IDEAS AT WORK "E-lec-tro-lux! E-lec-tro-lux!" the crowd at the Fairmont Hotel ballroom bellows enthusiastically after an ear-blasting rendition of rapper Will Smith's Will 2K has rousted them to their feet. The Dallas Mavericks Dancers fuel fervor from the predominantly male audience of 700 sales managers gathered to hear the latest strategy from Electrolux's new owner and chairman, Dallas businessman Joe Urso.

"This is who we are," says Mr. Urso, watching intently from the back of the room as he awaits his turn in the spotlight. His tone is both proud and sheepish, knowing that button-down types might find this spectacle a tad over the top. His investment firm, Engles, Urso, Follmer Capital, bought the 75-year-old vacuum cleaning icon in 1998 and moved it from Atlanta to Dallas last year.

For many in the audience, this is the first chance to hear from their new leader. And he's nervous. You see, not so long ago, these same sales leaders wouldn't have cheered anything that Electrolux management had to say. The Rolls-Royce of American-made sweepers was sucking wind - and not the kind that picks up dirt - the victim of a previous leveraged buyout that short-circuited. Once on stage, the 45-year-old CEO makes a series of rapid-fire announcements: Electrolux will launch a national advertising campaign, re-enter the finance business, initiate an employee stock ownership plan and set up a national telemarketing center with more than 300 employees in Dallas.

He tells them he expects Electrolux, which last year sold about $350 million in upright and canister vacuum cleaners, central vacuuming systems and carpet shampooers, to boldly blossom into a $1 billion powerhouse. Since the acquisition, more than $40 million in profits have been plowed back into Electrolux, including product development. "How about a hand-held shampooer and an upright with on-board tools?" he asks.

This news is greeted with more hoots, whistles and applause than the dancers' earlier gyrations. "It has taken us 19 months to capture their hearts and enthusiasm, " beams a relieved Mr. Urso, exiting to a standing ovation. "We had to re-engineer the entire business."The previous owners sold a cheaper version in discount retail chains, undercutting its door-to-door sales force. "It's the biggest cardinal sin you can make in direct sales," Mr. Urso says. "It would be like Mary Kay being available at Dillard's, or even worse, Sam's or Drug Emporium. They cannibalized their sales force with a less-profitable product."

Sara Lee Corp., which had owned Electrolux for nearly 30 years before the leveraged buyout, and three note-holding banks repossessed the floor-care company two years later in 1989. But the damage was done. Half of the sales force had quit, and a once-proud company that had earned $60 million in annual net income was bleeding losses at a $10 million rate.

The Sara Lee-bank ownership coalition nursed Electrolux back to slightly profitable health but did nothing over the next decade to revitalize the patient. "This was an Olympic champion on life support," says Mr. Urso. "We're rehabbing it back to Olympic status." Wake-up call Passion for Electrolux comes naturally to Joseph P. Urso, who grew up near the company's original plant in Greenwich, Conn. Most of the workers on the factory line were neighbors and relatives from his Italian immigrant community.

Ironically, he now signs one aging aunt's retirement check. "I was the first person in my neighborhood of several thousand people to go to college," Mr. Urso reflects. He was president of his senior class but a less-than-serious student. His high school counselor had told his parents that Joe wasn't college material. That stung deeply, and he was going to prove her wrong. He didn't. He landed a scholarship, but spotty attendance and a D-plus average his first semester nearly got the 18-year-old kicked out of Marietta College in Ohio.

"I'll never forget the disappointment and fear in my parents," he says. "My dad [a bricklayer] could not imagine that I would have to do what he did, which was work in a ditch, sweat and labor all day. They were terrified. They saw their dream evaporate." That was Joe Urso's wake-up call. He hunkered down, graduated with honors, went to law school in Florida and then earned his graduate degree in taxation from New York University.

In 1980, he and his wife came to Dallas and found it to be the land of opportunity. After 15 years of doing real estate and tax legal work for other dealmakers in town, Mr. Urso was making more money than he'd ever imagined but felt professionally unfulfilled. He'd saved enough money to keep his family of five comfortably ensconced in its Highland Park lifestyle for three years without additional income.

"So I jumped into business without a parachute," he says. "My wife was a little nervous about it."

He formed a buyout company in 1995 with equal partners Todd Follmer, a former investment banker, and Gregg Engles, who spends his full- time business energy as CEO of Suiza Foods. The next year, they purchased a small vacuum cleaner company in California and two private telephone companies that provide prison pay phones. But money needed to flow into those companies and not out, so any payoff had to wait. Just as things were beginning to stretch thin at the Urso household, the partnership was able to take out some cash.

Improved morale When Mr. Urso spotted Electrolux, he believed the match was heaven-made. His firm was already in the vacuum business, and production could be consolidated at Electrolux's manufacturing facility in Bristol, Va. But there was plenty of work to be done. Leading his list of changes were people issues. The commission structure was so screwed up with chargebacks to the sales organization that, in some cases, employees lost money when they made a sale.

"I actually sold a vacuum cleaner and owed the company $19 in commissions," says Joe Lino, an eight-year vacuum veteran and Electrolux's top individual salesman for the last three years. "It was crazy."

And if customers used credit cards, the salespeople had to pay MasterCard and Visa's retail fees. Talk about reverse incentives. Mr. Urso boosted compensation and commissions to the sales force, improved medical and retirement benefits and tossed out the chargebacks. "We reignited our people," he says. "We made life simple again. We got back to the basics of doing the right thing." He listened to employees about problems that irked them. The upright didn't have on-board tools. And they wanted a hand-held rug shampooer to use as a door opener or as a deal closer. (Hence the rousing applause at the sales meeting.)

Then there was the switch on the upright that broke too often. "It cost us $2 more a unit to put in a new switch. If we sell 100, 000 uprights, that's $200,000," Mr. Urso says with a shrug. "We did it in the first 90 days." Electrolux introduced a top-of-the-line, air-filtration canister vacuum system, the Guardian. Backed by a 25-year warranty, the new model is hell on wheels for those irritating dust mites, according to independent testing. Mr. Urso swears straight-faced that at $1,500 the Guardian is underpriced against comparable offerings from door-to-door rivals Kirby and Rainbow. And he ontends that its $850 models can compete with top-of-the-line sweepers offered in retail stores. "But for us to be competitive in the long haul, I need to have price receptiveness at many levels," he says. Electrolux is developing a new generation of cleaners that will include a unit in the $600 range.

A map on Mr. Urso's office wall pinpoints 600 cities with Electrolux sales branches. There's a heavy concentration of pins along the Eastern corridor and throughout Canada, where more than 80 percent of sales take place. Texas, where people used to say they "Hoovered" their floors, is a wide-open prairie. "It's a wonderful growth opportunity," he says. Electrolux is missing potential sales all over that map. Two out of three customers contacted the company about buying a machine - not the other way around. He'd like to double his sales troops by 2003, and that presents a challenge. "To be honest, there aren't a lot of people who wake up and want to sell vacuums door-to-door, OK?"

That's why compensation and training issues were so vital at the outset. "My Number 1 problem is getting my sales organization over the psychological hurdle of knocking on someone's door and saying, 'OK, I can do this.' " Cheryl Hall is the financial editor and columnist of The Dallas Morning News. Ideas at Work is intended as a forum for ideas and opinions of interest.

PHOTO(S): (The Dallas Morning News: Mona Reeder) "We reignited our people," Electrolux CEO Joe Urso said. "We made life simple again. We got back to the basics of doing the right thing."

© 2000 The Dallas Morning News All Rights ReservedCheryl Hall / Financial Editor of The Dallas Morning News, Making a clean sweep: Electrolux's CEO continues torejuvenate vacuum firm. , The Dallas Morning News, 01-09-2000, pp 1H.

 
   
 

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