Business Succession atBuilding #19: Overall,It Is Better to Be theFather Than the SonGina Vega

The Father

Nestled cozily in a cluttered office that resembled the controlled chaos of one of hisretail stores, Jerry Ellis, founder and CEO of Building #19, was reminiscing to businessprofessor Greta Stanley1 about the “early days” and thinking about the future.

In the beginning with Harry [Harry Andler, co-founder of Building #19, who died in1978], life was much simpler. When I started this business in 1964, I was a recentbankrupt, I was jobless, and I had to establish myself quickly.

There was no shortage of retailers, so I knew that I had to develop a personalityfor the business . . . people like to do business with people; they don’t like to dobusiness with companies. But now, 41 years later, we’re moving into a new centuryand it’s become hard to separate Jerry Ellis from Building #19. I don’t know whatthat’s going to mean for my son or, for that matter, for anyone who takes over thecompany. My plans are that I will continue working for probably less and less, and Iam winding down some of my other adventures. I want to give him as much room asI can. A long time ago, one of the big guys wanted to buy the company, but at that timeI wasn’t really interested in selling. I wonder now if this has turned into a one-manshow. I don’t think so, but maybe it has. I hope my son doesn’t find out the hard way.

Professor Stanley was enjoying this conversation; while her research and work withother family-owned firms had focused on issues of both start-up and of succession,succession and transitions held a particular fascination for her. She was eager to learnmore about the Building #19 succession dilemma, as she was a frequent and satisfiedcustomer of the eccentric chain and wanted to see the stores continue to succeed.

Please send correspondence to: Gina Vega, tel.: (978) 542-7417; e-mail: gvega@salemstate.edu at theBertolon School of Business, Salem State College.This case was presented at the 2003 NACRA conference in Tampa, FL. The author thanks the reviewers at thatconference, the reviewers and editor of Entrepreneurship Theory and Practice, the continuing review by BrianMcKenzie for the improvements in this case, and most especially Jerry Ellis and Bill Elovitz for theirgenerosity and openness in sharing their story.1. The name of this character is invented.

PTE &

1042-2587© 2007 byBaylor University

473May, 2007

Jerry continued his reflections over a cup of coffee, the same brew he had been givingaway free to his customers for years.

Whether it works or not, my plan is that my son will take over, continue thebusiness. I will keep on working for probably less and less—I want to give him asmuch room as I can. I’d like to leave my son with as solid a business as he possiblycan have. I just don’t think the timing is right—the business is not strong enough. Ihave to do something about that first, before I hand it over. Maybe that means closingsome of the stores, maybe contracting somehow, retiring debt . . . something.

When I first started this business, I talked myself into a great attitude which was,“There are only so many buyers and I can only get so much business. If they don’t buyit today, they’ll buy it tomorrow.” But maybe that philosophy is out of style. Mygeneral-manager-turned-president retired twelve or thirteen years ago, very suddenly.A big surprise to everyone. After 17 years, at the ripe old age of 51, he said, “I’ve gotenough money to live the rest of my life the way I want to live.” He hasn’t worked aday since; he bought a big camper and he roams the country.

I asked my son, out of courtesy, if he wanted the position. He’d been running avery successful Oriental rug division for Building #19 and didn’t seem like he wasinterested in the overall business. But he accepted, and he’s done a fine job againstsome pretty tough odds.

“Would your son be willing to talk to me?” Professor Stanley asked.“I think so, but that would, of course, be up to him,” answered Jerry.

The Son

Professor Stanley gazed out of the window at the bright sails on the small boats in theharbor. She needed to bring the conversation back to Massachusetts from its internationaldetour. Every conversation with Bill Elovitz was an adventure in enthusiasm and passion,and some of them veered seriously off course.

Both intense and relaxed, Jerry’s son, Bill, was completely at home in the noise andbustle of the beachfront restaurant in Hingham, MA.

Going to New York was just a chance for me to learn a lot of different ways for me towork—there was no question that I’d be coming back here—it was my job! That’s theway things are. I was supposed to come back. New York was very important workexperience because I had worked in Building #19 growing up all my life. Outsidework experience is very important, . . .” he trailed off.

Then, looking into the distance, he continued,

I got into Oriental rugs as a joke. We bought one rug, and we figured it would add tothe atmosphere of Building #19. People would come in and say, “Oh, those guys arecrazy!” We figured we’d put it in one store and when the week was out we’d move itsomewhere else and we weren’t worried about it. But it sold before we had a chanceto move it anywhere! So, I bought two more rugs and then four. Then I said to myfather, “Hey, you want me to pursue this because it seems like a real opportunity,”knowing that if I pursued it, it would be my chance to travel. And he said yes, becauseit seemed to work, and I got to go around the world on buying trips several times,going west and coming back to Boston. I made money everywhere I went. My biggestadvantage in going into the Oriental rug business was that no else at Building #19

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knew the business. I made a lot of mistakes but no one knew they were mistakes. I wasthe only one who knew it. The insulating factor is very helpful when you go into thefamily business. I developed a lot of confidence in my abilities by making mistakesand correcting them, and by doing it in an area where no one else knew anything orexpected that I’d be able to make any sales. It was very lucky, I’m telling you.

He smiled.

I guess you could say that I’m a manager, buying and selling goods. I wish I werean entrepreneur because it’s more fun. I have a business that I have to manage. Ilove taking risks at work, but I’m a manager, not an entrepreneur. When I becamepresident, that’s when I recognized that Building #19 needed a manager, not anentrepreneur. And this is good work, it’s very challenging and that’s important forme. There are a few good merchants left in the world, very few. I think that maybeI could become one. I think I know what I want done, but getting it done is a lotharder than it looks. I have a lot more to learn about it, and it’s a challenge. I takethat challenge and love it.

Professor Stanley thought about the difference between being a manager and beingan entrepreneur. Perhaps a review of the corporate history would help to clear this up in hermind.

History of Building #19

“In 1964, a certain Gerald Irwin Elovitz (AKA Jerry Ellis), then a 37-year-old fatherof three, was fired from his job as an appliance salesman at G.E.M. Department Store.Needless to say, he needed work. For a while, he became an inventor. As an inventor,he developed (and attempted to market) such technological marvels as automaticallyreturning golf balls. Inventing, he quickly discovered, was not a good way to supporta wife and family.”2

Instead, he took a part-time job with his old friend Harry Andler, selling salvage twodays a week while Jerry continued to look for work. “We didn’t want people to know I waslooking for a job,” said Ellis, “so we told them the reason we were only open two days aweek was because I was lazy.”3

Since its founding in 1964 in a warehouse in Building 19 in the Hingham, MAshipyards, the company had grown to four warehouses and 15 stores in Massachusetts,New Hampshire, and Rhode Island, each named Building #19 and a fraction (seeAppendix C). The company’s naming standard was changed after they opened Building#19 15/16. Jerry and his wife, Elaine, used to do radio and television commercialstogether. When faced with “15/16,” Elaine’s lisp got in the way, and the store wasrebaptized Building #19 1/5. In a casual environment of freewheeling displays, oddcollections of merchandise, and semisqualor, Jerry Ellis sold millions of dollars a yearworth of off-price goods to customers eager for a bargain and a laugh.

Unlike the discount chains, Building #19’s stock had a variety of unlikely sources.Salvage, overstocks, distress merchandise, job lots, and close outs formed part of theeclectic merchandise mix (see Appendix A for definitions of these merchandising terms).When an insurance company called, Building #19 responded. Floods, hurricanes, train

2. From http://www.building19.com/history.htm (retrieved 6 August 2004).3. From http://www.building19.com/jerryell.htm (retrieved 30 April 1999).

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wrecks—human disasters of all kinds created an opportunity for the salvage business.Bad buying decisions by major department stores, late deliveries by suppliers, damagedgoods—business disasters offered opportunities to Building #19 and its customers. A badeconomy or a good economy made little difference to the Building #19’s customers; likeJerry, they tended to be motivated by a bargain, regardless of provenance or usefulness. InJerry’s words, “If it’s cheap, I buy it.”

The Business Model

Building #19 operated on a simple model: Salvage = bargains = happy customers.This model worked successfully for 40 years. Buy very cheap and sell cheap. Thethree-step process was simple. For example, if a warehouse experienced a fire,

1. The insurance company evaluated the loss.2. A salvor was selected to do an inventory and prepare the paperwork for bidding.3. Building #19, along with others, bid on the merchandise.

The resulting salvage (a product that required a valued-added component to make it into“good” merchandise) was then sold in the retail outlets.

There were also other outlets for obtaining goods. For example, major manufacturersoperating overseas had to find ways to keep their factory lines operating or risk losingthem to another manufacturer. One way to do this was to use their “leftover” materials toproduce unlabeled or private label items specifically for Building #19 at a fraction of thecost that these items sold for in department stores. This resulted in very cheap items thatcompared favorably with their full-price cousins. Broken lots of first-quality merchandise,hidden inventory, mis-sized or mislabeled inventory, overproductions, cancellations, andwarehouse cleanouts of first-quality goods also provided the Building #19 buyers (called“merchants”) excellent opportunities to obtain stock.

All of this merchandise was then shipped to several centralized warehouses beforebeing allocated to the individual stores, which ranged in size from 50,000 to 90,000 squarefeet. A walk through the soft goods warehouse turned up multiple gaylords (4′ ¥ 4′ ¥ 4′cartons) of mixed merchandise, bought blind, requiring sorting, labeling, and pricing,along with racks and racks of clothing for women, men, and children and pallets stackedhigh with linens and other items. The labor-intensive mixed merchandise contained goodsof all qualities, ranging from high-end vendor returns to department store undeliverables.Store managers (also called merchants) wandered the aisles in a giant treasure huntfor items they wished to sell in their location. Merchants were encouraged to select itemsthat would sell to their clientele, which varied from store to store and reflected localdemographic factors.

Store managers were guided by a series of philosophical perspectives, although bothJerry and Bill laughed at the suggestion of a philosophy. What they both professed was acommitment to the customer, and it was that commitment that drove their retailingprocesses. This commitment to the customer expressed itself very clearly in the pricingprocess. Instead of determining the maximum price that they could ask for an item, themerchandising team struggled to find a price that would provide a good return forBuilding #19 and still be a bargain—not just a good buy, but a “bargain”—for thecustomer.

In the early 2000s, they experimented by hiring specialists, referred to caustically byJerry as “professionals,” to create a more efficient merchandising environment. The result

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was that although they moved closer to mainstream retailing, they learned that that was notwhere they needed to be. Stores turned bland and boring. They were losing their long-termcustomers, customers who had been attracted by the offbeat, by the surprises, by the sametreasure hunt approach taken by the merchants in the warehouse, but they were not pickingup the new customers who were shopping at Wal-Mart, K-Mart, or any other big boxretailer. According to Jerry, “We cannot compete on efficiency—only on uniqueness. Atrip to Building #19 is an adventure.” Bill amplified: “We don’t sell—we alter perceptions.What we do sell is the concept of Building #19.”

That concept included transparency of the supply chain. Letting the customer knowwhere the goods came from, how they got to Building #19, and why they were such a goodbargain was Bill’s biggest concern. One merchant had hung a sign over a display of hurtbooks in one store, showing photos of how the book harvest had been reaped andexplaining exactly what “hurt” meant in terms of books. What it meant was great bargainsfor the customer—using the merchandising process subtly, to educate the customer whileselling the concept. The idea was discussed at length in a merchandising meeting and waslater adopted by many different departments in various stores.

The concept of Building #19 also included humor. The laugh was important forEllis right from the beginning. Ads from the 1970s set the theme—a cartoon drawing ofJerry touting his bargains, exhorting customers to buy more, making silly commentsabout the merchandise, poking fun at himself, and guaranteeing satisfaction with his“30-day, no questions asked guarantee.” Many ads featured his partner, Harry, and themerchants and other members of the organization doing their jobs. Jerry wrote the copyfor these early ads himself and was the butt of his own jokes. Later, ads kept thespotlight on Jerry as the man who allowed his business to drag him away from hispurported real love—golf.

Building #19’s advertising slogan was “Good Stuff Cheap.” Newspaper inserts andflyers mailed to customers’ homes made it clear that bargains, surprises, and blunthonesty were the focus of the company (see Appendix B for sample). In a strangereversal of accepted strategy, Ellis advertised his goods based on their flaws. Life isimperfect, the ads suggested, and so are the goods sold at Building #19. Buy themanyway! The customer’s response was, “Why not? What have I got to lose? After all,the stuff is cheap.”

Over the course of 40 years, Jerry Ellis refined the strategy of squeezing a nickel,selling exactly what he advertised, making the customer happy with jokes about themessy stores (“Wipe your feet before you leave—you don’t want to mess up theoutside”), the free coffee he always provided customers to welcome them to his busi-ness (“Drink it—or use it to resurface your driveway”), and his guaranteed lowest pricesin New England (“If you can find a lower price elsewhere, you’ve earned a free bottleof champagne and five times the price difference”). A Frugal Americans Network (FAN)Club provided Ellis with more names for his mailing list and more opportunities tocontact customers.

Challenging Times for Building #19

Every business has its dark days, and Building #19 was no exception. Decisions aboutexpansion, leasing or purchasing buildings, merchandise to buy (Could it be sold? Wouldthe insurance companies still call if they refused an assignment?), human resource

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policies, and a changing retail environment had dogged Ellis throughout the company’shistory. He made mistakes, bad calls, unsuccessful gambles. Discussions with Jerry werereplete with jokes about purchases of paint can lids, doll eyes, windows from the JohnHancock Building in Boston, and a railcar full of broken bottles of catsup. Yet through itall, he claimed he was “lucky.” In his words,

A lot of lucky things happened to me and I was smart enough to recognize themand to capitalize on them. I tried to make assets out of liabilities. But today’sproblems are different. We are not getting better every day and we should be. Wehave expanded to the point where we have contests and things that we have to doto get more business than we had last year . . . at this point, I wonder whether thatmakes sense for us. Can you run 15 stores and keep them supplied with bargains,as opposed to just good buys?

Opportunities have dwindled—there were four huge hurricanes in Florida in 2004and very little salvage was received. The retail environment has changed—the bigguys, the Walmarts, the Home Depots, the other bigger, stronger, and smarter retailershave replaced our old competitors. These large retail chains have insurance require-ments for salvage, and we have been excluded from bidding on their merchandise.Everyone has better constructed and safer warehouses. There are just not that manyfires, and when there are fires, better fire-fighting equipment and processes reduce theavailability of salvage.

When I started, there were about 50 fire salvage guys; now, ten of them havebecome substantial and the rest have moved on. We’re still a player among the topten, but the business isn’t about relationships any more Now, it’s all about money,and our real strength has always been about the relationships. But, with theWeb and the growth of Web-based salvors, you can’t know if you can trust thembecause you can’t look them in the eye. So, you have to base your purchases onsomething else. You have to know your customer. Suppose you were in the marketfor a gizmo and Wal-Mart sold gizmos at $1.49 a package. Would you buy themfrom Wal-Mart?

Jerry asked Professor Stanley. “Sure,” she responded. “If I need gizmos, I have topay what they cost, and Wal-Mart is a cheap source for gizmos.”

“Ah hah!” Jerry countered.However, the gizmo manufacturer produced zillions of these items and sometimes

they are not stored properly. So, let’s say the gizmos were caught in a flood and theboxes were damaged. Now, Wal-Mart can’t sell them because you’re not going to pay$1.49 for gizmos in a waterlogged box. But, as luck has it, the gizmos are also packedby the dozen in small plastic bags. So, they’re still sellable. And I’m gonna sell them.How much will you pay for them and still believe they are a real bargain withoutthe box?

Um . . . $0.99?That would be a good buy, but it wouldn’t be a bargain. I’m gonna sell them for

$0.79 and we’re both happy, because I only paid $0.40. My customer won’t pay the$0.99, but she will pay the $0.79 as long as she doesn’t need the gizmos on a specifictimetable. Because I might not have gizmos this week . . . and my customer doesn’tcare.

It hasn’t been easy. I miss the spark and the drive and the fire in the belly.Maybe it comes from knowing that I’ve proven myself and I don’t have to provemyself anymore. I guess I should give the reins to somebody who has to provehimself.

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The topic of luck struck a chord for Professor Stanley. She placed little credence inluck and believed that planning and organization were the better routes to success. “Saveyour luck for the casinos; manage your business professionally for success,” she hadgrown fond of telling her classes. She was more than a little surprised at Jerry’s statement:“I don’t even know what a business plan is. It’s something other people write about, butI don’t have a business plan.”

Bill echoed Jerry’s concerns although he also believed he had been “lucky.” Heattributed his success in the rug business to luck—that no one else knew anything aboutrugs. However, he soon corrected that by taking employees on buying trips to New Yorkwith him and by having weavers come to the stores to educate the sales force. He claimedthat their policy of promoting from within had resulted in “some good luck.” But luckcannot be depended upon to build a business, Professor Stanley thought. For that, youneed skill and passion and creativity and hunger. Bill indicated his fear that these were insmall supply with his existing management team.

I’m not happy with the way we’re buying. We’re not going out and aggressivelyhunting for merchandise. We should be going out and creating our own salvage—taking care of our vendors and taking care of our customers. We should be aggressive.There’s three parties to every deal—the customers, Building #19, and the vendors.And if it’s not good for any one of them, it’s not going to be a very good deal.

In a merchandising meeting, Bill was blunt:

“Business is disappointing. We need to generate cash. Our warehouse inventory isgrowing but our customer base is not.” Interrupted by one of the merchants whosuggested that the high price of gasoline was affecting sales, Bill responded to theteaching moment: “And what about last year? Our average carriage was down lastyear also. You need to be working your inventory harder. I refuse to put more moneyinto the business while we have extra inventory. We have to be efficient, and I’mputting some pressure on you—you’re the experts in your areas. You figure out whatwe have to do.”

“And we have personnel problems, too,”

Bill continued privately.

We have two types of managers—the managers who are good with their people andterrible with the merchandise, and managers who are good with the merchandiseand terrible with their people. The manager’s job is very difficult because they haveso many responsibilities. They have to take good care of our employees, our custom-ers, and our merchandise. That’s an awful lot of hats to wear at once. I don’t want tofire people who are doing their best, but I can’t let them tie up the lines of merchandiseflow. It’s hard for me.

The description of the transition challenges kept on coming. Stanley was surprisedthat the father and son seemed to get along so well, with so many areas for potentialconflict. She decided to shadow each man for a day or so to get a better idea of how thetransition from Jerry to Bill could best be accomplished. The two men agreed, althoughBill needed a bit of convincing. They decided that she should witness a store visit run byeach man (each store was visited in rotation, once every 7 weeks, by Jerry or Bill), as wellas some meetings they conducted at headquarters to see them in their element.

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A Day with Jerry

Watching Jerry drive around the building before entering, Prof. Stanley chatted withone of the employees at one of the stores. “Oh yeah,” the worker said. “Jerry and Bill arereally different.” No elaboration was forthcoming, and they entered the store for the earlymorning meeting. Ten employees, nine of them women, were present at this meetingdesigned to give workers complete access to the owners. Jerry began by reading every notein the suggestion box, followed by awarding a 5-year pin and sharing the shoppers’ reportswith the group. The shoppers’ reports were generated by a group that provided secretshopper services. As each report was read, individuals were named and rewarded for goodservice (a $10 bill with Jerry’s picture in the center).

All comments by secret shoppers as well as regular customers, good and bad, wereread aloud, giving Jerry an opportunity to reinforce Building #19’s focus on the customer:“Most customers are uneasy or frightened almost when they come into the store. It’s yourjob to make them comfortable—at least give them a nod to let them know you see them.Maybe the shopper’s husband burned the toast that morning and she’s just cranky. . . .”Jerry commented about one critical letter. Most of the letters were positive, but whenletters critical of individuals were read, people appeared uncomfortable, eyes downcastand faces coloring with embarrassment. The vast majority of the comments were positive:“I love your store—you have great stuff,” “I don’t think I can ever remember a badexperience,” “They smiled real smiles,” and “Building #19 rocks!”

Suddenly, it was nine o’clock a.m. and customers entered the store. Jerry and Prof.Stanley left for headquarters, an hour and a quarter drive away, and promised to return thatafternoon for the walk-through and the rest of the meeting. The ride in Jerry’s car gaveStanley the opportunity to discuss some estate planning and ownership issues. Jerry’s goalwas to balance things between Bill and his two sisters in a way that would promote familyharmony. Bill was the one directly connected to Building #19 and already owned a“chunk” of it. He would inherit most of the rest in the long-term, with about 10%belonging to long-term employees. The siblings owned the real estate, some leasingcompanies, and some licensed departments. It was a complex arrangement geared to alloweach sibling as much autonomy as possible while maintaining a sense of responsibilitywithin the greater family unit.

Once at headquarters, the meetings began in earnest. One after another in Jerry’scluttered office, with staff desperately searching for a clear spot on the desk to put downtheir belongings, the person responsible for the weekly house organ, the “chief assistant,”the elderly soft goods merchant, the assistant warehouse manager, and the energeticadministrative assistant took turns fielding questions, sharing information, and receivingdirection. Between meetings and sometimes during the meetings, Jerry found requests forProf. Stanley: “Can you find me an apprentice for a year?” “Can you find someone whowants to run the medical supply division?” “Can you get me copies of house organs fromother companies so I can put together a checklist?”

About halfway through these meetings, Jerry motioned for Stanley to follow him intothe “B.S.” meeting, as the brainstorming session was coyly named. Eight advertisingpersonnel sat around a lunch table, surrounded by sandwiches, paper towels, sodas, andchips, ready to talk business with the boss. To Prof. Stanley, the advertising departmentdid not appear relaxed. It was obvious that they were waiting for something to happen.And happen, it did.

As in the store meeting, correction was public. A poor job had been done on somestore signs and the hapless artist took it on the chin. Jerry made it very clear that themessage that had to come across to customers should always be, “We love you. Please

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come in and have a good time.” The advertising department listened closely, discussingthe cartoon class graduation, possible marketing campaigns, new signs for the stores, andspecial ads. Finally, they were all laughing as two of them pretended to be Jerry and Elainein a run through of the first Jerry and Elaine radio commercial in a number of years thatwas scheduled to run the following week.

Another hour and a quarter drive and Jerry and Stanley were back at the store to doa walk-through and to continue the meeting. Connecting with the manager, Jerrydemanded, “Take me to the worst spot.” The worst spot turned out to be in the stock room,where inventory was being stored instead of put out on the selling floor. The walk-throughwas short, covering about half the store. The rest of the meeting was for the 14 afternoonor second-shift workers. Jerry handed out longevity awards for workers who had beenthere for 15 and 20 years. Again, the shopping reports and letters were read, but this time,people applauded those who received awards and everyone ate lots of pizza. Jerry packedup his bag and headed back to headquarters for the Tuesday evening meeting and mealwith Bill, and Professor Stanley headed back to her office.

A Day with Bill

Professor Stanley dialed her cell phone with one hand as she sat, stuck in traffic onI-93 for 55 minutes. Apologizing to Bill, she informed him that she would be late to themorning meeting. When she finally arrived, 15 minutes after the meeting had begun,the group was deeply engaged in what Bill had to say. Eighteen workers were seated in thebreak room, listening and talking, responding diffidently to Bill’s queries and compli-ments. Each compliment elicited a round of applause, and Bill beamed at the enthusiasmhis comments generated. This work group was an international one and represented thelocal community, with many immigrants from India and Pakistan among the members.

As the meeting progressed, it became apparent to Prof. Stanley that Bill was a naturalteacher. He involved the group in talking and reporting. He asked questions about themeaning of certain policies and requested their help in coming up with solutions forseveral problems. His trademark question “What should we do about it?” was met withmultiple employee suggestions. Some were workable and others were less feasible, butnone were rejected out of hand. A reading of the “happy” letters was followed by a readingof one unhappy letter. Bill led a discussion of the unhappy letter and solicited ideas aboutwhy the person was complaining and how they could avoid such complaints in the future.He concluded by suggesting to the manager that he write a letter to invite the unhappycustomer back to the store to “give us a second chance.” No employee names werementioned in this context. Questioned later by Prof. Stanley about his reserve, Bill replied,“Praise in public, reprimand in private. Later, the manager will hear it from me.”

The tour following the meeting took a small group (Bill, manager, assistant manager,head of merchandising, and Prof. Stanley) around the entire store. The manager hadrecently shifted several departments around in order to create more selling space, and hebasked in Bill’s approval of his technique, of the signage he used, of the end caps and theaisles that were wider than in the past, and at the ideas and enthusiasm of the team. Thisteam had internalized Bill’s merchandising approach successfully, and Bill could “walkdown any aisle and find something we’re promoting well—desirable stuff that would sellfor twice the price elsewhere.” He praised generously and constantly empowered peopleto come to their own conclusions, to get involved and committed to Building #19’ssuccess. “Let’s figure this out” was followed by “Do you know you can decide to hurt one

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department if it helps overall?” and “How will we know if this plan is successful? We needa way to evaluate the outcome of your changes.”

A walk through a secondary building included a detour so Bill could help a workerunload a large sofa from the delivery truck; he could not bear to see the worker draggingthe sofa onto the flatbed dolly and risk damaging the legs. Happily covered with dust andpleased with his effort, Bill and Stanley stopped for a coffee and some conversation aboutcompetition and ownership.

“Everyone and everything is our competition,” Bill claimed.

If the Red Sox are winning, they’re our competition. If the weather is good, the beachis our competition. Or the slopes. Or the golf course. We’re all about “shoppertain-ment.” We can’t compete with Wal-Mart at the low end in terms of efficiency, or withthe closeout stores because they specialize in a different item. We’re all about thebargain hunters, people who have free time and enjoy “the thrill of the hunt.” We needto get back to basics—increasing our salvage is the goal.

And it’s all my responsibility. I’m responsible for everything.

Responding to Stanley’s raised eyebrow, he stated, “Responsible means the ability torespond. It’s not about blame and guilt—it’s a positive word.”

Bill and Prof. Stanley continued their meeting several days later, with a series ofin-house merchant meetings. One after another, groups of three or four merchants indifferent areas came to the conference room to present their goods, bargains, com-plaints, and suggestions for advertising. A parade of shoes and rolling luggage wasfollowed by hosiery and fishing rods, rugs and ladies blouses, “Charles River Water,”and jeans. The theory behind mixing up the soft goods and hard goods was both toeducate the merchants about areas other than their own and to give rise to questionsabout the merchandise that could only be asked by nonspecialists, people who could actlike Building #19 consumers. It seemed to work, as criticisms were offered and com-pliments were freely given. “Would you buy this rug?” Bill demanded of the hosierymerchant. “Why not?”

The meetings concluded with the awarding of the Hunting Stick to the merchant whofound the best deal of the week. The decision about the best deal was made by the personwho received the Hunting Stick the previous week, and each merchant around the tableproposed his or her own special bargain: Slightly weathered cedar planters from Canadacompeted with 80,000 pairs of pantyhose. The Hunting Stick, a feathered NativeAmerican talking stick, was won by the sporting goods merchant for opening a connectionwith Everlast for last year’s heavy bags.

The theme of teachable moments continued throughout the day, even through thefinal all-merchant meeting where Bill read the riot act about the state of the business.He went over what good ads do, how inventory can be moved more effectively, activeinvolvement in advertising as part of the merchant role, and participation in the storeson the weekend as critical to the success of the business. “How can we make moremoney?” “How will we make this happen?” “What are the best sellers right now? Howcan we batch them in an ad?” “How can we increase our customer flow?” “Go to thestores and find out what’s wrong. Talk to the customers—they are the only ones whoknow the answer.”

After 6 hours in meetings, the merchants still did not want to leave the room. “We areadjourned—go home,” Bill repeated several times. But the brainstorming continued,conversation trickling off only when Bill himself left the room to walk Prof. Stanley to theparking lot.

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Decisions to be Made

Both Jerry and Bill recognized some organizational limitations, but they alsoacknowledged Building #19’s strengths. Both believed in the importance and contribu-tions of their managers, despite their lack of aggressive action. In Bill’s words:

We have a good sense of urgency for getting the merchandise on to the sales floor. Andthe managers have a lot of autonomy. That autonomy runs through the whole orga-nization, and I think that’s very helpful. People are allowed to make mistakes withoutgetting killed for them.

That last statement echoed one of Jerry’s: “We have a lot of concepts that are top notch.You know, there’s a theory of ‘enough is enough.’ Why should I kill someone for notkilling themselves at work? I’m more willing to accept mediocrity than to fire people.”

The two men continued their separate musings, each privately expressing to ProfessorStanley concerns that were remarkably similar. Jerry reflected on his son’s history withBuilding #19 and the years spent working with other retailers and worried about whetherBill felt obligated or forced into running the business. “He loves the company and theconcept,” Jerry acknowledged, “but to this day I don’t know whether he feels trapped ornot. I think on Monday morning he thinks it’s a wonderful business and Monday afternoonit’s a lousy business and Monday night it’s so-so and Tuesday morning it’s a greatbusiness again.”

Bill agreed:

Sometimes I hate going to work and sometimes I love it. But it’s work, it’s hardwork . . . it’s good work. It isn’t what I want to do, but I can’t do what I want to do.Traveling around the world would be nice, but that’s just a fantasy. I’m a workaholicand I’m stuck doing this, and so I’d better enjoy it. I like to work. I have all thesefantasies that I’d like to be mountain climbing all the time but that’s just a nicediversion. I think I’d get very bored doing it. I work. That’s what I do.

Jerry reminisced about Bill’s entry into the business:

My son’s in the company now and doing a very good job of it. He graduated fromBrandeis, and he probably had five jobs in four weeks or four jobs in five weeks. . . . Ihad sneaked off to play golf, got caught in a rainstorm and I ended up coming homeunexpectedly. There is my son on the couch watching television after I had just spentwho knows how much money. So we reached an agreement. I picked the hardestphysical job I could on the spur of the moment, which was the rug department. Andhe agreed to work until he doubled the business, the rug business.

He continued:

He’s got the right instincts. One day he came to me with the idea of selling Orientalrugs. I knew he couldn’t do that because this was just a salvage store and who wouldbuy an Oriental rug from a place like ours? I knew it wouldn’t work. I had read allthese books, you know. So, now we’re the biggest Oriental rug merchant in theNortheast, and the credit is all his. But, still, I don’t want to get in his way, force himinto a life he doesn’t want. . . .

I was in business with my own father. I shortened his life by ten years and hedidn’t lengthen mine any, either. We couldn’t agree on anything. I thought he dideverything wrong, and we fought very fiercely I didn’t want the same thing to

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happen with Bill, so when he accepted the presidency seven years ago, I startedlooking for other things to do to get out of his way a little bit, so I wouldn’t belooking over his shoulder.

He shrugged,

I got involved in all kinds of other ventures, most of which failed but some of themworked out well. Bill never said to get out of the way—he’s been a very good son. Ican’t think of any time when we even had a difference of opinion. But overall, it’smuch better to be the father than the son.

When Professor Stanley asked Bill which is better, he laughed.

I guess I can’t argue that it’s better to be the father but I’ve had some wonderfulopportunities. I have a wonderful business, a business that I happen to enjoy. I like tobuy and sell and I like to entertain the customers. I have a lot of luxuries that my fatherdidn’t have and if, as the son, I get no respect, that’s life. You know, if I wasn’tconcerned with my ego, with doing a good job and continuing to pay all the employ-ees, I could really have a great time. I could take money from the company and livereally well . . . but that’s not me.

My father’s never tried to impose his desire for me to come into the business andhe never got pushy. I like what I’m doing. I think I would like anything that I’m doingthat was a challenge. There’s some things I really want to get done. I want to see if Ican accomplish some of these things, see if I can make it the best place to workand the best place to shop. If I can make some peoples’ life a little bit better and I canmake the company a little bit healthier and enjoy myself while I’m doing it, that’s agood life.

“Sometimes I hate going to work and sometimes I love it,” Bill admitted again. “AndI like it when I’m not visible. I like a little bit of freedom. Once you’re somewhat of apublic figure it takes away your privacy and I don’t want that.”

“What do you want?” wondered Professor Stanley to herself. “You seem to have itmade the way things are going right now.”

Diffidently, he went on:

Here’s my vision: stores where managers treat employees with respect and give theman opportunity to earn as much money as they’re capable of earning. I like a companywhere customers brag about the bargains that they got.

We’ve lost a lot of our pizzazz. As you become an old mature company, you justhave to change your style. I need to make a culture change—it’s happening, but it’shappening slowly and I think we have to be revolutionary. I want people to beresponsible for what they do. I want it to be a matter of personal responsibility. It’sgonna be real hard to do—we have some people working for us who shouldn’tbe. . . . I’m stuck with some rules, but I can put people in a place where they’re notgonna hurt anything.

He swallowed, sighed, and concluded:

I guess if my father just walked away from the business, it would be easier for me. I’dknow what was going on everywhere and I’d only have to please myself. And I’d onlyhave to answer to me. I think it would be easier, but I’m not sure it’s good for him towalk away. I think it’s what keeps him young and happy. I don’t want him to put itdown. It’s his life. It’s his heart.

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A Final Word from Jerry

Professor Stanley wrapped up her series of meetings with a final conversation withJerry Ellis. She asked bluntly, “What kinds of problems would Building #19 have if yousimply walked away from the business? And, as vibrant as you are, what would you dowith yourself so that you didn’t miss the place too much?”

I have all these other things going on and I’m sure I’ll never have enough time to missthis business. I’m gonna guess that within the first year that I’m gone, many of mycronies will leave. Long-time employees who work here because they know what theycan get away with and what they can’t get away with. They’ll complain that with megone, it’s not the same. That always happens. I expect that and I’m not sure that that’sbad. When a person has been around for 20 years, they’re not about to have any greatnew ideas. They don’t have the fire in their belly anymore. About six months ago, Billasked me to confine my activities to the advertising department. I would love to dothis, but advertising and merchandising are so closely aligned, I have some troubledoing this. I can’t turn over accounts that I’ve done business with for 35 years—people that I trust and respect and who trust and respect me—I can’t take the risk toturn it over to others.

I think I spend most of my own time doing the same stuff that I’ve done over andover, trying to make some time to get through all these papers on my desk. They’re soyellow by now, I can’t even read them. Every Tuesday night I have dinner with Bill.It took a long time to talk as partners, and now we’ve moved to talking with me asJunior and Bill as Senior. It’s not true at every meeting, but . . .

This summer I’m going to finalize my estate plans, then I’m going to move out ofmy office and into the advertising department. I’ll go to Florida more often and comeback here less often—maybe spend 10 days in Florida, the five days here. Bill’s puthis heart and soul into the business and he deserves to be in charge. The hard part isgiving him the support he needs and letting it still be his show, not mine. And that’spretty tough.

When Professor Stanley mentioned to Bill that Jerry intended to move out of his officeduring the summer, Bill laughed once more and said, “When he does, I’ll get a dog andmove in there because of the sliding glass door. My dog would like that.”

As Professor Stanley drove back to her office and considered her meetings with thefather and the son, she was surprised to realize that the two men seemed to speak quiteopenly to her, but despite their weekly meetings with one another, they seemed not tounderstand at all what motivated the other. Bill’s loyalty to the business and his love forhis father kept him from acknowledging problems, and Jerry’s passion for his businessand love for his son kept him from letting go. Insignificant issues loomed large, andvital ones were brushed under the rug. How could she advise them in their time oftransition?

Gina Vega is associate professor of management at the Bertolon School of Management, Salem State College.

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Appendix A

Terms Relating to Salvage: The Language of “Cheap”4

Closeouts “An offering of selected discontinued goods by the vendor tothe retailer at reduced prices. This merchandise has beendiscontinued because of slow sale, a broken assortment,overstock, or the need to make space for a new season, etc. Thesavings are often passed along to the consumer as a closeoutsale, used to generate increased store traffic.” (p.42)

Discounted Goods “A reduction in price from ‘list’ or ‘regular retail’ given by thestore to its customers.” (p. 71)

Distress Merchandise “Goods at either the wholesale or retail level which have beendrastically marked down to facilitate quick sale, generally as aresult of some financial exigency.” (p. 72)

Irregular “An item which contains some imperfection but which is notapparent to the naked eye. An irregular is closer to being perfectthan a second.” (p. 117)

Job lot or odd lot “A broken lot, unbalanced assortment, or discontinuedmerchandise reduced in price for quick sale.” (p. 119)

Overstocks “Merchandise in stock and on order in excess of plannedquantities required to meet consumer demand.” (p. 160)

Salvage “Merchandise that is so damaged that it cannot be sold throughregular channels at original price.” (p. 214)

Seconds “Merchandise which is damaged in manufacture or which isotherwise flawed (although still serviceable) and which isoffered at retail at greatly reduced prices.” (p. 216)

4. All definitions are taken from Ostrow, R. & Smith, S.R. (1985). The dictionary of retail. New York: FairchildPublications.

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Appendix B Sample of Building #19 Advertising

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Appendix C Map of Building #19 Retail Locations

Source: U.S. Census Bureau, 1990.**Building #19 location

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