To most of the 200 people crowded into the funeral chapel that hot July day in 1981, Leon Levy had been Word Systems Inc.; it was hard to imagine the company -- a Philadelphia distributor of electronic office equipment -- without him. To the suppliers who came to pay respects, Levy had been a peer, a hard-driving entrepreneur whose business had grown with their own. To the customers, he had been a dynamo, an obsessive technician who made their service his primary concern. To his 30 employees, he had been a father figure, the dominant force in the company.
Now, shortly after his 57th birthday, not quite six years after founding WSI, Levy was dead, killed in an automobile crash after a late-afternoon service call.
Grim-faced and somber, Alan Ellenbogen and Sheldon Katsoff sat near the widow and her son while the rabbi delivered the eulogy. Ellenbogen and Katsoff had been more than Levy's partners and co-founders of a company that would grow to $2.2 million in revenues by 1980; they had been best friends, as well. Together, the three had gone through the shoestring beginning, the initial success, and the growing pains. It had seemed -- up to the moment of the accident -- that at last they were coming into their own, the shouting matches behind them, with a new management strategy and a larger organization in place.
But there would be little time to mourn. Leon Levy was dead, and responsibility for the company had passed abruptly to Ellenbogen and Katsoff. They had an obligation to the crowd in the chapel; to the widow, Roslyn Levy; to her 24-year-old son, Chuck, who had come to work for WSI as a full-time salesman in 1980; to the suppliers, customers, and employees; and to Leon Levy himself.
While large corporations are insulated from the risk of collapse at the loss of the man at the top -- protected by layers of executives crisis-management training and outside directors -- for a small concern like WSI there are few wise men to turn to, and little time tolook for help.
Rather than grieve over the loss of a friend, Ellenbogen and Katsoff would have to fight to keep their business alive.
The three men who would become WSI first got together over a poker game in the spring of 1975. Although Levy, a born tinkerer with a degree in electrical engineering from Carnegie Tech, was the only trained engineer in the trio, all were aspiring entrepreneurs, and all were attracted to the business possibilities they saw in word processing.
Levy had been a manufacturer's representative for Hewlett-Packard for almost 10 years, until the company bought him out, leaving him with cash but no business. Ellenbogen, 34, was a regional manager for CPT Corp., who had promised himself and his wife that he would have his own business by his 35th birthday Katsoff, 33, was assistant to the vice-president for operations of an industrial caterer in Philadelphia, who became intrigued by the new technology of word processing. What began as casual conversation over cards had become a serious business venture by the fall.
Dubbing themselves "the gruesome threesome," they pooled $25,000 and created WSI. Katsoff, with 15% of the stock, was the salesman. Ellenbogen, with 42 5%, had marketing Levy, with the remaining 42.5%, became president, service manager, and chief technician.
Their strategy was simple -- sell service. "We knew from the beginning people were looking for the equipment," Katsoff remembers. "We just had to come up with the right kind of organization to service and supply it."
Working out of their cars, the three partners went after corporate clients, promoting WSI as capable of offering more support and better service than such giants as IBM and Wang Laboratorics Inc. "We didn't make any money that first year," Katsoff admits. "I probably could have made more if I'd been on welfare." But the company grew quickly, attracting such customers as the Philadelphia branches of Merck, Conrail, and the Federal Reserve Bank. Revenues increased 50% annually, to $2.2 million in 1980.
Levy's character was the key to the -- company's initial strategy and subsequent success. He was obsessive, strong-willed, and a workaholic; his energy and skill redeemed the company's pledge of exceptional service. "Leon had a dominant personality," Katsoff says. "He thought of himself as a father figure," involved in every operation and taking a look over every shoulder. "Before we would do anything, Leon would ask, 'What does it mean?' Afterward, he would ask, 'Why did you do it?' like a father questioning a son."
That same character that was such a driving force, however, also caused severe growing pains as the company expanded. Levy chafed at formal meetings, resisted delegating authority, and postponed paperwork. He preferred to run the company in the manner of a European paterfamilias, involved in every decision. As WSI began increasing its third-party financing for customers that wanted to lease rather than buy equipment, financial planning and controls becanie even more important. Levy largely ignored both bills and bookkeeping and argued against hiring the kind of professional who could assume those responsibilities.
As the company grew, tension between the partners grew as well, largely over questions of priorities. "Our system for billing receivables was to wake up and think, Gec, that machine has been there for 120 days. Have we invoiced it?" Katsoff remembers "And at tax time we'd try to go back and reconstruct the entire year." Arguments in the office became so loud frequent, and rancorous that Levy finally agreed to import a consultant, Stephen Veiner assistant director of the Wharton Entrepreneurial Center at nearby University of Pennsylvania.
As with everyone who knew Levy, Veiner marveled at his dedication to his work. "A lot of people in the business take equipment from vendors and ship it right out the door," Veiner says. "Not Leon. He checked every piece of hardware first, and it wasn't just a cursory check -- he checked it out thoroughly.
"It was also typical for service problems to take a while to be solved, due to a lack of spare parts. Leon would take parts from other machines to fix a customer's unit. Nobody else would do that. Try asking your automobile dealer to take a part from a car in the showroom."
But Veiner also recognized that management was as weak as service was strong and suggested a larger, more structured organization. Hire a training manager and a comptroller to ease the burden on the CEO, he suggested. Institute regular and formal meetings of the partners to ease tensions. Add regular planning and forecasting throughout the company to encourage controlled growth.
Levy and his partners agreed. A comptroller was hired and put to work at the two-week task of balancing the company's checkbook. A service technician was promoted to service manager, although Levy refused to give him any responsibility. And Levy eventually agreed to participate in a planning session with the Wharton consultant as well.
