OPENERS Newswatch

CEO’s plea to public companies:
‘Keep your employees working’

A Pennsylvania family business leader spends $16,000 on advertising urging executives to avoid mass layoffs.

By Andrea K. Hammer

In early February, readers of the Philadelphia Inquirer and New York Times saw an unconventional ad in the papers’ business sections.

“Dear CEOs: I have listened to the executives of many companies say that they are eliminating thousands of jobs to ‘improve the bottom line,’” the ad copy began.

“I own stock in many of these companies and would prefer that the company make a smaller profit and the stock fall, in the short term, rather than affect the lives of our neighbors and their families as jobs are lost.

“Please join me in reminding all CEOs that we are not just dealing with numbers and profit, but with real people and real families who need to keep their jobs.

“Please keep your employees working.”

The ad was signed by Steven H. Korman, chairman and CEO of Korman Communities, a fourth-generation housing-development company based in Plymouth Meeting, Pa. Korman, 69, spent $16,000 on the ads. He also sent letters to CEOs of corporations where he owns stock, including Apple, ExxonMobil and Google. Korman says he took action after learning that Pfizer planned to increase profits from $16 billion to $20 billion by shedding 8,000 jobs.

“I own stock in about 17 of the large companies, and one is Pfizer,” says Korman. “That [news] bothered me because it’s not jobs; it’s people and families.”

The Kormans have built 40,000 single-family homes, 12,000 apartments and townhouses, and 6 million square feet of industrial and commercial space. The company, which has just over 500 employees, operates nine suburban garden and mid-rise communities in Pennsylvania, New Jersey and North Carolina. Some Korman employees have been with the company for 40 years, the CEO says.

“Even from a business standpoint, [layoffs are] not a good thing to do,” says Korman. “You don’t get loyalty that way.”

Korman says he received thousands of favorable comments on his campaign.

“Everyone needs a job and has to work. They feel good when they’re working,” says Korman. He stresses that he understands companies’ need to replace workers and to eliminate salary increases or reduce workdays or pay to stay afloat.

But Korman criticizes companies that focus narrowly on quarterly profits. As a stockholder, he says, “I’d rather they made $38 billion instead of $40 billion and have longevity with their people who really care about staying there.”

In February, Korman says, his company’s occupancy rates were down 4%; by March, he says, the figure was closer to 6%. “But every time there’s an up and down, are you going to drop people?” he asks.

Korman recalls that his grandfather Hyman, the company founder, allowed a third of his tenants to remain when they could not pay rent during the Depression.

Korman says his father, Sam, taught him “to treat people the way you would like to be treated. He was very good that way; he was a kind man, and I think treating people that way is very important. I’m very lucky; my sons are that way.” Larry, 45, supervises general operations. Brad, 44, handles the company’s portfolio acquisitions. Mark, 41, oversees commercial investments and developments.

“My dad told me one thing that always stuck in my head. ‘[Anyone] can kick in a barn door; it takes a carpenter to build one,’” Steven Korman says. “It’s easy to knock something, but it’s hard to create something.”

His message, Korman explains, is “just letting people know that we’re all in this thing together. And we need to help each other. It’s that simple.”

Andrea K. Hammer, founder and director of Artsphoria: Arts and Business Vitality (www.artsphoria.com), is a writer, editor and desktop-publishing specialist in Wyncote, Pa.


Businesses should focus on providing jobs

In a recent column in Directors & Boards, Family Business Publishing Co. President Robert H. Rock lamented that the unemployment rate had reached 7% (as of April 2009, it was 8.9%) and that the unofficial rate (those working less than they want to and those who have stopped looking for work) was near 15%.

Rock cited a letter he received from his father, Family Business Chairman Milton L. Rock, in the 1970s. Milton Rock, who for 35 years was managing partner of The Hay Group, a global consulting company specializing in human resources management, wrote, “Business is all about producing jobs as well as products and products…. There will come a time even in the United States when a company will be judged by the number of jobs it produces.”

“Rather than continuing to cut workers,” Robert Rock wrote in Directors & Boards, “CEOs must begin to think more about building businesses that secure and enhance employment. Boards of directors in general and their compensation committees specifically may want to underscore this notion by rewarding top management for retaining jobs and creating new ones. In these dire times, an incentive system that reinforces this objective could help get our country moving again.”


MAILBOX
A venerable firm from Puerto Rico

To the Editor:

Please be advised that in Ponce, Puerto Rico, the Serralles family owns and operates Sucesion J. Serralles Inc. and subsidiaries, which officially (to the best of my knowledge) appears as registered in 1865. It is currently operating under the watchful eye of its board of directors, which includes members of the sixth and seventh generation of the Serralles family.

The Serralles family actually started our enterprise in the early 19th century, as documented by historic American engineering record, National Park Service, under the U.S. Department of the Interior. This company branched out into rum production, commercially, after the repeal of Prohibition in the U.S.

Ernesto J. Serralles
Vernon Company
Guaynabo, Puerto Rico


Quotable

“I will go back to the basics of the foundation of the company.”

Akio Toyoda, newly named president of Toyota Motor Co. and grandson of the founder, on how he plans to lead the company through its current crisis (Wall Street Journal, Jan. 21, 2009).

 

“In challenging times, the history is what keeps you going. You don’t want to be the generation that failed.”

Warren Knight, an owner of Smiling Hill Farm in Maine, now in its 12th generation of family management (New York Times, Feb. 5, 2009).

 

“[W]hat’s good for shareholders is that the company will get an engaged owner as leader. That lays the ground for the company being handled responsibly long-term without the temptation of the ‘quarter-by-quarter mentality,’ which is the case at so many companies nowadays.”

Stefan Persson, chairman of Swedish fashion chain Hennes & Mauritz AB (H&M), on the elevation of his son, Karl-Johan Persson, to CEO of the company (Wall Street Journal, Feb. 12, 2009).


Cutbacks without layoffs

Two recent articles offered tips for business owners seeking ways to cut costs without resorting to layoffs.

Peter Cappelli of the Center for Human Resources at the University of Pennsylvania’s Wharton School told Business Week (March 9, 2009) that a 5% salary cut costs less than a 5% layoff because no severance payment is involved.

Mel Fugate, an assistant professor of management and organizations at Southern Methodist University’s Cox School of Business, noted in the Wall Street Journal (March 5, 2009), “How these concessions are identified and executed can make a significant difference in how well a company emerges when economic conditions improve.” Fugate told the Journal that management should be among the first to sacrifice and, when the economy improves, should reward employees who made concessions. “Doing so will preserve employee commitment and performance not only in the new good times but also in future downturns,” Fugate said.

Here are some cost-cutting suggestions culled from the Business Week and Wall Street Journal reports:

• Train existing staff to do more, such as tackling tasks in a department different from their own or performing maintenance.

• Lend employees to a neighboring company to help it handle a staffing crunch. Invoice the other company for the cost of your workers’ time.

• Prohibit overtime or require employees to take unpaid leave.

• Cut wage increases and perks such as cell phone usage allowances.

• Prohibit employees from taking company vehicles home (to save on gasoline and maintenance costs).

• Disconnect extra phone lines.

• Ask employees to contribute cost-cutting suggestions.


Study: Layoffs beget high turnover

In a 2008 study, researchers at the University of Wisconsin-Madison Business School found that after a layoff—even a small one—turnover among the surviving employees is higher than in companies that have not had staff reductions. In the study (Academy of Management Journal, 51[2]:259-76, April/May 2008), authors Charlie O. Trevor and Anthony J. Nyberg found that the more layoffs companies impose, the higher the turnover rate: A 0.5% downsizing predicts a 13% turnover rate, a 2% layoff predicts 14.1% turnover, a 5% staff reduction predicts 14.9% turnover, and a 10% reduction predicts 15.5%. This compares with an average 10.4% turnover in companies without layoffs.

“The downsizing-turnover relationship suggests a sad irony in that employees are laid off by companies that may subsequently find themselves understaffed,” wrote Trevor and Nyberg, who studied 200 firms.

David Noer, a professor of leadership and business administration at Elon University in Elon, N.C., and author of Healing the Wounds: Overcoming the Trauma of Layoffs and Revitalizing Downsized Organizations, told HR Magazine (November 2008) that layoff survivors experience a range of negative emotions, including fear, frustration, resentment, betrayal and distrust. This can adversely affect performance as the company tries to carry on with a smaller staff, the magazine noted.


AT THE HELM

Maureen Beal

President and CEO, National Van Lines, Broadview, Ill.

Generation of family ownership: Third.

Company revenue for 2008: $88.4 million.

Number of employees: 115 plus agents and drivers.

Years with the company: 35, but I left and worked for another company for ten years in between.

First job at this company: Switch-board operator.

At what age? 19.

Most memorable thing I learned from my father: His work ethic. He worked five-and-a-half days a week until he was 90. He stopped only because his health declined.

Most memorable thing I learned from my mother: The importance of family unity and practicing a responsible life. She held a family dinner every Wednesday, and you had better be there. She was our first bookkeeper, and she was very proud of that fact. That’s how my parents met.

Best thing about this job: The ability to pull a successful team together and to see them thrive. Working with so many good people has allowed me to achieve my dream for the company.

One of our greatest successes: We’ve received top scores in customer service from the General Services Administration for the last 12 years.

Best advice I ever got: Count your successes, not your failures.

Quote from our company’s mission statement: We used to have a mission statement, but it wasn’t memorable. Now we work with one belief: Every policy we have should benefit the customer.

Artwork on my office wall: An original watercolor painting of a manatee by Wyland, an environmental artist. He gave it to me years ago

My greatest accomplishment: Achiev-ing financial stability. This is a hard business. Profit margins are slim. We’re comfortable now. I went over the books line by line to see what we could cut. I’m still in charge of cash management. Every day I check revenue coming in and I sign every check that goes out. The head person in a family business has to be a family member. Cash is king. It enables you to reinvest in the company.

Worst thing about working in a family business: Initially it was overcoming the perception that I got the job because I was the boss’s daughter. I had to prove myself every day. Now it’s that it’s really tough leaving your work at the door—it’s hard not to take it home with you, or to a family event.

Best thing about working in a family business: The family culture spreads to the whole organization. You become part of a very large extended family, where you all look out for one another.

Advice I’d give someone wishing to enter this business: Be prepared to work hard—long hours and no summer vacations. Most people move in the summer. Don’t plan to leave the business, either. You’ll love it once you’re in it.

On a day off I like to … catch up on the industry periodicals. I don’t like to be seen reading magazines at my desk.

Philanthropic causes our family supports: We support the American Cancer Society and Aspire, an organization that helps the developmentally disabled. We also contribute to the Humanitarian Project, which supplies food and other necessities to families in need.

Words I live by: Treat everyone with respect.

—As told to Patricia Olsen