Morgan Lewis Jr.

Tuesday, 26 August 2003 11:57

Room to grow

Robert Blackham, managing partner at Roetzel & Andress LPA's Cleveland office, realized the firm needed just a bit more room when 42 of his attorneys were vying for only 30 offices.

"I had four associates sharing one conference room," Blackham says. "We had people from this office stationed in Akron."

Roetzel doubled its space, adding 20,000 square feet to its existing 20,000 square feet by leasing a contiguous floor in the One Cleveland Center building downtown.

"We realized that at the rate of our growth, we were going to be double the size we were two years ago in another year at the most," Blackham says. "We went from 18 (attorneys) in July 2001, and we're going to be 50 in September."

Blackham says growth was driven by the Cleveland office's existing practices, including intellectual property, corporate law, real estate, labor and employment, medical malpractice, estate planning and tax services.

With the expansion, Blackham not only wanted to alleviate the firm's space crunch, but to improve the design and conference rooms on the two floors. In the main boardroom, Roetzel installed a 62-inch plasma video screen for partner meetings and deal closings, and another smaller conference center for video depositions.

"We're not a pretentious law firm in terms of the size of our office," Blackham says. "But we do want our clients to feel proud and comfortable when they're here."

Roetzel's rapid growth over the last two years made the decision to expand simple for Blackham, but he cautions other decision-makers against rushing into a larger lease before your company is prepared.

"We didn't want to make a move until we were dead certain that we had more than enough people to service that overhead," Blackham says. "Make sure you've got enough productivity to service that debt."

Here are other tips to consider before renewing your lease or negotiating a new agreement.

Representation

Michael Haas, real estate attorney at Roetzel's Cleveland office, recommends companies use a tenant representative when searching for new office space. Most of the major brokerage houses (CB Richard Ellis, Grubb & Ellis, Collier's) offer tenant rep services.

"Despite the fact that we have a significant working knowledge of commercial leasing and the legal terms involved, the brokers provide a significant value in helping you negotiate the lease," Haas says. "The reason is they have a better sense of the market than we do as lawyers because that's all they're doing is office leasing."

Measure

Most landlords use the Building Owners and Managers Association standard for measuring office space, but are not required to. You need to know how the landlord measured the square footage because it's going to have an impact on your overall cost, Haas says.

Sometimes landlords will include common areas such as a portion of the building lobby, or even the elevators, in the measurement.

Right of First Offer

If you're expecting more growth, you might want to secure more space in your building than you need immediately. With a "Right of First Offer" clause negotiated into your lease, the landlord is obligated to offer that space to you before it's leased to someone else.

"It's all comes down to a negotiation," Haas says. "How much does the landlord want you there? How much does the tenant want to be there? I can assure you, if it's a significant tenant, the landlord will have some options available for them." How to reach: Roetzel & Andress LLP, (216) 623-0150 or www.ralaw.com

Tuesday, 26 August 2003 10:47

Room to grow

Robert Blackham, managing partner at Roetzel & Andress LPA's Cleveland office, realized the firm needed just a bit more room when 42 of his attorneys were vying for only 30 offices.

"I had four associates sharing one conference room," Blackham says. "We had people from this office stationed in Akron."

Roetzel doubled its space, adding 20,000 square feet to its existing 20,000 square feet by leasing a contiguous floor in the One Cleveland Center building downtown.

"We realized that at the rate of our growth, we were going to be double the size we were two years ago in another year at the most," Blackham says. "We went from 18 (attorneys) in July 2001, and we're going to be 50 in September."

Blackham says growth was driven by the Cleveland office's existing practices, including intellectual property, corporate law, real estate, labor and employment, medical malpractice, estate planning and tax services.

With the expansion, Blackham not only wanted to alleviate the firm's space crunch, but to improve the design and conference rooms on the two floors. In the main boardroom, Roetzel installed a 62-inch plasma video screen for partner meetings and deal closings, and another smaller conference center for video depositions.

"We're not a pretentious law firm in terms of the size of our office," Blackham says. "But we do want our clients to feel proud and comfortable when they're here."

Roetzel's rapid growth over the last two years made the decision to expand simple for Blackham, but he cautions other decision-makers against rushing into a larger lease before your company is prepared.

"We didn't want to make a move until we were dead certain that we had more than enough people to service that overhead," Blackham says. "Make sure you've got enough productivity to service that debt."

Here are other tips to consider before renewing your lease or negotiating a new agreement.

Representation

Michael Haas, real estate attorney at Roetzel's Cleveland office, recommends companies use a tenant representative when searching for new office space. Most of the major brokerage houses (CB Richard Ellis, Grubb & Ellis, Collier's) offer tenant rep services.

"Despite the fact that we have a significant working knowledge of commercial leasing and the legal terms involved, the brokers provide a significant value in helping you negotiate the lease," Haas says. "The reason is they have a better sense of the market than we do as lawyers because that's all they're doing is office leasing."

Measure

Most landlords use the Building Owners and Managers Association standard for measuring office space, but are not required to. You need to know how the landlord measured the square footage because it's going to have an impact on your overall cost, Haas says.

Sometimes landlords will include common areas such as a portion of the building lobby, or even the elevators, in the measurement.

Right of First Offer

If you're expecting more growth, you might want to secure more space in your building than you need immediately. With a "Right of First Offer" clause negotiated into your lease, the landlord is obligated to offer that space to you before it's leased to someone else.

"It's all comes down to a negotiation," Haas says. "How much does the landlord want you there? How much does the tenant want to be there? I can assure you, if it's a significant tenant, the landlord will have some options available for them." How to reach: Roetzel & Andress LLP, (216) 623-0150 or www.ralaw.com

Monday, 28 July 2003 06:38

Message in a bottle

Bruce Hennes, president of public and media relations firm Hennes Communications LLC, received a call from a client, a large nonprofit group, which was being sued by the parents of a child who drowned two months earlier in one of the group's swimming pools.

The attorney for the nonprofit was faced with questions from newspapers and television stations and planned to issue a statement saying that the lawsuit "had no basis of fact" and that the group would be "vindicated in a court of law."

"I told them, 'You can't say that, it's awful,'" Hennes says. "I asked them how they felt about this, and they said, 'We're devastated. We know this kid, we know the family. Our whole family knows their family.' I said, 'Bingo. There's your statement.'"

Hennes continues, "That's not spin. You're telling the truth. Admitting responsibility is not the same as admitting liability."

Employers often are not prepared to talk to the media when a crisis hits their company, Hennes says. But knowing how to deal with the press should be a crucial part of any disaster recovery plan.

Only half of employers who responded to the Smart Business/Employers Resource Council survey reported having a disaster recovery plan, a slight improvement over last year's survey, in which 47 percent said they were prepared for a crisis.

"Tell the truth, tell it all, and most importantly, tell it first," Hennes says. "It takes a lifetime to build a reputation. It only takes seconds to lose it."

Here are some of Hennes' steps to preparing a crisis communication plan.

* Anticipate potential crisis scenarios within your company and prepare key message responses. Think of the 10 worst things that you might face, and craft core answers.

* Have a media-trained designated spokesperson. A crisis is no time to hand the ball to an amateur or anyone unprepared to further the goal of maintaining your firm's credibility.

* Prepare to reach key personnel with current office, home, cell and e-mail information. You must be able to reach everyone, anywhere, anytime.

* Prepare basic background materials on your company and its key employees. The middle of a crisis is not the time to prepare a press kit. Consider maintaining a "dark" Web site that can be turned on in an instant.

* Develop a media distribution list with current names, phone, fax, e-mail and cell phone information. You will communicate with some of your audiences through the media. If the media doesn't get the information from you, it will get it elsewhere. How to reach: Hennes Communications LLC, (216) 321-7774 or www.hennescommunications.com

Monday, 28 July 2003 06:33

Fire inside

The question was, "What is the biggest challenge your company faces today?"

There were the usual responses -- increasing revenue, decreased sales and the economy. But the top challenge facing the 239 Northeast Ohio employers who responded to the Smart Business Network/Employers Resource Council Workplace Practices Survey is recruiting, motivating and retaining top talent.

This is the fourth year of our regional human resources issues survey, and the top challenge facing the diverse group of employers who responded has been roughly the same in each of the previous three years.

This year was different. Motivation worked its way up the list to join recruiting and retaining top talent as a concern facing employers.

It's understandable. All the concerns faced by employers are related to employee motivation. If profits are down, it affects employee morale by crimping bonuses or profit-sharing. When the economy is tough, employees can be concerned about their future with the company and not focused on the job. When health care costs increase yet again, employers are often forced to pass those costs on to their workers, decreasing morale.

Motivating employees during rough economic times is difficult. Just ask Jack Pickard, CEO of FedEx Custom Critical, which recently opened a new headquarters in Green. Pickard's business -- door-to-door ground shipping service for critical deliveries such as hazardous or temperature-sensitive materials and high-value products -- is directly related to the health of industrial production.

According to FedEx Corp., Custom Critical's revenue slipped 24 percent in both 2002 and 2001, yet during that time, the division was named one of the top 99 workplaces in Northeast Ohio by the Employers Resource Council, and the entire FedEx organization was named one of the "100 Best Companies To Work For" by Fortune magazine.

Pickard, who took over as CEO in June 2001 after Bruce Simpson retired, joined FedEx in 1986 and held positions in sales, marketing and operations before he was chosen to lead Custom Critical's 2,800 employees and contractors.

Although Pickard has several decades of corporate experience, he says his best training for motivating and managing people came when he was a company commander in the U.S. Army during the Vietnam War. Pickard ran a combat engineer group stationed in Germany.

"Our job was to go blow things up when the Huns came through the folded gap. If I told you any more, I would probably have to kill you," he says, laughing.

That kind of down-to-earth, accessible style is the hallmark of Pickard's management and an important aspect of motivating his employees. Although he altered his style when he entered the corporate world, he has found that many of the motivation tactics used in the army apply even in today's less hierarchal, less rigid corporate world.

"You have to give people a sense of worth in whatever it is they're doing," Pickard says. "The job has to be challenging for that individual, and they need to be recognized. When I say recognized, it's not just pay. They've got to be recognized for their job. ... If you create the climate, hopefully the people will become motivated themselves, because motivation ultimately has to come from the individual."

Communication

Only 53 percent of employers who responded to our survey reported using a newsletter to communicate with employees, and 40 percent don't have a company intranet.

That's too few. The most important aspect of employee motivation, Pickard says, is consistent communication, not only about the company but about the individual performance of employees.

"I don't think you can ever do it enough," Pickard says. "Key leaders and managers at all levels have to be focused on making certain that their employees are recognized, and in order for it to be meaningful, it's got to be personal."

Obviously, with more than 2,800 employees and contractors, Pickard couldn't talk with every one of his workers every day if he wanted to, but he uses several tools to keep them informed about what's going on with the company and to open lines of communication among employees.

Every month, he writes the lead article in FedEx Custom Critical newsletter, and employees receive daily e-mail updates about what's going on not only with their division, but with the overall $23 billion FedEx Corp.

Every other month, Pickard holds "Heard it in the Hallways" meetings, with employees randomly chosen from all departments. The meetings usually run about two hours and are a chance for employees to talk with the CEO and the human resources vice president directly.

"It's not for me to talk, it's for them to talk to me about what's on their minds," Pickard says. "They do it without having to go through the chain. That seems to be very effective. And the notes from that are published and sent around the organization."

FedEx's new 182,000-square-foot headquarters located on 20 acres in Green was designed for collision. The sprawling complex is arranged so hallways leading to and from various departments converge into larger open areas to encourage impromptu meetings between workers.

"The hallway meetings are sometimes the most effective ones you can have," Pickard says. "As you're walking back to a work area, there's a little area where, if you get into a conversation, you can sit down next to a coffee table, and there's a white board right there if somebody wants to make a note. We've tried to build areas where people will collide with each other."

Training

Employees get stale doing the same thing every day if they are not learning new skills or offered new responsibilities. To help top performers improve their skills, Pickard formed a Customer Response Team program, in which team members who have expertise in one operational area like logistics or customer service are placed on a team to serve the company's most challenging customers.

To offer variety, workers are offered an operations rotation in which they are pulled out of their department and placed for a short time in a new area where they might not have any experience. For example, a customer service employee could join the marketing department, or an employee from the financial team could learn how to handle logistics issues.

"When they go back to their organization, they have a different view of things," Pickard says. "I can't tell you how many times they've told me, 'Thanks, I really appreciate it.'"

Money

Money is often the best employee motivator, but you have to carefully monitor how your bonuses -- whether it's commissions, profit-sharing or stock -- are awarded. Employees tend to get very focused on the cash, and other aspects of their job are neglected.

"Sometimes there are some unintended consequences," Pickard says. "You could come up with a wonderful plan, and it may work very well for a time, but I've not yet seen any kind of financial plan that does not need changing almost constantly."

That said, FedEx Custom Critical uses a Management By Objectives system to financially reward its employees.

"If you talk to some of the HR gurus around the world, a lot of people think an MBO is old school," Pickard says. "It does go back quite a few years, but everybody in the company, including me, has a significant portion of their income based on achieving certain objectives over a course of the year."

One of Custom Critical's objectives is high scores on its customer satisfaction survey, in which customers who have used its services in the prior month are called to find out about their experience. Answers are tallied on a five-point scale between very satisfied to very unsatisfied.

"We get an actual numerical result of the relative joy of our customers over the last month," Pickard says. "Based on that, a portion of our income is paid to us in the form of an MBO bonus. Everybody understands very clearly that we value satisfied customers. That provides a certain degree of motivation."

Another employee-wide objective is a company profit goal, but there are also personal goals negotiated between employees and their manager.

"Obviously, we hear people saying, 'What can I do? I'm just a so-and-so clerk. I can't control the profit,'" Pickard says. "The fact of the matter is if that's true, I could say 'I'm just the president, I can't control the profit, it's what you people do out there.'"

Personal attention

Above all, the most effective motivation is personal recognition. Singling out someone's achievement -- even if it just a simple compliment -- is meaningful to an employee, and it doesn't cost a thing.

"Motivation, in the final analysis, is up to the individual," Pickard says. "If you're concerned about motivation, you build the climate that allows for it. Make certain that the person is doing worthwhile work, so they have some sense of achievement in whatever they're doing.

"If you reward them properly for that, and recognize when they do a good job, they're going to have to motivate themselves. If you give them all that stuff and they're still not motivated, then they're probably not right for the job." How to reach: FedEx Custom Critical, (234) 310-4090 or customcritical.fedex.com

Motivation myths

Even in these enlightened times, there are still employee motivation myths that linger in workplaces all over the country. Carter McNamara, president of Authenticity Consulting LLC, debunks five common employee motivation myths.

Myth No. 1 -- I can motivate people.

Not really -- they have to motivate themselves.

You can't motivate people any more than you can empower them. Employees have to motivate and empower themselves. However, you can set up an environment where they can best do that.

The key is knowing how to set up the environment for each of your employees.

Myth No. 2 -- Money is a good motivator.

Certain things like money, a nice office and job security can help people from becoming less motivated, but they usually don't help people to become more motivated. A key goal is to understand the motivations of each of your employees.

Myth No. 3 -- Fear is a good motivator.

Fear is a great motivator -- for a very short time. That's why a lot of yelling from the boss won't seem to "light a spark under employees" for long.

Myth No. 4 -- I know what motivates me, so I know what motivates my employees.

Different people are motivated by different things. I may be greatly motivated by earning time away from my job to spend more time my family. You might be motivated more by recognition of a job well done.

Again, a key goal is to understand what motivates each of your employees.

Myth No. 5 -- Increased job satisfaction means increased job performance.

Research shows this isn't necessarily true. If the goals of the organization are not aligned with the goals of employees, then employees aren't effectively working toward the mission of the organization. Source: Authenticity Consulting LLC, (800) 971-2250 or www.authenticityconsulting.com

Monday, 30 June 2003 07:31

Food for thought

It's difficult enough to make one restaurant succeed -- according to Hospitality Works, a restaurant consulting firm, 30 percent of restaurants fail within the first year and 70 percent have closed after five years.

That's why the seven Northeast Ohio Yours Truly Restaurants, run by the Shibley siblings -- Arthur, Lawrence, Jeffrey and Darlene Shibley Ziegenhagen -- are such an industry anomaly. Not only is the chain family-run and independent, but most of the restaurants have been around for more than 10 years.

The main ingredient in their success is the same element that has worked for restaurant chains from McDonald's to Morton's Steak House: Consistency. Customer know what to expect when they dine at Yours Truly in terms of the menu, dining room, service and price, no matter where the restaurant is located.

To ensure that consistency, the Shibleys designed a highly regimented system that began when the three brothers opened the first Yours Truly in Beachwood in 1981 and that they continued to hone throughout the chain's development.

"The system is pretty extensive," says Lawrence Shibley. "It's training for every single position, it's documentation of every recipe. Every assembly of each menu item is photographed with a detailed assembly chart to go with it. We have extensive handbooks, classroom training for servers and coaches within each dining room for the new servers. It's endless."

The Yours Truly system became more critical when the chain expanded beyond the capacity of its four partners. (Darlene joined the company in 1985). When the fifth restaurant opened in Shaker Square in 1993, the Shibleys promoted assistant managers from the restaurants to general managers, with the siblings overseeing the entire company.

"It was a slow progression," Shibley says. "As we expanded from five to seven stores, we kept taking even more steps to ensure quality in the absence of partner presence, and manager presence for that matter, because they can't be involved in every transaction." How to reach: Yours Truly Restaurants, (440) 247-8338 or www.ytr.com

Monday, 30 June 2003 07:23

From the ashes

You just can't keep Jerry Henn down.

When Henn, founder and president of Henn, a mail order retailer of handmade collectibles, launched his company, he had just closed his van conversion shop due to the early 1980s economic recession.

So Henn, a fifth generation entrepreneur, returned to his roots, selling the same type of handmade baskets, pottery, candles and Shaker woodenware that his family had sold generations before him.

"Country decorating was really taking off at that time," Henn says. "Back then, in 1982, there were no country decorating magazines, there were no mail order houses, there were no antique stores selling reproductions on every corner."

Warren-based Henn launched with four independent sales consultants and a handful of products, and in its first years expanded faster than Henn had anticipated. The independent craftspeople who handmade the woodenware and baskets couldn't keep up with the demand, so Henn started manufacturing the products in-house.

That decision helped stabilize the product supply, but posed its own set of problems. In 1996, Henn's basket manufacturing plant burned to the ground, and a year later, as he was negotiating to buy the facility that produced his pottery, that plant burned as well.

"Here we are, 50 percent of our product line is now pottery -- we have no suppliers," Henn says. "I was wondering if we were going to pull out of it. We were in a dive. But we finally did, and it started taking off again.

"Now we're in a growth spurt, and we just had a record sales month for the month of February," he says.

Today, Henn has more than 2,400 consultants nationwide and 500 products. He owes much of that success to using a direct sales structure for the company.

"Direct selling tends to be an anticyclical business," Henn says. "When times are bad people, tend to flock to home-based business opportunities.

"Direct Selling Association says most companies don't make it 20 years without a major plan change. We're still using our same plan today." How to reach: Henn, (330) 824-2575 or www.hennworkshops.com

Thursday, 29 May 2003 20:00

Craft work

It's early February 2001, and Alan Rosskamm drives back to Jo-Ann Stores Inc. world headquarters in Hudson.

It's mild and sunny, unusual for February, but Jo-Ann Stores CEO Rosskamm doesn't notice the weather -- or anything else for that matter. The farms, quaint shops and strip shopping centers along Darrow Road blur past, barely registering.

After months of denial, it is this morning that Rosskamm finally wakes up to the fact that his fabric and craft retailer is in trouble. Big trouble.

After a string of acquisitions, a multistate superstore rollout and an onerous introduction of a massive inventory control system, the company held $245 million in debt while profits were down 153 percent from the year before. Its New York Stock Exchange listed stock traded at less than half its value from the previous year.

With these facts weighing on him, now was not the best time to deliver a rousing speech to more than 100 Jo-Ann Store managers from around the country who awaited Rosskamm at Jo-Ann's headquarters.

Rosskamm enters the conference room. The cheery managers, perhaps reading his worried face, quickly silence and sit down to hear what they had expected to be an inspiring state-of-the-company speech.

"I went down there and said, 'Hey group, I don't have anything uplifting to tell you, this is our situation,'" says Rosskamm, who in hindsight can chuckle about the event. "It was the first time I got in front of a big public audience and really said, 'This is our situation.'"

What Rosskamm didn't expect was his managers' response.

"I had people sending me cheer-up cards, saying, 'It is not as bad as it looks, we're going to get through this,'" says Rosskamm, lunching on turkey and Swiss on sliced sourdough bread. "What that told me was that when you really confront your people, your team, with the hard facts, there is tremendous resilience there. They step up, and it's incredibly gratifying the way the Jo-Ann team reacted."

It was not only the buoyant reaction of Jo-Ann's 22,000 employees but also the nation's Zeitgeist which helped rebound the retailer from the time Rosskamm announced the company's turnaround plan in March 2001 to today.

As witnessed at stores like Home Depot and Lowe's, and Jo-Ann competitors like Michael's Stores and Hancock Fabrics, over the last two years, consumers seemed obsessed with improving and beautifying their homes. The nation's crafts and sewing industry grew from $23 billion in 2000 to $29 billion in 2002, according to the Hobby Industry Association, and in 2002, consumers spent $20 billion more on crafts and sewing than they spent at the movies.

The "nesting" trend couldn't have been better timed for Jo-Ann.

"Luckily, sewing and crafting seem right for America right now," Rosskamm says. "The whole nesting and cocooning phenomena, people spending time at home, looking for ways to express caring for family and friends with personalized gifting and all of that certainly helped."

The turnaround isn't quite over, but the company is now stable enough to allow Rosskamm and his team to focus on the next growth phase of the business, bolstered by the lessons learned not only over the last two years of turnaround but by the company's 60 years in business.

Too much, too fast

Alan Rosskamm has a unique look for the leader of a $1.5 billion company. While most CEOs opt for the clean-shaven look, he sports a broad mustache. His short, white swept-back hair is offset by black eyebrows and dark eyes. He's in the creativity business, so why not distinguish himself with a unique look?

Exceedingly polite, Rosskamm sounds more like a physician than a retail magnate. His words are calm, patiently delivered, even when discussing unpleasant topics like having to close 150 stores and cutting 8 percent of his work force.

"What we were guilty of clearly is undertaking too much, too fast, and not paying attention to the rule that a strategy is only as good as your ability to execute it," Rosskamm says. "We really stumbled badly on the execution because we were trying to roll out superstores the same time we were trying to put in major new systems, build a new logistics capability -- all envisioning of this long-term growth strategy -- right after we had digested a major acquisition.

"We both got leveraged financially, but more importantly, we got beyond our human capacity to execute effectively."

Jo-Ann grew from 655 stores in 1994 to 1,058 by 1999, primarily through acquisitions. The two biggest purchases were Cloth World in 1995, when Jo-Ann picked up 340 stores, then in 1998, when it acquired West Coast chain House of Fabrics and added 262 stores.

Although many redundant stores were closed after those buyouts, the acquisitions nearly doubled the size of Jo-Ann Stores. That, in part, required the retailer to take on more than $245 million in debt by 1999.

Under the weight of 400 new stores, many on the West Coast, Jo-Ann's Hudson distribution center was bursting with extra inventory and was too hopelessly low-tech to support a chain of its size. A West Coast distribution center and a better inventory control system were now critical.

"Operationally, the company had started to struggle," says David Rodgers, a retail analyst for McDonald Investments in Cleveland. "That was born out in the operational results, and we saw the stock price react."

With the influx of new inventory, the chain ran a "Band-aid" approach to logistics for at least two years after the last acquisition, says Jo-Ann Stores chief financial officer Brian Carney.

"We rented a contract facility in California to get product to the stores," he says. "The stores were getting two receipts from two warehouses. We had a lot of inventory in back rooms."

Meanwhile, Rosskamm and his logistics officers prepared the launch of a massive $33 million retail inventory control system by German conglomerate SAP AG.

"We just had a whole host of problems, and we're not blaming SAP at all," Carney says. "It was a rough installation. We have to take some of the blame, but it's a very exacting system. With SAP, you have to list every item to every store, otherwise it won't replenish. And if it doesn't think you're supposed to have it, it ignores that you're selling it."

Jo-Ann spent five months debugging the SAP system. However, while the system was getting its kinks worked out, Jo-Ann buyers and store managers ignored its commands. Buyers wrote their own purchase orders based on demand from store managers, not on what SAP was telling them.

"Everything was done by word-of-mouth," Carney says. "So, at the end of '01, we were way over inventory, we had blown our inventory budget, yet we knew we were out of stock on our key items. Alan always said we were in the worst spot a retailer can be: You've got all cash tied up in inventory, and you're not selling the stuff that you've invested in."

Fortunately for Jo-Ann, it had built a strong brand since it opened its first Cleveland Fabrics Store in 1943. Customers remained loyal to the chain despite its inventory troubles, although Rosskamm remembers one enlightening incident in Florida when a customer threw a swatch of black fabric in his face.

"'How can I make this skirt if I can't buy a seven-inch black zipper in your store?'" Rosskamm remembers the woman shouting. "And our poor frontline sales associates were hearing that every day."

Flow the product

The result of that SAP and infrastructure investment can be witnessed today through an unassuming "Store Personnel Only" door in the back of Jo-Ann Store's Hudson retail store. Once you step through the door and into the 1.2 million square foot distribution facility, you realize what an undertaking it has been for Rosskamm since the acquisition campaign began in 1994.

Joseph Erli, manager of the Hudson distribution center, walks the seemingly endless aisles of 26,000 Jo-Ann products stacked on racks 20 feet high and carefully bar-coded, everything from white shirt buttons and thimbles to ficus trees and resin furniture.

Green conveyor belts carrying cardboard boxes and blue plastic cartons rumble overhead. There are seven miles of conveyer, says Erli, a stout man with a thin gray beard and large bifocals. Yellow forklifts with flashing red lights beep as they zoom past. The entire warehouse roars with the sound of constant movement and activity.

What you don't notice is people. There seem to be very few until you arrive at the main sorting or "pick" area. There, dozens of workers travel graded metal catwalks -- as high four stories -- moving products from boxes into plastic cartons. Once the carton is full, it's placed on a conveyer belt in the middle of the catwalk, which carries it to the shipping area.

This constant stream of product moving in and out of the distribution center is a drastically different operation than it was only six years ago.

"We used to go through shipping and receiving cycles," Erli says. "In other words, we'd get all these import containers into the outside building and we'd do nothing but receive for two solid weeks, fill the building up and then we would pick it out for two weeks. Now we flow the product."

Erli, who came out of the supermarket and home improvement retail industries, helped implement the changes in distribution, including its conveyor system, the warehouse management software and the sorting area. But with the new stores, Erli quickly ran out of room with the seasonal influx of products.

In 1999, Jo-Ann broke ground on its 600,000-square-foot West Coast distribution facility in Visalia, Calif. The warehouse, which handles one-third of Jo-Ann's inventory, opened in April 2001 and helped remove the burden from the overstocked Hudson facility.

At the same time the California facility opened, the bugs were worked out of the chain's SAP system. Stores began to get restocked with high-demand products automatically, and the system pointed out redundant products and items that just weren't selling. The retailer was able to dump 20 percent of inventory in its distribution center, a $16 million reduction.

Inventory in smaller, traditional stores dropped 12 percent, and its superstores' stock sank by 17 percent.

"We're well ahead of the curve again on the logistics," Carney says. "By having the right systems in place and the right logistics network in place, it has let us now start driving the top line again."

Matter of editing

The year 2002 was kind to Jo-Ann Stores. While other retailers grumbled about a slow economy and low consumer confidence, Jo-Ann reported same-store sales increases -- the best indicator of a retailer's health -- every month in 2002.

For its most recent fiscal year, which ended Feb. 1, 2003, Jo-Ann reported $44.9 million in profits versus a $14.9 million loss from the previous fiscal year. Its stock, which traded at $10.70 a share the previous year, now traded at $26.18 per share.

In March 2001, Rosskamm laid out a three-year goal for the turnaround. Two years later, it appears as if he is nearing the finish line. Logistics are running smoothly, debt was reduced by $180 million, 148 underperforming stores were closed and more than $50 million of the least productive inventory was eliminated, all of which freed up more than $80 million cash.

"It really became a matter of editing and getting down to core," Rosskamm says. "Editing out the redundant product, and the nonproductive products, editing out the nonproductive stores ... and then also be very well edited in terms of go-forward spending and controlling your capital budget ... really focusing only on what's most important and getting full alignment of the whole organization, and then communicating like hell to make sure that everyone understands what needs to be done."

With most of the "editing" completed, Rosskamm has turned his sights on Jo-Ann Stores' next growth phase, informed not only by the lessons of the turnaround but also acknowledging that the retailer got more than a little bit lucky.

"As we look toward the future, we're not wasting time patting ourselves on the back," Rosskamm emphasizes. "We're very proud of what we did, but all the things we have apparently done right in the past two years have been helped and made a lot easier by the fact that our industry has been much in favor with the nation's consumers."

Remarkable phenomenon

Jo-Ann's growth, Rosskamm believes, will be in the 35,000-square-foot superstore or big box, the model that has been so successful in the last decade for sporting goods, books and electronics. The move will be the third major reinvention of Jo-Ann Stores.

The retail chain began with one 1,400-square-foot store in Severance Shopping Center on the corner of Euclid and Superior, where Rosskamm spent nearly every Saturday as a child. The store, named after a combination of the names of Joan Zimmerman and Jackie Ann Rosskamm, the daughters of the founders, began as small, free-standing stores located in shopping centers. During the 1970s and 1980s, Jo-Ann moved into larger, 4,000-square-foot spaces in regional malls.

Shortly after Rosskamm became Jo-Ann Stores' CEO in 1985, the chain moved from the malls into 10,000-square-foot stores in strip malls, which was the business model at the time. Rosskamm remembers asking his father, Martin, to let him take on the challenge.

"I said, 'I'm probably not ready, but we're really drifting, give me a chance,'" Rosskamm remembers. "To his credit, he did so. Although I heard about it at home, in public he never second-guessed me, and he gave me the opportunity to turn things around at that time. Now we think we have a formula that again will give us a huge opportunity to grow and serve our customers."

The superstore rollout began in 1995 with Jo-Ann's Hudson flagship store as a test market laboratory, called "Jo-Ann etc." The store was 46,000 square feet, about 11,000 square feet larger than the reformatted model Rosskamm plans to pursue.

"We said, 'Let's put everything in the box we think she would like buy from us, and see what it looks like,'" Rosskamm says. "If it never makes a penny, we'll still be a better company because we'll learn about things we can apply to the chain, products we'll discover and whatever."

Due to the acquisitions, inventory overhaul and the challenge of surmounting long-term debt, the superstore rollout stalled in the late 1990s. But Rosskamm was still encouraged by the numbers created by these bigger boxes.

The traditional 14,000-square-foot stores do $100 of sales per square foot, while the older 45,000-square-foot superstores do about $130 per square foot. The 35,000-square-foot superstores -- the prototype Rosskamm plans to pursue -- will launch with $150 of sales per square foot and mature at between $160 and $170 a square foot, according to Jo-Ann Store's estimates.

Rosskamm points to Jo-Ann's Montrose store as a harbinger of the nationwide superstore's success. Early last year, Jo-Ann closed the 16,000-square-foot store, which had about $2 million in annual sales, slightly better than the chain's traditional stores. A Michael's store moved into the same shopping center, and within six months, Jo-Ann re-opened across West Market Street in a former Homeplace 35,000-square-foot big box.

The Jo-Ann superstore, which opened in October last year, is expected to land $5.3 million this year. Michael's, which never had a store in the area, has $3 million to $4 million in sales.

"Out of the West Akron area, the marketplace has gone from supporting $2 million to supporting $8 million of revenue," Rosskamm says. "It's a remarkable phenomenon. Making more product available in a better environment with more support is giving the consumer the inspiration and the confidence to do more."

And apparently to buy more.

Even where the Jo-Ann name is new, like in Phoenix, consumers are responding to the superstore model. Four years ago, Jo-Ann had 14 smaller traditional stores in that market, with annual sales of $13 million. Six of those closed and were replaced with four superstores. Last year, those 12 stores landed $35 million in sales.

"What's unique about them is that they are the only ones that cross over in the sewing and craft and home d├ęcor," says analyst David Rodgers.

Rodgers says Jo-Ann's superstore niche will be in selling most of what its competitors offer in the areas of craft, sewing and home decor, so the consumer will shop Jo-Ann first and get what she needs. Then, if she can't find everything, only then will she go to a Michael's Store, which is primarily craft, or a Hancock Fabric, which focuses on sewing.

The superstores are also in prime "Class A" retail locations, while the traditional stores are in less competitive, harder-to-find strip mall locations.

"While it's not a completely unique strategy, it's unique in the world of sewing and craft, and it's proven it can be successful, but it's still early in that process," Rodgers says.

Rosskamm is confident the Montrose phenomena will bear out across the country. Industry research firm Thomson & Assoc., which has performed similar market research for Home Depot and other retailers, reported to Jo-Ann that there are at least 600 locations where demographics would support a superstore.

"Our ability to take any major U.S. market and replace traditional stores with superstores gives us incredible power to grow the business and to gain market share," Rosskamm says. "It's all from the leverage of being able to provide a more complete offer to the consumer, one-stop shopping, and it's the reason we're so excited about the opportunity to roll out these superstores across the country."

The challenge for Rosskamm is to convince otherwise those consumers who still think of Jo-Ann Stores as only as a sewing store -- not to mention the fact that Michael's is still a larger chain in annual sales and number of stores. Rosskamm says there will be some Sunday newspaper advertising inserts, but the main marketing effort will be through direct mail targeting the company's extensive loyal customer base.

"Although we never want to test that loyalty again, it is certainly gratifying that over 60 years, we've built enough confidence in our brand that she gave us another chance," Rosskamm says. "And now I think she's much more satisfied with what we have for her."

Long way to go

Jo-Ann Stores 3.0 is a far cry from what it was when Rosskamm's grandparents, Hilda and Berthold Reich, opened the first Cleveland Fabric Store, which sold imported cheese among the sewing needles and quilting solids.

Rosskamm has the data to back up his superstore plan and the knowledge gained from the latest turnaround. He anticipates opening 30 to 40 superstores over the next two years, with an annual earnings growth of 10 percent to 12 percent.

"They're not necessarily in a turnaround mode, but they're still in a transition mode," says Rodgers. "Now, as they start to roll out 20 to 25 stores this year, this is the first time they've done that. So they still have a little bit to prove to Wall Street, in that can they do this profitably and on time, and what's the impact going to be for the consumer. If they can complete the transition this year and move into next year and accelerate those store openings, the stock will reflect that."

The question is, will the nesting and cocooning trend continue? Will aging baby boomers continue to spend their time and disposable dollars on leisure activities? Rosskamm hopes so, but he isn't relying on consumer whims to guide his growth strategy.

"Everybody talks about it, but it's about continually improving your ability to deliver the right product to the customer at the time she wants it," Rosskamm says. "It's having all those backroom systems and processes in place, so you when you start focusing on new markets and new stores, the core business is going to run efficiently.

"We have become a much more efficient, much better retailer, but we still think we've got a long way to go." How to reach: Jo-Ann Stores Inc., (330) 656-2600 or www.joann.com.

Friday, 30 May 2003 05:50

Brewing success

David Lockshin added 9,000 square feet to his new warehouse facility last year on the hope that his beverage distributor, Fame Beverage Co., would land the contract to deliver Coors brand beers to Stark, Tuscarawas and Holmes counties.

Perhaps the folks in Golden, Colo., recognized that commitment. After a grueling three-month approval process, Fame Beverage won the contract, and the extra warehouse space did not go unused.

"It was a risk," Lockshin says. "But we knew it was better to take the risk than not take the risk."

Lockshin purchased the rights from a competitor to distribute Coors, the country's third largest selling beer. But the brewer had strict guidelines to follow before it awarded Fame Beverage its coveted brand.

"It was a major process," Lockshin says. "There was a lot of Excel programming and proving what resources we put toward the brand, how many man-hours and people. There was a wholesale development coordinator -- he's the one who approves or disapproves the process -- who had a checklist of 400 things we needed to do."

The brewer required Fame Beverage to maintain one sales manager for every four sales reps, which increased its work force from 48 employees to 75 last year.

"Coors' major competition is Miller and Budweiser, especially Budweiser, and they want to go after those guys," Lockshin says. "They don't want to give it to a distributor and have them just milk the brand. They want to make sure you're going to move it forward. That's what the test is."

In addition to Coors, Massillon-based Fame Beverage distributes beer brands including Samuel Adams, Molson and Great Lakes, and wine and nonalcoholic beverages.

Adding brands and keeping up with the latest beverage trends has helped Fame Beverage maintain its strength over its 71-year history.

"There used to be only four kinds beer in the area," Lockshin says. "When these new beer brands would come into the area, like Samuel Adams and Great Lakes, we would be the first guys to distribute them."

Lockshin recalls talking to Samuel Adams founder Jim Koch in the late 1980s when he managed to sell 40 to 50 cases a month for the then unknown Boston-based brewer. Today, he moves 2,500 to 3,000 cases a month.

"You have to keep your finger on the pulse of what's going on in the beverage industry by reading and talking to people," Lockshin says. "You find out what's coming out of the East Coast and West Coast and look at those brands and go after them, because nothing usually starts here in Canton, Ohio." How to reach: Fame Beverage Co., (330) 879-1888

Friday, 02 May 2003 07:47

Balancing act

When the economy is strong, people want to invest in new buildings. When the economy is in a slump, as it was in 2002, they are more likely to repair or improve what they have.

Luckily for Tom Nesbitt, president of United Glass & Panel Systems, his company is prepared to serve both markets.

United Glass designs, engineers, manufacturers and installs glass and panel systems for new construction, and in the past has followed up with service and maintenance on its work. Thanks to that demand, last year Nesbitt launched the service arm of his business as a separate division.

"Besides creating a more complete offering for our customers, this also makes great business sense for our company by providing a balanced income stream," Nesbitt says.

The service work, in addition to the new construction projects United landed last year -- including Malone College's science building, Mount Union Library and the Millennium Building -- helped the company boost sales by 30 percent over the previous year.

This enormous growth required the company to expand from its 8,000-square-foot facility to a 25,000-square-foot headquarters in North Canton.

"We have been very fortunate that the greatest adversity we faced was keeping up with our own growth," Nesbitt says. How to reach: United Glass & Panel Systems, (330) 433-9220

Friday, 25 April 2003 12:24

Brewing success

David Lockshin added 9,000 square feet to his new warehouse facility last year on the hope that his beverage distributor, Fame Beverage Co., would land the contract to deliver Coors brand beers to Stark, Tuscarawas and Holmes counties.

Perhaps the folks in Golden, Colo., recognized that commitment. After a grueling three-month approval process, Fame Beverage won the contract, and the extra warehouse space did not go unused.

"It was a risk," Lockshin says. "But we knew it was better to take the risk than not take the risk."

Lockshin purchased the rights from a competitor to distribute Coors, the country's third largest selling beer. But the brewer had strict guidelines to follow before it awarded Fame Beverage its coveted brand.

"It was a major process," Lockshin says. "There was a lot of Excel programming and proving what resources we put toward the brand, how many man-hours and people. There was a wholesale development coordinator -- he's the one who approves or disapproves the process -- who had a checklist of 400 things we needed to do."

The brewer required Fame Beverage to maintain one sales manager for every four sales reps, which increased its work force from 48 employees to 75 last year.

"Coors' major competition is Miller and Budweiser, especially Budweiser, and they want to go after those guys," Lockshin says. "They don't want to give it to a distributor and have them just milk the brand. They want to make sure you're going to move it forward. That's what the test is."

In addition to Coors, Massillon-based Fame Beverage distributes beer brands including Samuel Adams, Molson and Great Lakes, and wine and nonalcoholic beverages.

Adding brands and keeping up with the latest beverage trends has helped Fame Beverage maintain its strength over its 71-year history.

"There used to be only four kinds beer in the area," Lockshin says. "When these new beer brands would come into the area, like Samuel Adams and Great Lakes, we would be the first guys to distribute them."

Lockshin recalls talking to Samuel Adams founder Jim Koch in the late 1980s when he managed to sell 40 to 50 cases a month for the then unknown Boston-based brewer. Today, he moves 2,500 to 3,000 cases a month.

"You have to keep your finger on the pulse of what's going on in the beverage industry by reading and talking to people," Lockshin says. "You find out what's coming out of the East Coast and West Coast and look at those brands and go after them, because nothing usually starts here in Canton, Ohio." How to reach: Fame Beverage Co., (330) 879-1888