year in a row, we're devoting our cover story to the topic of business blunders. Based on the feedback we got last year, you learned quite a bit from the stories local CEOs were willing to share with us last time around.
So read on and find out how some of the best and brightest leaders in corporate Columbus -- taken from our SBN Power 100 list published in February -- have learned from their mistakes.
If you own it, act like it
Business was going well in 1993 when J.F. "Jeff" Keeler, chairman and CEO of Fishel Co., decided an expansion was in order.
He acquired an Indiana company called Johnson Brothers, making it a division of Fishel but leaving it with its own operations and its own identity rather than changing its red and white trucks to Fishel's signature yellow and making its employees Fishel "teammates."
Keeler's mistake: his decision not to "Fishelize" the new acquisition. It took more than five years to recover.
Over the years, Keeler has built his family business into a proven success by strictly following the Fishel culture. For 10 years prior to the merger, "teammates" had been sharing in the company's profits -- one-third before taxes, in fact. By that year, Keeler was sharing more than $700,000 with employees, who received about four weeks pay as their cash profit sharing.
"Some of my friends say, 'Keeler, you're crazy to be sharing that much,' and my answer is, 'I'm not crazy. It makes the pie bigger and there are more teammates that care about the health and the profitability and the quality of the company,'" he says.
Johnson Brothers, however, which was a 100-employee carbon copy of Fishel's telecommunications and utility construction services, was doing well on its own. Keeler decided to leave it alone rather than change something and risk problems.
"What happened is you let it alone and it floundered. It was like a ship without a rudder," he says, noting that the owner stayed on with the company but didn't provide much direction after the acquisition.
"Their employees never really felt like they were Fishel teammates. And they didn't take leadership or direction very well," he says.
The acquisition lost money five years in a row, totaling several hundred thousand dollars.
"It took us about five years to do something about it, and basically that was to put a Fishel teammate in charge," he says.
"We painted the equipment yellow, put (the employees) in our benefit plans and our training programs. And we made it part of Fishel Co. instead of a division of it. We changed the name and called it Team Fishel instead of Johnson Brothers," he says.
The turnaround was almost immediate, once the employees' attitudes changed. Profits returned within about two years.
Keeler says he learned two lessons from the experience.
"When you buy it, you really own it, and you need to integrate it into your existing business," he says.
He'd immediately "Fishelize" any future acquisition.
That day hasn't come yet, though, mainly because of the second lesson he learned.
"We would buy a company that would not be in the exact same business that we're in, but that would be a specialty subcontractor with a set of skills we don't already have," Keeler says. "If we know how to do it, we'll start it ourselves.
"We've opened an office since then in the Washington, D.C., area, and in Orlando, Denver, Houston, and we're in the process of opening one in Tucson. We're doing that all with homegrown, Fishelized teammates, and it's a lot less expensive than buying into the marketplace."
Keeping with the Fishel culture and maintaining the profit sharing practice has not only been successful for the $265 million company, it has brought personal satisfaction to Keeler.
This spring, he had what he calls "the thrill of a lifetime" when, at a quarterly meeting with 650 teammates in Phoenix, he passed out $1.3 million worth of profit-sharing checks in one hour.
"That was a new record for me," Keeler says, "and it was a thrill to look out in the audience and see that many people that were part of the team and contributing to help make a profit." How to reach: Jeff Keeler, 274-8100
Hire people with the right passion
Samuel Gresham Jr. will never forget the time he entrusted an employee to plan a big event for the Columbus Urban League and the caterers showed up wearing toga-esque outfits.
"I told him to go ahead and plan it, just show me the agenda and I'll give you that freedom," says Gresham, president and CEO of the urban league, of the young, male employee who coordinated the event about eight years ago for the league's Center for Change and Leadership (now known as the Center for the Study of Urban Life).
"What he did is he hired the Hare Krishnas to prepare the food, and I had all these straight-laced people coming in in suits. I tend to deal with community people who are very conservative. And here we have these bald-headed people with white sheets wrapped around them serving the food. That was embarrassing. He said he had a caterer for the food. I didn't ask to see all the details.
"I trusted him to that extent. Obviously, his expectation and his understanding of what is acceptable in a business setting, and what isn't, was very different from mine."
Gresham eventually fired the employee -- but not just because of that incident. It was clear to him that this young man's true passion wasn't in event planning or public policy or even advocacy, which were the key elements of his job at the urban league, a $5.6 million organization.
"He had a master's degree," Gresham says. "He was great for writing papers and doing the analytical work, but he just had a quirky personality. He went off a little farther than other people would go. During staff meetings, he would quote Shakespeare. It would irritate people. We're in here talking about how we're losing money or struggling because we're not meeting goals and nobody wants to hear Shakespeare."
Gresham says this former employee is now pursuing a career in teaching literature.
"That's probably a more fitting position for him," he says.
Figuring out the true interests of job candidates has since become an essential element in Gresham's hiring process at the urban league.
"The biggest mistake I make with people is I don't find that passion," he says. "People come in because they want a job. What I try to find out is what their passion is: What do you really like to do? What gets you upset? What makes your juices flow? I try to make sure what they're applying for is really what they want to do."
That's why Gresham's screening process also includes multiple interviews.
"I won't hire a candidate unless I've met with them three times," he says. "Once in the morning, early, to see if they're going to be on time. Why? A 10 o'clock meeting is not hard. A 7 o'clock meeting is hard."
The second meeting is always over lunch, to see how they handle discussing business during a meal.
"If you set them down to do a deal and they eat like a pig and they chew with their mouth open and they don't know how to use the napkin, people say, 'Yuck,'" Gresham explains.
The third meeting involves making a presentation to Gresham on a topic he tells the candidate to research.
"A lot of people get upset because they don't think they should have to do that," he says.
But it shows Gresham the candidate's drive, research skills and analytical abilities -- along with his or her composure in making a presentation.
Besides, Gresham adds, job candidates can put on a happy, polite demeanor the first couple times you meet them, but by the third time, they've let down their guard.
"You see things in that person they can't hide anymore," he says.
Another screening tool he uses to help identify the true abilities and interests of potential hires is to ask them about the last book they read or movie they saw. That, he says, can offer some interesting insights.
Gresham uses some of the same techniques with the league's 65 employees to make sure their jobs continue to be well matched to their interests.
"I manage by walking around," he says. "That's when I pick up most of my information about what's going on with people. They don't have to tell you. You know just by being around them. If they're unhappy, they're not going to be productive."
For example, he once had an administrative assistant who outgrew the position.
"I moved her to senior vice president of development, and she's flourishing," he says. "You just have to figure out what their passion is." How to reach: Samuel Gresham Jr., 257-6300 or email@example.com
Find your true identity
Ask Sandy Harbrecht about her biggest business mistake and the conversation quickly turns to regrets: about not being bold enough or tough enough; about seeing her gender as a hurdle to overcome in the business world; about not publicizing her company's accomplishments aggressively.
But the more she talks through the challenges she's faced in the past 15 years as president of Paul Werth Associates, the more her regrets begin to center around one specific oversight, which -- if not pointed out to her by a couple astute clients -- might have left her company floundering in the midst of a serious identity crisis.
Harbrecht cannot pinpoint when the real problem began -- and that, in itself, reveals the potential gravity of the situation. She only knows that about eight or 10 years ago, she suddenly realized her firm had gone off in a direction that more closely resembled consulting than public relations -- and nobody seemed to know it.
"It was a natural evolution for us to move the company into a consulting and strategic organization," she says, noting that her firm even developed a specific research model to help clients more thoroughly explore what their real internal and external communication issues were and how to best address each of them. "But we really didn't talk about the model or let the marketplace know we had a particular point of view."
Because of that, corporations were still coming to Paul Werth for brochure and other typical mainstay PR services. That wasn't the kind of work Harbrecht wanted to do anymore.
"We're really much more of a business adviser," she says.
Still, she had trouble turning those jobs away. Her inability to do so fed the misconception that Paul Werth was still a traditional public relations firm.
Fortunately, her clients soon realized the change and began pointing it out to Harbrecht.
"Our clients would say, 'I didn't know you did that,' or 'You're more of a management consultant,' or -- How did he put it? -- 'Meeting with you once a month, I don't need a psychiatrist.' That's when it really became clear to me that we were different," she says.
"Because it came so naturally, I didn't realize it. It didn't feel like a value. It took a few clients to discover it for me."
Yet even after the realization struck her, "I still was reluctant to promote it," she says.
It's the old story of the cobbler's children who have no shoes. Harbrecht always put promoting her firm at the bottom of her list. Her clients took priority.
"Here we had something unique and, if our clients had something unique, we'd tell our clients to tell the world, but we weren't telling the world," she says. "It definitely was hurting us."
Although Harbrecht says, "It took some courage to say we're different," she also acknowledges that not addressing her firm's divergence from traditional PR work could've hurt her company even more.
That's why Harbrecht is focusing on talking more about her company's consulting, strategy and research work now.
"We are using case studies, which we really wouldn't have done before," she says. "It gave us a greater appreciation for how we are unique and how to articulate that. Now clients aren't just coming to us for a Band-Aid solution, but for a real in-depth look at how communication can help take them to new levels of performance and success.
"Discovering all this has really changed the business -- to the point that I'm not sure that we're a PR firm anymore," Harbrecht says. "I think we're much more of a management consultant."
A name change is even under consideration for the $4.84 million firm.
"We're working on that now," she says. "I think we're going to change the way we describe what we do. There's been a lot of angst over, 'What do we call ourselves?' But whatever we decide, it's going to be evolutionary. I'm not going to hold a press conference and say, 'This is our new name.' It will simply evolve into different language."
As part of her company's rebirth, Harbrecht is correcting another past mistake. She's learning it's OK -- even smart -- to turn away business.
"It would've saved a lot of sleepless nights if I'd learned earlier to say, 'We're not going to take on this client,' or 'We're not going to respond to this RFP.'
"It helps the whole organization to have a common sense of what we want to do and what we don't -- and to have the courage to go after what we want to do based on who we are." How to reach: Sandy Harbrecht, 224-8114 or firstname.lastname@example.org
About three years ago, Tim O'Dell learned one of his biggest business lessons: Ask questions before you make assumptions about your customers.
The president of Fifth Third Bank, Central Ohio, says the bank made a critical error when it merged with State Savings Bank.
The significance of the merger wasn't lost on Fifth Third's Columbus area management: The bank's assets went from $1.6 billion to $2.1 billion after State Savings came on board. What they failed to realize, O'Dell says, is how the merger would affect customers.
"The mistake we made was we didn't realize how important it was to the State Savings customers that they retain their existing account numbers for their State Savings accounts," he says, pointing out the bank's well-established, long-term customers had grown accustomed to their accounts after years of loyalty.
"We asked them to change. Instead, we should've changed to be more accommodating to them," he says.
He doesn't think the bank lost customers over the mistake, but it sure started the relationship off on the wrong foot.
"We created a bit of irritation, a bit of a rub there, that could've been handled better," he says. "And we heard about it."
O'Dell won't make the same mistake again, and Fifth Third Bancorp's brass in Cincinnati also learned from the experience. In Fifth Third's latest merger, this one with Old Kent -- which is adding about 1 million customers to the bank -- Fifth Third will be more flexible and allow customers to keep their account numbers.
Now, he's also doing a better job of listening.
"Before we would make any changes like that, we would sit down with a sampling of our customers and get their reaction," he says.
Every month, he personally reviews the several dozen customer survey cards received by the bank; the majority are responded to personally by the appropriate person. The cards are mailed to customers and are available at all banking centers. Retail, commercial, mortgage and general banking customers all have the opportunity to give input.
"It allows us to be able to applaud the great customer service and to address any glitches we may have in customer service," O'Dell says.
In addition, in early 2000, the bank initiated the Community Advisory Forum, in which about a dozen representatives of the community meet quarterly with O'Dell and all bank division heads to discuss how Fifth Third can better serve the community at large.
One change put into action as a result of a suggestion from the group: a church lending specialty at the bank that provides services such as treasury management and lending for expansion. Making the community and customers a part of the process, O'Dell says, creates better support for the bank.
"The biggest mistake is assuming that we have all the answers," O'Dell says. "If we just ask for input and do things in a collaborative effort, there's a lot of power in that." How to reach: Tim O'Dell, 223-3909 or email@example.com
Sometimes you just have to let go
When Sue Doody started Lindey's Restaurant 20 years ago, firing unsatisfactory employees was a task she avoided at all costs.
"I think it was like severing a relationship with a family member. You felt like they were part of the group, and you were reluctant to say, 'It's time for you to move on,'" she says.
She wanted, after all, to run the business like a family.
"I wasn't in the restaurant business before," she points out. "I was a homemaker and mother of four and bought this place because I love to cook and love great food and knew how restaurants didn't always have the best food.
"As I told all my managers: I want it run just like my house," she says of the roughly $5 million, 120-employee business. "If you have company coming into your house, you want to do everything possible to make their stay a fun, nice, enjoyable experience and cook the best food and everything else."
A few years into the business, she got an unexpected reaction when she fired a waitress who just wasn't putting forth her best effort.
"She was such a wreck when she was waiting on tables, and when I let her go she came to me and was relieved. She wanted to succeed but she wanted to succeed for me and not herself. I was letting her (let) go of that tension," Doody says. "It really wasn't her cup of tea."
Later, Doody fired a long-time member of her managerial staff who obviously wasn't happy enough in the job to perform well.
In both cases, Doody had waited weeks before making her move -- a decision she now realizes should've been made as soon as possible.
She discovered she needed to focus on hiring and keeping staff who would buy into the theory of how she wanted the business run and how she wanted the customers treated. Others would simply have to go. Doody couldn't risk the possibility that guests would be reluctant to come back because they had an experience with an employee who wasn't congenial.
Still, for a time, she had to adjust to the idea.
"It was hard because I build up a good relationship with my employees, I think, and try to be interested in their personal lives as well as their lives at work and their best development," she says. "It's hard because you're kind of torn, but you feel like you're doing the best thing for yourself as well as for them -- but change is tough."
Doody always had a general manager who took care of hiring at the restaurant, but now she's added even more levels of scrutiny.
"Now we screen candidates much more carefully," she says, adding that she typically does not hire people who are going into food service for the first time.
In addition, several people, rather than just one manager and Doody, now interview candidates, and there's an orientation period when Lindey's management can find out more about the employee and the employee can learn more about the business.
"It works from both sides," Doody says. "If they aren't going to be happy here, then it's not going to be good for us or them." How to reach: Sue Doody, 228-4343
The Ernst & Young Entrepreneur Of The Year Award wouldn't be possible without the support of its sponsors. Not only do they provide the backing to help Ernst & Young present the Entrepreneur Of The Year program, but the sponsors also helped drive nominations for this year's awards.
Local sponsors for 2001 include Marsh, Jones Day, McDonald Investments, Bowne, The Ohio Department of Development and SBN Magazine.
National sponsors include CNN, CNNfn, the Kauffman Center for Entreprenurial Leadership, NASDAQ and USA Today.
Langdale's biggest business blunder came in 1989 when he was heading up his first venture, Digital Storage Inc., and learned a hard lesson about carrying too many eggs in one basket.
"We had a very large percentage of our business with one vendor," Langdale recalls of his then-$100 million company. "That vendor had a change in philosophy and about 30 percent of our business disappeared almost overnight."
The vendor decided to go directly to its customers instead of working through Digital Storage for marketing and logistics services, Langdale explains.
"Our management team sat down and said, 'Since they were contractually obligated to use us, should we sue? Should we get mad? Should we get even?' Instead, we got introspective. We asked ourselves, 'What caused that vendor to go direct to their customers?' That vendor saw us as a threat. That company made $10 million profit a year. We were responsible for about $9 million of that. They probably just got nervous. They didn't have enough control in their customer relationships."
With that realization, he went to work. He moved all of Digital Storage's logistics and marketing functions into a separate business and restructured them so the client company had the direct relationship with the reseller and Langdale's company worked behind the scenes. He called the new company Distribution and Logistics Services Inc. It lasted about 10 years as an independent business before being merged into SubmitOrder.
"If we are wronged, we can usually make an opportunity out of it that's much more valuable than (dwelling on the issue)," Langdale says.
Although Langdale has many business philosophies, here are two of the most revealing:
* "I've always said the secret to happiness is low expectations."
* "If winning is beating the other people in business, you're missing the point."
Langdale has sought outside expertise almost since the day he started his first company 15 years ago. As his business interests have changed -- and industries evolved -- so has the face of his advisory board.
Here are those who have helped him in the past as well as those who are advising him at present:
* Larry McLernon of LCI International (now Qwest)
* Tadd Seitz, a private investor who used to head up The Scotts Co.
* Bud LaLonde of The Ohio State University
* Mike Endres of Stonehenge Financial Holdings Inc.
* Roger Blackwell, owner of Blackwell Associates Inc. and marketing professor at The Ohio State University
* Roger Lautzenhiser of Vorys, Sater, Seymour and Pease
* Larry Hilsheimer of Deloitte & Touche
His greatest revelation
It's a familiar scenario. What business owner hasn't, at some point, gotten so wrapped up in the company that family and social life suffered?
For Langdale, all else took a backseat to his entrepreneurial endeavors for nearly eight years before he noticed what had happened.
"Awhile into the business, I realized I was focused solely on the business and not life," Langdale says.
He saw his friends marrying, having children, getting involved in the community -- and realized he was missing out.
"I realized I wanted a family," he says.
He shifted part of his focus onto his personal life and soon found happiness again.
"You need to have a balance in your life," says the 36-year-old husband and father. "You can't just do one thing and expect to find happiness and contentment. You have to create an atmosphere in your company where associates can have balance, too."
Langdale believes in encouraging well-rounded lifestyles so much that he's made employee contentment part of his companies' mission and vision statements.
"At RPA, our vision is happy clients, happy associates," he says. At NCT Ventures, the mission talks about "fulfilling people" as well as creating and adding value to the supply chain.
"We don't just want to work ourselves to death," he says. "We work hard and have fun."
Just 24 hours.
Dave Bianconi wouldn't allow himself any additional time to grieve.
He was devastated by the news: Liberty Mutual, his biggest client, was taking much of its business elsewhere -- and it didn't make sense to Bianconi, president of Westerville-based Progressive Medical Inc.
For almost 10 years he'd provided service to this client -- service that was, by all accounts, high quality. He'd received positive feedback from the Liberty Mutual field offices that his company was well-liked and respected, and that customers were very satisfied with his service.
Liberty Mutual was providing most of the eggs in Bianconi's basket -- a deliberate business plan he was following to use one big client to bring success for his company, which coordinates medical services and supplies provided to injured workers through the managed care system.
Now he was faced with the possibility of losing all of the pharmacy business he was providing to Liberty -- 45 percent of Progressive's annual sales. Liberty was responsible for 85 percent of the referrals to the company's pharmacy division.
"I felt very bad for our staff because they were very dedicated to the service to this company and kind of viewed it as a slap in the face," Bianconi says. "It took a little time to recover emotionally."
After that first 24 hours, however, he was over the emotional hump and ready to take action. Rather than pull in the reins and wait for the worst, Bianconi took a risk and hired more staff to jumpstart sales to other clients.
With a little luck and some fast work, Progressive Medical didn't miss a beat. Bianconi didn't have to lay off a single worker, and the company's overall revenue has continued to increase, from $17 million at the time of Liberty Mutual's news in 1999 to about $38 million expected this year.
"Don't give yourself very much time to cry over disappointments," Bianconi says, "because you just don't have time to do that. You just have to have that ultra-positive outlook."
Breaking the news
Bianconi's first course of action was to let employees in on the bad news. He met with managers and then with the entire pharmacy department.
"When your company goes through a tragedy or adverse situation, the staff needs to hear it from the owner and not from a second person," he says.
Still, he knew this news could send shockwaves through the company.
"We went from a future that looked very safe and secure to one that was unknown overnight," Bianconi says.
Instead of panicking, his staff turned around to support the company.
Sales staff and managers met with Bianconi to try to figure out what went wrong. Based on the positive feedback they'd been receiving from Liberty Mutual, they couldn't find a single thing to change.
Bianconi says there's really nothing the company could have done differently. Liberty Mutual executives told him they simply thought Progressive was too small a company to handle their needs.
"I don't feel it was anything that Progressive did" that caused the loss, Bianconi says. "You could provide the best service in the world, and that does not guarantee you're going to maintain that business relationship.
"One of the lessons we learned was, when you're dealing with a large company, there are many factors that go into the equation of doing business with someone, and sometimes you really don't know the real reason people do what they do," he says.
Devising a plan
With no apparent need to change the way Progressive serviced customers, Bianconi and his staff decided to focus instead on finding new business.
"I've always found that no situation is ever as bad as it seems and that there are solutions for every problem. Once you have outlined the solution and start to work on that solution, all of your fears go away," Bianconi says. "I've found that to be true in any aspect of business."
So he set out to create an opportunity out of a bad situation.
"The positive face I painted on it was that Liberty Mutual was forcing us to do something we should have done a long time ago, and that is diversify our customer base more than we had," he says. "So much of our resources and time were spent with Liberty Mutual. We refocused."
Fortunately for Bianconi and Progressive Medical, the timing of this particular bad news was good.
"Two years earlier, we would not have been as prepared," Bianconi says.
The company had just staffed its sales positions across the United States; up to that point, Bianconi had relied on Liberty Mutual's sales staff to refer business to the company.
"We were getting ready to market to other companies because we knew the position we were in was not a really desirable one," he says of his original business plan.
Calling for quick action
One thing reassured Bianconi: He was confident he wouldn't lose the business overnight.
"I knew something this large and big was going to take time to make this transition work," he says.
He also benefited from a stroke of luck. Liberty Mutual decided that, rather than doing away with all of its pharmaceutical business at Progressive, it would simply stop referring new business. Bianconi would keep Liberty's existing business, but over four phases, he'd stop getting its referrals.
The best news: Those phases didn't start until May 2001.
Bianconi lit a fire under the members of his newly expanded sales force. He wanted them to take full advantage of the time they'd have before the actual loss took place.
He knew he was going against the grain of what other businesses might do in his situation. Most would scale back and wait to see what happened with Liberty Mutual.
"I said, 'We cannot let them dictate what our future is. We need to move forward now while we can,'" he says, admitting he knew he was taking a risk by hiring staff.
At the time of the bad news, Bianconi had 70 employees; now there are 103.
"Being in business is a risk, and you must be prepared to make risky decisions. But I look at them as smart decisions," he says. "Certainly there's a risk, but that doesn't mean it's the wrong thing to do."
Progressive's sales staff did, indeed, bring in new business. Now Liberty Mutual accounts for just 30 percent of the company's referrals, and Bianconi says his goal is to bring in enough additional clients to reduce that figure to 10 percent.
Keeping good face with Liberty Mutual while growing Progressive Medical at such a fast rate has been key to handling the situation, says Rich Jacobs, with whom Bianconi regularly confers on business matters through TEC, an international organization for CEOs.
Jacobs, chair of a Central Ohio TEC group, says Bianconi's predicament is similar to that of other TEC participants.
"Most of my members, they started out with one really strong company, and then they've all pretty much realized they need to have a strategic plan so they're not so dependent on that company," says Jacobs, a teacher in Franklin University's MBA program who is a former consultant and manager for Columbia Energy Systems and former president of companies then known as Brockway Plastics Inc. and National Gas and Oil Corp. of Newark.
Business owners relying on one major client, Jacobs advises, need to keep two things in mind. First, they need to test the relationship with that client every day.
"So much of that is relationship selling," he says. "If you know the person you're dealing with is going to be leaving in two years, you need to do something. You can't wait that two years and see what happens."
Second, he says, business owners should always have a contingency plan.
"They always have to have a scenario that says, 'What happens if I lose this client? Would I go out of business?'" Jacobs says. "So, I think they always have to have a scenario -- best case, today's case and worst case."
The egg basket theory
"One part of the equation I think a lot of people miss regarding putting all your eggs in one basket is to not get complacent and sit back and say, 'Well I have this business so I don't have to look for new business,'" Bianconi says. "We never really did that; it's just that we accelerated our efforts in the possibility of losing that business.
"Liberty Mutual is still our largest customer and they probably will be our largest customer for a long time -- I certainly hope so. Somebody has to be your largest customer. They just will not be as large a percentage of our overall business as they previously had been."
Bianconi, meanwhile, still credits Liberty Mutual with a large part of his company's success, especially in its early years. The business climate as well as managed care and health care needs keep changing, requiring a response from Progressive Medical to keep up.
"That's what makes business fun, is it's not the same year after year after year," he says. "It does change, and you have to be smart enough to pick up those changes and understand what the customer wants." How to reach: Dave Bianconi, Progressive Medical Inc., 794-3300, ext. 2604 or firstname.lastname@example.org; Rich Jacobs, TEC, (740) 587-0714
Joan Slattery Wall (email@example.com) is senior editor of SBN Magazine in Columbus.
There is little question that success in business is built on smart ideas, those brainstorms in the middle of the night that become great new products and services.
That's the reason SBN Magazine and Anthem Blue Cross and Blue Shield created the Innovation in Business Conference.
This year's event, also sponsored by Andersen, Nextel, LaSalle Bank, Divine and Hughie's Audio Visual, honors 12 individuals -- four Master Innovators, five Visionaries and three Rising Stars -- for their smart ideas.
Picked by a panel of judges that includes Dr. Stephen Gage, president of CAMP Inc., Dorothy Baunach, director of NorTech and Cleveland Tomorrow, Jeffrey Dollinger, executive director of business development for the National Inventors' Hall of Fame, and Don Philabaum, president of the Internet Association Corp., this year's honorees represent a wide berth of innovative strategies, products and services.
In addition to the 12 honorees, whose stories you'll read on the following pages, this year we have designated 14 others as Finalists. Our judging panel found their stories enlightening and deserving of mention for their innovative ideas:
Dennis Barba Jr., e2Grow. Combines local content and online enabling services for small businesses to develop revenue-generating Web presences.
Ernie Hawk and Marcia Harris, KraftMaid Cabinetry. Designed a unique multimedia training program to educate resellers of built-to-order cabinetry.
Nancy Diller-Shively, Cambridge Home Health Care. Home health care provider that employs a philosophy of "happy staff = happy clients."
Dr. Frank Seidelman and Daniel H. Quigg, RIS Logic. Radiology information system software developers.
Doug Weintraub, Centerprise Information Solutions. Provides back office accounting and front office technology solutions with effective implementation and training.
Philip Wenk, Creative Playrooms. Child care centers that provide parents with service rivaled only by mom.
Deb Janik, Village Capital Corp. Since 1998, Janik has helped commit more than $14 million in loan and grant financing to inner city projects.
William Ryan, Master Consulting Group. The impetus behind the creation of the Northeast Ohio Area Chambers of Commerce by providing employee benefits and human resources expertise.
Rachel Torchia, Gateway Title Agency. Developed a proprietary service that helps people who sell their house "by owner."
James Fisher, IdeaStar. Designed two proprietary products -- GalaxyBuilder and CorpMeetings -- to solve clients' back-end needs for front-end problems.
Packy Hyland Jr., Hyland Software. Hyland's OnBase enterprise software integrates document management capabilities in a single Web-based application.
Dr. Ronald Copeland, Dr. Allan Khoury, Kaiser Permanente. Electronically linked its 10,000 physicians and other care providers in 19 states through a proprietary Medical Automated Record System (MARS).
Ed Hollinshead, Websprocket. Designed "smart packet" technology that paves the way for second generation computer architectures and smart networks.
Barbara Brown and Margaret Flynn, BrownFlynn Communications. Full-service strategic communications company that specializes in community education and outreach.