The Will to Win
WinWholesale's unique business model gives local distributors a chance to share in ownership
by Rich Vurva
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| WinWholesale president and CEO Rick Schwartz (right) and chief operating officer Monte Salsman say the Win business model is all about creating entrepreneurs. "We have a motto that says we offer a different kind of customer experience for our customers because we have an owner under every roof," Schwartz says. |
A paperweight on the desk of WinWholesale president and CEO Rick Schwartz captures the essence of the company's culture. It's etched with a quote attributed to former president Ronald Reagan that reads: "There's no limit to what a man can do or where he can go if he doesn't mind who gets the credit."
WinWholesale follows a unique business model that provides distribution executives at the local level with a chance to share in the company's success. Rather than having multiple branches run by branch managers, each local WinWholesale company is a separate C-corporation owned in part by the local president.
Presidents can own up to 40 percent of the local corporation and have decision-making authority on issues such as product mix, sales and marketing focus, customer segmentation and hiring. The WinWholesale organization provides support services to the local companies such as compliance and administration, accounting, payroll, insurance administration and data processing and group buying. WinWholesale also maintains a network of four regional distribution centers local companies can use for many of their inventory requirements.
To local company presidents such as Greg Jackson, of Dayton Windustrial in Dayton, Ohio, the business model is the best of both worlds. It gives him a chance to be a company owner, but doesn't saddle him with all of the responsibilities and headaches of an independent wholesaler.
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| Dayton Windustrial president Greg Jackson says the WinWholesale model gives him a chance to be a company owner, but without all of the responsibilities and headaches of an independent wholesaler. |
"It's an unbelievable business model. We were given this great opportunity to run our own business," Jackson says. "But we are supported by WinWholesale and we have procedures to follow. We know that by following those procedures, we're going to succeed."
Like many local presidents, Jackson started his career by working for a locally owned WinWholesale company. Hired by Dayton Windustrial as a truck driver in 1981, he learned the business from the ground up and held a variety of different jobs. He was offered a chance to buy shares of Cincinnati Windustrial in 1992, which he operated for one year, before returning to Dayton when the opportunity arose to buy shares of Dayton Windustrial.
Local presidents can also sponsor future presidents by investing up to 9 percent in a new location. Over the years, Jackson has helped launch three companies. "Probably the most satisfying moment we have as company presidents is setting someone else up on their own," Jackson says.
The net result is that company presidents have four potential sources of income: their base salary, the equity in the shares of stock they own, a bonus and any dividend income from the stock.
Chief operating officer Monte Salsman jokingly calls the WinWholesale model "the second best thing in wholesaling."
"The best thing is to be born into the right family. Now, if you didn't happen to be born into it, there's nothing even close – in terms of personal wealth building, in terms of autonomy and accomplishment – than our system," he says.
Branches are for trees
Schwartz says the company's business model encourages and rewards an entrepreneurial spirit. Rather than a corporate structure driven from the top down, WinWholesale strives to create an environment in which employees support the local company, not tell them how to run their business.
"We don't have branches; branches are for trees," Schwartz says. "A branch is a sales counter with someone who takes orders and tends to inventory, turns on the lights and makes coffee. We have companies run by people who have ownership and pride of ownership."
By removing distractions that an independent businessman would have – such as developing and maintaining computer software, negotiating a bank line of credit, and payroll processing – it frees the local president to focus on the customer, the market, the product mix and how to uniquely serve their marketplace.
Each local corporation answers to a board of directors, which typically consists of the local president, a WinWholesale regional vice president, an area leader and Salsman. Companies also closely follow a procedure manual, which is a compilation of best practices for running a successful wholesale company. The processes date back to the company's founding in 1956 but are updated regularly with input from local companies.
Employees also can access the Win Learning Center, an on-line resource center that provides information on topics as varied as general business skills, to how to perform a specific task, such as entering a purchase order. Six regional WinWholesale Group Service (WGS) offices in Phoenix, Denver, St. Louis, Atlanta, Dayton and New Haven, Conn., provide accounting services, process training and IT support, and six area leaders help local companies devise sales and marketing strategies.
"The culture of the organization is built around the idea that it is every person's job here to help the local company. It is not our job to tell them what to do," Schwartz says.
Future leaders
With the impending retirement of several company presidents in the next few years (the company buys out the shares of presidents so a replacement president can buy in), WinWholesale is currently developing a pipeline of potential presidential candidates. One new program has tapped into Junior Military Officers (JMO) after they transition out of the military. The company utilized the services of Alliance International, a Raleigh, N.C.-based company that offers career transition services for the top 10 percent of JMOs who have exhibited proven leadership skill and a strong desire to excel in corporate America.
WinWholesale currently has six JMOs that completed an eight-week crash course before being sent out to a local company to manage the business and ultimately
buy their ownership shares. The cost to buy into a local business can vary widely depending upon the size and scope of the business, but presidents typically invest an amount at least equal to one year's salary.
"It's all about wanting them to have skin in the game and a significant amount of risk, so they're making decisions from the same perspective that an entrepreneur would have if they did it on their own," explains Schwartz.
Tom Resz is a recent graduate of the JMO program who manages the Centerville Winnelson in Centerville, Ohio. After serving as an Army paratrooper stationed in Alaska and deploying to Iraq for a two-year stint, Resz left active duty in June of 2010. He went to college to earn a degree in computer science and began looking around for opportunities in the corporate world. He was introduced to Monte Salsman at an Alliance International career fair and decided to join the company.
"It was a pretty steep learning curve," admits Resz. "The hardest thing to learn has been the product knowledge." The company has since extended the training program for JMOs to give them more time to learn the business.
Since joining Centerville Winnelson, the company has generated double-digit sales gains. He credits the increase in business to a renewed focus on customer service.
"When I first took over, most customers came in to pick up their orders. We did five or six deliveries a month. Now, we do five or six deliveries a day," he says.
The biggest source of future leaders comes from within the organization, when employees at the local level exhibit an ability and desire to take on additional responsibilities. They participate in a field-based management development training program, which is a series of eight, one-day sessions that focus on fundamentals of wholesaling, financials, sales, purchasing and other essentials of wholesaling.
The organization has also discovered that branch managers or other executives with job experience at independent distribution companies often make good recruits. "An ideal person is someone who comes from a top-down structured distribution organization," says Schwartz. "When they join our organization, they rise to the top. It unleashes their potential."
Schwartz is often asked by outsiders why more distribution companies don't have a similar business model. He says the reason is because of the complexity of the systems required to support the WinWholesale approach.
"Our business systems are quite complex. We have shareholder ownership and an ownership management system," he says. Each individual independent C-corporation requires separate P&L balance sheets, cash systems, payrolls and unemployment compensation taxes, all of which must be accurately tracked and reported. "The only way to do all of that is to have tremendously good integration systems built around this model," Schwartz says.
This article originally appeared in the Jan./Feb. 2011 issue of Industrial Supply magazine. Copyright 2011, Direct Business Media.
GO WINWHOLESALE!
This fact is quite effective and very rewarding.
Good job!
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
