They mentioned their quandary to a friend, a second-year student at Harvard Business School. In January 1989 he introduced them to Walter Salmon, a professor of retailing. "They are obviously hardworking, eager, and personally attractive," says Salmon, 60. "One is inclined to help these people." When the two entrepreneurs talked about Sears, Salmon recalls, "there was a mistaken euphoria. In a young company, you always worry that enthusiasm exceeds prudence and control. It's a tricky little balance." Salmon told the pair about the school's field-study program, under which his students could volunteer to spend a 12-week semester helping them. The students would scope out exactly what kind of travel business Sears ought to consider -- discount or last-minute? unmanned kiosks or traditional storefronts? -- as well as offer recommendations on the kind of deal that seemed desirable. Salmon had his own ideas, too. The best way to scout out Sears's intentions, he repeatedly advised them, was to make some sort of interim agreement. "I urged David and Joel to get Sears to start writing checks," Salmon explains. "When someone starts writing checks, people ask, 'Hey, what's that check for?' That would accelerate the development of a final arrangement."
In August 1989 the two parties settled on what Fialkow terms a "quite lucrative" consulting agreement. "We kept imagining what it would be like to have Sears's resources behind us," says Fialkow. "But Walter would ask, 'What happens if Sears one day decides it wants out of the travel business?' He was very analytical."
Spending time with Sears executives forced Benard-Cutler and Fialkow to face some difficult questions. Chief among them: How's business? Their standard response, honed through hours of practice, was that business was, well, good. How good was it? Shhhh . . . listen to those phones. But the more detailed the questions got -- How much do you spend on training? Which draws best, direct-mail or newspaper advertising? -- the more the two risked being frozen in an eternal shrug. "The kind of analysis we had done for Sears, looking at their customers and at their systems, was better than what we had done for ourselves," says Fialkow.
It didn't take a planeload of perspective to sense problems. They hadn't been able to close the books on 1988 because "our record keeping was a bleeding ulcer," says Benard-Cutler. And profitability had been a more infrequent visitor than they might have liked, popping in and out but never staying long. The same was true of employees, who rarely stuck around.
National Leisure had to get better. And the founders knew of only one way to do that. "This is a laboratory for good ideas," says Fialkow. "And we don't assume that those are ours."
* * *
The best mentors ask the right questions. From the start Len Schlesinger made it clear he was vying for that league. Here is a partial list of questions that he asked Benard-Cutler and Fialkow during his first visit with them, in early 1990: What figures do you look at every day to tell you how you are doing? What are the company's key performance measures? How do you motivate your people to make sales? What's your conversion ratio?
"They looked at me as if I were from outer space," recalls Schlesinger, who had been recommended by Salmon. It was hardly an alien experience for Schlesinger, who teaches service management at Harvard Business School.
The pair had focused mainly, and magnificently, on the top line. But the business was maturing, and the time had come for them to add a new concern to their already-long list: profits. "The issue is this," says Schlesinger. "How much money is being left on the table?"
To get an idea, Schlesinger performed a simple calculation: he took the number of inquiries and divided it by the number of bookings. It turned out that not even 6% of all calls resulted in bookings; nearly 16 out of 17 callers did not buy vacations there. Forget outside opportunities, Schlesinger soberly informed the duo. "You can maximize the opportunity you have right here."
Like the mentors before him, Schlesinger shined the harsh light of quantitative thinking into the dark corners of what Fialkow calls "instinctual" management. By asking two salespeople to log the calls they took, for instance, he discovered that 30% of the callers were folks needing more details about the trips they had already booked. Meanwhile, potential new buyers were left, steaming, on hold. That led Benard-Cutler and Fialkow to create a checklist so that salespeople would do a more complete job the first time around.
"We looked at how much we did at the end of the day, but we never looked at how much we could have done," admits Fialkow. Schlesinger, 38, became the voice of profitability, beseeching them to see things from his point of view. When the two told him they planned to start a travel club, for instance, Schlesinger said he thought it was a great idea. Then came the killer questions: Do you have something of genuine value to offer? How would it affect the core business? What does the profit model look like? "For a long time we were in business to build a business," says Benard-Cutler. "Now we're looking at making money."
For the first half of this year, Schlesinger -- who, like Salmon, has deployed some of his students to work at the company for course credit -- has been working with Benard-Cutler and Fialkow to isolate the critical measurements that chart company performance. Next, he expects to help them incorporate what they learn into day-to-day operations. "He's given us a whole new approach to problem solving," says Fialkow. "He loves to brainstorm with us."
