A look at a company's benefits package designed by CEO who feels success is inextricably linked to employee happiness.
Lorry Lokey has no doubt that his company's success is inextricably tied to the happiness of his employees. So he competes for their talent and loyalty with state-of-the-art benefits
Who says that entrepreneurs who want their companies to keep growing can't afford generous benefits packages? Lorry Lokey, the 68-year-old founder and president of San Francisco-based Business Wire, is convinced that the top-notch package his employees enjoy is his competitive edge: the key to fast growth, profitability, and market command in the public-relations wire-service industry.
Thirty-three years ago Lokey, a veteran of General Electric's western news bureau and a onetime correspondent for the U.S. Army's Stars and Stripes Tokyo bureau, founded his company to transmit corporate press releases to the news media -- faster than the U.S. Postal Service could.
The start-up was a snap. "I invested no more than $1,500 in a teletype machine, a phone, and office space," the chief executive recalls. Within a year Lokey had earned a profit of $11,000 on sales of $36,000 for wire transmissions of some 1,200 releases. Its competition concentrated on the East Coast, the unchallenged Business Wire realized slow but steady growth along the Seattle-to-Los Angeles business corridor.
After more than two decades, logging profitable but far-from-startling sales growth, Business Wire suddenly transformed itself into an entrepreneurial powerhouse. By 1994 the company had quadrupled its 1986 sales of $7 million, growing to $28 million, and had secured the number two slot in its industry. That same period saw Lokey's staff grow from 32 to nearly 200 workers in 17 offices across the United States. And Lokey owes it all, he says, to employee benefits.
Well, that's a little misleading, but he is certain that his company's leap onto the fast track is attributable to the coming of age of a core group of committed managers and workers. And their loyalty to Business Wire stems from an appreciation of the benefits they receive -- benefits bound to the company's successful performance.
"If you use benefits to build a cadre of talented people who stay with you for years, you'll hold on to your power," he notes. "Your company's future will just get stronger and stronger."
Lokey's chief financial officer, Constance Cummings, takes a long-term view: "We're creating a paradigm for companies of the 21st century. There's no fear here because we believe in doing everything we can to hold on to good employees and to improve the quality of their lives." She pauses. "I may be a number cruncher, but I don't think it's a coincidence that a company that really found its heart is this successful."
Lorry Lokey stumbled into the world of employee benefits when, "back in 1969, our lawyer told me that Business Wire would get tax benefits by setting up a retirement plan -- and that because I earned the biggest salary, I would be the biggest beneficiary, with the largest retirement-savings account," Lokey recalls.
He introduced two benefits for the staff of seven: a pension trust, which was a defined-contribution plan that required yearly contributions based on a formula relating to the fund's investment performance, employee salary and years of service, and other factors; and a savings trust, a profit-sharing plan that allowed the company to distribute additional retirement funds as bonuses when yearly performance was strong. Both funds were tax-deferred.
"Neither plan by itself seemed quite enough," Lokey explains. "I didn't want to promise more than we could afford, but I did want our employees to share more of our profits during good years."
Seventeen years later, "back in 1986, we had gross earnings of $1.3 million, and my accountant told me, 'If you don't get that number below $1 million, you'll pay so much in taxes that you'll wind up with less than if you'd spent $301,000.' " He laughs as he recalls, "That year we wound up bonusing out about three to four months' worth of salaries to our employees."
"I did love the bonuses once they got started, but to tell you the truth, when I came to this company I was young and a proverbial job-hopper," says Terry Vitorelo, a 16-year Business Wire veteran. She was in her midtwenties when she joined, she adds, and "didn't care about retirement benefits." Later, when her husband lost his job, just after their daughter was born, she recalls, "I realized how lucky I was to have a job with so much economic security built into it." Vitorelo, who has worked her way from an entry-level editing job to become the company's vice-president of operations and a member of its executive board, is a classic example, to Lokey, of how benefits help build a company.
"My people spend a fourth of their lives -- or more -- working for this company, so they deserve to have their needs taken care of," the CEO explains. "Without financial worries, people have so much more energy and enthusiasm to bring to their jobs."
As Lokey has grown more committed to the business advantages of a comprehensive benefits package, he has become more experimental in his approach. His one rule: "You can't stand still."
Back in the mid-1980s a valued employee requested permission to bring her baby to the office. Lokey says, "I came up with the idea of converting a spare conference room into a nursery. Everyone helped everyone else, and we ran it like a parents' cooperative, with parents bringing in toys and supplies and staffing it round-robin style. We've had close to a dozen babies pass through over the years, and older children used to come after school or on vacation days." Philanthropy? Altruism? "Not at all. I didn't want to lose valued employees who wanted to be near their children. And it cost only $5,000 a year for the space." A small price indeed.
"We could not afford to lose the generation of talented people we'd built up within our organization," says Lokey. The company was in the midst of a national expansion. "We had opened offices in Boston and New York City by 1980, but it was in the mid-1980s that we went wild. We started with Charlotte, N.C., and added offices in Nashville, Miami, Cleveland, and elsewhere, all during a two-and-a-half-year period."
lokey says business wire considers each benefit from two points of view: first, its importance to -- that is, its motivational impact on -- the employees; and second, its cost-effectiveness -- its out-of-pocket expense, its effect on taxes, and the extent to which careful management can control its cost.
