Pushing Out the Service Envelope
The Massachusetts Envelope Co. challenges customers to "Just try to make us say no". The president of the family firm explains how the company outhustles bigger competitors.
My grandfather, Maxwell Grossman, was a practical man. He had started our family’s business—the Massachusetts Envelope Co.—in 1910, and built it by building strong relationships. He also knew when to cut a deal, even with his competitors. When his second son—my father—was born in 1919, my grandfather walked into the rival Boston Envelope Co. to see the owner, Edgar McCallum. My grandfather said, “Mr. McCallum, I have a cigar for you. My wife has just given birth to our second lovely boy.”
Edgar McCallum said, “Have you decided what to name him, Max?”
“Well, no, we haven’t,” he replied.
Mr. McCallum said “Max, if you name him after me, if you name him Edgar, I’ll give you $100.”
And so it was that my father’s name became Edgar. A hundred dollars was a lot of money to a family business in 1919.
The business consisted then of a one-room office and a small printing press. My grandfather would solicit orders from local businesses for custom envelopes, then print and deliver them. To him, the secret of success was simple. When I was 15 he told me: “Steve, there are only three rules in business that count. Rule number one is: Get the order. Rule number two is: Get all you can for the goods. Rule number three is: Collect the dough.”
Today it takes more than that to beat out our competitors. As president of our company, I still try to nurture strong relationships—with family members, employees, suppliers, and customers. But I learned in business school that, in a commodity market such as envelopes, you can set yourself apart in only one of two ways—by offering the lowest prices, or the best service. We are not large enough to undercut prices, so we have succeeded in growing faster and more profitable than others in our industry by offering unparalleled service, and by marketing our company as a service firm, not merely a supplier.
Good service depends on developing close relationships, a skill my grandfather passed on to my father and my uncle Jerry, both of whom joined the business in the1930s. During that time, my grandfather had become very interested in political life, and when World War II started he took leave from the company to become a Dollar-a-Year Man for President Roosevelt. He volunteered his time, as did other businessmen, to help administrate the war effort (they were paid a token $1 a year). He worked in the Office of Price Administration, then went on to other public positions after the war ended. He never returned to the Massachusetts Envelope Co.
My father and uncle ran the business for a long time. They could have used help, but my father never pushed me or my siblings to join the company. He always told me to do whatever I wanted with my life. He said, “I will never give you a pile of cash, because I’ve never seen anybody come out of a family business with a lot of money in their pocket who ever amounted to anything. But you will always have this business to turn to if you want it.”
The fact that my father never pressured me allowed the family business to remain an enticing opportunity in my mind. I started work there after I graduated from Harvard Business School in 1969. I sold our products for three years. But I came to a difficult realization: There were too many family members already present for me to make much impact—my father, my uncle Jerry, and two of his kids. There were a lot of Grossmans for what was only a $3 million company. I was already thinking about growing the business, changing it too, but I felt there was no way for me to do it right then. Given my training, I felt I needed another outlet to challenge me. So I went to my father and said, “Dad, I’m going to do something else. I’ve gotten an offer from Goldman Sachs to sell securities. It’s an opportunity to get into another business. I hope you understand.”
He was deeply disappointed, but he told me, “Steve, you’ve got to do what you need to do.”
I had three great years at Goldman Sachs. I was learning a lot, and I was on the fast track. Then one day, while I was sitting at my desk, the phone rang. It was my father. He said Jerry wanted out, and asked me if I wanted to buy Jerry’s share in the business. Jerry, who was interested in politics, had gotten involved with George McGovern and Eugene McCarthy, and was running a nuclear non-proliferation organization. I told my father, “I’ll be right over.” Because my father had never pushed me to join the company or to stay there, I felt it was my decision to return.
I bought Jerry’s interest in January of 1975. I was 29 years old. I borrowed the money from a bank, in the company’s name. When I walked in the door on my first day, my father sat me down and said, “Steve, you’re going to be the president of the company. I will tell you right now, there is no decision you will make about this business in the years ahead that I will fight you on. I will express an opinion, but it’s your business to run. I believe in you, I trust you, you’ve grown up in this business, and you know what it is to make money.”
He also said, however, that I would be president only if he remained as treasurer. He still signs all our checks, to this day.
Because I was young and had been away, the sudden move to make me president raised some eyebrows among our employees. But the transition went pretty smoothly. During my three earlier years as a salesman I had opened more accounts and sold more product than anyone else. Just as important, though, I had always treated everyone at the company with grace and respect. My grandfather told me that it didn’t matter how much money you had, you still had to treat every individual with dignity. My father gave me authority, but I never used it in a heavy-handed way. We had occasional differences in opinion over the direction of the company, but he continued to allow me to set our strategy.
Today, my father and I are equal partners. He is 73 years old and still comes in every day to sweat the details. Each morning he opens the mail. He says, “You don’t know what’s going on in a family business unless you open the mail. You see every check, every order, every complaint. There is no one in the company who can sweep a problem under the carpet.”
He also still walks around the plant once a week to rub his hand across the top of the printing equipment. If he finds dust he will tell the foreman: “Go back and clean it again.” He believes that, since he spends more time at the business than he does at home, the business should be as spotless as his residence. We’ve been in the same location since 1969, and when our customers visit us they think our building was built last week. My father believes that cleanliness instills a commitment to quality in the minds of our employees. He also believes that if our customers see a fine environment, they will believe we will deliver a fine product. Quality counts for something, and my father is the person who cracks the whip.
My father also believes very deeply that all of life is relationships. We take great pains in our family to maintain and build relationships. Every morning at 10:00 a.m. the family members who work at our company—my father, my mother, and my two sisters—sit down to share a cup of coffee and a bagel, and we just talk. Every day. For 10 or 15 or 20 minutes. It means a lot to me to be able to relax for a short while with family members whom I care about, who love me, and whom I love deeply. We have no board of directors at our company. That morning coffee constitutes a daily board meeting.
The biggest shift in direction that I initiated was to turn our company from a production business to a service business. To most people, an envelope is an afterthought. The average envelope company is a production company, run by production people. They try to get a high yield off their line. While that enables them to lower prices, it also makes them methodical. They get locked into certain envelope sizes, and fixed production schedules. They become inflexible.
We had always been run by marketing people, and I decided to push that as our strength. We began to tell customers we would give them whatever they needed, and would do it immediately. We told them we weren’t selling a commodity, we were offering a service. The big envelope companies had lower prices, but we were faster and more able to meet their needs. One time a customer called us on a Tuesday, in desperate need of 25,000 window envelopes by that Friday. There was no way a bigger company could interrupt their routine to fill this order. We did it. Another time the Digital Equipment Corp. called us on a Friday afternoon and said they needed 30,000 envelopes by 8:00 a.m. Monday morning. We did it. For us, flexibility is money, money is jobs, and jobs mean income for our employees.
The business grew rapidly, from $3.5 million in 1975 to $25 million in 1988. We chose to not manufacture envelopes. We print, customize, and fill orders. Our expertise was to sell, to go out and market, to take a commodity product—after all, it’s a piece of paper with some printing on it that’s folded up into different little shapes—and turn it into a service product, by saying to customers: “Try to make us say no. Anything you want you can have. Don’t ever call and ask us, ‘When can you deliver something?’ Just tell us when you want it and it will be there.”
To operate in this manner, we not only need flexible management, we need a flexible work force, one that will put in overtime, or work at sudden notice on the weekend. We pay much higher wages than our competitors, therefore we get the best people and they are willing to be flexible. We pay our printing employees $19 an hour. That’s $6.50 an hour higher than anybody else in our industry in the greater Boston area. People ask us how we can pay such a premium in a competitive business. The answer is, we get what we pay for.
Not only did our business volume grow, our gross margins increased from 33 percent in 1975 to more than 40 percent in 1988, which was the best year we’ve had. The envelope business has since taken a bit of a downturn.
We’ve made a lot of money, and we’ve invested much of it back into our community. I believe, as my father and grandfather, that giving children a lot of money almost guarantees they will never amount to much. I say to our three young boys, “There’s always a place for you in the family business. But don’t expect Mom and me to turn over a bank account to you. We don’t believe in it. We’d rather invest in making the community a better place”.
Volunteer work occupies an important place in our family. My father and grandfather gave time to many activities. I got involved in politics in the late 1970s, and I now spend a great percentage of my time doing work that does not relate directly to our business. In 1991 and 1992 I was chairman of the Massachusetts Democratic Party, which was almost a full-time job, given that 1992 was an election year. I have just resigned that post, to become president of the American Israel Public Affairs Committee, which works for legislation to improve relations between the two countries. I will be responsible for fundraising and educating Congress and the Administration in ways to improve relations between our countries and to move the peace process forward in the Middle East.
My volunteer activities take a lot of time. That has gotten to be a problem at the business. It has reduced my accessibility, and made it difficult to set a leadership tone. I’m frequently sidetracked with media interviews, and I’m often off to meetings. So I’ve decided to dedicate from 8:30 in the morning to 1:00 in the afternoon to the business. I will be available to anyone in the company, and no one from any outside concerns, other than our suppliers and customers, of course. We’ve lost a little momentum. My distractions have prevented some of our people from sharing their enthusiasm with me, or from getting a quick decision from me. It is a great personal advantage to be in a family business, because I can pursue these important outside interests. But I have a responsibility to provide leadership.
All these thoughts have led me to define the keys to our success. Many of them spring from the fact that we are a family business. It has become clear to me that our company prospers because of several distinguishing characteristics.
First is speed in decision-making. We once acquired four companies in an 11 month period. It took only my father and me to make those decisions. In one case, we met a business owner at 2:00 in the afternoon, and had bought the company by 5:00 that evening, on a handshake. We called the lawyers in later to take care of the details.
So much of what we do in family businesses is based on a sense of touch. We started a telemarketing department two years ago that now accounts for 20 percent of our business. We didn’t start it as part of a five-year plan on cash flow. We simply started it one day, because we sensed that customers no longer valued outside salespeople as much, that inside salespeople working over the phone and fax could sell an awful lot at much lower cost.
Fast decisions allow you to outhustle larger competitors. You should be able to drop everything and set a price immediately when a salesperson knocks on your door for advice. The mindset it creates also allows you to change management style based on no more than a hunch. One day about 10 years ago, after 47 years with the company, my father decided he was not close enough to the people who were actually selling our products. Every person who sells for us sits out in an open room, which we call the fishbowl. So that same day my father, at age 63, moved his desk out from his office into the middle of the fishbowl. Now everyone comes to him all day long with questions, problems, and requests. He’s always there to help.
Speed is also fundamental to handling complaints. We recently received a large order from Massachusetts General Hospital, which we hadn’t sold to in 10 years. But in filling the order, we used the wrong paper and were late on delivery. When the salesperson told me, I immediately called the hospital’s buyer, said I was sorry, and invited her to come over with her boss the following week while we fixed the problem. The fact that the president of the company, a member of the founding family, called so quickly and apologized rebuilt that relationship.
A second distinguishing characteristic is treating employees as if they are part of the family. We invite the people who run our presses, who ship goods, who sell over the phone, to our family celebrations. My father and mother invite people to their home for a barbecue on a regular basis. We buy whole tables for employees at major local functions; we don’t simply tell them to go have a good time, we go with them. The 52 people attending our last sales retreat had an average of 15 years with our company. That’s extraordinary in these times.
Helping employees grow in the company is part of treating people like family, too. My father, who had never gone to college, finally got a degree after 13 years of continuing education, and then got a master’s degree in counseling psychology. After that, he became a part-time guidance counselor at Boston College. One day two seniors walked into his office. They each asked my father what they should do for the rest of their lives. He saw they had potential, and said “Fellows, how would you like to come into business with me?”
They looked at him dumbfounded, but after some consideration they agreed. They started on the same day in 1972, and my father looked after their careers. They both still work for us; one runs the administrative end of the company, the other the telemarketing department. They’re now two of the most senior people in the firm.
Sweating the details is another fundamental. There is rarely, if ever, a time when either I or my father are not at the company. One of us is always present to handle complaints, figure out a tough price, give advice. When my father and uncle ran the place, my uncle was Mr. Inside; he handled all the administrative details. My father was Mr. Outside; he sold to the principal customers, talked to the salespeople, traveled all over. When I took my uncle’s place, I became Mr. Outside and my father became Mr. Inside. We’ve always maintained a balance between the person who faced the rest of the world and the person who sweated the details inside.
Equally important to the smooth running of a family business is that old skill my grandfather passed along—the building of relationships. I remember vividly a fund-raising event our family attended. Pledges were being made in the Jewish tradition of card calling; an organizer would read the list of attending families, and a person from each family would stand up to give a pledge. I was there with my father, my mother, and my wife, at a table in the name of the Grossman family.
“Who is speaking for the Grossman family?” the card caller asked. Usually I did, but this time my father put his hand on my arm, signaling me to stay seated. He stood instead, announced our pledge, and then said, “I want you to know something. No matter how much our good fortune enables us to share, I want you to know that my gift to the community tonight is the gift I’ve made of my son.” There he was, this father, telling 200 people how much we meant to each other, and how much our communal work meant to us.
It spoke volumes about our relationship. It also gives you a good idea of why it is we’ve been able to prosper without a hint of conflict in the last 17 years. It all stems from that cup of coffee and bagel we have around the table every morning of our lives. And we keep telling people, “If you do business with the Massachusetts Envelope Co., if you do business with the Grossman family, you can be guaranteed we will be there through thick and thin.”
There are seven words that I consider to be the heart and soul of relationships, and therefore of successful family businesses: Thank you, I’m sorry, and I love you.
We never stop saying “thank you” to the people who run our presses, prepare our negatives, ship our envelopes, take our orders, answer our phones; they are the reasons we are successful. We also never stop saying thank you to our customers. I never hesitate to say “I’m sorry” when we make a mistake, just as I had done with Massachusetts General Hospital. The words take care of many ills that can otherwise fester and create huge problems. And within our family, we never stop saying “I love you.”
The underlying value in those words, in building relationships, was once elucidated by Nicholas Gage, a writer who left The New York Times and wrote Eleni, a book about his mother, who died in Greece at the hands of the Communists in 1948. He said: “Successful relationships need as much work as successful careers. Give as much thought to the relationships you build with your parents, your husband or wife, your children, your friends. For in the end that’s what counts and that’s where you will find the only lasting satisfaction.”
Steven Grossman has been president of the Massachusetts Envelope Co. since 1975.