No. 1: Pedus International;

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Inside the Blue Whale, Pedus International is Harold Shapiro. He is Dick Dotts's man on the scene.

The Pacific Design Center, the "Blue Whale" to its Hollywood neighbors, is Mecca to West Coast decorators, a dazzling courtyard ringed by expensive shops, 750,000 square feet of showrooms selling Oriental rugs, ornate furniture, and expensive fixtures "to the trade." But when Harold Shapiro comes on his weekly visit, he doesn't see the center's six gleaming stories of azure glass towering up into the Los Angeles smog. He sees windows to wash. He doesn't see the lady in the leather pants, or the androgynous couple in cashmere walking hand in hand.He sees their detritus. Cigarette butts on the concrete. Lint on the carpet. A film of dust on top of a picture frame that he unconsciously brushes away.

At $50,000 a month, Shapiro's 15-man Pedus Janitorial crew is building manager David Shively's biggest expense after utilities. Is there a late-night electrical fire, leaving the carpets soaked and the walls streaked with soot? Call Harold. Did the 100,000 visitors frolicking at the annual Hollywood gay fair leave the parking lot in shambles? Call Harold. "I could find cheaper, nonunion companies," Shively says. "But Harold has sold us Pedus on how well he performs. He's on the job when I need him. If I call, he will make something happen."

When Dick Dotts, the 41-year-old chief executive officer of Pedus International, tries to explain the growth that made his company #1 on the 1984 INC. 500, he points to people like Harold Shapiro. A 31-year veteran of the cleaning business, Shapiro spent most of his career as a route and division supervisor for the Los Angeles operation of New York City-based National Cleaning Contractors Inc. But at National he was a frustrated salaried employee, his operation "a stepchild" to a distant bureaucracy that swamped him with rules and procedures. In 1980, when Pedus acquired National's Los Angeles operation, all that changed.

Now Shapiro walks the Blue Whale and Pedus's other installations once a week, a beeper on his belt in case another customer should call. "I work the way I've always worked," Shapiro says. "It's a constant going and looking and doing." But at Pedus he is an assistant vice-president, with a single mandate -- to take care of the customers. His compensation, like every Pedus manager's, is tied to a personal incentive plan based on his division's growth.

Finding managers like Shapiro was the core of Dick Dotts's plan for Pedus from the beginning. Since its 1979 launch, Pedus's growth has come from acquisitions, and management talent has been the most important asset it has bought.

"You can't build a big service company," Dotts insists. "What you have to do is hire people who have the same pride of ownership you do.

"We're not building a business. We're collecting entrepreneurs."

To hear Dotts talk, he has had to make only one big change in the business plan he wrote for Pedus five years ago. Starting with $200,000 in capital and a 68-employee security firm, the Los Angeles-based labor provider has grown into a service giant with more than 7,000 employees and $70 million in fiscal 1984 sales, expanding from guard services into janitorial staffing, food workers, and hospitals, spreading to 10 different cities throughout the West and Southwest. But that wasn't quite what Dotts planned. He had projected that Pedus would hit $100 million by 1983. Now he expects it will take him until 1986.

Dotts came to Pedus much like the managers he would later recruit -- eager, ambitious, and frustrated. Twice he had bumped his head on the corporate ladder, leaving a fast-track slot at Pacific Telephone & Telegraph Co. after 5 years when he learned he was too young for any more promotions, the leaving Bekins Moving & Storage 10 years later when he was passed over for the presidency. So when a management recruiter suggested that he fly to New York to meet Peter Dussmann early in 1979, he was ready for a change.

Dussmann, a Munich entrepreneur who had parlayed $500 and a job cleaning bechelor flats in his hometown into a major European janitorial company, had been looking to make an American investment. But rather than buying stocks or bonds, Dussmann wanted to use his money to build a new business. Within an hour, the pair had struck a deal. Dussmann would provide the initial capital; Dotts would provide the American experience and hands-on management; together they would create a national service organization. Dussmann offered to give his new CEO a lifetime contract, until the lawyers pointed out that, in California, anything over eight years would constitute "involuntary servitude." Instead they settled on seven years -- with lifetime renewal options.

"I'll plant the first tree," Dussmann told him. "You grow the forest."

They called the company Pedus, after Peter Dussmann, but it was not to be a copy of the German entrepreneur's European success. Although Dussmann had made his fortune building a janitorial service, Dotts wanted to encompass all types of compatible semiskilled labor -- security guards, parking lot attendants, and cafeteria workers. And unlike Dussmann's European business, which had grown internally, Dotts's plan stressed acquisitions, buying up the best of the mom-and-pop businesses that dominate the labor market in the Sunbelt.

"With most of them, their size has outstripped both their management skills and their resources," explains Dotts. "By my assuming some of those burdens, they're back in the hunt. They can concentrate on doing what they enjoy doing -- building a business."

Dotts made his first acquisition that year, buying a Los Angeles security company, Security International, for $85,000. He corralled his wife to be his temporary bookkeeper, and he set up brand-new offices on Wilshire Boulevard. In other respects, he admits, it was hardly a typical start-up. "We had the advantage of not having to worry about money."

Dotts spent his early days concentrating on meeting his first acquisition's handful of customers; their satisfaction was the key to his marketing plans. If they liked his guard service, they could open doors to other potential security service customers. And they would be potential new customers themselves as he acquired new services to offer.

As it happened, his acquirees weren't all the moms and the pops he expected. Although he bought up four small companies over the next five years, most of his growth came from swallowing up divisions shed by much larger companies. In 1980, he acquired the Los Angeles operation of National, and with it some $12 million in sales. In 1982, he bought the security and cleaning subsidiaries of The Bekins Co., the corporate parent of the company where he had been passed over for the presidency. That brought another $36 million in business, and expansion into San Diego, San Francisco, Phoenix, Tucson, and Dallas. But with each acquisition, large or small, he was buying managers, people he thought could share his feeling for customer service and his pride in delivering satisfaction.

"Then I'd give them their head," Dotts explains. There were no committees, no hierarchy, and no memos. Everyone was on a first-name basis; decisions were made face-to-face, with Dotts playing the devil's advocate more than the ultimate decision-maker. The manager had their own growth incentives. This time, Dotts would plant the tree; it would be their job to grow the forest.

Tim Gilmore, president and CEO of Pedus Security Services Inc., marvels at the result. "My autonomy is nearly total," he says. "In fact, Dick sometimes frustrates me -- he won't sit down and say 'This is your marketing program.' But that freedom is what makes me tick." And tick his company has: Since Gilmore joined Pedus with the acquisition of Bekins Protection Services, he has seen his business grow from $12 million to $30 million.

Eddie Neel has seen equally spectacular results. For 19 years, Neel had run his own company in Dallas, called Metroplex Maintenance Services Inc., undercapitalized and only marginally profitable, growing to just under $1 million in sales before he sold it to Bekins in 1979. When Pedus bought Bekins, Dotts made Neel a vice-president and Texas regional manager -- and Neel pushed sales up to more than $10 million a year.

"The difference is management," Neel says. "They told me, 'This area is yours; you're responsible for the growth; you're responsible for the P&L.' Then they left everything else up to me. It's slmost like having my own company."

Pedus's headquarters sit on a quiet street in the Hispanic section of Los Angeles, four low-slung white concrete buildings dotted with bilingual signs directing the steady stream of job applicants to the appropriate building. Like most of the company's assets, the headquarters buildings came as part of an acquisition, then were transformed, scrubbed, and polished, the wells repainted Pedus red and white, the corridors lined with graphic and abstract art.

Dick Dotts sits in his corner office, chain-smoking cigarettes and sipping coffee from the "No More Mr. Nice Guy" coffee cup his staff gave him for Christmas. He is smiling: Everything has gone largely as planned. With 6,300 building service employees and 2,500 security service employees (both full- and part-time) -- the fastest-growing work force on the INC. 500 -- Pedus has become a major presence in the industry. With offices spread throughout the Southwest, it is well on its way to becoming a national organization. Although the $100-million mark may still be a few years away, Dotts has no doubt that he will reach it -- as long as he can find new companies, and new managers, to acquire.

Dotts has seen his role change in the years since he signed his contract with Peter Dussmann back in 1979. Although he still finds time for customers, he spends the bulk of his time now with his managers, redesigning incentive plans as circumstances change and refining his control systems to ensure that they have the freedom to keep on growing.

"I'm having a ball," Dotts says. "It's an investment in people.The pleasure is in seeing them grow.

"We're a group of people coming together who get their kicks from the same thing.There's no philosophy other than having fun doing what you do. But it long ago stopped being Dick Dotts. The company doesn't grow because I pull people up. It grows because they push me up."

Last updated: Dec 1, 1984




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