What happens when a CEO is so effective that the company can't survive without him?
What happens when a CEO is so effective that the company can't survive without him?
BURTON A. BURTON RECOGNIZED only a handful of the 260 people crowded into the lunchroom to hear him speak. But he didn't need to know them to see that they were nervous about what he might say.
After all, Burton hadn't been around much in the past few years -- a time when the company he started and sold, Casablanca Fan Co., had taken a tumble. When he sold it in 1981, Casablanca boasted sales of nearly $50 million and a robust aftertax profit margin of around 21%. Now, less than four years later, the company has suffered a stunning reversal: it was facing losses of about $2.5 million. Employment had dropped by around 20%. Burton wasn't surprised when one of the owners called him that very morning. Would he consider taking over again? I'll give it a try, Burton replied.
Now he had to tell the employees, many of whom had never worked for him before. They all certainly knew his name. Not just because Burton Burton is a hard name to forget. So too was the man himself. His flair for marketing was company legend. He had spent more than $1 million to refurbish two old railroad cars and had toured around the country promoting the company; had built floats for the annual Rose Bowl parade; had made a promotional film in which one of his ceiling fans appeared almost to decapitate him. He used to hand out T-shirts that read "Blow Your Wad, Cool Your Bod with Casablanca Fans."
Blow your wad was right. Casablanca's fans were positioned at the premium end of the market, at least 50% higher in price than the average fan. The higher price reflected an increase in quality and styling -- but not that much of an increase. Most of the pricing premium was the result of Burton's marketing pizzazz. Here was an executive of a manufacturing company who refused to be drawn into a price war with his rivals from Hong Kong and Taiwan who were flooding the market with cheap fans. Burton played by his own rules, and these rules had raised an otherwise dreary business to the level of entertainment. Could anyone compete at that level with Burton? Could a Taiwanese industrialist tell better jokes than Eddie Murphy? "If you are going to sell $500 fans in a $200 market, you had better have something else to sell," says Walt Kirby, the company's former transportation manager. "Casablanca sells a mystique -- and it is Burton's mystique."
Alas, there is only one supplier of the Casablanca mystique. He left the company once, and someday he'll leave it again. "The next time I walk out of here," says the 59-year-old Burton, "it's going to be for good."
Like any company founder, Burton started out with a unique vision. He tailored Casablanca to fit that dream. But did he go too far? Is it possible that he infused his company with so much of that vision that it can't survive without him?
Jean Clyde Mason, an independent designer, likes to describe Burton in terms of one of his most passionate obsessions. "Burton," she says, "is on his own railroad." Appropriately enough, his journey to Casablanca began next to a railroad station in Pasadena, Calif., where he rented 3,000 square feet back in 1973.
Before that, he had run a small machine shop for about 15 years and had come "just as close as you ever want to be to going toes up," he recalls. It was an experience that would later serve him well. But in 1969, with sales peaking at around $800,000, he sold out to his partner.
Soon after, Burton rented the railroad station -- he even installed train whistles so he could toot at passing railroad cars -- and buried himself in another of his passions, antiques. The station was wall-to-wall with nickelodeons, slot machines, roulette wheels, gum-ball machines, chandeliers, and other collectibles. Some he restored and sold; others he kept for himself.
At one auction, Burton saw 300 ceiling fans sell out in three hours. In the 1930s, the advent of central air-conditioning had sent a chill through the ceiling-fan industry, but the nostalgia craze was fueling a comeback. Ever the practical hobbyist, Burton soon started pulling apart some of those vintage fans. He managed to make and sell a few pulley-driven units, but they were heavy and expensive.
So he started making fans powered by individual "barbecue motors," the motors that turn a spit over a grill. At 25 revolutions per minute, the fans weren't strong enough to move much air around, and their plastic gears broke easily. Elaine Pondant, who signed on as a Dallas sales representative, called them "trash with class." The fans looked much better than anything else on the market -- not that there was much competition. In the mid-1970s, there were only about 10 companies making ceiling fans. As rising energy prices made air-conditioning expensive, that figure rose quickly. By 1980, about 150 companies had jumped in, including many Far East competitors. They were producing models that retailed for around $150; most of Casablanca's fans sold for some $300.
At the time Burton started Casablanca, Hunter Fan Co. had the only brand name in the business. In fact, Hunter had virtually owned the ceiling-fan market going back almost to the Company's launch in 1886. But 90 years later, it was still making functional fans that weighed 50 pounds and weighed heavily on the eye. Burton, though, fashioned his products out of his love for antiques, and it showed. They were plated with an antique brass finish and were incredibly lightweight. The technology improved year by year. Burton saw the fans more as furniture than as cooling machines. "I don't like the low end of the market," he says. "It's not a challenge to get out there and see how cheaply you can make it."
By 1975, Casablanca was selling around $1 million in fans. A year later, sales soared to $7 million, and Casablanca was a major player in the industry. Demand became so crushing that Burton had to build a 12,000-square-foot, 24-foot-high warehouse in 90 days. By 1980, with sales at nearly $42 million, Casablanca had spilled into 10 buildings in Pasadena. "We almost fell into the fan business," says Thomas Frampton. "Then sales wouldn't stop climbing."
Frampton was a self-described "16-year-old high-school flunkie" when he answered an ad posted at a local college. He went to the address, which turned out to be next to the train station. Inside, Frampton found "an energetic man" tinkering amidst "a museum of things." That day in 1973, Frampton became Burton's first employee.
Burton never considered himself a businessman, and he did not want to manage the company. To run it, he wanted someone he could talk to and "a person who could get things done." His own interest was mostly in promoting the company. "I guess there's a little P. T. Barnum in all of us," he says.
Burton might very well have hired a lion tamer, given his idiosyncratic way of identifying executive talent. Consider George Watson. Like Burton, Watson had owned a small machine shop. They had known one another for about 25 years, but Watson had recently retired. "There are some opportunities here," Burton told Watson over the phone. "I need a guy up here who I can trust." Sorry, Watson said, my working days are over. "Listen," Burton appealed, "I need a guy with your good instincts and command and respect for people." Watson finally agreed to serve as a consultant three days a week.
After a few months, Burton asked him again. But I'm 70 years old, Watson complained, and my knees hurt so much I can barely walk. Burton bought him an electric golf cart, and Watson "was soon there six days a week. He was the right guy for the moment," says Burton.
Walt Kirby's moment came one day in 1977, although he seemed an unpredictable choice as well. Burton had met Kirby some 20 years back. Now, he called Kirby to ask his advice about a trucking strike that made it difficult to ship Casablanca's fans. Kirby, who once had been a trucker, told Burton to rent an 18-wheel trailer. I'll be there in a few days with a tractor to pull it, he said. He was clearly someone who got things done, so Burton offered him the job of transportation manager.
As he brought managers aboard, Burton had to learn to let them manage. At first, he tended to interfere. He might pull workers off a production line and, using skills honed in the Marine Corps, organize them to clean the grounds. Watson put his foot down. "It's your money and it's your show," the elderly man would declare. "But we have got to talk. Unless we talk, you don't need me." One task Burton absolutely refused to delegate, however, was "mail scrutiny," as he calls it. "The mail," Burton insists, "is the heartbeat of your operation." If something got out of sync, Burton says he could tell by looking at bills, reading letters from customers, or examining invoices.
While not a manager, Burton cherished his role as chief motivator. In Casablanca's early days, he had periodically handed employees $50 bills; he later instituted quarterly profit-based bonuses. He insisted on giving them out himself.
He was also an ardent practitioner of management by walking -- and wheeling -- around. From the start, he walked through the factory twice a day, noticing everything from poorly stacked castings to blocked fire exits. In 1980, the company moved into new quarters just east of Los Angeles. To navigate the 200 yards between the company's two main buildings, Burton bought himself a fat-tire bicycle. He also bought a couple of them for his managers.
As the company grew, Burton's means of motivating took more and more unusual forms. Burton ensured that "there was no such thing as dullsville at Casablanca," says Kirby. One day in 1979, Burton drove in behind the wheel of a 1965 Ford station wagon. Look what I bought, he told Kirby. What are you going to do with that? Kirby asked. Burton wasn't sure, but a minute later he suggested they raffle it off. He wasn't fazed when Kirby collected more than $1,000; he simply added more prizes and $200 in gasoline. The man who won the car "had tears in his eyes," Kirby recalls. Then there were the Thursdays when Burton would decide that the company should host a picnic the following Sunday. "My game is to get everybody to play," says Burton, "to keep their spirits up."
If that means improving the working environment, he'll do that, too. One morning he decided the factory parking lot was "too sterile" and needed trees. Within hours, the concrete cutters were on their way, as were the trees. Burton was off to Europe, but he called in every six hours. How are the trees? Are they getting enough light? Another day, he decided that workers on a new paint line had to walk too far to the bathroom. Since there was no sewer nearby, Burton decided on the spot to spend about $10,000 to buy and install the plumbing and an extrusion pump that would push the sewage 250 feet up, across the ceiling, and to a waiting sewer. He had it done within five days.
Company executives got the Burton Burton treatment as well. Without warning, he grabbed some of his managers and piled them into his car. Where are we going? one passenger asked. To see giant earth movers I noticed on the way to work, Burton replied. Once, on the spur of the moment, he took his managers along on a test ride in a Gulfstream III jet. First, they stopped to pick up an old friend. Then they flew to Seattle to visit a favorite account. When nobody was there, Burton insisted they rent a car and take a ferry to an island he wanted to see. After that, they grabbed a sandwich and returned to Casablanca. Another time, Burton interrupted a meeting to show off the boa constrictor he'd found on his car that morning.
"He keeps us on the edge of our seats," says one manager, somewhat out of breath.
If you are going to make a company work," says Burton, "it's a matter of internal spirit." External, too, and that is where Burton has really excelled.
Burton's marketing strategy isn't terribly complicated. A born performer, he gets up in the morning and does what comes naturally. It's usually outrageous, it's often expensive, and it's always something that nobody else would ever think of, much less have the nerve to do.
Burton has used an arsenal of gimmicks to keep the Casablanca name alive in the heads of sales reps and dealers. He once rode into a sales meeting on an elephant. At a company sales meeting in Las Vegas, he pulled up in a flashy sports car, and emerged carrying a large radio, accompanied by two female escorts. Once inside, he ignored the proceedings, grabbed some salesmen, and started up a game of craps.
He was always thinking of ways to sell the fans. To draw attention to his belt-driven models, he asked his lawyer's wife -- we repeat, his lawyer's wife -- to power one by pedaling a bicycle. TV cameras showed up, and the exposure brought in about $60,000 worth of orders. Burton wore out the soles of his sneakers. He went to football games and handed out 100,000 hand fans. He gave away T-shirts printed with that immortal line, "Blow Your Wad, Cool Your Bod."
Even in the early days, he furnished dealers with pub signs, big decals, and van decals. Later, there were neon signs and beautiful catalogs. Sure, the blades were less flimsy and the plating was thicker. But with a 50% higher price tag, Casablanca fans were still a hard sell. "We shoved it down the consumer's throat," says Pondant. "They were promoted into buying the product."
Burton's show never ran out of acts. In 1977, in the midst of a truckers' strike, Burton was forced to spend $20,000 for a trailer. Kirby suggested they might want to paint a company logo on it. Hmm. Find out how much it would cost to paint the whole damn thing, Burton asked. When Kirby came back with the answer, about $4,500, Burton didn't even wince. He already sensed that the scheme he was cooking up was worth twice that price. When the painting job was done, the Casablanca logo, in giant swirling brown letters, completely covered both sides of the truck -- and the nine others that Burton soon added.
They looked like circus trucks, and heads turned as they pulled into town. Soon dealers were competing to have the trucks parked in front of their stores each weekend. They staged mini-carnivals. Dealers would sell hot dogs, balloons, T-shirts -- and truckfuls of ceiling fans. It wasn't unusual for a truck to begin the weekend stuffed with about 700 fans and return to headquarters empty on Monday. By then, it was easy to forget that it had all started with a trucking strike.
Casablanca's sales force never knew what to expect. At one point, reps and dealers started grousing about everything from delivery to quality control. How did Burton answer their complaints? He made a movie. He spent $9,000 on a filmed report about the company's progress. In it, Casablanca's quality-control inspector is blind; the company's "scientific delivery schedule" shows employees throwing darts at maps; the "unique, fail-safe" backup accounting system consists of an abacus. Throughout the movie, Burton mispronounces the name of the company.
But, just as Burton had hoped, the dealers didn't forget the name. They remembered the movie or maybe the trucks. How could they forget the annual bashes Casablanca threw for them? More than any of his single stunts, they simply remembered Burton. "All of the dealers associated Burton with Casablanca. It was his flamboyance and creativity they loved," says Pondant. "With them, he was a legend."
He had an acute sense of what his customers wanted, too. Fan models lasted about as long as Burton's attention span. To keep sales reps and suppliers hopping, Burton insisted on introducing new features every year -- in an industry that had quit innovating around 1900. "It was always exciting to see what he would do," says Priscilla Williamson, owner of a San Antonio fan store. His suppliers had trouble keeping up. "He'd bring out a new model before the old model was off the shelf," says Dan Lane, president of Lansco Die Casting. "He's probably eaten some inventory over the years, but the marketplace loves it."
But nothing -- not the flashy entrances, not the movie, not even the yearly floats -- excited the marketplace as much as the railroad.
It was, simply put, a palace on wheels. Two stainless-steel cars, 1940s relics of the New York Central and the Rock Island Line. Refurbished with rosewood paneling, beveled glass, and custom-designed lighting. Fresh linen tablecloths topped with Baccarat crystal and fine china. It was 1979, and Burton could hear the foreign competition starting to chug toward him. He stubbornly refused to cut prices. He had bought the train for himself. But like most of his interests, he would find a way to make it part of Casablanca. "It's pretty easy to sell a customer if you invite him aboard and take him on a trip. You've got a captive audience," says Burton, whose fascination with trains began as a child. "It's a real different way to do it."
Which makes it perfect for Burton. Anywhere Amtrak would let him, he took the train, inviting major customers aboard. Dallas. Boston. Toronto. Priscilla Williamson will never forget the trip she took from San Antonio to New Orleans. The cars were packed, and the crowd was wildly enthusiastic. At one point, Burton turned to her and asked, "Who are all these people?" In Burton's hometown of Pasadena, he painted a warehouse, had a lawn put down, planted flowers, unfurled a red carpet, and stationed security guards all around. There were popcorn vendors and parking valets. He pulled the train right up beside the warehouse, and the public was invited aboard for two days.
In total, Burton spent about $1 million refurbishing the railroad cars and some $300,000 on the trips -- at a time when the company's annual sales hovered at around $40 million. "It had a lot more value than a major advertising campaign that comes and goes," he maintains. "You might consider the train a distraction or self-serving, but we got a lot of mileage out of it in terms of publicity." Consumers read the write-ups in their local papers. Dealers, he says, still remember him as "the guy who took us aboard the train."
With the train parked, Burton's ride had come to an end in more ways than one. One colleague suggests that Burton feared he could not top himself. In any case, he began to think that "I had accomplished a lot of the goals I had hoped for." In 1981, the company generated revenues of nearly $50 million, with aftertax profits of 21%. Casablanca was sitting on about $6 million in cash, around $15 million in receivables, no debt, and no payables.
Burton started entertaining buyout offers. The most promising one came from a Milwaukee-based holding company. Executives from Farm House Foods Corp. met Burton and gasped when they saw the financials. You can actually maintain these margins making fans against the Taiwanese? In August of that year, the company paid Burton $30 million cash for Casablanca Fan -- roughly twice its net book value. Like consumers who bought Casablanca fans, Farm House was paying a premium for Burton's style. "No matter where the fan business went, Burton's ability in home furnishings was virtually a sure thing," says Richard Fisher, who cofounded Farm House in 1970.
The day before the sale was official, Casablanca hosted a Halloween party for dealers in its new Dallas warehouse. During the evening, Elaine Pondant, who was then regional sales manager, walked into her office and found Burton sitting at her desk. He looked glum. "I feel like my bady's all grown up, and now it's gone," he moaned. Why did I sell it? Was it the right thing to do? Then he got up and walked over to her. He slipped a check into her palm. Pondant felt dizzy. The check was made out in her name, and there were six figures on it. Thanks for all your help, Burton said.
Not long after, Burton invited George Watson to lunch. When Watson sat down, he found the appetizer most appealing: a check for $1 million was resting on his plate.
A bit later, Burton stopped by the desk of Max Van Dordrecht, Casablanca's president and chief negotiator of the deal. You type? Burton asked. Well, why don't you type out a check for yourself?
Make it . . . oh . . . why don't you make it for $2 million?
I'll be forever grateful to the man," says Van Dordrecht. It's understandable if Burton does not reciprocate those feelings. About a year after the sale, Van Dordrecht asked Farm House to name him chairman of Casablanca. Though Farm House had paid dearly for Burton's marketing magic, it agreed. Burton, who had planned to remain actively involved after the sale, didn't mind stepping aside. "I wanted to see if it could run without me," he says. Burton kept the title of chairman emeritus but did little more than open the mail. Missing center stage, he turned his creative energy to building Villa Casablanca, a $5-million mansion with its own railroad and 18 differently shaped rooms.
Casablanca did run without Burton -- right off the track. "Under Max's direction, it was just another company," says Frampton. "It didn't have the flavor and character that it had had." As soon as he could, Van Dordrecht sold the train. "It had served its purpose," he says sternly. Many of Burton's publicity schemes -- like his annual Rose Bowl floats -- were shunted aside because, Van Dordrecht claims, "they had outlived their usefulness." Van Dordrecht replaced them with routine promotions, like truckload sales and T-shirts. Burton's suggestions were, by and large, ignored.
Burton's nonconformity had spawned and fueled Casablanca's unconventional strategy. Van Dordrecht paid lip service to keeping the company innovative and "setting up first-class dealerships across the country." But he didn't add value to the fans the way Burton had. "One fan is a very much like another," says Peter Wulff, editor of Home Lighting & Accessories magazine. "But with Casablanca, you've got the perception of quality." Under Van Dordrecht, that perception grew fuzzy. It didn't seem as if there were any reason for dealers to push the high-priced fans or for consumers to buy them. The company's aura dissolved quickly. "Things got pretty quiet and really, pretty dull," admits Fisher. Employees started leaving. "With all the employees, it was 'Burton Burton," recalls Von Dordrecht. "If they think about Casablanca, people always think about Burton Burton. I am who I am."
Dealers and suppliers also grew alienated. "They brought a few new things out, but not with the flair and style that Burton brings to it," says Lane. It wasn't just a question of promotion. Van Dordrecht didn't share Burton's eye for new products, either. There was, for instance, a new five-speed fan nicknamed "The Boomerang" because it came back for repairs so often. And then there was the "Liberty Fan," a model tied to the Statue of Liberty anniversary. That was scrapped, but only after Van Dordrecht spent about $200,000 on tooling. Some dealers considered dropping Casablanca entirely. "When Burton stepped away, it was all over," says Pondant. "The dealers started feeling that there was nothing left." What was missing? "Burton's personality wasn't showing up as much," offers Kirby. Without him, Casablanca had nothing distinctive to offer. It wasn't an entertainment company anymore, just another light manufacturer. Farm House didn't seem to understand that difference.
There was more that Farm House didn't know about, and it would nearly destroy the company. In June 1985, Farm House discovered that Casablanca's $11 million in inventory was overstated by about $3 million. Casablanca posted a loss of $2.5 million. "That was the straw that broke Max's back," says Fisher. Fisher had long felt that Casablanca needed Burton, but Burton was "tremendously loyal to Max." Still, Burton couldn't bear to see his company drilled into the concrete. "You want to see the company well managed after you've gone," he explains. "Besides, the fun and relaxation, for me, comes from running the company, not from spending money and being a big shot." In July 1985, at Fisher's request, Burton agreed to replace Van Dordrecht.
Burton returned to face not only unfamiliar people, but also new pressures. Casablanca was now a public company with heavy burdens; Farm House was counting on Casablanca's earnings to pay back about $14 million in bank debt. The market was crowded too. "We're going to return to doing some of the things that got us here," Burton assured the employees.
That meant returning to Burton's ways. To reinforce the idea that change was at hand, Burton had walls moved around. He issued buttons that read "No Surprises" -- a reference to the inventory blunder. Taking a lesson from his job-shop days, he initiated regular financial updates, "Tuesday Reports," and ordered the factory closed for an audit every 90 days. To give himself a stake in the outcome, he bought back a small percentage of the company.
Burton also hired back some former employees. He brought on new managers, again relying on his own unusual criteria. Before signing on as general manager, Rand Clark had been vice-president and general manager of the Sands Hotel in Las Vegas and president of a real-estate company. He knew nothing about manufacturing. But Burton had bought a condominium from him in 1983. He was impressed by the quality of workmanship, and by Clark's ability to get things done -- as he demonstrated when Burton asked him to add a loft bedroom within three months.
To pump up the 28 sales reps and 960 dealers, Burton spent about $25,000 replacing Casablanca's dealer catalogs with simulated leather loose-leaf catalogs. Casablanca also produced a bound version for consumers at a cost of $225,000. "The message was 'Burton's back," says Pondant. "The dealers associate him with anything that is new and good." And Casablanca went into the entertainment business again. The first sales meeting after Burton's return was staged like a Broadway show, complete with a playbill and such songs as "There's No Business Like Fan Business." The dealers hooted and hollered. There were new products too; Casablanca introduced some new colors and a line of art deco-style fans. "It was the old Casablanca again," says Pondant. To build word of mouth among consumers, Burton decided Casablanca would give away a free clock to anybody who bought three or more fans. Enclosed with the clock is a letter from Burton and a $1 bill to pay for batteries. "It is critical that the consumer go out and say nice things about the company," says Burton.
The numbers say good things about Burton. In his first year back, earnings from continuing operations rose to more than $2 million, from $306,000 the year before. Casablanca's stock, which had hit a low of 3 5/8 in 1985, settled in at around 6. "He doesn't do what anybody else would think of doing," says Jack Wilson, a senior vice-president of Paine Webber Inc. "He'll have that company humming in another year."
It won't be a carefree tune, though. Burton's repeat success may just go to prove that he has created a company that only he can run. "It's obvious that it is not just luck, since he has done it twice," says Frampton, who now runs his own company. Nearly 15 years after its start, Casablanca is still very much the product of a singular vision. "He is, and always will be, the guiding light behind the whole operation," says Kirby. "Without him, there is no operation."
Burton has filtered his own interests and eccentricities through Casablanca. Why use trains to promote ceiling fans? Why hire a plant manager with no manufacturing experience? Burton's motivations are often personal and usually quite mysterious. It's impossible to put a pencil to everything he does. "I don't try to question some of the things he wants to do," says Jerry C. Holland, vice-president and chief financial officer. "I just know that generally they will work out all right."
But Burton and his company are inextricably linked. He is, in effect, a prisoner of the role he initially carved out for himself. Without him, even the most basic underpinnings of Casablanca's strategy are called into question. "It's hard to say whether Casablanca could continue to ask the price that it does without Burton," says Frampton. Anyone who succeeds him will surely have trouble figuring out how to market the high-priced fans. They won't be able to create value the way he does. "There are not many Burtons around," offers Van Dordrecht. Without the original, Casablanca could become just another fan company.
Or maybe not much of a fan company at all. Casablanca is pinning many of its hopes on its lighting division. It already owns a middle-market lighting company and, earlier this year, launched Casablanca Lighting Co. to import pricey European fixtures. S. John Gorman, who came to Casablanca via an acquisition, heads the division. Around Casablanca, they have a nickname for him that probably is impossible in its expectations.
They call him Gorman Gorman.