Vic Barouh has built a profitable company by doing everything wrong.
Lee Abrahamsen, who spent 20 years with a competitor before joining Barouh-Eaton Allen Corp. tbree years ago, claims there isn't another company like it in the world. "If you judge it by the way the book says you're supposed to do things," says Abrahamsen, "this place shouldn't work." He isn't exaggerating.
A growing company with international sales of more than $50 million should not put its corporate headquarters on a mean waterfront block in Brooklyn. A business interested in controlling costs shouldn't hire people it doesn't have jobs for or tie up its cash in interest-free loans to employees. It should have an outside board, a strategic plan, an executive compensation program, a computer. A company in a highly competitive industry should not dispatch a former stenographer to open a new branch plant. Its chairman should not load pal lets. He should not kiss the women who work for him. He should not call them girls. He should not shout so much. He should not be so naive as to believe that love and respect are crucial to business success.
But don't bother explaining any of this to Victor Barouh, age 57. He won't understand what you are talking about.
Barouh is the founder, chairman, and majority shareholder of Barouh-Eaton Allen Corp., usually called Ko-Rec-Type, after its best-known consumer product. With plants on both coasts and in Puerto Rico, Canada, and Ireland, Ko-Rec-Type is the country's largest independent manufacturer of inked ribbons for such things as typewriters, printers, and bar-code markers. Its principal competitor in many of its product lines is IBM Corp., which could have put Barouh out of business a few years ago. The story is a useful one to begin with, because it illustrates much about how the Bronx native runs his company.
In 1957, a year after he started the business Barouh rather accidentally invented the product that fueled its early growth. A company typist kept a piece of white chalk by her machine. She would lightly erase an error, then rub over it with the chalk. It took forever, but the correction was neat. Barouh's business was making carbon paper, so one day, while watching the typist, he got an idea. He borrowed her chalk, rubbed it on one side of a sheet of paper, put the paper between the error and the typewriter key, and struck the key. Most of the error disappeared under a thin coating of chalk dust. That is how Ko-Rec-Type was developed. The company prospered.
Then IBM invented the self-correcting typewriter. "The funny thing was," Barouh relates in as fine a New York dialect as you are likely to hear, "that on Saturday or Sunday IBM announced that they came out with a brand-new typewriter and it lifts off errors. Monday morning about 40 people were at my door telling me they saw it on TV, and we're going to be in trouble because nobody's going to use our Ko-Rec-Type anymore.
"We immediately went down to the IBM showroom, and when the salesman was demonstrating the machine he looked at me and he says, '. . . and if you buy one of these machines, you'll never have to buy Ko-Rec-Type again.' So I immediately put in an order for a machine. I got back to the plant and I called everybody together and I said, 'Okay, here's what we have to do. We have to make this ribbon, and we have no idea what this ribbon is. We have to make the cartridge, because the cartridge isn't available. And we have to go into the injection-molding business to make the spools that hold that tape . . . So, first we gotta come up with the ink, then we gotta come up with a machine that puts ink on film . . . and with a machine that would split the rolls, and with the cartridges that these things go into.'
Within six months, we produced the first ribbon, and we were the only company in the entire world that produced that product. Later, we found out it took IBM six years to develop that product, and we did it in six months with absolutely no clue as to how to start."
Barouh's talent for motivating people gets him extraordinary results. His first employees, for example, were volunteers.
"My first job in this industry -- I was about 20 years of age -- I got a job working for Old Town Carbon & Ribbon in Brooklyn in the shipping department. . . In five years, I became the assistant plant manager. And then the company was sold . . . and they brought in a team of business experts. They were going to take this, what they called 'grocery store' type of operation and make it a national, well-functioning type of business. The first thing they did was they took all the middle managers and sent them to Philadelphia to take a test to see whether they were suited for the particular job that they were doing. And I refused to go. I did so badly in school that I knew I couldn't possibly pass the test, and I didn't want to be embarrassed. I told 'em, and they said to me that if you don't take the test then we have no alternative but to let you go.
"When they let me go I immediately took a 5,000-square-foot loft in Brooklyn and started to put together a little factory. A dozen or so people came from the old company to help me. Some of them just worked after hours, and some of them worked throughout the day. I explained to them I had no way of paying them, but they were willing to give me a helping hand, and that helping hand was what got me through the first couple of months to produce the first product."
Whatever would make someone go to work for nothing, with no promise of anything down the road? Maybe it has something to do with the kind of interest Barouh takes in people.
One day, when the crowd in his office had grown to nearly a dozen people, each with his or her own problem or idea that needed the boss's attention, the boss was busy advising one employee on the best washing machine to buy with the interest-free loan the company was making him. The loans are common practice for the company, made to finance cars, doctor bills, vacations -- almost anything an employee's supervisor considers reasonable. Barouh, one supervisor said, often overrules her and grants loans she has turned down. Nothing that affects the people who work for him is trivial to Barouh.
And he loves to talk. Ask him a question and he tells you a story.
Question: Is that the best use of your time, giving advice on washing machines?
Story: "People make the thing or break the thing. Management can do whatever they want with banks and borrowing and manipulating and everything else. If the spirit of the people isn't in everything they do, the damn thing is going to fail . . .
"I got a fellow here who's retired. [Casper's] been in this industry for many, many years, but his health is suffering. He's retired, but he can't stay home. He comes in two, three hours a day, and we put him in the office. One day his wife calls up and she says she's gotta talk to Vic. I never met his wife, but when she called she asked for Vic, and that's because when Casper goes home he says Vic this, Vic that. So she asks for Vic, and she says, 'Vic, this is Casper's wife, and I'm so worried. He passed out and he's in the hospital.'
"Now she's not asking for anything. She's not asking me for a doctor or for money. They have everything covered. But she's gotta talk to somebody.
"Let me tell you something. I need it, too. There are times when things look pretty rough, and I have to be able to walk downstairs and put my arms around a half a dozen people and say, 'Hey, guys. I'm in trouble. Will you do me a favor? Will you get this thing out?' Whatever it is."
Question: Do you screen people before you hire them?
Story: "No. When we had just bought this building and had skids of stuff to put away, this new Mexican kid saw me working, and he walked over and said to me in Spanish, 'Let me help you with that.' I tell you, I needed the help because I was ready to drop dead. What I noticed was that he grabbed the harder part of the job. Instead of handing me the cartons off the skid, he took them off the skid and walked up the ladder, and when he came down the ladder I just handed him another. I said to myself, Either this kid is real bright because someone told him I'm the boss and he's trying to impress me, or he's really a very conscientiousguy.
"In a few minutes we had a 10-minute-break bell. I said to him, 'You got a 10-minute break now. You can rest.' But I continued to take the cartons, and when he saw that, he didn't take a break, and we worked until 12:30. At 12:30 the bell rang again for lunch, so I said, 'You go eat, because I got an appointment with somebody, anyhow. You come back in a half-hour and we'll finish up this thing.' I didn't have any appointments, but I was testing him. I walked off the floor and stood behind the doorway and he kept working. He worked right through his lunch, and he put away the whole damn skid. Finally, about 5 minutes before the end of lunch, he took out a paper bag and he ate a dried-out sandwich. When I came down, he was ready to go back to work on the next section. I said to myself, The sonofabitch doesn't know that I was watching him. He's good. He's gotta be good. He's just what I'm looking for.
"First I put him on the printing press. He didn't know anything about it. In a week he was running it perfect. The second week he took the goddam thing apart and rebuilt it. The third week he was already running another machine. After a while I put him in charge of the whole printing operation. He had about 20 or 30 people working for him.
"When he worked on a job, he always trained every single person to know what he was doing. He would go to another department on his own, and little by little he learned how to run every department in the place. In Puerto Rico now, he runs everything.
"That's the way we train our people here. The department heads here came from within the working group. When the leading man quit, I went over to the spooling table and said, 'Girls, I need your help.' This girl came over to me, and she said, 'Give me orders. I take care of orders. I know everything.' I said, 'You sure, Lydia? You know what you're talking about?' 'Look,' she said. She'd made her own little book. Every oddball order that had come in that we didn't have a spec on, she had the damn thing listed there -- every single one. So she became the one in charge. After a while the department grew to 120 girls, and she's in charge of all of them. She has two girls that now know as much as she knows because she taught them . . . That's what they all do. There's nobody walking around here with an engineering degree scheduling this massive factory."
It all seems so haphazard, so unplanned. When, for example, a major competitor went bankrupt, Barouh hired one of its senior salespeople but never specified the job. "I finally asked Vic what he wanted me to do," says Lee Abrahamsen, who is now a senior vice-president, "and he asked me what I wanted to do. I said I wanted to be in charge of OEM sales. He said, 'Okay, you're in charge of OEM sales.' "
When Ko-Rec-Type was about to acquire the business and the employees of a small competitor that was failing, Barouh told the owner to bring his people in and let them spend a couple of weeks at the new company. "They'll figure out what they want to do," he told the man.
Roseann Langone, bored with her stenographer's job in Manhattan, went to work in the Ko-Rec-Type factory, soon moved upstairs to the office, and within two years took charge of government sales, which now approximate $4 million, nearly three times what they were when Langone took over. "I kept asking people, 'Hey, what am I supposed to be doing?' " she says. "And they'd say, 'Oh, no one thing. You'll figure it out."
"Langone?" answers Barouh, "I don't tell her she has to double her sales. Every day she comes in here she's trying to ten-times them. She sets her pace. Not me."
Barouh wants Langone to leave Brooklyn, where she has always lived, and take charge of the administrative side of a plant to be opened on the Texas-Mexico border. Langone says she doubts she will go. Barouh says, "When Langone sets up the Texas operation . . ." He knows she will.
When Barouh walks into Zoila Moreira's department, he gives her a hug and sometimes a kiss on the cheek. She hugs back. It might be difficult for hard-core feminists or trade-unionists to accept, but these two people love each other, like the 12-year friends they are.
"There are people here," says another employee, "who would die for Vic Barouh."
Barouh himself almost died not long ago, and not of natural causes. It is yet another story, but one worth telling, because it goes to the root of what makes the man tick and his company thrive.
A couple of years ago, Barouh was mugged in the parking lot outside his plant. He bought a gun. A few months later, two would-be thieves shot a company security guard outside the plant, and Barouh left his office to join the firefight. After that, he launched an anticrime campaign. He organized local business owners. He bought ads in local and national media. He got several thousand New Yorkers to send $1 to the mayor to pay for more police. He promoted a constitutional amendment stripping convicted felons of some of their civil rights. These things, he concedes, were an angry man's reaction.
"What really set me off on this crime thing was not the mugging. When I was mugged I got mad, and I was mad at that one guy. If I'd have got my hands on that one guy, whether he would have killed me or I would have killed him, I don't know. But I was appalled by the fact that somebody took a gun and rapped me over the head a number of times with it. And I was very angry at myself that I didn't fight back. Of course he had the gun, but I was still angry at myself.
"The thing that really hurt was not the mugging . . . What really hurt was when a man actually shot in front of me our security guard. When I looked down at him and I saw the blood coming out of his gut and I saw the color of his face change from natural to the color of my cigar ash, at that point, what I actually witnessed, drove me to where I truly understood what violence was and the effect that it has.
"We've had situations here where someone will pull a knife out, over a stupid argument. Initially, the others would run away, and just the two are standing there -- one with a knife and one without a knife. And that presents a problem. But I would go down and stand next to them and talk to other people to stand together with us. . . In the 30 years that I'm in business it's happened over a dozen times . . . and every time we've gotten the bad guy to calm down and put away his knife. When that occurs, if a group of 10 or 20 people out of the 500 or 600 we have employed here see that, then I encourage them to spread the word to the other people. If you stand together, then nothing happens, whereas if you run away and you leave one at the mercy of the perpetrator, that one could be you.
"When we were kids in the Bronx, we would take a broomstick and go out on the sidewalk and start hitting a ball. If there was a woman sitting on the stoop with her baby carriage and she opened up her mouth and told us to move on because she was afraid the ball was going to hit the carriage, and if 10 kids decided that they weren't going to move and they were going to defy that woman, then 50 windows opened up and 50 women and men opened up their mouths and said, 'You kids get off this neighborhood.' And when we saw 50 people caring, we walked away and we went to the school yard or to the park. Because 50 people cared.
"When I want something done and I express anger and hate to someone because they didn't do it right, I will solve the problem for that day but the very next day I've got the very same problem again. An example of that is, if a group of people have produced a bad product, and that product cost me $5,000, $10,000, $15,000, and I have to throw it away, and I'm out $15,000. I go downstairs and I'm angry and I scream, and I say, 'You stupid bastards, do you realize how many rolls we have to make to recapture this lousy $15,000 that you threw away? We're losing the customer. We can't ship the merchandise. It costs us money. We're working on a small margin.' The next couple of hours they make a nice roll. Everything is fine. And a week later, two weeks later, you're subject to the same problem again.
"But when you approach them and say, 'Guys, we made a mistake. It's a costly mistake, and we can't take that costly mistake, because if it repeats itself again then I'm out of business. I don't have a job anymore. If I don't have a job, you don't have a job. And I'm gonna tell you something else. I'm not threatening you, 'cause I need you to make it right. I can't be all over, so I need you to take care of your end.'
"Now, if a guy turns around and says to me, you know, Vic, it really wasn't my fault. This roll I received bad. I didn't know it was bad,' I say to them, 'You're right, but now we've gotta go together and talk to the ones that made it bad and explain to them the problem that we both have and that they have as well.' And I'll take the supervisor of the second phase of that operation and a worker and we'll go over to the supervisor and a worker of the first phase and we'll repeat that exact same thing -- how we're all in it together. And with caring, we have eliminated the overwhelming number of such problems . . ."
The tendency to trust and respect other people that Barouh has infused into his company and its employees doesn't mean that people don't fall short and don't get fired. They do -- when they don't perform up to their capabilities. But it does mean that Barouh and his managers are able to make sound judgments affecting people -- judgments about promotions and other sensitive matters that in other companies would demand adherence to formalized rules of procedure. Bonuses, for example. Anyone in the company is eligible, but bonuses are awarded irregularly and in no prescribed amount. This degree of informality, which could easily create suspicion and dissatisfaction in another environment, works well for Ko-Rec-Type.
Work scheduling and raw-materials stocking -- the kinds of manufacturing management chores that in companies of similar size are frequently handled by sophisticated computer systems operated by specially trained people -- get done at Ko-Rec-Type with apparent efficiency and effectiveness, but sometimes on the back of an envelope. Partly that is possible because communication among divisions in the company is easy and informal. And partly that is possible because supervisors and managers aren't permitted to just supervise and manage. Sales managers also have territories to cover. The supervisor in the spooling department loads ribbons right alongside the people she supervises. Researchers, from time to time, work on the production floor, building the products and using the processes they helped design. Consequently, personal loyalties run toward the company as a whole, not toward individual work units.
The example is set and continually demonstrated by Barouh himself. He is on the floor, in accounting, at the loading dock, or in some other part of the company all day long. If someone needs a hand, Barouh is as likely as anyone to lend it. It is hard not to be infected by his passionate and optimistic enthusiasm. The son of Greek immigrants, he puts on no airs.
Once, Barouh was visiting a competitor's plant at its management's request. The executive conducting the tour introduced Barouh to a machine operator. "This is Mr. Barouh," the executive said. "He is chairman of Ko-Rec-Type." "No," Barouh said, "my father was Mr. Barouh, and he wasn't chairman of anything. He ran a hat-check concession, and he's been dead quite a long time. My name is Vic."
Ko-Rec-Type's board of directors, consisting entirely of insiders, plays only a perfunctory role in the company's affairs. Which is not to say that the company doesn't have long-range objectives and strategies for attaining those goals.
"People told me," Barouh says, "that I'd never succeed in this business, because I didn't have the right structure or the right organization. Well, I know that all complex problems began as simple problems. Simple answers will work. Business today is just as loaded with bullshit and bureaucracy as government is."
Barouh is serious about the proposal he made to President Reagan for federal assistance to local, neighborhood anticrime groups. He received a polite letter from Edwin Meese III, counselor to the President, who said that Operation Care is "under review" at the White House.
"It does work," Barouh says. "The thing is, I can't sell it to the whole world. I can only sell it to the people I see. It has to be something that the President himself can see. In a short period of time, people would be able to walk the streets and come out of their hiding and walk with that feeling that we had in small towns and even in the Bronx, which is a bombed out place now, but it can be brought back to life again. It's not vigilante stuff, and it's not hatred. It's caring and looking . . .
"What am I gonna tell you? I don't want to sound like a crackpot. That's the way it is, and that's the way I am."