Trial By Jury
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.
The process spotlights a dealer's weaknesses and recommends better methods for managing his business, but it has benefits for the critiquers, too. It exposes them to different ways of doing things, and gives them a chance to work, and to relax, with their peers, a luxury they couldn't afford in their hometowns. "Joe would never expose his operation to any competitor," notes Landers, "and he'd never tell any competitor about his problems. There are real emotional advantages -- you can unload on each other here."
"When you're a small independent businessman, there's really no one you can talk to," concurs Claude Wolfe, a dealer from Orlando, Fla.
Even when the session is over, the closeness persists; the host dealer keeps members posted about the changes he institutes, and they may phone one another for advice. Then, when their turns come, they become the direct beneficiaries of the critique group's expertise.
In Rizzo's case, the critiquers had been asked to address the problems involved in turning the store over to his son. Rizzo had indicated that he wanted AAA TV to take care of him after he retired, or, if he were to die, of his wife, Jack's stepmother. Some of the members seemed to feel that would impose a hardship on the business.
Rizzo had also asked the group to consider a number of other questions: Should he continue to concentrate on service or expand his sales effort? Should he add new product lines? What could he do about poor employee morale? How could he deal with a Spanishspeaking work force? Where should the business be in 10 years?
The group squared off with answers -- to Rizzo's questions and dozens of others that they'd raised themselves during the review -- on a Tuesday afternoon in early February. The trial by peers took place in a small conference room at a Howard Johnson Motor Lodge close to the store. Rizzo sat at the center of one table, facing the dealers who were at tables on either side; his wife, still looking a bit nervous, and his son, a relaxed, good-looking 23-year-old, flanked him.
The critique began with Larry Suter, a dealer from Stuart, Fla., who wasted no time enumerating the business's shortcomings. "Starting with the inside of the store, more of the old equipment and junk should be removed or, better yet, thrown out. There's no discipline in the people at all." The list went on and on: the lack of identification numbers for serviced sets, poor housekeeping, illegible paperwork, obsolete test equipment.
Rizzo leaned across the table, the muscles clenching in his jaw; he was used to fighting and not inclined to remain quiet.
"There's no question about the bookkeeping system," Suter continued. "It's nonexistent. I don't think you've got enough figures to understand and operate on a budget and cost factor." Then, moving his finger down the list, he discussed individual employees, pay scales, and safety. "You may have to get out of delivering and picking up sets in half of your areas," he noted. "Either that, or put two people on a truck, one with a shotgun."
Several dealers laughed, but Rizzo smiled and nodded. "Don't laugh," said Suter. "I used to call on the commerciallaundry people in Miami, and one carried a submachine gun when they had big collections."
The next speaker, Howard Greenhouse, of Woodbridge, Va., suggested a method for increasing sales -- using the thousands of names of service customers as sales leads. "You have names, addresses, and telephone numbers of live prospects right here in your hometown," he explained. "It's just a natural, super, super way to get new sales."
Rizzo, his chin resting on a clenched fist, remained grudgingly silent during the remainder of Greenhouse's critique. Carter Pruitt, the owner of three furniture and appliance stores in Georgia, took up where Greenhouse left off. Rizzo had served on a group that critiqued Pruitt's business. "My suggestion is to hold meetings," Pruitt said. "Hold store meetings; hold management meetings; hold meetings of the service department. If this sounds familiar," he added, staring directly at Rizzo, "it is-it's your words from my critique. You told me to hold meetings. I come down here, and you've never held a meeting!" Everyone in the room, including Rizzo, broke into laughter.
Pruitt's wife, who had spent two days reviewing the books, told Rizzo, "My biggest surprise was that you didn't know anything about your financial statement; I think that you should sit down and learn about it, anything and all that you can learn about it." Then she turned the floor over to Al Rubin.
Rubin, who has a born salesman's natural charm, warmed Rizzo up: "The system that you've developed is practical, it's effective. It works for you. It makes you a living." But, opening pleasantries done with, he began to hammer away; he worked his way down a long list of suggestions as methodically as a carpenter driving nails. He told Rizzo that he should expand into video-cassette recorder and microwave repairs, air-condition his shop area, hire a new accountant, put some liquid assets into an IRA account, check out federal crime insurance, and settle things with his son.
"Set up an acceptable agreement in writing between you and Jack," he said, "that will, over an agreed-upon time period, transfer ownership from you to Jack." Like Claude Wolfe, the next critiquer, Rubin knew the importance of working well with one's offspring; his son is involved in his business, while Wolfe had taken over two stores when his own father had died.
But Wolfe had little sympathy for the heir apparent; his green eyes flashing, he noted, "I gathered statements like 'Sergio needs more help from Jack,' 'Jack should run the shop,' 'When Joe is away, Jack doesn't do any work.' "Jack, sitting at his father's side, began to fidget.
"Jack needs to prove that he really wants to work here," asserted Wolfe.
Unlike the others, Zeke Landres, the final speaker, felt that Rizzo knew exactly what he was doing. "I think he's got a pretty good handle on what's going on," he said, "but he knows, in his heart, that he can't continue to run the business the way it's being run, or he's not going to hold onto Jack." He made a number of observations, recommended that the store make more effective use of NARDA's methods, but finally he decided to cut the bull.
"Look, I wrote a lot more things down, but I've been talking for 45 minutes," he said. "If you're happy with the way it is," he told Rizzo, holding him with his eyes, "I don't want to hear any more horse from you. I mean, just run it the way it is and let it be a slophouse, and do it.
"You make a good living out of it -- you got a big house, okay? You got a place in Sanibel. You got two Cadillacs -- what the hell? Life is beautiful! You work three days a week. How bad can that be, Joe?
"I mean, you know, I come from the same place you do. I played stickball in the streets just like you did, baby. I pinch myself every morning and say, 'Is it still all right? Everything there? The money still in the bank?' What could be so terrible?
"But if you really want to change it," Landres said, "then shoot for that extra, Joe!"
It hadn't been easy for Rizzo; he had grimaced and endured the ordeal, but he wasn't about to suffer in silence forever.He had scheduled a rebuttal -- not normally a part of a critique session -- for the following morning.
When the members of the group gathered in the conference room again, Rizzo told them, "I felt like most of you didn't understand my business," and spent the next 15 minutes getting a load off his chest. His honor salvaged, he then admitted that he'd be implementing many of their suggestions.