Critique groups aren't for the faint-hearted, but for appliance dealer Joe Rizzo and others, they're invaluable aids to running a company.
Marie Rizzo seemed nervous; her husband's store, AAA TV Inc., a small television sales and service operation In North Miami, had never been so chaotic. The day before, six appliance dealers had converged on it, and now they were scrutinizing it as carefully as Internal Revenue Service examiners.
A myna bird shrieked in its cage at the rear of the showroom while the dealers, members of a critique group to which Joe Rizzo belongs, did their job. The dealers out back grilled a service technician; another huddled with Jack, the boss's son, while the one sitting in front of Marie, Howard L. Greenhouse, pored over the company's books. Marie smiled a nervous smile, and rolled her eyes as if to say, "What has Joe gotten us into now?"
What Rizzo had gotten them into was a hard-nosed, no-holds-barred, three-day review of his business by six of his peers, men who owned their own stores and knew what to look for in his. All of the dealers were members of the Southeastern Critique Group, an informal organization of dealers from six states. Twice a year, they converge on one of the members' stores, and subject the business to an excruciating review.
The probing of Rizzo's operation was as thorough and intimate as the visiting dealers could make it, touching on every item from the appearance of the store to pay scales, employee productivity, financing of inventory, effectiveness of advertising, and the advisability of adding new product lines. Everything from the business's basic philosophy to the number of transistors in its parts department came under consideration. When the interviews and inspections were over, the dealers would sit down with Rizzo and, in the words of one of the members, "tear him apart."
It was not an exercise for the fainthearted, but Rizzo, who had been in business for himself for 28 years and had once seen his business go down the tubes, was eager for their insights and advice. At the age of 55, he was looking forward to retirement, and wanted to turn the store over to his son, Jack. But the methods, styles, and goals of the old man, who had learned his lessons in the street, and those of his college-educated son were not the same.
And like many other small businesses in Miami, AAA TV was having problems.It had a clientele whose complexion was changing, money was tight, retail credit was virtually nonexistent, and the crime rate was growing. The first day of the critique, one of Rizzo's delivery men had been mugged. The store had grossed more than $400,000 during 1981, but the figure was down by 13% over 1980, and profits were marginal.
Rizzo was hoping that the six dealers and Zeke Landres, a representative of the National Association of Retail Dealers of America (NARDA) who was sitting in on the session, would help him make the transition and turn his store around. Rizzo himself had participated in a number of critiques of other people's stores, and he knew how valuable they could be. The days spent under the gun always had a perceptible effect on a business, and in many cases they had had a major impact. In Al Rubin's case, for example, the critique had helped make the difference between sinking or swimming.
Rubin, a member of the southeastern group who took an active part in Rizzo's critique, nearly lost his two stores in Philadelphia a few years ago. "During the '74-'75 recession, our volume went way down, and I was, for practical purposes, out of business," he explains. "I went to my father-in-law, and he lent me $30,000 to forge ahead; that lasted about a year, and we were back in the same boat, and I remortgaged my house and my business properties."
Last May, the critique group visited Rubin's store, and as a result he introduced a number of changes. "We changed some of the methods of bookkeeping" recalls Rubin. "We added some columns to our bookkeeping schedule -- our cost of goods -- that we'd never had before." He also got rid of a few employees, hired new ones, reassigned some work responsibilities, revamped the look of his store and had its sign redesigned, and established a better working relationship with his son.
After the changes Rubin did $1.7 million in business in 1981 out of a single consolidated store. The situation, he says, has changed from a "very bad" one into a "very good" one. "Profitability this year, I think, is excellent," he says. "It's about 3 1/2%." He expects to do about $3 million in sales this year.
A number of retailers, including ones in the boating, recreational vehicle, automobile, and jewelry industries, make use of peer-review formats to help them assess their performance and upgrade management techniques, but the dozen or so critique groups operating in the appliance field are among the oldest and best organized. All of them trace their origins to one founded more than 15 years ago by Zeke Landres, who was then a dealer, and Dick Donaldson, now the general manager of Sid's Appliance Centers in Tucson.
Landres recalls, "We were at a NARDA convention, and Donaldson came over to me and suggested that it might be a good idea if some of us got together and formed a self-help group." The two men discussed the possibility, found others who were interested, and decided to give it a try. The first group was composed of dealers from Michigan, Kentucky, Virginia, and Tennessee. The disparate makeup of the group was one of the reasons for its success; since none of the dealers were in the same geographical market, they were able to be candid with one another, and to disclose figures and business strategies. Other peer-review groups have failed to get off the ground, or have failed to function well, because of the problem of confidentiality. Another key to the appliance dealers' success was that all of the people in the group ran similar operations. "If you put a $5-million dealer in with a $600,000 dealer," notes Landres, "the one who's doing $600,000 may learn a whole lot, but the guy who's doing $5 million isn't going to pick up much."
Since the founding of the first group, a fairly standard formula has evolved for the critique sessions themselves; the basics are outlined in a guide that NARDA provides to interested dealers. Every six months or so, the members of a group, which generally consists of from 6 to 10 people, get together at a different dealership for three days; some bring along their spouses, a son or daughter, or one of their chief executives. "We feel it's an opportunity for wives who are not involved in the business to get a handle on what the husband's really all about," says Landres.
On Sunday night, the group gets together for dinner, then holds a two-hour bull session over drinks to talk about business and trade ideas. On Monday, they spend the entire day in the local dealer's store. They check out the facility, question employees about the business and the owner, and go over the financial statements and inventory records thoroughly. On occasion, they may go out and shop the competition or do sidewalk interviews with consumers. In the evening, they analyze the data they've gathered during the day.
On Tuesday morning, they return to the dealer's store to fill any gaps in their information. Following lunch, the members return to their motel to write their critiques of the business, and reconvene a few hours later to dismember the local dealer in person. During the oral presentations, which are taped -- and in some cases, videotaped -- for future reference, the owner isn't allowed to respond to his critics. The idea is for him to listen and learn, not defend. After the critiques are presented, the dealer then treats the group to a good dinner -- his major critique-related expense. Everyone returns home the following morning, leaving the local dealer to lick his wounds and decide how best to use the suggestions he's received.
