CEO's Notebook

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It was a terrible mistake. We had bedlam in our offices. Many clients phoned for appointments. But those who didn't know about the policy change were insulted when they came to the store, waited their turn, and saw people walk in off the street and get service ahead of them. It cost us a lot of money and a lot of goodwill.

I can't quantify how much business the walkouts and dissatisfaction cost us, but I know they hurt us and that management was very upset. Taking phone appointments seemed like such a good idea at the time that we did it all across the country instead of doing what we've done ever since: roll things out in a few regions first as a test. The bigger lesson is, Don't jump in and change something that's been working for years until you've tested it. Of course, we already knew that -- but we overlooked it because of our zeal about the idea.

Now the phone-appointments process works fine. Today our office managers book appointments only during hours when they know the stores won't be busy. It's never good to have people get mad at you, especially if you're in a service business. You just can't afford the ill will. --Written with Ilan Mochari

The Quotable Entrepreneur

"I'm not sure that we're as excited about the Web as the rest of the world is. But then again, after the past few months, I'm not so sure the world is all that excited about it anymore, either." --Roger Maxwell, founder of a high-end retailer called In Celebration of Golf, on his slow-going Web-strategy research

The Next Killer Benefit: KSOPs

When Gary Quick learned about a newfangled employee benefit called a KSOP, he jumped on it. Quick, the president of Quick Solutions, an IT consulting firm based in Columbus, Ohio, had never heard of the thing before, but his financial adviser sold him on its advantages. KSOP is the term for a qualified plan that links a 401(k) to an employee stock ownership plan. The combination offers entrepreneurs the traditional benefits of an ESOP -- namely, a way for owners to create a "market" for private-company stock and eventually cash out -- while also enhancing the company's 401(k) plan.

Here's how the KSOP works at Quick Solutions: Quick matches whatever money employees put into their individual 401(k) plans with a contribution worth the same amount in their shares of the ESOP, up to 6% of workers' salaries. "The entire company match is now in stock, but the company increased the match," explains J.R. Pine, Quick's consultant. Before, Quick had matched only 50¢ on the dollar up to 6% of salary.

Say a Quick employee making $100,000 a year puts 6% of his salary into the 401(k). At year-end the company will match that with $6,000 worth of stock in the ESOP. An employee who doesn't put 6% into the 401(k) may be leaving more than a little money on the table. Pine says that the value of a share of stock has already appreciated handsomely at Quick, a three-time Inc. 500 company.

Although the KSOP concept isn't new, the plans haven't been widely used. Now, as ESOPs have caught on, KSOPs are getting a second look. But there's some controversy surrounding them, too. In a more radical version of the KSOP, employees use their own 401(k) dollars to acquire stock. That's risky, says Anthony Mathews, an ESOP consultant with BCI Group, in Los Angeles. "You're tap-dancing around the securities laws. The more employee money that's involved, the more the risk. The ESOP is supposed to be company funded, an employee benefit," he says. But some companies will do anything in these equity-obsessed times, he says, adding, "we've raised a bizarre generation of employees." --Susan Greco

In a Former Life: Michael A. Chowdry

Michael A. Chowdry, 45

Present life: Founder and chairman of Atlas Air, a $637-million air-cargo carrier that provides planes and crews to international airlines

Former life: After learning to fly, at the University of Minnesota in 1976, Chowdry worked for mom-and-pop crop-dusting businesses in Minnesota and North Dakota. "You're 18 inches above the ground at 150 miles an hour," he says.

Lessons learned: You can get paid a lot doing someone else's dirty work. "Crop dusting paid three times as much as being a commercial pilot, mainly because it was semisuicidal work and no one wanted to do it. I learned that if you do something no other guys will do, you will get paid for the risk you're taking and the skills you're bringing to the table."

Chowdry also realized he could control his own costs by pinpointing exactly what customers were paying him to do. "In crop dusting, the farmers would buy and supply the actual chemicals," Chowdry says. "All the crop duster does is act as an applicator of the chemicals. In cargo flying, it's the same thing: we can get our customers -- the airlines -- to pay for fuel, because the planes and crews are what they really want.

"In the early 1990s, I saw that the cargo divisions of big airlines were just stepchildren, a by-product of their core business in passengers. I knew that if we charged a reasonable amount, they'd see the value in outsourcing to someone. The farmers were similar. They all saw the value in crop dusting. It was just a question of giving them a fair price. If you could do that, you'd be a hero to them."

Crop dusting taught Chowdry the virtues of having a simple business -- a company that provides one basic product or service. "For an air-cargo business like ours, warehousing and trucking would be easy areas to pursue. But we wouldn't be focused on them, and at the end of the day they'd become to us what cargo became to the airlines." --I.M.

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