Smokenders Kicked Its Bureaucratic Habits

Founder Jacquelyn Rogers almost went bankrupt before new managers cut the company down to size.

Tweet

October 8, 1979. It was Black Monday at the headquarters of Smokenders in Phillipsburg, N.J. In the small conference room at the end of the hallway, court-appointed trustees Tommy Thompson and Doug Hall had set up a makeshift office. They called in, one after another, the remaining 25 members of a headquarters staff that had once numbered 46. Each interview lasted about five minutes. At the end of the morning, only six of the staff still had a job, and Thompson and Hall were emotionally drained.

"It was murderous," says Maurice C. "Tommy" Thompson, Jr. "But the funny thing was that most of them were ready for it. Finally, some action was being taken."

That action was necessary because Smokenders, a company that runs eight-week seminars to help people quit smoking, had gone into Chapter 11 two weeks earlier. The immediate reason for the bankruptcy was that the September campaign to sign up new participants had bombed and there was no cash to pay the advertising bills or the course moderators. The long-term reason for the bankruptcy, says Jacquelyn Rogers, the founder of Smokenders, was the company's lack of financial management. Thompson's review of the company's financial history showed that in the first nine years of business, Smokenders never made a profit. In the last two years before bankruptcy, it lost a total of $2.7 million. Sales had peaked at $7 million in 1978 and fallen to $6 million in 1979, when the company lost $1.6 million.

Despite the company's financial woes, Rogers still speaks with pride of building Smokenders from an idea to a multi-million-dollar company: "With all due humility, I'd say that's pretty good for a housewife from Pennsylvania." A former advertising account manager, Rogers started the business in 1969 after she developed a method that helped her stop her own two-pack-a-day habit. She decided that if it had helped her -- when everything from pills to psychoanalysis had not -- her method could probably help others. The first time she gave the seminar in her hometown of Easton, Pa., she charged $3.50 a session to 23 people who had signed up. Ten years later, the rate was $295 for eight sessions and over 250,000 people had taken the course.

The course takes eight weeks to complete and during the first five weeks, participants are allowed to continue smoking. All the moderators are former smokers who have been through the course. To motivate people to stop, moderators talk about the benefits of not smoking (i.e., your breath smells good again, you wake up in the morning without coughing, you gain self-respect because you've been able to control a habit that once had control of you). One of the techniques used to break the smoking habit is a device on which a smoker records each time he takes out a cigarette. By becoming conscious of how often he is lighting up, Rogers found, a smoker can usually cut his consumption by one-third. According to an independent study of Smokenders' success rate, after 11 months, nearly 70% of those who completed the course were not smoking.

The first year Rogers gave the course, she ran the business out of her own dining room. Then she moved to an office in Phillipsburg, N.J., where her husband practices dentistry, and she started hiring people to help her cope with the mountains of paperwork -- advertising, brochures, materials for the course, questionnaires to be sent to Smokenders graduates. She bought a printing press to save on printing costs and set up a separate print shop. She hired two people to help her do the advertising in-house. And eventually she added a purchasing and distribution operation.

By 1973 she had opened chapter offices in Connecticut, Arizona, and Florida at the urging of three Smokenders graduates who wanted to spread the word to other parts of the country. She was soon swamped with requests from other grads who wanted to open their own chapters.

Because she recognized that she was more an idea person than a manager, Rogers hired more and more people to help her keep track of the business she was bringing in. The chapter managers were in charge of their own purchasing and accounting, but as the organization got bigger, Rogers noticed that this system didn't allow her to control expenses. Her managers were buying fancy mailing equipment and other purchases that she couldn't justify. The controller suggested that they bring the accounting functions into headquarters and make the managers fill out requisitions. Rogers agreed and the controller hired people to help him cover the 15 chapter offices. At this point in 1978, there were about 46 people on the headquarters staff.

While Rogers felt she had better control over spending with the new system, the people in the field saw the situation quite differently. Fay Fehd, who managed the northern California chapter, says the experience was demoralizing. She had no bottom-line responsibility and no control over money or budgeting -- not even a checking account. The chapter managers were only supposed to set up the Smokenders programs and make sure the moderators stayed close to the script that Jackie Rogers had written. And above all, they were supposed to be sending in reports -- "piddly little reports," says Fehd, "like how many people called into the office today?" She stuck with it only because she loved the Smokenders program, which had helped her kick her 27-year habit.

 1 | 2 | 3  NEXT