When her husband died, Kate Dickholtz faced every successor's nightmare: winning the loyality of a tough workforce that had only one message to convey. Prove yourself — and fast.
UNTIL TWO YEARS AGO Kate Dickholtz lived a comfortable life as a suburban housewife. After her husband, Art, left for work each morning, she filled her days with cleaning, gardening, church and club meetings, lunches with friends, and visits to her elderly parents. "My friends used to ask me why I didn't get a job," she recalls, "but I was happy to just be a housewife. Besides, Arthur didn't want me to work, and he never wanted me to interfere in his business. That was his domain."
No longer. When Art Dickholtz died in May 1988, Kate suddenly found herself in charge of the Flash Cab Co., Chicago's third-largest taxi fleet. Her new domain included 75 employees, 250 cabs, 400 self-employed drivers, and a sprawling complex of buildings on the city's North Side.
For Kate, that first year was a trial by fire, an intense on-the-job training program, with 12-hour days and one crisis after another: the chief bookkeeper, who had kept everything in her head, suffered a stroke, leaving the company finances in confusion; a cab driver had his throat slashed and nearly died; an aggressive lawyer threatened to file a million dollar lawsuit against the company over an accident claim.
Between crises Kate had a company to run. Although Art had made her CEO and sole owner of Flash Cab, most employees saw her as an outsider — a woman who was running a male-dominated business in which most "management" takes the form of macho confrontation conducted in locker-room language. "I felt constant resistance at first," she recalls with some bitterness. "I felt some of them were testing me to see how much they could get away with. They thought I would only be a figurehead, and that I wouldn't really get involved in the major decisions."
Soon after her arrival, some drivers began holding back their monthly fees. With this, Kate had had enough. It was time to exert a little machismo of her own. She gathered everyone together at a company dinner and let them air their concerns and complaints. "Then I told them they were all acting like a bunch of children," she recalls. "I told them I was going to be in charge, and that I was going to keep the company going, and that I was going to run it my way. And if they didn't want to be part of the company anymore, they could damn well leave."
As Kate learned the hard way, owning the company and inheriting the role of CEO does not automatically confer the respect or authority needed to run it effectively. Under the worst of circumstances she had to win her employees' confidence. And she couldn't do it by trying to be everything her predecessor was. She had to be herself, find her own style.
BEING HERSELF is probably the best move Kate made. Her debut as CEO at Flash Cab was difficult not only because she was relatively unprepared, but also because Art Dickholtz was a very tough act to follow. An autocratic boss who made most major decisions himself, he had built the company from scratch, earning respect and loyalty from his managers and employees over the years.
That respect is crucial because, as at many cab companies, Flash drivers are independent businessmen, not employees. About half of them rent their cabs from the company; the rest own their vehicles and pay a monthly fee to operate them under the Flash affiliation. So salary cannot be used as a basic management lever.
Art commanded respect from the beginning. When he and other veterans returned to Chicago after World War II, they tried to find jobs as cab drivers, but all the medallions, city licenses to operate a taxi, had been issued and were controlled by a monopoly. He organized a group of veterans to march on the White House to demand more medallions. Bowing to public sentiment, Chicago city officials issued 275 new medallions at a nominal fee to the veterans. Many of them then joined Veterans Flash Cab Company, which Art and a partner (whom he later bought out) started.
Art was the first in the city to install two-way radios in every car, so customers could call a cab instead of waiting on street comers. With a reputation for clean cars, courteous drivers, and prompt service, Flash prospered over the years.
The Dickholtz family now owns about 125 cabs, worth about $3 million for the medallions alone. While Kate will not release figures, outsiders estimate Flash's total revenues at more than $5 million a year. The company derives income from many sources in addition to taxi rental and affiliation fees. Most Flash drivers buy their gas at the company-owned Mobil station, have their cars serviced and repaired at the company-owned garage, eat their meals at the small company diner, and buy their insurance at the Dickholtz-owned insurance company, a highly-profitable sideline.
Drivers who pass Flash's extensive screening must keep their cars washed and comply with Flash's unwritten dress codes: clean shirts, clean shaves, no shorts or T-shirts or jeans. As president Jack Nichols explains, "The key to this business is getting and keeping top quality drivers. With some companies, any warm body will do. If your standards drop, your accident and repair rates go up and your profitability goes down. And if we get complaints about a driver who was abusive toward a customer, we'll drop him."
In a typically transient profession, Flash drivers are noted for their longevity, many having been with the company 25 years or more. Wayne Baker, who has been driving Flash cabs for 36 years, says people stay so long "because this is the best outfit in town. I've known the whole family for years. They're fair. It's a good company to work for."
Many employees are the sons, daughters, or relatives of other employees. Jack Nichols, vice-president Dick Rafael, and recently-retired radio room manager Bob Nordstrom all started out as drivers back in the fifties. Rafael, 63, who now runs the insurance claims department, met his wife when she was a telephone operator there. Her mother has worked in the dispatch room for 33 years.
Rafael recalls Art fondly as a man who knew every employee. "He'd do anything for you if you had worked for him long enough," says Rafael. "He helped mothers whose kids got in trouble; he loaned people money to buy their own cabs or to buy homes, and gave them money when they needed it for weddings and funerals."
Over the years, Art made Flash a Dickholtz family business. His brother Sherman served as the company lawyer; his retired father worked as a part-time cashier; his Aunt Birdie ran the diner for a time; as a teen, his son Michael pumped gas and worked at the garage. However, neither his first wife nor Kate, his second, were ever much involved.
Before her marriage to Art in 1965, Kate Thomas had worked as a bookkeeper while trying to launch a career as an operatic soprano. "When we met," she recalls, "I didn't know anything about the taxi business. I had grown up in a poor family, and all I knew was that only rich people took cabs."
Kate worked for a few months as a bookkeeper at Flash before she married Art, and filled in occasionally for absent clerical staffers at first. But she generally stayed away from the office. And that's the way Art wanted it for 20 years.
During those two decades, Art made a lot of money. Through his sixties he remained a rugged, vigorous man who worked hard and played hard, flying his own plane and racing his 44-foot sloop on Lake Michigan. Though he had fought it off for years, in 1985 he learned that he was losing his battle with bone cancer.
In typically careful fashion, Art began arranging for his own succession. He named Jack Nichols president, but kept the title of CEO and continued to make all major decisions himself. He brought Michael, his 35-year-old son by his first wife, back from Iowa (where he had been managing a family-owned mobile home park) and began rotating him through a series of jobs at Flash to expand his knowledge of the company.
But it soon became apparent to Art that Michael did not have enough management experience or gusto to command the rugged workforce, so he began grooming Kate to become his successor.
"ARTHUR HAD DISCUSSED business problems with me at home," says Kate, "and I had certainly soaked up a lot of information over the years. But I'd never had to make the decisions myself so I'd never paid much attention. When I realized he was actually coaching me to take over during those last few years, I began listening carefully and making notes. As different problems came up, about personnel, or investments, or buying new cabs, he'd explain things to me, and tell me what questions to ask, and which people to listen to and not listen to."
During the last two years of his life, Art asked Kate and Michael to attend the company's weekly executive meetings. "After each meeting Art would go over each decision with me, though he was still making the decisions himself. Suddenly, one day, toward the end, he turned to me at one of those meetings and told me to take over. That's when I realized I was really going to be in charge."
In charge, but not alone. Art realized there was no way he could provide Kate with all the knowledge he had acquired in 40 years. So he created a board of advisory trustees comprised of old family friends: a banker, a lawyer, a local businessman, and his executive assistant.
Just the same, when Art died in May 1988, and Kate moved into his office, she was "terrified." All his advice was valuable, she explains, "but it's like learning from textbooks. When you get out there in real life and you have to make the decisions yourself, it's not the same. I felt I'd been simply thrown into the job, and many times I said to myself, 'Arthur, why did you do this to me?"'
According to Jack Nichols, the employees' wariness was to be expected. "Everyone knew what to expect from Art," he explains. "When Kate started doing things her way, some of the guys starting grumbling, 'Art wouldn't do it that way.'"
Rightly or wrongly, Kate felt the resistance started at the top. That would have been natural, since both Nichols and Dick Rafael had hoped to succeed Art. But as Kate observes, "If Arthur had wanted Jack or Dick to take over, he would have asked them. But he didn't. He picked me." Art had asked Nichols and Rafael to help Kate, and had very generously provided for them in his will, but they weren't immediately responsive. "They probably didn't expect me to take over, or to stay. It wasn't that they ever did anything wrong; it was more of a feeling that they were not pulling with me," says Kate.
Realizing that she couldn't afford to lose them, Kate says "I called them into my office frequently to discuss things, and I tried to make them realize that I needed them, and depended on them. This went on for a while. But then, once I decided that I could run the company, I made it clear to them that I was in charge, and that they would have to accept it — and I think by now they have."
At times Kate still feels like an outsider, because she is running a company in which all the managers and nearly all the drivers are men. Much of the business is still conducted with a good deal of male banter. Kate is convinced that "most men don't like to work for a woman." But while some old-timers at Flash do think the taxi business is no place for a lady, even if she is "the boss's wife," most deny that they held that against her.
According to retired radio room manager Bob Nordstrom, "Kate's difficulty in taking over didn't have much to do with being a woman. It would have been just as hard for anyone to suddenly come in and take over a company run for so long by one guy — particularly a guy like Art."
One problem Kate faced was that many people within and outside the company felt that she was merely a caretaker CEO, and that she would soon be selling out. She got many buyout offers, most of them much too low, and some of them downright insulting. "They all figured that I was some dumb housewife who didn't know what the company was worth," she scoffs.
IN SURVIVING HER FIRST TWO YEARS, Kate has relied heavily on Nichols, Rafael, and the other department heads. She has also sought the trustees' advice on investments, tax and legal questions, salaries, and major expenses. "I have the final authority," says Kate, "but I have enough respect for these men that when they disagree with me, I listen. Sometimes I get a bit hotheaded, and they keep me from making rash decisions."
Kate has learned to depend on Paloma Ott, who spent more than 40 years as Art's executive assistant and serves the same function under the new boss. "Taking over would have been very difficult, even impossible, without Paloma," says Kate. "She knows everything Arthur did and why, and what he felt about different people. She's the glue that holds this place together."
Kate has also come to rely increasingly on Art's son Michael, now 40, whose knowledge of the company has grown rapidly since he took charge of the computer operations. "I get to see most of the business here on the screen," he says. "Sooner or later most of the company data goes through this room: billing, drivers' records, insurance claims."
While less dynamic than his father, Michael is more analytical, a trait that may be more valuable at this stage of the company's development. "My father used to joke that this is a very simple business," Michael says. "You know — people call a cab, we pick them up, we drive them where they're going, and they pay us. But actually it's much more complex than that. It's a real bowl of spaghetti — everything is interrelated. If you raise the price of gas by two cents, what effect will that have on the drivers? Do you buy new cars, or spend more to keep the old ones running longer?"
Art had made decisions based on years of experience, but often on little hard data. Now, however, under Michael's direction, the company has computerized bookkeeping, insurance claim processing, and other operations. As a result, Kate and Michael are able for the first time to begin systematically analyzing the company's operations.
"This company is going to change dynamically over the next five years," says Michael. 'To do that we have to be able to increase the flow of information to the department heads, and put together all the pieces of the puzzle. For example, I want to be able to find out quickly when a car was last in the shop, and for what; or check the accident record for a particular driver to decide whether to raise his insurance premium."
According to Michael, one of Kate's problems in taking over at Flash was his father's single-handed management style. As he explains, "Dad knew it would be very difficult for any single individual to come in and run the company the way he did. He let the department heads run their operations pretty much on their own, but nobody but him knew everything about the business. That gave him a great deal of power, but it has made Kate very dependent on the department heads."
Kate has kept closer tabs on each department's affairs. The managers naturally resent their loss of autonomy, but they seem to have adjusted. As one of them said, "With Art, it was like a dictatorship, but we had more independence. He was a tough SOB, but he was a benevolent despot. He was the boss, but once you got his okay he'd leave you alone. Kate asks more questions about what we do. With her you have to submit everything in writing, and then wait till it goes through the trustees. It does make things slower."
Kate is well aware that her managerial style has been difficult for the department heads to swallow. "Sometimes Jack or Dick will object to something I want to do, and they'll say, 'That's not the way Art would do it.' So I've had to blurt out, 'Look, Art's not here any longer, and that's the way I want to do it."'
Even Jack Nichols now agrees that "for someone who was thrown into this job, Kate has learned an incredible amount in a short time, and she's much more relaxed now." Some of Kate's decisions have meant big expenses: computerizing the accounting procedures; modernizing an obsolete telephone system; replacing the gas station's old tanks. But so far she has made no major changes in the company's basic operations.
Energetic and vivacious at 65, Kate drives to work each day in her big beige Lincoln, arriving well-coiffed and stylishly dressed. She admits to a struggle with her diet, but doesn't worry much about it. While she has been known to bring in a pot of home-made chicken soup for the office staff on occasion, Kate does not have the close relationships with the employees that Art had. Nor does she wish to, particularly when it comes to being a soft touch for a loan. "I had to declare a moratorium on all those loans," she says. "But the people who really need help can still get it."
Whenever Kate wonders whether she is making the right decision, she recalls one of Art's maxims: "If you make a mistake, make it fast and then fix it." On her desk, taped to a photo of her with Art on the deck of his sloop, is another of his favorite quotations that has guided her as a CEO: "In life you cannot control the wind, but you can adjust your sails."
PREPARING AN UNLIKELY HEIR FOR THE INEVITABLE
Like it or not, someday you will die. Like it or not, that could happen while you're still at the helm of your company. If you want your business to remain in the family, and there are no planned successors, it is wise to prepare an otherwise uninvolved family member to take the reins.
"A CEO must prepare a spouse or child for both the managerial and emotional issues of taking over," says Craig Aronoff, who runs the Family Business Forum at Kennesaw State College in Marietta, Georgia, and has counseled several widows who have taken over when their husbands died. "And he should give that person the opportunity to learn about the business first-hand while he's still healthy." Some basics:
- Invite your spouse or child to sit in on business meetings. Just by hearing real interchange they will learn.
- Promote an informal relationship between your spouse or child and your top advisors, so they won't be strangers should they suddenly have to work together.
- Discuss problems at home, and ask your spouse or child to analyze the situation and recommend a solution. Explain your solution.
- Set up a strong outside board of advisors, to ensure there is continuous oversight.
- Educate other family members, so they can lend informed, emotional support.
If nothing else, at least draw up a list of key outsiders — your accountant, lawyer, banker, and so on. Even if your spouse or child doesn't take over, they need to know how to reach these people fast in a crisis to protect their financial position and your estate.