A Business Transformed

How one CEO transformed his entire company in order to make its service indispensable to its customers.

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First you figure out what you can do to break away from the pack in your industry. Then you teach your salespeople how to make your product indispensable to customers. And then, as Jerry Kohl of Leegin has discovered, you learn that those steps are just the beginning

Jerry Kohl, at 41, is portly, talkative, impatient, energetic, quick to anger, quick to cool off, a chief executive with his fingers in nearly all of his company's pies, a passionate and opinionated man regarded by those around him with a touch of exasperation and a good deal of awe. Says a customer, laughing, "He's a maniac." She adds, suddenly serious, "He's the heart of that company. I don't know where it would be without him."

Kohl is the owner of, and the motive force behind, Leegin Creative Leather Products Inc., of Industry, Calif., a belt manufacturer that has posted some rather startling numbers.

For much of the 1980s Leegin's sales, expressed in millions, read like the judges' scorecards at a figure-skating contest. Nine point five. Nine point seven. Nine point three. Year after year the $10-million barrier seemed impervious, and Leegin condemned to steady-state purgatory. Just an everyday company in the apparel trade, so it appeared, due to be snapped up by a competitor or driven under by imports.

And then, suddenly, the heavens beckoned. In 1987 the company hit $10.8 million; in 1988, $15 million; in 1989, $20 million. Every year thereafter brought similar bursts. At the end of the company's last fiscal year, October 31, 1992, Leegin recorded revenues of $47 million, five times its mid-1980s level. This year -- no letup in sight -- the company expects to do better than $65 million. Profits, too, have grown apace. Leegin's pretax income in the last three years has hovered around 10% of sales. Its debt-to-equity ratio dropped from 3:1 in 1989 to 1.6:1 in 1992.

Leegin makes leather belts, which is to say it does business in a fiercely competitive marketplace, an industry propelled partly by fashion but mostly by buyers' unchanging need to hold up their trousers. The company has neither uncovered nor created a burning new trend or technology to hitch its rocket to. It hasn't signed up any deep-pocketed investors; it hasn't landed any make-or-break accounts, no Wal-Mart or Sears or J. C. Penney. (Leegin's 15 biggest customers account for less than one-quarter of its business.) Nor has the global economy boosted its growth. Leegin's customers, several thousand specialty stores and a handful of mail-order houses, are nearly all domestic. It makes most of its belts in its California factory.

Oh, and one other thing: Leegin never advertises. There isn't even a sign on the company's building. "The belt industry hardly knows who we are," says Kohl, exaggerating only a little.

So, what's the secret? You could say -- accurately -- that Leegin's salespeople can do things with computers that most salespeople only dream of. You could note how the office and the factory have been reorganized to support sales rather than undermine them. But those are parts. And ultimately, to understand what has happened, you have to see Leegin whole, the way its zealous leader, Kohl, sees it, as a company that has undergone and is still undergoing a self-directed metamorphosis. Leegin has quietly but surely been transforming itself from just another belt company to a supplier that its customers will find indispensable, maybe even irreplaceable. Leegin is eating its competitors' dinner because Kohl isn't afraid to throw out or reinvent any part of the company that interferes with that objective.

And if the reinvention has to be done on the fly, by trial and error, at the busiest time of Leegin's year, with a lot of involvement on the part of the CEO himself, well, hey -- nobody ever accused Jerry Kohl of not being a maniac.

Kohl always wanted to sell to specialty stores. He had run one himself, started before he even finished high school, with his girlfriend, Terri, now his wife of 22 years. It was a psychedelic shop, with T-shirts and paraphernalia for the youth trade, opened up each day as soon as its owners got out of class. At age 19 Kohl bought into Leegin, a tiny leather company he did business with, and set out to supply the specialty-clothing and leather-goods market. Two years later he and Terri bought out the founders.

Leegin grew -- a little. It was a tough business. Customers had to be called on by salespeople; catalogs and telemarketing alone wouldn't do the trick. But the stores were small, and Leegin's line was limited. Salespeople found themselves traveling long distances to write up small orders. Every time a salesperson quit, Kohl lost dozens of accounts. Back at the plant, Leegin's designers kept turning out new styles, since any clothing retailer likes something fresh for the season. But the proliferation of products threatened to choke the factory with work in process. A batch of belts could take more than a month to wend its way through cutting, sewing, and every other department.

Then there was the office, which by the early 1980s had turned into a jumble of fiefdoms and foul-ups worthy of a Charlie Chaplin movie. Orders awaiting fulfillment were jammed into a clipboard on the wall. Invoices were cranked out in sextuplicate. A simple request from a customer -- "add a belt to my last order," say -- went from customer service (which filled out a form) to order processing (which looked up the style and price information) to data processing (which entered it in the computer) back to order processing (for verification) and back to customer service (which was the only department allowed to talk with customers). The round-trip took weeks.

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