Firm reinvents self to beat stagnation


September 28, 1992|By Ross Hetrick | Ross Hetrick,Staff Writer

During the winter of 1990 and 1991, Robert E. "Butch" Michel was wondering how he could pump life into his Glen Burnie-based heating and air conditioning wholesale company.

The R. E. Michel Co. Inc.'s revenues were stalled, after a seven-year period of rapid growth. And Mr. Michel wanted to know where the company's ambitious expansion program had gone off track.

Then, at an industry seminar, he found the solution: He had to reinvent his company.

At the seminar, James R. Widtfeldt, a quality control official for Honeywell Corp., described how companies typically grow by pursuing one plan, repeating it over and over. But after a certain period, that approach will no longer work and the company starts to decline. To prevent that decline, companies must find ,, new ideas.

For R. E. Michel, that new idea was an intense concentration on the customer.

"Everything is customer service," Mr. Michel said.

And that means more than just smiling and being pleasant to customers. It means helping them with their advertising and bookkeeping and warehousing.

This new emphasis on customer service, for example, will save Eastern Petroleum Corp. of Annapolis $40,000 to $50,000 by eliminating the need for carrying inventory. Using a computer link, the oil supply and equipment company orders supplies needed for the next day, and they are picked up or delivered in the morning.

Eastern Petroleum doesn't have to pay finance costs to buy inventory, doesn't have to pay someone to watch the equipment and doesn't have to absorb the cost of "shrinkage" -- a euphemism for theft.

"We're very pleased," said Harry Youngling, vice president of Eastern Petroleum.

Good service also means helping customers boost profits. Some examples:

* R. E. Michel captures the chlorofluorocarbons, or CFCs, that used to be released into the atmosphere when work was done on refrigeration systems. Those gases have been blamed for thinning the atmosphere's protective ozone layer.

Under new federal regulations, CFCs must be captured in tanks, a service that the company offers with its "Recycle with Michel" program.

* The "Vantastic" program offers customers a chance to win service vans worth $14,000 each. This fall, the company will give away six vans through drawings.

"We constantly look at ways we can help our customer do a better job," Mr. Michel said.

The emphasis on customer service seems to have worked. Sales increased from $140 million in 1990 to $146 million last year. And sales this year are expected to hit $170 million -- a 16.4 percent increase.

To maintain momentum on improving customer service -- and on boosting sales -- R. E. Michel has a policy of encouraging new ideas.

"I've never worked in a place where the president of the company says, 'Try it, do it, risk it. If it sounds like a good idea, go for it. And let's hear what the results are,' " said Ricki E. Baker, vice president of sales and marketing.

rTC Mr. Michel allows Ms. Baker to try ideas "that nobody else in my life has ever let me try before without strings attached," she said. If employees succeed, they get a pat on the back."And if you fail, you are asked, 'What did you learn from that and how are you going to fix it?' "

The search for new ideas sparked the redesign of R. E. Michel's branches. Like other heating and air conditioning wholesalers, the company's branches featured a long counter with a catalog on top and clerks who had to go into the back room to get practically everything.

But in 1985 the company started a self-service arrangement, with products on shelves. Customers could select products quickly without waiting for a clerk.

Of course, not all the new ideas have worked out.

Several years ago, R. E. Michel started offering gas grills for contractors to install in backyard patios. Although the company tried to market the grills in several ways, they didn't sell. "It was an absolute bomb," Mr. Michel recalled.

The company also experimented with its headquarters. When it was planning to move into the Bay Meadow Industrial Park in Anne Arundel County five years ago, Mr. Michel wanted to put the building in backward, with the 5 1/4 -acre warehouse in the front and the executive offices looking out on Furnace Branch.

The architects and industrial park managers tried to convince him that the building should face out on the complex. But Mr. Michel stuck to his plan -- and now enjoys a picturesque river scene through his floor-to-ceiling office windows.

Still, there's one thing he won't tinker with: the company's policy of selling only to contractors. Do-it-yourself home improvement customers are not welcome at R. E. Michel.

"To sell to a retail customer would damage our regular customer, and we won't do that," Mr. Michel said.

The company has been doing business with many of these contractors for decades, and he wants to continue that relationship. "For us to jeopardize that relationship by cutting [contractors] out of an opportunity to make a sale is not our long-term, best interest," he said.

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