Document NYDG2vmQoLr15R1k624bE9qw

INTERVIEW WITH BILL ELDREDGE PRESIDENT SHERWIN-WILLIAMS INTERNATIONAL GROUP DECEMBER 10, 1990 INTERVIEW CONDUCTED BY DAVIS DYER AND KATHLEEN MCDERMOTT THE WINTHROP GROUP, INC. AT/First Draft/12/30/90 ._ N10810 0007-SWP-0059652 WG: We're talking with Bill Eldredge, who is the President of the Sherwin-Williams International Group. BE: Thats^^a4j-4&ey--eajr-l-iBe. That's correct. WG: And today is December 10th, 1990. Bill, as I mentioned, I'd like to start by asking you about your career--how you got started here and the various assignments you've held prior to this one. BE: OK. You want all the way? WG: All the way, yes. BE: OK. I started in 1953 and for one year was called a personnel assistant in the personnel department of the Chicago factory, which at that time was the largest paint factory in the world. I think we had 2300 employees. -A*?dUiy job there was primarily interviewing hourly employees and handling other personnel-related duties. That was for one year. From '54 until I960 I was assistant personnel director in the Chicago factory and the duties there were primarily labor relations. And from '60 to '61 I was personnel director of the Chicago factory with the various personnel activities that are involved. From '61 to about '64 I was assistant director of industrial relations in Cleveland working for the Industrial Relations Division, working 1 0007-SWP-0059653 mostly on labor relations matterssalary administration and other things. And then from '64 to * 65 I was assistant to the vice president of sales, mostly on personnel matters. And--from 'fi5 to--t-hi c; -WG*--Yes. BE: From *65 to *68 I was what was then called an area manager or a division manager m the sales--force in tho--northeast, I was responsible--first-line supervisor for 35 company--owned stores and three jobbers. That job is now called district manager, I believe. And then from '68 to '72 I was regional director for the North Atlantic region, which meant I had 7+eresponsibility for-'company stores in the northeastern part of the United States. That was until '72. From '72 to '77 I was director of marketing, research and development in Cleveland, ssd Wla didn't have a marketing research function back/then, and I X Tcreated 3 marketing research function <=emd -T^was involved with consumer research and also a primary element was site selection for stores. <3Bad /from '77 until '80 I was president of the Stores Division, asd ^*)e had not been divisionalized previously. We had operated functionally and Stores had been part of the general overall sales activity, but in `77 we created a division for the CZ, c t I----- Stores, and I was external manager of that^until '80. -- '80 to '81 I was vice president of public affairs. From 'J_Jto_-L83--andr-^ou know,--you--denJ-t--ea-re--what--month-, '81 to '83 I was in the job I'm 2 OW7.SWV-0059654 in now, which was then called group vice president international. -c -a, front '83 to '86 I was a group/president. At that time we didn't have a president, we just had a chief- b tS-~o executive, 3le were two group vice presidents>in the company; I was one of those two. And then in '86 I came back to this job fiC 00 because they created a presidents in the company. So I've been in this job from '86 till now. v3* \TT-7 <2 r WG: OK. You've covered a lot of territory . . . BE: Right. WG: . . . functionally as well as geographically. BE: Right. WG: Let's go back to the beginning, because I would like to get a sense of what the company was like in the fifties and sixties when you hired on. You were in the Chicago plant. BE: Right. WG: Is it still the world's largest paint factory? BE:A It was at that time the world's largest paint factory, that's right. It was a chemical factory as well. We had a 3 0007-SWP-0059655 chemical division at that time, and we made chemicals that were used primarily- in the paint industry and_we_j^ds_Juir--dyes-,--and we_jmad e--pix>ment^^r4marilry^-and dyes 7~hnd^hat--wars^~tmnr~pr imary business. at--that---t-i-me'--n--the-ohemxcal--division. And then we had 'T/p' EK- paint factory and we had a container factory, too, in Chicago. As you probably know, we had a container division which we subsequently sold. WG: When you were there, what kind of a place was it? My impression of the company in those days, it was a fairly paternalistic and unchanging is the wrong word, but not dynamic. BE: Yes. It was a very conservative organization. Organizationally it was unique because the personnel function in the Chicago factory--and I was in that personnel division and then became personnel director for the last year I was there-- didn't report to the general manager of the Chicago factory. It reported directly into the director of industrial relations in Cleveland. And there was no/vice president of personnel at the time. There was no corporate personnel function at all. All there was was an industrial relations function which was responsible for labor relations and the personnel departments at the various factories. There was a headquarters personnel function run by a woman who was a rather strange case. And -fees-when I was personnel director in Chicago--this gets confusing, I knowr_..but^-Jiir-try4r^i'^ In not~^elr^h^m-( 4 0007-SWP-0059656 .imported, I reported directly to the director of industrial relations in Cleveland and he reported directly to the vice president and treasurer of the company whose name was Luther Schroeder. ^asd-'lthe company at that time was really run by two people: Arthur Steudel, who was the chairman, who really handled the marketing and the sales; and Luther Schroeder, who really handled everything else. 195d- "this was Luther Schroeder's way of control!&^gh the factories, was1 to have the personnel function--whrich was-almost-Like--the political cumisaiS7 you know- -reporting directly to him., which was an indication of the fact that the monetary controls were extensive. A further .. illustration of that, and perhaps even a more important one, is Dec j \~LC^ ! eft whea=sie_had the field sales organization--the store organization- -which constitutes the largest part of our company. We wed have a regional director responsible for sales, and a regional mahager of credit and accounting who was geographically in the same location as miai Hiropnr-n-p_.-g.a-Tnr!- the regional director; they each had their own organizations, and the regional director of credit and accounting didn't report to the regional director wi-th-the=saj=es=managei~. This regional manager of credit and accounting reported directly through an organizational structure that to the vice president and treasurer. And this was the treasurer's way of really controlling the company. For all intents and purposes, Luther Schroeder controlled the company in other than the marketing end of it. Now that subsequently changed and has been changed for many years. 5 0007-SWP-0059657 WG: When Steudel retired, did Schroeder also retire? BE: Schroeder I believe died in office. IfiJLm nat-mistaken., Schroeder died. jJ-xn-a-lmost-posirt-ive-that' s -what-happened. Watt wouidk-ruaeiRber-mere than--anybody.--Sehroeder died in office-;--1--. -thinJe. I think he was 69 years old. I don't know if he was ever going to retire. WG: So it was a pretty top-down driven place by Steudel and Schroeder. Tf-t'S' f'-Of- BE: Yes. The interesting thing was/in Chicago, who was the largest function, there was a general manager called Wyatt Miller who really controlled everything in Chicago except the personnel function. And Wyatt was on what they called a board of tvoperators, which-meant once a week in Cleveland, I remember he would take the train in on Sunday night and have the meeting on Monday morning, and then fly back in the afternoon. And-^so'They had this board of operators that really controlled the operational part of the company, and it was made up of the general manager of the Chicago factory and I don't know who else except the operating people in Cleveland. So you did have field participation in that/ The climate was extremely conservative Giaassefee. Steudel and Schroeder/wear** I never saw!/ kj j ft-ivifc, LtKiro the entire time I was in Chicago. They didn't come to the field, they sent out directives, they-*were--not- aVt-p 6 0007-SWP-0059658 ojs--Schroeder wasnT"axeas. They paid lip service to equal employment practices, and only when some of us said, "We've got to change" did they make a change. They just didn't want to rock the boat, and of course they were--and other people can tell you this more than I can--they were very conservative financially. Schroeder did not want to borrow money . -Bs^wego at that time o r - a - '^felTas^gg~Trunni^a=^ocreMtei.*~iiere. *BSt As~you- ou've/heard this story about what happened when Cyrus Eaton pulled them out of their troubles. WG: No. I haven't heard that. BE: Well apparently at one time we got ourselves into trouble with borrowed money. This was during the Depression. And the story goes that Cyrus Eaton, who was on our board at that time, was the person responsible for getting us out of our problems. Vi ~ ' ' How -we did it I don't know. And of course the interesting thing is when Cyrus Eaton became sort of a persona non grata, you know, when he became close to the Russians, etc., ours was the only of? board that he wasn't thrown eat of, which is kind of interesting for a very conservative company. / WG: Actually (I heard that) when Kruschev came to the United States he stayed at Eaton's (apartment). BE: Right, -ftad Schroeder did not want to borrow money, and so 7 0007-SWP-0059659 as a result we were a company that carried a lot of cash. I mean cash just sat as cash with almost no borrowing, I think. I don't remember exactly how much at the time. And consequently the whole company was run that way. And it was only later after Schroeder died, many years after he died, that we got into a borrowing position, which is what eventually got us into the problems of 1978. WG: Was the company just getting better from year to year, financially speaking? T borJ > r BE: .Tit didn*t know, because they were not on the big board. They were on what was then called the New York Curb, I think, that later became the American Stock Exchange, and the annual# -pt,.j. jvj'ov ~ro reports told you almost nothing. They kept 4ii=bo themselves and I think that was because they didn't want to tell anybody anything, but I got the impression they were getting better all Vw Tvhs. the time. But I think one of the main reasons wore- that they .* \0>. tv- J u?c>Cs ' were expanding the store network substantially and thri-a was getting significantly greater volume, while at the time cost of paint was not going up. They were getting price increases without the cost of paint going up, and in that way they were in fact subsidizing the creation of the store network, which might f-l/vr- in and of itself notJbeen economical, but were building additional volume. Steudel was the guy that pushed the stores. He was the guy that just was responsible for rapid expansion of 8 0007-SWP-0059660 the stores during the early fifties. WG: Prior to the War, say, Sherwin-Williams paints would have only been available through hardware stores? BE: No, actually the first store#*--11"go bad;'^sthe-first-one c ic ^ was 1913. Well, Pat could maybe congestion -on that, but it was my understanding, and there were stores, some of which were the take-over of dealers who went out of business, but it was not until the fifties that there was really a rapid expansion of the stores. I believe there was a period of several years there where there were more than 100 stores added every year. I did a write-up on that once many years ago. I'll try and find it for you. iN WG: What was the thinking behind expanding the stores back then, do you know? - BE: Control distribution of the manufactured product. WG: Were the competitors doing that? BE: Yes. There- have been competitors doing--it. /iSeau one else has been successful on a national level with-doing it. -es. Glidden still has stores. They have something like 350 stores. DuPont T-r--' vi-no -. did have stores and got out of dfe-and got out of the decorative 9 0007-SWP-0059661 paint business. PPG had stores and only recently have given up their stores. lot of regional chains continue to have stores and do very well with it. So- there are quite a few company controlled paint store chains in the United States. I think the thing that's significant is that X remember when I was in the field as a regional director and a district manager, the store managers were given substantial profit sharing bonuses and given a great deal of autonomy because the company was not concerned so much with store-level profit. The company looked to make their money selling to the store. And- so in effect-^fehati-s what=t=3was: Xt was per own controlled distribution. A3l 4s a matter of fact, we had a chain of stores that can better be described as a loose confederation of entrepreneurs than as a structured store organization. We had no standard operating procedures. Now we eventually subsequently put aH these -things C p/l J ^ . .m, but at that time the store managers pretty much ran their show as they saw fit. They were audited periodically to make sure they weren't stealing, and there were controls on their produefes-that-they--purchased--wh-ioh-ware. othe-r^-than--manu f-aeturecb ^product, -and all the paint sundries and wall coverings and so on that they purchased, t jlvery store had its own checkbook, and / they operated pretty entrepreneurially. And some of them made very good money, really good money. Particularly in some of the rural markets, I think they probably made more than anybody else in town, just about. Some of them I know would bank in different towns because they did so well and didn't want people to know 10 0007-S WP-0059662 about it. I'm running through a lot of different things here. I'm sorry. WG: No, it's fine. I mean it1 s getting a sense of what the place was like in those days. BE: So I'd say that it can best be described as a company that had not missed a dividend, you know, even during the Great Depression. Had not missed a dividend. It was a widow and orphan stock. We skipped our first dividend in '78, I think. Prior to that it was very conservative. It was a low paying company. There was a joke throughout the industry that SWP stood for smallest wages paid. And there had been during the period I was there not a great deal of emphasis on technical development. v I remember I became concerned that we were losing chemists /-fortes because of our low pay. I remember once going to Art Holden, who was then -in cha-rge--of-,-- T-guess-he-was technical director of the company, and his attitude was sort of, "Well, if they go, we'll get somebody else." Schroeder had the opinion that we didn't need a lot of high priced chemists; that if innovations came out about'in paint, we could duplicate what the competition was doing and with our distribution beat them to the marketplace. We didn't need to spend a lot of money on research and development. We had a sort of interesting dichotomy at the time, too, because all of the laboratories except one came under the direction of ' OL-^r o rJArt Holden-who reported directly to Steudel. And there was a 11 0007-SWP-0059663 separate division headed by a man named Nate van Stone, and he was in charge of--I forgot what it was called at the time. X: It was synthetic resins, wasn't it? BE: Oh, no, no. He was in charge of a division that included l<0^nS Oij * Don Mngd-*s lab in Chicago. So there was on laboratory in Chicago ' 't i. dealing primarily with emulsion base that came under a different jurisdiction in the company. And van Stone never--I mean even though he reported to Steudel, I don't think he really ever gave him very much loyalty, because apparently the story is at one time van Stone had almost taken over the company--he and a man named John Prescott who at the time I was involved was vice president of manufacturing. And John Prescott was the only person who5 family w j Lc c went back to the Sherwins. X: Do you have any idea why they wanted to take it over? BE: Oh, I think that Steudel was too conservative and wasn't that innovative. X: Is this fifties? BE: I don't--no, that would have been before the fifties. I don't know when it was. The only guy I can think of that might f/1 111 j know--Walt'would know. But that's a fascinating story. I'd like 12 0007-SWP-0059664 to know what the real story is there. Because thoy=ralmQst took <ifc--ever? I understand they almost made it. And that was one of the reasons given to us, although it's hard to make sense why we never had a stock purchase plan up until much more recently, was the fact that apparently it could get into the wrong hands and somebody could take it over, and they cited that case. And I diM ij can't back this up very well, but it's there somewhere. Bob might know too. WG: John Prescott was a member -of the Sherwin family? X: Grandson. BE; John Prescott was, yes, grandson of Henry Sherwin. And he was vice president of manufacturing, but he never really had as much authority as he might have had, and I think it goes back to -fife Ff-iy-%tes=attempt that he had been involved with van Stone in an attempt to take oyer the company. And it's characteristic of Sherwin-Williams that they weren't fired. You know? It was sort of nobody really got fired in the company. I mean you really had to be stealing money or doing something extremely immoral to get fired. WG; Is that true in the hourly ranks as well as salaried? BE; The hourly ranks ran much more traditionally to a 13 0007-SWP-0059665 traditional labor relations situation where your union contract pretty much governed whether or not you could dismiss somebody. WG: Ho w did the company get unionized? Who did it? BE: Well, when I was in Chicago we had eight unions. We^had t-hses--jbhe main union was the Oil, Chemical, and Atomic Workers, merged--with- Llitr -A Lumic--Workers. I 'giiess__i-t-^iad--been--the--Oil-and ^-Ghemi-calr'Workers-:--Thay-merged-with the-Atomic. OCAW was our production unit. And then we had an operating engineers unit and we had six craft unions--you know, all the maintenance crafts of one sort or another. And I don't know when the company got organized. It was prior to the time I was involved. That was Chicago factory. WG: Different situation in different plants. BE: Different situation in different plants. OCAW also had Detroit--we had a factory in Detroit, Acme Quality Paints, and OCAW was there. And OCAW was in Coffeyville, Kansas, too. I used to haae--a labor in all those locations. And I guess we had the AF of L Paintmakers in the east, in Newark if I'm not mistaken. I forgot who was there, but I could dig that out. Somebody would know. And we had a different union in Oakland. I remember in Atlanta before we built that factory we had a 14 0007-SWP-0059666 warehouse and the warehouse had been previously organized by the Teamsters. So I think the Teamsters have part of that factory, and OCAW another part. I*m not sure about that. You could check on that. I remember very cfci-gt>ndtis*c when the union organized ' ' A Badl-as because Ba-llas did not have a union--t-Ha-M-g-Garirand. and OCAW went down and try and organize it, and that was in 1963. I went down to run the election from the company side, and I was there the whole month of August, remember Pat? *63. Pat: Yes, that's right. BE: And we won that election. But they got it in a subsequent Kl 0 rt & vy ~ Tv , election. I think it was OCAW that wont- ahead"?? WG: Having never been in a paint factory, is it a laborintensive process? BE: No, it's very, definitely not labor-intensive process. The cost of paint is highly raw material and not labor-intensive. The only labor-intensive business that we were in, in Chicago we had the container plant at that time and that was quite labor- / intensive. And the~=oitd-^method ef-^maki.-ng-brushes-- brushes are still labor-intensive. A lot of handwork in making brushes, less 7/is-- , PiSv^T than there used to be but/more feew-) . Painto none. WG: Did the company ever had any major strikes or work 15 0007-SWP-0059667 stoppages? BE: Yes, we had the long strike in Chicago--it was 119 days-- nineteen-; was about a year before I became personnel director, so it must have been--when did we come to Cleveland? Pat: 61. BE: I think it was 1959. A i^-day strike. I'm almost positive of that. It ended in September. And we had a long strike in Detroit, too. I can't remember when that was. Those were the biggest labor disputes. WG: Were they straight wage issues? BE: The strike in Chicago was almost entirely an emotional strike. The=unj=Qn^.nmmitpee--^he contract had terminated but we had kept negotiating on a day-to-day basis, and I remember wftgnwe left the hotel one night where we were negotiating with the understanding with the union that we would continue to meet the next Monday; I think it was a Friday night. And they had a membership meeting on Sunday to reaffirm this continued negotiation, and the membership overturned it. And it was primarily an emotional feeling on the part of the union that the company was not being fair to them or something. They went out 119 days and came back on the same package we had offered them 16 0007-SWP-0059668 before they went out, with maybe one or two minor modifications. It was a face-saving situation. WG: And the one in Detroit was a . . . BE: I don't remember that. I wasn't involved in that. WG: But in general, you know, if this isn't a labor-intensive business for the most part, would you say that the company's history is a . . . BE: Generally speaking the labor relations are better than--I mean it's not like the auto industry and the ST-t-' industry. WG; Not a strike every three years. BE: No, no. It was very unique, very rare that we had a strike. WG: My picture of the upper management of the company in these days was fairly paternalistic . . . BE: Right. WG: . . . and probably autocratic. What about at the shop floor level? Was it in that mode too? 17 0007-SWP-0059669 BE: Yes. WG: Tough supervision? BE: Oh, I'd say when you talked about Schroeder and Steudel being autocratic, I wouldn't call them tough, though. You know what I mean? I mean everything was done in a very gentlemanly way. There was not a severe relationship at all. I'd say in the factory that, -yea^Jb3aw.r-wfeeU4ex^ ay that we were probably middle of the road. I think we were not anywhere near as autocratic or tough as the auto industry. But I don't think we were very democratic either. And for my money, when you talk * about the type of supervision you have, it varies tremendously with the individual supervisor in terms of how he manages. And I remember being in the personnel department/where I would spend one day a week handling third-step grievance procedure, -ytauHatw, with a union. And-W^ien it came down to ill treatment, it was usually certain supervisors who were particularly difficult and others that never had a grievance filed. So it was . . . WG: So it was the individuals and not the sort of . . . BE: Yes. Generally speaking we certainly didn't have thesame kind of climate you had in an auto industry. It was generally a pretty collegial--that's not the word--but except for the one main strike we really had a pretty friendly relationship with all 18 0007-SWP-0059670 the people, in the labs and everything. WG: When you came to Cleveland, weren't Steudel and Schroeder still in? BE: No, Steudel had retired. They'd both gone by then and Baldwin was chairman. And I guess Fred Squires--I've forgotten who was VP of finance then. Maybe Fred Squires followed Schroeder, but Baldwin was chairman. Steudel had since retired /iuD os? I've forgotten whether he died or not. WG: Did you know them? BE: I met them both. I don't say I knew them. ILb3=-tel!h=y&u, Sometime when we're not taping I'll tell you how I met Schroeder Steudel I met only on a few occasions. I went in once--oh, I guess Steudel was still chairman when I came to Cleveland. I'm wrong. Steudel was still chairman and Baldwin was president. I remember we put together a presentation on some of the things we were doing in the field, and Baldwin brought me in to meet Steudel and to present it to him. forgotten about that. So he was still chairman. / I' Pat: Did he die then? Is that why? BE: I think he--I don't remember. No, he retired. I know he 19 0007-SWP-0059671 retired becausfe they put him on a very lucrative pension plan which was separate--different for Sherwin-Williams standards; maybe not by any other standards. But the thing I remember most about Steudel is playing golf out at Pepper Pike and he was in a foursome ahead of me. You know Pepper Pike, OK. And Steudel played left-handed. He was also sort of a short, at, rolly-poly guy. Pleasant guy. Really a -neat guy. And he played the whole round of golf--he carried two five irons and a putter. And the reason he carried two five irons was if that 'c-all youcarry and you broke one, well you'd have the other one. So he just had a hell of a time playing golf and went up and hit the ball and enjoyed it. I remember once I was going to tee up the ball and I moved away and he said, "Oh, hit the ball!" That's my recollections of Arthur Steudel. He was a big man in the Republican Party around here too, and also I think he had an automobile dealership at one time as well. Somebody told me that. And while he was still chairman here. Thfc=rapgSrts occasionally. -Wefe=now. ft doesn't happen now. But I don't remember much else about Steudel. remember. I don't know who else would WG: Do you remember the brand of car in the auto dealership? BE: I think it was a Buick dealer, but I'm not sure about that. WG: Was Buick a big Sherwin-Williams customer? 20 0007-SWP-0059672 BE: No. I don't think so. We did sell the auto industry OEM />/, f. finishes, though, out of our Acme subsidiary, -: :'k' -years-. We-now--dn^t--sel 1 "well-,--i^tis-inheresting. For a long period of time we sold nothing to the automotive industry in original equipment finishes. Now we're getting back into it, with some very specialty finishes and "in-mold"? coatings on the plastic parts. But as you know, we're a major factor in the automotive refinish business. WG: Right. Tell me about Baldwin. BE: Well Baldwin, his nickname was the undertaker because he looked like--Baldwin was a very nice man. He was very deliberate in what he did. He was always very open to me and my big problem was always finishing his sentences for him, you know what I mean? And I realized what I was doing and tried to stop. WG: Bob and Ray routine. BE: He was very conservative--or maybe that's not quite true. . t/ ^ In some respects he -e&d some innovations that didn't exist under Steudel. He was a different type of guy than Steudel. You know, Steudel was a salesman up from the ranks and Baldwin was Harvard Business School, and I think he tried to "modernize the company" along--the lines -of--perhaps a-more . . . END OF SIDE A, TAPE 1. BEGIN SIDE B, TAPE 1. 21 0007-SWP-0059673 BE: ,, . . -tteat our problems economically began under Baldwin, where we began to start to borrow money, which was used for operating purposes. WG: Rather than capital investment. BE: Right. WG: What brought that about? BE: I don't know, really. Other than the fact that I don't think the company was being well managed, and I don't think Colin was strong enough or aware enough to really find out what was going on, and I think the thing just sort of kept running itself, and I don't know when we got into those financial problems. Tom Micklich will give you a much better reading as to what--that -was than----wauld. The whalo financial problems we got into, because Tom Micklich, even though he's a relatively young man, was here before the change, and I think he would probably have a pretty good history of that. Pat: Did Baldwin come from Canada? / BE: No, Baldwin had worked here assa---I've forgotten where he started, but he and John Prescott had started together and were very close friends, and I've forgotten what he was doing, but he 22 0007-SWP-0059674 was at one time assistant to Steudel and then I think he went to Canada or vice-versa. He was sent there and then brought back. He didn't start there. He didn't come from there. And then Baldwin stayed on until his normal retirement date. I guess he wa~ss65=and he retired at age 65. There was I think a great fight over who would become president, and there were essentially three ^_ camps/*I saw.1 One was Walt Spencer, who was then in the manufacturing operations area, and he was the candidate of John Prescott, who had now attained more authority than he did under the old Steudel regime because he was close to Baldwin. They were good personal friends. T think they had be--Army together or something--lik<e^that'>-"star,ted with"'the"r:ompany together. The other was a man named Dick Bull who had come up through the sales organization of the company, at one time been regional director of the North Atlantic region, the job I had at one time, then gone one to become president of Acme Paint in / Detroit, which was a division. And his great accomplishment/* was t.r ; w- ^ /; ) that he had put -our lease--department--and--eur^-paint .-into K-Mart during K-Mart's great growth period. Then he came back, and I think he came back to a job of group vice president, I'm not sure what his title was. So he was really the top marketing man of / the company, and Spencer was the top production man in the company, and a guy named Bill Fine was the was the chief financial guy in the company. guess. He had taken over from Squires, I 23 0007-SWP-0059675 Pat: Was he the third candidate? BE: He was sort of the third--the three power camps. And I know Dick Bull campaigned aggressively te-Ja=Ba4ef with the board of directors, directors he knew, to be made president. But Baldwin wanted Spencer, and Baldwin was the guy that called the shots. WG: Is Dick Bull still alive? BE: No, Dick died about two years ago. Boy, Dick would have been glad to talk to you. WG: So at that point it was a three-way horse race between the three of them. BE: Yes. That's my perception. That's one man's perception of it. I never got a formal ... WG: Spencer had been in the manufacturing background. BE: Spencer had come up to the manufacturing ranks, and I first knew Walt when he was assistant paint superintendent in Chicago, and I was yast-;--T think -that ''O- whetv-I was, not too many years after I had started with the company. And he went from there to ho--had- some overseas assignments along the way that included, among other places, Havana, Venezuela, and Vancouver, sad I think 24 0007-SWP-0059676 all of those were building a factory. And then he came back to Chicago as jg-eneraJ=ananager~o-f--the--eh'ieago--opxeration: faxst '................ - ....... ar t iw , assistant: general manager and then general manager^ And then I ,rj_. ipK* believe went into Cleveland to take over manufacturing, although I'm not sure exactly sequentially how that happened. Walt Was at, strictly out of the business school approach. I mean he used consultants and he considered himself to be a modern executive who was going to change the company and bring it into the twentieth century. One of the things Baldwin did in retrospect, I think it was Baldwin who put us onto the big board <42a^the New York Stock Exchange), and of course which meant then we had to be much more open about our financial information, which we had kept very closely guarded in the old Steudel_, Schroeder days. WG: I notice that when we try to do a financial history of the company, it's not easy. I mean you get the sales and margin . . BE: That's about it. WG: Well, I'm going to come back and talk about this Spencer, but before we do that, I'd like to talk about your career in sales, when you moved from industrial relations into sales. BE: Yes. I was just &r one yeara staff job in sales. -And 25 0007-SWP-0059677 that -was, i went into sales because of my personnel background because they had significant personnel turnover problem^ in the stores, and they wanted someone to go and try to evaluate why that was. And I spent most of my time in the field trying to figure out why we had these problems and what our personnel issues were, and then essentially working with the field managers a lot and coming up with recommendations made back to Cleveland as to how to change our personnel practices. The major problem was we were underpaying the people, yj~. \j Osi and I think as a result of that partly, wo1 ve ctar-ted- to pay more competitive salaries. WG: So essentially the people who ran the stores, the franchisees, sort of, were ... BE; See, you're not franchisees. This is a company-owned operation. WG; Yes, OK. But the people who ran the stores had nice profitsharing plans, but the people ... BE; OK. The question is a good one. / I understand what you're saying. The profit-sharing plans were extremely good for the people in the middle-sized and rural markets, because even though they made small salaries, they made big profit sharing and they were very happy. Because of the competitive nature of the 26 0007-SWP-0059678 marketplace, we were never as successful in metropolitan areas as we were in the middle-sized and rural markets. As a result, our store managers, who were not given a high salary, made little or no bonus. ABd=-scfc=in-o rder to -kesp^the^--and We had tremendous personnel turnover as a result of this. So in order to get some stability, which would give us a base to be more competitive and more profitable in the larger metropolitan markets, we needed to pay higher salaries to get that stability. We have never done as well in metropolitan markets as we have in smaller towns. And one of the reasons was we tended to thinks#*--3r~can-go--dnto-that Whale._marketAng--sitm=rmeXection-probl-em. Wo--tended to think of a metropolitan area as sort of a combination of small markets, and we put in a small kind of a store, in neighborhood locations that we would have put in, in rural markets. And the problem was that we were generally out-positioned by the more aggressive competitor in almost every marketplace. Now we've subsequently changed that approach and we're doing a lot better in metropolitan markets, but never as well as we did in some of these small towns. You go into a small town, first of all, every other competitor was a dealer so there was nobody else buying direct. And the costs of business were amajbl, so you got into / profit pretty quickly. And then you developed people who -werev you know, I remember the guys we had running stores in Maine, for example, I remember walking along the street with one of them once and he introduced me to a friend of his who was former Ambassador to the U.N. He'd come to Maine to run the small 27 0007-SWP-0059679 newspaper. One/was a retired lieutenant commander. And also -they did a lot of industrial, what we call chemical coatings business, because in every town there's somebody that paints ,`r- _ i'V. : C > jy something, you know.j Furniture or kitchen cabinets or almost ^ 'i Oj (A* yf 7f c- _> everything. And these-guys would be on the boards of these small companies, you--know-. It was a one-to-one deal. It was just a different kind of relationship than one gets in a metropolitan area. One of the things we tried to do in our site selection work and what I did when I took over the Stores Division, was restructure ourselves in metropolitan areas to be able to operate in a way more consistent with what that market required, -asagaimgfc=henand^wefvep=doee, we've come a long way in that area. WG: What were the differences in the two markets? I mean what is an urban customer looking for, a metropolitan customer? BE: Well let's take an example. Wo~woro dealing~ i-rt-a .meterepe^ttan---our biggest customer in our stores is the painting contractor. WG: Has that always been true? BE: As far as I know, yes. The biggest customer in our stores is the painting contractor. In a small town the guy would come up and pick up at our store or we'd run it out to him in our car or something like that. Now when you go into a city like Boston- 28 0007-SWP-0059680 -and I'll never forget this--you know Boston pretty well. WG: Yes. BE: Well we have five stores in the metropolitan area. One was in Somerville in a crummy little location off Powderhouse Square. One was in Arlington up on Mass. Avenue. One was in Chelsea %!*>/ right under the Mystic River Bridge. As Charlie Dasaey said--who .. was then the guy who was/running the operation m Boston who's become a great friend of mine and we work^ogether; in fact he was the guy we did a lot of these revolutionary things with-- Charlie said, "I don't go there on a rainy afternoon because I might commit suicide." Now we had one in Cambridge right on Mass. Avenue right at Central Square. And we had one in West Roxbury, and we had one in Brookline. Now I've given you more than five. But anyway. WG: Yes, six. BE: Yes, I gave you six. One in Brookline that was in a location that should have been a Fanny Farmer store, and -it wac / >u.Gt-,--anyseay. There was no way--first of all your painting contractor didn't come to these little stores because they wesee generally not good parking and so on, and also we,couldn't handle the large painting contractor. I mean we didn't have enough I- p stuff in the store, we couldn't give him the service, d need 29 0007-SWP-0059681 300 gallons of a given color, and you know the guys would be-back there, literally they'tHbe back "there with canoe paddles and 'V; Ox-ddrums, you know, trying to make---and of course we were the laughing stock. So what we did, cx.r r-T was the first what we call commercial store. Charlie*7"really was the driving force, a -guy CtX-L- C named-Charlie-Bassey, was then district manager of Boston. Arfd the now lives in Cleveland. Heretired from the company. We closed the five inner city stores: West Roxbury, Brookline, Somerville, Cambridge, and Chelsea. We closed those five stores and -w-opened what we called a major commercial branch in Medford, just off Mystic. And we put in a lot of stock. We didn't even try to sell the DIY customer out of there. We simply put in a lot of stock, we put in mixing facilities, and essentially what we provided was enough paint for the painter. We ran trucks out of there and that was the first time we really- -it is now still the biggest volume store in the company. And--we made ..thenrjwround. From d^at, we went--to that same concept throughout the United States. And then when we went to suburban stores, we went to stores that were better located, -you in freestanding locations or in strip shopping centers, something like that. I remember moving almost all the stores in the Boston metropolitan area. We moved Hingham from a little crummy location to a bigger location. We moved Natick. We finally had to get out of Marblehead because it was just too rich and we couldn't pay the rents in Marblehead. So--thajfc-t-s--whatr--I mean_-x^aily--by--who-we--(went--to--ma-rket--fco) . 30 0007-SWP-0059682 WG: was that going on in the sixties and seventies? BE? We didn't start that until--well we started that in the mid seventies. WG: But before that, the Stores operation was essentially a lot of mom and pops and canoe paddles? BE: Yes, that's right. But they were all our employees. Hhat-ts right-. Which was very successful in the middle and rural markets. And I remember stores--Lowville, New York, was a town of 3500 people and we made money there every year. One of the things that was a characteristic,when you got a store like that, you became known and people came to it, and our store manager went out and hit all the farms and got the barn painters kjSJw. And what those guys always had, they had little stores, but they had a plug-in technically to a-~so it was a very effective type of organization. So in many respects, like our ,t r~ i , l- / friend Charlie Davis up in^HamA-lt-en-. He painted everything. WG: Back on your own career. Bill. You moved from this n- - / assistant/sales manager job where you were concerned with the problem of analyzing turnover in the stores, then to a regional . BE: I went to a district manager, which was the first line sales 31 0007-SWP-0059683 job, over the store managers. And I did that because Colin Baldwin called me and said, "I want you to do this." I said, "Why the hell would I do that?" He said, "I want you to do this because, d'rfd`aJiit;very^-appeciaiwe-^that^crt because I want you to come up through that organization and you've got to go to the bottom. I won't make you a store manager, but I want f- pi. 2 M.-'.r* '',r you to get that experience." So I did/ -T^went- - out there, it-wars -ceaiiy-you--know. I went out to be supervisor of 35 stores, and nobody had ever gone into that j ob without having been a store manager before. So I just learned frem^my.-rso-lcc learned from my guys, is-^hat I--did. I said, "I've got to know the business. Tell me what you do, and I'll work in the store." store is. vou know, shakjj^-^ctrnirsh-^nd--tldr^he^h-i-n?s-~vQU don't--dro. fBut I worked in the store every Saturday, i*r~egorge1 cs--store. And h; i-f I went around and I let my guysAtrain the other guys. One thing I learned as a supervisor, people learn a lot from peer group learning, and I'd set up a meeting and I'd bring in the guys and I'd give every guy an issue he wanted to discuss, and I'd tell him, "How do you do this successfully?" And the guys would learn from each other. And that's really what I did mostly was peer group learning. And my function was more personnel than anything else, getting the right guys in the store. Which is the name of the game in any business. WGs Yes, right. Were the stores in your region facing stiff competition particularly? 32 0007-SWP-0059684 BE: Well it was a division. My first step you mean when I was running 35 stores? WG: Yes. BE: I had metropolitan northern New jersey, which is about as competitive as you get, -to the anthracite region of/Pennsylvania, . . h MD which was relatively rural fcagaasee I had long-time guys up there that knew their business and they were great guys, cag- YeG- knosL-the. --I had^a/branch in Kingston, Pennsylvania, which is across the river from Wilkes- Barre, and the sides of the store used to slant because the'mines '-ft.tie. /tu --- 7* n have--been--a-l-l -undermined up there. And--eo Jivery once in a while a car will fall through the street. But I had a store manager named Nick Pappas and if I have one prejudice about people, it's -, jA- ^c.V- pick Greeks, because g^raevcrj . i `-cay~nefctee/percentage , :tj O O-'-r* e*-~ superb, effective store managers. And these guys/just were r- fA experienced and they knew what they were doing and they made money and they paid their people well and they brought them along, because that was a poor area, you know. But/metropolitan northern New Jersey, we were just wiped out by most of the more effective competitors. WG: That's kind of when.you got the sense that what you had to do to be a metropolitan competitor ... 33 0007-SWP-0059685 BE: Right. And we had to force that up through the organization. I mean that was a fight to get them--we had to bring that up through the organization. WG: Just because the people above you had gone . . . BE: The people above us didn't really understand what was going on, anfeaa^let of our, lor a while a guy named Lr^-v> Bert (Oca-1) was my regional manager, and he tended to follow - ' t> >1' '-T whatever Cleveland said. And then Charlie/became the*but most of the other regional directorsW^li^jp\u^tvei^c^ the guys in the South didn't have the same problem.^ They just didn't have this competitive a market. The guys in the Northeast and the guys in the Pacific Coast were the guys with the biggest problem. And generally speaking the regional directors of those areas had not been aggressive guys who tried to tell management what had to be done and what had to be changed; or didn't have the capability of expressing themselves or making a point across and making a case. I remember one of the good things about being a regional director, which was the next job I was in, was that you really didn't have much communication with Cleveland. You had one / regional director meeting a year in Cleveland and you came in and had presentations for a day and a half, and they never let you talk, and you played golf for a half a day and you went home. And you pretty much did what you wanted to do. it was a neat job in that respect. 34 0007-SWP-0059686 E \n rv 1 CF WG: You were just given targets and as long as you met them, it was OK? BE: Yes, we were given targets. You had targets. As a district manager I had a target in terms of sales and profit, and I was compensated based upon that. And it was sales of SherwinWilliams product, not of anything else, and profits. So the advantage of fete products other than Sherwin-Williams in the store would be only to add to the profitability. T-here--was__no_ rga.1 advantage-te -selling -these-;--^whieh--was--a--good-was--to--approach ih=sr It really wasn't a bad incentive plan. But what was the thought? I lost my thought there for a minute in terms of profitability. WG: You were talking about a regional manager. BE: Regional manager, you ran your own show, and that was the job I had next. Y-oa=^an=your--ovm--show. One of the really unique things, and maybe I'm jumping ahead, but it's relevant. We were given targets in terms of sales and profit. We were never given working capital targets. So we had no target in terms of / f r.: , inventory and accounts receivable other than write^-ups of-past > -duerr Probably the major thing that Breen did when he came in was control working capital. That1s -the-biggest hit-that came--about as. a_ restilJb^-of^when -I., was, running. J;he-.Stores--4^iv-is-ion-;-- jnean-ho-get--ahead--of--myself-4When I was running the Stores 35 0007-SWP-0059687 Division, I had ho working capital targets and I'd go to management and say, "Do you have any inventory objective?" "We'll tell you about that. Don't worry about it." When 4 came ji ' '" - t. '-'i' /' i ! /J in, thafe-3! had working capital targets, and/the first year that 'rt i'*t- 'Z'n'-'.ti LulSir \ they--saird it's serious, we reduced working capita In by $30 million. That goes to the bottom line. WG: But in the old days people just didn't care about that. BE: No, they didn't care about store level inventories at all, and the store managers, because they didn't want to be in a dis service position, would load up the stores with paint. I mean I'd go into the stores, they'd have more damn paint than you could shake a stick at. Never sold/it. The only thing they had to deal with was the obsolescence problem, because if they held it too long, for over three years, and it became obsolete, it was a direct write-off. And so there was great panic to get rid of it before the three years came up. WG: And did they . . . BE: WeXb--a_lcit_Qf-it--was -inventoried, -I moan the auditors I -V T- 7> *= weren't there.'- It was inventoried as being current. I remember oss** we had a company controller at one time by the name of Earl Peck who was a really nice man. And I remember -being in the field once and I came--in--and--I e-aid--fee- Earl, "What would happen 36 0007-SWP-0059688 if we ever took a totally accurate inventory?" He said, "Oh, God, we couldn't afford to." We do now, by the way. WG: I'm sure you do. Did the store managers have the ability, you know, if they wanted to get rid of inventory for some reason, could they set prices? BE: Oh, yes. She--&fee*ejaeEaager, one of JA&^tM-naoT-^he store manager had complete control over his pricing, which meant that he was difficult to manage because often you didn't know until the end of the year what his gross margins were because you v/-^ didn't have reporta that told you what--it was--only-unt-i-i--we--got Trev-J t the POS system, ymLJoaow--what-1 mean? WG: Point of sale. BE: Point of sale terminals, that ssa accumulated data that allowed you to tell what the gross margins were in the stores. And so you used to go through the whole year waiting for the final inventory which told you what your gross margin was. When you consider, even back when I was running the stores, this was a / $500 million business, one percent of gross margin is $5 million, and we didn't have the information unless you went in and pulled sales tickets every month and priced them, you didn't know what your margins were. 37 0007-SWP-0059689 WG: What's puzzling to me about this is how that system was able to endure so long. BE: Well it was one of the hidden problems. There's no question about it. Year after year we would have big swings, surprises good and bad. And-it^wa-c @ne of the things that tended to have the investment community downrate us, was our inability to know what our margins were, and they knew it. And I remember the last year I ran the Stores Division. We were getting a pretty good control on our margins, nrd tbry -hfid--FjrnfrH--fr--Wh4rvn-y--- i + had been so bad a few years before, had Ernst & Whxreney the accounting firm in. It_.was -called Ernst Ernst then. New--it^s Tfrl y r 1\j r, // A "i -} i. -y ; - -- J > Ernut a YoungMShad been/in to monitor igt and S had ajt"estimates > i-- t ^ si, _ YJ and I-^ft-pretty sure what feteey-^were, -ad- Ernst and Whinney was 0 o re telling management that T$y estimates were much too high. And-I -7., "7 0 )' We did have control. *4$e came out at the end of the ? : ! year, wa ware-they were wrong and we were right. WG: But your sense was more intuitive based on . . . / BE: We--wers=gatfe^ng, just before I left the Stores Division we were starting to get POS information. It wasn't 100% but we were getting more accurate information. And we were also monitoring, we were pulling sales tickets. We were doing cross-checks r. thxough-here. IJ-ve-j-umped--ahead-; Jr C i- > Bu-1. Lhat-wayr^--T---d--wra :i t, S. J\ 38 0007-SWP-0059690 gng_ o f ftr-ft- wa .ci__t^a-TJLy ve ry 1 i f"M <* f--the-- regional__director~~prett-y much._d.id ,what he wanted_to-do. The other thing was if you bought other than Sherwin-Williams , 7/ pli<t, r/-. -manufactured merchandise, you had to have that do,,.. v_..d of / ce-rtain--Mrffiit--yotr^ou3rd-4^a-ve--on--fehatr^-so---if--you bought . . . WG: ^percent of your sales. BE: Yes, right. [uys would unload and dump that stuff at the end of the year often because they were overstocked. WG: You went from district to regional. BE: Yes, regional (director). WG: And then you were in this market research and development function. BE: After the regional director. WG: After the regional director. Tell me about the market research and development function. BE: Well we didn't have any marketing research function/ And * /*. T. this--is--one u'f"the--things- that really, the driving force onsthis 39 0007-SWP-0059691 1., foui ! was Walt Spencer ,h I--think,--to--get--e--marketimg_xesearch_iiuiGtian.. Or~maybe--xt"Was Baldwin.. I tsfe- -was--in-ehaxge--at And -go I came in and my fa primary thrust initially was to set up some methodology tsf better '7>\ >.i : ' ! . store site selection. Because-in the past when we wanted to put a store in a town or move it, we sort of left it up to the regional/district manager to find a location ^and we felt there ought to be some science to this. Ac a-matter of fact, p.?> i /\ probably <jLn retrospect, it's/one of the most sophisticated jobs <?<>< Wt PvjT IfJ (tifivLC,t 0,<c I v^ we ever did because-we hired--the-guy that worked -foi me~wliu is f Y oO O IT a*- Orft O'- .OOO.-<n>acs, He ,i. now president of a company that does this-kind-of thing--ho Worked, for--me--I took him -out--o_a--store. Very-bright guy. And: -n--firm nn fhi^-Wmrrt-^^n.'V;I' v/ln'r iiiHfl11 n Vni-i-Trveoo--nfft, ofsthis, make a long story short, we collected variables, (r- ST/1 a sample of our stores, and then we went through fche-^various dc -analysis,--esoontiaJJLy called stepwise multiple regression, which wag-^j=ialong with juct cort of common -thjmsfs^- judgments. and -w& came out with a fairly good model as to what made one store profitable as against another one. We were able to do that only insofar as it affected DIY retail business, though. Because site selection is primarily quantifiable in (V r- ' ' '* \**w/ 42 '/Jt'-L. terms of retail, and < wanted the eest e--the business/ which is still the majority of the store, we did a modified site r^<> <_ *?t- v ' j --T V j - i. ' * ^ ^ 1- selection, ec&entiaHy-^which was--more -sort &-,--1--don^-t knew--If ^fchP- Dp ! phic-Method-is right, but-you went and-you--found--out-where --your contractors were and where they picked their paint and where 40 0007-SWP-0059692 they shopped and where they painted, aad-jjfou figured--somewhere l/J U A<-? /*& /c.c CSI' fitn-K.1**C, hround -t-h^r-e was e-good---p3:ace--and-trhev--had-exLQitah_parfeinq--and there was ^epcugh^-^gsssfr,, And we also looked at successful competitors. The ease most successful company I've ever seen Cjnwr C.c doing this>is a company on the West Coast called Kelly Moore. f It's a privately owned company. A-^guy I teak-out of a store..and brought into various ioha wq: What is the fellow's name, the very bright guy who helped you with the ... BE: Tom Gay. And he's president of a company in San Diego now. T don !t ramPTnhpr fh<* nams nf tho. ncvmprmy f--but T-oould look--it--up- .But--dees--that--kind--of--thing--for-everybady. ~r a.' guf L-TTT -y~ etrr I^CT f ^ ' '^u WG: Prior to this effort, the company had made no effort to do coordinated planning for the stores? BE: As far as I'm concerned, no. They'd come in every year essentially with new products and new colors and things like that. But we had no standard operating procedure^ The only store manual we had was an accounting manual. We didn't have an operations manual. The operations manual was created by Charlie si Basse-y when he was m^efe vice president of operations when--we--were in the Stores Division. Charlie hired a guy and they spent fUTl time__and--reatetn-he tirst--Store--Operating-Manual. It has since 41 0007-SWP-0059693 become much more sophisticated. WG: Are there early copies of that around, do you know? BE: I don't know. Charlie might have one at home. It was the first manual. WG: We're talking what date? BE: This would have been 1978/79. We had an extensive accounting manual in the stores, but it was for accounting procedures and not operating procedures. WG: And in terms of sales advice and sales procedures, they just BE: What you had was a meeting once a year which was on products, primarily, on new products, where the regional [aJ } Ju C 3 '* - directors wut=to Cleveland, and then es4='put on meetings for 'Tjfe/JS- .. T1**- . Tfrfr*- ear people m the field. J&gL as regions -we-set up oar own training sales meeting activities, but see- did that pretty much on our own. WG: And so it would vary. BE: It varied significantly from region to region. 42 0007-SWP-0059694 WG: But there was no common strategy about how to attract customers or how to place advertising. BE: Well advertising was generally controlled at the regional level, except for nationwide television advertising. Other-than an a^v^t-hising manaqer__i-n--each-.region-,--and-he"~ essentially determlned^whether--w&~went^fco~^ity=^ide---3dvertising. We had -a budget- to -work- frenT^^oi^th^t-;--^we-deeided--how--muehnewspaperv-hoW;mUGh -radioT-how-TnUch spot~td^s^v~--And--that--again was mostly regional except for the national television-.-^ WG: Was the content of the ads, did that vary from region to region? BE: Most of the ad mats were made up in Cleveland. That was generally pretty centralized. We worked off standard ad mats. WG: But again, the store manager could have a sale if they wanted to have a sale. BE: Generally you did that with the district manager's approval, and I'd say the jurisdiction of the store manager in pricing was much more in the contractor area than it was in the retail area. We generally set retail prices and determined when we would sell them on sale, but quite often I know people would walk in and l C-- they were about to leave because we were -always higher priced. 43 0007-SWP-0059695 -s^giK the store manager would say, "Wait a second," ycaifeiow. A lot of them^don't let them get out of the door approach. And some guys could stand up to pricing pressure and give a quality story and some guys couldn't. Some guys would just sell for one price. So again it varied a lot not only from district to district, from store to store. WG: So there wasn't a common training that the store managers went through? BE: There was a training-teh^ng in Cleveland for new store managers that lasted, what, two weeks? Pat: Yes. BE: But the other training that was done we did on a regional level. WG: And how did people get to be store managers? BE: When they initiated stores in towns, often what---they simply went--in, they'd go into town and they'd talk to the local banker and the local ministers and they'd say, "Do you know a man who has got these kind of characteristics who would like to be in business for himself but doesn't have the capital?" And they'd interview the guy and make him a store manager. Now eventually 44 0007-SWP-0059696 once you got stores located, what you'd try to do is hire salesmen and store personnel and assistant managers and bring 7? . T* Li t-'A WG: Is that still how it's done? BE: I'd say now, yes, it's pretty much how it's done. But now the caliber of people you have is totally different. I-asean ^ow you get college graduates to go into these stores. You never got b-r- a college graduate before, booauoe there are so many more college graduates: We never hired a college graduate in a store. WG: Even as a store manager? BE: He might have come in as a store manager, but it was incidental that he was a college graduate. There were some that were hired, but it was coincidental. Now there's so many people coming out of these various state schools, and they don't have other places to go. WG: Yes. It just strikes me . . . END OF SIDE B, TAPE 1. BEGIN SIDE A, TAPE 2. Tf" BE: Y-ur=wir expenses associated with the structure. For -J example, it you take the American Management Association course 45 0007-SWP-0059697 -ifi sales management,1 the normal span for a sales manager of salesmen working for him is from 8 to 15 salesmen. When I was a district manager I had 35 stores and three -jobbers. There were a few areas in the U.S. where we didn't have stores, where we had distributors, and I had three up-there in upper New York State. So we did have a regional hierarchy backing them up, so that was a cost of doing business. But by and large, if the store broke even, the company made money, because the company made money selling to the store. WG: The store managers didn't have any control over the price at which they bought from Sherwin-Williams. BE: No. No, none whatsoever. WG: So I assume that was a source of friction. BE: Well they often were outpriced by dealer competitors. At that time we had Sherwin-Williams sold through different distribution channels/ -andiAhe-^reasen was-4.s-that we couldn't Vyr ; "l. " ' - charge them--a- lower price than we charged independent dealers--- thL_-sjores-r--T--mean.. Beeause-we^i-beer^-eited-previxmsiy^Tmder anlJ,trust--reguiet-ions--and -it-was a violation of the Robinson Patman Act to do that .- When you were involved with --distribution, they--couldnJt-change it. So what we in fact did, and this is sort of interesting, a lot of our products developed because we 46 0007-SWP-0059698 brought out almost exactly the same product with a different label on it so we could sell it at a different price. So cpu Ldn-^t--seXl--the_-contract for_these--retail--prices--so--we--brought . ", a - a .t-- oufi^-Super Kem-Tone was our best known, product, and Painter Craft k0"T c Quality SeT was Super Kem-Tone under another label. And frankly we got a lot of product proliferation as a result of simply duplicate products under a different labels So-we-got--somewhat- ^di-ff-erent--produet--supportrs. And--because -Sherwin-W-il 1 iams--paint was-sold through other._dis s, also Another sort of unique thing was we had subsidiary companies: there was the John Lucas company, the Lowe Brothers Company, Acme Quality Paints, W. W. Lawrence Company, and they all had their own labels except they all had Super Kem-Tone. So you would find Super Kem-Tone being sold at a discount in Elizabeth, New Jersey and it was some Lucas jobber who dumped it there. And that's one of the reasons we eventually in the long run took Sherwin- Williams paint out of all distribution channels other than our own stores, although it cost us a lot to do that in terms of lost volume. I think it was the right decision. -Weii-r-Jaek--Breen at the ti-mo- WG: As I understand it, some of the stores were selling things other than paint. BE: Oh, yes. Well of course they all sold paint sundries. 47 0007-SWP-0059699 WG: What's that? BE: Sandpaper, tape, brushes, rollers, pads. Spray equipment has been a big paxt of our business. We have probably always been the biggest spray equipment seller in the company because we got started with Grayoo very early, Grayeo-being really the first /bfc.v.CJ.5. , CO~>t JTT vf good manufacturer of-aero spray equipment m the -ctere. A lot of spray equipment, but we also--here goes another long story: -ur stores--in-rural areas uspd tr> ha -irony. =;nnr &-11 stores sold wallpaper, because that's where you go to buy wallpaper is a paint store. A lot of guys in rural areas did very well selling carpeting, Vr cja1lirg draperies, in selling curtains,, I remember <bffiinrr jrn nir Galveston store, and*&s was the carpet, drapery, curtain outlet for the area, .aad -he had a couple of women m the store who were extremely proficient in selling these things and very well known, like any other specialty store would be. But the product mix varied from store to store. Some guys took on toys at Christmas time because we're so seasonal. -And guys would yrm nnni^n- put--aj?k?d Tin Ward) we sold everything and anything. And there wasn't a whole lot of control over it except you'd go in and see something in the store and say, ''Get that the hell out of there because we don't want to sell this." One of the big mistakes we made, in fact I'd say the 48 0007-SWP-0059700 -VLtf1' / ,C" ^ biggest mistake we made, Walt Spencer dooi-ded that paint did not have rapid growth potential, but that other decorative products such as wall covering and floor covering and draperies , f.hv /V^r did. Therefore we would turn all of our stores into decorating centers. And-=whereas certain stores had individually done very <)g .jf.t-ri >)<^l well with other/products, some stores had never done well with anything except paint. And so we forced every store to become a full line decorating store. We'd take stores with 800 square Tnw feet and divide them up into four departments, And of eeurcc once tte^. had a half-way decent paint presentation^ Now it was almost gone. &s> 'they/had to be in the carpet business. So f- ^ "Trc somebody would come in and order carpeting. The carpet would come on a truck. Where did you cut the damn carpet? These guys /2.40-)!*{'7 would cut it in the parking lot when it wasn't ready. And jonu St> P,'Z- /--C i ' -know, we had a program to without all the backup support that was necessary to do it. And^-oo- what happened was we got 03 these guys involved selling other products for which there was less margin and more problems in terms of complaints accounts receivable and ^a1 1-tfaese, and our paint business started to go down. And in fact probably of all the things % did right in W,Pi "/-A-r- i-j2_ running the Stores Division, IE reversed that trend and got them going back to selling paint. And the guy who's running the Stores Division now is fsfeRasWy even doing it more than that. Now that is not to say we still don't do very well in certain markets floor coverings. And I think we're the second largest retailer of floor covering in the U.S. We are the largest 49 0007-SWP-0059701 retailer of wall coverings. But that always has fit with a paint store. Wall coverings have always fit with a paint store. Pat: Was Decorating World developed ... BE: No, we had a concept--Walt said he wanted to become a full line decorating house, and that's when we decided to set up a pilot and we went--ad- spent a long time studying sites and studying product lines and came up with Decorating World in Charlotte, which 4^ 25,000 square feet of total decorating outlet, and as Pat will tell you, it was an absolutely beautiful store. It was a marketing success and a business disaster. WG: Yes, I was reading some of the management reports about it, people camped out in order to get into the store. BE: Oh, it was a beautiful, it was a fascinating store, it was really a super store. It's just we couldn't operate it and make money operating it. It was just .... Do you have a picture of it? Pat: Yes, I have a . . . WG: it was a different concept than what you were talking about earlier, though, of just adding some other ... 50 0007-SWP-0059702 BE: Yes. It was a different idea coming out of the same concept and becoming a full-line decorating center, rather than just a paint Store. THn irnr t-ake this and----?<=-R matter^-#--faxrbj--Decorating World ended up influencing a lot of our stores--a lot of our larger stores have many of the concepts we developed for Decorating World. WG: Why was it a business disaster? BE: Because first of all we didn't know how to operate it. I mean none of us were experienced retail operators. We didn't know how to operate it, and we designed an operation which was almost impossible to operate profitably because of the costs involved. It was too complex and too costly to operate. WG: Just to keep track of all the inventory. BE: Not only that, but the number of people you needed and to man it effectively. WG: Was it the idea that you would come into one place and solve every need of the house? What was the concept? BE: Yes, that was the idea. 1' ' You'd get all your decorating--we had a beautiful wall covering department. It had a lot of products in stock and almost every wallpaper book you could think 51 0007-SWP-0059703 of. Then we had a--rug department-, a carpet department that had a machine we imported from West Germany where you push the button and the rolls went around and you could take it off, and 332H had thrs^hd^ou had hardcover flooring. We had a bathroom/kitchen shop. You know, all the bathroom stuff. Pat: Lamps. BE: We had a lamp department. We had a seasonal department with porch furniture and patio furniture and barbecues and all that sort of stuff. And it just was too costly to operate. We sold a lot, but it was just too costly. WG: Logistically it's much, much more complex than a paint store. BE: Oh, yes. We had a Mr. Fix-It. You know, we did a lot of ]A.ir6sco 1 07^ '2 ~j, marketing research to find out what do- people find-they--donJ t have on mr-ta i n 1 ncafcxrons. And we ftave guys xn red j ackets standing behind the counter, you taaow, and you'd come with your decorating question and complaint and he'd come and help you out ^ ' - - AI ' and lay out things for you and do all that stuff. It sounds * great. It was great. It was a fun, fun store. And we got it better. But we never got it so it could make money. WG: There was only one? 52 0007-SWP-0059704 BE: Only one. Now we took the Decorating World--we did go, r-A&. So'Ai. (a ) "'-W however, to larger stores, -ad- we west-to-sales floors up to 1? , 000 square feet. -&ad Len Ward said that we shouldn't have `ia -'j e anything above 5yO0 and I pushed for 9,000. And we got -a=ot & of them in that were i,000---not a lot, maybe 20, 30. in retrospect he was right. That was just too big to manage. He'll tell you about that. r-- WG: But a store like that would place completely different demands on the manager just to . . . BE: Right. WG: The skill levels and everything would be different. BE: Absolutely true, and that -wars one of the problems was adequate training for all this. Again, in some of these smaller towns you'd have a full-time carpet: sales manager-of-^a store who was very professional like you might get in a Sears store or in a local furniture store. But to take a store manager, and--this--4s ^cera4ttrrrto-- takerrarr=shere=anager who we were barely able to train and sell paint, and also ask him to become a specialist in carpeting and wall covering, I mean he'd see a woman come in and lU 0`iL-i, g0 out the back door. If you were big enough to be staffed with expertise in the various areas, you were OK. But the typical small store, I.mean 53 0007-SWP-0059705 WG: I was just thinking about the ads. The ads for the stores were very much having women in there looking for all kinds of things, but in fact in the real world these guys were used to dealing with male paint contractors. BE: Yes. The guy who's a good contractor salesman is probably 'J'C- IL'f l w ZC'jS >. J C. ' -v not a good guy/ You know, selling wallpaper to a woman is an art. I mean you've got to know what you're doing. -GharlieE^^^^-telIs--stories about. th.oxo-bs~-a big--walXcoverAng--salron, ifc-ks. on Second Avenue--in--New--York ^--flad-^ou--'want- to - see--the real pros, 1 nnnift out with fhrnn -t ^-1 U:t nnri ..y.nn got cO1 ---talk--to the- woman__and._get to know her and--comc out with three rolls.--And she'll say, "Well I donJLt--like that one-.11--*iWhich of these two-do you like the-best1?" B3 Xf you just let ^tern^go3 into the books and go on and on, it never ends sometimes. Never have a store near a bus stop, because that's what the women do while they're waiting for the bus, they come in and they read the wallpaper books. But you need almost in all cases, with exceptions, you .f^C- need women who specialize in tfasFt. I'd say 95% of the wallcovering is bought by women. We-t-d--need women--to^werk . . . WG: That raises the question about recruiting women to work in the stores. Did that happen? 54 0007-SWP-0059706 BE: Yes. I'd say this, in all fairness, I think we've always had a very open employment policy on that. I mean if a woman came in and wanted to become an assistant manager, we'd make her an assistant-"'-we had women store managers. And we had Women distnct--the biggest problem Was when you had to unload a truck. Because the trucks would come in and you'd have to help the truck driver unload the truck. That was the only real problem with women managers. But we had a lot of very good women managers a t -^5=r assistant manager^ We still do now, I think. In fact we have more now than ever before. We have woman district managers now. WG: But as you went to this furnishing store concept, did you hire more women as . . . BE: Well a guy who was VP of marketing by the name of Billy -f - Davis came up with an idea called we would have a woman in every store and she would be called Shirley Williams. Pat: It's true. BE: % Billy came from Texas and he thought this was a great idea, and some of us told him this is no way to operate in this day and age. Anyway, we had it. We had Shirley Williams Service. And that was decorating service. And eventually the women said, "You know, we don't want to be called Shirley Williams. Call us by 55 0007-SWP-0059707 our own names." And we did. But we hired a lot of women for tMrfi--n--1 ^fe^ojtjjgniAn as decorators. We'd call them decorators. Now that didn't mean they were graduates of any interior decorating service- Some of them in fact were. Gur best source was often the interior decorating course at the local community college. WG: How did you train the decorators? BE: Well we'd^ have Jusually) a decorator at each region who was a decorator and she would train them, but in many cases we found very capable women. There are a lot of women who have training ) C <-> `-"O h t_, in -this and who for^e =ea=son**-maybe they can only work four TyhfrT hours a day^ and we^-do-^iLot of .thaj^j-=#ea=know. A womenr^wotrld- Tr.._aH maybe had. r, ^almost every community college had a decorating area, and we'd go and get some of their better graduates. So maybe they were not professional decorators, but they generally were -good enough -to -he - -able--t-o-- -they had/color sense aad-thoy had what--goes--wifeh-whet, which is ^ ! often not the case with some of their customers. Sr'- f - better than the average paint store/person. They were WG: That concept of the store as a decorating center didn't take root, right? I mean there was a retreat from that back to the paint stores? 56 0007-SWP-0059708 BE: Well I'd say yes, there was a retreat back toward that being the primary emphasis, and-the-emphas-is--now7~whioh--is--what--we--try fsJ/.iA*il L>7 to-do -and I th-i-nk-has--been--done--even-more-so-noWy ~is- we' re paint stores again. But a lot of those paint stores still do a lot of business in other than paint products, and some of them could still be called truly decorating centers. I think you find them in some of the smaller markets. Pat: Some of them on the ?? pads?... b ^ "Nt, fW) 9-)^ BE: Yes, say in-^?- of a major mall,/ the ones in Indianapolis, still are very much truly decorating stores. We still sell a lot of floor covering and a lot of wall covering. Wall covering in the last few years has been in a demise, and I \ilS rr think it's the whole industry, 44ss not just *-fbr- a while it really took off. God, it was great. We were selling foils and 'Jtx. r,,i i.u C flocks and some of the high priced papers. IX ^ust-went on a tipaniifniimAn increased And the last several years it's been down and it's not just us, #*rte=>the whole industry has been down. I don't know why. WG: A while ago you were talking about the decision to focus the stores on Sherwin-Williams brand paints, and to take SherwinWilliams brands away from the other pr-odwt-s. BE: Right. 57 0007-SWP-0059709 WG: You said one of the reasons to do that was this problem of not being able to control the pricing. BE: That's the major reason. WG: But weren't there also other reasons there? BE: No, I'd say the major was the fact we--couldn-^fe--when we maden"m - rr tii i 1 i ng' dornrntlnrr < i ijl'i r wr made a decision to be a retailer, which the stores had not been up till then. A WG: Essentially wholesalers to paint contractors. Ip'fV' BE: Well they'd been everything. Butmade a decision that, w^lJr-Wcftt'-inadn n dnni oion-t-hut aaeefegHbirer is where the potential is. The DIY market is going to explode. And in fact it did. WG: Do it yourself. BE: Andy!retail was where we should put our emphasis. Once you / made that decision, you realize that you had to control your own marketing, and you couldn't control your own marketing as long as other people had your product, they'll do whatever they wanted to with it. And that I'd say was 90% of the reason we did what we did. 58 0007-SWP-0059710 BE: We didn't have Dutch Boy then. WG: No, but you had ... BE: We had Martin-Senour. WG: You had Martin-Senour ... BE: So we attempted to convert all of our dealers to MartinSenour. With only very limited success. We did some. WG: What was the history of Martin-Senour prior to this? BE: Martin-Senour was a company in Chicago that we bought. And Martin-Senour had a reputation for very high quality, fine color operation. And they were run by an extremely innovative man STuA'^r named Bill Sfcawart who is probably one of the best salesmen I ever mm- into. And he built that company into sort of a niche high quality, high fashion, high color capability company. They were the ones that did the Williamsburg Colors, which is probably IN, "Tlbi~ {-**->'j'r i M(_ the most prestigious differentiation#. It's hard to differentiate yourself from competition when it comes to wall paint. Let's fact it. I mean it's essentially a commodity product. But he was able to/success fully--one of the most 59 0007-SWP-00597H n 0 successful differentiation or niche jobs I've ever seen in a commodity. c^T WG: Premium price paint. BE: Premium price paint. A line of deep colors that you couldn't get in many other places. Unique specialty colors like the Williamsburg colors. And also he had what was called the Color Robot, which was a tinting machine. You oame into a stare and--you--put in..a form and it wenL~cnug, cfiugy chug, chug, chug apH Hrnnrjht- onf yTMn~ rta.jnr- it was a precursor of ones we have now which are very sophisticated, ^-Ones where you Lake a coder ewatchg^it-wasn' t that Gophis Lied Led, but it was ahead of whatJbhe-other- color tinting machines wca-e-;-------- WG: Was Martin-Senour run as a kind of a subsidiary or . . . BE: Yes, it was run as a subsidiary. It was not integrated at *3T ^ * if-zr ts -^1 all. I think Bill S-towart reported in to somebody here and he I* ran his own show. Now when I was in labor relations, we also handled their labor relations, which wasn't much because they iT_ didn't have a union, so-we consisted mostly of foreman training. I got involved in that with him. WG: Were the other brands--Lowe Brothers or Lucas--were they separate too? 60 0007-SWP-0059712 BE: Interesting that you say that because they were separate except we decided that somewhere along the line to merge the^ stored They had stores^--Lowe and Lucas. We decided to take their stores and put them under the existing region^ And I remember being a regional director and inheriting twelve Lowe Brothers stores, along with two Lowe Brothers sales managers. WG: Were the sales practices and organization and everything pretty much similar to those stores? BE: They were similar except they were, if you can believe it, more poorly organized than we were. I mean V/ooo^ - unbelievable things that yreise-1t-ve found out about these guys. XOiy Whose Storfi "P tn--t-Vifv--Por-+-r.n aT-^stT-~TJ^o_f-ov-gr%tten wher^ it was,--it wasn't ixrWubum, buL it ^was--areund--Llmre=-Lhe Medford- area. .Anyhow the guy -waa sleeping- -with--the-waddLpaper~dhady - and it-^wa-o-known and-our stores- looked- ^aaST-cem^areu to tReiTir. We eventually integrated them and we kept their product line separate and kept their organization separate and finally we said, "This is ridiculous" and--we__went -oatrdthere. I had 12 stores out of 250 that were a different brand and I said, you know, "Let's just convert them," and we did. WG: Do those brands still exist I mean out there? I mean can you buy John Lucas paints? 61 0007-SWP-0059713 BE: No. .Wfe^koap-fchom^lT think we probably sell them somewhere to keep the name. Pat: Yes, we have a trade--we still keep the (trademark). BE: We probably sell something somewhere to make sure we don't lose the trademark. WG: But over time that's one of the things that happened was the consolidation of those brands into Sherwin-Williams. BE: Yes, exactly. Except for Martin-Senour. WG: Except for Martin-Senour, which was kept separate. Then the Dutch Boy was an acquisition. BE: An acquisition. Martin-Senour was definitely kept separate. We only had one Martin-Senour store, I think. We never had stores. So that frealljr) business^didn't change except we tried to convert people to Martin-Senour. / WG: Why didn't that work? You know, the highest quality paint out there, why didn't it work? BE: Just that it wasn't that well known a brand in the general marketplace. ... 62 0007-SWP-0059714 WG: That's true. I never heard of it until about two weeks ago. BE: It was known in a niche market. And when the competition heard Sherwin-Williams was going to go out of the dealers, why of course every paint seller in North America was in there. And we only got a few of them. So all the other companies went in and took the dealers over. We kept some. Kept some very good accounts. Some--where do you live?. WG: Central Square. BE: Central. I don't think we have any around Central Square. Central Square was on Mass. Avenue on the west side of--the street abaat three hi onlrr up. north of whatever the cross-street is. WG: Prospect, Magazine. BE: There was a guy named Jim Gardner who ran it who later, when we merged them became a salesman out of Medford. Really good guy. He stayed with us until he retired. WG: We're leading into the troubles of the seventies, and I want to get your perspective on that. BE: Yes. I think, you know, a variety of things come to mind, 63 0007-SWP-0059715 and I don't know how well connected these are, but I do know from a financial point of view we were in fact borrowing money to pay P'Gfc 0 V. A ""<> / .v S y OZ ?~i-C dividends and to^my^pegatings. And I don't know why this all happened other than I think the stores were not being run as efficiently as they could be and I think they were probably a drain on the company. I guess in general we just didn't control expenses and the most important reasonAwe didn't control working capital. I mean there were no real controls in place on working capital. Spencer was a very bright guy and his instincts were all right, but he didn't know what was going on in the organization. I remember being concerned about a lot of things, and I would come in on a Saturday morning because I know Walt H"f>o used to prowl the halls, and I feaew him way back to Chicago days ynnng, so he'd say, "What's going on?" And I'd say, "Let me go into your office," and I'd go into his office and talk to him, Saturday morning. And I'd say, "Walt, here's what's going on, here's what's happening, you've got to understand this." And he'd listen to you and he wouldn't say anything, although you knew it was sinking in. And then at the end he'd say, "Remember you don't report to me." And he'd have people between you, layers between you, that were buffering him from what was really going on. And I remember distinctly at that time we were giving all kinds of positive stories to the Tf- investment community, and the guy who was & contact with--fehe-guy =whc was our treasurer, a guy named Jim Cole, and I was running the Stores at that time, working for a group vice president named 64 0007-SWP-0059716 Ron Curley, and I'd run into Jim and he'd say, "Well, I see things are going well." And I'd say, "Well, we've got some ^things goodj and not so bad." And he-eays, "Well, the investment community's very interested about this, this and this." And I'd say, "Well Jim, that's not going to happen." And he'd say, "That's what Ron's telling me is going to happen," and I said, "Well, Jim, that's simply not true." He said, "Well, if it's not true, then we're getting a real problem." And of course we gofe^a fi. pc MX- Prv-s xJ V~H the investment community because we kept telling them things that didn't happen assd that one book, restructured, reformed. And-the-major^-Spencer had a tremendous ego and whenever you came in to tell him about something, he knew more about it than you did. -Ho- knew-more-about this, he know more- about that. He was quoted on the outside as being a business expert, and he didn't know what was going on in his own company. He was trying to do the right things. I remember when he left the company, after he left, when I went into his office and he told me he was leaving. And I said, "Why are you going?" iookjrc Lik'Z. f- And he said, "Look," and he took a pen out of his pocket and he opened it up and he had some--what are the pills you take for heart? WG: Digitalis. BE: Digitalis. He said, "This is the reason for it." Nitroglycerine, digitalis. "This is the reason for it." And I 65 0007-SWP-0059717 said, "I'm sorry, Walt. I'm sorry you're leaving. I know you wanted to do a lot of right things. I know you had the right approaches." Well, a few months later when he want to Tulane and all kinds of articles were coming out where Breen was really raking Spencer over the coals, you know, in print, in quotations. And Walt wrote a letter to me. I was then, by that time--this was later. I was VP of public relations--public affairs. Public piihi ir; af-FaiT-_g.---The..same-thing.. He wrote a letter to me complaining about all these stories that were coming out. And he said, "You know. Bill, you remember what you said to me &, p-cnv"the day before I left," and I looked--back and 'L- said, "Walt, I know what you wanted to do, but Walt, it never happened. It never got through the organization." Because I remember he wrote a copy of the letter to Allen Holmes. You know, I sent a copy to Allen Holmes. (Laughter) . And that -vfac~^resP3ry^-the two problems Walt had was he had enormous ego, he thought he knew more about everything than anybody else, and he was very bright. He had all ,. t OCK.t'O the right ideas, I think, except that he was smokod into something like, you know, the change in the stores, making them full line, and nobody could tell him he was wrong, what would Vi it * . 'jJ^ rof happen. And he surrounded himselfi--Hhe made Bill Fine the president, and Bill Fine never should have gotten that high. I mean he never should have gotten that high. And he had Ron Curley who was the group vice president who was my boss, and Ron Curley never should have gotten that high. So we had guys that were extremely grateful for having been promoted as far as they 66 0007-SWP-0059718 were, and the last thing they were going to do is tell him he was wrong. And the crime of it was Walt would listen to you when you told him he was wrong. I mean he wouldn't agree then but you'd see it come out sometime later. You didn't run any personal risk at all if you told him he was wrong. And the same way with Jack Breen. Only Jack knows what's going on in the organization. If I had to point out a 10 to 1 difference between him and Spencer, / Jack got- his fingers isst- almost everything. And that was Walt's failure. And that's what happened. And-the whole-organization, ,* )N O^tPl^i^TC. You had a lot of i-noompetonec running things, and that's why, how many of them are left? You don't see them around. There were good people everywhere, there were good guys trying to do the right thing. But the guys on top were incapable. WG: So the reorganization, the things that were talked about to the investment community in the seventies was smoke and mirrors? BE: Yes. It was what they thought, what they believed. I mean you know, made all these plans. The plans never worked, never got executed. They believed it. WGs That 1977 supplement to the annual report which describe these changes, actually it was the divisionalization which created the job, you then took (it there)? BE: Yes, that's right. 67 0007-S WP-00597] 9 WG: But in reading that document, there was a reference to organization studies of the early seventies and senior management taking a hard look at things going on. BE: Don't remember that. at-J The guy who really put that4together was Bruce Morrison. Pat: Who put the reorganizing structure? BE: VO-r- , 0 Cb u*- i es. There, was .a--gi^ na-med Bruce Morrison who oame-4-n- WG: Is he still around? BE: Well, yes, he is but he's not here. He's in Louisville. He was research director of our advertising agency and I got to know him that way when I was running Marketing Services. And then I hired him to replace me in Marketing Services, and tf&r then l^^p&^the .guy who was VP of planning died and Bruce took that job. Pat: There was a vice president of planning? BE: Ted Barrett. Ted Barrett died and Bruce took that job. And he was the guy that put all that together. I remember him saying to Spencer, "You can do this once." And then Bruce got fired by Breen. JBajtca is orazy. I mean Bruce is probably the most 68 0007-SWP-0059720 intelligent man I have ever known and he's actually a totally entertaining person. He's a damn near a genius. He's Ph.D. in psychology. He taught psychology before he came into this job here, and^-he's ip business for himself and doing marketing research with his wife. He got remarried. Pat: But he's crazy. BE: He's crazy, but he's a fun guy. I mean exciting, entertaining guy. Very bright. He was the guy who put it together, if you have a chance. I mean he'd love to tell you the story, I'm sure. Pat: Do you know how to reach him? BE: Yes, I've got his phone number. Bill Babcock's another one that can probably . Pat: Was Bill Babcock involved in . . . BE: Bill Babcock was involved in the whole 1`ogo change. He's the guy that ... Pat: The logo change, but not the restructure. BE: No. I don't think so. 69 0007-SWP-0059721 WG: That was the logo change from the traditional thing to the . BE: ZLr ea=feafc-J-s Spencer's concept was that there was not enough growth in the paint industry, and we were going to become a diversified company, which was the hot thing to do, and that that old trademark was too paint-specific and did not allow A fO 0--- sufficiently fee bo a broader scope of the company. And that's when he went "$> the logo change and we hired a company in Bath called F.. Eugene Smith and Associates. And the lead guy on that job was a guy named Bill Babcock, who then broke away from F. Eugene Smith. But~Bill was~~ the--guy who eventually tricd-^to-take Spenoor-'s as a designer ... END OF SIDE A, TAPE 2. BEGIN SIDE B, TAPE 2. BE: Tr r ... a very good job. I still see Bill every once in a while. , WG: But the reorganization in '77 was, you know, as you read it, it sounds like the right thing to do. / BE: That was right. That was right, I think. Actually the first one took place in *76. I think in '76. Len would be able to tell you, Len Ward. I think prior to that, the whole Paint Division was organized functionally: the Chemicals being 70 0007-SWP-0059722 separate and the Containers being separate, in that;we had a VP of sales, a VP of operations, somebody in charge of R&D, somebody in charge of distribution, etc. And then I think it was in *76 they took the automotive refinish business and made that a separate division, and took the chemical coatings and made that a separate division, and left what I'd call the consumer business, which was the dealer business of the stores all functionally organized under Billy Davis. And so we still -feswre Manufacturing and Stores and other sales, separate. It was not until '77 that 1/0 we broke up tfeafr-- 4hat was called the Consumer Division brtee=fehat-<ttp into two divisions: Consumer^ and Stores. Pat: But in *76 they had split up. BE: We had split away Automotive and Chemical Coatings. And the remainder was called the Consumer Division, and then in '77 we broke that into/Consumer Division, which was the Paint Supply ... Division?..*fche Dealer Division and the Stores Division. But it was definitely the right thing to do. I mean we definitely sfea^feed to get--we- started to look at the stores independently and started to say, "What are we paying for paint? How does it compare to the marketplace?" Our transfer price was way out of line with what it should have been. It^-s--always-in faot We were making decisions at stores that were based on a different transfer price. We few-wo'-re not running the stores to make money. We reoriented our thinking to think of making 71 0007-S WP-0059723 ourselves a profit unit. And that's probably the most important restructuring thing that's 3?eeiiy done in the history of the company. And the other divisions benefitted, too, hirt--not~-bang sort--of--pul-led--together. The Automotive Refinish Division, which has always been a good division of the company, became really good because instead of having guys that knew automotive paints and other paints, they could concentrate on only guys that knew automotive paint. WG: Well in that respect I mean Breen did not reorganize the company. He kept the basic structure. BE: Right. WG: So it's a validation of it right there. But I guess the company's problems were so acute by the time you did this . . . BE: I think the reorganization still made long strides, but I'd say some things were going in the right direction before Breen came here, no question about it. But the major change Breen made was to replace people with more competent people. Not always. We had a lot of guys that got hired that are not here any longer. There's at least as many guys that were hired since Breen that were-irerte`~then~who-have been fired. Pat: That's right. 72 0007-SWP-0059724 BE: Probably more. Pat: Yes. That's true. BE: A lot of false starts and bad guys. But the big thing was control our working capital. We reduced our inventories, we reduced' our receivables, and we extended our payables. We used to be paying guys in seven days, suppliers, and they loved us. And we had these very cozy relationships with them. Breen came in and all of a sudden we took these guys we were paying in seven days and paid them in 60 days and they screamed and yelled and we said, "Where are you going to go?" And this is probably the number one reason for the turnaround. And-Gemmes-trard-a-'veryy--you- knsaw, (Commes with a financial background had a very strong working capital orientation. And what Breen did, then, Breen /cf'O'T-y \i - brought in a whole planning/ We started out, we had a seminar put on by a guy named Ram Charan who specializes in this kind of thing. You may know him. And we all learned, we went through the whole strategic planning and operating planning process. So we have the five-year strategic plan. Every spring you do it and every fall you do your operating plan. Now we've combined them in the last couple of years. And what that forced us to do, it's not so much that the five-year projection has any {.valuej , but it forced us to all of us think about the various elements that impact on the profitability of our business. It's a disciplined way of looking at what influences your business, and making your 73 0007-SWP-0059725 plans based upon the information. And we never did that.We had a budget and that was about it, and the budget was sort of what everybody sort of sat around and thought we'd do. And that I'd say that was a major contribution of Breen. And the other thing that Breen made--a variety of things--but Breen got to know the key people in the organization. And Breen knows what's going on in the company. And I'd say that Breen knows very well the top s- ? - ,.>. 150 people. And he talks to them and when he first came about, he went out., l-ines--of communication-, he'd go to somebody's subordinate, which was a concern, but then you realize that's no problem. He's not trying to find something out on you. I mean it's just his way of picking up things. -And--so--what-you- have is ,o j .o 3- management now, and-we e^-thxough our monthly operating review meetings, and those started out to be incredibly grim. Golly, I'll never forget them! And now they're much more routine, but we'd go into, you know, "What did you do for the month? Why did you do it? How did you do it? How did that compare to what you said you were going to do? Why-^wore the variances thanas?-' What are you going to do next month?" And--se--yeu-know--the i, fes Tom Comities says, all the companies talk about doing -it, The big difference is we do it, and we continue to do / it. There's this continual ongoing microscopic--well microscopic isn't right because that's not true--but extensive review of what's really happening inside and outside, and therefore what does it mean we should do. You know, I'd say that's the success factor that Breen brought to the company. 74 0007-SWP-0059726 WG: Were the managers who turned over when he came in, the first fires in Sherwin-Williams history? BE: No, not the first, but it was very uncommon. It's certainly }'J the kind of thing^ that feoak=piafie^ever happened before. And I'll say an interesting thing about that, a lot of people don't know, but Jack took great care to try and see that those people were handled well. A lot of people got six months to a year's severance, and outplacement service, and Jack would follow with the outplacement people, and call to people in other companies and talk to them. It wasn't the kind of thing that he did heartlessly. I-mean he made- tho-move-;--and it wasn't juefe--and ~Jr~i some cases I know very well, he delayed until he could find a slot for the guy whore-tha guy was in a posit-ion to--leave. Jwek o.rbas~=a--great;^I 've seen people try to emulate Jag^^y -h-i-s c.n.v toughness^ and I^evseerr^he can be terribly tough, -I--mean--really tough-, without knowing when to back off. But Jack always knew when to stop, you know, when the guy had had enough, and how to then be considerate. And I've seen other people try to emulate him in his toughness without the same sensitivity in the relationship. WG: In thinking about, again, the pre-1980 company, was how Sherwin-Williams was managed different than the norms in the industry generally? 75 0007-SWP-0059727 BE: I don't know, Wo Ht t --f-^d-say tirst of all I don-t know-, except that generally the industry tended to be a very conservative, old guard business, and most of the industry did not operate with stores. I mean the companies you can think of like Benjamin Moore, which is very strong in the Northeast, was a family-held company that established relationships with independent dealers and essentially did the same thing for 40 years, you--knew=^-sQ~that=~yeu^-a 1 ready knew- what tho other--guy--was- -d4rng. There are a lot of companies like that. The industry is a very fragmented industry. I was talking to you about somewhere between 1000 and 1500 paint manufacturers. It doesn't take much capital to get iftfee--it. You don't need a ohfvmiwfrry---you can get your formulas from raw material suppliers. You can buy used equipment and set Up a shop. ^ /- ~ i t r r. ^ You can make paint that satiof icsF dealers in your specific area. One of the things that's characteristic of paint formulation is people seem to-- contractors primarily--seem to like different characteristics in paint -throughout, in different parts of the United States. In _ J- r one area an off-white of a certain tone is hot, and in another'an off-to.no-U3f another/white color is hot. The whole country has gone latex except up until a few years ago when I was involved-- New York City was still ariieavy^ttaty-i^hab^we cali an alkyd flat-th ey--eall'''thsrt an ' ic e--cream-fiat, whieh-was -an alkyd-based, oil based paint with _a-st-i-ppier~ef feet ~tcrit that the contractors ioved. The -only^-place .in the-Un i-ted--Bta-tes-that--you--did--that So there would be/guy^ wer in Brooklyn grinding out one color of 76 0007-SWP-0059728 --irr depreciated equipment-4#here ! the guy's wife was the accountant and he was the salesman and tfee=r^w=mateiai^=suppiier he had a couple of guys in the back room mixing it up. How can you compete with him? He could do a more effective job. So a lot of the industry was this fragmented . . . WG: Yes. You almost have to go geographical market by market. BE: Right. And then the strongest companies now are regional companies. I don't know who it is in Boston. I.have a couple of friends who are VP of marketing at two Boston companies. One of them's called California Paints. WG: Sure. That's about two blocks from my house. BE: And the other one is Cabot's, which is a wonderful old company. Pat: We've trained more executives of . . . BE: The VP of marketing of those two companies both worked for me at one time. Cabot Stains, that's a quality product. I don't know if you've ever seen Cabot Stains, but it's the product that people like on Cape Cod. So the industry is loaded with these kind of companies that specialize geneiraiiy, I mean there's a million companies making--!'ve been (in loftsTjr in New York City 77 0007-SWP-0059729 h where a guy's cranking out/white baking enamel, yessH^sftbw, that he sells to people who put it on fixtures, like lighting fixtures. Just crank: it out. It's such a diversified industry in that sense. Very few companies make everything. WG: Is advertising one place where you do get a national . . . BE: It-is^-ahout -the only--place wo have--ves. 4/e've got a national 42 through advertising, and we're about the only paint company, I guess PPG advertises nationally, and Glidden does some advertising nationally. The only national advertisers, Glidden and PPG. Benjamin Moore does some, too. Pat: Yes, I was going to say Benny Moore does. BE: Theirs might be spot, though. We see"it, it might be spot because they're not equally strong throughout the United States. WG: In the industry, is the big money to be made with external coatings, rather than ... BE: The big money is made more on specialty products like automotive refinish products. .That's where the better market-- yxm^f;i-nd^nternatlpnail;y" all- he, _if you look at the ranking of paint companies by volume worldwide, we're the only major company that's not a chemical company. And a lot of the money is made on 78 0007-S WP-0059730 the raw materials that go into paint. And a lot of our competitors we think look to make their money on the raw materials, not oh the product. Because the other big companies in the world, other than PPG, are all European. Some Japanese. WG: Yes. Well it's a whole big subject we need to talk about. We're kind of running out of time here. BE: Yes, you've got Tom Micklich at 3:00. I've got to see him at 2:00--I've got to see him today. So I'll see him at 2:30. I'm back in Friday. When are you here? WG: We'll work something out. Because I'd like to pursue this. We didn't even talk about International, which is . . . BE: Yes, which has never been a big part of our company. WG: No but its, you know, an aspect of it. And also I'd like to talk in a little bit more detail about the eighties. And I'm sure when I go back through the transcript I'll probably want to talk about the fifties and sixties. This has been really great. / BE: I don't know how good it's been, but you're going to talk to a lot of good people. Len Ward will give you a lot. Who else have they got? 79 0007-SWP-0059731 WG: Jack Wallace. BE: Micklich I think is probably the best source of what happened to all this financial. WG: Yes. Still something of a mystery to me is why it happened when it happened. BE: Ask Tom. And Tom was here in one capacity or another during that period. He's a very bright guy. So. Pat: And Art Maine was in Chicago before that? BE: Art Maine is the guy that Jack worked with most on the change in personnel. Pat: Where'd he come from? BE: He was in the Chicago personnel department. Pat: That's what I thought. BE: And Art's here in the area, as you know. Are you going to see him? WG: Yes, he's on our list. 80 0007-SWP-0059732 END OF INTERVIEW 81 0007-SWP-W59733