Big-company refugees are taking over some unlikely small companies, often with spectacular results. What do they know about management that the rest of us don't?
Until Barry Merkin took over, with his Harvard M.B.A. and some 15 years of big-business management experience, Dresher Inc. was a small, profitable, and fast-growing maker of brass beds run by its founder, Max Dresher.
Max had started the company in 1945 and had run it himself since then. At one time or another, he had done every job; when a problem developed, Max was on top of it. By 1979, though, Max was in his sixties, and the time had come to sell his Illinois-based company. The buyer was Standex International Corp., a $300-million manufacturing conglomerate headquartered in far-off New Hampshire.
For a few months, Max and his son stayed on to run the company. But such arrangements seldom work well, and this one was no exception. In May 1980, Standex decided it should bring in its own man, Merkin, recruited from Xerox Corp., to take charge of Dresher. Max waited in his office, chatted amiably with Merkin for a couple of hours, shook Merkin's hand, left, and never set foot in the place again. Only three years later, Standex itself decided to follow Max out the door. It shucked Dresher by taking the company public and spinning off Dresher shares to existing Standex shareholders.
Another small business ravaged and wrecked by inept and shortsighted corporate management?
Not this time. In fact, just the opposite is true. Dresher is stronger than it has ever been, and while lots of things have changed since Merkin moved into the corner office, no one at the company is complaining:
* Burt Stewart, plant manager at Dresher's main facility, in Bedford Park, Ill., attended an industrial trade show in Chicago recently and saw what he thought was a good deal on an Italian metal-bending machine he'd been wanting. He phoned his boss, manufacturing vice-president Jim Nolan. If that's the machine you want, Nolan told him, buy it. Stewart committed the company to a $35,000 purchase on the spot. "With a Max Dresher here," he says, "I would have needed an act of Congress. Now, they trust me that much. . . . Deep inside, I feel like this is my company."
* "Things," says 30-year-old Mike Przybocki, foreman in the polishing department, "have gotten a lot more professional. . . . Before, it was always run as fast as you can. Now, things are done with some thought. When we come out with a new style, we have time to work out the engineering production."
* "Now we know our responsibilities," says Nancy Kosowesky, a secretary to Dresher's executives, "and we don't have anyone breathing down our necks."
* "When I came," recalls data processing manager Fred Burmeister, "this was a job. Now it's fun. I couldn't see myself leaving, even if someone else offered me more money."
And shareholders certainly aren't complaining. In 1980, the year after its acquisition by Standex and 35 years after Max Dresher founded the company, Dresher's sales were $18.2 million. Last year, the company's sixth year without its founder, sales rose 14% from the previous year to $31.4 million. Earnings last year were $1.9 million. A share of stock issued when the company went public in 1983 is now worth 15 times as much.
With a new man at the top, Dresher has become a different company. By and large, it is in the same business, shipping the same products to the same markets with the same managers, foremen, and workers. It has, however, undergone radical changes as a place to work, and in that sense is typical of a growing number of companies that recently have been taken over by an unusual group of managers. These managers are a relatively new phenomenon in the business world, too new even to have a name, but they are running more and more small companies. Among them:
* Remington Products Inc., which was the small and failing electric shaver division of Sperry Corp., until Victor Kiam bought it and turned it around.
* North American Tool & Die Inc., a back-street shop employing ordinary machinists and die makers who today produce extraordinary sales and profits under new owner Tom Melohn's unconventional direction.
* CWT Specialty Stores Inc., a New England fashion chain, whose formerly frustrated merchandise buyers now are having the times of their professional lives while CWT, under Jerry Gura, outpaces its regional competitors.
What makes these managers part of an identifiable group is not the kind of takeover tactics they used to gain management control of their companies. None of them is interested in asset plays, the kind of stock-and-debt shenanigans that keep paper entrepreneurs like Irwin Jacobs and the gang at Kohlberg Kravis Roberts & Co. constantly in the newspapers. Melohn and a partner bought North American Tool & Die outright.Gura and Kiam used leveraged buyouts to acquire their companies. Merkin doesn't own Dresher, which is publicly traded, but, through stock options, he has acquired a large equity position in the company.
Nor are all of these people technical geniuses in their respective fields. Gura may know women's fashion as well as anyone else at CWT, but Melohn at North American Tool & Die brags that he lacks the technical skills required to change his own license plates.
Instead, what makes them a group -- and an interesting group to watch -- is where they come from and what they bring with them to the small businesses they are running now. "Years ago," says Bob Hayes of Hayes/Hill Inc., a Chicago-based management consulting firm, "big-company guys didn't go into small companies." But these big-company guys -- Kiam, Gura, Melohn, Merkin, and it's hard to say just how many others -- have abandoned corporate careers after 10, 20, or more years of experience to run companies that frequently are smaller even than the smallest division of the corporations they left.
Melohn left C&H Sugar Inc. after losing a fight for the top job (see box, "Tricks of the Trade," page 102). Cal Hunter, who now runs Headquarters Cos. Network Systems, a business that supplies temporary office accommodations to other businesses, left the heavy-machinery industry after 25 years because, he says, "I kept getting involved with businesses that were being eroded by the Japanese." Merkin bailed out because, as he told Standex chairman Dan Hogan, "working for a big company like Xerox isn't the fun I thought it would be." Whatever a manager's reasons, says management consultant Peter Drucker, the ranks of refugees like these will swell in the future as baby-boomers start to clog the upper reaches of corporate pipelines. Or, as Hunter at Headquarters Cos. puts it, "The Yuppie glut in no-growth Fortune 500 companies will cause people to bump heads against the organization and not grow at the rate they expect."
