Collective Effort

Profile of an EOY winner. The competitive advantages of an employee-owned company.

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Cecil Ursprung had a theory: if you gave workers some power, they would repay the company a thousand times over in performance. Reflexite's 240 employee-owners -- this year's Entrepreneurs of the Year -- have proved him right

"These folks are really innovators. In manufacturing, in sales, in organization. They built the business." -- Ken Iverson

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Not to be too ham-handed with the symbolism, but a mile or two from the aging downtown of New Britain, Conn., is a pair of factories that could star in a documentary on America's economic past and future prospects. One is the huge former home of defunct New Britain Machine, now dark and silent, "500,000 square feet and one security guard," as a neighbor describes it, mute testament to the decline and fall of yesterday's industrial economy. The other, right next door, swollen with people and equipment and activity, is the modest plant of Reflexite Corp., a growing and profitable technology-based business competing in a dozen world markets, an untidy token of a brighter tomorrow.

"It's companies like Reflexite that we hope will be the rebirth of Connecticut," says David Edgar, who left a fast-track position with a Fortune 500 corporation to join the venture as vice-president of human resources. Connecticut, hell -- this company is helping the whole United States. Between 1986 and 1991 Reflexite's sales doubled and doubled again, last year topping $31 million. Its work force nearly tripled; profits rose almost sixfold. Though it competes head-on with giant 3M Corp., it has expanded into Canada, Europe, and Mexico. By decade's end it's likely to be a $100-million company operating around the globe.

But what's striking about Reflexite isn't just the growth, which has been surpassed by plenty of well-known flashes in the pan. It's the remarkable sense you get when you visit the bustling plant that -- well, that this company doesn't do business in the ordinary way. Reflexite seems to achieve the virtues of Japanese management with purely American methods. It somehow taps and channels huge amounts of entrepreneurial energy without coming apart at the seams. It's a company whose unusual structure seems to protect profitability, in boom times and slow periods alike. If it were publicly traded, it's a company -- believe me -- you'd want to double-mortgage your home to invest in.

Dave Edgar already has. So have a lot of Reflexite's other employees; as a group and as individuals, they own 59% of the company's stock. That, as we'll see, is not an incidental fact.

Reflexite's story begins with Hugh and Bill Rowland, Connecticut-born brothers who graduated from Yale University in 1940 (Hugh) and 1943 (Bill). They were engineers by training, and Bill in particular had a gift for coming up with new plastic materials and products. In the late 1960s he invented a new method for producing retroreflective material. ( Retroreflective means reflecting light back to its source; it describes the material that coats highway signs and barricades, the tape affixed to life preservers and fire-fighting gear, and the like.) The method -- simple in concept but a bear to execute -- involved molding thousands of microscopic prisms onto every square inch of a plastic sheet. The Rowlands patented key aspects of the process and began learning how to implement it on a commercial scale.

In 1983, with the brothers' young company doing a profitable $3.5 million in sales, 3M paid a call. Would the Rowlands be interested in selling? And if so, did 42 times earnings sound like a fair price?

By some measures it would have been a graceful exit. Hugh and Bill were then in their sixties, and the Reflexite board was worried about succession. The brothers stood to clear about $5 million between them from 3M's offer. There were only two obstacles. The would-be buyer was obviously more interested in Reflexite's technology and patents than in its factory and would promise to keep the New Britain plant open for only a year. That didn't sit well with the Rowlands, old-school Connecticut Yankees who believed a company had a responsibility to its community. Then there was this fellow Cecil Ursprung, out in Michigan, whom Hugh Rowland had just signed up as Reflexite's next president and heir apparent.

Not that Ursprung had a personal stake in scotching the deal. Quite the contrary: he hadn't moved to Connecticut yet, and his newly signed contract included some stock options, which would vest immediately if control of the company changed hands. So he could make a killing without even starting his new job.

But what was a killing compared with a vision? "I had a very, very strong feeling that this was one of those one-in-10,000 opportunities where a really great company could be built," Ursprung says. "And I truly felt, even with a company I respect as much as 3M, I wasn't sure that anybody could nurture this technology the way it needed to be nurtured, and make it blossom, unless they lived with it every day and had to depend upon it for their livelihood." Giving an impassioned speech along these lines, Ursprung persuaded the board to give him a shot. A few weeks later he began the delicate task of taking over from the founders.

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