Will Success Spoil Jerry Gorde?
Jerry Gorde, the 32-year-old president of Virginia Textiles Inc. in Richmond, is in a small office next to the second-floor conference room where he will soon make a presentation that could complete what he calls the "Turkish Connection" -- a chance to almost double the company's sales in one year. Gorde sits in a large, fan-shaped wicker chair behind a highly polished mahogany desk. The walls are paneled in walnut; the carpet is a rich, deep brown; the lighting is overhead and recessed. It seems vaguely funereal, but Gorde laughs at the observation and says that, on the contrary, it is an official "president's office," even though it used to be a storage closet.
Too many times, he says, while he was loading trucks in his cutoffs, sweating under a hot southern sun, one of his well-meaning salespeople would rush up to him with a client eager to meet the president of the company. It happened so often that he had to write a memo on the subject. Given a few minutes warning, the memo said, Gorde would be glad to assist in a sale by running upstairs to the "president's office," changing into a business suit, and there receive visiting bankers and customers in a corporate splendor that would make them feel secure. Appearances are important to the world of traditional business, particularly for Virginia Textiles, where the reality is markedly untraditional. And it would be inappropriate to uncover him in the office where he actually works, down in the warehouse next to the soda machine, which he shares with four other people and two dogs.
The irony of a quick-change artist playing upstairs-downstairs games amuses and pleases Gorde. "I'm a walking contradiction," he says, quoting a line from songwriter Kris Kristofferson, "partly truth and partly fiction."
Suddenly, as if he has just heard "Two minutes to showtime" and a knock on the dressing-room door, Gorde jumps up and announces that it is time for the meeting.
Among the men seated at the conference table are Orhan Asliturk, chairman of Oras Group of Companies, a Turkish holding company with global reach based in Istanbul, and Murat Agirnasli, president of IVO Import & Export Co., Oras's trading division in Western Europe and the United States. They want Gorde to open the U.S. market for them so that they can introduce a new line of T-shirts and sportswear made of Turkish cotton, which is allegedly superior to domestic cotton, and less expensive as well.
Gorde flips rapidly through charts of the deal's major objectives and statistics. Between the dressing room and the stage, a change has come over him; there is an edge now, and the confidence of a veteran performer. Although he is dressed in a flannel shirt and gray corduroy Levis, it is clearly part of the overall dramatic effect -- the daring, brilliant, nonconformist wunderkind, a comer, the right man to bet on.
For a while, the atmosphere is more self-congratulatory than deliberative. All agree that there are profits to be made, and they are apparently sampling the feast in their minds. Then Gorde says that if he has to spend $100,000 up front to prime the market, he expects to recoup his investment through a specific schedule of cooperative advertising allowances over the next 36 months. This gives everyone on the other side of the table heartburn. They find it very difficult to agree to specific allowances, given the fluctuation of cotton prices on the world market. "Of course we can agree," Gorde insists. "Everybody we need is right here in this room. Who else do we need?" To which Agirnasli, a little surprised by Gorde's brassy push for the goal line, says, "C'mon, Jerry, quit playing the hard-assed businessman." And Gorde says: "I can't. That's what I am." Then the contestants feint and jab at each other for another half hour until Gorde finally wins his allowances. Later that afternoon, Gorde will recall the struggle and say, "God, I love it. I'm good at it."
Good is an understatement. In 1976 Gorde bought a 200-square-foot T-shirt shop in Richmond. From that modest beginning, he has engineered the creation of a $6-million company with five divisions: retail, direct screen printing, advertising specialties, wholesale distribution, and monogramming. Over the past five years, Virginia Textiles has grown at a compound annual rate of 94%. The company has won a place on INC.'s list of the 500 fastest-growing privately held companies in America two years in a row. And Gorde has reaped the benefits: Honored by the city of Richmond as its Small Businessperson of the Year, he owns a 1963 Corvette split-window coupe, pays himself $1,000 a week, and recently bought a small house in a woodland setting near the James River.
By any traditional measure, Jerry Gorde's business career is a triumph -- but therein lies the contradictions with which he must wrestle. Gorde has not only built a dynamic business, he has given it a human face -- open, employee owned, and democratic. But the more successful he gets, the more he worries that he has betrayed his own ideals. "It is quite a shock to me when I think of the person I have grown to be," he wrote in his personal journal. "How in the world did I become so lost?..."
"My father sold his company to Eckerd Drugs in 1969," Gorde says, "and at the age of 50, he was all used up. I mean he couldn't remember what his fantasy dreams were after he got the bucks. And he spent the next 10 years of his life sitting in his underwear in an easy chair because he couldn't figure out what the hell he made all the money for. I am desperately trying to hold onto the dreams of what it is that I want to be free to do."
One afternoon in 1972, before the Democratic and Republican national conventions had started, members of the Youth International Party, known as "Yippies," threw a party on South Miami Beach for the poor of an impoverished area that began about 10 blocks from the Miami Beach Convention Center. Gorde, who, at the time, sat on the Party's national council along with such well-known radicals as Abbie Hoffman and Jerry Rubin, was distributing food among the folding tables that had been set up on the beach. But the guests couldn't wait. They began attacking the tables, stuffing the food into shopping bags they had brought with them.
"I remember one group of people," Gorde says, "shoving so hard against a table that it collapsed, and these people fell all over the ground. I was picking people up and food up and they're still trying to stuff food in their bags, their coats, their pockets. I got pissed off at these people who were stuffing the food into their bags and denying the others anything at all. I went up to Abbie and I started complaining bitterly about it. He had to explain to me that people are inherently good and that they weren't doing it to hurt their fellow people; they were reacting out of their desperation to survive. It wasn't that they were 'bad' people; they were 'good' people who were suffering."
It was there, as much as anywhere, among the bagels and pastries in the sand, that Gorde decided someday to measure the sum total of all his days in terms of the number of lives saved or Constitutional principles upheld. He dreams of becoming the voluntary director of Amnesty International or the American Civil Liberties Union, and Virginia Textiles is his ticket to get there. "I want to have made enough money," he says, "that I can go to them and say, 'I don't want a nickel, just send me into your biggest rat hole and let me do the job."
But dreams, he is finding, are fragile things. "It's hard for me," he says. "It's like a state of suspended animation." Gorde thought he was strong enough to buy into the American Dream of business success without selling his soul. There was a time, not so long ago, when his mouth would have filled with sand if he had even thought to say he loved being "a hard-assed businessman." Now he fears that, despite his vigilance, he will slip over the edge, that Virginia Textiles, once only a means to an end, will, in fact, become the end.
Gorde got his first look at what he now describes as the "belly of the monster" at the age of six, when he started working half-days on Saturday in his father's business, Miami Fruit and Syrup Co. He didn't like it -- he wanted to play instead -- but over the following years he began to learn about business. "He was a natural," biis father, David "Bud" Gorde, says. "Jerry's what I call an off-the-seat-of-the-pants executive. It's all gut. You don't learn it in school and you don't read it in books."
Entering the University of Miami in 1969, Gorde planned to become a lawyer. But during his sophomore year, his sympathies turned against the war in Vietnam, until finally he dropped out of school to work full time in the antiwar movement, supporting himself by selling his hand-made leather crafts and living in the apartment of his friend, Robert Tarren, now Virginia Textiles's vice-president of sales.
Then the Democratic and Republican parties announced that they would both be holding their 1972 national conventions in Miami, and suddenly the city became a mecca for every radical group with enough money to make the trip. A local underground radio station told an advance man for the Yippies that, out of the local talent, Jerry Gorde had the best files of government and law-enforcement agencies, local staging areas, and potential donors. After the man had studied the files, he agreed that they might serve as a basis for Yippie operations during the conventions, and he called Abbie Hoffman.
Later that afternoon, they picked up Hoffman at the airport. Within 24 hours, Hoffman had called the radical pantheon to join him and Gorde in Tarren's apartment: Jerry Rubin and Allen Ginsberg, among them. "It was a real kick in the pants," Gorde says. "Every one of my heroes was crashing in that room. Inside 72 hours, I was transformed from a dropout selling leather keychains and doing minor movement work to being part of the national coalition."
The Yippie slogan that year was "10 days to change the world," and Gorde was actually surprised when it didn't happen. "I really believed," he says, "that the war would end and we would all be marched down the streets in a ticker-tape parade." Instead, one night after the conventions had ended, Gorde remembers, as he was burning papers in the Yippie office, two undercover policemen stuck a gun in his face and said, "If you're here tomorrow, you're gone." Gorde left town that night and began the four-year period of wandering about the country that he sometimes describes as "going to Katmandu."
Katmandu, the capital of Nepal, was, to Gorde, a symbol for a state of mind that might sustain the '60s high, once the jasmine-scented reveries and movement energies of the Woodstock Generation were past. Gorde spent his time shuttling back and forth between Maine and Miami, working as a commercial fisherman or selling his leather crafts at carnivals and beach resorts. In 1976, he met Wendy Herron, now the 31-year-old vice-president of Virginia Textiles's retail division who, at that time, was a medical assistant to a doctor in Miami Beach.
Jerry and Wendy were living together in Bar Harbor, Maine, when Jerry's mother called to report that one of his cousins was going to close or sell her small T-shirt business in Richmond. Since Jerry and Wendy were about to leave for Miami anyway, they promised to stop off in Richmond to take a look at the business. "By that time, I was kind of burned out, and I was getting a little old to be on the road year after year. I was 25, and I'd been bopping around the country since I was 21, and the politics were over and the friends were scattered all over the place."
The shop was called Dirt Shirt. It was 10 feet by 20 feet square and contained one rack of irregular T-shirts and one wall of initials and pictures that could be heat transferred onto the shirts. "I walked into the store and said, 'Jerry, you've got to be kidding.' " says Wendy. "It was everything I hated -- plastic pictures on T-shirts. But Jerry went right to the books to see if we could make anything out of it. He said we needed an economic base, that it was a way to get to Katmandu."
Gorde wasn't alone. There were thousands of Yippies and hippies and assorted counterculture freaks opening T-shirt shops or leather-craft shops or macrame stores all over the country. But Gorde was different from most. He already had a large and reasonably well-informed talent for business from his years working for his father, and he had already thought out the conceptual underpinnings of his company's organization. "I knew that my ideas were so very different that no matter how brilliant I was and how good I could be in business, in an institutional business environment I would be considered to be a creative renegade and I would be bounced out of every company that I tried to get into. I had no degree. I had no professional background. I was really one of the disenfranchised. At that point, I decided to build my own system."
Gorde's capitalism celebrates the right of every individual to be "free and creative." But before that can happen, he believes, people must "get above the economic necessities of their lives." The corporation is a means to this end, a stop along the way to fulfilling personal dreams and goals as diverse as the individuals involved. Personal freedom within the corporation, however, must promote profit. "Without the bottom line," Gorde says, "the dream is jeopardized, the whole thing becomes a joke, and we've all wasted a lot of time."
The best way, he asserts, to satisfy individual economic necessities and preserve personal freedom while at the same time maximizing profits is by letting employees own the corporation and by giving every shareholder an equal vote in major corporate decisions, regardless of the number of shares held. Any given individual's value to the corporation is then based on the merit of his or her specific contribution. "The other owners listen to you," he says, "because you've made more right decisions than wrong ones, and wrong ones are inevitable." Ultimately, the corporation perpetuates itself because as owners take their profits and leave to pursue their dreams, they hand over their responsibilities to others who are equally inspired to reach the same threshold.
"My father gave me the bottom line," he says, "and the Yippies gave me a philosophy. And the idea was to determine whether I was going to have to remain outside society to survive intact or whether I was strong enough to enter the belly of the monster, promote a different sense of business philosophy, maintain a bottom line, and at the end of that period, assured of monetary success, would still have enough of myself left to reach my goal."
On September 9, 1977, Jerry, Wendy, and Jerry's old Miami friend Bobby Tarren were officially in business. Gorde had given his cousin $3,000 in cash from his leather-craft savings, and the three partners had signed papers to take over payments on an existing $8,000 bank note. They paid themselves $50 a week each and checked the cash register every hour to see how much they had made.
Dirt Shirt was business primeval. Customers would wander in off the street, select one of the irregulars from the rack, spell their names out from the initials that hung on the wall, and have them ironed onto the shirt. It was a slow, maddening process for three people who had enough energy among them to trigger nuclear fission. And it was exactly the kind of dead-end challenge a former Yippie leader needed to restore hs sense of urgent opportunism. As it turned out, Gorde's Yippie experiences were more than loosely connected to his success in business. The hours spent negotiating with contentious radical groups and local government officials had given him a compelling verbal dexterity. But above all, he had come away with an almost visceral certainty that, given enough thought, most difficulties could be turned to his advantage.
It was obvious, for example, that the meager drop-in trade would never get anyone to Katmandu. The business needed more traffic, but it couldn't pay for the advertising to get it. So Gorde went to a local radio station and offered to supply it with T-shirts bearing the station name in exchange for airtime. "This developed a retail traffic," Gorde says, "that was substantially better than the store deserved." The partners soon added more racks of T-shirts, and so began an expansion program that is still underway.
At the same time, the partners started to develop some crude systems that would help them organize and manage the growing enterprise. "It was kind of ludicrous how much attention we gave to setting up systems, given what we had to work with, Tarren says, "but we were always conscious of their importance. At first we tried very basic stuff like which rack we would start with first when we took inventory and what color shirts to count first. We got better at it as we went along."
While Wendy ran the retail operation, Gorde and Tarren were busy calling on other radio stations, advertising agencies, restaurants, and bars. Not only did they offer T-shirts, but they also came equipped with an appropriate "concept." For example, when the owner of a local pizza parlor couldn't understand why anyone would want to buy a T-shirt with the name of his parlor on it, Gorde explained that if "Had a piece lately?" was printed on the front of the shirts, they would go flying out the door. That owner has since sold more than 1,000 T-shirts, and is still a customer. The "I only sleep with the best" T-shirt, which was sold in the gift shop of The Hyatt Richmond, was another big winner, until company officials questioned its taste. At the end of its first fiscal year on March 31, 1977, Virginia Textiles recorded about $80,000 in sales and a minuscule profit of roughly $2,000.
By the end of fiscal 1978, sales had doubled and profits tripled as the trio expanded its list of corporate accounts. They had hired Jerome Golfman, their first salesman and greater volume had enabled Gorde to build up his credit with the bank. They had formed custom screen printing, their first division outside retail sales, through a merger with the textile division of Richmond Graphics Inc., a local screen printer and billboard designer.
But the merger with Richmond Graphics represented more; it created a new level of production control. At first, when orders called for only 100 or 200 shirts with simple lettering, Bobby, Wendy, and Jerry would complete the order themselves, working through the night with a converted photographic film dryer that they cranked up to the highest temperature possible.
As orders grew, they invested in a custom-made machine that could do both screen printing and heat transfer. And still the orders grew, 1,000 then 2,000 shirts, forcing Gorde to rely heavily on subcontracts with other screen printers. Most of these screen printers could neither deliver high-quality product nor could they deliver on time. "The customers were accepting it," Gorde says, "because there was nothing else around. But I just knew it wasn't good work. I just knew it wasn't under control. The people at Richmond Graphics were truly good artists and technicians, but they were very poor at business." Gorde settled Richmond Graphics's Small Business Administration loan and paid its back payroll taxes, and the combined company set up shop in 1,000 square feet of rented space behind a lithographer's plant. Today, the custom screen print division has roughly 3,500 customers, most in the central Virginia area, and is the company's second largest division, accounting for about 35% of total sales.
Even though the company's business was growing rapidly, Gorde found it difficult to translate this success in terms that bankers could understand. "They were very leery of a T-shirt company," he says. "They'd never seen their company name used in that way." They had seen their name, however, on glass mugs, key chains, calendars, and countless other advertising specialty items. Shortly after the Richmond Graphics merger, Gorde added the company's third division, which now contributes about 12% of total sales. "As soon as I opened up the advertising specialty line," Gorde says, "they all understood what I was doing." It was an ideal solution because Gorde didn't have to produce or inventory a product, and his salespeople were already on the street selling T-shirts to customers who were also usually interested in other advertising specialties.
In fiscal year 1981, sales passed $1 million for the first time. And once again the former Yippie maestro got as much volume out of the performance as he could. "We wrote up a very, very strong, professionally written profile of the company," Gorde says, "and supporting data was worked up by our accountants and put into their binders. Then I found out the biggest VP I could get hold of in each of the major banks in Richmond and sent them the package, giving them the privilege to bid for the Virginia Textiles account. The one who offered the best service and the lowest interest rate would be privileged to lend us $500,000 for our new expansion move. And United Virginia Bank, the largest bank in the state, bought."
Continuing growth meant expansion into larger quarters, and expansion into new ventures as well. The company had grown rapidly, but so had the industry, and the mills were straining to meet the insatiable demand. Gorde himself started to build large inventories of T-shirts as a precaution against a drought. Other retailers and screen printers with less credit and smaller orders were caught in a constant scramble for product because they couldn't get it from their traditional dry-goods wholesalers who had somehow failed to build their inventories.
So Gorde started servicing these smaller customers out of his own inventory, adding an average of 15% to handle the orders. He advertised his offerings in the trade journals and quickly built his new wholesale division to $1 million in sales. In 1983, he used "four-color, blasto, professionally done, two-page ads," and by December, sales of the division, now called Blanks Alot! had passed $3 million. Altogether, Virginia Textiles's five divisions, which also include a small monogramming and embroidery business, are expected to bring in revenues of about $6.75 million in fiscal year 1984.
"What I've done," Gorde says, "is just set up a little world that I could be comfortable in, and I'm saying, 'If you can be comfortable in it too, share it with me.
For two years, Gorde shared the rewards of his world by giving employees an annual salary bonus so that they could buy stock in the company. He couldn't give them stock outright, because it would be taxed as personal income, and many employees didn't have enough cash at year-end to pay such a tax bill. Taking withholding tax and Social Security out of the salary bonus and allowing employees to invest the net solved the tax problem, but it galled Gorde. "I realized," he says, "that Uncle Sam was taking about 35 cents on the dollar out of the money that we were simply trying to give to the employees to enfranchise them." That was when Gorde started thinking about an employee stock ownership plan (ESOP).
In the spring of 1982, Gorde attended a national ESOP convention at The Capital Hilton in Washington, D.C. "There were about 300 companies there," he says, "and most of them had already instituted ESOPs. Unfortunately, from a philosophical standpoint, 95% to 98% of them did it only for the tax benefits. I left very disillusioned; it did not occur to me that ESOPs would be used simply as a methodology for avoiding taxes and that the liability for those companies who used it for that purpose was that they had to give stock to their employees. For me, giving stock to the employees was the primary benefit, not a liability. If, in fact, I could avoid the taxes and pump more stock into my employees quickly, I could speed up the process of turning the company into a corporation wholly-owned by employees."
Corey Rosen, executive director of the National Center for Employee Ownership, remembers the conference vividly because he participated in a panel discussion while Gorde was in the audience. "Jerry suddenly jumped up," he says, "and made this statement that all these people were deluding themselves and their employees. That if they didn't given them full participatory rights and control of the company, it really wasn't employee ownership and they didn't deserve all the tax breaks they were getting. At that point, several people in the audience walked out, maybe 20% of the audience. Jerry was very impassioned. I never saw anything like that before, and I've spoken at a lot of conferences."
Soon after he returned from the conference, Gorde sat down with James Tilton, an attorney at the Richmond-based law firm of Hunton & Williams, to devise an ESOP that would incorporate his ideas. "His point of view was unusual," Tilton says, "in that he really did see it as a shared work effort and a shared ownership effort. He saw it both from the standpoint of what's right and what's fair but also from what's effective."
Currently, the Virginia Textile ESOP, effective in March 1983, but retroactive over the prior 12 months, owns about 10% of the outstanding shares, while 11 out of 53 employees own the remaining shares. Twenty-eight employees have stock in their ESOP accounts and 7 of them will begin the vesting process in March 1984.
"Right now we're in the process of educating the employees," Gorde says. "If you put in an ESOP and your only reason is the tax ramifications, then you don't want the employees to become educated as to what their rights are, because all you're doing is inviting them to become involved in the company, and you don't really want that. In our case, we're asking every employee to become an owner and a partner."
Each employee is given a 56-page description of the plan written in "plain talk," a prose style characterized by simple, declarative sentences with a glossary at the end of the plan just to make sure everything is easily understood. 'I think the average person on the production line is not as concerned about the ESOP as he or she is about the next paycheck," says Benjamin Kutner, the company's vice-president of finance. "But as we learn more about it and we're able to do things like allowing people to borrow against the equity in their stock, then they'll be more appreciative of the ESOP, and it will make them feel more like they're working for themselves rather than for some boss."
The new ESOP is hard evidence that Gorde is willing to put his money where his mouth is, but it is not a gift. "Sharing," he says, "means sharing the bad as well as the good." During the second half of 1982, for example, employees were asked to accept a 15% cut in pay because business was expected to be slow. That would erode first-half profits, and then the company couldn't show bankers its expected 5% profit margin. Gorde may say that "the bottom line is such a narrow, unhealthy target, such a limited goal," but in practice, he acts like it is The Deity. The alternative to the pay cut was a lay off of six employees. Gorde said the company would return the pay cut during the anticipated strong first-half of the next year, but he couldn't guarantee it. According to Gorde, the employees considered the issue for five hours, and finally voted to accept the pay cut. But morale was low for months, and the decision remains controversial even after the money has been returned. To Gorde, however, the temporary pay cut demonstrates the company's willingness to control its finances. "This company is very much based on capitalism," he says. "It is very much aware of the bottom line and it does, at times, prevail."
For Gorde, however, the regency of the bottom line often seems like a hollow accomplishment. "You know," he says, "the development of excess money has nothing to do with what I thought was important when I was 22. In fact, that's what I resented most -- that everybody had turned out the best part of themselves and replaced it with the bottom line." He recalls that when he dropped out of school, his father told him that while he was wasting his time, his friends were passing him by on their way to successful careers. To which he said something like, "When I want to, I'll make them look like they're standing still." And by his 30th birthday, Gorde had already lived up to his promise. He was the president of a company whose rapid growth seemed like only a prelude to greater glories. But in some ways it was a bittersweet victory.
"Sometimes I can't see anything else but that I've already sold out," Gorde says. "And Wendy will sit down with me because she knows I feel really bummed out and she'll say 'Jerry, take a look around. Look at how many people are working for your company that have an opportunity that only you could have made for them. You may be losing part of yourself, but you're not losing it forever. We're making something happen; it's creative effort, a productive effort. The work is valuable; it makes people feel good.' "
Wendy's attitude about work at Virginia Textiles appears to be shared by most of the people there. "When I was a road salesman," Jerome Golfman, now a senior salesperson and partner, says, "I was just a peasant. Now I'm the master of my fate." He dreams of owning a hotel on a beach somewhere and sometimes wonders if he is "a capitalist whore." Bruce Greenblatt, 26, who used to sell restaurant equipment and now sells advertising specialties and T-shirts, says, "Jerry's changed my opinion of myself. He's given me a chance that I would never have had before." Sarah Parker, 27, who has been with the company for six months, thinks she is "kind of an administrator with advertising specialties, but pretty much an experiment." "I guess all the people here see it as the ticket to their dreams," she says.
For all of them, it has been Jerry Gorde who opened the path to their dreams. As Benjamin Kutner says, "It's still very much a one-man organization." Gorde is its high priest and keeper of The Vision. He sees himself as a "casual communicator" who delivers everyone's mail each morning and cruises his turf in a variety of Levis, bib overalls, flannel shirts, and workman's caps, proselytizing the faith. "Step one's been completed," Gorde says. "I'm a minority stockholder and now I depend on my influence, respect, esteem, and charisma to make sure it continues to go the way I think it should."
But some of the more intriguing dramas in the Virginia Textiles story haven't been played out yet. What, in fact, will happen to the company if Gorde does cash in his chips? Who is Jerry Gorde, or what is he becoming? "Watching Jerry now trying to straddle the socialistic and the capitalistic, well, I sit and chuckle," his father says. "This is his own personal fight, but I know who's going to win. Capitalism's going to win, there's no two ways about it. First he started out with a little convertible Falcon, now he's got the convertible Mercedes; he bought a three-piece suit; he bought a house; he got a passport. Hey, there's only one thing that can happen. He's going to be a filthy capitalist one day."
One thing is for certain. Ten long years ago, Gorde set out for Katmandu, at the northern foot of the Mahabharat mountain range in central Nepal, where the snow leopards and yeti howl to the distant looming presence of Mount Everest.
So far he has reached Richmond. It has been a long trip.