Ask any seasoned entrepreneur what the secret of growth is, and he will tell you that it all comes down to people and management. The logic is hardly breathtaking. Good management solves problems; bad management creates them. It's about as simple as that.
What's less simple, and more breathtaking, is the challenge of finding good management -- a challenge that becomes increasingly critical the more successful you are. Some companies get lucky and hire the right people. Many more hire the wrong people and stop growing as a result. Then there are those such as General Alum & Chemical Corp. that invent their own solutions and develop management talent in-house.
General Alum was little more than a shell of a company when Jim Poure bought it in 1978 and merged it with a chemical distributor he owned. With annual revenues of some $350,000 and annual losses of around $10,000, the combined entity was, for all intents and purposes, a start-up -- which is to say, short of cash. But, money aside, there were other reasons for not bringing in experienced professionals to run the company. "I had a good idea of the type of company I wanted," says Poure, a 20-year veteran of the chemical industry and a former vice-president of sales and marketing for Inland Chemical Corp. "I wanted an organization with a particular style and mold. The problem with hiring experienced people is that they have preconceived ideas of how things should be done. So I decided to look for people with talent, energy, and basic intelligence and interest, people who wanted to get in on the ground floor and roll up their sleeves, with the understanding that the rewards would come later."
In the early years, moreover, Poure did not really need much of a management team. Relying on his own experience and street smarts, as well as the hard work of his employees, he quickly turned the company into a producer of high-quality alum, a chemical used in the treatment of water. This he sold primarily to municipalities, which kept coming back for more. By the end of 1982, annual sales had risen to $2.2 million.
But all was not well with the company, which had yet to see a profit. Its internal organization was a chaotic mess, and Poure was beginning to wonder how long he could go on. "There simply weren't enough hours in the day for me to handle everything that needed to get done," he recalls. Nor did he have anyone on board who could ease his load. He had a group of bright young managers whose enthusiasm and energy he valued, but whose inexperience only aggravated the problems. Sure, they had great potential, but their average age was barely 28, and there were limits to what they could contribute. Poure realized, too, that it could take a long time for them to develop into seasoned professionals unless they received the proper training -- something he did not have time to provide.
To make matters worse, the company was facing some new and serious challenges in the marketplace. Among other things, it was beginning to suffer from the fact that it had only one production facility. General Alum's competitors, most of which were large companies, had several plants, which gave them a distinct marketing advantage. Customers were understandably wary of depending on any supplier that might leave them in the lurch if its plant broke down.
The obvious solution was to build a second plant, but Poure knew little about plant construction or financing. He needed help, and he wasn't going to get it from his young managers. So where could he turn?
As it happened, Poure knew a number of big-company executives with whom he often got together. Over the years, several had shown an interest in General Alum. One was a former colleague named Hap Murphey, who had, in fact, recruited and hired Poure as a cub salesman at Inland Chemical some 20 years before. "He was my mentor," says Poure, "and he's remained in that role." So when Murphey mentioned that he was planning to retire and would be happy to work with General Alum on a part-time basis, Poure jumped at the chance.
Their first project was the new plant, which Poure had decided to locate in Toledo. Together they developed the plans and discussed the financing. "We had limitations on capital, and we looked at some alternatives," says Poure. "His suggestion was to bring in a limited partner."
But Murphey's expertise lay in marketing, not finance, so Poure cast about for someone else to help put together such a deal. Again, he played his social contacts, this time turning to a family friend named Carlton Niemeyer, a 68-year-old former investment manager for Central Soya Corp., who had also retired recently. Niemeyer, too, was interested in working part-time with General Alum, helping to develop its financial structure. "That gave us a real strong financial adviser," says Poure. "We used his business talents to prepare business plans and pro formas to present to the banks." Forty percent of the new plant was sold to a limited partner, which "gave us the capital to secure the balance of the financing through the Toledo Economic Development Council and the Small Business Administration."
Eventually, Poure added a third person to his team of part-time advisers -- John R. Berger, a 64-year-old scientist who had been Inland Chemical's vice-president of research and development and environmental management. Berger was feeling underutilized by the company that had acquired Inland and welcomed the opportunity to work on developing General Alum's manufacturing operations.
With all three, Poure worked out arrangements that gave them a great deal of flexibility. They were paid by the hour, plus expenses, but they could determine for themselves how much time to put in and how to allocate it. From the advisers' standpoint, the relationship allowed them to stay involved with the business and still have the freedom to enjoy their retirement. As for Poure, he got the benefit of their experience, as well as critical advice on how to keep the company growing.
That solved one problem, but it did not address General Alum's need for experienced management inside the company. After discussing the options with various people, Poure decided to bring in a high-priced Fortune 500 executive as director of sales and marketing. It was a disaster. "The problem was ego," Poure recalls. "We all thought he was just the man we needed, but he couldn't make the adjustment to a small company. His field was sales management, and he was used to having a staff of people doing things for him. He was a specialist, rather than a generalist. It was like taking an ear, nose, and throat guy and putting him in a family practice. He lasted six months, which was three months longer than he should have."
Burned by the experience, Poure searched for another solution to his management problem. He was reluctant to go outside the company again. Was there a way, he wondered, for General Alum to grow its own managers? He thought of his advisers. What if he were to match each of them up with one of the more promising young people he already had on board? The advisers would continue to counsel Poure, but at the same time they would serve as mentors to his management team. If the system worked, it would give him the best of both worlds, combining the energy and commitment of the young people with the wisdom and experience of the retirees.
The more Poure thought about the plan, the better he liked it, and -- in late 1984 -- he put it into effect. He assigned his 22-year-old son. Tim, to work directly with Hap Murphey in the marketing area. Niemeyer took on 38-year-old Roger Meyer, the company's controller. Berger was teamed up with 23-year-old Mike Feehan, General Alum's production manager. And Poure himself focused on the career development of 29-year-old Barbara Lehman, his administrative assistant.
It has been three years since Poure first set up the mentor system, and General Alum has never been healthier. Sales have climbed from $3.8 million in 1983, when the company finally turned a modest profit, to about $7 million last year. Since 1985, moreover, it has been "substantially profitable," according to Poure. Meanwhile, all the mentors continue to play an active role, he says, and the young managers are "two or three years ahead of their time."
Each of the mentors has had a significant impact on the company. Early on, for example, Murphey persuaded Poure to refocus General Alum's marketing efforts away from the municipal water business toward private contracts, primarily in the paper industry. "Over half the alum in this country is used in the paper business," says Murphey. "If you get a good industrial account like a paper company, you can still negotiate a competitive price, but service is more important to maintain that account. With the municipal business, it wouldn't matter how good [the service was]: if our price was a buck a ton too high, we'd lose the business."
While he was advising Jim Poure on the company's strategy, Murphey was helping Tim Poure to implement it. "The first time I went in the field with him," says Tim Poure, "we were making a contract proposal to a paper company in Milwaukee. I didn't know what to expect. I mean, when you've got a bunch of 40- and 50-year-olds sitting around a table, and some 22-year-old starts tooting his horn about what his company can do for them -- well, there's often a credibility problem." But Tim had been to the company's paper mills. He knew what the company needed and how General Alum could provide it. Murphey, for his part, could speak with authority about broader trends in the paper industry. "I was able to get the people's attention, and he was able to come in and do some sharp marketing," Tim recalls. "It was a real nice combination." Real nice, indeed. General Alum beat out two large competitors for the contract.
This is not to suggest that the mentors do the managers' work for them. True, they provide contacts and handle specific tasks that demand a higher level of expertise. But more often they serve as teachers and advisers. "Our role," says Murphey, "is to be elder statesmen, to critique them if we think they are doing it wrong."
Sometimes the young people choose to ignore the advice. Murphey and Tim Poure once disagreed about a young woman who had applied for a job as a salesperson. She was enthusiastic enough, said Murphey, but she didn't have enough experience in the chemical industry. "In his day, there were no female salesmen," says Tim, who hired the woman anyway. Within six months, she was the top sales-person on the staff.
Usually, however, the young managers are happy to follow their mentors' advice. "If I didn't have [Niemeyer] to turn to, I'd have to go to an outside accounting firm to get direction," says controller Meyer. "He helped us to revamp our entire budget process, so that it was as sophisticated and as accurate as possible."
Oddly enough, Niemeyer has also played a mentoring role with his old friend Jim Poure, forcing him to accept a financial discipline that does not come naturally to him. "Two years ago," Poure recalls, "when we weren't getting the profits we expected from the new plant [in Toledo], he spent about an hour in the parking lot, chewing me out for a couple of things we'd done. I don't mean he shook his finger at me, but he gave me a firm and constructive analysis of the mistakes we'd made and how we could have avoided them. If you are going to bring someone in as an adviser, you'd better be able to listen and learn. I recognized that he was correct."
More recently, Niemeyer helped Poure restructure the company. Prior to the restructuring, General Alum's two plants and its distribution division were separate corporations, a device Poure had used to obtain financing. Niemeyer came up with a plan to consolidate the different entities under one corporate roof and to buy out the Toledo investor, leaving Poure as 100% owner of General Alum. At the same time, Niemeyer put together a financial package to provide the company with capital for expansion, then helped present it to the bank. "Banks like it when senior people make a presentation," notes Niemeyer. "It gives you greater credibility. We came up with a logical plan, showing there was more to the numbers than just wishful thinking." The bank approved the loan.
Poure himself could not be more pleased with the way things have turned out. His own life is much calmer these days. "I had so much going on at once that I couldn't separate everything," he says. "I'm probably putting in as many hours as before, or more, but I'm a hell of a lot more productive."
Not that the system is perfect. "You have to remember that these people are retired," he notes, "and they like to travel. Sometimes they aren't around when you want to bounce something off them. But now I feel comfortable bouncing things off my own management staff, whereas a year or two ago I didn't."
The development of the management team has allowed Poure to think about long-term issues, including succession. With the encouragement of his advisers, he has designated his son Tim as heir apparent, although he himself has no plans to retire for another 10 or 15 years. "It helps Tim to know the time frame," says Poure, "and we felt that [his designation as successor] would give our employees a good feeling, knowing that the company would continue."
Meanwhile, General Alum continues to grow. With the decision to build a third plant, Poure decided that it was time to add an experienced manager to his team and -- in April -- brought in James J. Young, a 59-year-old senior vice-president at Owens-Corning Fiberglas Corp., as the company's chief operating officer. Nevertheless, he has every intention of keeping the mentor system in place, training the people who will run the company in years to come.