The young maverick

Rosenbluth Travel was just another storefront travel agency--until the fourth generation transformed it into a national powerhouse. Who says the excitement of entrepreneurism has to die with a company's founder?

By Dan Rottenberg

1974 Hal Rosenbluth graduates from college. He resents his family's travel agency because it has always been a rival for his parents' attention, and because it strikes him as dull. But lacking a better prospect, he joins the dormant, $40 million (billings) company in Philadelphia as a go-fer.

1990 Under Hal's leadership, Rosenbluth Travel has become the nation's fifth-largest travel company, with 8.3 billion in billings, 2,500 employees, and 400 offices.

Until a decade ago, Rosenbluth Travel was as ordinary as an airport waiting lounge. Since nothing about the family- owned company distinguished it from its competitors, no one paid it much mind. Customers passed through its doors the way they make their way through an air terminal-matter-of-factly and generally oblivious to the surroundings. Over the years, business improved, but at a ploddingly deliberate pace. And that's how things stood through three generations of Rosenbluths. This sleepy company turned into an aggressive, dynamic, and highly profitable industry leader after it fell into the hands of one member of the fourth generation--Hal Rosenbluth.

The story of Rosenbluth Travel is not merely one of a company that in a brief 15 years was transformed from a storefront operation into the nation's fifth-largest travel company, though that's fairly impressive in its own right. Even more unusual is that the feat was accomplished by someone who was supposed to be only a caretaker.

If Hal had played by the well-established rules of family business, he would have realized that he didn't earn his position as the company's CEO, he inherited it. Hal should have known that all of the excitement of entrepreneurism died with the company's founder, his great-grandfather. It should have been clear to Hal that his most important task was to make sure that the family company didn't go belly-up under his watch.

Fortunately for Rosenbluth Travel, Hal didn't play the game by the conventional rules. His experience provides refreshing lessons for all others who take over family companies. Those who inherit a company don't have to meekly keep the sta- tus quo, they can infuse an enterprise with a new sense of purpose and entrepreneurship, as Hal did.

In fact, the business landscape is changing so continu- ously that those who don't reject the status quo may well be doomed to failure. Nowadays, if companies don't periodically reinvent themselves, they'll wind up in an ash heap because the competition will satisfy new needs of the market first.

How do you reinvent a company burdened by three generations of ingrained thinking? For Hal Rosenbluth, the answers lay in an acute understanding of his changing market, an appreciation of how technology can add value to travel services, and a sensitivity to what employees of his generation want out of their jobs.

As a boy, Hal seemed like a directionless kid. Nothing excited him. He had no interest in books, and was constantly at loggerheads with his schoolteachers. His high-school grades were so poor that he was rejected from the University of Pennsylvania even though his father and mother were prominent alumni; instead, he majored in criminology at the University of Miami, where, he says, "I barely made it out."

Hal also perceived no challenge within the family company, which his great-grandfather, Marcus Rosenbluth, had founded in 1892 as a small steamship ticket office serving mostly immigrants. Marcus was succeeded by his sons Joseph and Max. They in turn passed control to Joseph's son Harold, now 65, and Max's son-in-law, Eugene Block, who still share the title of co-chairman.

Rosenbluth Travel didn't get into corporate bookings-- today 90 percent of its business--until the mid-sixties. In the somnolent days before deregulation in 1978, airline fares were assigned by the Civil Aeronautics Board and were rarely altered. Most companies viewed travel as an unavoidable cost, and thus found little need to use travel agents. So the travel industry was primarily oriented toward vacationers.

The company Hal joined after graduating from college in 1974 was a 4O-person agency, which, in his mind, was plagued with office politicking. And because it was easy to serve clients, Hal recalls, "the company had no drive and no imagination. It was probably as good as it could get, given the lack of a competitive marketplace."

Hal spent his first two years at Rosenbluth as a general helper to Eugene Block, and another year-and-a-half as a vacation consultant. "I was only permitted to sell trips to Washington, D.C., and New York City," he remembers. they figured if I crapped things up, at least our clients could walk home."

Hal became a vacation manager. But after two vice-presidents were let go, the elder chairmen appointed someone they could trust--Hal--making him a divisional vice-president. It lasted a year, but Hal felt uncomfortable exercising authority-he thought he didn't deserve, and demoted himself to the post of reservations agent.

That turned out to be a smart move, even though it was motivated merely by Hal's contrarian instincts. "I was very conscious of the Boss's Son Syndrome," Hal says today. "I wasn't gung-ho about joining the company to begin with, and I didn't want to get into a leadership position until people came to me on their own for advice."

It was on the reservations floor, away from office politicians and prima donnas, that Hal says he finally fell in love with the family company--"Not so much the company, as the people," he adds. It was one of those lucky confluences of the man and the moment: Air fares had just been deregulated, throwing most travel agencies into chaos (today the airlines make an average of 25,000 fare changes every day). Hal was on the floor, talking to clients every three or four minutes, and the experience provided both the sense of purpose and the sense of fellowship that he'd always sought, albeit without realizing it.

"I came to understand clients' needs and frustrations," he recalls. "I also got to know the needs and frustrations of the people I was working with. We bonded-we'd go out to a watering hole every night and talk about the endless possibilities we as a company could attain. That's when we realized that we weren't really in the travel business but in the information business. We figured if we could get better information to our clients than our competitors could, we would be giving them better service, and would get their business."

From those late-night bull sessions emerged Rosenbluth Travel's current away of sophisticated computer services aimed at saving money for corporate clients. Hal's troops produced a dazzling array of proprietary computer services that were ahead of their time. They provided clients with instant, lowest-fare information on flights, rental cars, limousine services, and hotels. They analyzed corporations' travel patterns and negotiated bulk discounts based on them. And almost as if they had never been noticed, Hal and his gang were suddenly accounting for most of the company's day-to- day business. The old folks were impressed, and they wisely and respectfully stepped aside. In the end Hal got control with little overt resistance. Today Rosenbluth Travel handles 48 percent of the business air traffic in the Philadelphia area, and more than 1 percent nationwide, a considerable figure in an industry with 36,000 agencies.

But those sessions also fertilized Hal's determination to create a collegial company in which all employees considered themselves partners.

By late 1978, when air travel was deregulated, Rosenbluth Travel's reservation agents accounted for about half of the company's employees. But corporate clients sought the firm's help in sorting out the new fares and routes, and Hal began to negotiate service contracts with them. As he did, he hired additional agents and leased computers, having that latitude since he had his father's trust. Hal was enough of a corporate politician, though, to avoid major capital investment that would have caused his superiors sufficient wowy that they would feel compelled to meddle. Instead of buying computers, he leased them. And instead of parading in scores of them, he brought them in gradually, as increased business justified.

By 1984 Hal had engineered his own kind of skunk works. His cadre of 20 reservationists had increased to 100, learning and supporting each other while the rest of the company remained stagnant. Without receiving so much as a promotion, Hal had become the most important person in the company. Then he signed a major deal with DuPont, and the travel industry stood up and took notice of Rosenbluth as a big-league player.

The introduction of computers also produced an unexpected byproduct: It forced the company to reassess its relationship with its employees. "It wasn't a matter of hiring outside experts" in order to integrate the computers with the business, Hal says. "Everything was new. There were no experts. We had to learn with the people we had, depend on each other, follow our instincts." Over time, Hal's practice of inculcating teamwork created just the sort of familial atmosphere he had yearned for in the first place.

Whether Hal's evolutionary makeover of their company was seen as heretical by his father and Eugene Block is difficult to say. Both Harold and Eugene--described by a company spokesperson as "private and publicity-shy"-declined to be interviewed for this story. But as Hal recollects, Harold and Eugene basically let him pursue his own vision.

"When it came to big things like bringing in computers, I'd sit down with Dad and Gene and give them my reasoning," Hal says. "When it came to changing how we handled people, I just did it. For the most part, Dad was supportive and provided insight for me. Or maybe he and Gene didn't fight me because they saw that what I was doing was working.

"I always respected Dad and Gene because they let me make decisions," Hal says, "and most of my decisions were to give other people the power to make decisions. One of the great limitations of family owned businesses is that the family tends to make all the decisions. That's wrong, I00 percent wrong. The key to a successful company is having loads of people with diverse views who are all making decisions."

By 1985 Hal had become the company's de facto boss, and he officially assumed the CEO title. Harold and Eugene limited their involvement to review and advice, as co-chairmen of the board, though they still held much of the company stock. "The beauty of our company, my father has said, is that each generation has known when to turn it over to the next one," Hal says.

Whether consciously or not, by allying himself with the troops at the bot- tom, Hal tapped into a resource overlooked by most businesses: legions of bright, young people hungry and grateful for an opportunity in a tight labor market. He used symbolism to make them feel part of the team, too, calling them "associates" instead of "employees." The label "employee," he explains, "has connotations of subservience. Once someone feels subservient, you're in deep trouble. I felt we all worked together."

Hal's willingness to listen and give his people's ideas a chance has fostered an unspoken sense of obligation. This is critical to the success of Hal's strategy because, in truth, his so-called associates are really just plain old employees. Rosenbluth Travel doesn't pay higher'wages than average, and doesn't even offer a profit-sharing plan. ("If you have profit-sharing," Hal argues, "you should have loss-sharing too. But who the hell's going to do that") Instead, monetary motivation comes largely from an elaborate system of performance bonuses and promotions.

Employees also have little hope of rising to the top. For one thing, eight family members are actively involved in the company. In addition to Harold, Eugene, and Hal, there's Hal's mother, Frances, who has worked in the accounting department four days a week since the kids finished school; Hal's younger brother, Lee, 36, an executive vice-president; Hal's sister, Amy, 33, a vacation consultant; Eugene Block's wife, Cecily, who works with older clients; and Eugene's nephew Robert Rosenbluth (Hal's second cousin), who manages one of the company's branch offices. All of the company's stock is split among Hal, Harold, Eugene, and Eugene's son Chuck, who manages a hotel in Washington, D.C., but isn't involved in the company.

Still, there's no doubting the sincerity of Hal's passion for his people. "Under my dad and Gene Block," Hal says, "the company had a very good focus on the client. My basic philosophy is: Focus first on your associates. Clients can only be first to the associates if the associates are first to the company. Our people are happier, so they serve the client better. To me, it's just common sense.

Hal's views may sound self-serving. Yet much the same characterization was reached by Wharton professors Eric Clemons and Michael Row in a recent case study. Rosenbluth Travel, they wrote, largely owes its success in the eighties to "the vision of Hal Rosenbluth and his ability to create an organizational structure predicated on service and innovation . . . There is a pervasive concern for associates that may be more characteristic of a progressive family than a modem corporation."

"A lot of corporations believe friendships complicate business decisions," Hal says.''That's nonsense. If you're fiends, you look-out for each other."

It remains to be seen whether the company's good vibrations can be extrapolated in- definitely into the future. Continued growth at the 30 percent annual rate of the eighties will make it increasingly difficult for Hal to maintain the personal contact with the rapidly growing work force on which he places such importance. And continued expansion is essential if Hal is to continue to satisfy the rising expectations of his army of upwardly mobile young disciples.

"We have virtuallv no turnover in leadership," Hal acknowledges, "so that can be frustrating for ambitious people below." Nevertheless, he insists, "We can give people opportunities to learn new things. We can give them more responsibility, even if it's not necessarily vertically upward."

Hal's recent venture in North Dakota suggests that his capacity for contrarian management decisions is far from exhausted. It began in the summer of 1988, after he read about the Midwest farm drought. Hal felt he wanted to help suffering farm families. Several inquiries led him to hard-hit Emmons County in North Dakota. Within weeks Hal was in Linton, the county seat, advertising in the local paper for 20 people from farm families to do computer data-entry work for three months.

He was amazed at the response. More than 80 qualified women applied the day after his ad appeared, for jobs paying just $5.87 to $6.65 an hour. He hired 40 of them part-time and sat them in an abandoned tractor dealer showroom. By the end of the summer Hal concluded that his philanthropic ges ture was actually a business bonanza.

''There was no turnover among these women," he says, "no absenteeism, and virtually no errors. And the people were lovely." So he decided to keep the data-entry center in Linton, and furthermore, to expand it into a telephone reserva- tions center. He could have 200 employees there by the end of 1991, and he plans to expand his phone and computer op erations to similar North Dakota communities.

"Linton turned out to be what I think is the future for human resources for corporate America," he says. "Companies say they can't find good people anymore. But farmers and their wives are very resourceful, and they know how to solve problems together."

Hal is also building a four-bedroom vacation house for himself on 308 acres next door to the training center, which suggests that his enthusiasm for North Dakotans is more than corporate minded."The problem with a lot of family businesses," Hal says, "is that they concentrate on the family. I say the hell with the family. There's a more important family, and that's my associates. Too many families say to their employees, Where would you be if it weren't for the family I look at it the opposite way."

The irony, of course, is that Hal's rhetorical revolt against family control is largely the result of his family upbringing. "I've tried to be as interested in the views of my associates as my father was in mine," he says. "I became a contrarian because of the value my parents placed on debating issues with us kids at the dinner table. Contrarians can contribute if they have parents who let them. If they're snuffed out--well, maybe that's the genesis for a lot of family problems."

But will Rosenbluth Travel be a family firm in the future?

"I hate nepotism," Hal insists, in an indirect reply, not with- standing the critical role it played in enabling him to exercise his management style. "It's the worst thing that can hap pen to a company." He maintains that the people who've made the company successful and have leadership qualities should be the ones to run the company, and "not merely those with good genes. If they have both, fine."

Does this mean hell steer his own children--Jeffrey, 7, and Jessica, 1--away from the company? Hal's answer: "I'm teaching Jeffrey to kick field goals."

Hal Rosenbluth

Age: 38

Family: Wife, Renee, children Jeffrey, 7, and Jessica, 1.

Homes: Gladwyn, Pa., and a 308 acre ranch in Linton, North Dakota.

Motto: Employees first, family second.

Challenge: Maintain double-digit annual growth rate, expand services to clients, stay close to workforce.

Rosenbluth Travel

Business: Travel agencies (400 offices).

Billings (1990): $1.3 billion.

Founded: 1892, by Marcus Rosenbluth.

CEO: Hal Rosenbluth.

Ownership: Shared among Hal, his father Harold, Harold's cousin Eugene Block, and Eugene's son Chuck.

Employees: 2,500.

Claim to fame: Got in early on airline deregulation and helped create the corporate travel agency business.