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Network: October 1992

Network questions and answers.

Now that risk and hard work have paid off, a CEO wants to reward himself but worries employees will resent his conspicuous consumption. Read his letter and tell us (by mail: Inc. Network, 38 Commercial Wharf, Boston, MA 02110; fax: 617-248-8090; or phone: 800-238-1756), should he stop worrying? Or should he feel guilty? And what kind of car do you drive?

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My wife and I want to lease two Lexuses at $2,000 per month. The company can easily afford it, but my workers all drive clunkers. No one earns more than $40,000, while my wife and I take out $200,000, combined. How do I reconcile my upscale lifestyle with the fact that employees earn so much less?

Name Withheld

"Your concern is one of morale, not morals," says Gary Edwards, president of the Ethics Resource Center, in Washington, D.C., which provides consulting to businesses and government. "You have an obligation to pay employees fairly," he says, "but as an owner, you took the risks and should reap the rewards." The real question is not, Is it fair? but, Is it wise?

Chuck Piola, executive vice-president of sales for NCO Financial Systems, a $3.9-million collection agency in Blue Bell, Pa., drives a Mercedes but makes sure everyone knows his story. "Apologize for getting rich. Say, 'Listen, I'm uneasy with something. I've worked hard, and I want to reward myself.' " Piola also lends out his Benz occasionally; that, he says, forestalls resentment. But Piola may be blind. Joe McGowan, NCO's vice-president of operations, says, "Come raise time, employees see that success and want a piece of it. All they deal with is perception."

Mirit and Josef Rabinovitz, founders of JMR Electronics, in Northridge, Calif. (#268 on this year's Inc. 500), heard grumbling when they bought a Mercedes. "We laughed it off. If you become defensive, that legitimates their objection." The episode underscored a change many start-ups go through: as a company grows, owners and employees grow apart, financially and socially.

Jack Stack, CEO of Springfield Remanufacturing, in Springfield, Mo., and author of The Great Game of Business (Doubleday/Currency, 1992), worries about the long-term consequences of such division. It damages credibility, he says. "And if your business goes down, there will be no negotiating for concessions." Stack drives a 1989 Buick Regal with a dented front fender. "I know how easy it is: banks offer you lines of credit, and it's easy to suck that money right through the company. But are you building value? Are there retained earnings in case of a downturn? Or will you have to lay off one of those $40,000 workers? Do you send back the Lexuses and then ask the employees to help you? I can always look employees in the eye and say, 'We're equally involved.' "

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Ethnic Marketing

I am about to launch a line of hair-care products for the Asian market. How can I get ethnic-marketing expertise?

M.B. Wong

San Gabriel, Calif.

You can explore a market cheaply by making contacts within the target community. Develop personal relationships, not just business contacts, says Arlyn Morse, president of Kayla Cosmetics, in Burbank, Calif., which specializes in cosmetics for the Asian American market. Use those contacts as an informal focus group. Most ethnic groups have business organizations and chambers of commerce. The U.S. Pan-Asian Chamber of Commerce (in Washington, D.C., 202-638-1764) and the U.S. Hispanic Chamber of Commerce (in Washington, D.C., 202-862-3939) can direct you to local chapters. Or call your local chamber of commerce.

The Minority Market Series compiles American Demographics and Numbers News, featuring articles from the past three years on Hispanics, Asians, and African Americans (800-828-1133, $17 to $29). The ethnic yellow pages list publications, organizations, and businesses within particular ethnic communities. Find it through ethnic chambers of commerce.

Remember that ethnic groups are not monolithic. Marj Pendergraft, a director at Erlich Transcultural Consultants, a Los Angeles ethnic-marketing-consulting company, says, "Within the category 'Asian' fall several distinct cultures, including Japanese, Chinese, Vietnamese, and Indian. You wouldn't want to market to them all in the same way."

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Running On Empty

My small trucking company can no longer afford to pay the salaries and expenses of our sales force. We may switch to independent reps. How can we build and maintain a successful independent sales organization?

Warren L. Ellis

President

California Transportation

Service

Laguna Niguel, Calif.

First make sure independent reps are the answer. The Small Business Administration publishes a 50¢ checklist, "Is the Independent Sales Agent for You?" (SBA Publications, P.O. Box 30, Denver, CO 80201-0030), which gives tips on choosing reps. (See also "Reps or Sales Force?" Sales and Marketing, December 1991, [Article link]). And don't fire staff reps too soon. Ed Bobrow, founder of marketing specialists Bobrow Consulting, in New York City, says, "You'll need someone who's experienced enough to supervise, train, and motivate the group." He recommends Harry Novick's Selling Through Independent Reps (AMACOM, 1988, $69.95). Also try Managing Mavericks, by Leslie J. Ades (McGraw-Hill, 1992, $22.95); it has a checklist for choosing agencies.