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Making the Adjustment From Owner to Employee
After merging his distributorship with a larger firm, Ralph Cahn had to adapt his work methods and his thinking to his new employer.
Part 2 in a series BY KATHERINE L. HOUSE
The first move for Ralph Cahn was easy. After signing an agreement to merge his distributorship, Word Products, with Independent Business Products, he called business associates and friends who had advised him during the process to let them know the good news.
It was the first formal step in the long and difficult process of integrating the two companies. Several factors, including the recession, soaring insurance costs and fierce competition led to the decision. Last February, Cahn was at the forefront of a growing trend--company principals joining other distributorships as sales reps long before retirement age. They often give up their own offices--and some freedom--in exchange for fewer management hassles and, in some cases, higher incomes.
Once the merger was final, there were dozens of details to work out. One of the first steps was notifying clients. On Feb. 19, Cahn sent a letter on Word Products letterhead to buyers in each account addressed to "customers and friends," explaining that he had combined operations "with a fine local organization." He mentioned that he would retain his office as the South Bay office for IBP and that customers would "continue to work with us just as you have in the past." He promised to call recipients within two weeks to discuss the benefits of the change. The letter stressed the increased product knowledge and improved service that would result from the new affiliation. Cahn enclosed a new IBP business card and company brochure.
When Cahn called his clients, they didn't seem concerned. "They view it as a name change," he explained at the time. "They don't really care as long as I'm there." He also sent letters to accounts payable departments so they would make out checks accurately and so blanket purchase orders could be reworded.
Also, Cahn and IBP had to notify their vendors. IBP sent a letter to all of Cahn's vendors explaining that he would submit orders under the name Independent Business Products, which would pay all invoices. Signed by Cahn and Gail O'Roke, CFC, vice president of operations for IBP, the letter explained that IBP would supply a credit application if necessary. It also asked vendors to treat IBP orders for a previous Word Products job as an exact repeat.
Making Changes
Of course, Cahn and everyone at IBP wanted to ensure that Word Products customers remained happy. At the same time, there were logistical issues to work out. Cahn stocked a variety of computer supplies to provide quick delivery and improve mark-up. During the negotiation process, Cahn had agreed to reduce inventory since IBP's philosophy is to stock only essential items to keep costs down. "There were products we warehoused that IBP doesn't," says Cahn. "I was concerned with how we would get them promptly to customers." After the merger, IBP set up an account with a major computer supplies vendor that would drop ship items for next day delivery to accounts.
Although Cahn had a computer, it was incompatible with IBP's and could not be used. Cahn used his computer to complete the paperwork involving any orders entered before the merger. Then he began to write up orders and submit them to vendors and IBP for entry into IBP's system. As Word Products customers placed their first orders with IBP, customer information was entered into the IBP computer. Although initial orders for Cahn's customers involved extra work, Cahn would save time on re-orders.
New paperwork has seemed daunting at times. Cahn, of course, is no longer responsible for billing, which his computer software handled. At the same time, Cahn must handwrite orders and no longer has records of customer purchases and vendor data stored in his computer system for easy retrieval. On the plus side, he has found IBP's many statistical reports helpful in analyzing his customers' purchases, accounts' profitability and his performance, once he became familiar with them.
During the first few months, there were personal highs and lows. He had arranged to work at IBP headquarters across the San Francisco Bay two mornings each week to familiarize himself with procedures and meet with other employees. At first, Cahn had a difficult time adjusting to IBP's "open office" layout of cubicles for employees. Accustomed to a private office, he was acutely aware that he could hear other people's conversations and they could hear his. The new work environment was a constant reminder that Cahn didn't run his own company and that he had lost some privacy when he traded in his company name. Gradually though, the hum of IBP's offices became routine. He reminded himself of the benefits of the new relationship while thinking that he was fortunate to maintain his own office on the West Bay.
Cahn had his phone forwarded to Hayward when he was on calls or in the Hayward office. This worked well because the IBP staff could help his customers when he was out. Sometimes customers would ask questions that Cahn and his associates couldn't answer because records were in the other office. Cahn found he couldn't always respond to questions as he thought he should be able to. It took months for Cahn to become comfortable with that arrangement. A year later, in spite of Cahn's maintaining duplicate paperwork of work in progress, clients still call and ask questions he can answer only after checking records elsewhere.
Although there were drawbacks during the transition, Cahn was elated the day he received his new insurance card allowing him to participate in the IBP health maintenance organization. He was looking forward to saving money on health care and was relieved to know that spiraling insurance costs would no longer jeopardize his need for health coverage. There were trade-offs, of course. He and his wife were forced to find a new primary care physician, and Cahn needed a referral to a new cardiologist. The change was especially hard on his wife, who insisted on seeing her "old" doctor for a few months despite the higher rate.
The Ups and Downs of Change
During the first few months, Cahn naturally experienced mixed feelings about the merger. Some days it seemed that the "new way" of doing things was far more complicated than the "old way." Through it all, Cahn appreciated the additional support he had from a larger company, access to more suppliers and assistance from two order entry people. He looked forward to learning more about printing and selling a wider range of products. After only a few months at IBP, he sold products he had never sold before, including 4-color wall charts for doctors.
Cahn learned to disregard preconceived notions he'd had when the agreement was signed. For example, as the principal of a small distributorship, Cahn had assumed that IBP would have better vendors than he did. But he discovered that he had solid relationships with good vendors that IBP could benefit from. Soon IBP began using some Word Products vendors, especially for computer supplies. At other times, Cahn had to abandon suppliers when IBP already had adequate ones for certain products and didn't want to add another, says Mel Digitale, CFC, vice president of sales.
Cahn especially enjoyed the companionship of other IBP employees. "It's really nice to get advice and support on business problems as they come up," he said. At the same time, he occasionally grew lonely after his only employee left his office March 31. He even forgot to have IBP pay the rent since the employee had paid the bills. And some days he had a difficult time handling three phone lines by himself. He planned to reduce the number of lines once he moved to a smaller office, something he had agreed to do during the merger negotiations.
As one of several sales reps, Cahn soon found himself analyzing commission reports, something he never had done. When he got one of the first reports, he compared it to each invoice to make sure costs were right. When he discovered a few minor errors, he stewed. In one case, IBP was billed a higher price by a vendor than Word Products. The mistake wasn't caught until Cahn analyzed the commission report and discovered his commission was lower because of the higher cost.
Details, Details
There were other time-consuming tasks. Cahn and O'Roke spent dozens of hours agonizing over how to assign inventory numbers to Word Products supplies so they could be integrated into IBP's warehouse and computer system. Cahn's codes would no longer be valid, and he would need to learn a new set of identification numbers. Nor would his computer system accurately reflect inventory balances since records were kept at IBP. Cahn also spent extra time retrieving artwork from vendors. As principal of his own firm, Cahn rarely got artwork back from manufacturers, which IBP needed if it switched vendors after the merger. At least once, a vendor sent back artwork that did not reflect the most recent printed piece, causing problems and delays during the proofing stages.
Throughout the transition, Cahn and IBP managers remained happy and confident that the arrangement was working. Said Cahn last March, "The main thing is that IBP people solve problems promptly." Cahn thoroughly enjoyed his 35-minute drive to the East Bay when he traveled to the Hayward office. Once he even took his camera and shot photos of a beautiful flower garden along the way.
Two months into the merger, Cahn began working closely with Digitale, vice president of sales. They held three lengthy meetings to determine in which accounts Cahn should pursue additional printing business. Digitale asked Cahn about each account's business, its printing needs and how much printing he sold. The two found 20-30 accounts to concentrate on for print business, and Cahn began to make appointments to call on them.
Digitale accompanied Cahn on some calls early on to answer questions about the transition. He and Cahn touted the new products and services Cahn could offer that he didn't before, such as complete warehousing with pick and pack. They explained the role of IBP's full-time sales service people and mentioned that in some cases, Cahn could now get better pricing thanks to higher volumes.
Cahn never regretted making the decision to join IBP. He reveled in the sense of belonging, admitting that he had felt alone when he ran his own company. Even when he was bogged down by time-consuming details, there was a reward that continually reminded him that the transition was worth it. He and his wife were planning a trip to Russia to visit their older daughter, who was studying there. His new affiliation with IBP would allow a 3-week trip that would include extensive sightseeing. He was learning Russian by playing tapes in his car. During May 1993, he began to notify customers of his impending trip to let them know whom to contact in his absence. He also saw the vacation as a good way for clients to get to know the IBP employees who could assist them.
Katherine L. House is managing editor of FORM magazine.
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