Back in 1985 Jim Graley envisioned his auto-body company repositioned and transformed, its future filled with profit sharing, employee involvement, and state-of-the-art technology. 'From today on,' he stood before his workers and pronounced, 'we're a completely different business.' What he didn't foresee was how messy -- and how personal -- change can be

No one could blame Jim Graley for not trying. For 14 years he'd slogged away in his back-alley auto-body shop, 16 hours a day, seven days a week, only to face the underbelly of one more grease-ridden wreck and the promise of one more unprofitable year. "It was like digging a ditch only to watch the dirt caving in behind you," he says with a sigh.

Clearly this was not what Graley had planned when he'd left his job as a manager for Simplex Time Recorder Co., a manufacturer of time clocks. Nor was it what he'd envisioned when he'd assured his tearful mother that leaving his promising corporate career to open up a body shop was not a horrible step backward. "I wanted to use the sales and marketing skills I'd picked up to further my own business rather than someone else's," Graley says now. And besides, he loved cars.

As a youngster he had worked after school and summers in his uncle's small body shop alongside his cousin Don. There, he'd learned not only the mechanics of body work but also the tenets of business success. "My uncle grilled into me the importance of running an honest and ethical business," Graley says.

Body-shop owners are perhaps the nation's grittiest entrepreneurs: businesspeople who spend their days pounding out dents, repainting door panels, and replacing twisted bumpers. With thousands of one- and two-man shops dotting the nation, they're a sort of modern-day version of the neighborhood blacksmith. To this day, the industry survives as a fragmented business with few national brands or economies of scale, and little consumer confidence.

But Don, then 27, and Jim, then 29, resolved from the beginning that their business would be different.

Armed with a toolbox and $250, the two opened their own body shop in 1971 in their hometown, Chesapeake, Ohio. By doing a tad more than the average -- a free shuttle service for customers and frequent advertising -- the two cousins captured more business than they could handle. Inside the shop, workers and owners labored side by side. Jim Hamilton, owner of nearby Hamilton's Chevrolet, remembers the Graleys as "two young, hardworking fellows who treated their employees like family." Business also benefited from the divergent yet complementary styles of the two cousins. Sandy hair askew, prone to hot-tempered outbursts, Don clearly preferred banging out a car door over banging on a calculator. Conversely, Jim, soft-spoken, dark hair ever combed in place, preferred grinding out the numbers over pounding out the dents.

But by 1985 the Graleys could see their good fortune stalling out. Sales that had been growing steadily peaked at $525,000 and refused to budge. Jim could see competition popping up on every street corner. "We were all offering the same thing," he notes. "Graley's had lost its edge."

Beyond Graley's backyard, technological and design innovations in the auto industry were changing the landscape of auto-body repair forever. Increasingly, Detroit and other auto makers were pumping out unibody cars with high-gloss metallic finishes. Just to service these cars, a shop had to fork over around $120,000 in new equipment. For those unable to make the investment, it was the end of the line.

It was the silent transformation of a silent industry.

But Jim Graley was intent on making the transformation -- and making it right. He inhaled anything he could lay his hands on: tapes, seminars, business books. "It was inspiring stuff," says Jim. "But I lacked a central theme, a direction, to hang all these ideas on." Then late one September night in 1985, it jelled. Jim found the answer -- an idea that would change his business forever. "I felt like I'd been saved, found religion," he recalls of his epiphany.

Jim Graley didn't find his source of inspiration in any business best-seller. Rather, he found it buried in a dry GM newsletter revealing studies that found women were the key decision makers in 70% of new-car purchases. He figured if that were so, women would be equally important in making decisions about car repairs. "If this were true," Jim concluded, "having a grease-pit shop where buxom pinups decorated the walls and dirt-laden tires served as seating probably wasn't the best way to attract women."

From that central theme, the ideas flowed. At the core of his vision was a complete repositioning. He would change the focus from the service -- pounding out dents -- to the customer, by marketing to one particular customer segment: women. In an industry dominated by dirty fingernails and spotty service, he'd stand out as the Tiffany's of body shops. Jim saw himself conducting customer tours through his space-age shop. And that would be just the beginning.

"I was so excited I called Don over to the house at 11 o'clock that night," recalls Jim. There, for two hours at his kitchen table, Jim mapped out the "new Graley's." When he finished, his cousin just shook his head. "He said it would never work," recalls Jim. The workers wouldn't buy it, the doubting cousin pointed out. "The costs would price the shop out of the market," Don went on. But Jim was convinced -- and Don's negative response hardly surprised him. "Don's the fastest car appraiser in the state but could care less about market strategy," Jim explains. "Me, I love thinking about strategy."

Two weeks later, armed with an easel and two feet of flow charts, Jim stood up in front of his eight employees. He mapped out a future filled with profit sharing, employee involvement, and state-of-the-art technology. His promise: "From today on, we're a completely different business." When Jim finished, he could feel the skepticism. "It was a sea of blank faces with an occasional mutter here and there," he says. But that was understandable -- a lot to absorb in one meeting. So he figured he'd move slowly, proving to his men his commitment and sincerity one step at a time.

He started in small ways. Keeping with his plan to attract women, he hired women to greet female customers at the door and walk them through their appraisals. In the shop girlie calendars came down. In the front office Jim and his staff started dressing more professionally. Tabletops were cleaned off and adorned with potted plants. And when it came time to pick up their cars, customers were greeted with a free car wash, a thank-you note on the front seat, and a couple of pieces of candy.

Advertising shifted toward women, too. While the ad budget stayed at 2% of sales, Jim moved his print ads from the sports page to the society page. On the radio he addressed women's fears head-on. "Ladies," the announcer began, "if your husband has just wrecked the car and you dread the thought of walking through a grease pit or sharing the couch with a dog or getting wolf whistles as you walk through the garage, then why don't you come down to Graley's? Let Cristi, Michelle, or Cathie greet you and give you a cup of coffee." Small though those changes may have been, they reaped big rewards for Graley Autobody. Between 1985 and 1986, the company's sales jumped from $525,000 to $1.6 million. Convinced that he was moving in the right direction, Jim started spending even more. In 1986 he secured $180,000 of financing to open a second, much larger shop across the Ohio River on a well-trafficked boulevard in downtown Huntington, W. Va., and decorated the interior along the lines of a popular local three-star restaurant. In the main office he put in plush red carpeting accented with glass-and-brass decor and topped it off with a fancy chandelier. In the body shop, the off-white linoleum floors were buffed to a high gloss. Body men were asked to organize their stalls.

With the purchase of a new computer-information system in 1987, Jim moved toward his dream of a paperless body shop. Rather than depending on confusing and often illegible work orders, he envisioned the day when body men would pull orders for repair jobs from their PCs. But rather than overwhelm his employees with too much too fast, he started by replacing the old work orders with clean, clear computer printouts.

And for those customers who called looking for a quick answer on when their cars would be ready, Jim installed a closed-circuit-TV monitor. Now, without so much as stepping away from his keyboard, he could scan the shop floor and know exactly where a repair job stood.

But as Jim well knew from all his management texts, guaranteeing speed and volume in the shop inevitably relied less on fancy computers than on employee enthusiasm. He looked for ways to inspire employees as well as customers. He custom-designed $250,000 worth of bake ovens for factory-finish paint jobs. He spent $40,000 on frame straighteners and another $30,000 for laser wheel-alignment machines. While this equipment allowed him to speed service on late-model cars, Jim figured it would also make the work of his employees easier, faster, and more lucrative in their body shop.

Their body shop. That's how Jim wanted his workers to think: his profits were their profits. The profit-sharing plan he discussed -- another idea gleaned from his foray into management theory -- would be, he knew, an uphill battle.

Jim's employees, like many in auto repair, were used to being paid a flat rate, based on the standard number of hours it takes to repair or replace most parts. To make more money a body man turns hours, or does a job in less than the time allotted on the work order and goes on to the next job. "Body men like to be able to dial their own future," explains one shop owner. But while this system gives each man a measure of autonomy, it narrowed Jim's choices. "I have no way of getting my men to care about the quality of their work or the wasted parts per job," says Jim. He figured those two problems alone added up to 10% of sales. The solution: put the men on salary and give them a percentage of profits. "I need them to care if the light is left on in the bathroom."

Jim had only to recall the blank faces that greeted his speech in 1985 to know his men weren't ready for profit sharing. Most were put off by the 34% pay cut they'd have to absorb at the start of profit sharing, despite Jim's explanation of how they could quickly more than make up that amount. So instead of harping on profit sharing, he decided to institute programs that implied what profit sharing is all about: trust. He started holding daily "release meetings" -- get-togethers for employees to vent their frustrations and concerns. Company-sponsored training kicked in, and for each course completed workers received a badge to sew on their uniforms. There was the "safety fund," rewarding employees $25 for each week there were no workers' compensation claims filed, and the recycling program, to siphon money collected from scrap metal into a new employee lunchroom. And there was the promise of new uniforms and better benefits.

Despite a setback here and there, by the late 1980s Jim was fast becoming noticed within the industry: "He's definitely been in the forefront," notes Denise Lloyd, publisher of BodyShop Business, a leading industry monthly. Asked to do speeches, quoted in articles. One shop owner, Dave Williams, even fashioned his entire shop on the Graley concept. "There are few people you can look to for inspiration in this business. Jim's one of the few," says Williams, owner of Precision Collision, in Wheelersburg, Ohio. Newcomers to the industry -- pedigreed newcomers -- agreed. Mark O'Neil, a Harvard M.B.A. and former McKinsey & Co. consultant who studied the industry with plans of his own national auto-body rollout, puts Graley's "on the cutting edge." Of all the players he interviewed, O'Neil declares Jim one of the industry's elite. "I've come from the top down, but he's come from the bottom up."

Talk to men who worked in the body shop then, and they'll say they remember clearly the day their boss stood up in front of them, pointed at some numbers, and told them that from this day forward the company would never be the same. Gary Cremeans, a longtime veteran of Graley Autobody, remembers hearing about lots of changes -- a new computer system, better advertising, profit sharing -- and frankly, he remembers being scared to the quick.

Jim's profit-sharing scenario worried him most. The way Cremeans understood it, he would give up turning hours and take a pay cut with the promise of splitting 50-50 any operating profits over 40%. The problem was, the Graleys were forever complaining about paltry profits, so what would there be to split? As Jim laid it out, profit sharing would encourage a higher level of efficiency on the shop floor, better-quality work, and a keener eye for waste -- all of which would ratchet up profits. But how would employees know if the company had indeed made a profit if management controlled which numbers were made public? "I wasn't sure we had the kind of trust that would convince me to take a pay cut," Cremeans admits.

Still, though Cremeans and others were nervous about Jim's profit-sharing ideas, they were more than willing to put those fears aside, knowing that Graley Autobody was a good place to work, "like a family," recalls John Jerrell, another veteran Graley body man. There were no time clocks, and it wasn't uncommon to see one worker drop what he was doing to help out another struggling with a problem. In a business where it's not unusual for a body man to work at a different shop every two years, half the men at Graley's had been there eight years or more. But as the Graley transformation began to take shape, so too did ever-so-subtle signs that life there would never be the same.

Sure, the men were pleased about all the new work the shop was attracting. But some couldn't help but think Jim was going a little too far. For instance, neatening up the shop felt like a waste of time and energy. As for targeting women, that was fine, but it wasn't so fine to be getting marching orders from a woman with little experience in auto repair. As part of the effort to hire more women in the shop, Jim put a woman in charge of quality control -- making sure the cars were completed quickly and on time. "I'll listen to anyone who's got a better way," says Pete Stymiest, a longtime Graley employee. "But I won't be bossed by a woman who doesn't know a taillight from a watermelon."

At first, the men say, it seemed as if well-intentioned plans were souring on the carry-through. Take the staff meetings. "Jim talked about working together like a football team," recalls Gary Carmon, an hourly worker. "He called a 'team huddle' twice a day to talk things over." But the huddles quickly digressed into one-way lectures. "Jim talked, we listened," Carmon and others say. "And lots of times Jim didn't even come to the meetings. Gradually, fellows in the shop gave up going at all."

While Don scurried to keep up with the higher volume -- shuttling from wreck to wreck, radioing in appraisals to the front office over his walkie-talkie system -- Jim worked equally feverishly in his back office, sketching out big plans. "It was clear Jim didn't care much what we thought," Jerrell says. "He was too excited about all his big ideas." Take all the money spent on new technology -- technology meant to make work easier for the men in the shop. "Some of this fancy equipment didn't work the way it was supposed to," Jerrell says. New prep stations heralded for creating bubblelike jet streams that kept dirt away from a car while it was being worked on actually sucked dirt to the car, according to Jerrell, making the job harder. "Jim wasn't working in the shop at all anymore," Jerrell says, "and yet he made us feel stupid if we offered suggestions."

Jim admits he liked being out from under greasy car engines. "I like wearing a neatly pressed white shirt to work," he confesses. "I never felt comfortable being dirty all day." And he loved his computer -- trying new programs, looking at his business from any number of angles.

But to Jim's body men, all that time at the keyboard meant their boss knew less and less what the day-to-day operation of the "new Graley's" really meant. Chuck Thompson, a body man, says that the pressure for speed, volume, and profits -- a key part of Jim's management mantra -- meant corners were cut. "We started cheating the customer and then the insurance agency," he claims. "We'd say we were putting a new fender on a car, but instead we were using cheap aftermarket parts." Because these parts were not made for the car, Thompson alleges, they had to be ground paper-thin to make them fit. Not only did he worry that the cars were unsafe, but it made his job harder. After his complaints went unheeded, he quit in 1987 after eight years with Graley's. Thompson later won unemployment benefits when an administrative-law judge ruled that Graley Autobody had required Thompson to participate in "a fraud on both the customers and the insurance carrier." Jim maintains he lost the decision only because he hadn't taken it seriously enough to bring a lawyer with him to the hearing.

Not that most of the body men were particularly bothered by the Graley-Thompson showdown. Much more nettlesome were the subtle, more demeaning changes happening around them. Into a shop that had once prided itself on a family atmosphere, Jim installed time clocks and a closed-circuit-TV monitor. Under pressure to increase speed and volume, "99% of the time I couldn't even break for a lunch hour," says Gary Carmon. "Then they had the nerve to put up monitors to see if I'm having a Pepsi on their time." Sure enough, Jim admits he occasionally used the monitor "to catch employees loafing around."

It was an atmosphere that caused employees to second-guess what they said and didn't say. For example, most of them didn't tell Jim they thought the training program was a waste of time. "It was all stuff we already knew," explains Jerrell. Gradually, poor communication degenerated into lack of communication -- starting at the top. The body men said squabbles between the two owners got more frequent and higher pitched. "Jim and Don routinely got into screaming matches . . . one threatening to sell out to the other," says Kenny Dickess, a painter's helper.

Then there were the gibes -- not much to talk about at first, but slowly they got irritating. "Jim started griping about how we were making too much money," says a body man who wishes to remain anonymous. "It was his way of nudging us to switch over to profit sharing. Jim thought we were too greedy, just out for ourselves, not the company." Jim's approach, says the body man, "didn't make you feel you were playing on the same team as management."

Jim, meanwhile, did little to hide his own good fortune. "One day Jim would complain to us about sagging profits, and the next week he'd show up to work in a brand-new Corvette," says Jerrell. The more Jim moaned about profits, the more skittish the men became about tying their livelihood to such a bleak number.

Still, many of the body men forgave these discrepancies. "Put yourself in his shoes," says Jerrell. "Jim spent big money building a new facility, buying fancy new equipment. He can spend his money any way he wants to. So what if there are a few mess-ups?" None of that was worth giving up a steady paycheck, especially in an area that had been hard hit by the heavy loss of mining and steel jobs. "It's not easy to walk away from a job in these times," says Kenny Dickess.

But in the spring of 1989 Jim introduced a program that tipped the scales -- from a few missteps to a question of character, as his employees saw it. The innovation was part of Jim's master plan: computerizing the workplace. He wanted to use information technology to gain a competitive advantage, just as he had read countless companies had done to great bottom-line benefit. It was a decision that sealed his fate with most of his longtime employees. "He thought the computer was a secret weapon," says body man Greg Ellis, who had been at Graley's for a year. To Ellis, however, it appeared to be "a clever way to lie."

Traditionally (at Graley's and elsewhere), body-shop men are given the original estimates as their work orders, which include hours allotted for the repairs to be completed. In 1989 Jim stopped handing out the originals in favor of his simplified computerized versions. "It didn't take long before we saw our pay was falling," Jerrell claims.

Suspicious, a posse of shop men organized into a mini-investigative squad. Some scoped out original appraisals left by customers in their cars, others requested them from the local insurance office, and still others called customers at home. What they found seemed to confirm their worst fears: computerized, in-house versions shaved time off the original estimates, which both reduced their pay and made it harder to turn hours. To the employees that meant only one thing: management must be pocketing the difference. Jim tried to counter those rumors by inviting any employee with questions about a computer worksheet to come to him, to scan his files -- to get the story straight. And come they did, in droves. Soon after, the Graleys installed a paper shredder -- fueling further ill will. The reaction of the two Graleys, according to the body men, only made the situation worse. Recalls Jerrell, "They told us we could live with the system or move on. It was our choice."

For five of the eight original shop men, the choice was to move on.

Jim Hamilton, the local car dealer and a former admirer of Jim and Don, remembers when "the Graley boys" started out with a family atmosphere in their shop. Thanks to "ego and big ideas," he says, they've now forgotten a crucial business tenet: "Happy employees create happy customers."

Is it true? has Jim lost faith in this simple dictum? He insists no. From where he sits, he's fighting every day to make Graley's a better shop for customers and employees alike. Just look at what he's put in place: a new lunchroom, new uniforms, training, and so on. None of those, he emphasizes, are the hallmarks of an owner who doesn't care about his employees.

"Sure, maybe I miscalculated," he admits, pondering his earlier actions. About the discrepancy between original estimates and computer printouts, Jim explains, sometimes to get business he cut his price. Yes, the workers' hours got cut, but he made less on the job, too. Did he tell employees when that happened? "Not always."

Yes, he invited employees to come to him with questions when he heard of their skepticism, but he never imagined the onslaught. "Every day there were questions," he says. After a while, "it wore me down . . . I got sick of them questioning my integrity." News that employees were organizing posses and calling up customers and even insurance companies to validate their suspicions only further angered Jim and convinced him he should buy the paper shredder.

Jim counters each accusation from former employees. At times, he admits, he misjudged. "I did speak too much at the release meetings," he says. "Now I bring a yellow pad, scribble, and listen." About installing the time clocks, he says he had no choice. Since the shop was being audited by a regulatory agency, he said, he needed to prove that his men didn't work more than a 40-hour workweek. Why didn't the men in the body shop know that? Faced with questions about the TV monitor or the firing of an employee who questioned the hours on his computer printout, Jim blurts out, "If an employee doesn't trust me, I don't want him working for me."

Why the mistrust on both sides? What did go wrong at Graley Autobody? Here was a business that had been a good place to work, that was more progressive than most, that attracted and held on to its workers for years. Overall, goodwill had prevailed.

Ask Jim what he thinks went wrong, and he answers almost sheepishly, "Maybe I tried too hard." And in a way he may be right. To dare to transform a company from a back-alley business to a state-of-the-art industry leader calls for an against-all-odds drive, commitment, and dedication. But few, including Jim Graley, are prepared for how messy change can be.

Bringing about change is an unpredictable, time-consuming process. It's ongoing. It won't step aside when a CEO needs a breather to run the business, to recoup the investment in fancy equipment, to make a profit. However noble one's dream, the route is filled with unexpected land mines. Not least of those is dealing with the fears, concerns, and even gripes of the employees charged with carrying out the dream. For what feels well intentioned and morale boosting from the top can emerge as autocratic and insensitive to those at the bottom.

And when good communication is critical to the process, all-too-human feelings can get in the way. With the advantage of hindsight Jim says, "I can appreciate the employees' resistance." They had, after all, had years of experience at Graley Autobody and had been used to a certain way of working. Habits are not easy to change. But Jim says that his employees' reactions still sting: "What I can't tolerate are the personal digs." A few minutes later he offers a comparison sure to make his pain a little clearer. Their lack of trust, he says, was "like finding out my wife is cheating on me."

At this moment in time, it's still hard to say whether Graley's earlier vision will come to pass. It's already been seven years in the making. Jim still believes -- even in 1992, after upping the advertising budget from 2% to almost 5% of sales -- that "our ad presence not only attracts customers but makes the workers proud." To the contrary, says a current employee, who wishes to remain anonymous, "We run ads saying we're the best shop in the East, but we're not treated like we're working for the best shop in the East." All we hear, he says, is criticism "when we screw up." Far from taking pride in the advertising, he says it "reminds me that we're the ones who have to live up to the promise" made on the radio and in billboards every day. "Sometimes Jim doesn't realize how hard we work to keep his promise," says the employee, who adds that he thinks Jim's trying to run a good shop.

And there has been some progress. Although he's given up on profit sharing for now, Jim is offering the workers who've remained and the new hires the chance to share in the profits gained from reducing a portion of the shop's waste. In an average month, he says, he puts aside $1,000 toward new and better facilities for his employees. Company sales remain at around $1.3 million; operating profits hover at around 40%, which puts Graley's in the top 25% of body shops in the United States, according to one industry expert.

Still, Jim Graley says, there are days when it all looks pretty bleak. "Don and I sit down on the curb, look into the gutter, and all I want to do is get up, walk down the sidewalk, and never come back." But in another breath, he pledges, "If I survive this mess, this will be a different company."


Pat Lancaster doesn't know Jim Graley or his company. Lancaster is in an entirely different sort of business -- a $50-million manufacturing company. But he empathizes with Jim's tale, for he's been through it himself. "If I had known how painful this change would be, I probably wouldn't have done it," Lancaster says now. And he knows he's not alone: through an entrepreneurial network, Lancaster knows the

founders of a dental-supply company, a food-additive manufacturer, and a mining-equipment distributor who've all confronted variations on Jim's story.

Lancaster began the shift to a quality workplace six years ago and is just beginning to see positive results. Three years into the move -- after instituting quality teams, company retreats, and a companywide restructuring -- Lancaster was shocked at how little had actually changed and, more hurtful, how little his employees trusted him. He says he got a close-up glimpse of how bad things were when he filled in for one of his managers. Poking around to find out what minor gripes might be festering, he asked team members to tell him about the time they'd been the angriest in the last six months. What came back was a firestorm.

"I stopped caring about this company six months ago," one worker belted. "All you care about is speed here." "You treat me like a piece of meat," accused another. Barked a third, "Who cares about signs plastered on the wall saying 'Quality Is Our Bridge to Customer Satisfaction' when I can't even get proper lighting to do my job?"

It was personal. It hurt. "By the end of the session I was in tears," Lancaster recalls. He says the meeting taught him one simple lesson. "If you tell an employee you're going to give him ice cream, then you decide when to dole out the cones and what flavor, even an ice-cream lover is going to say, 'Yuck.' "