Les Schwab: Pride In Performance - Business Biography

LES SCHWAB PRIDE IN rts it Wet KEEP PERFORMANCE IT feePe GOING! LES SCHWAB Pride In Performance Keep It Going! Les Schwab was raised in the Central Oregon area. In his younger days he did newspaper circulation work, and was circulation manager of TheBulletin in Bend, Oregon, when he entered the tire business. The beginning of the Les Schwab Tire Centers was January 1, 1952, when Les purchased the O. K. Rubber Welders in Prineville, Oregon. The original store was little more than a shed with a two-holer out back, an outdoor pump for water. It was a very small retreading shop with just one employee. With a $3,500 investment, and a very humble beginning, Les has built the business into the largest independent tire business in the United States, including such areas as Los Angeles, New York, Chicago .... anywhere. People often ask, ‘Why Prineville?’”’ The answer is that Les started in Prineville, a city of only 5,000 and just kept growing; and is now in the Seattle area with 35 locations, in Spokane, in Portland, and in nearly every city in the three Northwest states of Oregon, Washington, and Idaho. Also in two locations in Montana. He lost his only son in an auto accident in 1971, but he looks upon his over 2,000 employees as part of a large family. He asks the question, ‘What better thing can a man do with his life than to create opportunity for young people and to watch them grow into successful people; not just for money, but in all ways, especially into good family people.” His profit sharing plans, which are like partnerships, are probably the most Continued on back flap... Digitized by the Internet Archive in 2021 with funding from Kahle/Austin Foundation https ://archive.org/details/lesschwabprideinO00OOschw =) ev ste Eh. tae oA dt ae a Les Schwab Pride In Performance Keep It Going! by Les Schwab Copyright © 1986 Les Schwab Second Printing 1990 Third Printing 1996 P.O. Box 667 Prineville, Oregon 97754 cover photo and frontispiece photo of Les Schwab by: Photo Art Commercial Studios, Inc., Portland, OR. Library of Congress Catalog Card Number: 86-62104 ISBN: 0-89288-151-8 All rights reserved. No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any informational storage and retrieval system without written permission from the copyright owner. Printed in the United States of America. printed by Maverick Publications Drawer 5007 ¢ Bend, Oregon 97708 Table of Contents 1 LSAT ey rhGe i RI eae Re | ASA PEs AS I aS Per EY RO Ae Ta pte Re, 2 1 TESSSODCGIEVESE oR eal a a n= a NRCS eter Si ete ECCT ME To re ee iS cae ae ly ice 8 BT SCHOOUR PoOrtiy riarian, Wiy PULUTC. WITC >. «6.24 6 sa fesse wad Bhan es de. 11 CLIT SERCH AO LCCOWN o gS eycr a dos Wes ok os ek Baie Tle ale aisle 12 NPE SGC Gp 8 LV. cath nia AP 13 CPI at AC CITES NNUAL Re) attie a aU ats Rg A RI EE, 4 15 UR a ek 17 SEO, ESS YAU ESTE SS og se sec ts ots dBc oases Bids Sal Sade MEMO R RE IRL a a 19 PP Ae SU ALES Cm S065 CS) a at tA GUS RGEET Ol a i i Vea (weet ea em A a 20 A RUGS COmpany. ENONCY EOUCIES 7... 2c %ccg vs stars sa cses ge sayin 5 cee 20 mauciiter Vareic Bom — Prank Canady «oc <6. 6 0c 0.05 pees cates 22 AESeeTOM STAT TINS GoOULCACIT ore woo ssccdc aie slet cgelm s so £4 ends Sage Bees 24 Bee Oe TOOUCION CUCL gee eae sis oe ck noe ct: OM Ree ee UT 24 BETNOC ET SCM == SEC SLOTEy 9 ico sis a6. 6 wipes eigen ie bie AGS 6 gla oe ates 25 BARC TITS VIALAS ACI SUOUE vc 5.core voeengs whee bose 6 lee dua ea eekek wre eugene 26 net cay ga ae walks osAlege ie esis 6 olois, SU OR oe aL Bre VOL oe Ren Thinking of Future — Dreaming — Planning ..............+...-. 28 Onn Day-— oth store — Dick Hammack. 23.26. .2 1c se ene nts © ees 29 een cle eine ors Gigs) alone BS yahoo east cialis lage iat31 RETRO) UOLY pr ee eee rae Garth lr iso wise teh Wasted eae Gees, Rept 33 oro oe SUL OG OU OR er carer Se eae 34 eri mera BYE ae IAI aia a ie eraa bo) Bel (Sein « whn tjasecaie.« 35 2c4lh 9 a ever ale closes gitsls sie als kuin SEOLC MUI PIOOGL RIVEl — OUT eM ACS a OUT OLIN LONG iescit ears oFoils a'ese ois 6 HAF sw Aa G!Wyetae 90 nos 36 General Tire Dealer Development Program ................eeeeee 36 Pride In Performance Walnut-Sawdust Combination Rubber 222.0. S75 ee ee 37 Synthetic Rubber cc. os Oe es en acne aie38 Steel Tite Stwds 2 ode ec a es ee ee ee 39 Sipitig-and Retreading <.. osc. oi een eee se eee 42 Driving Many Miles: 2°:4-5.-2 5. aca es he coe nee ne ee 43 NOT NEIOT 5. se ae cies ete orale se Th re oe vee 44 Radio Advertising -—— Free Beer. 3. ee ee ee 46 Cleaning Up Stores — Free:Flats for Ladiesin =... 2204.0 0ee ae 48 Start.of Supermarket Tire Stores: 2, ee 50 Startof Cattle RAMChiig so 3c cc ce aes sees een eee 50 Start of Klamath Falls and Hermiston Stores..................05. 51 start of Assistant Manager Progtam,: eye vce eo aes 53 supervisors OF Whattcn. Js Acse ev eae ce ee 55 Moreion Supermarket lire Stores 6 6 revs eee 55 Restaurant EX penences.25 si. ccc arcs set wcict oestuigs SO Wake eee ee 56 Corporate Executives — Rubber Companies ....................- 57 Thees Schwab hires Sign... sas). vee ee a ee 60 LS» Profit Sharinesbrust suc 8 aces sc ot ees ee ee 61 First-Profit Sharing Contract 4 isc. ee ee eee 62 New Prospective Controller — Theories.......... pem Rer ears a 62 WOOT LFUSts cases sees geen Oe OS oe ee ee re 64 Klamath Falls ccs os ter cease ene os ee er te 65 Zoning: Problems, Bend and Others2.....-20 2 eae oe 66 Lebanon, First Store West of Cascades a... <2 35, ee 68 Burns‘and Shorty Severance: v0: 68 Norm Nelson Gomes:to:Main Office .:. ..0.. ene 70 My: Son: Harlanc cence) se Ce ac eae eee 71 Bob‘ Newell== Lewiston... 5 cscs ee ee ee ee 73 Bob Finzer-— Manager Retreading... ... 0.2.3... so ee eee al Harlan Schwab — Giant Tires: 2... weeeee 78 Don: MilleeJomns Company. +... -2 2g eee ee 79 Deathvot Harlan Schwab env. = soc ye eas eo 80 Matt-Tomseth — Diana —Alane.. ees ee 81 Margie’s Weddinsi=2Ranchsctinceine soa ae oe ee ae 82 Don Miller and: Norm Nelson Buy-Out. ©...0..25.5.. 203 87 Unselfish for'Good Reasonss. 7. ee es ee 92 Rehash of First Store Keep It Going! Oliice People Vs Store Peoplé:.....4 .5.... Aue. wires 94 Hone Managers and Zone Meetings .. 2.6.2. oo. ses ce cca cu ede loin 95 OSIM ROCs beter Rens hpi citi dkwees o RRO ean ade ol 97 Seem ae NG Viren icccneee A. cy shes ie alse a Se Le La IE Re Oe 99 BS CemFOSTAMIIAUICT mcr.s.5.5,4 sits dar Ee Ree die 100 INCISCINSEATCL INALCHOUSES, coo hoes ob sass oun SO OE, St 102 POMpanyv planes a7 ccs, 2. SOS aeG PISE eAll je IOLA OO,. wee 103 Thoughts of Going Public — Buy Out offers.................... 106 Creating Programs — Complacency ................. WERK, OTS: 109 BEES 109 EO Thought for New Executive pi Cetarn SEEDS ate VEE 143 INICRCTSIDCALEES © ni hemes oars ine Baroness gw MO OO 116 POPE MI NC PSOTE COLNES9cfodoe ngSapte odySoporte hg a a.te aed ER EM, 8 Ss M7 eC RI chek oe wleni Mont Millem Made President £5 /sus;ouwoide 119 ik EC OOO BEALE NWECK, CE OW GE eres ts 9s csinils ne las SET ON EC INACYCL SLOLES iawrconshaas eis 4 Rqee GN Rahs BK selon las MOE ahs 120 120 oe Se PEAS COME ATIC IVIMIECD VINE. 5,ons:o-<doscko detansnonereesoo a eele MA Assistant Manager and Manager Meetings ..................00005 22 NG Oe 123 Oe: SE A EROSIVE COLE odes, vs Sandiana-shcbate a ART 8 123 Ec dill ge eee AAU HEMI CEIEIOs DOAULIC) tras. Awikes oS as ekooneroke OR fais Oa eee tiesereliveaseriahe RIOV TING teasdiatssucaet oteAcadrecerevtitip MELE Coeee 125 lee ena oe ue ee 126 Miaway equipment Company %...40% 6 tae Omi NeTEy.—— MIXING. W.ATENOUSE io .ecoos ce NLS ae mae ee tele 128 By NORTE CSS CH WADE ING fiend orsicseaskertio caress) ayerslace tlsiasalso welade, EN Oe 129 Re 131 sl Sts.000i New store Percentage Rent. Policy «.......:... eee 133 INGw DLOre Development Program) .c) siete aredionrid sds EEE AE 134 Aa Re OR a PPR Onin EE B24pero de 4 fee ee Re eeenr S'S NELIPIISCIT 136 EA MOMEMBEE SerPRR POE ara Gets cry cope nial ae reaera eRe oy OO IGetCS a Sea tMeyiae ovals Nie eats Wolo ots Se Sie MGT IULIET FICAFU ACL ACK occscskevnrovececsscdoiel« 138 eee reek 2 140 Pes Schwa Heart Altack y.208 tat, Sea. or EATS Steders 141 Oh.seinveda s eet s0tel sce vie PM WiICk) NAMEOLPLeSIGeNt ««:.3-<.2:0usvscaveve Don Miller Leaves — Open Book Policy..............eeeeeeeeee 143 Rare WileCE Progra Created iicicccict arora accuogeysuncoh sheyetotoret nreeia o1e.* he 144 145 INCLATA ARES yey Weece reese: vkeichonrecnstoceratavion sso acelece meen Co ete Gibb AVANC 148 are dca dats @ hole Set mE UNS Csooeiov rciivs ooocuserex crouzttieiay PNET INES OTT serene ccneees The Forgotten Working Man .......-..02ecccce ee 149 eters d's150 mhe tole tssslesiere EVR ODI aesanyt viinn copiere rca rtarmaideunein ian Atle . 154 sees eeeeeees Loyalty — Suppliers and Employees ............ Pride In Performance Bill Burnside.— PlunvStores, 4. Soio2 cd. eee ee ee ee 156 TIAN YTV1S iss Ss snl 6 Re'w aie Reals TS he ieee 161 Boise Manager Meeting os c.0e ewes enim eae ee cele a) eee 162 New: Type C om petition \ic.ccieee oat womlidw tomo ae cae oe 164 1979: Hawaii: Manager: Meeting ...4.:....<caywe 5. Seer a ae 165 KeMeart-anid Fred: Meyer ass eicstsaseruresa wie anenc eae.0 RGM ae ee 166 Sunriver 1977/Assistant: Manager: Meeting.........¢.... ese 167 Sunriver: 1980:Manager, Meeting Sms: - ari2iss at he We 168 Tire:and Retreading Future... 72. is sare cotta ow eee ee 169 Sunriver 1981 Manager Meeting... t4: (4 Seabee ee 72 Faults of Management) ..3:5.. cit secs thew scue Ree wie areca ae 172 Letters from: CustOmersic:.ccw sence eu wade alba wee eee 178 POOr GEOrge StOPYiwsr eee & susie ase wee orate jos let eee Seeger 179 Pire Pricing: Policy: Large-Accoumts 32iiuc..iw swe ee ee 181 EeSsGredit Plans on. tte son ene on evinces ee ee 182 Early. Year:-Customersciis die teens noes aes ie eee ee 183 Vindictive—.Right-or Wrong ?2472 5). gadeeess Oke eee eee 184 Day. in the Désert Shorty Severance:.........00..0.. .20 See 185 Jack Keith:and: Lyle Schoolthhetterssscc hac... cue Ste ee 186 Advertising Theories s-jger ccc ee ihca cians gee ee 188 A-[eetter from-a Store Manager 1982. x.::\. varscrten.) eiccane eee 188 Profit:Comparison: Report ::.-...7.in<.00m een re 189 DOM ar Story: dcsinc ean: eed oe Gare sicias e e 190 Les: Schwab. Trust: Bulletinsi.<c).0 Aaa cates See eee Se 192 Rudy Contreras ioc... cick ire evi ee 197 Our Company-T98s 35is. aire oiria cetera eee 197 Costior Discounting? 2%..:iten wen.Goes caao eee 199 Tire Quality andDealer Quality.c.ke nen OR eee eee 201 News Media — Politicians — Social Security................005. 203 W Edwards Deming 220.2,. t.kin cece at ee ee 204 Business, Ametica’s:Backbone wimace artes ee ee ee 205 Future Objectives. :8iins a5. oa anes ee 207 1982 Employee Speech can ease aes as ee eee 209 Keep Decision'Making LOwer.au. pyeee 214 People and Neéeds .2:55 chore ee a ee 212 everyone Had Help Sometime. ....05.0ieae.e ae ee 215 Keep It Going! ENCE YOO) SSS sea aa aoa eee 218 ER ALC mE IAMR INS rt reeeres ccs Ces Be eos oa Uy Es oe 219 Domi: roblems *—- Portlands: . ite eked oh ba ve ga vebe aeons 220 BE ay ONS ee CODE tie er RACs an cs hide so FRc sk boc nah hte 223 Gary Wanderscheid Letter...... | Sea Seenution nod me aL Meese gee 224 MORI Oia Cas Wem ite figs Ge a oes PARE oo awa oy Oa TE 225 SS MANICOAESic tNC eeeC IV re ety ee leh arety ao dod a wee eae Gea Cae. MAS LOMO eR te le ee shame te oy AR e's Shaky ae mien ankle oae229 1995 — Looking Back, by Dorothy Schwab.....:........... 232 We Believe in the Same Dream, by Margie Denton........... PapeXe) Mica: ande last hdivion... Dy eles SChWaDE. <i. <..fcmerees 4239 Foreword se ee This book was written mainly for the 2000 families that make their living selling Les Schwab Tires, and for the thousands of families to follow for the next 20, 30, or 40 years. I wrote this in November and December of 1985. I did write this 100 percent with my old 40 year old typewriter. I do thank Jan Nolan, my right hand gal, and Lorraine O’Hara, our word processing operator, for helping correct misspelled words and helping on proper punctuation. I didn’t have a ghost writer; I wanted it in my own words. I hope to pass on some of my theories of business to our people, and I hope these theories are used in our business for as long as the Les Schwab Company continues. Should we fail to follow these policies toward customers, and employees, I would prefer that my name be taken off the business. There could be some interest in this book, especially with our old time customers. Also with people who are interested in business. If so, you are invited to read the book. I hope in some way this book might help you in the business world. If you are not interested in business, this book will bore you; and, if I were you, I wouldn’t waste my time reading it. Les Schwab Preface There are many business people, tire dealers and others who will get ideas which could be useful to them from reading this book. You, of course, are welcome to use them as long as you don’t violate our trademarked names or names and terms that are an exclusive to our company. We will not send out copies of our profit sharing contract, nor will we send out copies of other programs we use. In this day of liability lawsuits, we can’t and won’t expose our company. We also cannot take the time from our office to spend a lot of time with visitors. We will for most anyone do this: Make a list of questions you might have, send them in letter form to our office, and we will answer them for you the best we can. I encourage you to share profits with your employees. I encourage you in every way possible to “‘Build People.’’ This is good for America, it is good for you, and it is good for your employees. If you do share, do it openly, and honestly, and don’t get jealous if they start to make some money . . . that’s the whole idea. If you make people under you successful, what happens to you? Aren’t you also then successful? But if you think of yourself first, it just won’t work, and there’s no use attempting it. What nicer thing can you do with your life than to help young people build their lives into successful people, not just in money, but in all ways. The older I get the more proud I am of the profit sharing programs and other programs that I have created, or have helped to create. I believe so strongly that America is such Keep It Going! 3 a great country and that Capitalism is the best form of government. I think we owe it to America to do our share to see that it continues. The best possible way to make it succeed is to share with people, to help people be successful people. Early Years It was October 3, 1929. The Bishop Schwab family was spending the last few days at the home of Grandfather and Grandmother August Schwab on their farm in Isanti County, Minnesota. It was the day the Bishop Schwab family planned to leave for their new home in Oregon. Father Bishop was not there. He was drunk again, so the trip was delayed for one day. On October father, 4th the family, mother Alice, Evelyn 15, Raymond 14, Leslie 12 and baby Joyce 6 months left in a 1929 Chevrolet sedan car. It was a new car. I was born in a home in Bend, Oregon. My folks homesteaded in the Oregon High Desert area and were homesteading at the time of my birth. The homestead was near the wellknown G. I. Ranch, and was 1-3/4 miles west of the then Fife post office. My family moved back to Minnesota in 1919 when I was about 1-1/2 years old. The homestead is now part of the G. I. Ranch. There is a book about Crook County schools that shows that my mother taught school at Fife in 1916, one year, at $65 per month. The school, Fife post office, and the Carl and Molly Pauch home are all gone now. What my mother did with my sister, Evelyn, and my brother, Raymond, during the time she taught school I don’t know. They had just a two room homestead shack, maybe my Dad took care of them. They were only 1-1/2 and 3 years old. Since I was born on October 3, 1917, I evidently was started while my mother taught school at Fife. I was probably the reason she didn’t teach in 1917. My mother was my teacher for the first 3 grades of school in a country school in Minnesota. Then 3 years of school in a consolidated school in the small town of St. Francis, Minnesota. The 7th 6 Pride In Performance and 8th grades were spent in the Brooks Scanlon Camp schools; the 7th grade was in Brooks Scanlon Camp #1 and the 8th grade in Brooks Scanlon Camp #2. The schools were just a railroad boxcar with somewhat crooked windows cut in one side of the boxcar. Over the years I’ve had a lot of fun telling the story that I am a Brooks Scanlon graduate, B.S., or B.S.U., standing for Brooks Scanlon University. I'll talk more about this later. If I remember correctly, there were three of us in the 8th grade. In those days we had to take state exams to graduate from the 8th grade. We all failed. My mother tutored us during the summer, and we all passed the state requirements at the end of the summer. She then took over the school and taught until her death about 1-1/2 years later. We had an auction and sold all the animals and equipment in Minnesota. After paying all the bills and paying for the new car, there wasn’t much left. The farm wouldn’t sell as it was the start of the big depression, and the bank finally took the farm back for the debt owed. My mother thought it might help my father’s drinking problem if we moved back to Oregon and got away from the atmosphere he had created in Minnesota. But that didn’t help, and it caused the Schwab family many heartaches in the less than four years that both my mother and father lived after returning to Oregon. We were all taught to work at very young ages. It seemed the normal thing to do. Evelyn went to work in the cookhouses for the single men soon after coming to Oregon. She was only 15 years old at the time, a skinny little girl, but she did the job for several years. My brother worked cleaning up the bunkhouses for the single men. There were three newspapers in Oregon in 1929; The Oregonian, The Oregon Journal, and the Merged News Telegram, all out of Portland. I soon got one of the routes, and before long I got all three newspapers. They came into camp with the log train that came out every day from Bend, and I delivered them during the noon hour of school. Today, 1985, it would be impossible for any lumber company to have a log camp. Not, at least, the type that Brooks Scanlon had in the 1920’s and 1930’s. Small two room homes, a two holer, and no running water. Water was hauled by train from town, spigots were spotted around camp, and you took your bucket to Keep It Going! 7: the tap, filled it and carried it to your home. Some of the larger families put two homes together, others at their own expense, added a kitchen. Today that would be poverty, but the homes were clean and people had fun. There _ was one community shower. The area was extremely dusty and the men came in from the woods around 4:00 p.m. and headed for the shower. Women and kids could use the shower in the afternoon, but buster, you better be out of the way when the loggers came into camp. We played a lot of group games such as horseshoes, baseball and softball. Kids played outdoors and could find a jillion thingsto do, such as catching and taming small animals, and hunting rabbits which were eaten. A lot of deer meat was eaten, both in and out of season. We formed a baseball team at camp. I was only 12 years old but I was the catcher. We didn’t have a catcher’s mask, I caught without one... and sure enough, I got a baseball in the face, and what a black eye I had. In fact, it made me ill for a couple of days. Why these men let a 12 year old boy catch baseball without a mask is a mystery to me today. My mother bought me a mask and I continued to catch and play baseball. From The Oregonian, September 16, 1985 . . . Headline on business page. ‘‘LAST RESIDENTIAL LOGGING CAMP IN NATION CLOSES DOWN.”’ Camp Grisdale, Washington (AP) The last residential logging camp in America is shutting down, marking the end of an era in the Northwest’s troubled timber industry. It was the Simpson Timber Co., which operates the Camp Grisdale at the southern end of the Olympic National Forest. Some remarks were: ‘‘This is one of the saddest days of my life,’’ said Dorothy Nulf as she prepared to leave the camp with her husband, Clarence, a mechanic at the camp. “‘I raised my daughter here and she had a real good childhood here.”’ Today DEQ and other government agencies would not allow the forest to have a log camp. It might spoil the scenery, and the environment. Yet almost every year I take one day and spend it at the former log camps. Today, 52 years later it is totally impossible to find any signs of the old camp sites. I’ve been around the people of the log camp for the past 50 or more years; _and the people, and the children of these people, have turned out 8 Pride In Performance to be much above the average citizen, both in success in business, and in being a good all around citizen. The interference of government in people’s lives and interference in private property rights started a few years after this period. High School My mother had a strong desire for my brother and me to attend high school. My brother Ray had graduated from the 8th grade and had been out of school for two years, so we started high school together in the fall of 1931. We were two awe struck boys entering the big high school from the logging camp. We boarded at various homes, mostly with people who also had lived in the logging camp. We would come into town early Monday morning and return to the logging camp Friday after school. We missed much of the school activities and pretty much felt like outsiders. One of my biggest fears was that my father would come to school on Friday drunk. It would haunt me all week, as I was proud; poor, but I had a lot of pride. Many a Friday evening we would have to sit in front of some of the old moonshine places until 9:00 or 10:00 p.m. until we could get our drunken ride home to the log camp. This was killing my mother. She was now teaching school and in poor health anyway. It was sad times for the Schwab family. At the start of my brother’s and my sophomore year my mother rented an old house. I think we paid $8 per month rent. My brother and I batched. We didn’t eat very good, but we could stay in town on the weekends. This started my newspaper circulation career, as I immediately started to deliver newspapers. I remember so well my first route. I didn’t know how to ride a bike; we never had one and my parents wouldn’t allow me to ride anyone elses. I ran the route for two months in order to get enough money to buy my first used bike. It was on the far end of town too. [remember going back to the agent’s home because of an address mixup, then back to the route. I still couldn’t find the Keep It Going! 9 address of a new customer, so back to the agent’s home. While talking to the agent I fell over in a dead faint. I hadn’t eaten and I had probably run and walked 9 or 10 miles, but I was too proud to complain. I just plain fell over from weakness and complete _ exhaustion. Just a few months later in response to an announcement over the high school speaker system, I checked into a newspaper route opening for the Oregon Journal. I was hoping that maybe in some way I could handle both routes. But that couldn’t be, as the newspapers all came in the same way and same time. | talked to a Mr. F. W. Goldenberg who lived in Portland. The Oregon Journal didn’t have a full time agent in Bend at that time. He was‘a good talker and I more or less took the route sight unseen, and resigned my News-T elegram route. It was a sick looking route and I was somewhat sorry, but it turned out to be a real break for me later. The Oregon Journal was very aggressive for circulation. Goldenberg taught me how to sell, and I soon doubled the route given me by him, and I was fast becoming his hero. January, 1933 our mother became ill and was in the St. Charles hospital. She died in 9 or 10 days from pneumonia, but as much as anything from complete exhaustion. She just gave out and gave up. With Dad’s problem, the rough log camp life, teaching school and baby Joyce . . . it all amounted to just more than she could handle. My brother Ray and I continued to batch. Evelyn took baby Joyce and continued to work at the cook house in one of the log camps. But Ray and I had a problem. Our father had now been fired at the log camp and he stayed with us. My cousin did us a real favor and took us into his home for a couple of months. I had considered moving to Washington and living with an aunt and uncle. My boss, F. W. Goldenberg, told me that if I stayed in Bend he would give me the downtown route, with the news stands, and I could keep as much as possible of my old route. By doing this, I could make between $30 and $40 per month and I found board and room at a high school boarding house for $15. Goldenberg fired the young man that had the downtown route and I think this man disliked me for life. Goldenberg made arrangements with the high school so I could _ finish my newspapers and go to school when done. I would go to 10 | Pride In Performance the principal’s office, pick up my slip, and pick up at whatever point the class was at that time. I had a first period study hall, so I didn’t miss too many classes, but I did miss the study period. In the summer of 1933, I was 15, and I got my first taste of business, except for my paper routes. My route took me through a motel (one of the real old time ones) and at the edge of the river there was an abandoned swimming pool. Mr. and Mrs. Walker had decided to open this pool and were working on it. I asked them if they were going to sell confections. They didn’t seem too interested, so I asked them if I could lease the confection stand and start my own business. They said, go ahead. They gave me free rent. So I went to the wholesale houses and creamery and bought candy and ice cream. I did all of this on my bike, which did have a basket for my newspapers. We didn’t have electricity to my stand so I had to also pack ice. I fixed up this stand myself with hammer, saw and nails. I didn’t do too bad, except for one thing that all businessmen have to contend with . . . burglary. About once a week they would break into my stand and steal everything. They broke me. Mr. Walker told me to bring down my candy to his ticket place and work for him. So I did. Mr. and Mrs. Walker were nice people, they were good to me. My father died almost to the day of my 16th birthday. He was found dead in front of a moonshine joint. We thought there might have been foul play, but it didn’t really matter; he had gone so far downhill and was working for 50¢a day for a rancher. It sounds like my father was all bad. This isn’t true. Why and how a man can let this happen, the Lord only knows. I think it started with Mother going to school to renew her teaching credentials, Dad having an affair with the hired girl, being a person who took one drink and couldn’t stop until he completely gave out, and downhill from there on. But he was a hard working, extremely strong man, a gentle man, but a raving maniac when drunk. It certainly brought sad days to our family. The Oregon Journal and The Oregonian were just entering into a circulation war. The Sam Jackson family owned the Oregon Journal. It was a good newspaper and growing fast. Mr. Goldenberg wanted to start a Sunday route in the farm area. We would deliver the Sunday newspaper and send the daily Keep It Going! 11 newspaper by mail. He wanted me to run it. I needed a car. I bought a 1926 Chev with a box on the back. I think I paid about $75 for it. I can’t remember where I got the money, but I believe I paid cash, or nearly paid cash for it as I can’t remember any ' payments. We scooped The Oregonian with this rural route and signed up 75 to 80 percent of all the farms in the rural Bend area. I was the hero with The Journal and, even though only 16, I was becoming recognized as a good circulation person. I wouldn’t use my 1926 Chev except on Sunday. I rode my bike during the week, even though I was getting to the age where a 16 year old boy didn’t like ‘being seen delivering newspapers, especially on a bike. But money, in this case, was much more important than pride. During the summer of my 16th year Mr. Goldenberg worked with me to take over the whole city of Bend for the Oregon Journal. There were 8 or 9 routes in the town and I took over the whole town during the summer. Actually I was now making about $175 to $200 per month and not even 17 yet, in the middle of the depression. The high school principal, whom I had become friends with because of my many office visits, only made $150 per month. I think I thought I was already a man. I bought a new 1934 Chevrolet, 2 door sedan. I had the only new car in the high school of 500 students. Only one girl, a daughter of a businessman, had the only other car. Of course, sometimes kids would come to school in their parent’s car, but there weren’t any traffic jams around the school such as they have today. Dorothy Harlan, My Future Wife I began dating the girls and soon met Dorothy Harlan. She was almost the same age, but one year behind because her birthdate was in December. Mine was October 3rd. I think we would have married when we were both 17 except she had to finish school. ‘+: Pride In Performance We were married at the age of 18, and we will soon celebrate our SOth anniversary. I was lucky; we have been very much in love, and we have had a happy marriage. We rented a small two room apartment and shared the bath with four other apartments. Seven or eight months later we moved into a nicer apartment and thought we had really arrived. Less than a year later we bought our first home for $1,800, but only lived in it for ten days. The Oregon Journal asked me to move to Eugene and be district manager for the Eugene area. I wanted to move, and, like most young men, get out of the old home town. But I was a sorry young man. I was an eastern Oregonian and the wet valley wasn’t for me. After about nine months in Eugene, the Journal changed their program. They made much larger territories for the district managers and cut down to nine districts in place of the 27 they then had. I was, even though only 20 years old, lucky enough to be picked as one of the nine men. I got back to eastern Oregon covering about half of eastern Oregon. Upon leaving Eugene I found myself in debt about $900. Dorothy traveled with me, and we stayed in motels that had kitchens. We didn’t have a home for about 18 months, so we really paid off all our bills. I vowed then to never get in over my head with debts, and I have kept this vow. Dorothy became pregnant, and it was with our wishes. We had been married nearly four years. Harlan, our son, was born June 23, 1940, but it stopped Dorothy from traveling with me. I was one lonely man. The Bulletin, Bend, Oregon The phone rang one day, the Bend Bulletin wanted to talk to me about becoming their circulation manager. Their circulation manager had been killed in the war and they could now offer a permanent job. They offered me $45 per week. I was already making over $50 per week with commissions. I thought it over and told them I would take the job for $60. They said, you’ve got Keep It Going! 43 it. There were three owners, or stockholders, in the Bend Bulletin; Robert W. Sawyer, Publisher, Henry Fowler, Editor, and Frank Loggan, Advertising. Mr. Sawyer was definitely the head man and owned about 80 percent. The one question I asked - was this, ‘‘Who is my boss?”’ It was supposed to be Mr. Sawyer and no one else, but after a few months it appeared I had three bosses. One day I went into Mr. Sawyer’s office and said, “‘I was told that you and you alone are my boss.’’ He said that was right. I told him it appeared I had three bosses. I was told I was a department head the same as Loggan and Fowler. He said that was right, and called in the other two men and told them the facts of life; thereafter I didn’t have a problem with three bosses. If I hadn’t done this, my life at The Bulletin would have been miserable. The one thing I did know was newspaper circulation work, and I knew a lot more about it than the two minority owners. Thereafter I was a department head as much as possible. The circulation end of newspaper work is usually regarded as the lower end of the prestige ladder. I attempted to put some pride into the circulation work, for myself and for others. I was young, sometimes cocky; but this same cockiness helped me a lot in going through life. I could hold my own, but often times I didn’t impress some of the high society people. World War II The war had started and was getting larger. Harlan was a prePearl Harbor child, and that was supposed to keep you out longer. But in my case it didn’t seem to help. They started breathing down my neck and I volunteered for the Air Cadets. First you needed two years of college, which I didn’t have; then they said if you could pass a test they would waive the college. I took the test in the Episcopal Church and passed it. They soon called me in and I was now an air cadet. I’ll never forget walking away from my wife and son in Redmond where they had moved in with her parents. I had a lump in na _ Pride In Performance my throat that would choke a horse. I had absolutely no desire to go to war. Basic training was hell at Shepard Field, Wichita Falls Texas, and I missed my wife and son terribly. I was there about six or seven weeks, then off to Randolph Field, Texas. Randolph Field was then the West Point of the Air Force. Dorothy took the train and came to visit me, but it was nearly impossible to get any passes from the Cadet Corp. She stayed until I got my first leave and we went to Redmond. I had to get back and went back to Texas alone. Dorothy and son Harlan came down later and began their miserable life of following me. I went from Randolph Field to SACC (San Antonio Aviation Cadet Center), then to Brooks Field also in the San Antonio area, and then to Monroe, Louisiana. Dorothy had found work at an officer’s family home as a maid at Randolph Field. The first home was miserable, but the second home was with great people. We still correspond to this day. Dorothy and three year old Harlan went with me to Monroe where they lived in a miserable small bedroom, but they were in the area. I couldn’t get off base except on Sundays. The war ended while we were in Monroe. The war ended in September, 1945, and in 60 to 90 days I got out with the help of Robert Sawyer, Publisher of the Bend Bulletin. But when I walked up to the pay window to get my $600 severance pay they told me, “‘Young man, you don’t get any. You got out under some regulation called, ‘For the good of the country’, and under this you lose your severance pay.’’ My family and I really needed this $600, but it was not to be had. As I think back today, if I had an employee I asked to get out of the service and he lost money due to my request, I would pay him this money. It didn’t even enter my mind that the newspaper should have probably given me this payment. With most companies in those days you got paid on payday and that was it . absolutely no benefits. I was now 28 years old. I had ambition, and, overall, I did a good job as circulation manager of The Bulletin. 1 wanted to buy in, but it was lucky that I couldn’t. I wanted to go into business as i had always wanted to be a businessman, but I didn’t have any money. The war had taken just about all our savings, plus the Keep It Going! 15 fact we sold our home for $3,400 (the same type of home then cost $10,500). The war really set us back financially. I did line up a magazine wholesale business which I almost started. It would have been a new business to Central Oregon, but I felt guilty to my boss, Mr. Sawyer. I had only been home about eight months and his circulation department was in one hell of a mess. So I dropped the idea and another man took up the idea and went ahead. I was jealous of this man fora long time, but again, I was lucky. The magazine business did not have a good future. Post War I was going through a period at this point of not knowing just what I wanted to do. The war years had set Dorothy and me back a lot. I always loved sports, but never had a chance to play. My ambition as a youngster was to play in the major leagues some day, but as I think back now I never would have been good enough to do that. Fast pitch softball was popular just after the war and we had played a lot of it in the army. We formed an upper and lower league in Bend. I watched the windmill pitch and thought, hell I could do that. In playing baseball as a youngster I more or less threw my arm out so I threw a lot of underhand balls because it didn’t hurt my arm as much. I caught in baseball, but had a problem in getting the ball down to second base fast and hard enough. So I took up the fast pitch softball, and after about the second year I was getting pretty good. For a period of about two or three years I was the best fast pitch softball player in Central Oregon. Our team went to the state tournament in Pendleton, and we lost the first game by a 2 to 1 score. I also pitched for another team in Baker in the state tournament, but only pitched the last three innings. They didn’t score on me, but we also lost this one by a 2 to 1 score. I also organized a Junior League. We had eight teams and I just about ran the whole show. It was very successful, but God, the hours I put in. Almost every evening I was either playing or Pride In Performance 16— running the Junior League. I remember one night a man who worked for The Bulletin was on my back, I lost my temper and told him if he knew so damn much why didn’t he help me with the league. I think I speeled on for about five minutes telling him off. The next day I waited for the fireworks as I walked through the shop. He did stop me and I thought, here it comes, but he said, ‘‘You thought you ate my ass out, but you should have heard my wife after I got home.’’ Anyway, the kids had fun in the Junior League that I almost ran by myself. I was active in the Junior Chamber of Commerce, Toastmaster Club, and head of the tourist promotion part of the Senior Chamber of Commerce. Almost every evening I had something going on, two or three noon meetings each week, and being circulation manager of The Bend Bulletin at that time was not really an easy job. I did win a nice award that year as being the outstanding Jaycee Young Man of The Year for Bend. I guess it was worth it and I learned a few things. When I went into business I decided I had worked enough for other people and that hereafter I would work for myself and my family. I have never been active in civic work since then; I feel it is a lot easier to give money than it is time, and I’ve tried to be generous in that way. I have a lot of respect for the great people who do the free work for their community, men such as Cecil Sly, Rev. Jim Howard and many others. I was learning a lot as circulation manager, learning to work with people, to organize and to promote. After a couple of years I had the circulation department humming. I started an ‘‘Honor Carrier’ program with my newspaper boys. I had about 50 newspaper boys and when I first came home about 10 of the 50 would quit every month. I had to go to the schools, get a list of the 7th and 8th grade pupils, go to the homes and actually sell the routes. This is when I started to hire some girls to deliver newspapers. They worked out great, but it was nearly a first. Heretofore, girls never delivered newspapers. I remember well one wisecrack one of the newspaper boys made shortly after we started hiring girls for the routes. He asked, ‘‘Les, what are you going to call the girl carriers? You can’t call them newspaper boys, so I guess you’ll have to call them paper bags.’’ But girl carriers worked out great, and, in fact in most cases, I believe Keep It Going! 47, they were more dependable than boys. Giving recognition to the carriers through the ‘‘Honor Carrier’ club worked great. Each month I had one Honor Carrier and ran his or her picture in the paper with a short story and gave them a $25 bond. Then they could start over again and work up the ladder and were called one star honor carriers. Some worked up to be two and three star honor carriers. They earned this right through getting new customers, good service (not more than four complaints of missed papers per month), by bookkeeping and collections. ; Looking to Buy a Business I was 33 years old now and still wanting to go into a business of my own. Money was the main thing holding me up. I didn’t want a service station, or something that didn’t have some kind of a future to it. I did think a lot about the wholesale gasoline business, but these didn’t open up very often. They, too, were pretty much controlled by the oil companies, and as I think back, if Ihad gone into the wholesale oil business I am sure I would have wound up having an independent type dealership. My brother-in-law had made a lot of money in the lumber business in the Mitchell, Prineville and John Day areas. He was in partnership with his brothers and they had a lot of guts. They had started with a small mill at Camp Watson, 20 miles or so northeast of Mitchell. They bought a lot of private timber from local ranchers, much of it for around $1 per thousand board feet. The war started, prices went up, and there was a fortune to be made in making lumber. They built, shortly after the war, a larger mill in Prineville and it operated until the company went out of business in 1983. Fred Hudspeth, my brother-in-law, told me to find a business and he would help me finance it. That was all I needed, and I started to look seriously, as I knew time was running out. I believed if you didn’t get started in business at a fairly young age 18 Pride In Performance you would get into a rut and never make the big decision to jump. There was a tire business for sale in Prineville. At first, Fred wanted to buy this business and make it a three way partnership between his brother, John, himself and me. In fact, we went so far as to decide to go ahead, take inventory and take it over the following first of the month. I was to give my boss notice on Monday. Fred called me Sunday evening and said his brother John didn’t want to go ahead. I was disappointed, but very lucky this happened. I have often thought what their one-third each would be worth today; but with their later financial problems | am sure they would have taken all of my expansion money and the Les Schwab companies wouldn’t have been able to expand. It would not have worked out under the partnership plan. A few months later Fred, Dorothy, her sister Margaret and I went to Corvallis to an Oregon State-Stanford football game. On this trip Fred mentioned he knew I was disappointed and that if I could find a business he would help me with the money and I could be alone. That was all I needed to know, and I earnestly started looking. I always went back to the small tire shop, the O.K. Rubber Welders in Prineville, Oregon. I thought it, the tire business, had a future. I remember telling my wife I thought I was a salesman, a pretty good one, and maybe that ability could be used in the tire business. This small shop retreaded tires, sold new tires, fixed flats and it was hard, knuckle busting, dirty work. The price of the shop was $11,000, plus inventory. Mr. Winn, the father of the Prineville operator, owned the building and I leased it for two years with a three year option. I got $11,000 from my brother-in-law, sold my home, and borrowed on my life insurance. Altogether I raised $3,500 and I gave $2,800 of this to Marshall Winn, the man I bought out for the small inventory of retread rubber. The new tires were on consignment from General Tire and I was in business taking over January 1, 1952. Keep It Going! 19 First Day in Business I had never fixed a flat tire in my life. I always put on my spare and took my flat tires to a service station. Marshall Winn agreed to stay with me for 90 days, but he wasn’t much help. He had only one employee, Bill Welch, who did understand the tire business quite well and he stayed with me until his retirement. Bill never did work into ‘any management positions but he worked until his early retirement at about age 55 when he took a medical retirement. I remember telling my wife many times that if I ever got a chance to go into business I had some ideas about sharing with people and about sponsoring people in business. There are a lot of people who could run a business, but would never get a chance due mostly to the lack of start up money. I was going to furnish the money and in some way share with them in the promotion of our business. January 1, 1952, my first day on the job. I was the first one there. Both Bill Welch, my employee, and Marshall Winn had a habit of coming in late. A man wanted a couple of 6 ply tires mounted on his wheels. All we had were hand tools and we changed the tires on the floor. I had these two tires all over the place, and if I remember correctly one of the two other men finally came in and saved me. The first month we did $2,800 in sales, but it was nearly all retreading which carried a total gross profit of nearly 70 percent. I took $350 salary and paid my man $300, so after salaries I still had $840. I believe I only paid $100 or maybe $150 rent, so I actually made a small profit the first month. February was even less in sales, but in March I started going and by June and July I was doing $10,000 and more per month in sales; at year end I had $150,000 in sales. The man I bought out did about $32,000 per year in sales. 20° Pride In Performance Frank Canady About April I needed another man. I told Bill Welch he could hire him as I was going to be the outside salesman and he would have to work with him. He hired a man, but the man didn’t work out. About that time a beautiful young man by the name of Frank Canady walked into the store. He said he and his wife wanted to live in Oregon. They had stopped on top of the hill and by looking down into Prineville they decided they wanted to live here. He said he looked around and decided he would like to work for me. He gave me a reference, I made one phone call and hired the man. This was probably my first good move in business. I let the man go that Bill Welch hired and thereafter I hired my own people. Within a couple of days Frank Canady was already a very important man. I had started a profit sharing program for the two men, but it wasn’t what I really wanted. I kept thinking. Rubber Company Phoney Policies I started in 1952. At this time, and for years and years to follow, the pricing policies of the major rubber companies, on truck tires, to their dealers were most unfair. They were all the same, all five of the major American rubber companies. The cost of a truck tire, to the dealer was, at least in theory, the same from all five companies. For example, if a truck tire cost the dealer $100, he would find, when he made sales calls, that someone else would be selling a like tire for $90. The dealer would then call his supplier, his supplier would say, sell them for $90 and we will Keep It Going! 21 give you 5 percent commission. You would send in copies of the invoice, the rubber companies would then cancel your $100 billing, rebill at $90, less 5 percent. BIG DEAL. You would have more than 5 percent in interest expense, and bookkeeping costs before you got through. This was called, ‘meeting a competitive situation.’’ I called it milking the dealer of his profit as his cost shouldn’t have been as high as $100 in the first place. I, too, had to contend with this until I made my connections with Toyo Tire Company from Japan. I say, thank God for the foreign tire supply; it helped the independent tire dealer, at least it certainly helped me. Tire dealers were forced to put up with this baloney and it broke many of them. I did everything possible to move the figures around some way so that I could survive. I think I did a better job than other dealers as I made it through this period. Even though it was impossible to make a reasonable profit on new tires, I usually always got the retreading, and I could make a decent profit on that. By handling the business on a one-man basis (sales, service, credit, the whole works) I could operate very cheaply. Business was good and I was making a reasonable profit on paper, but I was having trouble with collections, and that made me walk the floor nights. Most of my credit problem was with my largest account. I had a theory that went like this. Never take advantage of a customer, never take advantage of an employee, but take all the advantage you possibly could of a rubber company because they were not being fair and honest with me during this period. I said that when I went before Saint Peter on my judgment day he would look over my record and say ‘‘Oh, I see you were good to your employees, that’s in your favor; Oh, I see you took advantage of the rubber companies, that’s in your favor; I'll give you a good mark for that.’’ While saying that, I would put a mark in the air for the good mark. Today, 1985, I don’t feel the same way toward rubber companies as I did 25/30 years ago. They are much better people today. Maybe people like me finally made Christians out of them. Whatever .. . today I don’t want my company to take advantage of anyone, even the rubber companies. But I certainly 92° . Pride In Performance won’t apologize for anything I did, in order to survive 25/30 years ago. I am proud that I had the guts to fight hard enough to survive this period. I feel strongly that the rubber companies were very unfair to their dealers during the early days of my tire business. But, really, in many ways this proved to work out in our favor... . I’ll get into that later. Mary Kay, founder of the very successful Mary Kay Cosmetic Company, has a saying .. . do good for people and it will come back to you ten fold. Do bad and it also will come back to you ten fold. The five major American rubber companies have received their just awards as two of them have dropped truck tires entirely, and the other three aren’t doing very well with truck tire sales. It serves them right, they have earned their failure. Daughter Margie Born — Frank Canady June 30th came along, six months after starting business, and my daughter was born. She was so tiny, four pounds, but went down to less than that. We had to leave her for a few weeks in the hospital. She is 33 years old now, and we have had 33 great years. She has been a joy to Dorothy and me. Frank Canady’s wife had a baby girl a week later. November came along and Frank told me he just had to take his wife back to Indiana, as she was so shaken up with the baby she needed to be close to her mother. He said he would be back in four or five days and help me through the snow tire rush. Sure enough, in about five days he was back and stayed for six weeks. What a tremendous man this man was and what a help he was to me during my first year in business. About Christmas time Frank left to go back to his wife in Indiana. He had helped pull me through that first snow tire rush. In the meantime I had picked out a man I thought would be good and had lunch with him. He had a good job and I didn’t think he would be interested. I didn’t have much to offer except that I planned to grow and he could grow with me if I was successful. His name was Bob Dickman, another tre- Keep It Going! 23 mendous man. He joined up with me, and today he just retired as our member dealer in Junction City. His son now owns their business. He was successful as our independent dealer and his son is successful too. The spring of 1953 Frank Canady and I began corresponding. His wife had solved her problems, and he wanted to come back to Oregon. I told him I wanted to branch out in Redmond and would love to have him back. He got here in August and worked at the Prineville store until we opened our new small store in Redmond about the last of September. I had bought two lots in Redmond for $2,250. The man who owned it was a retired logger, a real fine gentleman. I bought 75 feet of frontage by 137 feet deep, but in thinking it over I asked him if he would sell me another 60 feet on credit. He did. I put a small 22 by 50 building on the lot. I had about $10,000 invested in land and building. Frank was the only employee, and he took his lunch to work. I still had a profit sharing program going. I ran Redmond as part of the Prineville store and Frank shared in both, but I soon changed the program. My theory in the small store was that all other large tire dealers had big service trucks running all over the country. They called on mills, commercial accounts, garages, and service stations. Their retreads looked better than mine, but I had made up my mind to do it differently. I would advertise to the ranchers and other people telling them to buy direct from me, buy wholesale. They, the other tire dealers, had $6,000 plus invested in service trucks; I put in the whole store for $10,000 and we were there six days a week. They only called once a week. The other dealers would give from 25 percent to 40 percent off on retreading. I gave about 15 percent off and sold direct. It worked. People did come directly to my stores, and business was picking up constantly. 24 Pride In Performance First Profit Sharing Contract A big day in my business career was January 1, 1954. I told Frank Canady I didn’t have time to run Redmond, I trusted him and I would make him a deal. You run this store, I'll sell you the tires, I’ll charge you $200 per month rent (an excellent return on a $10,000 investment), and you take $400 as salary and thereafter we would split 50/50. I made a profit of 5 percent or so on the tires he bought and about the same on retreading, but he would have to leave his money in the store until his share equalled mine. This was the start of the profit sharing program that we still use today. We still share 50 percent of our profits, but we share with all the employees in the store. The manager now gets 25 percent of what is left after sharing with all other employees. I also told Frank that if the Redmond store did make it, he could have a raise if he wanted it. If he wanted a $100 raise, I would raise my rent $100, it was to be 50/50 hereafter on everything. We followed this program on the first six or seven stores I built. I also told Frank that if this store was successful (Redmond) I planned to build more. If this store failed, I would go back to Prineville and run just one store. As I think back, Frank Canady was even more important than I thought. There wouldn’t be the chain of Les Schwab Tire Centers that we have today if we hadn’t been successful in Redmond. Start of Production Center The Prineville store was now bulging at the seams. I didn’t own the building so I couldn’t very well build on. I bought a small carpenter shop (32 by 32) from Dan Fridley. It sat on the lot where our office is now located, except we have bought much Keep It Going! 25 more land. The mailroom in the main office is part of this 32 by 32 carpenter shop. I moved all of my retreading equipment to this building. The idea was that in a year or so and before my lease ran out I would build a tire store on the front. I was at an -O.K. meeting and they were encouraging moving the equipment out, making a store out of the shop, and centralizing the retreading production whereby one shop would do the retreading for five, six, seven or more stores. By accident somewhat I was years ahead of them. When Mr. Winn found out I might move, he offered to sell me the building. Since that was a better location than the Madras Highway, I bought it, and that is where our present store stands on the East Ochoco Highway. The centralized production idea was on its way. Entering Bend — 3rd Store We now had Redmond and Prineville and they were both successful. I wanted to expand into my old home town of Bend, but I had the franchise for the O.K. Rubber Welders, and both Bend and Madras were taken. I even went so far as to take an option on a building in Bend, but I couldn’t figure out how to work it and I dropped the option. The Bend O.K. operator wasn’t very successful and the district manager for O.K. and I talked a lot. We decided I could put in a second O.K. store in Bend and pay a royalty to the Bend O.K. Rubber Welders. I bought a small building where our present store is today and opened a second O.K. Tire store. I leased the building to Mel Hilliard, the Bend was O.K. man, and he in turn held the lease, but Paul Rukaveno the operator of my store. I did the retreading and sold him the new tires, but Paul and Mel didn’t get along. I told Paul to be patient, that I would work it out in time, but Paul didn’t have patience; he moved out, dropped me, and I was left with a vacant building. I went to Mel Hilliard and asked him if he would like to get out of the lease with me. He naturally said yes. I told him I wasn’t 26 Pride In Performance going to lie to him, that I was going to open an independent tire store. He said I couldn’t do that and my reply was, let’s not argue, I just wanted to be open about it. He signed off the lease and I was ready-to go. The problem now was a new name. TIRE CENTER was in my mind, but that seemed too plain. I had in mind already to get other people to join me, so it could be Les Schwab Tire Center or John Smith Tire Center. TIRE SERVICE CENTER was another name I thought of. We ended up with Les Schwab Tire Center and started with Les Schwab in smaller print, but soon changed to where Les Schwab became the predominant name. Ernest Miller from the Prineville store was the first manager: Now I had a fight with the O.K. Rubber Welders. This was later changed to O.K. Tire Stores. They were on my back, but we charged ahead. Entering Madras — 4th Store Gordon Priday was one of the employees at the Prineville store. I still managed the Prineville store along with my other duties. We talked about opening a store in Madras and Gordon wanted to manage the Madras store. I’ve told the story that Gordon didn’t say ‘““Good Morning’’; he started off the day with ‘‘when are we going to open in Madras?’’ I told him I already had a fight on my hands with the O.K. people. Anyway I decided what the hell, as long as we had a fight, why not have a good one. I bought a small bankrupt fruit stand in Madras for $5,500. It was only a 50 foot lot so I bought the corner lot for $4,500 and we opened. It had a small apartment in the back and Gordon moved his family in and lived in the back. We figured we could break even with $2,000 per month in sales, make a small profit at $2,500 and do okay with $3,000 per month in sales, and that is about all we did. The first year we broke even. I worked with Gordon and we started the second year better. We made about $800 the second year and Gordon got half, as he, too, was under the profit sharing contract. Another new store had opened in Keep It Going! 27 Madras just about the same time and he had a nice new building. Ours was not so nice. The only money we spent remodeling was done by Gordon himself with hammer, saw and nails, but we won the battle. The other store closed after about two years. Again, if we had not won, it would have ended the expansion for Les Schwab. Fight with O. K. Yes, I really did have a fight now with O.K. They were threatening to take all my equipment away from me and cancel me out as an O.K. Rubber Franchise Member. I remember one meeting very well. They flew into Redmond, about five of their people, and we met in a motel room. I was alone. They said they had come for my answer. I asked ‘‘what answer?’’ They said I had to get out of Bend and Madras or else. I lost my temper and told them that hereafter I didn’t want any more harassment from them; if they had anything more to say, say it in court. I walked the floor nights, because if they took my equipment it would have bankrupted me. I was bluffing, but I was determined. I told Dorothy I might have to go back to selling newspapers, but I had my neck bowed and I was going to see it through. As I think back, I think the reason they didn’t take it to court was due to the fact that if they lost it would have messed up the franchise nationwide. The fee on the O.K. franchise was only $12 per year. I kept the franchises for Redmond and Prineville for years and years until it wasn’t worth the $12 anymore. Every time they tried to cancel me I would send them a registered letter telling them I wouldn’t accept the cancellation. I insisted they let me run under the O.K. franchise in Redmond and Prineville. O.K. had about 1,100 franchises mostly in the western United States, and was very popular. I had spent a lot of time and money building the O.K. name in Redmond and Prineville, and I didn’t want to give up the name until I had established the new name of ‘‘Les Schwab Tire Center.”’ 28 Pride In Performance I had an O.K. Rubber Welders in Redmond and Prineville and a Les Schwab Tire Center in Bend and Madras. This fouled up my advertising, because I couldn’t advertise O.K. in two towns and Les Schwab in the other two towns. I had always advertised as ‘‘Les Schwab O.K. Rubber Welders,’’ and I was glad I had done this. I did this because I had in mind that some day I would drop out of O.K. I repainted my buildings in Redmond and Prineville and made the main name ‘‘Les Schwab Tire Center.”’ On the left side of the buildings in Redmond and Prineville I put the General Tire sign up (painted) and on the right side of the building I put up (painted) the O.K. logo which was the O.K. man. In Madras and Bend I had the same, except on the right side I had “‘Kraft System Retreading.’’ General Tire was promoting the Kraft System retreading nationwide. General Tire had okayed the O.K. equipment and I thought that just maybe if I did get into a lawsuit with O.K. I could tie their two tails together and let them fight it out. Anyway, I now had common identification and could advertise on the radio (TV wasn’t here yet) and in the newspapers and give them hell. The pressure on me was tremendous. My largest account was way behind on payments and it worried me no end. My net worth was about the same amount as what they owed me. If they had gone broke at that time they would have taken me with them, and the Les Schwab story would have ended right there. Thinking of Future — Dreaming — Planning We had an excellent babysitter for little Margie. We called her Grandma Peterson and Margie really thought she was her Grandmother until she was seven or eight years old. Also her real Grandmother, Daisy Harlan, kept her when we took trips. To get away from the pressure sometimes I would call Dorothy and say, ‘‘Let’s get the hell out of town for at least overnight, maybe two nights,’’ and we would do just that. But guess what? I would Keep It Going! 29 usually visit other tire dealers, the large ones usually. ‘We were riding down the Columbia River Highway one evening going to Pendleton. I told Dorothy I was jelling an idea for the future; that I was going to build me a small warehouse, ‘move Mildred, my bookkeeper, out with me, that I was going to buy the tires, do the advertising, price the tires, do the books and maybe build six, seven or eight stores some day. I knew I could buy tires better if I had the time. I knew how to advertise and promote, and I wanted to share with the store managers and make them successful. I was already visualizing ahead, but we certainly went past the six, seven, or eight numbers. I also remember riding back from ‘the Ochoco camp site. At that time it was just back of the Keystone ranch. The General Tire salesman was with me, and for some reason I got mad and told him, ‘‘just you wait until I get $10,000 that I can call my own money and I'll show you I can buy tires better than you bastards are selling them to me.”’ John Day — 5th Store — Dick Hammack The Prineville store was making most of the money at that time, but the other three stores were coming along too. I was making a trip each Tuesday to John Day and I ran this route too. The Blue Mt. Mills had bought an automobile agency building and had put their truck shop in the back, the front was a service station selling gas and a man was in the tire business in the showroom. He wasn’t making it. I rented the building from the Hudspeths and started my fifth store. We sold gas also. I transferred Bob Herringshaw from the Prineville store to manage John Day. But I soon bought the Oakridge store and Bob wanted to move to Oakridge. I replaced him with Don Zigler from the Prineville store, but we had management problems in the retread shop and I asked Don to move back to Prineville to manage the Production Center. Jack Defoe from Prineville was supposed to take the John Day store but after staying only a 30: Pride In Performance week or 10 days in John Day he decided against moving. I was in trouble as I didn’t have a man to put in the store. Dick Hammack, who was only about 20 at the time, maybe 19, had worked for me since he was 16 in the Redmond store. I sent him over but he was over his head. Denny Cook had worked for us in Madras and I sent him over as assistant manager. After a few months I reversed them, making Denny manager and Dick Hammack assistant manager. Dick quit and started a tire business in Dayville. We did have the non-compete deal in our contract, but the only penalty was the forfeiture of money coming, and Dick didn’t have anything coming as he had lost about $3,000 during his management time. Dick soon went broke in Dayville and went to work for Shoop and Schultz, the largest tire dealer at that time in Central Oregon with stores in Bend, Redmond, Prineville, John Day, Klamath Falls, and Redding, California. Today Shoop and Schultz are out of the tire business. Dick came back to us and still works for us today. He became manager of Spokane, but that didn’t work out. He was assistant manager in Corvallis for a long time and said he never wanted to be manager again; but when we bought a tire store in Woodburn, he applied, got the store, and has done a great job. . Earlier I said the manager couldn’t get his money until his share equalled the investment in the store. One day I walked into the office and Dick Hammack was there. I asked him, ‘‘How come you are here today?’’ He said, ‘‘It is a big day; I brought a check over which pays off my store.’’ I told him I was going to Bend and why not ride over with me. We discussed old times, and I felt good that our programs had helped this man so much in his life. Dick is now in his high forties, and, outside of the short time he left from John Day, he has never worked for any other company, starting with us at 16 years of age. Even though Dick Hammack had a couple of setbacks, he always bounced back. I am sure, today, he is happy and proud that he saw it through. He is a very successful store manager today and will wind up with a very nice retirement nestegg. Many, if not most, men that fell off the tree in earlier days would just quit and go another way. Today they often stay with the company, go back to working by the hour, and start to work up the ladder again. And almost always they do make it back to Keep It Going! 31 store manager again, and the second time around they are always a much stronger manager than they were the first time. I am happy to see these men stay with the company. I hate to see the company lose these experienced men, and in most all cases it ‘is best for the man to stay with the company. It is seldom that I ever see any man do better on the outside. But pride makes them want to leave, and I can understand that. We started out with 50 percent’of the profits going to the manager. Over the years we have changed this some, but we still share 49.51 percent of our profits with our employees in the stores. Each store operates as a separate entity and each store operates as a separate business. The store employees share only in the profits of the store they work in. The 100 Story Today our program is what I call the 100 story. What happens to each $100 of profit that each store makes? The 100 program follows. The last change we made was when we started two assistant managers in the larger stores, and that too, is covered in the following breakdown of the 100 program. THE LES SCHWAB PROGRAM FOR EMPLOYEES IN THE LES SCHWAB TIRE CENTERS This is what happens to each $100 earned in each of our stores. ONE ASSISTANT MANAGER STORE: $100.00 15.00 $ 85.00 or 15% goes into your Trust up to 15% of your salary. If 15% of our profit does not cover 15% of the payroll, you will not receive the full 15% of your salary, but will receive the correct portion. Pride In Performance a2 $ 85.00 10.20 $ 74.80 $ 74.80 7.48 $67.32: or 12% of the remaining $85 goes into your cash bonus program. This is distributed to you in October of each year under our share program. Ask for the explanation. or 10% of the remaining $74.80 goes to the assistant manager and into his partnership Profit Sharing Contract. He does not get this money until his share equals 10% of the store. Thereafter he can draw the surplus. Most times the assistant manager takes this money with him when he becomes manager. It saves a lot of interest expense, and it makes it easier for him to start and manage a new store. $ 67.32 16.83 $ 50.49 or 25% of the balance (22.5% of $74.80) goes to the manager under his manager contract, which is the same contract as the assistant manager. He can’t take this money until his store is paid out and thereafter can draw the surplus. When the manager is allowed a draw, the company takes a draw. This is the only time the company takes any money out of the store. As you can see, the employees get 49.51% of the profit of the store, the company keeps 50.49%. The 50.49% is used for expansion, to make more opportunity for great young people. TWO ASSISTANT MANAGER STORE: $100.00 15.00 $ 85.00 $ 85.00 8.50 $ 76.50 or 15% goes into Trust, same as above. or 10% goes into the cash bonus program. This is 10% instead of 12% like above, because there is one less Keep It Going! 33 man, as one of you are now under the assistant manager program. It comes out almost exactly the same under both programs, so don’t feel shorted. -$ 76.50 5.74 or 74% goes to one of the assistant managers, same as $ 70.76 above. The money is left in the store until his share is paid out, or until he moves up. When he moves up, his money is taken with him to the next store. $70.76 4.21 $ 66.55 ; or 5.5% of $76.50 goes to the other assistant manager. Sameas above. 16.06 $ 50.49 or 21% of $76.50 goes to the manager, same as above. So both programs come out the same, whereby the employees receive 49.51% of the profits. Oakridge — 6th Store An older man had started a brand new O.K. Tire store in Oakridge, but he couldn’t handle it and closed it. He wanted me to take it over. I had built a reputation of being able to fight the O.K. people, and, in following years as the O.K. company was falling apart, the O.K. operators seemed to want me to have their stores. I turned it down as I didn’t think Oakridge was large enough for a tire store. Absolutely no trading area (just fir trees) outside the city limits. I took another look at it a few months later and turned it down again. This gentleman called me again one day and said he was going to lease the building to a couple of mechanics for $100 a month, but he still wanted me to take it. I told him that for $100 I would try it. That included the equipment and building for $100. He had new equipment, and also had an 34° Pride In Performance alignment shop. The equipment alone was worth the $100 rent. I had bad luck in Oakridge. The first manager lost money. The second manager really came up short. We lost money fast. I sent Lloyd Meeker over and his wife Marion kept the books. They were great people, completely loyal and honest. They started to make a small amount of money. First Member Dealer My very first Member Dealer was Art Robinson in the small town of Fossil. He had the Signal Oil agency and we often met at the Bridge Creek Mill near Mitchell. I had this account for all of their tires, Art had the oil account. He had a Signal Station in Fossil. I suggested to him that he take his wash bay, paint it, put in racks, and make it a small tire store. He was short of money so I loaned him $2,500 and I don’t know why because I wasn’t all that rich. . It worked great. Art made some money and in a couple of years he built a new tire store, a real nice one, for such a small town. He had Lee Oglesbee as manager and iater sold the business to Lee and marked up the tires he sold him. He couldn’t do that today with the rules we have with Member Dealers. Art wanted to sell out in Fossil as he had a chance to buy a beer wholesale company. We bought the tire store building and offered to let Lee Oglesbee continue on and we would help finance him. We gave him a choice, be our store manager or own it. He elected to work for us. He had something else in mind, he wanted to leave Fossil some day. He did a great job. We built a new store in LaGrande and Lee managed it. We later built another new store in Albany, and Lee now manages that store. Lee and his lovely wife, Esther, are the type of people that have made America great. I would sooner have a handshake deal with Lee Oglesbee than I would a contract a mile long with many people. But why Fossil? What was I thinking about? I guess I wanted Keep It Going! 35 to prove that you could make a tire store work in a small town, something that none of the rubber companies could do. I guess I just wanted to expand from the first day I got into business. Hood River — Our 7th Store The O.K. operator in Hood River had dropped out of O.K., but he was lost. He had painted out the O.K. signs, but didn’t know what to do with it. Dorothy and I and Don Zigler and his wife were in Portland for some kind of meeting and I wanted to go home by Hood River to look at this. I didn’t know if I could make it in Hood River, so I offered to buy it with nothing down (I did pay cash for the small inventory) and $125 a month, which took 10 to 12 years to pay out. I had an escape clause in the contract that I could turn it back to him and not have to pay it off. He wanted to lease it to me, but I already had seen the wisdom of owning property and I wanted a contract so that I would own it someday, if I made it. This was wise, as this same building (we bought the adjoining building, and a service station lot on the corner) is now leased to United Telephone Company at a net lease at $2,700 per month. They spent $250,000 making a wonderful office building out of this. Our rents go up with the cost of living, and in 30 years we also get the office building. We now had seven stores, and we were going through The Dalles to get to Hood River, so naturally I started looking for a building in The Dalles. The General Tire salesman called me one day and said a man was developing property near the bridge and wanted to build me a tire store. I said I’d meet him for lunch. I left Prineville at 10:30 and was in The Dalles at 12:00 noon. I drove like crazy in those days. I had a Chev El Camino and 90 miles per hour was my normal speed. I told the General Tire salesman I was looking at a war surplus building that was empty. We drove by and there was now a ‘‘For Lease’’ sign in the window. This was a three story building with three apartments above, a basement, and the ground floor store. I leased the two 360 Pride In Performance lower floors, and we were soon in business. My rent was low, about $200 per month. The Dalles — Our 8th Store I had seven stores, I wanted to open this eighth store in The Dalles, but I was running fast and working long hours. I was still at the Prineville store and people still wanted to talk to me, especially my old time customers. Our office was where the present truck tire room is today. I would be in the middle of important business and would be interrupted by someone wanting to buy tires and, of course, only from me. I loved to sell tires and would often try to get my bookwork done at night or on Sundays, but even then when people would see the light on they would knock on the door and want something. General Tire Dealer Development Program I was at a General Tire meeting in San Francisco. With seven stores I was being recognized by General. I had made a deal with them for what they called a 5S percent dealer development program. I asked for a special meeting with the key people and got one. I told them I wanted to start my eighth store, but before I did I wanted their assurance the S percent dealer development would continue on. I needed this extra 5 percent to make this work. I also told them I planned to move out into a separate office and get out of the Prineville store so I wouldn’t be interrupted so much. They assured me that it would be and I went ahead. I built a 30 by 80 foot building in frontofmy retreading plant. The office took less than one-third of the building. The balance was for a small warehouse to be used for special buys. Keep It Going! 37 I didn’t get into actually warehousing our tires until about 1965 or 1966. I sorta brokered tires. General Tire would ship to a store, but bill them to Prineville, and we in turn rebilled them to the proper store. After I was in the new office six months or so General cancelled the S percent dealer development program. I called the vice president at night and got him out of bed. He later told Dorothy I called him at 2:30 in the morning. It was not quite that late, but I was mad. I threatened to sue them and called them most every name in the book. I got the 5 percent back, but they made me mad. It is hard to comprehend today why big companies treat their dealérs and employees the way they do. This same man, Stan Hanse, asked my wife at a large General Tire dinner party . . . how do you live with that SOB husband of yours? But he said it in fun; I had earned his respect. Walnut-Sawdust Combination Rubber Winter tires had become popular just a few years back before I started in the business. The addition of sawdust or walnut shells in the rubber helped a great deal on traction. We charged $1 extra for walnut and when a customer would ask why, we jokingly would tell them it was one heck of a job sticking all those small pieces of walnut shell down into the rubber. The sawdust rubber or walnut rubber has always been a 100 percent exclusive of the retreaders. Except for one small effort by one of the small rubber companies, no new tires have ever been made with either walnut or sawdust. The General Tire Company used walnut shells to make their winter retread rubber. Mohawk Rubber Company at that time made their winter rubber with sawdust. If I changed from one company to the other, which I did do from year to year, I would wind up with a mixed group of tires. Walnuts wore longer and if we mixed them up on the customer he would come back in the spring with one tire wearing out faster than the other. 38° Pride In Performance Sometimes the customer would think he should have an adjustment on the tire that wore out faster. I would tell them, no, really I should charge them extra for the one that wore so long. But we always kept the customer happy in the best way possible. I was in Stockton, California at the Mohawk Rubber Company plant. I was watching them make retread rubber and I noticed they used a large measuring shovel to add the walnut shell, or sawdust, as you could then order it either way from Mohawk. They added two shovel fulls to each batch of rubber while mixing. Since we had such a hard time deciding which was best, walnut or sawdust, I asked them . . . ‘‘Could you put in one shovel of walnut and one of sawdust?’’ They said yes. I told them to make all of mine that way unless I told them differently. I went home and started a big advertising campaign. . . “‘The new rubber especially designed for Les Schwab Country . . . walnut for ice, sawdust for snow; the new combination rubber especially designed for Les Schwab.’’ Many people brought in their old tires and asked us to redo their tires, the new rubber sounded so good... they wanted that. And it was good. We used it for years and years. It was another first for the Les Schwab Company. Synthetic Rubber Synthetic rubber became popular during World War II. Natural rubber was hard to get. Synthetic rubber proved to be better than natural rubber, as it would wear longer and the price was more even without all the ups and downs that the natural rubber market always had. So ever since World War II the treads of tires have been made from oil or synthetic rubber. But synthetic rubber was much more slick than natural rubber in the winter time. This helped to bring on the need for winter tires as the colder it got, the more slick synthetic would get. Walnut and sawdust helped to break up this hard tread, to keep the tread of the rubber rough as the pieces would drop out as the tire would wear down. Keep It Going! 39 Today, both on cars and trucks, the treads of tires are nearly 100 percent made from oil. Most people don’t know this. There is some natural rubber used as a blend with synthetic in the sidewall of tires, also in the liner of tubeless tires. A heavy use of -natural rubber is used in the ewe of the nylon or polyester plies of the tire. Today, 1985, research and chemistry have developed a synthetic rubber that is soft. We’ played a small part in the development of this rubber, and we have a nationwide trademark on the soft rubber we use called ‘‘Snowflex.’’ One problem with the soft rubber with traction tires is that it has a tendency to make the tire walk. This is especially true on station wagon type cars. But the new soft rubber, with steel studs, is a mighty good winter tire. We still put out walnut shell retreads, but not as many. We can use walnut with soft rubber too. Some people put on soft rubber, with walnut, with studs and it is great . . . not much wear, the tires might walk some, but a lot of traction. We tell the customer the truth. To get the utmost traction in any tire, you will have some ride problems. How important is good traction? Steel Tire Studs The steel studs in tires came into use in the sixties. This too is 100 percent a tire dealer program as you can’t buy new tires with studs already in them. The factory makes the tires, pinned for studs, and the tire dealer puts in the studs with a special machine. We use the term ‘‘pinned for studs’’ because to make a stud hole in the tire you need pins in the matrix that makes the tire. Some states have outlawed steel studded tires and most states won’t let you use them until November Ist, and they must be taken off about April 1st or 15th. Most states vary a week or two, but nearly all are about the same. There’s no doubt that steel studded tires will damage concrete roads, but they don’t hurt 40 Pride In Performance First day of snow at the Les Schwab Tire Center in Bend, Oregon. blacktop. I’ve seen burners working on highway passes that burn off excess oil to help traction for cars, so how could studs hurt when all they do is rough up the road, exactly what the burners are doing .. . burning off the top oil that has formed during the summer so the road isn’t so slick. I think that steel studded tires are the greatest for traction. How much is a life worth? The greatest traction tire by far is the steel studded traction tire. If you mount two studded tires only on your drive wheels, don’t expect too much braking safety though... you get a lot of traction, but not all that much help in stopping. If you want help on stopping, mount four tires, all studded, and then you really have the best. Many people do put Keep It Going! 41 on four studded tires, but by far the majority only use studded tires on the rear wheels because of the cost. Front wheel drive cars differ in that they do have more traction, and studded tires on the front power wheels work well, but even on front wheel drive cars, all four are better of course. We can also drill holes in tires and put in studs where the law allows. We often do this for the sawmills and yards that use carriers, or large lift trucks. On some of the real large tires used nowadays in the large mills, we often stud the tires that sell new for as much as $10,000. We drill over 500 holes in the tread, and insert the studs with a stud gun. When there is ice and snow around the mill yards studded tires are a really great asset. 42 Pride In Performance Siping and Retreading Siping of tires is also another safety factor for winter driving and for driving in wet weather. Siping of truck tires has definitely proven to be of value, as even without the benefit of traction on snow, ice and wet roads, the tires will run cooler and give more mileage. And again, siping is pretty much the business of the tire dealer and the retreader. I don’t know of any new tires that come from the factory siped. We can buy precured rubber that is siped at the factory. We apply this rubber to truck tires and it is working out well. We also have siping machines in nearly all of our stores so we can sipe new tires we sell, or for that matter any tire that the customer wishes to sipe. I have been in and out of the siping business for the whole 34 year history of our company. Today we have much better machines than we did have to sipe tires. We especially have one in the large retread shop, made in Sweden, that does a real factory type job of siping both retreads and new tires we sell. I started my business mostly on retreading and I have personally had a special interest in retreading ever since. A high percentage of all winter tires are retreads and I think the big reason is that they are seasonal tires, and it creates extra inventory problems. The new tire factories do make winter tires, but are limited somewhat due to the inventory problem. That’s the reason that all walnut and sawdust tires are retreaded tires, and a high percentage of the soft rubber and steel studded tires are retreads. It is a big part of the passenger retread business. I'll admit that retreaded tires aren’t quite as good as new tires. But even today I personally would prefer a good, first line retread tire over many of the cheap new tires. Retreads, in total, are better than they are given credit for being. Heat is the largest factor in causing tire problems,- and that is why retreads work so great for winter tires. Have you ever, in going down the highway, seen a tire tread, Keep It Going! 43 or parts of a tire tread, lying along the side of the road? How many times have you said, or at least thought it, there lies a retread? I’ve had people say this when riding with me and I would stop, back up and check the tread. At least 50 percent of the time the tread is off a new tire. In fact, a national study proved that well over 50 percent of the treads lying along the side of highways are new tire failures, not retreads. Since today 50 percent or more of all truck tires on the highway are retreaded tires, that speaks well for the retread industry. Between town and my ranch it is 40 miles and well travelled by log trucks, a good road, but crooked. My son-in-law and I one day checked a tread lying alongside the toad and decided to check every one between town and the ranch. In checking ten treads, we found that seven of them were new tire treads. Every airline in America uses retreaded tires. Often the tires on airlines are retreaded four or five times. Driving Many Miles It was not unusual for me to drive 600 miles or more in one day and make many stops. Many times I would leave home, go to Hermiston, Pendleton, Milton Freewater, Walla Walla and look around the Tri Cities for a new location all in one day. Other days I would go to Burns, Nampa, Ontario, Weiser, Baker and back that night. I drove fast, but I’ve never had any kind of wreck. Speaking of driving fast. One time I was returning from Roseburg and the closer to home I got the faster I drove. I came through Powell Butte and about where the A&W Root Beer stand is in Prineville I was stopped by the State Police. He was the game warden with a pickup, he said a souped up pickup. He said, ‘‘I’ve been chasing you since the Powell Butte store, I’ve had it set at 100 mph, but you have been walking off and leaving me.’’ He said, ‘‘Mr. Schwab, you can well afford the $25 fine, but let me tell you, someday you aren’t going to get to where you are going. Won’t you please take it easy?’’ I told him I would, 44. | Pride In Performance and I did slow up some after I was 60 years old. He made more of an impression on me than if he had given me a ticket. Norm Nelson Norm Nelson, an experienced tire man with a lot of experience, had joined our company. He had worked for us earlier but only stayed a few weeks and left. I guess he thought maybe we were doing some things right after all, and he went to work for Dick Turner, manager of the Bend store. We had already started the assistant manager program. Dick wanted to make an impression on Norm when he told him that he would be assistant manager. I told Dick to bring Norm over and meet me in the office at 8:00 p.m. Dick went through his ceremony and Norm thanked us for the opportunity. I then told Norm, ‘‘now that you have gotten one promotion today, how would you like a second promotion?’’ I told him I had leased this very day a building in The Dalles and how would he like to be manager? Of course he jumped at the chance. This didn’t make Dick Turner too happy, but life is hard. I told Norm to meet me in the office at 8:00 a.m. the following Tuesday. He was in my office at that time. I was having fits with my largest account at that time and many other problems. We planned to go together to The Dalles and Portland and line up equipment and remodel The Dalles building. I told Norm he knew the tire business as well as I, to go ahead on his own to The Dalles, buy his equipment, remodel the store and do it all just like it was his own money. Norm had a knack to remodel a store at a very low cost. He tore up all the tables that did handle the war surplus displays, used the lumber to build a counter, put in an office and did a great job of building a tire showroom at practically no cost. Today, we probably would have spent $100,000 to open; we did this for less than $1,500. We were an instant success in The Dalles. We sure gave the apartments upstairs fits with all the air wrenches working below. As each apartment was vacated, I would rent them and make tire Keep It Going! 45 storage out of them. The people who had the Signal Service Station next door and had the west end apartment stayed there for several years. Later we took over the Signal Station and later we bought the station grounds. We had a crazy lease in The Dalles. The building was built on leased ground and after 20 years the building went back to the Hull family. Mr. Hull had died and his son lived in Portland. They owned the Terminal Sales building and also a big office building in Seattle. I made an appointment with him. His father had in his will that the property could never be sold. His son was able to break his father’s will. Today he would have been better off if he had never broken the will. I didn’t have time to pursue this and forgot it. Later, when Don Miller had joined us, I asked him to work on this and see if he couldn’t buy the property under the store so we would eventually own both the store and the property, because if I owned the ground, then, when the Anderson lease (Anderson was the war surplus dealer) ran out, I would own the building. Don got the job done, but he wouldn’t sell us just the ground under the store; he wanted to sell us the whole 11 acres. The price was $50,000, a real steal. The ground under the store was worth that much and considering that we got the building later, it was worth more than that. Today this $50,000 investment is worth at least $500,000 or ten times as much. I owe Don Miller many thanks for getting this job done. It was shortly after we opened The Dalles store that things weren’t looking too good. I don’t know just how many times we have hit times like this in our 34 year history. I now had eight stores, three of them breaking even at best, and losing some money. The other five stores were doing fine. The stores not doing well were Oakridge, Hood River, and John Day. I closed the Oakridge store and sent the manager to Hood River. Dorothy and I went to Oakridge and had dinner with Lloyd and Marion Meeker; I told them I wanted to close Oakridge and would like to send them to Hood River if they wanted to go. I also told them that if I didn’t start to make a profit in Hood River I planned to close it. We discharged the Hood River manager for dishonesty, I made the switch in John Day and made Denny Cook manager. I now had seven stores and Hood River and John Day started to show a profit. So we were going again, life is not all hard. 46 Pride In Performance I’ve sometimes told a story like this; you get into a box canyon, you can’t find your way out, but if you search hard enough you might find a ray of light. By probing this lighted area, meaning thinking about it-24 hours a day, and walking the floor nights, you might find your way out. Then you are on a new plateau, you are out of the box canyon and you now have room to expand again. Radio Advertising — Free Beef I had a good knack for radio ads in my earlier days. I wrote all of my radio ads myself. Before I opened in The Dalles I was running an ad that for some reason caused people to talk. It ran, in the closing, Redmond, Prineville, John Day, Oakridge, Bend, Hood River and SOON in The Dalles. I don’t know what there was about this ad, but the ‘‘Soon in The Dalles’’ had people in Prineville repeating it to me constantly. I had worked up several catchy ads that drew attention. Lucky Strike cigarettes were tremendously heavy advertisers. Jack Benny was their star on both radio and TV. LS/MFT was their slogan. It was on their cigarette pack and they hammered it constantly, LS/MFT, Lucky Strike means fine tobacco. I was watching Jack Benny one evening and I told Dorothy, ‘‘Look, L. S. MFT. That means Les Schwab means fine tires.’’ I started to use it immediately, and it was very effective. I also used it many ways, such as, “‘Les Schwab means frost tires.’’ There’s frost in the air, time to think about snow tires. Les Schwab means Firestone tires. We were selling some Firestone tires at that time. Les Schwab means fast treading, just 20 minutes of your time needed to retread your tires. We had loaner tires all mounted up. We would put on the loaner tires and wheels and retread your tires. Then we would mount the retreaded tires on their wheels and when they came back it just took minutes to put their tires on. The customer was not held up much at all, and it did bring us a lot of retreading business. Retreading was much Keep It Going! 47 more popular at that time over today. Another ad I remember well was a car coming to a fast stop, a voice would say, ‘‘Where are you going so fast?”’ ‘I’m going to Les Schwab’s; I can buy tires at wholesale.’’ ‘‘Oh, you must have _afriend there.’’ “‘No, haven’t you heard? Everyone buys tires at wholesale at Les Schwab’s. You don’t need a friend that knows a friend to buy tires at wholesale at Les Schwab’s.’’ It was in November of 1962. Doris Breese, President of the Crook County Cowbelles, called on me. The Cowbelles, which is the auxiliary of the Cattlemen’s Association, were starting to promote the Beef Gift Certificates. She suggested that I use them as gifts for my employees. I told her I was way ahead of her, that I had already started a file, and was considering using the Beef Certificate as a promotion in selling tires. The idea started in Klamath Falls. Louisa Horton was active in the Cowbelles and had talked to Dick Turner, manager of our Klamath Falls store. From this, we worked it into our Free Beef promotion. 1986 is our 23rd year for our “‘Free Beef’ promotion. It has been one of our most successful promotions in that it helps to promote the sale of beef, and also the sale of tires. From almost the first day of my business I had made up my mind that I wanted the business of the rancher. I can safely say that the ranchers have been the backbone of my business for 34 years. I have specialized in ranch tires from car tires, pickup tires, truck, tractor and odd ball sizes to fit various ranch equipment. I remember when I saw the first Heston swather, and the harrowbed. They had odd sized tires so I put in inventory one of each size knowing that someone would have an emergency some day. It was about a year later when a sweaty rancher came in quite excited saying, ‘‘I don’t suppose you have one of those damn odd ball size Heston swather tires.’’ I did, he was most happy as the equipment might have been down a week or 10 days for the lack of one tire, and during haying season that is mighty costly. I didn’t make a profit on the tire, but I made a customer. I started using the ‘‘Free Beef’’ promotion from January 15th to March 1st the first few years. Now we use it for the month of February only. We give $7.50 for the sale of two tires, $15.00 on a sale of four tires. Also we give the beef certificate on the sale of 48 . Pride In Performance retreads but in a lesser amount. We do not raise prices in any way, it is strictly an added bonus for our customers, and a boost for the sale of beef. We are up to giving nearly $250,000 out in free beef, and we spend about $250,000 advertising beef, and tires. We have many customers who wait for the beef promotion to buy their tires. One of our slogans for the promotion is, “‘It’s the Les Schwab Way to ‘Beef up’ tire sales during the slow winter months. It’s Free Beef Time Now, at Les Schwab’s.’’ Many others. I had a crippled bull at my small home ranch. We named him Bolliver. His front legs were broken at birth. My daughter made a pet of him. I made him my herd bull. Cattle get up from lying down with their back feet first. Since his front feet were damaged he got up in the front first and would often sit that way, like a dog, looking around before he got up the rest of the way. He would often sit near the highway, cars going by would slam on their brakes . . . who ever saw a bull who sat like a dog. We used a picture of Bolliver for years as our mascot for our free beef promotion. My wife wouldn’t let me sell him so he died on the ranch. I have received over 20 awards from local, county, state, and national cattlemen’s associations for our free beef promotions. We’ve enjoyed doing it, it helps promote the sale of beef, and it has been good to our company too. Cleaning Up Stores — Free Flats for Ladies We had started to clean up our tire stores and more and more women were buying tires. I thought, how can we get the attention of the woman buyer? In the middle of the night I got the idea of fixing flats free for lady drivers. So we started advertising, ‘‘Lady, don’t attempt to change your tire if you have a flat, it could be dangerous for a lady. Les Schwab will change your flat and fix it free for the lady drivers in our area. Call Les Schwab, a friendly sudden service man will come to your Keep It Going! 49 rescue.’’ This was a tremendous attention getter and we made many friends with the ladies. It always surprised them when we did hold up our end of the bargain. My men were told to never high pressure the lady, to tell her she needed new tires if she _needed them, but to talk to her husband. At least half of the tires that go flat are shot, and should be replaced. The lady would be a heel if she didn’t buy from us after we helped her out, and we built a lot of business around the free flat program. We had many funny experiences with the free flat program. It was supposed to be ‘‘When there was no man around.’’ We advertised it that way, but often we would get a call to fix a flat and the man would be looking out the window, usually behind the curtain. But so what? By taking advantage of us, it made them tell all their neighbors about how they got their flat tire fixed free. Some women who couldn’t afford a new tire, or a used tire, or any kind of tire wanted us to fix their tire regardless. We told them it is impossible. We sometimes even put in truck boots to keep them going. They really bounced down the road. We had one lady in Prineville who drove us nuts. Her tires were shot but she wouldn’t buy. We spent hours trying to keep her going. One day she came in with four cheap tires she had bought mail order and wanted us to mount them. We did. Some gratitude for all the free work we did for her. In Hillsboro we fixed a flat for a lady. The next day we fixed her husband’s flat but charged him. He turned us in to the state board for discrimination. We gave him back his money, and Jerry Harper said a pair of panty hose, but we were told we couldn’t fix flats for ladies, unless we fixed all flats for all people free. We got our state representative on this, and they tried to pass a law that would make it legal for us to fix flats for ladies. The House or Senate debated if for days and we lost. So we quit fixing flats for ladies free, but the stores right today seldom charge a woman for fixing a flat tire. I always knew if we fixed all the flat tires in town we would have all the tire business in town. We used to advertise at times, ‘‘Flats Fixed 49¢.’’ This gave the impression too that we were low on price. We drove our competition nuts. Life is hard. 50. Pride In Performance Start of Supermarket Tire Stores We now had seven tire stores. I got the idea of ‘‘Supermarket”’ tire stores. We had meetings of the store managers about every six weeks. I told them about this idea and the Bend store soon had a sign in the store window, ‘‘Bend’s Only Tire Supermart.’’ I had them change it to Supermarket, but this led into a major change in programming a couple of years later. I wasn’t in business long before I thought of the idea of some day having what looked like a supermarket tire store. Most tire businesses had a small showroom, and all the tires were hidden in the warehouse. My thinking was to reverse, to make the showroom the warehouse. It would impress people, but I had to wait until I could get the right buildings to work out of. I did the best with what I had, and even then I had a lot more tires displayed than any other tire dealer in the area. People were impressed. Start of Cattle Ranching I always had a longing to own a cattle ranch. My good friend Shorty Severance didn’t help much, as he was a retired rancher and a good friend. I enjoyed his company. I had built a net worth of about $800,000 which today would be equal to about $2,500,000. I wanted to get out of the tire business and own a ranch until I was about 55. My plans were to sell it at about that age and play golf the rest of my life, but I never could figure out how to sell the business. I didn’t want to let my people down either. The circle I would go went like this. Let’s sell the stores to the managers; they had money coming under the profit sharing contract. But then they would need the retreading plant. Oh Keep It Going! 51 well, that wouldn’t be too hard to run. Well, as long as we had the retreading plant, I might as well keep the warehouse. The warehouse would make me $100,000 per year, and that was mighty good money . . . . I could still sell the stores at as good a price as they could buy on their own. So it always ended this way. If I kept the retreading and the warehouse, hell, I might as well keep the whole thing. But I went into ranching. I had seven stores, and every Friday night we ran up to the ranch; Dorothy, Margie and I, and usually Margie brought a friend. But ranching was a mess; the tire business kept growing. I’ve often said I think I am one of the very best tire dealers in America, but without a doubt I probably am about the worst rancher in America. Attempting to be a cattle rancher has cost me millions of dollars. I would undoubtedly be 3,4 or 5 million dollars richer if Inever attempted to bea rancher; but I really don’t regret it, as you only go through life once and I would have hated to go through life without my cattle ranch experience. And today, with the addition of half of Summit Prairie, we do have a good cattle ranch. Start of Klamath Falls and Hermiston Stores I sold the first ranch in late 1965, getting my money in January of 1966. I went back full time in the tire business and things began to happen. Knowing I was selling the ranch I had already opened a store in Klamath Falls. Most everyone said that Klamath Falls was a hard town for a tire business. Some said Les Schwab has gone too far, he’ll get hurt this time. I was selling General and Armstrong tires, but both were taken for Klamath Falls so I sold Goodrich and Mohawk tires. Within a few months both General and Armstrong told me to go ahead and sell their tires. I then kept all four lines for all locations. People said Hermiston would be a good place to start a tire business. One Saturday I ran up there with Don Brandvold, our accountant at that time. I noticed a TV repair shop vacant and I 52. | Pride In Performance soon made a deal on it. Following is a bulletin I wrote shortly after opening in Hermiston. We were going fast. May 28, 1964 Gentlemen: I made a trip to The Dalles, yesterday. Hood River and Hermiston I think our store in Hermiston is as close to a ‘‘Certain store”’ that I've thought about for years . . . the ideal store for the small town. The Super Market Tire Store. ; And when you try to figure out why, it’s just because it is clean, well arranged, and the tires are beautifully displayed. This Iknow... you could put a store like Hermiston in any town in the U.S. and this store would go... it just can't help it. Every time I’m in The Dalles store, I wonder how they keep it looking so clean. Actually The Dalles has the worst parking, the poorest service area (the service and store are all in one room) and from a physical viewpoint, they probably have the least to work with than any store. But it always looks clean, the tires are waxed and displayed beautifully, and you immediately get the feeling that you would like to buy tires in this place of business. I found out exactly what they use to clean their tires. It is Spray Paint, clear lacquer, and they letter the name of the tires with Just the white paintstiks that you use, before they spray the tires. Then the tires are cleaned daily with just a dust cloth, and they clean so nicely because of the clear lacquer. Get it at any auto parts house. This is an order.... Get tire stands, the new Armstrong stands looked real nice in Hermiston, order some, and order some large enough to hold up 1000/22 truck tires. Keep It Going! 53 Display with lacquer, etc, one each of the Miracle, Premium Miracle, Coronet, Super Jet Retread, Jet Tread, Cross Country, DCL retread, Extra Traction Retread, Super All Grip Retread, and 1000/20 or 22 in Armstrong TR, S.D., S. L., and in the Commercial, the Extra Traction. In the General, the Jet Air, Dual 90, DCL and anything else you stock and sell. This 1vow... WE ARE GOING TO HAVE A SUPER MARKET TIRE STORE IN EVERY TOWN THAT WE HAVE A LES SCHWAB TIRE CENTER. I hate to use threats, it’s against my policy entirely, but you can visualize what is going to happen in your town if you don't RUN A SUPER MARKET TIRE STORE, because I'm going to have it regardless of cost, hurt feelings. A Super Market tire store has tires displayed, a clean showroom, tires waxed, appealing appearance. . . . hell, you know by now what a Super Market tire store should look like. If you don’t take a trip to Hermiston, it could be the most important day of your life. Isay Hermiston, instead of Klamath Falls, or The Dalles, or others, because Hermiston didn't have much of a building to start with, all of you have better basic buildings. I sincerely hope Ihave made myself very clear. ILove You, But I Love a Super Market Tire Store Even More. Les Start of Assistant Manager Program When I first started growing we often opened a store with just the manager. Then he would hire a helper, then maybe a full time man, so the manager was the only person I was concerned with. But as we grew into four, five and six man stores I began to think that other people should share more too. I asked the store managers to appoint their best man assistant manager and give him 10 percent. I would give up S percent, they would give up 5 54. Pride In Performance percent making it 45/45 and 10. But they didn’t get with it and with seven stores we only had two assistant managers. I wrote this bulletin about this time. It was dated August 20, 1964. Parts of it are: “TO ALL STORES . . .If a bright, young, ambitious man joins our company and wants to make our company his career, does he do it because he likes Norm Nelson and wants to help Norm, or Gordy, or Bob, or Denny? Do you men think that some little fairy sent you this man just to help you build your bonus? Do you think that this man is going to work ten hours per day, miss meals, have ungodly hours at home, just to help you build your stores? Do you think this man is going to work for low pay, year after year, just so that you can build your profit share contract into a nice fat nest egg??? No, I don’t think so. He wants to see results, just like you did when you started up the ladder. This man didn't Join the company because of the future of the store manager, or for that matter for the future ofLes Schwab personally. This man Joined the company because of his future with the Les Schwab Tire Centers, NOT IN YOU PERSONALLY. If you men block this man, you are being selfish.”’ And this program, in spite of this bulletin and my urging, never did work until . . . we made a change. Since our managers didn’t volunteer, I made a rule. That starting August Ist, our year end, the manager’s contract was going to be changed to 45 percent. If he didn’t have an assistant manager the company got SS percent. Do you know something? We never had a problem after that in having an assistant manager for each store. Today our managers do better, but the proof here is that even good men need discipline, and they need guidance, and they need an iron hand over them. One time I told my managers at a meeting, and I had lost my temper somewhat, ‘‘Sometimes I think I’ve got to force you men to become successful.’’ Keep It Going! 55 Supervisors or What? It was about this time that we had shared $150,000 with our managers for the past year. We had eight stores at the time and that was about $19,000 per store. They were not completely doing the job. You could hire a supervisor for about $10,000 per year. I told them I could hire 15, $10,000 per year supervisors for the $150,000. That would be nearly two supervisors for each store. Now, dammit, what do you want . . . do you want two supervisors looking after you, or do you want to do the job yourself and do it right? They got the point. But it’s the truth. If our people don’t overachieve, and if our people don’t work their butts off, then we might just as well go the corporate way, drop most all bonus programs, hire a bunch of supervisors, and be just another corporate company. That would be bunk, and, if all we are working for is money, then I think [ will take my money and run. We have great people and they do a great job, but we must constantly remind ourselves as to just why we are successful and what we must do to continue to be successful; because if we become complacent, brother it’s all over with. More on Supermarket Tire Stores It was in this period that I was beginning to think, ‘‘There must be some way I could work it so I could start a tire store any place and not worry about getting franchises from the rubber company.”’ First, every place I wanted to open already had an O.K. Rubber Welder; I dropped out of O.K. but now I had General Tires for my main supply, and I was hemmed in again. It is harder to visualize today, but at this time you almost had to have at least one of the major rubber company lines of tires to be 56 Pride In Performance in the tire business completely. I was praying for the day we didn’t need a franchise to sell tires. I didn’t know how it was going to happen, but I was praying it would. When you had a major company line up of tires, they had you under their control ... at least somewhat. If you sold other tires they would threaten to cancel you, if you lost the major line you couldn’t very well be in the tire business completely. The big break came mostly with the overproduction of tires, and the entering of foreign built tires into America. Montgomery Ward, who was really large in tires at that time, switched from Uniroyal to Firestone. This left Uniroyal with a lot of surplus molds and potential production. They opened their doors to large tire dealers to form buying groups. All the tire dealers were damn disgusted with the major rubber companies, so most all of them jumped on the bandwagon. I could see the light, but I had to get larger to get in on the action. Hurry, hurry, let’s get there. I want to help rub the major brand companies’ noses right into the ground. We got there later, and I’ll cover more of this later. Restaurant Experience | I guess as I think back I’ve always been interested in business. Even on the farm, when we went to town, the stores and the people working in the stores interested me. That probably is the reason I was successful with my newspaper routes. The newspapers, in the 1930 plus period, were very competitive and if you had ability you could make good money. There was about 25 percent unemployment during this depression period, my folks died when I was 15, but I never took a dime of welfare money. I always could find more work than I could do. I think one thing that convinced me to be a salesman and a businessman was a job I had one summer along with my newspaper route (before I got the whole city) working in a restaurant. I washed dishes and I washed them all by hand, no dishwasher. It was the Idlewood Cafe, on Franklin, just west of Wall Street; I got $3 per week and. Keep It Going! 57 my lunch and dinner. Later on they put a white shirt on me, a black bow tie and I waited tables. I don’t think I had eaten in a restaurant in my life, so I was like a young bull seeing live people for the first time. We would recite our menu, and the people would select. I really messed up a lot of people, but after a few weeks I got the hang of it and did fairly well. After school started I got $1.50 per week and dinner, but it was hard work with the paper route early in the morning, school all day, and working until 8:30 at night. I needed time to collect my newspaper route, and to sell more subscriptions. The only time I had was Saturday mornings. So I quit the restaurant and started working harder with my newspaper route. If] remember correctly, we got 50¢ for each new subscription we sold. That’s like $5 today. I could make more in a few hours when I was hot than I could all week at the restaurant. That convinced me that selling and business would be my career. Corporate Executives — Rubber Companies As a young person I always thought that the heads of large corporations must be human calculators. As I got deeper into the tire business, and met many of these people, I was surprised. So often all they knew was the policy of the company. Ask them a question, and the policy would flow from the mouth in a stream. They couldn’t think on their own. Probably the reason they were at the top was that they always followed policy. The good people, who could think and had guts, had dropped out of the company long ago and went out on their own. It got worse instead of better as time went along, and I think without a doubt that this had a lot to do with our trade imbalances of today. The first few years I was in the tire business, I met many men who were great tire people. I learned a lot from them and would look forward to their next visit. The companies didn’t have the guts to pay them a salary and often started them on straight commission, gave them a territory and told them, we will give 58 Pride In Performance you 5 percent or 3 percent of everything you sell. These men, if good, and only the good survived, built their territories and often got up to earning more than the college educated district manager in the regional office. They were worth more, but along came the college clerks with the calculators . . . and I can just see them selling a new program to the management people. It would go like this: The man out in the field would have a base salary of $1,000 per month and a maximum bonus of $5,000 or a top pay of $17,000. The next man up would start at $17,000 and have a maximum bonus of $6,000 and so on up. In selling this program, please note that the man below, at best, can never make more than the man above. Sounds good, but what happened to the man I looked forward to seeing, the man who had built the territory, the man you could respect? He quit. His job was filled with young punks just out of school that didn’t know a damn. It was a waste of time to talk to them, and you were a sucker if you tried to take them out on commercial calls. I’ve often said we should send Goodyear, Firestone and other large rubber companies a Christmas card each year and thank them for their policies, as their policies made it possible for us to be successful. So the same things that I got mad at them about are the same things that helped us in the ehd. For example, Firestone’s program for their territory people went like this: In order to earn top bonus you had to sign up new dealers, increase sales and sell top dollars in various categories such as truck tires, passenger tires, batteries, etc. A salesman could have eight counties. He could have the very best dealer in each county, he could have the highest sales per car registration of anywhere in the U.S., yet if he didn’t sign up new dealers, push unneeded tires onto the dealers, and various other cruddy business practices he couldn’t earn top bonus. No credit for holding the top dealers, and no credit for holding the high sales. In attempting to sign new dealers and the other business practices he irritated his present dealers. What a stupid program coming from such a large corporation. I thank them for making it possible for us to succeed. Many times we would open a new store in a city and there might be five tire dealers in town. By the end of the first year, maybe two of them would lock the doors. It wasn’t us that ran Keep It Going! 59 them out, it was their own suppliers that broke them, we merely pushed them over the hill. Thank you, Mr. Major Rubber Company. I spoke earlier about truck tire sales and the selfish way the large rubber companies sold these tires to their dealers. Everyone could buy truck tires for less. money than the dealer. They had the Original Equipment Dealer (car manufacturers, trailer manufacturers, others) who bought 15 percent to 20 percent below dealer cost. The oil companies could buy for less, service stations at this time sold 55 percent of all the tiresin America, today it is about 10 percent. So for the dealer to sell truck tires he nearly always had to get support from the company. They called it meeting a competitive situation. I remember one time in my office, Iwas mad, and I told them, “‘I don’t know just how I am going to do it, but you SOB’s someday are going to meet a competitive situation right across this desk. You are going to compete against other rubber companies right across this desk.”’ Yes, that day did come, and I’m proud of what part I played in arranging this. Another favorite program of the rubber companies was to have what they called National Accounts. They would sign up large companies (and some not so large) and bill them direct. The dealer would get 5 percent for delivering the tires, but it would cost the dealer more than 5 percent for the bookwork and interest expense. I remember well Ford Robertson, the Pendleton dealer for General Tire. He was good with large commercial accounts, but General Tire signed up his large accounts. He was making 20/25 percent profit, had to drop to S percent and it broke him. Also the rubber companies had a deal for state, county and city cars and trucks. They sold the City of Prineville tires at over 20 percent below my cost. The City of Prineville bought about $1,000 worth of tires per year. Man, was I ever looking for a new source of supply . . . but where? Icame very close many times to dropping all truck sales. Why didn’t I? Two things made it possible for us to stay in the truck tire business. One was the Seiberling Tire Company, who had been bought out by Firestone. Firestone had put their research into Seiberling, and they developed us three truck tires of quality that we could sell and make a profit. The other was Toyo Tires 60 | Pride In Performance which was coming into the picture. The major rubber companies had bankrupted their dealers, often leaving us as the only dealer in town who offered service, so we could sell Seiberling and Toyo tires at Goodyear prices and make a profit. Goodyear didn’t have a dealer in town to offer service, they had gone broke a couple of years back. It opened the door for us. We are the only chain of independent tire stores in the U. S. that is in the truck tire business and the earthmover tire business. We retread tires in our shop that sell for over $2,000 and you don’t want to make mistakes with that type of tire. The foreign tires have saved the life of our company, and many other independent tire dealers. I thank God for the opportunity to sell foreign tires, I don’t feel one bit bad about selling them over American made tires. The Les Schwab Tires Sign I was so disgusted with the tire suppliers that I was willing to do most anything to help my company survive. About 1966 or thereabouts I made a big decision. I decided to take down all rubber company signs, to go straight independent, to buy tires like Safeway buys groceries, to buy the best possible tire, good quality, and at the lowest possible price. This was a major move at that time, no one had really tried it. I needed a sign to replace the rubber company signs. Our sign man Dick Carlson, who still makes our signs, and I rode down the streets of Prineville. There were not many lighted signs in Prineville at that time. We came to the Standard Oil sign where it said Standard, and then Chevron was in the box. I said, “‘There it is, put Les Schwab where they have Standard, and put Tires where they have the Chevron logo.’’ That is how we adopted the Les Schwab sign. Maybe I should pay Standard Oil a royalty, but I don’t think they want it or need it. So now we were truly a Supermarket Tire Store, as in no way were we identified with any rubber company. The only signs on our buildings were the Les Schwab Tire Center Keep It Going! 61 sign on the building and the pole sign, Les Schwab Tires, in front. L. S. Profit Sharing Trust It was in 1966 that we formed the Les Schwab Profit Sharing Retirement Trust. I sometimes wish I had left the word ‘‘Retirement’ out of the name, as it is more of a profit sharing plan that works into a retirement plan if the company is profitable. There’s no obligation to the company if the company isn’t successful and profitable. The first two years we put in 10 percent of each employee’s earnings, but starting the third year we put in 15 percent of each employee’s earnings and have put in 15 percent ever since. Each year the main Board votes on the amount they wish to put in. It’s not in writing, but it is the company’s intent never to put more than 15 percent of its profits into the Les Schwab Profit Sharing Retirement Trust. So far the 15 percent of profit has always covered 15 percent of the qualified payroll. At this date we now have $26,000,000 into the plan. Truthfully, when I formed the Trust, I didn’t think it would ever hit $1,000,000 in my lifetime. I am very proud of this plan. Our checks from the company for the last three years have exceeded $2,000,000. It is a pleasure to me to be able to see this large check go into our employees’ Trust. I enjoy giving it as much as they enjoy receiving it. Several years ago we formed what we call the Century Club. All that is, is the top 100 employees in the plan. A couple of years ago we topped this off with a Super Century Club, and that is all employees with over $100,000 in the plan. I think off hand there are about 40 employees over $100,000. We still run the high 100 in addition to this. This always creates a lot of interest among the employees and they look forward to seeing their name among the top 100. 62. Pride In Performance First Profit Sharing Contract The profit sharing contract I started January 1, 1954 with Frank Canady has been a great program. At first it was just a handshake deal, and we didn’t really have a contract. Most of my business dealings, at least earlier, were handshake contracts. After Frank had over $5,000 coming my lawyer friend, Al Gray in Bend, said I should put this into contract form. He wrote the contract and hardly a word has changed in that contract since the very first one. The assistant manager contract is exactly the same as the manager contract. I’ve often said that sometimes guts pays off more than brains, because, if Ihad followed advice, and, if I had had a formal business education behind me, I never would have started the profit sharing contract in the form I did. Jim Bodie was our lawyer for a period in the earlier days. One Saturday morning he dropped by the office and told me he had been thinking about this contract, and he seriously recommended I drop this contract at once. He ‘said it was going to get me into a lot of trouble down the road. I told him I had faith in people and I wasn’t afraid of trouble. I kept it going, and we have had practically no problems with it. New Prospective Controller — Theories When I had about eight stores, one of the large mills closed in Prineville. I had played golf with their controller, and I wasn’t happy with the controller I had. He wanted to stay in Prineville and would do so on less pay than normal. I asked him to join us with the understanding that after six months or so I would make him controller. After three or four months he came into my office and told me he was quitting. I asked why. He said you can’t run a Keep It Going! “uvad vp ua} Inogn pjing a4 *11Ng Sulaq SasojS UsapOU Mau ay] {0 2UC 64. . Pride In Performance business the way you do, it is just a matter of time before you go broke. He said I was too trusting and didn’t have enough controls. Well, we now have 163 stores, so he must have been wrong. He went to work for the State of Oregon and that I guess is where he belonged. A few days later a lot was going on in the office. I had signed a lot of large checks and I began to wonder . just what does hold this company Og I'll admit we didn’?t have many controls. The thing that held it together was that we ran each store as a separate entity. As long as we made sure every tire was billed to them, as long as they made sure every tire they sold was billed to the customer, we would come out all right. And, of. course, as long as people were honest. Our contracts with the managers said, in case of dishonesty you forfeit all of your money in the contract. After they had $20,000 or so in their contract it helped everyone be honest. Also I think our handshake deal, the trust I put in them, the opportunity I gave them. . . they would have to be a real heel to try to steal from me. Also, now that we share with all people, if any one employee sees another employee steal anything, they are a weak kitten if they don’t report it. Why? Because this man is stealing from them, from his children. If he won’t fight for his children, he can’t be very much. For a company as large as ours is today, we have very little dishonesty. Our program clear through is one that causes self-elimination; the weak soon get weeded out and the strong remain strong. More on Trust Our Les Schwab Profit Sharing Retirement Trust also had the dishonesty clause in it. Steal from the company and brother you lose the whole bundle, but the government, in their wisdom, made us change this. Now, after 15 years, the employee is fully vested regardless. I admit this.isn’t all wrong, but it takes away the right for us to run our business. During the first 15 years the employee forfeits part of it for dishonesty. The company doesn’t Keep It Going! 65 get the money; it goes to the Trust, the employees. There have been a few cases where the employees have lost all or part of their Trust money. Any man can go to work for us at 23-24 years of age and have $1,000,000 in his Trust at age 60-65. If they work up into assistant manager and manager positions they come out much better. Also our executive office people are assured of a great nest egg for their later years. I think that a man joining our company has such a great opportunity I almost cry anytime I see or hear of anyone getting fired for dishonesty. They not only lose the money they have coming in their cash bonus, and part of their Trust money, but they lose the greatest opportunity they will ever have. I can’t remember one single man leaving our company and doing better outside. For a lousy few hundred dollars, they wreck their lives. I’m glad it doesn’t happen often. Klamath Falls Klamath Falls was the first brand new building that we built from the ground up. Klamath Falls was our eighth tire store. It was truly our first, nice appearing, all out Supermarket Tire Center. Hermiston, with a nice remodeling job was second, so my desire was to go through all stores, remodel and make them nice. Dorothy and I usually took a week, sometimes ten days, about April. We usually went south, Las Vegas, Palm Springs and in that area. One thing I always noticed was people patronized the nice places, not the cheap places. I told my managers at a manager meeting that we were going to modernize all of our stores, we were going to have tiled restrooms and we were going to have men’s and ladies’ restrooms. They laughed. Who had ever heard of tiled restrooms in a tire business? A year or so later, a columnist for a Portland newspaper in her column said. . . guess what, I traveled most of eastern Oregon, and the cleanest restrooms I found were in the Les Schwab Tire Stores. Tire businesses weren’t noted for cleanliness. 66 . Pride In Performance Zoning Problems, Bend and Others I had bought more property in Bend. I think altogether today there are at least six or seven different pieces of property that make up the present store. I had a great man who built or remodeled my stores. It was another handshake deal. I would draw up a rough plan on a piece of paper and tell him to build the store. His name was Skip Rau. He charged me carpenter wages and 10 percent on sub-contracts on a cost plus basis. He was aman a lot like Frank Canady; he worked hard, and would build me a building at a big savings to me. He went to work rebuilding the Bend store, and, man for the first time we ran into the newly formed building codes. Skip Rau ran the building inspector off one day and the fight was on. He red tagged our job and held it up for months. We had steel posts holding up our canopy. He said we had to fireproof these steel posts by putting chicken wire around them and gunite the post to protect them from fire. I had to build a fire wall on the canopy side of the property line even though the next lot was a vacant lot. I went to several city commission meetings in Bend, but I lost on all counts. It was do it their way or else. I told Dorothy this is the start of something ... watch out, and, brother, it was. Today we spend darn near as much (if you consider time) getting building permits, engineering plans, architect plans and fees, fire marshall inspections, sewer permits, and handicap restrooms, as we used to spend on the entire building. Each building department of each city wants to show the city council they carry their own weight, so the fees go up and up. In that way it doesn’t cost the city anything; the builders are paying it. The bureaucracy builds larger and larger. It makes a person feel he is committing a crime to build a new building or to remodel an old building. If it was up to me personally I would never build another building. I just can’t put up with this, and it upsets me terribly; but that’s not fair to the young people. Our company thrives on opportunity; young people come to work for us with stars in their eyes, they Keep It Going! 67 want to be a store manager some day. Some of our large store managers make over $100,000 a year, more than the president of the company makes. They want this opportunity; so, if I quit building, it would kill our company. The bureaucrats live on this _. . . the entrepreneur, the man who is ambitious. In my mind they are a bunch of bloodsuckers living off those who are doers. I could write pages on this, but it is so negative. We have one tire store in Portland where the street in front is so busy no one can park. The law says our employees can’t park in the residential area; the back half of our lot is zoned wrong, so we can’t park cars even on the back half. Our employees can’t park on the street, they can’t park on our own land so they walk a few blocks. The back half of our lot is no man’s land; it can’t be used for anything, and this isn’t uncommon. We have had and do have similar problems in many of our stores. Here’s a quote, in today’s Oregonian . . . November 17, 1985. “Rancher Jack P. Gyllenberg explained to 87 year old Baker County rancher Verne Walter that Walter could not divide his 800 acre ranch among his seven children. That old man went over in the corner and cried when I told him that.’’ Another case here in the Prineville area, a lady had 360 acres and she wanted to give five acres to her daughter to build a home on. She couldn’t do it because zoning laws wouldn’t permit it. I wonder why people stand for this terrible invasion of private property rights. I think it is because it affects only one person or family at a time and they are not organized. The other side (1000 Friends of Oregon and others) are organized. Crook County has had the highest, or near highest, unemployment rate in Oregon for several years. Crook County is cowboy country. Many people like the Western flavor associated with this area, and many would like to retire here and have 10, 20 or 30 acres and have a small ranchette. They would like to have a few cattle, a horse or two, and a horse trailer to take them out to the great open spaces of public land. Crook County would grow a lot if it wasn’t tied up by LCDC, the rules coming from Salem, the 1000 Friends of Oregon, and others. You will be thrown in jail if you attempt to subdivide your land without their permission. I think the people from the other side of the Cascades want to make a playground for themselves and they are doing a good job 68. Pride In Performance of it. Outside of Bend, Eastern Oregon is not growing and the people mentioned are doing everything they can do to keep it from growing. Lebanon, First Store West of Cascades Lebanon was my first store on the West side of the Cascades. Again, it was an O.K. Rubber Welder that wanted to sell out. I had sold the ranch, and I had some money. I paid cash and we had our first store in the Willamette Valley. Many people had told me that just maybe my programs worked only because of the geographic locations. I usually told them, bull; but I did wonder myself. It didn’t take long for us to find out that it worked even better when we had more people, so we broke into the big area. We were definitely just country boys attempting to stretch out, and Lebanon was an instant success. Lebanon was our tenth store. Burns and Shorty Severance I had my eyes on Burns. I had been doing business with a member dealer in Burns, but he got ahead of himself and bought a dirty, run down, O.K. Rubber Welder store. I had looked at this many times, but it was impossible to remodel or to make anything of this building. Steve Heppner was the dealer, but he wouldn’t listen to me. He mixed himself up with an oil company, again against my advice. They built him a new building, he owed me money so I dropped out. Steve and IJ are still friends to this day. I know he is sorry, very-sorry, that he didn’t listen, and didn’t work with me. We’ve talked about it several times, but I had been looking around Burns and would build when I could Keep It Going! 69 afford it. ‘Shorty Severance was one of the best friends I ever had. He was the retired rancher I mentioned earlier. He traveled with me a lot. I often called him at 7:00 a.m., and got him out of bed; I never was too well organized so I usually worked off the seat of my pants. He always went with me and sometimes said he felt like he owned part of my company. He was great company, and his advice was good. One time I came out of a store quite mad because the manager hadn’t followed up on some items and I was blowing off to Shorty. He said, ‘‘Les, cool down. Always remember if that man knew the business as well as you, he would be riding in this El Camino, and you would be changing the tires.’’ I never forgot that. Another of his sayings was the Indian story. ‘‘Remember,’’ he would say, ‘‘the old Indian buck .... if everyone wanted the same thing, they would all want my squaw.’’ Shorty would be with me, but he never interfered while I was doing business. On the way home or at the social hour he told many stories. Everyone loved him. He retired from his large ranch at about 62 with a bad back, and bought a nice home on the heights. He mowed his own lawn, and one day while he was mowing in his bib overalls a lady stopped (one of the higher society people of the town). She asked Shorty, ‘“Do you mow lawns?’’ He said, “‘Yes, I do.’’ She asked, “‘What do you charge?’’ He said, ‘‘Well, the lady at this home lets me sleep with her.’’ The lady drove off. Another time Shorty was mowing his lawn and the mower was acting up. An oil truck was parked across the street, the type to blacktop roads with, but the equipment was late getting there; they saw the old man had troubles so they came over to see if they could help. A pickup went by with a new mower on it and Shorty said, ‘‘Darn it, that man bought a new mower, he will get part of my business.’’ Noon time came, the men wanted to go downtown for lunch. Shorty said, ‘‘T’ll get my car and run you downtown.’’ He had a brand new Cadillac. The construction men looked it over and said, ‘‘Old man, tell us how we can buy a lawnmower like yours.’’ He had many stories, a very enjoyable gentleman. Shorty dropped by the office one day just before noon. He said, ‘‘Let’s have lunch,’’ which we did. He had a brand new car, 70 . Pride In Performance so I said, ‘‘Let’s take it for a ride.’’ He said fine . . . so we took off for Burns, 155 miles away. I told him I had been looking at some lots and wanted his advice. He helped me pick the lot we now have in Burns. I made an offer, they took it, we built a new store, and we have been very successful in Burns. It is our type of town. Norm Nelson Comes to Main Office When I had ten stores I was getting to the point where I couldn’t personally handle it all, and I didn’t have very good office support. It concerned me, but I seemed to be lost as to what to do about it. I could have done better than I did, that I’m sure of, but I was still handling the whole show by myself, such as advertising, purchasing, pricing, checking most invoices, signing checks for stores and office, the whole works. I was a volume man, but not too scientific. My handshake contracts were what was getting me through, and I needed help. Norm Nelson was my top store manager, so I talked to him. He was making big money in The Dalles. I brought him into the office, sold him 20 percent of the tire store company, used his bonus money from The Dalles to pay for part of it, and gave him a bonus to pay for the rest of it. He was supposed to help me, but he was a salesman and a store man. The first thing he did was to go to each store, get there about 7:30 Monday morning, stay there until 6 p.m. Saturday night and come home. He cleaned up the store, sold tires, and when he left he left with the words .. . ‘‘Now when I come back, I want this store to be as clean as it is now. I also want you to be clean with proper hair cuts and I want you on the ball.’’ He did this to all ten stores and, man, business went wild. He really cranked them up. He was supposed to help me, but he was doing such a great job outside that I left him alone. That didn’t solve my problem, and in some ways it created more problems because business was so good. Norm Nelson was one hell of a tire salesman, and it’s too bad everything turned out the way it did at the end. Keep It Going! 71 We were going through Sweet Home to get to Lebanon, so naturally I had to look for a location. Sweet Home was quite small so I wanted a small store, one I knew smaller sales would pay the way. I found one, a vacant Volkswagon garage (small garage), -and I made a deal. Many of the deals I made were a five year lease, a five year option and an option to buy at a definite price. The time to make a deal is when you are talking to a man with a vacant building. Iwanted an option to buy because I told them if my business was successful I wanted to be able to build on or remodel, and I didn’t want to fight with them over who was going to pay for it. The five year lease, with the five year option, with the option to buy was a vety important part of our success. I just would not lease a building unless I could get an option to buy. It wasn’t that I was so smart that I had figured out inflation, I had not; that part was lucky. I wanted to protect my location. I didn’t want to take a corner building for ten years, build a nice business and then have to argue with the landlord about the next ten years. I wanted protection. I wouldn’t deal without this protection. It made sense, so I always got my deal... or no deal. Business was growing like mad butI still hadn’t solved my office problems. I was still much concerned about what to do with the office. My Son Harlan I haven’t mentioned my son, Harlan, so far with this history of our company and my life. He had trouble in school and today we now know why. He certainly was not dumb. He started from the first grade on with the new system of teaching English and spelling, and he had trouble reading and writing his whole life. He also had what we now know was dyslexia. His words might have the right letters, but in the wrong places. He had worked in the tire store and he had worked in the retread shop during school. After his graduation from high school I put him in our small office, but he had a real interest in jays Pride In Performance the space program and every time a General Tire executive came around he quizzed them about Aerojet General at Sacramento. Aerojet was a going concern and strong into space programs. He got a job in Sacramento and went down there at age 19. He did great at Sacramento working with the real brains and he got into the experimental part of Aerojet. He married Jean Stanton, but later Aerojet cut way back, and Harlan thought he might be laid off. So many people had told him he should go home and start working with his Dad. About the strongest store we had at that time was Klamath Falls, and I encouraged him to work for Dick Turner. He didn’t do bad, worked hard, but he got hurt once and that affected him somewhat during the rest of his life. It was about ten below zero, he was changing truck tires; he let the air out of a tire and went inside. Whenever you let air out of a truck tire a certain amount of water comes out and it froze. There was probably 10 to 15 pounds of air still in the tire, and, when he broke the lock ring, the pressure caused the lock ring to fly up, hitting him in the head. They took him to the hospital, but for the rest of his life he had trouble with headaches and complications from this accident. He quit the Klamath tire store and bought a dump truck. Harlan never did fully understand business. Dorothy and I met him in Chemult. They had taken him on the truck and on the financing of the truck. I got the financing changed and he fussed around with the truck, but it didn’t pay off. He worked for a contractor on a big job on the Snake River, but this contractor was never noted for being generous, and Harlan lost his butt. He stopped by the house one night really broken down. Maybe I was too rough on him, but the only thing I could tell him was, dammit I told you so. In consideration of how I have treated my family since then, often losing much more on business deals, I wonder now if maybe I was too harsh on him. He was defeated, bankrupt, broke and really down. I paid off all of his bills, because he had no choice but to take out bankruptcy. He then came to work for us. We started what we called the L. S. Specialty Service. He whitewalled tires, put studs in tires and did specialty work. It was then I began to see he really had a lot of talent, eccentric in some way, yes, but talent he had. I’ll come back to Harlan later. Keep It Going! 73 Bob Newell — Lewiston Bob Newell was a large tire dealer in Lewiston, Idaho. He had always admired the way we ran our business and had made many trips to Prineville in an attempt to copy our ways; but he always took the guts out of the program when he attempted to use it with his people. My thinking has always been, if I give away half the profits I still have half; if I Share $10,000,000 with people, I still have $10,000,000 left over before taxes. I don’t understand why businessmen can’t do this, as it is being unselfish for good reasons. It also helps a lot of other people. Bob Newell was a big dealer when I started, and as I grew I got as large as he. He, Ford Robertson, who had four stores in Pendleton, LaGrande, Heppner, and Walla Walla, and I were regarded as big tire dealers in the Northwest. We all sold General Tires. General Tire in those days was a great company. They started to fail when the founder, Bill O’Neil, got old and died. Anyway we had a couple of meetings and talked about forming a buying group. This group, if completed, would have been about what the Les Schwab Warehouse Center is today. I guess I saw I could do it better alone and didn’t encourage the group deal too much. Bob Newell decided he wanted to sell out. Like so many tire dealers, I seemed to be his hero and he wanted me to have it. Dorothy and I went up there and I decided not to buy it, but my people encouraged me, I took another look and I finally went ahead. After all the auditing I paid Bob Newell only about $230,000; but I did take over several bank loans which I paid off. Bob Newell, in my mind, was and is a fine gentleman. I take pride in his friendship and we are still friends to this day. I got six stores, plus a wholesale company and a large retreading plant. I sent Gordon Priday to be overall manager, and I sent Denny Cook from John Day to manage Lewiston. I soon closed the wholesale company as they were competing against our own stores, a policy I never could believe in. I paid rent on an empty building and got taken on subleasing the 74. : Pride In Performance building. I had too much to do to follow up as closely as I should have and Gordon didn’t understand that part very well. I intended to run the Lewiston deal as a separate company since it was already a corporation. I had bought the corporation by the Les Schwab Tire Centers of Oregon, because they had the most money and I usually figured on something like this; what is the worst that can happen? I figured that if the whole thing failed I would lose $250,000. Could we afford a $250,000 loss? Yes, we could, so I went ahead. Gordon was in over his head. We had inherited a union of the Lewiston people, and I had never had any experience with a union. Gordon fired nine people one Monday morning, and we had trouble on our hands. We made the front page of the local paper almost every morning; they called me almost every night. I told them to quit calling me, to print only the union side, as that seemed to be the one they favored. They did quit calling me. The NLRB board filed many papers against our company. The NLRB is the National Labor Relations Board, pro union all the way. I had problems and I walked the floors at night. Harlan, my son, and I took a trip through that country. It looked bad and I talked a lot about locking up many of the stores when the leases ran out. Bob Newell had done a poor job in securing his property because he didn’t use the five year lease with options to buy. It looked like we had a failure on our hands. One Monday morning Norm Nelson and I talked most of the morning. We both decided that we had to get Gordon out of Lewiston. Bend was open, so we gave him the Bend store. I told Norm that starting right now all the Idaho stores would come to Prineville for the meetings; we were dropping the idea of a separate operation, and hereafter they would be part of the Prineville group. They would just have to drive to Prineville for the meetings. They were now part of Prineville. I told Harlan to take the one big truck we had, to go to Lewiston and to tear out the retreading plant to the walls and move it to Prineville. If the shop had not been losing money, we would really have been in trouble with the union. It really overloaded our Prineville plant; we were running seven days a week, 24 hours a day. Norm spent nearly three weeks in that area. He went to each store, cleaned it up and did what he did when he first joined the main company. Keep It Going! 75 The Idaho stores started to go. The idea of moving everything into Prineville was the right move, and almost immediately the Idaho stores started to be successful. Following is a bulletin I wrote our Idaho store managers. Sept. 30, 1966 TO:. Gerald Harris Pat McGrath Chuck Jones Don Morgan Gerald Wessels Welcome to our company. By now you have met with most of our key men, and you should have some idea as to how we wish to operate. I went back through the last three or four weeks and made copies of the bulletins that this office has sent out. Please take these home, digest them, and ask Gordon Priday to explain anything you don't understand. We are great to send out bulletins, to keep you posted at all times about what is going on at the main office, with our suppliers, and at other stores. We expect you to follow the programs as set up in these bulletins. We are also great for meetings. All major decisions are made at our store manager meetings. This is the place to argue like hell, but once the decision is made, then you must follow. If you don’t like it, bring it up again at the next meeting and we'll thrash out the problem until we select the best course to take. The big thing that I think is going to hit you right between the eyes is that ‘‘WE EXPECT YOU TO RUN THESTORE. "’ You are on your own, and you will sink or swim according to your abilities. It takes quite a man to be a store manager, I've always said, because you must have credit manager abilities, sales manager abilities, service manager abilities and above all just plain old management ability. 76 | ) Pride In Performance All of our programs will immediately go in effect in Idaho, but there will be some delay before we actually give you our written contract under which you will operate your store. Why? Well, let's wait to see if you like us, and if we like you. But once the contract is given, it will be dated back to Oct. Ist, 1966. Our store manager contract is a complicated instrument and we just can't put one out without knowing that the arrangements between the company is a solid one, one that will last. Norm Nelson is General Manager of all of our tire stores, now totaling 17. Norm is a tremendous tire man, and has an outstanding record of success behind him as manager of our store in The Dalles. Gordon Priday will be general manager of the Idaho stores under Norm. Gordon too has an outstanding record as manager of our store in Madras, and about 13 years with our company. Gordy might have a little different way of doing things; he may not be the smoothest man in the world, but he is not hollow... and he’s a man who will speak his mind. In other words, you'll always know where you stand with this man, and above all, he's 100 percent honest. We have no secrets in our company. And we especially have no secrets as to where you stand with your profit share arrangements as we put out a P&L every month showing you exactly where you stand. We absolutely do not have any hidden charges against your store, every single charge is made by invoice. You buy your own tires, you run your own store... it is up to you 100 percent as to how much money you make. I might add, about Gordon Priday . . . he likes to make a profit, and he'll help you make aprofit too. And that’s what we work for ... your family, our families, our employees and their families and very little consideration is given to the families of our suppliers. We want to make a profit, we earn it, and we don't give a damn about the profit of our suppliers. I hope you pick up the spirit of eur company, I hope you are with us a long, long time, and Ihope you make that nest egg for yourself with our programs, just like so many of our employees Keep It Going! 77 already have (ask them) and we'll certainly attempt to hold up the management end of this company. Les Schwab I never want to forget how much the company owed Norm Nelson for the work he did with the Idaho stores. We are deeply indebted to him. Bob Finzer — Manager Retreading Just how it all happened I can’t remember, but Harlan was in charge of the Prineville retreading plant. Don Zigler was the boss, but had quit. The job was too much for Harlan, he just didn’t have a chance. I don’t think anyone could have run it at that time. Harlan and I talked a lot. We decided to build a new plant across the road on property I had bought from the Owens Freight Lines. I had bought this several years earlier thinking that some day I might need it. I’ve often been told I have the ability to look ten years ahead. Be that as it may, some of it was luck. We built the new plant, and, from building the new plant and from the total job, it was too much for Harlan. He was about to break down emotionally, so I had no choice but to take him off the job. It certainly was hard on me, too. It made him feel he was a failure and he was drinking entirely too much. Norm and I did a lot of talking. We went through our whole employee list and were trying to decide who had a tough enough hide to manage the retread plant. We settled on Bob Finzer; he was tough but fair. We talked him into coming into Prineville to manage the retread plant. It was getting to be big business, with 70-80 employees in the plant. We owe Bob a lot, as this was one hell of a tough job. We put Harlan in charge of maintenance, also what we called research and development. 78 - Pride In Performance Harlan Schwab — Giant Tires Uniroyal had a large off road giant tire shop in Yakima. They wanted to sell it and Harlan wanted this shop, so we bought it. They also had a rubber mill that came with it. He did one great job getting it moved to Prineville and in getting it set up and in operating it. He completely built the giant tire shop and it hasn’t changed much since he built it. He had to put all the equipment in place with large cranes before he put the roof on the shop. In many ways he was a genius in getting all of this done. Along with this he was building a lot of new equipment. One thing we bought was a Kobe rubber extruder. We got it in, but the state electrical inspector said the wiring didn’t meet code. I asked him what was wrong with it, and he said it didn’t have approved Oregon State code parts. It was a beautiful wiring job, but we couldn’t use it. Another case of stupid Oregon bureaucrats. Harlan said he could build a new wiring setup, and he worked 24 hours a day to do it. It is still working today.’ Harlan had the knack to rebuild a machine and it always worked. I remember when we moved the Lewiston shop to Prineville, we had Lodi presses. They ran on hydraulic pressure and broke down constantly. When they were down our shop was down and Harlan told me he could convert these two presses to air. I said, ‘*Talk to the factory.’’ He said he had and they said it couldn’t be done, but he knew it could be done. I told him to go ahead. He worked the whole weekend, converted the hydraulic to air and they worked beautifully, much faster and they never broke down again. He was a genius when it came to equipment and when it came to rubber formulation too. Keep It Going! Don Miller 79 Joins Company Things were moving so darn fast. I still hadn’t solved my office problems. Don Miller had graduated from the University of Oregon and had worked at one of the Prineville sawmills. He worked up fast and at a very early age he was in charge of the three or four Oregon mills that this company had. I spent a lot of time with him, as he controlled the checkbook for them, always needed money. and I He quit the Prineville mill when they started downhill and had gone to Idaho to work for Potlatch Forest. He didn’t like the corporate life and started to work for Kelly Roberts in the accounting firm. Don was extremely fast with figures and I always admired him for this. He often said I was faster, but I give him the credit. . . he was good with figures. When I bought out Bob Newell I called Don and asked him if he wanted to do the accounting work. They did it and did a great job. I made up my mind I had to get Don Miller to join our company. I gave him the world to get him here. I didn’t care too much who had the money, or who owned what, I just wanted our company to be successful. I had a real desire to give the rubber companies hell, as they had treated me so lousy in my earlier days, so I practically gave Don Miller 20 percent, equal to Norm’s deal. I gave him a bonus to pay off the 20 percent. He had a great deal, but in the long pull he earned it. Don Miller moved to Prineville, and it took him about two weeks to get the office in shape. He really moved things and people around and he got it humming, pronto. Norm Nelson wasn’t too hot on having Don Miller join the company. What took place between these two men and me during the next three or four years is entirely beyond my comprehension to understand. Norm was running the stores, Don ran the office, I was buying, pricing, advertising and in on the overall plans. We made a great team the three of us, and we were very successful. We added store after store. Norm had a knack for remodeling a tire store without too much cost. We 80. Pride In Performance bought out many old time tire dealers, we took some service stations and completely remodeled them adding showrooms and made nice looking stores out of them. We were rolling. Death of Harlan Schwab Harlan Schwab would have been a tremendous help to the Les Schwab Company had he lived his normal life. He had problems though and in some way he would have had to conquer these problems sooner or later. The tire burner that we plan to install soon would have been right in his field. I think we would be making our own rubber if he were around. It was best not to have him over a lot of men; he could work well with them, but people problems bothered him. It was 2:00 a.m., October 26, 1971 when the doorbell rang. I was so sound asleep that I couldn’t get my bearings for awhile. Denny Denton and a policeman were at the door. They came in and told me Harlan was dead. He had run into the back of a log truck on Third Street near the present A G Market. I sometimes have thought he might have done this on purpose, as he was very depressed. He was on his way to his office to sleep a couple of hours before he started his next day’s work. He was 31 years of age. In March of 1972 the Bend Bulletin wrote a half page story about Harlan. It was a beautiful tribute to him. The heading was ‘“*‘DEATH OF HARLAN SCHWAB ENDS PROMISING RESEARCH ON IMPROVED TIRE RUBBER.’’ He had been working with PPG Industries, a giant of a corporation who constantly did a lot of research on new products. He was working with D. D. Dunnom, director of PPG’s tire industry services in Pittsburgh, Pennsylvania. Dunnon and PPG were interested in the ‘‘Blue Rubber Project’ that Harlan was working on. By not using carbon black, and using- the material from PPG, Harlan was able to make rubber into any color he wished. He made the rubber blue. We had in mind making a retread rubber that would Keep It Going! 81 be identified 100 percent with the Les Schwab company. We had, by letter form, the guarantee from PPG that we would get an exclusive on the product for retreading, and they wanted it for new tires. After Harlan’s death I received a letter from Mr. D. D. Dunnom. “I had not known Harlan very long, but during our short period of shared work and ideas I came to have a very high regard for his enthusiasm and technical abilities,’’ Dunnom wrote. PPG Industries wanted us to continue the project, but Harlan had most of this in his head and we didn’t really have anyone to take over, so I dropped the project. It could have been a very revolutionary change for the retreading of tires. I wish I could have finished the project. Harlan left his wife, Jean, daughter Diana, ten years old, and son Alan, eight years old. Dorothy and I have been close to this family for the past 14 years, since Harlan’s death. Matt Tomseth — Diana — Alan Diana went on to Lewis and Clark College. After graduation she married Matt Tomseth, also a Lewis and Clark graduate. Matt had worked some for our stores during school, picked up the spirit from our people, and went to work in our Longview store under John Britton. He didn’t want any favors, worked hard, recently got promoted to assistant manager in our new Lake Grove store. Diana is the type who could get a job most any place. She was working as a travel agent, but gave up working when Matt got promoted. They built a new home and she says her career now is to be a supportive wife. I’ve always told her that the best thing she could do is to help her husband be successful. I’m old fashioned. Alan went to work for the company at the end of his high school and has been there ever since. He is proud of the company and I’m sure he will do what he can to see that the success of the company continues. He has the right attitude and he should help 82. . Pride In Performance the company a lot in future years. He has a lot to learn, but he’s young yet. Margie’s Wedding — Ranch April 22, 1972... my little daughter got married. I still call her little, as she barely exceeds five feet. What a big day. She married Denny Denton, son of Ray and Hazel Denton. Denny comes from a large pioneer family and it seems like he is related in some way to a good percentage of the Crook County people. The weather had been bad and I kept trying to get Dorothy to change the reception to the Golf Club building, but she wouldn’t do it. The wedding was in the Community Church and the reception at our home. The day before it was about 50°, but it was about 75° for the reception. We had a whale of a crowd with young men parking cars in the meadows. Champagne flowed, and it was the party of the year for Prineville. They have two lovely daughters and have been very happy. Denny had worked in the Prineville store for several years and had worked up to assistant manager. The customers all liked Denny, he was tops in service, but he and the manager disagreed and parted ways. He later returned to the company and soon worked up to manager of our distribution center. He left later to manage the L. S. Ranch. Margie and Denny’s two gals are now seven and nine years old. Leslie is nine, Julie is seven . . . both sharp little gals. They can twist old Grandpa around their fingers quite easily. In November of 1973 we bought back the ranch I sold in 1965. Denny Denton was made manager and he and Margie moved to the ranch. I did the flood irrigating for three summers, and it was one of the best parts of my life. I also plowed a lot of fields and helped some with the hay. I think it was about August of 1976 that Denny asked me if I would go up Sarvis Creek and turn off the Cat. He had left it running during the noon hour. I had had in Keep It Going! 83 the back of my mind for some time how nice it would be to clear the land of juniper trees and plant crested wheat grass. The Cat was parked at a junction of two small forks of Sarvis Creek. It was a juniper jungle, so instead of turning off the Cat I started to push trees over. You push the tree over, back up with the blade down and partially fill the hole made, then pick up the tree and push it into a pile. After I would get an acre or maybe two acres cleared I would take a hand seeder and walk around throwing seed out. Since the soil was freshly disturbed we usually got a pretty good stand. The old Cat heated up a lot and I also threw the tracks off of it, which didn’t make my men too happy as they had to get them back on. I went to Redmond and bought a new Cat and this was my hobby for about three years, and I loved every day of it. I would go to the office, work like heck until about noon, order a sandwich, eat it on the fly, put on some old clothes at the ranch and hurry to work on the Cat. I would work nearly to dark, take a shower at my mobile home and hit for town. I worked Sundays and all which didn’t make Dorothy too happy, but she knew I was having fun. We then turned the clearing job over to Larry Koops. We also hired a second Cat owned by Jack McCullough and for several years we had two Cats working clearing the land. We now have cleared 15,000 acres of junipers and have seeded most of it. We sprayed the sagebrush with a helicopter on about 7,000 acres. We have made a tremendous improvement with our grass production on the L. S. Ranch. We also developed 40 or 50 extra water holes. Whenever the men would see a wet spot they would put in a water hole just below it. Many of these hold water the year around. After I got off the Cat, the men modernized. They built a seeder on the back of the Cat. After they made a pile they pulled a lever and rode the Cat around seeding the disturbed area. Also I hauled fuel to the Cat in 50 gallon drums, and they have it deliverd by Standard Oil to a 500 gallon tank which is moveable and stored near the Cat. I wish I had that when I was working. Life is hard. In 1984 the Cattlemen’s Association had a tour. They usually pick three ranches that have done improvement work on range 84 Pride In Performance land, cross breeding or water development. Ours was the second ranch they visited. When I was on the mike, I explained the cost of clearing, the cost of seed, the cost of spraying and the water hole development. I had the feeling many of the ranchers present (about 200) had in their minds this fat old man didn’t make any money ranching, so I told them what they needed to make a project like this successful and I couldn’t see how they could do it without it, it was very important to have 160 tire stores. Meaning, of course, that it took the tire stores to pay for the land clearing, as ranching couldn’t possibly pay the bill. After buying the first ranch back, we bought the Nye Ranch, then the Coffelt, then the Severance Camp Creek, and then the Teater Ranch. The Nye, Severance and Teater ranches all had forest permits, so we could put over 500 cows with their calves on these permits for three and a half or four months of each year. In 1984 we bought half of Summit Prairie and traded the Nye and Coffelt ranches in on the Summit Prairie purchase. We now have a nice ranch. We can put all of our cattle on the forest or Summit Prairie for all of the summer months. This gives us great fall feed and early spring feed. We have been told by government people that our land clearing and range improvement work was the largest project of its kind in the Northwest. Iam proud of our improvement work, but it has been expensive. We will have a large investment in range land improvement by the time we complete the work. We are through clearing, but now we are going back with the Cat, pushing out the stumps left from the burning, leveling the ground and seeding the burned area with crested wheatgrass. The crested wheatgrass really grows in the spots that had the tree piles and where we burned. I guess the tremendous heat from burning killed all weed seeds giving the new crested wheatgrass a better chance to start and to grow. Denny Denton, my son-in-law, managed the ranch for seven years, from 1973 to 1980. They built a new home that I think is one of the finest homes in Oregon. It was built too large, though, with 6,000 square feet in the home on two levels, and 1,800 square feet in the garage and shop. They thought they wanted to spend their life on the ranch; but when their older girl, Leslie, got close to school age they wanted to move to town. The ranch has been a source of worry to me, as we have taken py ‘youvy dig uoljiod {0 ay]°T ‘8 Keep It Going! jluunyg ‘I1AIDA 85 86 | Pride In Performance high operating losses; and being the businessman I am, this is hard for me to tolerate. I wonder how other ranchers make it without another business. Most of them aren’t. You could give your son a ranch free and clear and if he had to borrow money to buy cows, equipment, and pay interest, he would soon be broke. It has been that way for 15 years now, yet ranch prices continued to go up until a couple of years ago. Within the last two years ranches have dropped in value at least 40 percent and often 50 percent. The operating losses haven’t affected our total financial statement much. We are lucky; and, as I’ve often said, I always wanted to own a big ranch and I would have hated to go through life without the experience. Money isn’t everything and you only go through life once. I’m glad for the experience, and, if I have any regrets, it’s that I was not somewhat more successful financially. I’m a good businessman and good tire dealer, but a lousy rancher. Art Smith took over as manager when Denny left. He’s had problems too with the finances, but I think that in 1986 we will for the first time make a profit on the ranch. With all the land clearing, with the water development, with Summit Prairie, with forest permits and the fact we can rest our main ranch all summer, we now have an excellent ranch. It has taken time and thought to put it all together, but I think everyone concerned is proud of the ranch today, rightfully, even though the money invested is high. Dorothy never did like the ranch too well, but Mommy is 100 percent marriage type lady and whatever I wanted she went along with. The first time we owned the ranch I said we went up every Friday. She says they always saved their problems for me so I had five hard days of the tire business and two hard days of attempting to ranch. Dorothy and I lived at the ranch for about three months of each year the first three years we owned it. The second time there wasn’t much for Dorothy to do, but she was a good scout and let me play. I also did work at the tire business and did keep in touch, but Don Miller was now president and he had things well under control. Keep It Going! 87 Don Miller and Norm Nelson Buy Out Don Miller came to our company in 1967. Norm had been in the main office, but outside most of the time for two or three years. I had sold the ranch the first time in late 1965, had some money and we really started to roll. We built or bought many new stores and we added several member dealers. We were getting some of the best Goodyear dealers to drop Goodyear and join up with us. In my wildest dreams I never thought I would see the day we could steal the best dealers from the large rubber companies. I was already starting to see my reward, as I had sworn to myself that someday I would show those rascals. Norm Nelson and Don Miller were both making tons of money, but, as always, I never paid too much salary. The salary was enough to live on, the rest stayed in the company to be used for expansion. They each owned 20 percent and this was more or less given to them, as I gave them a bonus to make their payments; but dark clouds began to appear. They had a problem and I had one too. They and their families saw all the money they were making and their wives wanted to get their hands on some of it. I also saw a future problem with the way I had formed the company. I wanted to change their stocks, as the way it was at that time I had to buy them out, if they wanted out, regardless of the financial condition of the company. I had a net worth of about $2,000,000 both personal and company. I owed Norm and Don, plus all the profit sharing managers’ and assistant managers’ contracts of about $4,000,000. I could visualize, if I should die and the company failed, my family could end up with nothing, as the first loss would be mine, their money was guaranteed. I soon found out I had run into a buzz saw, as both Norm and Don teamed up against me. This is something I never could figure out, because Norm didn’t want Don here in the first place, yet it wasn’t Norm and I arguing against Don, it was Norm and Don against me. Norm did want to see more of the money, and I guess he didn’t have the courage to fight with me about it so he 88 Pride In Performance sided with Don. This was one terrible mistake on his part as you use hindsight today. I started to work on this about April or May of 1969. Our year ended July 31st, but Ididn’t get anything done by July 31st, so I dropped it. We had another great year, and the debt to them and the managers was going higher. I was even more concerned and realized I had to change it, so I started working on it the next year in January. They wouldn’t give an inch. I was surprised as I wasn’t asking for that much. What they had was given them; I was only asking for a change to protect my family somewhat. The arguments went on for months. Howard Deitrik & Company was our accounting firm. Howard was a lawyer and a CPA. The deal we finally settled on was crazy as I look back. Briefly the agreement was: 1. The stock value as of July 31st would remain the same as the past agreement and they could get their money as per terms of the contract. Any further growth would be a new type of contract and they wouldn’t be guaranteed the money; it would have to sell on negotiable terms. 2. They would get a S percent cash bonus each year, and 5 percent of total profits. Today that would be a bonus of about $1,000,000 per year. They also got an increase in salary. We had the contracts all ready to sign; I still have them in the files. Earlier Don had asked me for a draw the following fall to help send his boy to college. This wasn’t part of the deal, and I always liked to keep all deals as per agreement. We had the habit, still do, of inter-office notes, so I wrote Don a note and told him now that things were all settled, please don’t ask for the $2,500 draw. After all, he would get a fat cash bonus the following year. This was on a Friday, and Don came into my office bouncing off the ceiling. I guess all the negotiating was wearing on his nerves too. I listened to him, and I remember a tear coming to my eyes. I thought, what kind of monster had I made of these two men? Money has funny effects on different people, especially the kind of money these men were now Keep It Going! 89 making. I went home, and Dorothy and I talked about nothing else that night, Saturday, Sunday and most all of Sunday night. I was at the end of my rope. At breakfast Monday morning Dorothy suggested, ‘‘Why don’t you buy them both out? You’ll get by some way.’’ Something hit me. I hit the table, dishes fell off and I said, ‘‘That’s the best damn idea we’ve had in the six months we have been talking about it.”’ The agreements I had with Norm Nelson and Don Miller said I could buy them out at book value any time by giving 30 days notice. I think they had forgotten that. They also knew I hated the thought of running the company alone again. The main reason I had given them such a lush deal was I needed help and I needed to get out from some of the pressures. Be that as it may, my mind was made up. Dorothy said, ‘‘Now Dad don’t do something when you’re mad. You’ve always said don’t make decisions when you are mad.’’ My reply was, “‘It’s about time someone got mad, and I am mad.”’ I took a quick shower and hurried to the office. They were having a meeting and I said, ‘‘I want all of you in my office.’ Margie was working in the office during the summer so I had her come in, I called Harlan over from the retread plant, and I made my announcement. that ‘‘This is to notify my two partners Iam buying them out July 31st, and to consider this their 30 day notice.’’ It was very quiet; Margie’s eyes were as big as saucers; I said, “‘Don, you’ve wanted a swimming pool, now you can have it; you will get $225,000 in five payments, plus interest. Norm, you’ve wanted money, now you are going to get money. You will get around $300,000 in five payments; you are bought out.’’ We proceeded to close the books for them for the fiscal year end, and it wound up I owed them $525,000 which would be over $1,500,000 today. This was hell, but what a lucky thing it was that Don had made such a fuss over the $2,500. Several times I have run into the contracts we had ready to sign. I know now I would have hated myself for signing such a deal. I know now I would have felt much different about the company had I signed the contracts. I feel sure I would have sold the company and got out, as I would not have liked what I think would have happened to our company. The company and I have had many lucky breaks. Many Pride In Performance 90 of the lucky breaks have come by tremendous thinking efforts, by completely shaking out a problem; but there has been some luck too. I started to work on reshaping the company. As I said earlier, we had a book value of $2,000,000 yet owed the employees including Norm and Don about $4,000,000. I said I am going to reverse this; I want the company to have twice the value as the amount owed the employees. I started to shake things up good. I canceled all bonuses in the office, I cut the top manager contract down to 22.5 percent instead of 45 percent, and I shortened the payments due from the stores by 30 days to prevent the managers drawing their money and putting a cash drain on the company. I had all the managers come in to my office in groups of four, five, and six and we talked and talked. I explained what I had to do; I had their support; they were great. Norm sat down on the other end of the building and didn’t come in to see me. I had made my mind up that he would have to come to my office. Don and I finally talked, and I asked him, ‘‘What do you want to do?’’ He said, ‘‘I would like to stay.’’ I told him that hereafter he worked on a salary only. I said, ‘“How much salary?’’ He said, ‘*$2,000 per month.’’ I said, “‘I had in mind $2,500, so let’s make it that.’’ Don and I agreed. Norm and I finally talked. I paid him $3,000 in monthly salary, but in a few months Norm left. Norm had been outsmarted by Don Miller. Attending the National Tire Dealers convention in New Orleans a couple of years later, after a few drinks, I asked Don this question, “‘Weren’t you really trying to run Norm out of the company?’’ His answer was, ‘‘Hell, yes.’’ Bob Finzer was with us at the New Orleans meeting. But what in the world were both of these men talking about? They shouldn’t have been so hard headed in dealing with me. The contracts I finally gave in on were not livable. I can truthfully say it wasn’t the money I wanted; I was thinking about my family, our company, and the families of all of our employees. Money does funny things. Don later told me he was just not capable of digesting the total picture; it was overwhelming. Life is hard, but again it turned out to be by far the best thing that could have happened to the company. Greed was entering into the company, and greed destroys. Keep It Going! 91 Iam sure Don Miller and Norm Nelson would tell this story differently; I would like to hear it, and I hope it gets into print some day. I certainly couldn’t have been 100 percent right. I know now I was right for the sake of the company, but not for their sake. Their interest today would be worth around ‘$12,000,000 each. The future of any company is seldom around one man. Business structure is an unusual thing. You build a business one step at a time, block upon block, one step up the ladder, step by step. Our company was much deeper than Norm Nelson, and I'll always say that Norm did much for the Les Schwab Company and we are deeply indebted to him; but he left in a huff and we never missed a lick. The depth of our people clear through and on down to the men buffing, retreading tires, selling and servicing tires was there and they were great. I did slow up somewhat to reorganize, but we soon started to grow again, thanks to great people. Parts of a bulletin I wrote in February 13th: ‘‘Norm Nelson has resigned, which you know. There's been a definite conflict in the thinking between Norm and myself for nearly two years. Norm had done a lot for the Les Schwab Tire Centers and the Les Schwab Tire Centers have done a lot for Norm Nelson. We are going to change the complexion of the company somewhat. We may lose a few dollars in sales, we may not grow quite asfast, we may not make as much profit, but we will gain, in the end, with stronger people and people make the company. We will live longer, be happier, have a nicer relationship, have a better home life and more security. We are going to be harder than ever on dishonesty, and disloyalty, policies, but we will have more consideration for your personal life and personal problems."’ It didn’t quite work that way, Norm wasn’t totally responsible for the pressure, it is just there in the tire business. I want to say again, Norm Nelson was one hell of a salesman. I truly do wish it hadn’t worked out the say it did. I am still at a loss to think of just why it did. It could very well have been my fault, but no one can say that I didn’t try. 92 ; Pride In Performance Unselfish for Good Reasons UNSELFISH FOR GOOD REASONS has been a slogan of mine for nearly the 34 years I’ve been in business. I sorta stole this from Mr. James, the founder of the O. K. Rubber Welders. His was ‘‘unselfish for selfish reasons’’. I changed it to “‘unselfish for good reasons’’. I never could understand why more business people don’t share with their employees. What nicer thing can they do with their profits? You can’t take it with you. Naturally you should look out for your family, but you can always come out better for your family if you look out for your employees first. I said from the first that I was going to share 50 percent of our profits in the stores with our store people in that store. Our first stores only had one man, so naturally he was the manager. They took their lunch. Today our average store has about 12-13 employees, so if you go back to the 100 story printout schedule you will note that we share 49.51 percent of our store profits with the employees in each store, based only on their store. Have you ever been to or read about a ribbon cutting ceremony by a wealthy man, whereby he had built a wing on a hospital, built a museum or a church, or something for the community? Often times his own employees were in the crowd and some of them couldn’t afford to buy new shoes for their kids. I believe in sharing with those who helped me and thinking about “‘unselfish for good reasons’’. The more you share, the more you have left for yourself. I don’t like to think about having it left for myself. I like to think about it as having it left to expand the business, and to create more opportunity for more young people. If you share $10,000,000 with your employees, you also have $10,000,000 left over before taxes, about $5,000,000 after tax, for the company to expand with, to create more opportunity, to build more stores, to expand and expand. There’s no limit; but you have more than the five million, as with our programs, the employees leave a lot of their money in the company, or Trust, and this too can be used to expand the programs. It’s self perpetuating. Keep It Going! 93 Rehash of First Store Go back to the very first store, and our contracts haven’t changed a word in them since the first one. It was very simple at first. Today it is much more complicated, because more people are involved and more dollars. If it took $80,000 to run a store and the store made $20,000 per year, at the end of the first year the manager had $10,000 coming, the company had $10,000. We ran the store in debt to the $80,000, now the store owed the Warehouse Company $60,000. Next year he made $20,000, the manager now had $20,000 coming, the company had $20,000 coming, the company never took any money until the manager wanted to make a draw. The manager can’t draw his money until the store is paid out. The store now owes the Warehouse $40,000. For the next two years the store continued to make $20,000 per year, the manager now has $40,000 coming, the company has $40,000 coming, the store is now paid out. We charged interest against the indebtedness all this time, the store is now paid out, and, at the 12 percent, the store is now saving $800 per month in interest each month. If the store made $20,000 the fifth year, we now have $20,000 surplus. The manager can now draw $10,000. When he draws $10,000 the company draws $10,000 which runs the store back to where it is paid off, but no surplus. The manager can’t draw until the store has a surplus. When the store overpays his Warehouse bill, he gets an interest credit; complete openness, complete fairness, and complete honesty are necessary to make this type of program work. In our very first store, we paid the tax and did not charge it to the store. That is the story of our first stores. Today we pay into the Trust each year and we pay the employees’ bonus in cash, but the assistant manager and manager have to leave their money in until their share equals the total store investment. Also today we have to take tax money out as we go along, but the basic program is the same today. I hope we never have to change this. When the manager or assistant manager quits we get five years to buy him out of his contract. We make five equal 94 Pride In Performance payments, no interest; that’s part of the deal going in and we’ve never changed it. All of our store managers and all of our assistant managers are partners with the company. They don’t own stock, they are partners by contract. It is the same as a partnership but much cleaner with the company maintaining control, as they are employees not stockholders. In many ways this is best for the employee, because should he die, his family knows just exactly how much they have coming and how they will get it. Every month we send out checks to managers who have resigned, retired or died. We have never shorted an employee’s family one dime. Many companies, if they so desired and if it was in stock, could cheat the wife a lot. I’ve seen this done and it makes me sick to my stomach. I never want this on my conscience. We have always treated our store manager as a customer. We treat him the same way we treat our member dealers. Member dealers own their own stores. We want the manager to check all billings that come from the Warehouse, we want him to argue with us if he thinks he isn’t being treated fairly, and we want him to act like a businessman. In fact, in each town, the manager is Mr. Les Schwab. Many people call him Les, most times kiddingly, but sometimes people think that store is the only store and the manager is actually Les Schwab. Office People Vs Store People We have had over the years some people in the office that sometimes think they are more important than the stores. The office serves only one purpose, and that is to serve the stores. You can have the most beautiful records in the world and go flat ass broke. The office and accounting people can only tell the stores what they have done. If the store manager runs his store right, he doesn’t have to spend hours and hours looking at the office reports; if he’s doing okay the records will show it. In fact, if he spends too much time in his office reading the mail, it is a sure thing his store will suffer. Sell tires, give service, keep Keep It Going! 95 expenses low, make sure everything is billed out, keep good communication with employees, be careful with credit, watch for leaks . . . do these things and you’ll come out all right. The damn computers can’t run a tire store, they can only tell you what you have done. Many times I’ve told accountants . . . you tell us where the pencil has gone; but, if you were smart enough to tell us where the pencil should go, you would really earn the high fees you charge us. The same goes for lawyers. Our store managers make more than our office people. Some of our office people, especially some with MBA degrees, or CPA certificates, sometimes wonder about this. But I’ve warned them, don’t bitch to me because that is the way I want it. If you want to go out, start at the bottom changing tires and work into a manager job, then hop right to it. If it weren’t for those men in the stores working their butts off in all kinds of weather, missing meals, God awful hours, etc, you wouldn’t even have a job. Besides, they are TWO DIFFERENT COMPANIES . . . THE RETAIL STORES AND THE WHOLESALE WAREHOUSE COMPANY. Zone Managers and Zone Meetings ZONE MANAGERS are very key people in our company. Even at first, at meetings, Itold my managers... “‘If you don’t do for your employees what I have done for you, then this company will die when I die.’’ I had seven stores when I moved out of my first store, but by being active every day, I could help another store manager more in one hour than a professional type management person could in a week. Why? Because I had the same problems, probably that very morning. The professional type management loses out and it doesn’t take long. Stay out of a store 30 days and you’ve forgotten 50 percent of what you should know. Today we have our 163 stores divided into 17 zones. Each zone manager runs his own store, and supervises seven, eight, nine or ten other stores. He attends an office zone manager meeting every month. Our planes pick up the zone managers who live the 96. | Pride In Performance farthest out, and the ones closer drive. They meet with our president at 4:00 p.m. and have an informal meeting until 6:00 p.m., then dinner at the office (we have a kitchen and we serve meals in our office), and they continue the meeting until around 8:00 p.m. Then they start again the next day at 8:00 a.m. on the formal meeting. They usually end around 2:30 p.m. and go home that night. Years ago, the night before the meeting the men had some wild parties. Prineville is a good place to have a wild party, and sometimes you find more trouble than you need or can handle. Today with the dinner, meeting, and different type of managers we have eliminated that problem entirely. We run the zone meeting just like a Board meeting. One of the highlights of the zone meeting is the selection of a manager for a new store or for a store where one resigned or fell off the tree. The better the store, the more applications we get. Each man gives his speech, usually presents a budget showing what he thinks he could do, tells about himself, his family, his desire to move and the reasons. The zone managers ask him questions. He then leaves the room and another man who has applied enters. The questions are usually similar. How much money do you have in your profit sharing contract? If the man has been thrifty and hasn’t drawn much and has $50,000 to $60,000 coming, this is a credit to him. For example, today, if an assistant manager having $50,000 in his contract goes to a new store, the company puts in $75,000 and the new store now has $125,000 to start with, and this saves the new store $1,250 per month in interest if 12 percent is the figure used for interest. We are fair with the interest charge, always charging the going rate. That is a big factor, because today it takes about $200,000 in operating money to start a new store. If the manager doesn’t have anything coming, then the company doesn’t put in anything and the new store has to pay $2,000 in interest cost each month. This hurts, but seldom if ever is this the case. An assistant manager or a present manager always gets the opening and takes at least some money with him. After all the applicants make their speeches the zone managers have a lengthy discussion and select the applicant best qualified. The men are then called back into the room and the lucky one is notified. I’ve seen men cry when they didn’t get the Keep It Going! 97 job, but they always get their chance if they are qualified, and often the bad break turns out to be a lucky break, as just maybe the next store is even better. Plum Stores We have assistant managers of some of the older stores who make more than the manager of some of the smaller stores. This is okay; they have just as much if not more responsibility. A few years back we noticed we didn’t have many applicants for the small stores. Men get wise and lay back for the plum stores; so we changed our policy, and today we don’t have a problem with getting applications for the small stores. I am going to print out the bulletin I sent out. Today this has been adopted into our policy book. GUL DEald NESS. Attachment to Policy No. 1 TOP STORES... JOBS WHEN THEY OPEN MANAGER THE WHO GETS job in any of our top stores is a real plum for the The manager to replace any one of the managers of the selected is who man top stores. It should be the goal of all store-trained people to want to earn the reward of being selected for the management Job of any top store. for the top stores, In making the selection of anew manager the following will be considered: 1. The assistant manager, in most cases, will not be allowed to apply. This opens the door for the fully qualified people. 2. Has the applicant ever pioneered credit will be given to this. 3. a new store? Much Willingness to move. Has the applicant applied for stores : 98 ; Pride In Performance before, especially the less profitable stores; or has he waited for a plum to open? 4. Consideration will be given to the amount of money tn his profit sharing contract. Has he been thrifty? 5. Does he have ability to train people and promote them from his past store? How many people have been promoted to manager, or assistant manager, from his store? 6. Consideration will be given to his standing in the management comparison report and the profit comparison report. Consideration, though, will be given to economic conditions, etc., of his past location. 7. Age and maturity. Is he mature? Does he have his family life under control? Is he looked up to; does he build people? In rare cases, where we don’t have a qualified man as judged by the above, the assistant manager or a lesser qualified man will go in under a 12.5 percent contract. After two years this man will receive the full 22.5 percent contract, provided he has proven himself. Les Schwab May 19, 1983 Attachment to Policy 1 6-22-83 And this new guideline policy made a big change. We now get many applications for the small stores, because no one will ever get a ‘‘PLUM”’ store unless he has followed this policy in his career with our company. When we first started our stores the managers, even considering today’s money, were probably making $20,000 per year. Today we have six or seven managers who make over $100,000. They are worth it, they are tremendous business people with a Keep It Going! 99 lot of experience behind them and have one big load of responsibility. Iknow a lot of business people when a store like this opens would find it hard to allow the new manager to make this much money. Why not keep some of this for the company? After all you _ certainly should be able to get a good manager for $40,000 per year. Yes, I’ve thought about it, and, if we didn’t have the complete program, we would be foolish not to change. The big stores are real plums. Young men dream for the day they can manage a PLUM STORE. It’s real motivation to even think that just maybe I'll get there some day. And, why not? If they all do their jobs right there will be more and more PLUM STORES. J. C. Penney I’ve observed the J. C. Penney company over the years, and I knew some of the managers. They had a program whereby if the store did $1,000,000 in sales, and the manager had pioneered this store, he got 33-1/3 percent of the profit of the store. So if the store made 10 percent profit the manager got a bonus of $33,333; but if he moved or retired the new manager was told ‘‘we already have $1,000,000 in sales, you had nothing to do with this, so we will give you a new program. We will give you a base of $500,000, and, if you hold the $1,000,000 in sales, you will get half bonus on the $500,000, 10 percent of $500,000 is $50,000, and half bonus would be $8,250. He would get a bonus of $8,250 just for holding the store the way it was when he took it over. He got 100 percent of the bonus program for everything he built over the $1,000,000 in sales and the $100,000 profit. The company kept the difference between the $33,333 the first manager got and the $8,250 the second manager got. There’s really nothing wrong with this; I considered doing it too, but I’m glad I didn’t. I like it our way best even though sometimes it is possible for the wrong man to get a PLUM STORE. The J. C. Penney profit sharing programs of old are all gone now. They died when J. C. Penney died, and they are now just a big corporation. I truly hope this never happens to my company. I hope it goes on for 100 Pride In Performance hundreds of years just the way it is today. My family has the right attitude today; I can’t speak for the second and third generations. I just hope they will get Schwabism. It would be good for them, and I wish I could live to be 200 years old; but life is hard. “Share” Program Added As our stores got larger I often looked at the total program and thought it should be changed. I spent a lot of evenings with adding machine paper all over the floor. I couldn’t find the key to any change, so I always left it alone. When we had a four man store we had the perfect program; but when we got ten employees it was different. In a four man store they all got 15 percent of their wages in Trust, 10 percent was divided between the two employees, which was 5 percent each. The rule is that no person under management could get more than S percent. Ten percent of the balance, which would be 9 percent, went to the assistant manager under the terms of his contract, and 25 percent of the balance, which would be 20.25 percent of the starting figure, would go to the manager. Bookkeepers share too, but on a somewhat lesser scale; but on a very fair scale. It works out that they get 2/3rds of what the sales and service people get. When we got into a ten man store I began to think the assistant manager got too much in comparison to the other men. However, the assistant manager of a large store had to be an outstanding man. It was a good job, too, as the larger stores made good money. I also thought the men who had been with us should get more than the new men. I worked and worked on this and always ended up by throwing away all my work papers. It was on a Saturday morning, Dan Roberts at that time was manager of passenger retreading and Lyle Smith was manager of truck retreading. Both of these men were excellent cowboys; they helped me with branding on my small home ranch. After we finished I asked them to my home for ‘‘Miller Time’’ and I told them I was going crazy attempting to figure out a plan for better Keep It Going! 101 distribution of our profit sharing program in the larger stores. _On my desk Monday morning was a program from Lyle Smith. I immediately saw this was the answer I wanted. He suggested dividing up the bonus pot into shares, give one share to the new man, two shares to the men who had been with the company two, _ three and four years and give three shares to the men who had worked five years or longer. If we had six men, two in the new, two in the middle, two older employees, and if we had $12,000 in the bonus pot it would work like this. . . 2 new men at One share each 2 shares 2 men in the middle of ue shares each 4 shares 2 men 5 years and more of three shares 6 shares Total shares 12 Total bonus pot, $12,000 divided by 12 would be $1,000 per share. So the bonus would be... 2 men at $1,000 $ 2,000 2 men at $2,000 4,000 2 men at $3,000 6,000 Total $12,000 We adopted that program and also use it today in our retreading production shop, distribution center and in our main office. We also made another change. We changed from 10 percent cash bonus for the store employees to 12 percent. In other words, 12 percent of the store profit would be divided between the store employees other than the manager and assistant manager. Making it 12 percent took a little away from the managers and assistant managers, and it made everything more fair. I thank Lyle Smith for helping me with this idea. 102 Pride In Performance Nelsen Tire Warehouses The Nelsen Tire Warehouses were becoming a big factor in the tire business in Oregon. This company was started by Rudy Nelsen way back, possibly around 1940. He was strong in truck tires and wholesaling tires to smaller dealers, service stations, etc. He was also a large truck tire retreader specializing in fleet accounts. Rudy was an excellent tire dealer and if he made any mistake, it was in not changing with the times. | His son, Neal Nelsen, took over and he could see that tire wholesaling was going out. Possibly our success with retail stores had a lot to do with him starting into the retail store tire business. If Neal made a major mistake, and he must have because he went bankrupt, it was in moving too fast, but he had me concerned for quite a period of time. The Nelsen Tire Warehouses were springing up all over Oregon. I think they got up to 24 stores. They were heavy on advertising and using the famous name of John Brodie, and John Brodie in person on most all of his T.V. spots. They always advertised they had the lowest prices in town and one ad ran... spoken by John Brodie, ‘“we post our competitor’s ads on the wall,’ and John would point to Les Schwab, Goodyear and Sears. I always thanked him for putting me first. When you advertise you have the lowest price, you better have the lowest price. People walk in expecting the lowest price, and, if you don’t have it, it rubs them wrong. I personally think it is very foolish and poor business to say, “‘we have the lowest prices in town.’’ I remember a man telling me one day, ‘‘I checked the Nelsen Warehouse prices and he isn’t any lower than you are with your prices.’’ He, I’m sure, wouldn’t go back, as he was disappointed and thought they misrepresented themselves with their ads. Neal Nelsen had a good program operation costwise. He used something like the oil companies used to use with their consignee dealers. His managers got a commission on everything they sold, such as 11 percent for new tires, 12 percent on retreads, and 100 percent on service work. The store turned in Keep It Going! 103 all the money to the Nelsen Tire Warehouse main office, cash or credit card was the only way they sold, no company credit. Each month the manager got a check and he in turn would hire his own employees. The manager naturally held down costs, paid low _ wages and really had a low overhead operation. The flaw here was they didn’t get, with the low pay, near the quality of employees we had. The Nelsen Tire Warehouses possibly operated their stores for 8 percent less operating cost than our stores, but he was always obligated to his supplier and usually had only one supplier. Most of the money was coming from the tire supplier, therefore he didn’t have the leverage buying that we did. We always had one line of tires at the same price as Nelsen, but we had three or four lines to choose from. It did concern me as I knew they were operating for less cost and they had somewhat lower prices. After thinking about this for a year or so, wondering if I shouldn’t cut wages and benefits, I finally made this decision. That decision was, ‘‘If I couldn’t be proud of my company, if I couldn’t pay good wages, if I couldn’t have good benefits, if I couldn’t have the best employees, then why would I even want to stay in business, as I had all the money I wanted personally.”’ So we did nothing, and we won. The customer likes us best. Life is hard . . . for the man who thinks he can take a short cut. Company Airplanes Airplanes have become an important part of the Les Schwab companies. I doubt if we would have ever bought the first plane if it hadn’t been for Don Miller. As our company got larger and larger and after Norm Nelson left the company, it became important that Don could get some place in a hurry. He started to lease a plane every now and then. Bob Miller had moved to Prineville from Lancaster, California, and he was an experienced pilot. Bob moved to Prineville to more or less retire, buy a small farm and possibly some commercial buildings; but once flying gets into your blood it is hard to remove. He did build a commercial building in Prineville, and he 104 _ Pride In Performance did buy the small farm, but he couldn’t stay away from the airport. Often times when Don, Jerry or other office people leased a plane, Bob Miller would be the pilot. Don proposed to the Board one day that we buy a plane. It was quite a shock. Dorothy was very much against the company having an airplane. We had been shown a Cessna 421 plane that the Disney family had owned, I think the price was $180,000. Anyway the company was going great and we did need to get around, so the main Board agreed to buy the plane. Now we had the plane, we needed a hangar. We leased some land from Crook County at the airport and built a hangar. We made a mistake though and built it just large enough for the plane we bought. The company kept growing. When the crash came with Norm Nelson and Don Miller we did $10,000,000 per year in sales, today we do $130,000,000 in sales with our stores $50,000,000 more in sales through our member dealers. and The Cessna 421 was a good plane, but we did get scared a few times with icing, as it didn’t have enough power to get up through the icing zone and it had a ceiling of 24,000 feet. Don Miller proposed we buy a more powerful plane. Bob Miller looked them all over and decided on the Piper Cheyenne II. The Board bought the new plane for about $750,000 plus the traded in Cessna 421. The Piper Cheyenne II has been a great plane. In 1983 we put on about 600 flying hours and we leased other planes for about 400 more hours. Now we thought we needed two planes. There was a used plane just like the one we had, which we bought for $340,000. The theory was good; we had two planes almost exactly alike, but the used plane we bought had been sitting out in the rain in the Tacoma area for 18 months. They had given it a new paint job and had put all new upholstery inside so it looked like new; but the plane had mildewed all through by being closed up all this time in such wet weather. The instruments were all screwed up, and we had several scares with it. For example our President, Phil Wick, was alone with the pilot, Bob Franklin, coming home from Seattle and all the instruments went blank. Bob came home by using his watch and knowing the route so well. It was an overcast day, too. We had three or four more scares so we started to think about a new plane. Keep It Going! 105 Bob Miller, our head pilot, always wanted a jet. The King Air people had taken Dorothy and me to Palm Springs once and to San Francisco another time. The Aero Commander people brought Dorothy and me home from Palm Springs. This was a _ funny one. We met them at the airport, they showed us around the plane, we got in and it wouldn’t start. We had to wait four hours for them to get a small part. The Cessna people had also taken us twice to Palm Springs, once in the Citation II and once in the Citation I. Actually three times as they brought us home in the new Citation SII]. Anyway we ended up buying a new Citation I and traded in the Cheyenne II that caused us the problem. They will put in,new instrument equipment I’m sure before it is sold again. It seems impossible to justify two airplanes, as it does cost a bundle to maintain them, service them, the depreciation and the total cost, but I don’t know how we could run our company without them. Both planes fly every week, at least one is going some place just about every day, we have so many meetings. For example, once a year we make the complete rounds of our stores for ‘‘Employee Benefit Meetings’’. This alone totals about 25 meetings, as we combine four, five, or six stores into one meeting. About six people in the office know how to put these meetings on and they take turns. Usually three go at a time. They leave the office about 4:30, have the meeting at 7:00 p.m., and are home in Prineville by 11:00 p.m. and back in the office the next day. Without the planes it would be two long days. It makes all our stores just one hour away. When our key men did travel a lot they spent hours driving. The wages we pay our top men makes this mighty expensive. Now they are home every night except for rare occasions. What's this worth? It’s worth a lot. Before we had two planes two of our top men got divorces, and that is sad. I’m a strong family man myself and you can’t put a price on that. The way I have finally figured out the planes is this: How many more stores can we run with fewer executives with the planes? It comes out to be a lot, and these extra stores will pay for the planes, plus create more opportunity for young people to expand with the extra stores. 106 _ Pride In Performance Thoughts of Going Public — Buy Out Offers Many people have asked, “‘Why don’t we go public with our stock?’’ People have also asked, ‘‘Why don’t you sell out and retire?’’ When we had 12 or 13 stores I thought a lot about going public, partly to raise money to expand faster. I had the chance to buy a small public company that was nearly bankrupt, it would have been an easy way to go public. I am so glad I resisted the urge to have our stock on the market. I don’t want a few investors around the country club asking about our business and questioning some of our decisions. They might even ask, ‘“How come some of those store managers make so much money? Why, they make twice as much as I do and I have a college degree.”’ I'd probably lose a customer, as my answer would be, ‘‘He is worth twice as much as you and he has a degree too; he learned how to be a businessman.’’ I’d probably add, “‘He also learned how to work, something you never did learn.”’ I think companies who specialize in selling larger businesses have put me into their computer, as they call:about every six months or a year and question me about selling the company. They have my age, I’m sure, in their computer and they think I should retire. Don Miller wanted to have a company come out from New York. I thought he would talk to them when I was gone as I was going to Hawaii for a couple of months; but they waited until I got home. This company was headed by a man in his seventies who had made a fortune by buying up privately held companies and letting the present management run them. There’s certainly nothing wrong with this idea and when they saw our figures, our people and our facilities they drooled at the mouth. They called me after they got back to New York and wanted to bring out more people. I told Don Miller I couldn’t mislead or string people along, so I wrote them a letter and told them I didn’t want to sell, but would keep them in mind should I change my mind. The KKR people also contacted me and I| had them spend a day with me. I was curious more than anything. Everyone knows Keep It Going! 107 about KKR; they have bought companies out in the billions. They are nice people and if I truly wanted to get out I would consider them, as they have a good reputation with how to handle the company and employees after they buy it. The leverage buy out has been a real fad in American business the last 10 to 15 years. It works like this . . . say a company sells for $80,000,000; the owners get their cash, the company buying out puts up $5, 6 or 7 million, usually about 10 percent or sometimes as low as S percent. They borrow all the balance. They take in as partners the highest eight, nine or ten executive people in the company. This usually is a different type of stock. They borrow from large retirement accounts, various institutions and large banks. Often borrowing from a Trust, they pay interest and share the profit if they take the company public or if they resell the company years later. When KKR bought the Fred Meyer stores in the Northwest they borrowed heavily from the Oregon State Employees Retirement Fund. It has worked beautifully for the retired Oregon State employees; KKR has made them a bundle with the Fred Meyer purchase and with one or two more purchases the State Employee Fund was in. KKR has a good track record. Some day they might stumble, but so far their record is excellent. KKR is a partnership I understand of seven men. They have put together some excellent deals. I asked them when they were visiting me how they got started. They said they started small and were lucky enough to have the first ones work out and as they established a good record they got entry to the larger trust funds. The figures I’ve used earlier, and the number I’ll use following, have nothing to do with what I think my company would sell for. Idon’t have any idea of what our company would sell for as I have never seriously considered selling the company. I do know it is worth more when I’m alive, than whenI am gone... . I’ve been told this by people interested in purchasing our company. They have always asked if I would stay on as Chairman of the Board for five years as part of the deal. I have seen companies fail, go down hill, and sometimes disappear entirely after the founder retires or dies. I hope this doesn’t happen with our company, but I won’t have much control after I’m gone. The leverage buyout actually works as follows: If a company sells out 108 _ Pride In Performance for $80,000,000 and they pay $10,000,000 down, they borrow the $70,000,000 and at 10 percent they pay $7,000,000 interest. A company this large should make $20,000,000 before taxes and bonuses. They pay the $7,000,000 interest which is deductible, and a payment on the principal. They should have $6 or 8 million left over after the above, and nearly half of that will go for federal and state taxes; the balance they can use for future expansion. But look what a tremendous return that is on the $10,000,000 investment. Say there is $3,500,000 left over, that is a 35 percent after tax return, and that is terrific. The company actually buys itself out. The use of high leverage is dangerous too. If the company loses money, the first loss comes from the people who made the down payment, their $10,000,000 could be lost fast should things go wrong. Win some, lose some and if they get by with some luck with the first four or five they can stand a loss now and then. J. C. Penney said you only have to be right 51 percent of the time to be successful, but you have to have a better track record than 51 percent to be successful. I could come out with an astronomical bundle of money if I sold the company, but what would I do with it? What good is money beyond a certain point? I think the biggest misconception the public has about a successful businessman is he is working for more money. You won’t find many truly successful ones that are greedy. Success in my mind comes from having a successful business, one that is a good place to work, one that offers opportunity for people and one that you can be proud to own or be associated with. Success in life is being a good husband, a good father and you end up being a second father to hundreds of other men and women. Just last night I attended the wedding of a young man from our office (in fact both the bride and groom work in our main office) and this young man told me that two men had influenced his life, his father and me. That’s worth more than money. Keep It Going! 109 Creating Programs — Complacency It’s very rewarding to create a program and watch it work. There’s something in our program that makes a man, several hundred miles from the main office, be at the store at 7:30 a.m. and stay there until 9:00 p.m. if needed. It’s not a big thick policy book, it’s not a lot of supervisors, as we don’t have them; it’s something that our programs created in him right in his heart. That is opportunity, the right to be successful, to be a good family man and hold his head high. Our company will be 34 years old January 1st, and one thing we must guard against is complacency. Many of our managers are now in their fifties. It’s hard to run in overdrive for 20, 25 and 30 years, but ten years of employment doesn’t guarantee a lifetime job, not in the competitive tire business. In fairness to all other people in the company, all people must carry their weight or move aside; and that includes me. I started doing just that several years ago, I cut my salary by one third; last year I cut it in half, and I plan to cut more this year. I am a long ways from being the highest paid man in the company today; I am seventh or eighth down the line if you consider bonuses. I have never taken a bonus from the company. Since the big blow up with Norm Nelson and Don Miller I have never allowed, outside of the store managers, our key people, to make the real big money. The most problems I’ve had in the executive end of my company have been with the people who made the most money. Thought for New Executive Program A few years back my accounting firm thought I should work up a program for our Executive Vice Presidents and President. We have four of them. We are a real open company, and at some of our executive meetings I openly talked about working up a plan. In thinking about a plan for the Executive Vice Presidents I 110 _ Pride In Performance wondered about the other six Vice Presidents. Why should I make an Executive Vice President a millionaire and the man down the hall, almost equal, would get nothing? Then I said, let’s include them. Well if we included them, how about the next man down the hall who was almost equal in talent? And would we create greed in the company especially after I leave this world? After the blow up in 1970 I had dropped all bonuses in the office, but I couldn’t leave it alone. In less than a year I was working on a new program. I wanted to create a bonus program for our retread people, our distribution people and our office people. I wanted one that wouldn’t go crazy and wind up with bonuses too large to be practical. I had already had enough problems with key people making too much and the problems that came with it. Ihave store managers who make over $100,000 per year, and I tell them I hope they make $200,000 soon; but that is different. They run their show and they are responsible for the success of THEIR store. Key executive people are very important, but sometimes get a free ride. We are different from most of the American corporations, as we think the most important people in the company are the people on the firing line; the ones who sell, do the service work and take care of the customer. Most American corporations have the fat salaries and outrageous bonuses for the top people, and treat the people at the end of the line as peons. I guess that is why, if you are on the ball, you can beat them on any type of fair competitive basis. We already had an excellent Trust fund set up for our warehouse company which was the same as the stores. I didn’t want a bonus based upon the profit of the retreading shop or warehouse, because we could name our own profit. We had captive customers, our stores and member dealers. The Trust we already had was based on the total company. The stores had to be successful or the Trust wouldn’t be. Our policy was to put 15 percent of our profits into Trust for all employees up to 15 percent of their annual salary. I knew it didn’t take the full 15 percent of profit to do this, usually around 12 percent. So, why not give them the difference in cash? It would be a good, clean bonus program that couldn’t possibly grow out of sight. I got a little more generous and went for 17 percent for the men and Keep It Going! 111 women working on hourly wages, 22 percent on the supervisor salaried group and 30 percent for the executive group. We started the new bonus program for the warehouse, retreading and office people in 1972 or 1973 and it has worked fine. It makes it easier to keep the records as it is based upon the _ same qualification as the Les Schwab Profit Sharing Retirement Trust. We now have all hourly employees of the Warehouse Company (office, retreading, trucking, distribution, loading, Midway) on the share program, same as the stores. New employees, one share; two through four years, two shares; five years and over, three shares. The hourly employees are entitled to 17 percent of the total company profits (including stores) in proportion to total salaries in proportion to the qualified total payroll. From this, the Trust is paid first, 15 percent of each employee salary. The balance goes into the Bonus pot. Last year the per share value was somewhat lower, due mostly to the fact that we now have more three share employees. Last year the value was $458 per share, so the new employees got their 15 percent into Trust, plus cash of $458. The two through four year people got $916, plus their 15 percent into Trust, and the three share people got $1,374 plus their 15 percent into Trust. Since all of this is based upon profits, the cash bonus goes down first, should profits drop. Should profits drop far enough, all the cash bonus is wiped out, and part of their Trust too. We give a statement at year end to each employee showing the total bonus pot, percentage share, the dollar amount, the amount paid into his Trust, the amount his Trust earned, and the check enclosed. We also have this at the bottom, ‘‘This represents a total of ‘‘X’’ dollars and is a certain percent of total earnings’’. This is very impressive, because if the employee has been with the company several years, the figure at the bottom could equal or exceed their salary. Normally, without Trust earnings it runs 30 to 40 percent of salary. The supervisors and executive people have the same deal, except their bonus is based on 22 percent of profits and 30 percent of profits. If an executive person’s salary equaled 1 percent of qualified payroll, he would get 30 percent of 1 percent of the total profits, as total bonus and Trust contribution. Now, going back to giving a generous phantom type stock or 112 _. Pride In Performance something like that to executive people, I said, we are just going to leave it alone. Since all people worked on the same program, the hourly people will feel much better knowing they had the same program as you men do. They can understand you getting more salary, and, of course, the higher the salary, the larger your bonus, and the Trust contribution. Work hard to get a salary increase, and you also increase your percentage of the bonus pot. If it would help the company live longer, if it would help the company to be a better company, I would gladly share ownership, stock or whatever with our executive people; but we are going to have a better company the way we have it now. The top store managers make more than our President, and our Senior Executive Vice President, and I insist that we keep it that way. I'll make a prediction that if our top four or five people in the office start to make more than our top four or five store managers, then our company won’t be the company it is today. They won’t as long as I am alive. This is an unusual way to run a business; but more businesses would be successful if they gave more attention to the people on the front lines. We have great executive people, and I don’t want to belittle them in any way. I want to impress upon them that we are running two separate companies, one is the wholesale company named ‘‘Les Schwab Warehouse Center, Inc.,’’ and the other is the Les Schwab Tire Centers. The Warehouse Center is the retreading shop, Midway Equipment, Distribution Center, Trucking Center, and the main office. The Les Schwab Tire Centers are all the stores. The Warehouse company is a wholesale company. In proportion to other wholesale companies we pay excellent salaries, bonuses, retirement and benefits. The stores and member dealers are customers of the Warehouse. We wouldn’t have a warehouse company if it weren’t for the stores and member dealers. The Warehouse executive people should be very happy the store managers make good money, as it helps them. If jealously ever creeps in, goodbye Les Schwab Company. We have great people and this won’t happen as long as I’m alive; I'll kill them if it does. They’Il find out that LIFE IS HARD. I love them, they are great; but in any family you do need discipline, and our company is a large family. We now have over 1,450 employees, and our member dealers have over 600, so there are Keep It Going! , 113 over 2,000 families that make their living selling Les Schwab tires. Member Dealers I want to go back and pick up in 1970. I had bought out Norm Nelson and Don Miller. They both lost all bonuses and were on a flat salary. Norm pouted and we didn’t talk much; but he was still one heck of a salesman and I had him working on getting new member dealers. He helped to sell some of the largest dealers in the Northwest. They dropped their supplier and joined up with us. One was the J. J. Stamper Tire Company in Coos Bay. They had been a Goodyear dealer for 40 years, started by the father. The son, a CPA by profession was forced to take over the business due to the death of his brother in a plane crash and the father was retired and elderly. He had a good business, but with Goodyear a very low profit. In working with a new dealer of this size we often split it the first year. We tell them to buy some from us and stay with your old time company and see how it works out. They almost always join up. The Stamper Tire Company now has four stores, plans to build a fifth and is doing nearly $6,000,000 in sales. Tom Stamper says we kept him in the tire business. Ed McCall in Astoria was another. He had been with Goodyear for years and years. Ed is a fine gentleman, past president of the Oregon Tire Dealers Association and was successful in just all ways. He now has another store in Seaside owned by him and his son; another success story. We are proud of our joint association. Lauren Young is nearly our oldest Member Dealer and has been influential in many ways in the Les Schwab story. We have been associated for 26 years total. He and his lovely wife, Dena, had bought out Art Morton, our dealer in Lakeview. He dropped out of Les Schwab for a couple of years. Years later he told me that I scared him. I talked too fast, and seemed too high powered. Anyway I started to look around Lakeview a few years later. Lauren contacted me and wanted to talk. He joined up with us 114 ; Pride In Performance again. Later we bought his Lakeview business, property and all, and he and Dena went to Roseburg to open a larger store. This was a bold move on their part. If they weren’t successful, they would have lost it all. The Lauren Young Tire Center, with the Les Schwab TIRES Cascades. He now sign was our third location West has two stores, both extremely of the successful, doing nearly $4,000,000 per year in sales. Lauren has really practiced ‘‘Building People.’’ His Lauren Young Trust Fund, for his employees, has been extremely successful. Even more successful than our plan. He has $1,500,000 in his plan which is great for a small company. Recently one of his employees retired at 52 years of age with $140,000 in his Trust. He had only worked about 15 years for Lauren. Just about 100 percent of our old time Member Dealers have a Trust plan for their employees. When I had the first meeting in Seattle with over 30 dealers attending, I asked this question, ‘‘How many of you have a profit sharing Trust for your employees?’’ Not one dealer in the room had one. So our influence of sharing with people worked down through our dealers. Today, many of the Seattle dealers have started a profit sharing trust for their employees. Pleas Brown in Baker, an ornery old time Eastern Oregonian, had been a Uniroyal dealer for 25 years or more. Everyone tried to get him to change, but he never did. Like most old time Eastern Oregonians, loyalty is important. When his friends ask him about his deal with Les Schwab he answers, ‘‘Well, Les came over and said, try us for one year. If you like us, come with us all the way; if you don’t like us, then drop out. Les also said if we don’t like you, we’ll drop you. We shook hands on it and that is about the way it was.’’ Truthfully, that is the way it was. You can have a contract 100 pages long and it doesn’t mean a thing. The men making the deal is what counts, and a handshake deal with Pleas Brown is better than a long contract with most any man. Pleas is a character, and I guess I am, too. We always got along great. Both of us say what we have on our minds and neither of us pussyfoots around. There’s a story about Pleas Brown that I’ve always loved. He had a 10 percent partner who loved to hunt and fish; so does Pleas Brown. His name was Bob Derrick. Bob had bought 40 Keep It Going! acres that had a small lake, he stocked 115 it with trout, and he guarded this lake zealously. One spring Pleas and his friends saved all the fish heads and cleaning from all the fish they caught. When they had a hundred or so they went to Bob’s lake and dumped them around the cabin along with empty beer cans _ and other junk. They had alerted the State Police, so they were in on it too. When Bob and his wife went up for the weekend he thought he had been trespassed and someone or a group had really fished out his lake. He notified the police and was really concerned. Bob began to suspect some people, and Pleas got worried that it might cause trouble between some friends so he told Bob the truth. Pleas is retired now, Bob sold his interest and Pleas Brown’s two sons are now running the business with our blessing. It is working out well. I like to see sons take over, if qualified, for our member dealers. If they don’t have a qualified son, we always buy them out. And there’s Jim Barney in Moses Lake. Jim had worked for us for several years and left the company to go into partnership with Roy Scaggs. They were branching out too fast and had four stores, mostly with our money. Don Miller and Jerry Harper had left one morning to meet with Roy Scaggs and Jim Barney in Pasco. While sitting at the breakfast table, talking to Dorothy, I told her what Don and Jerry were doing. I also made the statement that I had always liked Jim Barney and hated to see him be closed up and that is what Don had intended to do that day. Sol jumped into my El Camino and started up that way, behind Don and Jerry. They started an hour ahead of me, but I got there just 1S minutes after them. We rented a conference room and from a full day of discussion it ended up in breaking up the partnership between Jim Barney and Roy Scaggs. I think Jim had a minus net worth at that time, but we sponsored him in Moses Lake. Roy Scaggs went under, but Jim has been very successful. On December 1, 1985, we bought out Jim Barney and he has retired. He owns a considerable amount of commercial property in Moses Lake and ended up at least semi-wealthy. It’s a nice feeling to know that our company and our programs helped so much to make Jim a successful business person. 116 Pride In Performance Also Pat and Nancy Rimmer who were in Richland. They bought a tire dealership that I had turned down several times. They were not making it and actually had a minus net worth of about $30,000. I gambled on them and financed them. Since then we have built them a new store from the ground up in Burlington, Washington, their old home area, and traded the new store for Richland. They are now very successful people, businesswise, and again I know our company helped these fine young people on their climb to success. Bob Dickman, one of my first employees and a good tire man also, has sold out to his son in Junction City and that is working out great too. We have 60 great member-dealer stores just about 100 percent successful. They are all good people and good businessmen. Norm Nelson Quits Anyway, in six or seven months, at a Board meeting, I questioned Norm about his attitude and asked the other Board members their opinion. Norm couldn’t stand to be criticized, got mad, resigned and walked out of the meeting. It was about two years before I ever saw him again. I hated to see Norm leave, as he had tremendous ability, but we couldn’t go on the way we were at that time. A couple of weeks later I had my hand on the telephone. I wanted to call him, I wanted to tell him to take his money or use it as collateral, go to Boise, be a member dealer and I would give him that territory and everything East. I couldn’t make myself make the call. I think I over-estimated Norm’s business ability, as he later did go into the tire business in competition against us in The Dalles, and it hasn’t worked out very well for him. Norm was gone, he had been a tremendously important man in our company and I thought we would miss him much more than we did. Bob Finzer, who was then manager of the Production Center (retreading) said one day, ‘‘Les, I had lunch with you and Norm for years, you were the one who fed him the ideas and made the plans;’’ and I guess I did. But Norm had the ability to Keep It Going! 117 walk into a store, walk through it and everyone in the store would light up. He possibly over-cranked up some of the young men. Sometimes the pressure created by Norm and the company, (Norm was not entirely to blame), caused some young men to _ more or less crack, as they couldn’t take the pressure. Pressure was getting to me, too; that is why I gave Norm and Don such a deal. I wanted to lighten the load. I don’t know just what a nervous breakdown is, but I know I came close to it. But when I bought out Norm and Don, I said I was going to see it through for another five years. I wanted to get them paid out and I had a five year contract with them, so I cranked myself up, attempted to put my nerves together and steeled myself for the five year period. My wife Dorothy and I, even though completely opposites in character, have been very close. Without her I think I could never have stood up under the stress I had. Don Miller Made President Don Miller really went to work, and within one year we made him President. I’ve often said Don Miller was a tremendous man with figures, an extremely intelligent man, bookwise and with percentage figures. I, too, think I am fair, and I enjoyed working with Don in most ways. We disagreed on how to work with and handle people; but the more we worked together, the closer we became with people policy. When Don discharged a man or demoted him, he would leave mad, and seldom would that man stay with the company. When I discharged a man or demoted him, we usually stayed friends. But Don was aggressive, and I am positive that The Les Schwab Company wouldn’t be where it is today had we not had him for about 16 years. He demanded respect from his people, and he got it. He earned it because of his ability and his business sense. Don Miller was the perfect right hand man; but Chairman of the Board ability, today | wonder? But, God, how he could get to the bottom of a problem fast. Don could do more work in one day than most men could get done in a week and some could never get done. Don and I had some terrific arguments, usually about the 118 Pride In Performance treatment of employees and about member dealers. I remember telling Don once, good God, in talking to some men you are holding four aces, you are going to win and you know that, let the man walk out with some dignity. Don did improve and the last three or four years he was with the company I will say that no store manager or any key person got discharged unless he had his day in court, meaning before the zone board or with a complete hearing by concerned people. Don and I argued so much about member dealers, both oneon-one and in front of the Board at Board meetings that I got to the point I had to decide which way to go. I was spending some time at the ranch, I started plowing and stayed with it for a full week and all week I thought about Don Miller. Should I let him run the show, or should I demand he follow my wishes 100 percent? I never like to give definite orders; I like to persuade people to do it my way. I don’t want to run the show myself; I like to work through people, and, unless you let them have almost the full power to make the final decision, you have a weak person working for you. I talked to Denny Denton, my son-in-law who was managing the ranch. After one week I told him and I told Dorothy I had made the decision. I was going to let Don Miller run the company as long as the P&L Statements came out okay. I was at the point that I either had to discharge him or let him run it. Oh, I had a lot of influence in the company all the time, but I did back off. I sure as hell didn’t want to take over 100 percent. My nerves were just starting to recover. It was a good decision. Not to take anything away from Don Miller, I want to say he built a lot of people in the company. He was extremely good at building women employees into executive people. He solved problems fast and he would not let any back biting get started; he stopped it fast. Among the people that Don Miller developed were Dan Roberts and Jan Nolan, both extremely important people in the company today, and many others too. Possibly he was better with the office people than with the store people. Store people are more independent; I made them that way. Keep It Going! 119 Phil Wick Grows We were growing like mad adding six or seven stores a year. Don needed help, especially in running the stores. We had the zone manager program working, but we needed more help over the stores. Don didn’t have the store experience which he needed. We talked about which man to bring in. We had about 12 zone managers at that time. In looking around the room at the zone meeting, there were 8 or 9 of them that were very equal. But one seemed to stand out, and that was Phil Wick. He had started in Bend, worked just a few weeks, and moved to The Dalles under Norm Nelson. From there to assistant manager under Joel Ylvisaker in Sweet Home. From there to assistant manager of the new Walla Walla store under John Smith, and then to manager when we discharged the manager. Before I go on, I want to tell a couple of stories about Phil Wick. Phil is the all-American, Mr. Clean boy, or man. Anyone would be proud to call him his son. When he and Joel were in Sweet Home, a really small store, Norm and I stopped there. As we drove out of town. I told Norm I would hate to be their competitor. If Iwas, I think I would tell my wife . . . Iplanned to paint my building, but I think I’ll forget it. I planned to buy some new equipment, but I think I’ll forget it. There wasn’t in my mind any tire dealer in the country that could have stood up to the competition that Phil and Joel put out in Sweet Home. When we caught John Smith in Walla Walla on dishonesty, we made Phil manager. He was only 24 years old. Every time I had lunch with Phil I seemed to ask his age. It always amazed me that he was so young. I remember so well when this happened in Walla Walla, (John’s dishonesty deal), that I felt bad for Phil’s sake. Early one morning I went out to Phil’s parents and talked to them. I wanted them to know that Phil was not mixed up in the Walla Walla mess. John Smith was an excellent tire man. A prodigy of Norm Nelson. I thought some day this man could be sales manager, and an executive person in our main company. He could have 120 ; Pride In Performance been, but for a few hundred bucks he threw away his whole future. He surely must be sorry today. He didn’t even get the few hundred dollars, as we canceled his whole profit share deal and he forfeited about $25,000 because of our dishonesty clause in the contract. What a price to pay for stealing! Fred Meyer Stores Time was rolling along. Don was doing an excellent job as president. One of the many great things he did was the deal with the Fred Meyer stores. Don handled this 100 percent by himself, with office help; but without any help of any kind from me, except to say go ahead. I went to Hawaii; he completely put the deal together without my help. Fred Meyer was in the tire business in about 16 of their stores. They, like so many of this type of business that attempted to go into the tire business, were a complete failure. They had a union shop; all they had to offer was price, no respectable service. They were associated with the TBC Corporation. TBC was formed to be a buying group in the heyday of the buying group movement. They started out with Irv Eisbrook as the main man. In fact it was pretty much a one man show, a dream of Irv Eisbrook. He had taken early retirement from Dayton Tire and got the idea of putting the chain type stores into the tire business. He gave almost any large department store or supermarket the whole state, if they would sell his tire. He soon sold out the whole nation. The Fred Meyer stores had the Cordovan tires for Oregon and Washington. So he then started the Multi Mile line of tires and specialized in attempting to get the large tire dealers, especially the large wholesale tire dealers. Armstrong and Multi Mile About this time I was selling Armstrong tires and General tires and a private brand of tires by Goodrich, the Brunswick tire. I Keep It Going! 121 was not warehousing tires, I was brokering tires. Multi Mile had called on me, but with the extra cost of warehousing I thought it best to stay with Armstrong and Brunswick tires for the lower priced tires. But Armstrong was a marshmallow company. They _ had a fairly good product, but had marshmallow men running the sales end of their business. Their main concern was to hang on until retirement, a typical outlook for many corporate executives of a lot of American corporations, especially the tire company corporations. I insisted on having an exclusive on my main line of tires. Armstrong had promised me this exclusive. There was a tire dealer in Washington who thought it was great business to buy a bunch of the competitor’s tires, and then advertise them at give away prices. He did this in Hermiston. He wasn’t supposed to sell Armstrong tires in Hermiston, that was our territory. Anyway I lost my temper one Friday night, called the head man at the Hanford, California factory, and told him off. He said I spoiled his sleep, and that he had a duck hunting trip planned for the next morning. I not only spoiled his sleep, he lost the largest account he had; as on Monday morning I called Multi Mile and told them to come back out again, that I wanted to take on their line of tires. This was my very first attempt at warehousing tires. To take on the Multi Mile line of tires, I had to order by freight carload lot and I had to have a warehouse. Earlier I had bought the Owens Freightline Terminal, across from my office. Again I was thinking ten years ahead, as I certainly didn’t need it at the time I bought it. Steve Lieser had been working at the bank. They wanted to transfer him; he didn’t want to leave Prineville. I hired him, and he was our first Warehouse manager. So, we started our very first warehousing of tires, and our first ordering by carload lots. But Fred Meyer was selling the same tire (same tire, different name) for practically carry out prices. Wherever we crossed with the Fred Meyer stores, we down played the Multi Mile tire. But Fred Meyer couldn’t make it in tires. They switched over to Goodyear, and this was even worse. They locked up their tire, brake and alignment stores. We had a good reputation, so they contacted us. They wanted us to take over six of their freestanding stores. They were the ones that were not connected to 122 _ Pride In Performance their main supermarket buildings. We took five of the six. The sixth was too close to our Albany store. We took over two in Salem, one in Tigard, one in Longview, and one in Santa Clara on the outskirts of Eugene. They gave us the right to identify with our colors, a minimum rent with a sales factor above that. It was the same sales factor that we use for our stores. Within one year we tripled the business that they were doing, even though we sold the same tires at a slightly higher price. Which proved that people don’t buy tires on price, they buy from someone they trust and from someone who will smile, and from someone who will give service and stand behind what they sell. The Fred Meyer connection has been extremely successful. These are the in the five only stores where we don’t own the building. Today, Fred Meyer stores, we are doing over $5,000,000 in sales, over three times what they did. Assistant Manager and Manager Meetings Every year we have a large meeting of our assistant managers and of our managers. It’s the highlight of the year for these people. We put on nice meetings; we don’t spare the expense. We had a meeting in Coeur d’Alene, Idaho for the managers. I’ve many times called this the worst store manager meeting we’ ve ever had. Why, I really don’t know, except we didn’t seem to have any direction for the company at that time. We had taken on the Michelin line of tires. Michelin people are good sales people. They were working with my stores, more or less behind my back. In some ways, the main office had drifted and somewhat lost control and direction. After this meeting I put out a bulletin which said, “‘I noticed at the manager meeting in Coeur d’Alene that most of our managers were riding on Michelin tires on their personal cars.’’ I asked them, ‘“‘Is your future with Michelin, or is it with Multi Mile tires?’’ I told them to take off those blankety blank Michelin tires and put Multi Mile tires on their car. And I followed up; and they did take off the Michelins and they did put on Multi Mile tires. Just suppose I hadn’t gotten on this at this time. Today, Keep It Going! 123 instead of having the nice Les Schwab sign, we would have had a great big Michelin tire sign up in front of our stores. That would have been sad. I can’t name you one dealer that is making a decent profit selling Michelin tires. But I can name you 163 _ stores today selling Les Schwab Tires, and they are all making a profit. Executive People We kept growing, adding seven or eight stores every year. Don was a good president. We hired Tom Freedman for comptroller. Ken McRae was controller. He worked into building the new buildings. He liked to do the drafting work, and was good at it. We hired Jerry Harper, and he took over sales promotions and advertising, and is a very important man to the company. We brought in Rich Priday from being manager of the Santa Clara store, and put him in charge of purchasing. Phil Powell moved to the main office from Production. Dan Roberts had worked his way up to being in charge of our Production Center, and is today, recognized as one of the best retreaders in the United States. We brought in Von Thompson from manager of one of the local banks to become our credit manager, Denny Denton started Midway Equipment. We were building a strong and solid company. We were free of debt, everything was paid for, including the ground under our stores, and all buildings. We were on top of the world. Entering Seattle I was taking about three months off every winter. But I did a lot of thinking during those three months. It seemed that each year I would come home with an idea that would change the flow of the company. I think it was the spring of 1977. I had decided that we should place more of our purchasing into the TBC lineup of tires. To us, an exclusive on our main selling lines of tires is 124 ; _ Pride In Performance very important. The TBC lineup was the Multi Mile tire and the Cordovan tire. They were the same green (uncured) tire, but had different names. But they also had an overlap of many tires, especially in what we call RV (recreational vehicle) tires. We had the Multi Mile lineup but didn’t have both. It was against the policy of TBC to give both lines to any one dealer, but it could be done. I walked into a zone meeting late and sat down. Don passed me down a note telling me that TBC was giving the Cordovan line of tires to a wholesaler in the Seattle area. Giving a line of tires that you sell to a wholesaler is terrible, because they will sell to anyone, including your own customers, and ship the tires direct to them. You can operate with a very low overhead when you sell by telephone. I left the zone meeting, went to my office, and called the president of TBC. I told him he had promised me that he wouldn’t give the Cordovan line of tires to anyone without first talking to me. At first he denied it, but later he did remember doing this. I asked him to get on a plane, we could pick him up in Portland with our plane; I wanted to talk to him. Don Miller and I really worked him over (Marv Bruce), but he wouldn’t say for sure. The only thing was they wouldn’t sign up the wholesaler at this time. He went to Seattle, and I called him early the next morning. I wanted to stay with him, as out of sight, sometimes out of mind. He gave me his answer. He said, “‘You put in a wholesale business in Seattle, and I'll give you both lines.’’ I asked him to give me three days to think it over. After consulting with Don Miller and other key office people I made the decision to go ahead and put a warehouse in Seattle. This was a big decision, and a gamble too. We called a meeting of many of the Seattle dealers. The timing was great, as the O. K. Tire Company was going out of business. The twenty or so O. K. operators in the Seattle area were needing a line of supply. I, too, started as an O. K. operator, so we had something in common. Jerry Harper and I put on the first meeting. I told them that they could buy tires from us and wouldn’t have to follow all the rules for the first two years. But after two years we expected them to look like a Les Schwab store or drop out. I just knew that after a few months they would want the Les Schwab sign, and Keep It Going! 195 they did. We ended up with about 30 tire dealers joining up with uS. We leased a really nice 45,000 square foot warehouse for five years. Bill Storms moved to Seattle to run it. We now have five _ company stores in the area. It is amazing that within 18 months we were the largest tire dealerin the Seattle area, and we are just touching the potential. When we put up the Les Schwab signs, we took down 14 Michelin signs. It was a great day. We operated the Seattle warehouse for about two years, plus a few months. I noticed that a large portion of the tires we sold out of the Seattle warehouse were hauled from Prineville to Seattle. Why? Because Seattle, although doing fine, could not order the boxcar loads on all of their tires, only on about 35 percent of them. We have two or three boxcars coming into Prineville nearly every day. So we would order the Seattle tires and truck them to Seattle. We save about 5 percent on boxcars direct factory shipment. It costs 2 percent to haul them to Seattle. We saved 3 percent by getting them into Prineville and trucking them to Seattle, plus Seattle could order in smaller quantities. So why have the Seattle warehouse? Why not deliver directly to the dealers and our stores? I asked the office to give me all the figures. We could save over $300,000 a year by closing the Seattle warehouse. We locked up the warehouse and started to serve our Seattle area stores out of Prineville. It has worked out fine, and we are saving money. We did pay rent on the empty Seattle warehouse for about two years. We did manage to sublease part of it. Regardless, we saved a lot of money by making the change. Why Prineville? Suppliers fly to Portland and get a rental car. Some fly into Redmond, but the schedules are very limited. When they drive over from Portland, they come across miles and miles of empty space. They always wonder, where in the world does this man sell all the tires? And one of the first questions asked is, ‘‘Why are you in Prineville?’’ The only answer I can give them is we 126 | Pride In Performance started here and grew out of here. You start with say a 100 by 200 foot building. Business grows, you add another 100 feet, then another 100, then another, and on and on. We now have 450,000 square feet of buildings. We can hardly afford to move and what the heck would we do with the Prineville buildings? I guess they would make good hay barns and that’s about all. Prineville isn’t growing much. Prineville really isn’t the greatest place to make our headquarters. Transportation in and out is poor by plane, by rail, and by truck. I do think, in total, we get a higher class employee and a more loyal employee. That helps. Every way we go out of Prineville to deliver tires we go over mountains. It’s.a mess in the winter. If we were in the Portland area, we could deliver 90 percent of our tires mostly on freeways. We have 17 diesel trucks which do nothing but deliver to our stores. We have another four which we use around Prineville. It has turned into a large operation. If we ever go broke, it won’t be the 30/40 cents a tire more that it might cost to work out of Prineville. It will be because we failed, and anything else is just excuses. Midway Equipment Company A few years ago we started the Midway Equipment & Supply Company. When Denny Denton moved into town from being ranch manager, this was his dream. We gave it a different name, as it is impossible to get franchises to sell to yourself. For example, Goodyear won’t give Weyerhaeuser a Goodyear franchise, but if Weyerhaeuser started a separate tire business they could then get a Goodyear franchise. We sell tire changers, alignment equipment, tire studs, compressors, brake equipment, tire racks, tire repair material, and anything that a tire dealer needs through Midway Equipment & Supply Company. We also make tube tanks and truck tire safety cages. We rebuild compressors, tire changers and some jacks at Midway. A big project we now have going is the building of service trucks. They buy the bare truck and completely build the service truck. Some sell for $25,000, which is still $5,000 less money than our Sa7] GOMYIG IAL] 4aJUI) PUD JUDIZDAL] AIIAAIS "YINAJ Keep It Going! a7 128 _ Pride In Performance stores can buy the same truck for from other companies. They have orders to keep them busy for one full year right today. Midway is doing about $3,500,000 in annual sales. We do sell some to lumber mills and to other tire dealers, but so far the main business is with our stores and our member dealers. I have always noticed that when we create our own programs, we are successful and we make money. When we follow the programs created by the large company, they make money and they are successful . . . the dealer works 12-14 hours a day and just hangs on. It seems odd that most businessmen have so much trouble creating their own programs. My advice to them would be to create more of their own programs, to not always follow; to be more independent. I remember one time returning from Portland, about three years into business. I was selling General Tires, and I had the O. K. Rubber Welders for my name and for my retreading equipment. I had attended an O. K. meeting, and, as usual, I had argued a lot. I told my wife that I wished I could just follow their programs, it would make life so much easier for me... butI just couldn’t. They, (meaning all of them), were not being fair to their dealers. I told Dorothy that there was a better way to do business, and I had to explore my own ideas, even though it was going to make my life more complicated. There was something in me that just wouldn’ let me be a follower. I wanted to create my own ideas and it turned out best, but it did cause my life to be much more complicated. Tom Sherry — Mixing Warehouse Tom Sherry has a tire business in Missoula and Kalispell, Montana. Tom is a tremendous tire salesman, but has had trouble making a profit. He wanted to join up with us. I was at my winter home, but told the boys if we were going to finance this purchase by running up a large debt with the Warehouse, we should own half of it. The Husky Oil people were back of Tom. We bought them out, but very little money changed hands, as the net worth was very, very low. But it is working out. Tom does a tremendous business, and with our help and system he is Keep It Going! 129 now making a reasonable profit. . lalso told our office and Warehouse people that before we got all done with Missoula and Kalispell they would find out it would be best to transport the tires from Prineville. We, because of the distance, tried to work it to ship tires direct. And it did work out _ best to use our trucks to order from Prineville and to deliver from Prineville. And that got me to thinking. Just why was it that we could ship tires from Prineville for such a long distance and still come out? And when you think it through, it is because our large warehouse in Prineville is a mixing warehouse. We have about 325,000 square feet of tire warehouse, another 100,000 square feet in retread production and storage, and 30,000 square feet in our main office, about 455,000 square feet in our main operation. This is hard to believe, but all told, we buy from 150 suppliers from all over the world. We have five main lines of tires that we keep an exclusive on in the Northwest. These five suppliers probably account for 85 to 90 percent of all of our tire purchases and sales. But we buy from 30 more tire companies to fill up all the odds and ends. And that is what makes up Les Schwab Tires. Many people actually think we manufacture tires, but we don’t. We do manufacture retreads, clear up through the large earthmover tires. The Les Schwab lineup of tires is about as good a lineup as it is possible to have. It is impossible for any one company to make all the tires needed today. And even if they did, you can still put many companies together and come up with a total line of tires better than any one rubber company could ever do the job. What a long way we have come from the first days when we were locked in and had to have a major rubber company line of tires to be in the business. I prayed for this day, and it arrived. Why Not Les Schwab Tire? Why don’t we have a Les Schwab tire? It would be a very easy thing to do. But then we would be somewhat locked in. Today, the way we work it, if we have a problem with a tire, we drop the 130 Pride In Performance tire, pick up another and continue to swim upstream. We don't drop the company, we just drop the one tire that is causing a problem, and we substitute another tire from another company in its place. By buying and selling the supermarket way, by having the large mixing warehouse, we have the best of all worlds. All tire companies now have their own way of figuring their cost of tires. The first ten years or so I was in the tire business all the major companies had the same cost on the same tire. This was actually illegal then, but not enforced. Today the fair trade laws are better patrolled. It has helped us. One company might make the best small truck traction tire, or one company might make a tire of equal quality at 10 percent less. In the highway tire, another completely different company might make the best highway tire, or a highway tire equal in quality but at 10 percent less cost to us. In larger truck, we might recommend one company for front wheel tires, and a completely different brand for drive wheels. In small car radials, we sell one company’s tires, yet sell completely different brands on the domestic American sizes. That is what makes up the Les Schwab lineup of tires. It is the Les Schwab lineup of tires, bought and merchandised by Les Schwab, guaranteed by Les Schwab, and completely serviced by Les Schwab. People know we sell quality tires, Les Schwab tires. We wouldn’t think of ever selling anything that wasn’t first quality in its price range. If we had really wanted to, I’m sure we could have covered half the United States, the Western half. But our aim has never really been to get large, just for the sake of being large. I’ve always wanted to be the best tire dealer, not necessarily the largest tire dealer. Even so, we are now the largest independent tire company in America, and this includes New York, Los Angeles, Chicago, all of them. And it is in the small town of Prineville, in Central Oregon, which makes us even more unique. I am proud of it. Why are we in Prineville? We get visitors from all over the world. Important ones we pick up with our plane in Portland. It is hard to get to Prineville. Keep It Going! 131 New Store Percentage Rent Policy I said earlier that I was starting to take about three months off in the winter. But I usually came home with some fresh ideas, often times an idea that would change the ‘“‘flow’’ of the company. Along about 1977 I got to thinking about how we charged rents to each store. I also knew that it was getting harder to start a new store. The zoning requirements, the strict business codes, the handicap requirements, the fire marshall requirements, the sign ordinances, the soil requirements, the landscaping requirements, sewer requirements, drainage needs . . all of these items were making it so a new tire store costs several times the cost of not too many years back. So to build a new store and put in a new manager and assistant manager plus the crew, and attempt to make this store profitable was becoming harder and harder to do. Sometimes we would have an opening for two store managers. One would be an old time store, already making a good profit and well established. The other would be a brand new store in a town that probably already had several well established tire dealers. Several men would apply for these stores, but two would stand out. Let’s say they were both equal. The one that got the established store would make a big bonus the first year. The one who pioneered the new store would work his behind of, and, if lucky, make a very small bonus the first year. And that would go for the whole crew. The crew working in the established store would get a nice bonus, the ones in the new store got experience. Each store paid rent based on the value of the building. Some of the older, larger stores had a rent cost of 2 percent of sales. Some of the new stores would have a rent cost of 5 percent of sales. That wasn’t fair. What would be a fair way to handle this? I got an idea. Why not charge each store a percentage of sales for their rent and forget the value of the building? There are some good points and some bad points to this idea. The good points are: 132 Pride In Performance 1. Each store would have exactly the same rent cost in percentage to sales. 2. The new store, even though it should be paying about $4,000 per month rent, would only have to pay $1,000 or $1,500 per month the first year. The bad parts of the percentage rent ideas were: 1. The old stores who had managers who also pioneered these stores in the earlier days would now pay a lot more rent than before. Some of the really successful stores, who still didn’t have the new, expensive buildings, actually would pay almost twice as much rent as before. The difference between $4,000 and $1,500 mentioned just earlier is $2,500 per month. Someone has to make this up. But now this is divided among all the old stores, and most stores pay more; but not all that much more. 2. Now we didn’t have any relationship between the value of the building and the rent paid. So everyone wanted their stores remodeled. Before they took more of a business look at it, and if the remodeling cost too much, they would forget it or cut down on what they wanted. So we would have to control this from the office much more than before. The greatest part of the whole idea was that the old time store manager liked the idea of helping the new stores. We discussed this at the zone manager meeting, and the entire zone board went for the idea. So, we put the new schedule in. The way it works is like this. Each store pays into the pot 3-% percent of the passenger tire sales, 1 percent of truck, tractor, and earthmover tire sales, and 5 percent of alignment. The pot then pays the landlord who owns the building. At the end of the year the pot should be even. If we have a surplus, we will lower the sales factor a fraction. Should we be short, we will raise the rent factor a fraction. So far we are right on track. So the sales factor rent idea. helped the new stores get over those first two or three years. It was a good idea, and it helped open the doors for more expansion. The help and attitude of the Keep It Going! 133 old time store managers was most gratifying. They had Schwabism; they loved the company, and they wanted to help the young, new managers get a good start. New Store Development Program And we went on for a few more years, and I could see that the new stores still had problems the first year or so. Our Warehouse company was making a good profit. SoI got another idea. Should our Warehouse lower the: price of tires to the stores by 1/2 of 1 percent, or would it be better to use this1/2 of 1 percent to help new stores? We do $80 million in sales in our Warehouse, and1/2 of 1 percent is $400,000. If we lowered the price of tires by 1/2 of 1 percent, the old stores would hardly notice it, but if we helped the new stores they would really notice it. So, I developed the ‘‘New Store Development Program.’’ We formed a policy on this, and put it into our policy book. This is what we do... 1. New stores get free rent the first six months, they go on the sales factor. thereafter 2. New stores get free advertising for the first 90 days. For the remaining nine months of the first year the Warehouse will pay one-half the advertising cost. (Old stores pay all of their advertising.) 3. New stores get all the moving expenses paid for all employees moving to the new stores. (Old stores pay their own.) 4. New stores get all hand tools paid for. (When a manager is moved into an old store, the tools are already there and paid for.) 5. New stores get an inventory adjustment, if we buy out someone and take their tires and pay them more than our cost on the tires. 134, _ Pride In Performance 6. New stores will get special prices on certain tires to put on some real sales for the first six months. 7. New stores will receive, free, the office forms, envelopes, invoices, credit forms, etc. About a 90 day supply. (Taking over an old store, these items are already there.) All of this is paid for by the wholesale company and comes out of the 1/2 of 1 percent mentioned before. You can easily see that this helps a new store manager become more equal with the man who takes over an old, established store. And, again, the old stores are helping the new stores, just like I did when I first started. For example, our Oregon City store, at the end of the very first year, came up with an 11 percent profit. Without this help they would have made 1-1/2 percent. Look what this did for the morale of all the employees at the Oregon City store. This was and is a great program. I am really happy that I thought of it. It again helps us to expand, to create opportunity for young people, to give these young managers and their crews the right to be successful, the right to hold their heads high. When we create programs, we are successful. When we follow programs created by other people, they become successful. This was another program created by Les Schwab people. Self Insurance Self-insurance is also a program created by us. And we do this with our health, dental, glasses, glass breakage, collision on all trucks, and the first $100,000 of any fire. At the year end we divide all costs between all stores, and we save 30 to 40 percent over the cost of having insurance. We pick up on the high end on liability, fire and major medical; but we handle all other insurance on a ‘‘self-insured’’ plan. I think many of the large chain stores are doing this now, but we were first, especially with our : medical plans. We pay 80 percent of our employees’ medical cost including dental and glasses over $100 the first five years of employment. Keep It Going! 135 Beyond a certain point we pay 100 percent. I think the most the employee can be out is about $800, even though they might have $200,000 in bills. After five years of employment we pay 90 percent. We do not look for excuses not to pay, like many insurance companies do. We don’t look for loopholes. We truly want to help the employee. We do expect honesty. In fact, if they turn in false claims, that is an act of dishonesty, and means automatic discharge. Our insurance programs have kept many of our employees out of bankruptcy, and out of poverty. We have had several bills over $100,000 on medical claims from employees, many more of $25,000 and more. In almost all cases, without our insurance, our employees could not possibly pay these bills. Their total cost on any of them was about $800, we paid all of the rest. In cases of death, the family gets the life insurance, which we pay 100 percent. We carry a minimum of $30,000 and a top of $50,000 on each employee, double indemnity for accidental death. This along with their Trust money, plus social security for the children, puts the families of our deceased employees in a reasonable position to live decently. It certainly keeps them out of poverty. We have had several deaths and I’m always so glad that we had this going for them. The company pays 100 percent. It’s deductible to the company, and not taxable to the employee. February 2, 1986... lam going to insert this, because since I wrote this in December, 1985 about self-insurance, the liability insurance situation in America has gone completely insane. In 1984 we bought $21,000,000 liability insurance with pollution coverage for $155,000. In 1985 this same insurance without pollution coverage costs us $455,000. This year, 1986, we can’t even buy any type of coverage of that magnitude at any price. The office had put a binder on $6,000,000 of liability, $500,000 deductible, at a cost of $710,000. I picked up the phone, called the office, and told them . . . NO WAY am I going to pay $710,000 for $6,000,000 liability insurance with $500,000 deductible. They told me that the insurance companies had told them we had to buy some of the lower at the higher prices before they would consider selling us the high end. My people were having a meeting in Portland with our lawyers. I called in and got on the conference phone. | made this 136 _ Pride In Performance statement, ‘‘If this situation has gotten so rotten that we could be put out of business over a flat tire lawsuit, then so be it, I’ll be damned if I will let myself be blackmailed.’’ So today, our company doesn’t have one dime’s worth of liability insurance and if the rates don’t become more reasonable, we won’t have any. I haven’t been able to understand for a long time why the juries award the tremendously large settlements that they make. A few years back, Sears was sued by a man who had a blow out, wrecked his car, and killed his wife. The tire had 52,000 miles on it. The jury awarded him $27,000,000. If the tire had 52,000 miles on it, think of the millions of revolutions this tire had made, the many, many times it had hit rocks, chuckholes, etc. How in the world could this possibly be the fault of the tire? But when juries make these kinds of awards, liability insurance goes crazy. Tasks Ke Here I go again, but the LCDC law of Oregon really gets to me. I wonder if the people truly understand what is going on. I wonder if they realize where this could go and what this can lead to. In the Bend Bulletin, Sunday, November 24, 1985; the story states, ‘‘The director of the Division of State Lands has asked Benton County to prosecute a Corvallis man for plowing under an environmentally sensitive wetland.’’ A Mr. Alan Dapps owns 130 acres on the edge of Corvallis. He has tried to get this land inside the Urban Growth Boundary so he could eventually develop his land. The way it is now, it is ‘“No Man’s Land.’’ He has to pay taxes on it, but he can’t touch it . . . can’t even build a home for himself on it. The State, in a sense, has taken this man’s land and hasn’t paid him a dime for it. The last paragraph of this story reads, ‘‘This willful disregard for Oregon's wetland management laws cannot be tolerated. Mr. Dapp’s action leaves us no option but to pursue every avenue of enforcement available to us.’ Since Mr. Dapp couldn’t build homes, he started to plow part Keep It Going! 137 of the 130 acres to raise rye grass. He said he hoped to make enough on the rye grass to pay the taxes. I can understand that the government should protect certain areas, and that some areas would be great for the total public. Oregon is already 55 percent public land; do they need more? - But if they do demand more, they should buy it; not just take a man’s land without compensation. I think it is great to raise a family on a few acres. I’ve seen families (going way back many years) buy a few acres, build a garage and live in the garage until they could build their own home. In building the new home, everyone in the family worked on it. The wife, even though pregnant, might be painting, the kids helping, the father spending all his spare time. When they finished, this was their home; they had built it with their own hands, and it was part of them. I knocked on a lot of doors in my newspaper selling career; I saw this happen. I started many a newspaper route in areas where people were building their own homes. This was 35 years ago. There were many men building homes also to sell. A man and his son or son-in-law . . . a man and a helper, or two men would go together. They would buy a lot, start to build, and usually sell the home before it was completely done. They would then buy another lot, and start another. They built a new home, right after the war, about 1946, 1947, and for a few following years for $8,000 to $12,000. With today’s dollars, this would be about $35,000 to $40,000 . . . a very liveable home. Today it takes a complete set of blueprints that have to be presented to the building lord, permits for everything under the sun; and these same people, not having all the engineering and drafting ability just gave up and went to work for the ‘‘big boys’’ at union wages. The same home would now cost $75,000 to $80,000 and more than that in the really tight places that really have all the restrictions. So people today are often times required to live in a condo, because by building 30 to 40 units into one, you can pass all the laws. They, today, are forced to live in a box... what a shame, when they could have had a few acres. Yes, many of them do get the few acres, but not nearly enough. I’ve also seen on T.V. big housing developments built by the 138 Pride In Performance government. I’ve seen on T.V. where many of these were being torn down. Why? Because they became filthy, crime infected. People would pee out the windows, throw garbage out the windows, crap in the hallways. People who own and build their own homes don’t pee out the window or crap on the floor. What a shame it is that we are putting so many restrictions on owning private land and not allowing use of this land as we see fit! It is not good for America; it’s such a shame to see this trend getting even stronger every year. I hope and pray that someday soon, and I mean really soon, people will rebel and get down to common sense. If they don’t we will soon have socialism, and communism follows. Don Miller Heart Attack I want to go back now and pick up the story of our company. I had bought out Norm Nelson and Don Miller. We had made Don Miller president. Don was a real goer. We talked a lot, we worked together a lot. Don was almost completely responsible for putting the Fred Meyer deal together, whereby we got five stores in their shopping centers; the free standing stores not connected with the main buildings. These five outlets are about the only outlets our company doesn’t own. Our arrangement with Fred Meyer has been very successful for both parties. We have always had the haircut rule, and the mustache rule in our company. Hair must be above the ears and above the collar. We didn’t have it in our retreading plant. Since we were having many visitors coming to Prineville (large customers brought in by the stores’ managers), Don wanted to put the rule in the retread plant also. And this caused some problems, but our employees today are actually proud of the haircut rule. I think it is really the first act of commitment that they really want to learn Schwabism, that they really want to be successful, that they really want to hold their head high and say, ‘‘I work at Les Schwab’s.’’ All people who apply for a job sign on their application that they acknowledge the hair rule, and that if they are hired will follow the rule. Keep It Going! 139 I was taking more time off. Under Don’s tremendous ability to get a lot done, the company was doing great. We had brought in Phil Wick to run the stores. Tom Freedman hired Gerry Darnell as controller. We had good airplanes and good pilots. The overproduction of tires world wide gave us tremendous buying power. We had, even though being tough bargainers, really good relationships with our suppliers. We were free of debt, we paid our bills . . . suppliers or any one dealing with us always liked that. We always got the best deal possible. But in 1980 the company had some sad news. Don Miller had a heart attack. He took about six weeks off, with our urging, and rested. But he had more trouble, and he went to Portland for open heart surgery. He was off about two months, and spent part of this time in Hawaii. He loved the islands. I had to run the company again for this period of time. I did some reorganizing with the idea that it would lighten Don’s load, make it easier for him to be president. Don was off for four or five months during this time. I made four executive vice presidents. Phil Wick headed up the stores, Tom Freedman headed up the office and all accounting. Dan Roberts headed up the retreading, and Rich Priday headed up all purchasing. The idea was that every person in the company would report to someone before they got to Don Miller. Donna, Before Don came back to work, I met with Don and and told them that I definitely wanted him to work through these people; that I definitely did not want him to attempt to run it alone, and that I wanted his promise that he would work with his executive vice presidents and let them run their departments; and for him to act as president and to shorten his hours. And Don did shorten his hours to 40 hours a week, and sometimes took a three day weekend. But Don could get more done in 40 hours than most men could get done in 80 hours. But Don had changed, too. Open heart surgery is a real shock to anyone. In some ways, Don became somewhat paranoid. He told me once that he had a real fear of dying in the office. In June of 1983, at the assistant manager meeting in Sunriver, Jerry Harper, our sales and advertising manager, had three films made of three speeches I made at the meeting. Actually 140 _. Pride In Performance two speeches and another one-half hour of questions and answers. It was a regular Hollywood production, and they did do a good job. I told them, ‘‘You guys just think I am going to have a heart attack and die.’’ Les Schwab Heart Attack On August 1, 1983, I did have the heart attack. It was Monday morning, after four days at Black Butte Ranch, where we golfed, drank and ate for four days. I was talking very seriously with Don Miller. I kept thinking I had heartburn and took a bunch of Rolaids. At lunch with the crew (we always have five, six, or seven for lunch) I got dizzy and told the men to take me home. I took a nap, then back to the office, and right into another meeting. At dinner that night, it hit me. I told Dorothy I was going to bed, I really had the flu. She said, ‘‘You are going to the hospital.’’ I was six days in intensive care, another day in the hospital, and six or seven days at home. I wasn’t quite all with it, sort of half out of this world. Then to Portland. First to Dr. Rush, the cardiologist. He barely started his tread machine, and stopped it. Into the hospital and open heart surgery the next day ... late in the day; I was the third one for Dr. Oakie that day. The next thing I remember was a sweet voice saying, ‘‘Mr. Schwab, you’ve had serious surgery, everything is okay.’’ I fell in love with that nurse immediately; what a sweet voice, and what sweet news. About six or seven more days in the hospital, and then home for what was supposed to be two months’ rest. I could barely walk to the highway and back at first. It’s a real shock, and since the doctor told Dorothy that I was a stout man (he really meant fat), it was harder on me than most. I used to say that there isn’t any possible way I could quit smoking, no use trying. I smoked the pipe all day. Some people said I only lit it once a day, in the mornings, and it went all day. At cocktail time I usually smoked two, three, or four cigarettes. But I hadn’t smoked in nearly four weeks; the doctors were really against smoking, but I hadn’t missed it. I was just too darn sick. And I thought, what a great time to quit, and I did. The better I Keep It Going! 141 began to feel, the more I missed the pipe; but I’ve stayed with it. _While sick, the manager meeting was scheduled for Sunriver. They naturally went ahead with the meeting. But an odd thing happened at this meeting. No one gave me the news, but my grandson leaked it. He said, ‘‘Did you hear about Don Miller?”’ Of course I said no, and he told me that Don Miller had announced at the Sunriver meeting, to all the managers and their wives, that he wanted to retire. It was a real shock to all the people. Don and I had talked for years about his taking over, becoming chairman of the board when I retired or died. I couldn’t believe it. Don was 12 years younger than I. So within about ten days, at least six weeks before the doctor wanted me to, I started to’go to the office. Don told me at first that he wanted to be vice chairman, move upstairs to an office and be away from the hubbub, bring in John Britton to run the stores, and make Phil Wick president. I didn’t think we needed two chairmen of the board, and told him I still wanted to be active. Regardless, I told him I certainly wanted to keep his brains in the company some way. I had a real problem on my hands at a really bad time, as my old brain wasn’t quite working right yet. I was still somewhat in shock, both from the four-way bypass operation, and from the news about Don Miller. Phil Wick Named President Don took a cruise with Donna. He left with the understanding that he wanted to resign as president. I asked every department head in the company, plus most zone managers . . . ‘“Who should we make president?’’ Phil Wick got the nod. What to do with Don Miller? We had planned a manager meeting in Hawaii. Many times, in the past, our key people, when they left, left with bad feelings. I wanted Don to leave in style, if he left. Don had done so much for the company, he had been the key man for a dozen or so years. Yes, I was always in the background. Don and I worked together closely; but he was the operational man, and he did the work, and he got the job done. I could never have handled it all during those dozen or so years. Yes, I might have had someone like him, but I do wish to 142 Pride In Performance give Don credit. The main board and I talked a lot. We decided to give Don six months off with full pay to gather his wits and see what he wanted to do. We also decided to keep him at about half pay for the balance of the fiscal year. This would give him one more year in his Trust, and he would wind up with about $330,000 in Trust, including his Trust earnings for that year. This would make him a net worth of nearly a million dollars. Don came back from Hawaii and attempted to work part time. It just wouldn’t work for Don; he was so used to being the top man. We did have a nice farewell party for Don at the Marriott in Maui, Hawaii. Iam still at a complete loss as to just what all did happen with Don. Why did he pick Sunriver, while I was in the hospital to make this announcement? Why couldn’t he have waited a few months? Many of our employees have hard feelings toward Don for doing this. We gave him a lot of time off to recover from his surgery. Why didn’t he have the same consideration for me? That is the question asked by many of our people. When it was all over, Don and I were talking. I told Don that I still couldn’t figure out just what his thinking was. Dorothy thought that Don got panicky; when he thought he might have the whole load, it floored him, especially with his new attitude about dying in the office. I told Don that the idea of his being vice chairman might have worked, if I had died, or if 1came back with the idea that I didn’t want anything more to do with the business. I would have gone for this . . . go upstairs, get away from the hubbub, but you would still have to be president. Just work the 40 hours per week, and work through the executive vice presidents. That is what I’ve been wanting you to do. . . but in no way would I let you make a puppet president out of Phil Wick, you continue to be president, and let Phil run the stores as executive vice president. I truly tried to do everything possible for Don so that he could leave the company with good feelings. I hope he isn’t mad at us. I can’t think of any reason he should be; but he did come through Prineville one day and didn’t stop at the office to visit. I can honestly say that did hurt me. It also hurt the feelings of a couple of people whom he had helped a lot, and who thought a lot of him, mainly Jan Nolan and Dan Roberts. Keep It Going! 143 Don Miller Leaves — Open Book Policy So we lost Don Miller for good. But like so many people who have left the company, we don’t seem to fall backwards; we still seem to charge ahead. And that is because of the complete depth we have in the company. As long asthe stores, retread shop, and distribution center are run right, we will make a profit. The office and all the computers, all the records in the world just tell the stores and the other departments what they did last month, last year. Too many corporations think all the brains are in the main office and all the bonus money is paid to the four or five high people. All the others are peons, or just numbers, and if you have a union, that really makes them a number. The truth is that the success is at the other end. The office merely keeps their records and tells them how they are doing. The real job for the office people is to provide motivation, to create programs that make it possible for them to be successful, to be fair, to be open, to have really open communication, to have no secrets, to support them. Certainly the office has the final say; but for gosh sakes, give them (the working men) every reason to hold their head high; it helps you to hold your head high, too. I’ve always believed in the complete open book policy. I haven’t any reason to hide our profit statements, or to hide anything. If anything we have going isn’t fair, let’s make it fair. Create a program. Live with it; if they make $100,000 a year, tell them you hope they make $200,000 some day. When you share half the profit, the company has half of $200,000 instead of half of $100,000. Don’t spend the $100,000 for anything but to build the company larger, to create more opportunity. It perpetuates itself. It’s like the cat and rat farm; you can’t lose. Have you heard the story about the sure way to make money with the cat and rat farm? Just get a large, open area, build two strong fences, have thousands of rats on one side, thousands of cats on the other side. Feed the rats to cats, feed the cats to the rats, and sell cat and rat skins. Get a perfect balance, and all you have to give them is water. A sure way to make a nice profit. Life is hard _,.. for the cats and rats. 144 Pride In Performance More Mile® Program Created When we create a program, we make money. When you follow their (rubber companies’) programs, they make money. The Les Schwab More Mile® process is a program created by us. Harlan, my son, was working on the ‘‘blue rubber’’ program. The idea was to have a truck retread that would be an exclusive with our company. Pre-cure retreading was becoming very popular. Bandag was the pioneer, and by far the leader. They made a hell of a profit, too much. They would show 22 to 24 percent before tax. That’s immoral. They were great salesmen; in fact, they lead many a retreader around by the nose. We had Bandag. They called it “‘cold rubber.’’ They would make a tread in a flat mold, put it in boxes, ship it to us, and we would process it on the tire. They cured the tread at the same temperature as we cured a tire in our hot shop. By the time it got to Prineville, it was cold as hell. They pretty much call it pre-cure now, instead of cold cap. The great part of a pre-cured retread is that you don’t need a mold for every sized tire. And you could retread almost any tire that came your way. It has never worked out in passenger car retreading, but it is an excellent way to retread a truck tire, solid type tire, industrial tire, and smaller commercial type tires, especially the radial tire. Like so many companies that pioneer a new product, they sell you on having an exclusive. But as soon as they get the nation covered, they start to cheat on you, and pretty soon the price cutters are coming into your area and giving away the product. This happened when we sold Michelin. This was now happening with Bandag. It was not too long after Harlan’s death. My daughter and sonin-law, Dorothy and I went to Las Vegas to the National Tire Dealer’s convention. The Hawkinson people were there, but their booth was not busy. The Bandag booth was busy all the time. I always knew the Hawkinson system retreading was a long- wearing retread. I talked to them and asked them if they would make the Bandag tread designs for us in the circle band type Keep It Going! 145 mold. You bet, they said. I thought this . . . that if we bought the very best rubber available, rubber equal to the Bandag rubber, and if we put it on with the Hawkinson band, then it would wear with Bandag. The cost would be $12 to $14 less per tire, and you could sell it for less to the customer. But this will only work in a large production shop, because you need so many Hawkinson bands. You need two for bias ply for each size tire, and for each tread you want. You also need two bands for radial and for each tread. I went ahead with the Hawkinson system. I already had it in a very limited way in our shop, so we knew how to run their system. I developed the name, “‘LES SCHWAB MORE MILE® PROCESS.’’ We bought the very best rubber that money could buy, and we bought it in boxed or sometimes called slab rubber. The better the grade rubber, the harder it is to run through an extruder. To run through better, you need to add extenders, oils, or material that would take some of the mileage and wear away from the rubber. We feel boxed rubber wears 10 percent longer. We had Hawkinson make us the bands to our specs. It worked great. We now had a retread that in our minds would wear with Bandag, at a $12 to $14 less cost, and it was an exclusive to us. We trademarked the ‘‘MORE MILE’’® name nationwide. We were soon doing two and a half times as many More Mile® in the sizes available than we were in Bandag. When we created programs, we made money. We also, I think, helped to save the Hawkinson people from going out of business. We had people all over the country calling us. We have since dropped Bandag. We now have our own Les Schwab More Mile® Precure System. It is working great. Another program created by our company. Trademarked too. Michelin Tires Michelin Tire was about the first radial tire in America. At least they were the first radial tire of quality in America. I sold them once, but dropped them. But when I bought out Bob Newell in Lewiston, Idaho, I inherited the Michelin line again. I thought, 146 Pride In Performance oh well, let’s see how they do. But Michelin was high powered and before I knew it they were having a big influence over my store people. I never allowed any company to give spiffs directly to my people. Give it to the company, and we’ll decide what to do with it. Michelin was working around me. Many of our managers were riding on Michelins on their personal cars. Often these were given to them. What do you tell your prospective customer when he asked you, “‘What’s the best tire?’’ You tell him, I have Multi Mile on my car, or I have Michelin. Michelin was giving its franchise to anyone. There’s always someone who thinks he can operate a business on 10 percent. They always go broke, but then someone else comes along. Michelin also demanded that I put up their sign. I told them my policy was not to put any rubber company signs. They didn’t even hear me. Every time they came around, they demanded that we put up their signs. Their franchise was the type that you renewed each calendar year. They came around and talked to Don Miller and told him we had to talk this year before they would renew our franchise. Don told them to never mind, that we were going to drop them. Don had a worse temper than I. I think I would have kept them one more year and weaned them out. He was right, though; get it over with. Michelin lost one of the best accounts they had in the United States. Michelin continued to call on us. I always called the Michelin district manager the sign man. When we went into Seattle we took down 14 Michelin signs, and put up the Les Schwab signs. The next time the district manager came around he shook my hand and said I was a better sign man than he. Today Michelin calls on us and tells us that we don’t have to put up a sign. They said they would also stay out of our stores. We still aren’t going to sell their tires, even though they have a good following. It wouldn’t be fair to the Toyo people, Multi Mile people, and people who have been loyal to us. In my honest opinion, today Michelin does not have any better tire than any other first line tire. But that is a matter of choice. We sell $180 million in tires today, and we don’t sell any Michelin tires. Keep It Going! Les says he isn’t the greatest roper. In this picture he roped his own horse. He says at least he did catch both feet in doing it. 147 148 Pride In Performance More on L. S. Trust I’ve talked a lot about the Les Schwab Profit Sharing Retirement Trust. Today we have $26 million in this Trust for our employees. Eight hundred thousand dollars of that is mine. I am working today in every way possible to help protect this money against inflation. Commercial property is an excellent place to invest money for inflation protection. Even though we could have built our own buildings, I have let the Trust build many of our Les Schwab store buildings. The deal we give them is 10 percent on the land, 12 percent on the building, a triple net lease where the company pays all taxes, insurance, upkeep. We have a ten year lease and four five-year options. The rent goes up by the cost of living (COLA) at every option period. The company can buy the buildings at any option period, but at appraised price. So the Trust is guaranteed a little over 11 percent plus full inflation protection. When the ERISA law came in the government put many regulations on the retirement trust funds that were administered by the company who made the trust. I can understand this, as some companies would cheat their employees if they could. They did clear up what we could do, and what we couldn’t do. And with the new tax laws whereby you can depreciate a building in 19 years, there was a good tax loophole for a business person, and for the Trust, too. The Trust can buy the lot, lease it on the deal mentioned above, and the company can build the building. You can’t depreciate the land, but you can the building. The Trust doesn’t pay taxes, so they took the land. The company can buy the land at 10/15-20/25 or 30 year option periods, but at appraised price. Now, today, November, 1985, the talk is to change the tax laws whereby you must take 30 years to depreciate a building. The government is changing the tax laws entirely too often. It is hard to make future plans and do financial planning when they are constantly changing the tax rules. I think every business that makes $100,000 or more (and even less) should have a Trust to share profits for their employees. It is one Keep It Going! 149 way that the employee, too, can get in on a tax loophole. It makes me feel good to think that the people who helped me so much with this business are going to have something too at the end. This year our check to the Trust was $2,500,000. It was a pleasure to write this check for the benefit of a bunch of great ‘people. We don’t charge one dime of expense to the Trust. The company pays 100 percent of the costs, even postage stamps. We buy the property, close the deals, administer the property, all at company expense. The Trust profit is 100 percent their profit. The Forgotten Working Man The most forgotten man in any business is the man who just works, does his job day after day, doesn’t cause problems, seldom misses work, and doesn’t demand or ask for unreason- able things. Usually this man doesn’t have a desire to get up to higher level management jobs, or sometimes he just has a problem in asking. He’s not only the most forgotten, he’s often the most abused. Again, after taking three months off in the winter, I came home with an idea. And, again, this idea did change somewhat the flow of our company. I said, ‘‘This year we are going to improve the jobs down the line. We are going to make better jobs out of ordinary jobs. We are going to make it possible for a man to work for 30 years on the hourly job, and still be a successful man. We need these men; they are often times the backbone of our company.”’ The three-share program turned out to be part of this. All the old timers in the company get three shares of the bonus pot. As explained earlier, new employees get one share, the middle ones get two shares. We increased the salaries, which helps their Trust contribution. For example, John Surplus in John Day. He has worked there 18 years, changing and selling tires, in all kinds of weather, and at all hours. He now has $113,117.70 in his Retire- ment Trust. He is just 18 years in the Trust, and he will end up 150 Pride In Performance with a nice retirement plan. He is 51 years old. By the time he is 60 he will have about $290,000 in the pot. He will be able to retire with dignity any time he wishes. There are many more. I don’t want to mention too many more, but I am proud that these men, who have worked so hard, will come out so well. It didn’t hurt me, or my family to do this. Why can’t more business owners see this? It’s being unselfish for good reasons. When you have a good program, and when you allow this program to work, and when you don’t get jealous when someone makes money, then you, too, make a lot of money. But money, the owner’s money, should always be used for expansion. It perpetuates itself. The more you share, the more everyone has, the larger your company grows, the more successful you are . . . you and everyone connected with you. We added the 90 percent medical. We added protection when they retire to cover them until the Medicare plan takes over at 65. It would be such a shame for this man to have a $100,000 medical bill just after his retirement and have to spend all of his retirement money for this. As much as possible we attempt to protect them against inflation. One of the most unfair things today is that all government retired workers are covered against inflation when they retire. Practically no private retirement plan can increase with inflation. It is impossible for them to do so. A great way to stop inflation would be to have a law that absolutely nothing could be tied to the cost of living. By that I mean government retired workers, social security, leases, union contracts, everything. It would go a long ways toward stopping inflation. Another group of people who plays an important part of any company is the middle management people. I want to comment on just a few, and I apologize for those I miss. I will start with the store people first. Key People Jerry Harris, Lewiston store manager and zone manager for his area. Today he has $138,476 in his Trust and a lot more Keep It Going! 151 money in his store manager contract. Jerry came to our company when we bought out Bob Newell. Jerry has told me many times that he thanked Bob Newell for selling out to our company. I tell a story on Jerry that always makes him grin. We had a big store opening in Walla Walla. On Sunday morning many of us were standing out front in the nice sun. Jerry’s wife, Delores, came out of the upper floor of the motel with a suitcase. She ran back up the stairs and got the clothes. A minute or two later, here came Jerry, walking slowly reading the Sunday paper. I said many times, this is when I knew we had a true executive in the company. And Jerry has been a true executive. He has two sons in the company. Both are store managers, and one is already a zone manager. Chuck Swafford, Klamath Falls store manager. He went to work with our company 21 years ago. He was just a punk kid of a young man who liked to race cars. He also built some race cars. I thought, there’s not a man going who is ever going to amount to anything fussing with race cars. He went to John Day as assistant manager, to Hermiston as manager, and now is in Klamath Falls as manager, and zone manager. One of our largest stores. Chuck Swafford has promoted more assistant managers to managers from his store than any other store. Often times he hurts his store just to help his assistant manager get a new store. A true believer in Schwabism; many young men owe him a lot. Other zone managers who have been with the company for over 20 years are Ron White, Joel Ylvisaker, Dave Ross and F. Don Miller. Zone managers who have 15 years or more are Lee Oglesbee, Orville Cheek, Sam Cox, Arlan Kohler, Jerry Taylor, Steve Scott, John Britton, and Dan Lennon. The newer zone managers, and most of these are ten years or more, are Dan McKinnon, Dave Sohr, and Duane Harris. Many, many young men owe so much to these men. They have worked with young people, they have helped young people, and they have enjoyed seeing these young people grow and be successful. None of them are selfish. And this goes for hundreds of our employees. I wish I could write something about each, but it would take pages. Gary Mansker just resigned as store manager and zone manager, and went to the Seattle area and bought two smaller 152 Pride In Performance tire stores. At least they were small when he bought them; he has already doubled the volume in sales. We allow our managers to go independent, if they wish, but it can’t be a promotion, and it can’t be in the area that we want the company to expand. And it has to be done 100 percent on their own. When an old time employee gets to be around 55, he doesn’t want the strain of working the long hours. Yet he doesn’t want to retire just yet, either. We want to allow this man to have the opportunity to be a member dealer on his own. In our stores, we expect our managers to have a wage cost of around 12 percent. As a dealer, he can have a wage cost of 15 percent and take it somewhat easier, and work some more years. But we want these people to take the smaller towns; it can’t be a promotion. It is rarely that we accept new member dealers. They have to already be in business; they have to be the most successful dealer in the area, and they should be in good financial shape. We get calls constantly wanting to start what they call a franchised store. Actually, we are not a franchised company, as we don’t charge a franchise fee. Sometimes they do have the money, but don’t have the experience. We are not interested in teaching them the business. If we are going to take the time to do this, we would rather spend it on our people. We have the money to start more stores, and we don’t want to gamble on inexperienced people. Also, if they (a prospective member dealer) expect us to finance them, then we would rather finance one of our own people with one of our own stores. We have several store managers who have been with the company for 20 years or more. Many of these are perfectly capable of being a zone manager. Most times they are just in the wrong town, and don’t care to move. Jack Rountree, Bob Woods, Joe Hankins, Pat McGrath, Jim Jones, Jerry Wessels, Dick Hammack and Archie Telfer all have 20 years or more. These men, too, have done much for young people working in their stores. It makes them proud to see a man go from their store, to manager of another store. I always notice, at the manager meetings, usually at dinner. You see three or four store managers with their wives, eating together, and so often there’s a father in the group. By father I mean that the other men at the table started their career with usually the older member of the Keep It Going! 153 group. There’s great camaraderie in our company. It’s a great reward to know, especially when you get older, that you helped many people get ahead in the business world. Jerry Harper has just about run all of our television advertising program from the time it started. We started with a low key type Eastern Oregon approach. We are a nice place to do business, and we wanted to portray that. We are headquartered in Central Oregon, which is considered Eastern Oregon by the people west of the Cascade Mountains. We have nice Eastern Oregon scenes. Since I am a rancher, along with the tire business, we have used a lot of ranch type backgrounds. Television advertising is powerful, that I'll admit. In teaching new employees how to sell, I have urged them to use sight and sound. Show a cross section of a tire, show the tire . . . don’t just talk; use both sight and sound. Television is effective, because it has both sight and sound. Newspapers have sight, radio has sound ... be a television type salesman. And they have learned well; we have great sales and service people. There’s never a week that goes by that I don’t get letters from customers . . . where do you get such great employees, they ask. Usually they say, “’.. . in this day and age’’. We send many of these letters out to all stores. Our people like to be thanked. If I go to Portland, Seattle, any place, people recognize me from the television ads. Paul Dunn, Vice President Data Processing, computer department. Paul came with our very first computer, and has grown with the department. We are doing ten times the volume that we did when Paul joined us. He’s worked long hours to keep updated. Alan Nielsen, Vice President in charge of the Distribution Center, 14 years with the company. Phil Powell, Vice President Purchasing and fleet accounts. Von Thompson, Vice President of credit control and assistant to the president. Gerry Darnell, Vice President and Corporate Controller. All are important people in the middle management field of our company. Jan Nolan is Corporate Secretary. I like to call her my right hand gal, and she doesn’t mind. She does much under real estate control, especially for the Schwab family. Jean Stigall heads up our insurance. Arlene Deitz is in the Warehouse accounting. Dorothy Fuller is on payroll and employee benefits. I call her the 154 ; Pride In Performance Grandmother of the Trust fund. She likes that. Larry Henderson, recently promoted to Controller. Doug Smith, purchasing; Brian Capp, purchasing; Judy Sell, Pam Ontko, Randy Matzek, Scott McMillin, Vera Harper all are such important people to the company. Where do you start, and where do you stop when it comes to recognizing important people? There are eight foremen in the retread Production Center. It would be impossible to kick out 1,200 passenger tires and 350 truck tires per day without these men. There are five foremen in the Distribution Center. We ship about 8,000 tires per night, including the retreads. They are responsible for this, and they are unbelievably accurate. The loading crew every night loads the 17 diesel trucks that we have to haul the tires. In winter this is the most miserable job in the company. They load tires in zero weather, they have to go! In fact, our busiest season is the cold weather season. We have been shipping, lately (November), over 13,000 per night in new tires, which means that some days there are over 15,000 tires being shipped out. Without the dedication of these people, the company would be in a mess. Tom Freedman is our Senior Executive Vice President, and does most of our legal work, along with being over the entire office. Rich Priday just took over all property purchasing. Rich is Executive Vice President of resale purchasing, distribution and pricing. We’ve talked about Dan Roberts, who heads up all retreading in Prineville, Lewiston and Spokane. He started with the company at $1.80 per hour. But, he says, he got lots of hours. Our normal work week was 54 hours per week, six nine hour days each week the first 12 years or so of our first years in business. We did pay overtime over 40 hours. We didn’t have all the benefits then, and as I think back, I wonder how I got such good people. Loyalty — Suppliers and Employees One of the hardest things to do in business is to part ways with people who have been important to the company, and who have Keep It Going! 155 been associated with the company for many years. And this goes for suppliers, as well as employees, accounting firms, and others. But on the other hand, if you don’t face it, you hurt your company. Loyalty works both ways, and I’ve seen people be too loyal to their supplier, to some old time employees, and these ~same small businesses gradually go downhill. I started with the O. K. Rubber Welder franchise and had new General Tires. I was lucky, as I got a good education. O. K. taught us to sell the retread and the used tire, make a high gross, and very few O. K. people ever went bankrupt. General Tire taught us how to sell the high priced tire, tell the quality story. General had a national slogan, ‘‘COST MORE—WORTH MORE..”’ They had a good quality tire and a good sales story to go with the quality tire. I had a fairly new employee, married man with six children, whom I sent to the training school of General Tire. When he came home, about the first or second day, he sold a man a set of tires with puncture sealing tubes for $400. This is like $1,500 today for a set of tires. I didn’t like this, as I thought it was a case of overselling. I always said I wanted to be somewhere in the middle, someday, when all my plans worked out. I wanted to have a tire for everyone. I didn’t want to be known as the high priced place, and I didn’t want to be known as the cheap place. I guess that is why, many years later, I came up with the idea of the ‘‘supermarket’’ tire store. The man who bought the $400 tires came back, about two years later. I sold him the tire that had taken the place of the $400 set for $250. His question was, ‘‘Are you sure this is as good a tire? I paid $400 last time.”’ Which proves, I guess, that people do like to be proud of what they buy, do want quality, and are willing to pay the price. O. K. petered out when the founder retired. They are completely out of business today. They could have, with proper management, been nationwide today, and could have been a real factor in the tire business. General Tire also pooped out with the death of the founder, and isn’t much in the tire business today. They, too, had a great dealer organization, and could have been a much greater factor in the tire business today. I guess if businesses didn’t fail, we would be ‘‘ass deep’’ in businessmen. There isn’t any better regulator of business than the law of 156 | Pride In Performance supply and demand. That’s why it is so foolish for the government to be interfering so much in the building of cars, all types of manufacturing, and in the tire business. Today, on the sidewall of the tire, there is molded so many government requirements that cost a lot of money, both to the factory and to the customer. And it doesn’t mean a damn; nobody reads it and no one pays any attention to it. It goes back to the business who sells the tires, he is the one who puts out a quality product, stands behind it, has good employees, and gives good service. I always said, and told my suppliers that too, that we never quit a supplier unless it was their fault. They choke on this sometimes, but it is true. Either they can’t meet the quality, they can’t meet competition on price, their service is lousy, they don’t keep their word, or there is some reason why we quit them. We never quit them overnight (except Michelin). They get plenty of warning .. . they just fade away. Bill Burnside — Plum Store April 7, 1985 MEMORANDUM TO ALL EMPLOYEES MANAGER OF A ‘‘PLUM’’ STORE... WHO WANT TO BE I would like every employee, including assistant managers and managers, to read the attached application. I want you to keep this and read it again, and again... . Why? Because it tells the story so completely of how to become successful in the Les Schwab Company. I have underlined some important points that Bill makes in this application. This application was made to the zone board at the April 3, 1985, zone board meeting. He got the job. You can see from reading this that Bill started, as you all have started, at the very bottom. I have always been proud in the growth of our people, and I have purposely intended, in our programs, to allow people to grow on their own. In fact, that is the only way any one can grow. Success never comes by some Keep It Going! 157 light beam coming down from above and shining on your head. It comes from earning success, step by step by step. Our President, Phil Wick, did it exactly the same way that Bill tells it in his application for the Milwaukie store. My success came exactly the same way, too, and I can see myself clearly in Bill's application. I want to continue to offer opportunity for 100 years after I have left this earth. We have an excellent chance for our programs to continue on long after 1am gone. Why? Because of men like Phil Wick, Bill Burnside, and many, many more great employees. For example, look what some of our zone managers have done, without extra pay, to help get the Seattle area going. They have taken time away from their families, and their jobs, to help our programs succeed. We owe these men much. Bill attached to his application the Guideline policy thatIwrote May 19, 1983, which is now attached or added to Policy No. 1. He had this in mind for years, and he followed it knowing that we would be fair when a ‘‘Plum’’ store did open. The bottom of this Guideline addition says... ‘‘In cases where we don't have a fully qualified man for a plum store, the new manager only gets 12.5 percent of the profit, and not the 22.5 percent contract.’’ I can say with sincerity that I hope we never have anyone with a 12.5 percent contract. I want you men to do what Bill did, and, ifyou do, I feel certain that you, too, will manage a ‘‘PLUM”’ store some day. Why? Because by doing this, we will make many more ‘‘PLUM”’ stores. Les Schwab This bulletin, and the application speech of Bill Burnside, is somewhat lengthy, but it is important. For the sake of young people who want to make their life with our company, I want to print it in full as I think it is important to them. Refer to the Plum Store Policy earlier in the book. 158 Pride In Performance April 3, 1985 Good Morning. My name is Bill Burnside. I am here to tell you of my desire to be the Manager of the Milwaukie Store, and to give you a little background about myself. My wife, Sandi and I, have been married for 17 years. We have two children, Maridy, 15, and Brian, 13. When we moved up from Madras to be the Assistant Manager at 82nd, we moved to the Milwaukie area where we have lived since. Our children have been involved with the area Little League programs and the YMCA basketball. We, as a family, do our business in the Milwaukie area and consider ourselves part of the community. I feel to run a successful store you have to be involved in not just the store, but the community and the surrounding businesses. We have seen the community grow and have seen changes take place and have been part of these changes. We would like to contribute more to this growth on a larger scale with the Milwaukie store. I have always expressed my desire to be the new Manager of the Milwaukie Store, but what makes me qualified for this position? Here is a little of my history with Les Schwab. I started with Les Schwab Tire Centers on March 28, 1972 at the Madras Store as Sales and Service under Gary Mansker. I held this position for three years, at which time I was promoted to Assistant Manager. I stayed at the Madras Store until November 1976, at which time I made a lateral transfer to the 82nd Street Store. I felt this move would expose me to a different market from the Madras Store and to broaden my knowledge of the market in the Metropolitan area, and to help prepare me for my own store. In 1980 I applied for my first store, Santa Clara in Eugene. I did not get it. The next store up was Independence — I did not get it either. In November of 1980, Sandy Blvd. was open — I went for it unopposed and got it. In February 1981 we opened our doors for business with Steve Holly, Assistant Manager, Mary the Bookkeeper and myself. Keep It Going! 159 The first year we were not in the phone book and our only exposure was the paper, which did not go into our area, so things were slow coming. Our first year in business we did $267,000. At the beginning of our second year, we realized we needed something to help build the volume, so we bought a used alignment machine, cleaned out two bays and started our alignment shop. The volume did not warrant adding an alignment man, so I took it upon myself to go to an alignment school and I was the alignment man for approximately six months until we had the alignment business to warrant a full time alignment man. Our second year in business, we ended up with a 6.6 percent YTD profit. Our third year in business we worked on our retail business and alignment shop. We also concentrated on getting the expenses down to the volumes we were doing to maximize profit. It was starting to pay off. We finished with an 8.1 percent YTD profit. At the beginning of our fourth year all the stores in the Portland area went together and pooled our advertising money and we were working as a team. The extra exposure and promotions helped to build the volume so that by the end of our fourth year we were 12.7 percent YTD profit. We still have that momentum going and we are at 14.2 percent YTD profit, and 15 percent Total is our goal. It has not been easy, and has been quite a learning experience for me. I learned to think of expenses in terms of percent rather than dollars. This has benefited me because as the volume grows you still remain aware of what it takes to make a store run and make it profitable. You learn to work with the people working with you and depend on them as they depend on you to guide the store's growth. The store has grown over the last five years, and I am very proud of its growth and the crew working with me that has made it what it is today, a respected business in the community and a place where customers can come to buy tires and feel they left with their money's worth, and a feeling that they would want to come ack. The last eight years in the metropolitan market we have seen 160 Pride In Performance competition come and go. We have learned to adjust to the market and its changes. We have learned to advertise our products effectively and I have been an active part of the decision making and working to put the Les Schwab name at the top of the places to shop for tires. We as a group have learned to pool our money and spend it to give us maximum exposure. I am in tune to the market and the way of doing business in this marketplace. With all of this going for me at Sandy Blvd., why would I want to leave? - I have spent the last 12 years with the Company _preparing myself for a larger store, with a greater growth potential, and Milwaukie is that store. It is a new challenge and a great opportunity. I want to see it grow, as I have seen Sandy Blvd. grow. I want to be the one to make it one of the largest stores in the Company, because I believe it has that potential. To accomplish this I feel the new Manager has to go to Milwaukie and provide leadership and training to make it a full fledged Les Schwab Store. I am aware of the problems in the Milwaukie Store and feel the crew is a good one, and more than eager to work as a team. Together, we can overcome the problems. I know the market and live in the community. I can concentrate my efforts on pulling the crew back together. My 13 years experience with the Company has given me the background for meeting the guidelines as set by Les Schwab for this advancement. I) The Milwaukie Store is very much a plum with excellent potential for further development for both the store and its manager. 2) I have pioneered a store and made it profitable. 3) My willingness to relocate as previously done in support of the company's and my own needs has been made irregardless of the profitability or the location. Keep It Going! 161 4) As I believe myself to be a long term employee, I have been thrifty with my profit sharing in letting it build for this opportunity. 5) I feel I can train people and will promote them from the Milwaukie store. 6) Our standing in management comparision has only gotten 7) better with time, and will continue to do so. The last five years at Sandy Blvd. has matured _me_to handle people, and I feel I am respected by my peers and my family is behind me 110 percent. Iam qualified to go to the Milwaukie store and make it and the crew successful, and would appreciate your vote of confidence. Thank you, Bill Burnside Manager — Sandy Blvd. Lanny Lyle Lanny Lyle has been our property manager for many years, along with many other duties that he has done. He worked for us seven years, left for two years to enter business, sold out to his partner and joined us again for seven more years. He resigned December 1, 1985 to take a position with the Capital Savings Bank in Olympia, Washington. The Prineville Chamber of Commerce and the Les Schwab people had a nice farewell luncheon for him. At the luncheon, he stated that anyone who works for the Les Schwab Company leaves a better person for the experience. I really do think that young men who work for the Les Schwab Company for three or four years is almost as good as taking three or four years of business schooling. The reason for this is the complete openness of the company. Every employee in every store is encouraged to read and study the Profit and Loss Statement of his store. Each store has a monthly meeting around the P&L Statement. They are encouraged to ask questions. The 162 : Pride In Performance manager goes over the gross profit, the wage cost, the advertising and all of the operating costs each month. Each statement shows how much goes into the Trust, the cash bonus, the assistant manager and manager contracts. Each employee gets the complete chance to see the total operation of each store. Lanny and I were coming back from Yakima one day. Lanny is a good Baptist and we got into a discussion about religion. After 15 minutes or so of this I told Lanny that it was funny that I would be discussing religion as I so seldom entered a church. He said, ‘‘T don’t think it is odd, just about everything you teach in your company is in the Bible.’’ I thought this was a nice compliment and have thought about it many times since. I guess ‘‘do unto others’’... morality . . . encourage a good family . . . honesty are a part of Bible teachings. We truly do teach young men to be honest, to work hard, to be a good family man, and to hold your head high. Boise Manager Meeting In April, 1975 we had our manager’s meeting in Boise. It is interesting to compare records for the ten year period. I commented on the $400,000 we put into the employees’ Trust fund. Last year, 1985, we paid in $2,500,000 which is six times as much. Without checking, I’m sure we also had six times as many employees. I commented on our profits, and our profits are also up by six times. We don’t have six times as many stores though as our sales per store have grown. Our total sales are also up about six times. So in this ten year period, our company doubled in size every 3-1/2 years. And when you do this, there’s pressure, man what pressure! It’s really no wonder why some of our key people more or less “‘blew their tops.’’ It’s no wonder that we have had three heart attacks, including mine, in the Executive Group. The real miracle is that we are still here, still going strong. In my speech to the managers and their wives in Boise, in 1975, there were a few remarks I made that are interesting to review. Such as, ‘‘] think today, as I’ve always felt for over 23 Keep It Going! 163 years, that it is more important than ever to stand for policies, programs and ideals that STAND out. Policies that are cleaner, more fair, more original and better than any in the field today. Programs that are refreshing, higher in goals and relative to what we stand for. Ideals that are characteristic to all things that had made us successful. And then we can’t just mouth these policies, programs and ideals ... . we must believe in them, we must practice them daily.’’ And for this ten year period, it appears now that we did well in following what we preached. At the Boise meeting, 1975, ten years ago, I asked, Why are we successful? Have you ever really tried to put your finger on the reasons? Is it just an accident? And I followed this by telling of a conversation I had recently with one of our key office people. In discussing theories of business, an ex-executive of a large rubber company had told us that their objective was to make the home office successful, that everything else was secondary. And it’s sad to say that this is the theory of too many of the large American corporations. Our theory has always been to make the store, or our Member Dealer successful. That if they were successful, then the home office just had to be successful. The big bonuses, the most opportunity, I feel should be at that end. The large corporate policy is that the large bonuses, and the most opportunity, is in the home office. The men at the ‘‘so called’’ bottom end were just numbers, and, if they were unionized, then they really were only numbers. Then | asked, ‘‘Who is right? On one side we have the large corporate theory, and on the other you have the Les Schwab theory. Are we smarter than those huge companies . . . and I think the answer is, you're darn right we are."’ And in this ten year period, time has proven that we were right. The large rubber company dealer organization had fallen apart. Their dealers have gone broke, and their own supplier was the fault of the bankruptcy. Our stores, and dealers have been successful. Again I thank the large rubber companies for their policies, it made our success possible. At our 1978 meeting, three years later, I said, ‘‘Times are changing. Competition is coming at us in different forms. '’ So we were seeing the effects of what I talked about in Boise. The large rubber companies had failed with their distribution system, but 164 Pride In Performance now new types of competition were springing up. We had to sell ‘‘The Les Schwab Difference.’’ We had to continue to ‘‘create our own program.”’ New Type Competition The company stores, Goodyear, Firestone and others, distribution system was an expensive system. The new competition coming at us now, is the newer, smaller, independent type dealer with a very low cost, low overhead type business operation; also the discount tire stores, sometimes in the chain store type operation. Now, should we attempt to lower our cost by taking away benefits, pay lower salaries? By doing this, we could milk the stores and Member Dealers and pull this back into the home office. Sounds good, but it really doesn’t work that way. We took the opposite approach. This was the start of our program to make better jobs for the men down the line. We increased wages, we changed and improved our medical, dental and insurance programs. We increased our cash bonus making it 12 percent to be shared instead of 10 percent. We started the share program whereby the experienced men got three shares, new men got one share and the men in the middle two shares. The results proved us right. We had better employees than our competitors. We gave better service. I don’t have any way of really knowing, but I don’t think our percentage wage cost was any higher than competition because our people just plain ‘‘put out more.’’ People don’t understand tires so they buy from someone they trust. Tires, if not properly sold and properly serviced, can be a danger to the buyer. Our people were becoming the ‘“Tire Professionals’’ and people liked to buy tires from these men. Again, we were growing through people. It’s the right way to run a business. During this period of time, 1977 and 1978, we didn’t grow much in number of stores. We were taking time to improve our main warehousing, retreading, and office facilities. We were setting the stage for more growth, looking for that ray of light that would lead us out of the box canyon. Keep It Going! 165 We were facing new challenges. It was a ‘‘New Day.’’ I said this in my 1978 manager speech, ‘‘We have a need to continue to make our company the best employee company in the area. We need your help.’’ I’ve never been sorry for my desire to be a good employer. The more I’ve done for my employees, the more successful our company has been. It does take discipline, though. There can’t be a free ride, it must be earned. It is a harder way to run a business because it takes so much motivation. And you can’t pass on enthusiasm unless you are enthusiastic. It’s hard to keep cranked up all the time. But it is the fun way, and a person gets more pride from the business, and it is such an enjoyment to see young men grow through opportunity. 1979 Hawaii Manager Meeting In 1979 we had our manager meeting in Hawaii. We have taken the managers and their wives to Hawaii every fifth year for the past 15 years, making three trips in total. This is a tremendous trip for people, especially for the newer managers and their wives. Some of the people, especially some of the younger wives, had never been on an airline before. I hope we can continue to make this trip for these great people every fifth year for the future. At the 1979 meeting, in my talk to the managers and their wives, I pointed out our sales, our profits, and the amount shared with our employees. It figured out that 7.07¢ of every sales dollar went to employees in the form of benefits. I told them that most of our competitors, using less costly help, didn’t have nearly this high of an employee benefit program. Most any company has some benefits. For the sake of comparison, let’s say they had 3 percent employee benefit cost. So ours is 4 percent higher. Who pays this 4 percent? At least half of this comes from the supplier, Mr. Rubber Company. We pay our bills, we will not obligate ourselves to them, we just plain buy better. The other 2 percent is paid by the customer. Will a customer pay an extra $4 on a $200 sale to buy from someone he trusts? To buy from a profes- 166 Pride In Performance sional? I am absolutely positive that he will, providing we earn it. It doesn’t really cost him, he saves it anyway in getting a better product and better service. -K Mart and Fred Meyer My wife and I just spent the day shopping in the Palm Springs area. We spent about $300 on various items. We couldn’t get any help or advice on anything. The people selling didn’t know peanuts. It was disgusting. I told my wife, as we walked out of one place where we had spent $150. ..it’s no wonder our company does so well, it’s our employees. We shopped in a K-Mart. I looked over the tire department. They have a few tires on display, but no one to tell you, or show you the difference in tires. On the door to the service room a sign says, ““Ring bell and a service man will come to the door.’’ Good God, and they expect to sell tires? Iam sure that if you asked them the difference between a $50 tire and a $60 tire, they would tell you $10. But K- Mart, along with many other chain stores of this type are going out of the tire business. Fred Meyer told us, when we took over their tire stores, that they could merchandise items when the items could be displayed and checked out at a check out stand. They are good at that and so is K-Mart good at displaying, pick up the item and check it out at the check stand. But when something should be sold (and tires should be sold, explained and the right type of tire should be put on each car according to the needs, weight, size and the job intended to be done by the car and tire), then the mass met- chandiser just can’t do the job. We have a problem that comes up often. A person will buy two tires or four tires from the mass merchandiser and bring them to us to mount. Should we mount them and charge a nominal price for the service? Or should we always take care of our customers first? Also, many times they really have bought the wrong tire for their needs. How much liability do we have if we mount the tires, knowing that they won’t stand up under the conditions in that area? Right now we do mount them, but not on the first day Keep It Going! 167 of snow or when we are covered up. It’s a problem that I wish would go away. Sunriver 1977 Assistant Manager Meeting In my talk to the young assistant managers, Sunriver, 1977... ‘“‘Tt's true, for most of you your future is just starting. Many, and I hope most of you, plan to make this company your lifetime career. I hope that so far your association with this company has made you a better man. I hope that the future will do the same. This company still firmly believes that people are the success to our company. Most anyone can sell tires. The only difference between a Les Schwab Tire Center and most any tire dealership is the people working there . . . you people. And that's why we must continue to ask ourselves... how can we do an even better Job? ‘‘We have great people within our company. Some do fail, some do get demoted from a job they truly wanted to do, and some do leave the company. I don’t know if we will ever find the answer to this complex problem. I do know that there is always an association between opportunity and risk. Usually the higher the opportunity, the higher the risk. I do think that if you will follow the programs that we have, then you can almost be assured of a successful business career. ‘‘We talked about it last year, many of you are new... I would like to rehash some of the basic things with you again today. 1. Be honest with ourselves. 2. Be honest with the people we work with. Be honest with your customer. I've told you before, I'll tell you again... “‘There’s absolutely no excuse, reason, or cause for you to be anything but 100 percent honest with the people you work with, or with the customer you serve. "’ 3. Be humble. Pride In Performance 168 4. Haveadesire tolearn. opportunity. It is up to you, we can only offer the 5. Tell the truth... have an open mind. 6. Beaman ofaction... make some mistakes, this is the way you learn. ‘‘And when you have established this two way communication, between you, your boss, your fellow employee, your customer ... you've gone a long way to clear the way for your success. I told you last year, other people make you successful. It hasn't changed. Other people do make you successful. So don't let yourself down . . . and don’t blame other people. Very few success stories are built on luck, very few promotions are given by luck... THEY ARE EARNED.”’ Sunriver 1980 Manager Meeting In my talk to the managers at Sunriver, 1980, Iseemed to be in the prediction mood. Sometimes I do quite well, other times I really miss. Ido much better when I stick to the tire business. In predicting what would happen in the tire business between 1980 and 1990, I said... I. We will have fewer tire companies January I, 1990. 2. We will have fewer tire company distribution warehouses. 3. We will have fewer tire dealers. 4. We will have fewer retread shops. 5. We will have more large independent wholesale dealers. tire And I hit just about 100 percent. Thirty years ago a very nice Keep It Going! 169 small business was to have a passenger tire retreading plant. I think that there were about 9,000 such shops in the U. S. then. Today there are less then 3,000 retreading plants left. Passenger car tire retreading has really slipped. Right today, 1985, we can buy a new tire made in Korea for probably 20-25 percent more - than the cost of retreading a tire. Tire and Retreading Future What’s the future of the tire business? It reminds me of a Bob Hope joke. He was speaking to a university graduating class. He said, ‘“Here’s my advice to you who are about to leave the university to face the world of the 1980’s. DON’T GO.’’ And that somewhat fits the tire business today. If you aren’t in it, keep out . . It’s going to be rough during the shake out period. There’s something wrong when we can’t put about ten pounds of rubber on a tire, and do it for less money than the Koreans can make a new tire. Today we put our passenger car retreaded tires to the store at cost, maybe 1 percent above. If we didn’t the stores wouldn’t have a market for them. The reason that we don’t drop passenger tire retreading is that I think this imbalance will balance out in a year or two. And if it does, then we will be in a good position to get a large share of this market in the Northwest. Goodyear, Firestone, and all of the American tire companies have gone completely out of the car tire retreading. They have stayed with truck tire retreading, in fact, truck tire retreading is growing. The radial truck tire has been a great improvement for the truckers. Flat tires, with the radial tire, have been cut by 80 percent. The radial tire retreads are even better than the bias ply tires. The mileage on the radial, over the bias ply, has nearly doubled. And the radial truck tire retread mileage has nearly doubled, too. The original cost is higher for the new tire, but the savings to the trucker, with the truck radial tire, have been tremendous . . . and much more trouble free. Some other predictions made at Sunriver, 1980... 170 Pride In Performance 1. Our employee Trust will have $30,000,000 by 1990. (We already have $26,000,000 so we will go way past the $30,000,000. It will hit at least $40,000,000). 2. Our company will have between 1,500 and 2,000 employees. (We have 1,450 today, plus 700 in member stores, so we will have about 2,500 by 1990). 3. Our company will have an operating net worth $60,000,000 by 1990. (We'll beat that by $20,000,000). of 4. Some of you people in this room will have over $100,000 in your Trust by 1990. (We already have 40 employees with over $100, 000. I think these same people will have $200, 000 by 1990). I asked, ‘‘Big dreams? No, these are facts.’’ And they were facts, and it is great to see these dreams come true, almost five years early. I used some letters and comments from customers at the 1980 meeting and they are worth mentioning. From Eugene, ‘‘This is the only business in town thatI can go into and don't have to look around to see who I want to wait on me.’’ He was an older man and went on, ‘‘There isn't a man working here that I wouldn’t be proud to call my Grandson.’ When Lanny Lyle registered for a business meeting at Salishan, his wife, who was sitting in the car, overheard four older ladies say, ‘‘No wonder he has short hair and looks neat; he works for the Les Schwab Company.’ They saw the sign on the car door. Another customer in Walla Walla said, ‘‘This is the only tire business in town where the employees have ears’’. Referring of course to our haircut policy. A large supermarket owner told me, ‘‘When a person says he or she works at the Les Schwab Company, I cash their checks without any further checking. ’’ These are nice things to read and hear. Socialism isn’t forced upon* people. People vote themselves into socialism. People vote for the man who offers the benefits, Keep It Going! 171 not realizing that they and their children will some day have to pay the bill. We, as a company, can do the same thing. And if we do, and if we don’t earn it, then we, like a country can go downhill, and eventually fall. We must guard against this .. . how? Well, true democracy is sometimes cruel, people get hurt, ' they go bankrupt, they lose their jobs. People in our company can sometimes get hurt. It breaks my heart to see a manager drop off the tree. I know it hurts. But, like true democracy, we offer opportunity. I’ve said over thé years that there is an association between opportunity and risk. The point being that we must earn our way every day. And those not earning their way must have the limb sawed off the tree, as cruel as that may sound ... and that goes for Member Dealers, you must earn your way or we must saw off your limb and drop you from the tree. I am optimistic about the future, in spite of everything. If we are smart, if we earn our way, if we ‘‘Do the Job,”’ then the future will be optimistic to us. I am 68 years old now. And I’ve run it in overdrive my whole life. I’ve been in business for 34 years, and I think back a lot. In writing this book, memories come back, and you wonder why so many things happened. Why have rubber companies closed factories all over America? Why did foreign tires become popular? What happened to the many large major brand tire dealers? How in hell did ‘‘Les Schwab’’ become the best known tire name in the Northwest... when really there isn’t even a Les Schwab tire as such? How did these things happen, and why? Will changes come in the future that will just reverse these happenings? Will it always work in our favor? How and why did we break away from the pattern and go to what we know today as the Les Schwab way? To make a trademark name out of ‘‘Les Schwab’’ was a daring thing to do at that time. We developed the ‘‘Les Schwab Tires’’ sign. We developed the Les Schwab concept of buying and selling tires, the Supermarket concept. This wasn't the way the big rubber companies wanted us to do it. We were way ahead of the times. The large rubber companies turned out to be our best friends. Why? Because their ways, their policies broke their dealers, often leaving us as the only dealer in town in a position to give 72 Pride In Performance service. This we know for a fact . . . when we create our programs, when we create our policies, and when we follow our programs and our policies . . . we make money. We will always remain strong as long as we have the ability to continue to create... policies and programs. Les Schwab is now a trade name.... It is a trade name that is accepted and respected. Les Schwab is a concept of buying and selling tires. People don’t ask the brand, they are buying Les Schwab Tires. It has been the efforts of many people who have made this possible. These people have given power and pride to the Les Schwab sign. The Les Schwab sign sells tires. The chances of the major brand tire companies to re-establish their dealer network is practically nil. The chances for growth through the private brand tire, and the foreign tire, by the dealer is great. Who makes the private brand tire? The big rubber companies do. Do they want this business? Now that they are on their knees, you bet they do. Will they want it in the future? I don’t think they have much choice. It’s a new day and I think the Les Schwab company can play a big part in building this “‘New Day.”’ Sunriver 1981 Manager Meeting What is the best route to follow to continue to be successful, to build for this new day? How? Build people? Our most important Job today, as it has always been, is to build people. I was speaking to the managers, Member Dealers, and their wives at the Manager Meeting in Sunriver, 1981. I was discussing the times and how the Les Schwab Company had done in the past, and about the future. I asked this question of them: ‘What is the best route to follow to continue to be successful? ‘What should our company do to build for this ‘New Day?’ How and what should our company do to build for the future? The answer is, as it has always been... BUILD PEOPLE.’’ What is the most important’part of your job? To build people isn’t it? It is the most important aspect of your job. Most of you Keep It Going! 173 are earning, in total, $60,000 per year. Can you personally change enough tires, work hard enough, to earn that much? No, it’s impossible . . . you earn it by building people. Your job is to work with people under you. People like to feel important. Everyone would like to be looked up to, to be somebody. And, as I’ve said for years, make the people under you successful. You’ll be proud, and, best of all, then you too will be successful. No one enjoys being treated like a push button, a payroll number, a perforation in an IBM card. In our rush to get the job done, it is sometimes hard to give each man some special attention. But you better, or Ican assure you, you won’t be successful either. They make you stccessful, these men under you are going to be the ones who make you a successful man, or these same men can be the ones who can keep you from being a successful man. How can you make people feel important? The best way to start is to believe that they are important. Really believe it! Really want to make each man under you successful, and you’ve got to believe it in your heart. You’ll find yourself showing it in many ways... * By giving them all the responsibility and authority they can handle. * By including them in what’s going on. * By assigning them work which is important in their eyes . . work that they can take pride in doing. * By letting him share the limelight now and then with you. * By taking a sincere interest in him as an individual. * By never belittling or ridiculing him. * By asking for and listening to his or her advice. « By confiding in them once in awhile. 174 Pride In Performance * By letting them know they are needed and appreciated. ‘‘Most men are starved for personal recognition. Any boss who, unknowingly or otherwise, destroys an employee's self esteem also destroys the employee. Truly work to make this man . a successful man and then you have done something great.. Great for the man and great for you.”’ Our managers and zone managers have grown so much over the years. I look around the room, at the zone manager meeting, and think . . . what a great collection of knowledgeable business people we have in this room. These men have truly built people. I used to worry, making statements such as, “‘We can build a man to store manager, but we have trouble getting him higher.”’ I was just too impatient, it just took time. I am sure that all companies talk about building people. But do they, or do they just mouth the words? At times, I’m sure our company has been guilty of not working with many people right. But as I’ve said many times, our company has a way of selfelimination and the managers who don’t build people soon get their limb sawed from the tree, and they drop off. Life is hard. At the 1981 manager meeting, I talked about our operation as being a three way partnership. The stockholders as one unit, the corporations and its people as another unit, and the employee Trust fund as the third unit. Our company will always be successful as long as all three units work in harmony. If greed gets into the act, watch out. Greed can come from any of the three, but most likely it would show up first with the stockholders, it usually does in any company. I, or my family, have never taken a dime out of the company except in the form of a salary that must be earned. The family also gets paid rent for many buildings they own, but so does the Employee Trust. The lease between the family and the company is exactly the same lease that we use between the employee Trust and the company. I don’t see potential for greed from my family. If they do get greedy, I’ll come back and haunt them. I think the mistake that many business people make is they are sometimes too loyal to their supplier. We are 100 percent independent and I am proud of that. My loyalty is to my family, and to my employees and their families first, and Mr. Rubber Keep It Going! 175 Company is last. We are not impressed by big names such as Michelin, Goodyear and others. WE ARE IMPRESSED WITH THE LES SCHWAB NAME. I hope my competition in the future is Michelin and Goodyear dealers. They can have the big sign, we will have our success from the programs that we have created. We will run them into the ground. I look forward to and welcome the fight ahead . . . we are going to be the winner. Again speaking to the managers and their wives, at the Sunriver, 1981 meeting... ‘‘We have created an excellent image for our company. . . for the Les Schwab sign. I ask your support to further this image that we have worked so hard to create. Each of you represent your company in whatever you do. What you do, what you say, how you appear, your clothes, your hair. . . everything about you makes an impression that hurts or helps our image. I ask your support... and the support of your employees — it’s important to your future, to their future, and to the future of our company. ‘Let me throw in a few words of caution before signing off today. I am old enough to have watched companies and businessmen grow. I’ve also seen companies and businessmen fail. I’ve watched our railroads become a mess due mostly to stupid demands on the part of their unions, plus weak management. I've watched the automobile business get into the mess they are in today. There was a time when America made well over half the automobiles made in the world. Their workers demanded more and more, and received more and more. Such things as paid birthdays and the day off, a full year’s pay if laid off, protection if they lost their job due to foreign competition. Even a clause in their contracts that if more cars were made, more people would have to be hired in percentage to the increase regardless if needed or not. Nothing based on increased production, nothing based upon success in the market place... . The executive people were pigs too. They voted themselves bonuses in the millions. Just ask and ask for more and more, and what happened? They destroyed themselves. Socialism is not forced upon people... people vote themselves into socialism. I have watched strong countries become weak due to their socialistic programs. ‘I have watched rubber companies become sick and this has 176 Pride In Performance worked in our favor. We are now strong, we are now the winner, but I caution you. . . let's base our salaries, let’s base our bonuses, let's base our Profit Sharing Trust, let’s base all of these things upon our success, upon our production, upon our ability to make a profit . . . and let’s not start to get concerned about non-productive items such as a paid holiday on your birthday, sick pay for flimsy reasons, running to doctors for unrealistic purposes . . . . Let's do the job, make ourselves and our company successful, think positive, act positive, be successful and these things will follow. I think the whole point is that we must think success, we must think positive and we must continue acting as we do today. Because if this attitude ever changes, if we think there is a free lunch, if we rely on last year’s results and ask for pay for non-productive items... then this company will turn the corner too, like the ones mentioned, and then we too will start down the hill. And once you start down, it is mighty hard to turn around. Remember this in years to come and if we do start to fail, remember today, because there will be an association. ‘T will end this with a few sober thoughts. There are so many questions about the future of our country, and this will affect the future of our company. There are two classes of people in our country. There are those people who produce more than they consume, and there are those people who consume more than they produce. The problem is that the numbers, in the last few years, have been moving fast to the non-producers. This means that the voting edge is, or soon will be, in their favor. As I’ve said earlier, socialism is not forced upon a nation, people vote themselves into socialism. With the trend we are taking, it is easy to see the possible trend of the nation. ‘‘We have been, and still are, going through a shake out period in the tire business. I think we are just about through it and as I said earlier, I think our future could be bright. But it is a gamble, and in many ways we could be called crazy for expanding the way we are today. But remember . . . if we create the programs and policies, we make money. If we follow the ones they create, THEY make money. So if we can put together, and keep together, our programs, our policies and keep good people like you growing... ifyou can be successful, and if our company can be successful, then aren't we going to come out the other end Keep It Going! 177 of this period even stronger than before? “Business is fun. The more competitive it is the more fun it is. It is one hell of a lot more fun when we are successful, when we are the winner! I want you to be able to hold your head high when you say you are with the Les Schwab Company, that you - are successful, that you are a winner! ‘In this New Day, more and more, other people will be running this company. We have great people. I’m willing to gamble. We will make it work. I have much faith. “My wishes are that when the sun comes up on that New Day, we want the Les Schwab sign to be glowing . . . glowing with opportunity for all people concerned. ’’ Les Schwab (end of speech). . . Faults of Management In writing this I certainly do not want to give the impression in any way that I think the working man is the cause of our problems. It is at least 90 percent the fault of management. What causes people to vote in a union? It is dis-interest on the part of management, it is lack of communications. They, management, had their own little cocoon. They forgot that their success came from the people working under them. These people were just bodies that made things run through machines. It wasn’t the union’s fault that the American car makers made cars that people didn’t want or need. It wasn’t the workers’ fault that Firestone made millions of the Firestone 500 tire that had to be recalled, it was management’s fault. A company, any company, should work up programs and policies that are fair to stockholders, to management and to the employees. And then we should have very open communications, follow the open book policy. If you can’t defend it, it must be wrong. If it is wrong, then make it right. The workers will understand and they will work with you, if you give them a chance. 178 Pride In Performance Letters from Customers We get many nice letters from customers. Usually four or five nice letters each week. We get some crank letters too. Usually the crank letters go something like this; I bought this set of tires from you three years ago. I only had 52,000 miles on them and one blew out. The man at X store refused to adjust it. You say on TV, “‘If we can’t guarantee it, we won’t sell it.’” How come you don’t live up to your word? I answer the nice letters petonall: I turn over the crank letters to Jerry Harper. I received this letter today and I like the remarks abot our TV advertising. TV is a powerful box. I walk down the streets of Portland or Seattle and people recognize me and stop to talk. Talk is something I always like to do. Below is a copy of the letter received today. Les Schwab P. O. Box 667 Prineville, OR 97754 Dear Les: I suppose you must receive many complimentary letters con- cerning your superb products and service. But, I would like to offer a little recognition for the excellence of your TV commercials. I’ve always admired the straightforward, honest and sincere manner in which you relate the advantages of doing business with your establishment. These messages have always left me with confidence and reliability — refreshingly unlike the hullabaloo so prevalent these days. I first dealt with Les Schwab Tire Centers while stationed with the Air Force at Klamath Falls, Oregon, 1966. Ever since then, we 've driven on nothing but your tires. For the past nine years I’ve worked as the Purchasing Manager Keep It Going! 179 for a manufacturing company here in Spokane. Your local store at East 6320 Alki has serviced our small fleet of vehicles for several years. The long-lasting business relationship fostered by your employees speaks for itself. In this regard, Mike Messinger of that store should be acknowledged for his outstanding service. If he worked for me, I'd do one thing, promote him. Again, from a consumer's viewpoint, let me suggest adherence to your fine, direct approach to advertising. We like it. Sincerely, Karl H. Garlock Poor George Story I am very fond of our customers, however, I learned early in my business life that you can’t let your customers run your business. I have a ‘‘Poor George’’ story that I’ve used for many years, especially with store managers who show a poor profit, and weak management. It goes like this: George was in the tire business. he was a very likeable, hard working man, nice to everyone. John, the trucker came in and said, ‘‘George, I need four tires for my pickup .. . how much?”’ George looks at the price sheet and said, ‘‘The tires are $60.00. Do you want them balanced?”’ John said, ‘‘Of course I want them balanced.’’ So George writes out... AGITES 1D SO0.00 Bre EOE 4 wheel balance @ $5.00 Total $240.00 20.00 $260.00 John says, ‘‘My God, that’s too much.’’ George gets nervous, thinking, I would hate to lose the sale, business hasn’t been very good. And then says, ‘‘John, I’ll throw in the wheel balance.” George has now given in, let it be known that the price is vari- Pride In Performance 180 able. John then says, ‘‘Make it $225.00 and you have a deal.’’ George looks quickly at his cost and notices that he would still have a $33 profit, business hasn’t been good, I want the sale, and says, ‘‘O.K. John, we’ll put them on.” Here is the profit picture on the three ways to handle the sale. The cost is $48.00 per tire, $192 for the four tires. 4 tives @ SO0.00s oo oe ee es 2 $240.00 4 wheel balance @ $5.00 20.00 Total $260.00 Cost 192.00 Profit $ 68.00 A L1FOS2 @60 OU ustiaccacics & Gales ae (free wheel balance) Cost $240.00 Profit $ $ 48.00 COE oe eI ee Sc ET (free wheel balance) Cost $225.00 _ 192.00 Profit $ 33.00 GN] 26.2% 192.00 20.0% 14.7% The cost to run a tire store is 25/26 percent of sales, usually slightly more. So George would have made a small profit on his first price, he’s bound to go broke on the other two prices, in time. So John charges the tires. George is small and doesn’t have a plan to charge interest. So 30 days go by and John gets his bill for $225.00. But he has a lot of bills; payments on his truck, a house payment, another payment on equipment. He thinks, good old George, he won’t mind if I skip him this month. The next month he again gets a bill for the $225.00 and thinks he should at least pay George some of the bill. So he takes him in $50 and acts like he is doing George a big favor. And in four or five months he gets it all paid. After a few years George goes bankrupt. John tells his friends, ‘I sure miss good old George, he was a great guy. I guess he just wasn’t a good businessman.”’ Then he goes to Sears, Wards, or Keep It Going! 181 a chain type store. They quote him the price, they charge him for the wheel balance, and they ask him about credit. If he wants credit, he fills out a bunch of forms, they check his referen ce, they charge him 18 percent interest if he charges it and John doesn’t argue at all, doesn’t say a darn word, doesn’t attempt to - bargain them down to the $225.00. And *‘Poor George”’ is broke. He goes to work for the chain store. He sells tires out of the book, he doesn’t bargain, he charges the customer interest, and he only gives credit to the parties who qualify and who will pay on time. So the moral of the story is, don’t be a ‘‘Poor George.’’ Love your customer, give him top service, give him the best available price the first time and stay: with it, and don’t let your customers run your business. Tire Pricing Policy: Large Accounts I think I was one of the very first, if not the first, tire dealer to print my own price sheets and to stay with one price for everyone. We call them the ‘‘Supermarket Price Sheets.’’ This came along with the idea of the ‘‘Supermarket’’ concept of buying and selling tires. I have never really chased the large commercial account. Every one is after this business. But, the unusual part of it now is that we do have a lot of business with the large accounts. For example, we have most of the Pacific Northwest Telephone business. We have most of the Potlatch Forest in Idaho. We have Boise Cascade in LaGrande and in other places. We get most of Weyerhaeuser in Klamath Falls. We get our share of Willamette Industries and it looks like we are going to get more. We have many, many more of the large customers, and we never do anything to get this business except to offer good service, fair prices, stand behind our tires and help solve their tire problems. It is important for heavy users of tires to work with a ‘‘Tire Professional.’’ The right tire on the right job with instant service when needed. Some of the large tires sell for as much as $10,000. Sometimes a whole operation can be shut down because of a tire failure. We have as much as $35,000 invested in one service truck to service the large tires. We have 182 : Pride In Performance over 300 service trucks, not all, of course, costing $35,000, but 300 or more with compressors, lift gates, and properly equipped trucks to do all types of tire service work including the hard to handle tractor tires, calcium filled that need pumping both ways. And we sell the calcium to fill tractor tires and have trucks equipped with calcium tanks. A large tractor tire, filled with water and calcium weighs a bundle. You better have the proper equipment, or you better leave them alone. Our store people do not buy a lot of dinners, and they don’t booze it up with our large accounts. Times have changed anyway, this doesn’t have to be done anymore . . . and I'm glad. I’ve always said that when a Weyerhaeuser truck pulls in, it costs just as much to jack up the truck, fix the flat, put it back on as it does a ranch truck. Our men don’t take a lesser wage, the tires are just as hard to work on, so the price should be the same to everyone. Yes, on large accounts, who have their own tire service men, we do sell for less . . . we can afford to, but we are realistic. It’s all just plain common sense. L. S. Credit Plan Another program created by us was the L. S. Credit Plan. I always wanted to do credit sales, and I always have. But after a few years, I had three different accounts receivable books. I had the open account in which the customer was supposed to pay in 30 days, but often made his own terms. I had the GTAC (General Tire Acceptance Corporation) plan where we made a sale into a contract, and I had started the Add On plan. One morning I woke up and said that I was going to merge all three plans into one plan and call it the L. S. Credit Plan. Under this plan every account was really an open account, but if they didn’t pay in 30 days we charged 1-1/2 percent interest on the balance. So we printed up our forms and put the plan in. It made many of my old time customers mad, and often at first I would write off some of the interest when they paid. In starting a new store there wasn’t any problem because we would explain and start every account Keep It Going! 183 under the L. S. Credit Plan. The plan worked great, we now had just one accounts receivable book. We were years ahead with the L. S. Credit Plan. This was five or six years ahead of the bank cards, Sears, Wards, Penney’s and others. Today, just about 100 percent of credit is done - exactly the way the L. S. Credit Plan works. We started this in 1955, years and years ahead of them. Early Year Customers As I think back over the many years I think the first six years I was in business were probably the most rewarding. I knew all of my customers, we had fun. Customers who had moved away would often come back, usually to visit friends, but would buy tires from me. They often said, “‘I’ve driven on smooth tires for a couple of months knowing I was going to visit Prineville, and I wanted to buy tires from you.’’ They were great people, I never hesitated to give them credit even though they lived far off. As I got larger, more and more days would be spent solving disagreeable problems. . . with employees, and with customers. The larger you get, the more problems you have and you lose the personal touch with the old time customers. Usually the problems you must solve were not my problems, they were problems created by new employees, etc. I didn’t mind solving my problems, it is harder to solve other people’s problems. | missed the personal relationship with my customers. I still miss ity I had some very unusual customers in my early days. One old time ranch customer bought one hundred percent of his tires from me. He never questioned the price, he wasn’t an adjustment hound, he was a good customer . . . except he never paid for his tires on time, not even close to being on time. About twice a year, when he sold some livestock, he would meet me on the street and say, ‘I better wipe out that tire bill out at your place.’’ He would give me a blank, signed check . . . never filled in the amount, he left that up to me. It was a waste of time, 184 Pride In Performance stamps and money to send him a statement. I never lost a dime on him, I never asked him to pay, I wanted his tire business. I had another old time rancher who wouldn’t pay for the tires he bought until he needed more tires. Then he would come in and say, ‘‘I better pay for those tires I bought several months ago, I need more tires,’’ and he would pay, buy some more tires, and we would never see him again until he needed more tires. It was useless to send him a bill. I had another rancher who, after I moved out of the store to a central office, always came to the main office about twice a year to pay his bill personally to me. We had started charging interest by this time. He would have his bill, and tell me... “‘I’ll be damned if I’ll pay you interest.’’ And he would point to the last interest charge. I would credit off the last interest charge and he would be happy. I guess he didn’t notice all the interest charges for the many months before. I had a lot of this type of customer. They were great people, they were a lot of fun, and they were exceptionally loyal. I appreciated and wanted their business. There aren’t many of these old characters left. I miss them. This is the computer age and it is much harder to do business on such a personal basis . . . and that’s sad. But if we hadn’t changed with the times, if we hadn’t put in, computers, if we didn’t start to charge interest for over 30 days, then we too would probably be a *‘Poor George’’ today. Vindictive — Right or Wrong? I’ve never been a vindictive person. I would never hold a grudge. I’ve often wondered if this was a sign of weakness, or of strength. And, now, in later life I’ve decided that it leans to the latter, as so often temporary enemies of 20 years ago, are my best boosters today. Companies that I dropped, mad at the time, are now often good boosters of our company, and we have put together some excellent deals for the Les Schwab Company. I think it is wise to keep in the. back of your mind a memory of a wrong done, but don’t dwell on it. It is best to just promise yourself that some day I am going to win, and get your satisfac- Keep It Going! 185 tion that way, instead of being nasty and hateful, as you only hurt yourself. I think a good example is Firestone. I sold their tires 30 years ago. I dropped them. I thought they treated their dealers wrong, and I didn’t think they did right by me. Since then they have -gone downhill, our company has made tremendous progress, and that in itself is satisfaction. By leaving the door open we have been able to buy some hard to get ‘‘Off Road’’ type tires. Firestone makes an excellent ‘‘Loader Dozer’’ tire that is used in logging. We also made some excellent buys by taking five or six thousand at a time of certain size small truck radial tires. But the big break came this last summer, 1985, when Firestone approached us on taking 150,000 surplus tires. It was the Firestone Supreme tire that comes on new cars. They thought they were going to have a strike and also the new car sales were off. They didn’t have the strike, and in the settlement they agreed not to shut down to get rid of all the tires. So they wanted to dump them and they wanted to do it in one area only. So who could handle 150,000 tires (that is 120 boxcars of tires?) The Les Schwab Company selling the Supermarket way is one of the very few who could handle such a deal. We also are one of the few who could write the check for this amount. With one fill-in order, the deal was over $4,000,000. It helped our volume in 1985, it helped make the year a successful one. If I had been a vindictive person, this opportunity would never have been presented to my company. Day in the Desert — Shorty Severance At times it would seem that pressure would get to me so bad that I thought I would blow my stack. It seemed, that with worlds of work to do, someone would be at my elbow all day. Many times a representative of some rubber company, other times my own people attempting to work out a problem. Since my roots were in the desert area, the area between called the High Desert, Bend and Burns is I would sometimes just drive out that way. I would ride around, sometimes take a few pictures, some- 186 Pride In Performance times drink a few beers, I just wanted to relax . . . I had to relax, I’d had it. One day, about the last of March, I thought I would see the Lost Forest area, about 20 miles southeast of Brothers. I got into mud, slid off the road. It was built up road in that area, about two feet. I had my El Camino. I thought, My God, I’m going to have to walk 19 miles back to the Bend-Burns highway. I gave the El Camino the gun, got it going, got up speed of maybe ten miles per hour, and got back on the road. I immediately turned around at the first chance and started back to the highway. When I got to the highway I thought I better knock off some of the mud, from me and from the car. Guess what, a car stopped. It was George Hesdorfer, the Armstrong salesman. He wanted to talk tires. Even way out in the Desert I couldn’t get away from tires. Just two days later I stopped on my way home at Shorty Severance’s house. This was nearly a habit, he loved to have me stop. He always said, mix yourself a drink, let’s visit. I told him about my trip to the Lost Forest. He laughed and said, ‘‘Gee I wish I could have been with you, we’ve done this so often.’’ I left, went home, and within 15 minutes, Eva Severance called me and said, “‘Shorty died in the chair, within minutes after you left.’’ I was the last man to talk to him. I loved this man like a father. He was such a great friend to me. Jack Keith and Lyle School Letters Another letter just came in, we get so many... Dear Mr. Schwab: This is a long overdue letter to tell you how much we have enjoyed doing business with your firm. Not only do we buy tires from your store, but several of our children do also. We also avail ourselves of your other services such as batteries and brake jobs. When you say, ‘‘We guarantee our work and products’’ you really mean it. Your personnel are tops as it is always a pleasure to work with them. I cannot say enough about their attitude, politeness, and their cheerfulness. We do most of our business at Keep It Going! 187 the West 11th St. location in Eugene. Don and his crew are tops and always conduct themselves in a very professional manner. You should be very proud of them. We've tried other tire companies when they were running a sale. They can’t hold a candle in service and courtesy to your _employees. You may rest assured that we will be customers of yours for a long time. Other companies can take lessons by watching how your people conduct themselves. | I remain very, Sincerely yours, Jack E. Keith Mr. Keith said other people could take a lesson by watching our employees. A competitor did just that at this same store. He had his employees park for one hour in front of our store and told them to watch how our people worked, and to go back to the job and do the same. I doubt if it did much good, it takes more than just watching. And here’s another letter that just came in. The letterhead had, ““Lyle Public Schools’’. Dear Mr. Schwab: Yesterday my Diversified Occupations class and myself had a real treat. One of my former students, Jeff Clark, who is now working for your Woodburn store was at school visiting with some of the teachers he had had. In the course of our conversation, he mentioned where he was working sol asked him to come talk to the class about his job. He did a terrific presentation! He spoke so positively about the company and his job that we are all interested in working for the Schwab stores. That kind of career explanation is not only good for the class, but good for your company. Iam really proud of Jeff. It makes me feel good to see a former student who really likes what he does, likes the company he works for, and makes goals to better himself in the organization. Sincerely, Mrs. Joan Titus 188 | Pride In Performance Jeff has been with our company around three years and should have a big future. We need more teachers like Mrs. Titus. Advertising Theories A mistake a lot of businessmen make is to shotgun their advertising. By this I mean they spend a few dollars on newspaper ads, a few dollars on programs, a few dollars here and a few dollars there. You can’t be effective that way. Whatever you do, you must do it with gusto, you must do it in volume. For example, radio. One ad isn’t worth a darn, but ten ads per day, for 30 days, get attention. It is a case of repeat, repeat, repeat. You have to learn to say no to all the gimmick advertising, it is never worth anything anyway. I learned early how to say no. An ad salesman would call on me, I would be busy. They asked for ten minutes, I would listen and say no, I didn’t want it. Invariably they would in some way ask, why? My answer was that I had a policy that I didn’t explain why I didn’t spend my money. And I would not attempt to counteract the question, why? This always left them speechless. I thanked them and went back to work. A Letter from a Store Manager 1982 A letter from a store manager in February, 1982. “A few days ago I received my January, 1982 statement. It shows that I now have my store paid off, and a credit to my account. It is a great feeling of accomplishment. I would like to say ‘Thank You’ for the opportunity to be a successful person. ‘Only one thing could be more gratifying, and that would be to leave my MARK on as many successful people as you.”’ So our store managers are maturing, they have learned Schwabism and it is rewarding to me to see that now other people want to ‘‘Grow People’’ and that is what it is all about. Keep It Going! 189. Profit Comparison Report Each month we put out a ‘‘PROFIT COMPARISON REPORT.”’ This shows the net profit of each store. The store making the best net profit is at the top of the list, and so on down to the store showing the least percentage net profit. This gives the very smallest store the opportunity to be at the top. All he has to do is show the best percentage net profit. We also have running lines showing, “‘Excellent Management’’, ‘‘Good Management’’, ‘‘Fair Management’’, and “‘Needs Improvement.’’ Excellent management is 12 percent and better, good management is 10 and 11 percent, fair management is 8 and 9 percent and needs improvement is 7 percent and lower. The percentage figures come before the employee benefits such as the Retirement Trust, cash bonuses, assistant manager and manager profit share contracts, and before taxes. There is a tremendous interest in this report. But is the best manager always the one at the top, or near the top? Not always, by any means, and I stress this in my bulletins and in my talks to different management and employee groups. It is possible that the very best management is the top man, but he could be about in the middle, too. Here is an example of three stores. Let’s say that they are all in exactly the same sized city, and the same type of city. Pick out the best management, Yearly Sales and the reasons why. $1,000,000 $1,250,000 $1,400,000 12% 10% 8% 125,000 §$ 112,000 Percentage Net Profit Dollar Net $ 120,000 $ In our report the first one would be in excellent management, the second one would be in good management, and the third one would be in fair management. Who is the best manager? The one in the middle is. Why? 190 Pride In Performance Because he made the most dollar profit from his city. The first one maybe was too tight with his customer. Probably didn’t have enough sales prices to get the extra volume. Sometimes you have to allow an extra couple of dollars trade-in to make the sale, which he probably never did and let some sales go to competition. The second one, which I consider the best, made the most dollar profit. He also did $250,000 more in sales than the first manager. This means that he took $250,000 in sales away from competition, which is good insurance for the future. The third manager probably gave away too much to get the extra $150,000 in sales. It would probably have been best if he had let competition have this business, or at least part of it. If he could have netted 9 percent, he would be, in my mind, the best manager as he would then have netted $126,000 and would have made the most dollar net out of his city. In my mind the best manager is the one who makes the most dollars from his city. If you are too conservative, you usually show a good profit (providing you exceed X dollars) but you’ve lost too many sales. If you sacrifice too much profit, just to do a lot of volume, then you are on the other end of this comparison. The best place to be, in this comparison, is somewhere in the middle or high middle. This same theory will work in any business, with allowances for the differences in gross and net profits in various businesses. A supermarket, or a car agency, usually shows a 4 percent to 8 percent before tax profit, a fast food restaurant would show an 18 percent to 22 percent profit before taxes. X Dollar Story I used the expression ‘‘X’’ dollars above. It is another story that I have used for over 30 years. I tell the managers that the very first thing we must do in a new store is to get to X dollars in sales. That figure is the minimum amount that is needed to gross enough profit to pay overhead. And that is the big reason you shouldn’t build a $400,000 store in a town that probably would Keep It Going! 191 only do $60,000 per month in sales. You should have a $200,000 building. - Next you need to gross a certain percent. Then you must hold the operating cost down to a certain percent. All this equals net profit. If you pass X dollars, and if you don’t make a profit, then one of two things is wrong. Either someone is stealing, or you (the manager) are doing a poor job of management. And in either case it is grounds to discharge management. Here’s an example with a $60,000 store. ... Sales | Cost of Goods $60,000 37,800 100% 63% Gross Profit Operating Cost 22,200 15,600 37% 26% Net Profit 6,600 11% So if you make or exceed the X dollar $60,000 figure the above should be the result. If that isn’t the result, then one of the two things mentioned is happening. No one has ever proven this wrong. It takes, besides property, about 2-1/2 times monthly sales of someone’s money to run the business, either your money or borrowed money. So with $60,000 in sales, it takes $150,000 of someone’s money to run this business. A mistake that a new businessman makes so often is this. . . . His business grows to $100,000 in sales. Now he needs $250,000 to run his business. He can’t borrow this much, the bank won’t go that much. The businessman seldom ever sees the obvious thing that he should do. What he should do is to drop off $40,000 of his business, get back to where he can handle it, and then grow slowly and wait for the money to catch up. Often times a new businesssman will go broke because he can’t borrow the amount needed, even though he is making a good profit. I’ve often read that 80 percent of all businesses that go broke, go broke the first couple of years of their operation. 192 Pride In Performance Les Schwab Trust Bulletins I am 100 percent convinced that every company should have a ‘Profit Sharing Retirement Trust’’ for their employees. It is the greatest tax savings plan going, especially if you consider your employees as part of the family . . . and if you don’t, you should. I’ve talked about our Trust a lot, it is impossible to talk about it too much. I put out a series of seven bulletins to our employees a few years back. I won’t attempt to print them in Sere) but will hit the highlights. No. 1. I talked about the past and present of putting the employee money into commercial property, to protect them against inflation, most of it in our company’s property. And I talked about the fairness of the arrangement as we don't charge any cost of buying the land, or building the buildings against the Trust. The company pays it all. It must be fair, if a company isn’t fair the government will be on you. . . and they should be. No. 2. I went into more detail regarding commercial property. Here is one paragraph from the bulletin. ‘If this is going to work, it is upon your back as employees of this company to do two things. That is to help develop enough future store managers and assistant managers to run these stores. Second to help business to be good enough so the 3 percent sales factor will cover the cost. (In our company, it takes almost 3 percent of sales to cover our Trust payment each year.) So don’t cry to me if this fails, my job is to provide the opportunity, your job is to make it work, I only wish I had this opportunity when I was your age. My pleasure is and will be in seeing this work out for you. I will be proud. No. 3. Here's the first paragraph of the No. 3 bulletin regarding our Trust. . . . ‘‘Ask yourself, or ask anyone, this question. If you could buy into a company that paid no income tax, that 100 percent of the operating expenses were paid by A]JUDJSUOD PYOA AY) AIAO UNA S14] AY1] SYINA] UBaIYS1A eef t ii 193 Keep It Going! ° Pride In Performance 194 someone else, and that specialized in building commercial buildings, that even the costs of finding, planning, and buying these lots were paid for by someone else, then wouldn't you have one fine investment? People in the money field would break down our doors buying stock in this type of company. What am I talking about? I am talking about the Les Schwab Profit Sharing Retirement Trust. Let me elaborate... and then I filled out the page explaining the above. No. 4. if What is the Les Schwab Profit Sharing Retirement Trust? 2, Why was it formed? ei How is it decided as to how much money will go into the Trust each year? . Does the company have to pay in the money? If the company goes broke, what happens to the Trust? If the company is sold, what happens to the Trust? Can the company ever get back any money put into the Trust? 8. Can I lose my money? I'll take a short cut with the answers to No. 4 Bulletin. 16 It is a profit sharing plan formed under and adhering to government regulations. The whole idea is to share profits with employees. Money beyond a certain point doesn’t mean anything. It is fun to share. (I’ve always said that you can only eat one meal at a time, drive one car at a time, live in one home at a time and live with one woman at a time), ‘I’ve lived with the same one nearly 50 years.’’ Beyond Keep It Going! 195 that, what is there? So why not share? To share profits. It is up to the main board of directors. Our unwritten policy is to share 15 percent. So far that has always covered 15 percent of everyone's salary. Should it not, then the employee might only have 12 percent, 8 percent, or 6 percent or a lesser amount credited to his account. . No, the company can take a complete skip on any year, or they can pay less. I think it is important though to have a policy and stick with it. The Trust is completely outside of the company. If the company went out of business, the Trust is still all there, but the company of course would not pay any more money into it. If the company is sold, the Trust is still there. It would be up to the new owners as to their wishes about the continuation. But it would be very foolish if they didn't keep it going, even if ona lesser basis such as 10 percent, or even 5 percent of wages. The company can never under any circumstances get one penny back from the Trust. When any employee forfeits part or all of his money, this money is distributed to the remaining people in the Trust. You forfeit your money during the first five years ifyou are dishonest, or ifyou work for a competitor. You can lose part of it up to fifteen years. You are vested at the rate of 10 percent per year for the first ten years. So if you resigned, or were discharged in five years, you would receive 50 percent of your money. The balance would be distributed to the other employees. No. 5 bulletin lists all the property owned by the Trust. This ts Pride In Performance 196 available to any employee who wishes it. No. 6 talks about the three way partnership . . . Stockholders, Employees and the operating company . . . and the Trust. No. 7... the final bulletin. ‘‘T am convinced that there are two things certain to happen. Along with the old cliche, death and taxes, I’m convinced that: I. We will have inflation. 2. That Socialism is already here and that people will vote in more. I said this might change with Reagan, and with the voting out of Senators Church, McGovern, Ullman and others. It has calmed down a lot, inflation today is running about 4 percent. (There are more details and the employees should ask for them. I hope there is something in this that might encourage other businessmen to form a Trust for their employees.) In November Christmas. ... of 1979, I sent out a bulletin regarding I. CHRISTMAS PRESENTS TO THE MANAGER from employees. We know you love him, but stop it. I stopped the employees from buying me a Christmas present, I want the manager to stop it too. . STORE CHRISTMAS PARTIES . . . I prefer you not have them. If so, always, and I do mean always, include the wives. I prefer that you always put your family first at Christmas. . CHRISTMAS ADS... Never buy the ‘‘Merry Christmas’’ ads in the newspaper. The only person you are wishing a Merry Christmas to is the publisher of the newspaper. Send him a Christmas card. - REMEMBER, we have a policy. . . no drinking on company property, at Christmas time or any other time. Keep It Going! 197 Rudy Contreras In June of 1970, a hard working young man had quit our company and had returned to his home in Sacramento. Our manager had insulted his girl friend (his wife of many years now) at a store company picnic. I’ve never been ‘too fond of company picnics, but we still have them. Something bugged this young man, he didn’t want to be a loser. He turned around and drove back to Prineville. He was a good friend of my son, Harlan. In fact, as a boy of about 12, he mowed the lawn for Harlan. They talked and Harlan brought him to my office. I urged him to go back to The Dalles and see it through. In just a short time we removed the manager. The tenacity of this young man over the years has been something to behold. He has worked, he has dug and grubbed, and worked and worked, and today he is one of our most successful store managers .. . Mr. Rudy Contreras, the very successful store manager of the West Vancouver, Washington store. He pioneered this store from the ground up. Our company is made up of men with perseverance and tenacity, and this story fits dozens of men, in fact hundreds of them. So many men have been so heartbroken at times, but they saw it through. These men have given me the strength to see my end through. How could I ever sell our company and let these men down? IfIbelieve what I say, then I must do what I believe. This company will never be sold, I hope. Our Company 1985 Our company today, 1985, does the best job ever of building people. People aren’t natural born leaders. Leadership is learned and I can’t explain fully how it is learned. The ability to lead and inspire others is acquired through the experiences of one’s every day life. The ultimate nature and quality of that leadership 198 Pride In Performance reflects the character and personality of each individual. I ask our people to reach for goals that they think are way beyond what they might think possible. So many have come such a long way. So many have such a great future ahead of them. That’s why it has been possible for them to help others. I ask them to do it not only for the company, and for them, but for the fun of it, for the complete enjoyment received from the attainment of helping others reach their goals. Our company has a way to help people over-achieve. To me an important element in establishing a happy, prosperous atmosphere is our insistence on open, free, and honest communications in our business meetings. We owe each other our honest opinions at all times. No one wants to follow a weak leader. We build strong leaders with open and honest communications. There are many ways to do business, and there are many ways to be successful in business. This is especially true if money is the only goal. There’s the mass merchandise way of selling at low prices, really low paid employees, big inventories, no service, check it out at the check stand and good bye. If you have any problems with what you buy, God help you! Getting any help is a dream. But this way is becoming more popular nowadays and I will admit that prices are somewhat lower, due mainly to the volume buying that the large chain stores have available to them. Also the selection is better and the carnival atmosphere appeals to people, especially families when they shop together. The large shopping centers have taken a lot away from the small town business areas. In our small town, Prineville, during Christmas season you see families leave by large numbers, heading for Bend and the shopping centers. On the other end, some businesses do fine with high prices, and smother you with service. I never wanted to be known as the high price place, and neither did I want to be known as the cheap place without good service. I wanted to be in the middle. I found out early in business life that there was power in volume buying. I think this was one of the main reasons I had such a desire to get big. I know today, right or wrong, that our company can buy tires for much less than the small independent dealers. Many times we could sell at their cost and have the profit we needed. This was especially true when our competition was buying from the Keep It Going! 199 major rubber companies. Today we still have a buying edge, but not as much. ' [sometimes think that our company gives away too much free Service, and often goes overboard in making adjustments on tires. When a customer buys a tire from us, and pays for a wheel - balance, his original cost is his final cost until this tire is worn out. We rotate the customer tires free for even wear, we fix his flats free (on the tires we sell him), and we rebalance his tires free if needed. We fix all flats free for senior citizens, even on tires we don’t sell. If you add up the total cost of all this it would be several million dollars every year. We could sell tires for a lot less if we charged for all the service. We guarantee all car tires against road hazard and we stand the expense of this ourselves as there aren’t many, if any, rubber companies who give the road hazard guarantee. That’s a foolish guarantee in most ways because if you bought a new suit, tore the pocket on a nail, you wouldn’t expect the store to give you a new suit, but we give you a free tire. I get many letters from customers in which they make statements something like . . . ‘J went into your store thinking I was going to have a fight over a tire that failed. The young man was so nice that I felt ashamed of myself: He adjusted the tire so cheerfully, I promise hereafter I'll always buy my tires from Les Schwab.’’ We do make a lot of loyal customers, so maybe the policy pays off. I always hated to hassle with a customer and I suppose this was the main reason for the generous policies. It is better to charge a dollar or two more at the time of the sale, and average it out... something like selling an insurance policy with the sale. Cost of Discounting I’ve used charts, the blackboard and other aids to explain to our store manager and Member Dealers the cost of discounting in doing business. I have an old story which was taken from an automotive magazine in 1965. I send this story out about once a year as this story is important to the small businessman . . . who Pride In Performance 200 doesn’t want to be a ‘‘Poor George.”’ I’ll shorten it here but I think it’s important because if you are going to sell at low margins, you’ve got to cut out the frills and extra free services or you won’t be around to give any service when the customer returns. You’ll be in bankruptcy court. Operating % Sales Cost Gross Cost Op. Cost Net Net % $100,000 $60,000 $40,000 $25,000 25% $15,000 15% $60,000 $35,000 $25,000 26.32% $10,000 10.5% Discount 5% $ 95,000 So if you discount 5 percent you have to do $42,857 more dollar sales to net $15,000. You would need $142,857 in sales to net the $15,000. There isn’t any way this extra discount would increase sales that much. Discount 10% $ 90,000 Now $60,000 you have $30,000 $25,000 to sell $172,727 27.78% more, $5,000 or $272,727, 5.5% to net $15,000. That is impossible. In my mind, if you discounted all merchandise 5 percent, you would probably only make up the difference between the $95,000 and $100,000 at best. The same with a 10 percent discount... you probably would only make up the $10,000 difference bringing your sales back up to the $100,000. No one has ever proven these figures wrong. Every business has a base operating cost, percentage-wise. A good businessman will soon know this figure by heart. And your average gross must exceed this figure, or you will become another ‘‘Poor George.”’ Keep It Going! 201 Tire Quality and Dealer Quality All tires have approximately the same amount of tread. If a company is going to make a lower priced ‘‘Cheaper’’ tire, the savings come out of the area between the bottom of the tread and the liner. Where is the safety built into a tire? Exactly in this area. If cost is taken out of building the tire, they will build a cheaper sidewall. Lower priced tires will often have less bead wires, an important part of tire safety. All people, especially family people, are safety conscious. All people know the danger of flat tires, and blown out tires. The different construction of tires should be explained by ‘‘Tire Professionals.’’ More and more people buy tires, not because of brand name, but because they have faith in the dealer they want to do business with. One time last summer, 1985, a man came into the Bend store, he said, ‘‘I think I need four tires.’’ Our man said, ‘“We have a real special on Firestone tires.’’ The customer said, “*I don’t want Firestone tires, I want Les Schwab tires.’’ The replacement tire and automobile markets are also markets in which consumers place a very high value on the experience they have had with products and services they have purchased previously. People have an entirely different set of priorities in buying tires over beer, cigarettes, or like items. They are far more concerned with the reputation of the retail outlet at which they are doing business than with the brand name of the tires purchased. At my winter retirement home, people constantly ask me, ‘‘What is the best tire to buy?’’ My answer, ““There are many good tires today. Be sure to buy from someone you trust.”’ Their answer invariably is, ‘Who the hell is that?’’ I wish I had some stores in this area, the Palm Springs area. The years between 1970 and 1985 were extremely important years. We evidently did things right as we came out on top. We recognized and took advantage of the major rubber companies’ failing dealer organization. We saw the radial tire coming on, and we were leaders in this area. We saw foreign tires entering the market, and we led the way. We were lucky. We were and 202 Pride In Performance are a strong company. We were, and are, an extremely independent company . . . and best of all we have great employees. America has many problems. The tire business has many problems. Problems create opportunity. The solution to a problem is . . . common sense, open communication, complete honesty, and the desire to help your fellow man become a successful person. Our company is indebted to so many people in America and to so many people within our company. They have given us the opportunity and foundation that we have today. It is good to pause and think about how much we’ve all been given. We must never take a free ride. We must not squander or surrender our inheritance. There’s so much opportunity awaiting us. The success of any company is in direct proportion to the ability and motivation of its people, and that fits anything. The success of any school, community, country, business, church, family . . . anything, is in direct proportion to the ability and motivation of its people. In my mind there’s absolutely no substitute for the good, old fashioned American competitive drive. The desire to do the job better, the desire to better yourself... to get ahead, to do more for your family, to be successful. Color it any way you wish, I believe that nothing will ever take the place of initiative, incentive, inspiration and perspiration. I am quick to admit that business people make many mistakes. The largest being greed, the lack of foresight to believe in ‘‘unselfish for good reasons,’’ the lack of desire to see that all employees are successful employees. I believe the tide is turning for the good in America. I believe that young people can play a big part in this change for the good. I believe that if more people cared, and if more people shared, and if more people used ‘‘common sense’’, then we could all help create an even better company and an even better America. It is so great to see the great vibrations going through our company. Everyone is so anxious to develop and to grow and to help other people to develop and grow. And as great as we might think we are, we are just touching the possibilities of what we can be. Keep It Going! 203 News Media — Politicians — Social Security In my own way of looking at things, I think it is a shame that the news is presented to us in the form that it is. I also think it is such a shame that our politicians have so little courage. Newspapers have been taken over by absentee ownership and the bottom line is about all the owners look at. The three major TV networks all lean to the liberal side. You can switch from one newscast to another and usually always the news is exactly the same, and presented in the same order. Both have almost a monopoly in their areas so it’s hard for anyone to do much about it: The politicians, especially the liberal ones, scream ‘“‘tax the rich and everything will be all right.’’ Down in their hearts, (if they have one), they know this isn’t true, but it gets votes. Peter Grace, in his Grace Commission report states, ‘‘If the government confiscated all remaining income above $35,000 a year, it would run the government for only 41 days.’’ I have seen figures like this many times before and all of them are about the same. Mr. Grace also noted that 90 percent of all taxable income is generated from the $35,000 and below income brackets. If 100 percent of all corporate income was taken, I’ve seen figures that it would run the government less than 75 days. The national average net income of all U. S. corporations is 5 percent of sales. The California sales tax is 6 percent, Washington is now 7 percent. Our company makes 4 percent net. So who is going to pay the additional taxes in the future? It is the young working people of our country who will have to carry the burden. At $30,000 per year income for a family, $4,200 is paid into Social Security... $2,100 by the employee and $2,100 by the employer. Since Social Security has been changed so much (due to politicians fooling with it to get votes) | think it should be changed even more now. For example, why not drop off entirely people in the higher income brackets. This might help the young people who have to pay and make the program more sound for the needy older people. 204 Pride In Performance It is not the people who have paid into Social Security their whole life who are getting more than their share. It is the sideline deals, put in again by the politicians, that are hurting the total program. My understanding is that a person can pay into Social Security a very small amount, and then draw out the minimum payment each month. Often times they draw out each month as much as they put in during their lifetime. This has worked great for retired government employees, as most retire young and have time to work on the outside long enough to qualify for Social Security. My two grandchildren, upon the death of my son, drew $499 each or $998 together. This, in my mind, was entirely too much, as each was drawing more than some of the older people who had paid into the plan their whole life. I better get off this. Iam not complaining for my sake. I work every day with young people and they are great young people. They deserve a good future and I want to do what little I can do to see that they get a chance for that future. The big taxes of the future will be taken from the families in the $15,000 to $35,000 range. If they only knew this, they would vote differently, I’m sure. But how can we get the news to them with the media the way it is today? W. Edwards Deming W. Edwards Deming is the man who taught the Japanese about quality. He is 84 years old now. He is a hero in Japan. The Deming Award is the highest award a businessman or industrialist can be given in Japan. He believes that quality and the customer come first. He says that American factories should pay more attention to the customer and less attention to bonuses. Deming believes that the sins of American industry are of its own making, that the Japanese challenge may offer American business the last chance to save itself by waking it up. In his four day seminars, Deming takes many pot shots at American management with statements like . . . ‘‘The one thing we must never export is American management, at least to Keep It Going! 205 friendly countries.’’ He thinks time is running out, not so much on him but on America if it does not change its ways. ' Deming is particularly critical of the modern phenomenon of the executive who comes right out of business school with experience in finance but none in the product end, and who becomes _ an all purpose interchangeable manager, able to go from a sausage factory one day to the newspaper company on the next and an industrial company on the third. He asks, ‘‘Are they in business just for maximum profit in the shortest possible span? Do they think for the long term relationship between the company, customers and employees? Who can put a price on a satisfied customer?‘‘ Deming has been working with Ford and General Motors . . . and I‘hope they listen. I never gave it much thought before but I see a lot of Deming’s thinking in our company. We know that our stores that sell the tires must be successful, and they are more important by far than the main office. We teach our managers to believe in making the men under them successful. We saw the collapse of the major rubber companies, which opened the door for us. If America is going to continue to be No. 1, America needs more good businessmen, fewer bureaucrats who just get in the way, fewer MBA’s who are in over their heads. How can we accomplish this? To start with the media and the public should take a different attitude toward business. Profit has become almost a dirty word, and any decent profit is usually referred to as ‘‘Excess Profits’’ when mentioned. To build a building, on your own land, requires months and months of time in order to get the proper permits. If your land becomes zoned wrong by someone drawing a line in the planning office, your land becomes *‘No Man’s Land’’ and it is useless. The businessman, too, must learn to be more concerned about his customers and employees. Business, America’s Backbone Business is still the backbone of America. The gross profits of business start everything going. All taxes, all wages, all new factories, all charity . . everything starts with the gross profits 206 Pride In Performance of business. Corporations have their faults but what is the alternative? In spite of their faults, I’ll take the American large corporation over the other any day. If we get to the point that our thoughts run to such things as (1) nice working hours; (2) the vacation home, boat, or camper; (3) personal thoughts with personal greed . . . forget the main reason we are a company, then this company is going to fall apart. A successful businessman is seldom a benevolent man. He should always be a fair and honest man. I do not regard myself as being a benevolent man. I do think of myself as being fair and honest. I am quite stubborn. I believe strongly in the ways a business should be run. I would like to review some of these thoughts, and I hope the future management of this company will follow the policies I outline: I. I believe that a company should share with those who help the company be successful. 2. I believe in fairness to all employees, with complete honesty with all employees, and I believe in the open book policy which we follow. 3. As cold and callous as it may seem, I believe that management and employees must produce or they must be replaced. Ten years of service does not guarantee a lifetime Job. The problem with being successful, is that you must be successful each day. You can’t live on yesterday's record. 4. I do not believe in free handouts. 5. I do believe in our Trust fund retirement plan, our life insurance, medical, dental, our bonus program and in general good programs for good, deserving people. 6. I believe in a fair wage. To whom much is given, much will be required. Keep It Going! 207 In my talks to the employees at the 1983 meetings, I asked some questions that I think are worth repeating. I was wondering as to why I was still in business, and what were the objectives of our company. Just what are, and what should be our future objectives... . I. Do we want to make money for the Schwab family?If that is the main objective, the answer is absolutely would be greedy on the family’s part. not. That 2. Do we want to take a larger percent of our profit for bonuses, salaries, benefits? And the answer is absolutely not. If the bonuses should become larger within our present framework of our present programs, that is okay. We already have great programs. If we took all of our profits and divided it between the stockholders and the employees, that would be wrong and that would be selfish and greedy. Why? Because it takes opportunity away from the great young people in our company to advance their careers. We need money to expand. Future Objectives SO WHAT They are: ARE OUR OBJECTIVES FOR THE FUTURE? I. To expand our business mostly for the purpose of creating opportunity for our young people. 2. To keep our present stores successful in order to make a profit, and in order to have money to expand our programs. Along this line, our goals are: a. To make a reasonable return on investment, not for the sake of our stockholders alone, but to get money to use to expand. 208 Pride In Performance b. To continue to buy and build locations which open the door for opportunity. c. To form a development program to help start and find new locations. A program that is possibly different from any other company in America. (Since this time, we have put in the New Store Development Program which is working great.) If our programs are so good, and I’ve bragged about them a lot in this book, then why don’t other companies use them? This is a question I’ve asked myself thousands of times. I don’t really know, but I do know that successful companies and’ successful countries have in some form followed this type of thinking. I’ve been close to two rubber companies in Japan, especially the Toyo Tire Company. I’ve spent time in their country. I do know the thinking of their company and their country’s business outlook follow closely to the thinking of the Les Schwab Company. Over the years I’ve often sat down with other businessmen and explained our programs. They say they want to adopt our thinking, but when I see them a year or so later I find that if they have attempted to use them they usually have taken the guts right out of the basic programs. Others can’t get over the hill of sharing, or of completely opening the books on an open and honest basis. Larger corporations are so bound up with policies, the huge policy book, committees, boards and unions that they are afraid to make a move. I still say we should send the larger rubber companies a Christmas card each year and thank them for their policies, as they have made our success possible. In earlier days, I often had executive people from the rubber companies in my office, often times even the president. I loved to spread out the P&L Statements of one of our stores (always the most successful one) and show them the results. They were always interested in our success and growth. I would kiddingly suggest that they buy the program from me and use it nationwide. I wondered then, and I still wonder yet, why they didn’t take me up on the offer. One day, an executive vice president of Uniroyal gave me the answer. He said that if he took the program, put it in detail, and presented it to his company, this Keep It Going! 209 would happen . . . it would go from one committee to the next, from one executive office to the next, and by the time it came out the other end it would be so chopped up that you wouldn’t recognize it as the same program. He also said, ‘‘If one man ran our company like companies were run by men like Harvey Fire_ Stone of Firestone, Bill O’Neill of General Tire, J. C. Penney of his company, and if this man liked it he would hit his desk and say, ‘I want this program adopted 100 percent, I don’t want any B. S. or backtalk, I want it to go into effect immediately,’ then it could be done. But with corporate bureaucracy the way it is, something like this would just wallow around and die. Each corporate bureaucrat would want to make his mark, and the marks of many would kill it.’’ 1982 Employee Speech Here are a few excerpts from a talk I made to our employees in HOS Desi ‘Tam a believer in capitalism. I think it is the purest and best economic system ever created. I wish more companies would follow our thinking. I see some hope lately that more are trying. Capitalism is good and successful not because it creates personal wealth and prosperity, but because it calls forth, propagates and relies upon the best and most generous of human qualities. The process of investment, investment of your money and company money bears a close relationship to the oldest ritual of gift giving. In order to make a successful gift, the giver must first suppress his own appetites (in other words, save) while at the same time figuring out the desires of the recipient. Money that you have earned has been withheld. Money that I have earned has been withheld. Why? To invest, to create opportunities for more people . . . to further our programs. These gifts are not offered without expectation of a return. The outcome depends upon the voluntary responses of — you — and others to come. . . future people who are being given an opportunity because we did 210 Pride In Performance suppress our appetite, because we did not spend everything we earned, and because we have worked to create opportunity for people. “To the extent that the recipient values these ‘‘gifts’’ more than the givers, to the extent of our ability to create profits, in © this case, to the extent of our motivation . . . this will be the gauge of our future success. ‘‘We must not be motivated by the desire to consume wealth or to indulge our appetites. We must be motivated for the sake of the freedom and power to expand our dedicated company programs. ‘‘We have already established ourselves as the most successful tire company in America. It could be that we are just starting. We have the opportunity to be the movers, the shakers, doers, and givers. We must be obsessed with the idea of a positive vision, a vision that ‘‘WE’’ are going to be the successful ones ... not for greed, but for pride, for opportunity for more people, for the right to hold our heads high, for the right for us and other people... to be successful. “The flood of growth can be comprehended and sustained only by investors (that is us), who have money of our own (your money and the company money), and who can share in and pass on the profits as we gain new knowledge, and new investment skills. I hope all of you people play some part in our growth, in our investment ability. I hope that a few of you will become stars. We need you to continue these programs. We need you to rise up and fulfill our needs... WE NEED LEADERS. “The basics... 30 years... 52 to 82. What a great 30 years. Will it work for the next 30 years? I won’t be here. Are we humble enough, dedicated enough, motivated enough to make these dreams continue to come true? These are the questions that only you can answer. I wish you the best.’’ (end of Les Schwab speech . . . employees . . . 1982) Keep It Going! 211 Keep Decision Making Lower A company starts, it grows, and as it grows, more and more of the decision making moves to the main office. And this is one hell of a big mistake. The decision making should always be made at the lowest possible level. People at the lower end begin to feel like puppets .. . pull a string and they are expected to react. A policy book is started. It gets larger and larger. People become numbers, morale goes down, they join a union, and soon your company is just another big corporation. It is such an easy rut to get into. But how do you stop it? If you have it, how do you change it? The main thing is to never allow it to get started. Give your manager the authority to make his own daily decisions, under certain guidelines of course, but let him run his show. Keep open communications, follow the open book policy. Why have secrets? Sure you can fool your people for a few months, but the truth always comes out anyway. Weigh each directive that comes from the main office. What’s it going to cost? Is the cost more than the savings derived? Don’t hesitate, throw out the crap that just causes extra work, get tough, mean it. If you have already gone too far, go back and review every directive sent out for the past year. Let the people at the store level and your manager know you are behind them. They are the ones who make you successful, not the person in a nice office who has nothing to do today but to send out another damn directive. If it doesn’t help the store, tear it up. . . tell the store to tell the office to go to hell. Back your people if they are right. If they aren’t right, take time to ‘‘shake it out’’ with them. Regardless, any way that it has to be done, doit... keep the decision making at the lowest possible level. 212 Pride In Performance People and Needs We have all seen on TV cases where a steel mill closed, or an auto assembly plant shut down, thousands of people thrown out of work instantly. These people had been earning in the area of $11 per hour. They were shocked, few had any savings, it would be impossible for them to find another job at that wage. But most of them had four wheel drive rigs parked in front of their homes, many had boats. Their interest wasn’t in ‘“PRIDE IN PERFORMANCE”’ ... . their interest was not in*‘‘KEEP IT GOING,”’ their interest was in the boat, the four wheel drive rig, what to do after work, what to do on the weekend. If our interest gets into that area, then we, too, will start to decay. But we have something that they don’t have, and that is opportunity. The opportunity to work into a store manager job, to get a ‘‘PLUM”’ store. The opportunity to help other people grow. Our company must always keep the door open for opportunity, to make it more important to get ahead than it is to have the four wheel rig, the boat, the big weekend. We must save our money, we must use this money to expand our company . . . it should not be used for greed, or for selfish reasons. The one thing that drives a person is need. It may be the need to be recognized, the need to compete, the need to win, the need for security, the need of a challenge, or just the need to belong. Every man has a need at times. One man has it for 30 minutes, another for 30 days. But it is the man who has it for 30 years who makes a success out of life. And that is the man that we attempt to mold our employment programs around, that man who wants to be successful for his whole life. In turn, we, as an independent tire company, are facing some strong challenges for the future. We have a need, too, A need to advertise, a need to merchandise and promote our company, the products and the services. Do we plan to aggressively advertise as strongly as we always have? The answer is yes. Do we plan to continue to aggressively promote our merchandise, company, and services? The answer Keep It Going! 243 is a definite yes. Do we plan to continue to make our company the best employee company in the area? And the answer is VES 04 providing????? Providing that our employees earn their way, providing that they don’t start to expect a free lunch, a free ride. What happened to some of the old companies that we were associated with many years ago? What happened to the O. K. Rubber Welders Company? What happened to General Tire? I am very familiar with these two companies. They both had periods of fantastic growth, of fantastic success. But they both failed to look past today’s results and plan for the future. They were both lulled into a misconceived idea that, because things are good today, maybe they could cut back on some programs that were costly, save a few bucks. Things would continue to be good tomorrow, next month, next year. They were wrong. They started to go backwards. O. K. sold out, they lost it all, they have completely disappeared. Could this happen to us? Yes, and no, but not if we continue to approach the tire market as we’ve done in the past. Just because tires now last longer and are harder to retread is no reason to change. It’s even more reason to become even more aggressive than in the past. Even more reason to do the job right. Even more reason to sell the difference. Should we give up because of increased competition from chain stores, discounters, company stores? Hell, NO, it’s even more reason to be even more aggressive than in the past. We can handle all problems, if we do the TOTAL job. What happened to O. K. and General Tire? I think they forgot their people, employees, and dealers. I think that as the founders got old, they wore out and so did their companies. I think their programs, their companies died for the lack of a second effort. And that is what Les Schwab has to do. . . make that second effort. We know that every day we live brings us into the future. What was good for us yesterday may not get the job done today. Fifteen years ago no one heard of Crest toothpaste. Today it is number one. Filter cigarettes weren’t here 15 years ago; today they have the market. Remember the old meat market? Today it’s pre-wrapped. Who heard of Toyotas and Datsuns 15 years ago? Who would have thought that the Toyo built truck tire would be our number one tire today? 214 ; Pride In Performance Just as sure as the sun will rise tomorrow, our customers will change. We must take into consideration changes as we plan our future advertising, our promotions, our themes, our future image in the marketplace. I do think about what happened to O. K. and General Tire. We, as owners, managers, employees, have to know what is happening. It is important that employees know so that they can help translate ideas into action and then into accomplishment. We want this self-initiative nurtured and encouraged. Henry Ford once said, “‘The school of experience is the best school of all. But its graduates are too old to work.’’ And that is why we need the young people of our company. THEY ARE THE SECOND EFFORT. We want them to keep abreast of changes around us, to play a key role in the image we wish to create. We must continue to involve our people in our programs, help them to fit in, and then and only then will we have taken the steps toward accomplishing our future goals. Things, ideas, and people change. It we wait for things to happen the right moment may have passed and the market will have slipped by. We must continue to build enthusiasm into our company. Without enthusiasm, our company is dead. We don’t want the route of O. K. and General Tire. _ We want our people to be motivated and enthusiastic. We ask them to make the second effort. We ask them to have. . A positive attitude A friendly smile Enthusiasm and pride Neat personal appearance A courteous and friendly attitude Motivated motivation Teamwork and honesty A self-starter attitude And if we do these things, we will see even brighter horizons ahead. We will be proud to be Americans, we will be proud to be a tire dealer, we will be proud of the Les Schwab Company, and we will be proud to hold our heads high. Keep It Going! From a speech to the assistant managers MeWs Rare ae 215 and their wives, ‘'T think all of us can remember back and think of people who affected us in our earlier life. Your father, your store manager, ‘your zone manager, your fellow employees. Often, as you think back, these small things could possibly have changed your whole life. And you, too, have such an important effect on the people who work with you. As assistant manager, you already, at your young age, hold a very responsible position. Things you do with people, action you take with them on a daily basis will be remembered by these men 20 and 30 years from now. Everyone Had Help Sometime ‘“T had several men that Ican think back on who helped me a lot. One in particular lived in Hood River back in my newspaper circulation days. Actually I was his boss, but I never thought of him in that way, nor did he think of me as boss either. He was older than I. He died quite young. His wife sent me a prayer with the footnote... ‘Dad thought this was written for him, and he wanted you to have a copy.’ I’ve looked at this many times over the years, and today I am beginning to think it could have been written for me. It is an excellent way to end my talk today... ."’ DEAR LORD: THOU KNOW better than I know myself that I am growing older and will some day be old. KEEP ME from getting talkative, and particularly from the fatal habit of thinking I must say something on every single subject on every occasion. RELEASE ME from craving to try to straighten out everybody's affairs. MAKE ME thoughtful, but not moody; helpful, but not bossy. 216 Pride In Performance With my vast store of wisdom it seems a pity not to use it all... but you know, Lord, I want a few friends at the end. KEEP MY mind free from the recital of endless details, give me wings to get to the point. SEAL MY lips from my problems. Give me strength to listen to the problems of others. Help me to endure them with patience. TEACH ME the glorious lesson that occasionally it is possible that Imay be mistaken. Keep me reasonably sweet. I do not want to bea saint... some of them are so hard to live with, but a sour old person is one of the drowning works of the devil. HELP ME to extract all possible good out of life. There are so many great things around me, I don’t want to miss any of them. (End of Les Schwab speech, assistant managers, 1979) I’ve talked a lot about employees, and won’t cover that too much more. Our company has a way of self-elimination. I don’t like to be on management people about their hours, their expense account, or other small things. I always impress upon people that they never have to pay anything out of their pocket that could be considered company expense. If you eat lunch with a customer, put it on your expense account. Put everything openly on your expense account, and, if it is too high, we will talk to you. When we would catch people stealing, often times the first thing they would say is that they spent $20 of their money entertaining a customer, so they paid themself back with the $20 they stole. Don’t ever give any employee a reason to steal from you. We are generous with our employees with benefits. Our people are the highest paid people in the tire business, when you consider benefits. And with our sharing programs, if one man is dragging his rear, the other men will let him know. And this man has to be dropped; he eliminated himself. You don’t have to get mad at him, you don’t have to abuse him, just part ways and be friends. A lot of people don’t want to work that hard; that’s okay, Keep It Going! 217 that’s their right. But we don’t want them on our payroll. It’s not fair to the other employees. And as hard as it is sometimes, we must remember that ten years of employment does not guarantee a lifetime job. That only works in places that don’t have to meet the competition. Change of Accounting Firms Nineteen hundred eighty-five has been a big year. The biggest decision that we made was probably the change in our accounting firm. Kelly Roberts’ firm from Lewiston, Idaho, had been our firm for 16 years. I had told my wife many times that if something happened to me Kelly Roberts would be invaluable. So what happened? I began to notice that it was taking entirely too long to make our audit each year. It was messing up our office for four or five months out of each year. The work was being duplicated. I took the total hours charged to us by his company and wrote him a letter. The letter said that it amounted to having six men in our office for five months. And I asked him how he would like to have that many men looking over the shoulders of his employees. I asked him to cut down the work, to streamline the auditing. He didn’t seem to understand. He was four or five years late into the LIFO-FIFO type inventory reporting, and it cost us over $900,000 taxes that we can’t go back and pick up. He argued about installment reporting on accounts receivable. This year, after the change, we saved a lot of taxes by using the installment reporting on accounts receivable. Our people in the office, mainly Gerry Darnell and Larry Henderson, put up a big fight to change firms. It took guts on their part to make this challenge. After many, many meetings, after interviewing many of the large national firms, we decided to change, and we selected the Price Waterhouse firm. It has proved to be a good move. But I don’t want to downplay Kelly Roberts; he is a tremendously hard working man. He did a lot for the family. But the change had to be made. It was a hard decision 218 Pride In Performance to make. The Price Waterhouse ‘‘in house’’ magazine ran a full page story about our company, after we gave them our account. Just one paragraph, ‘“‘What the PW team found on that visit surprised and impressed them. Dan noted, ‘Their tire bays are cleaner than our office!’ But not for long. The next day, an office clean up campaign was ordered. ”’ One more, ‘‘Despite many offers, Les refuses to sell to conglomerates, choosing to pass the business on to his family. My loyalties are to my family and my employees, he says. I have a strong desire to see our programs keep going." Policy Book I hate a big policy book. I like to allow our managers to make decisions daily, within guidelines of course, but on their own. The manager has the right to make discounts to certain customers, to handle his complaints and adjustments, to handle his employees, to act as though he owned the store. All of this, of course, is within the overall policy of the company, but our managers have much more leeway than any chain type operation that I know of. But the manager, in no way, can take a free ride. In no way will we allow our managers to use our programs to feather their own nests. In no way will the manager be allowed to take advantage of his employees, and our programs, for personal gain. He has to earn the respect of his crew, and his customers. A great big, fat policy book won’t do that. Our policy book is made up of 31 policies. It is just a small three ring notebook. We do keep it up to date always, and we do use it; and we do follow it. It covers everything from the important profit share contracts to haircuts, and everything in between. It is all the policy book that any company ever needs. Keep it simple, it’s easier to understand. Keep It Going! 219 Estate Planning Estate planning is something that no businessman likes to discuss; but it’s so important. Estate taxes seem so unfair. I’ve always kept my companies out of debt. We don’t owe anyone anything today. But when my wife and I die, the government gets one-half of the company, and the heirs have to buy back half of the company from the government. We can’t even build a reserve to pay the taxes. If we built a reserve large enough to pay the estate taxes, the IRS: would accuse us of having surplus earnings; we would then have to pay dividends to the Stockholders and a penalty. By advanced planning, we have saved a lot in estate taxes, but we are still going to get hit mighty hard upon the deaths of my wife and me. And it is better today than it was before the Reagan administration took over. It used to be 72 percent. That was immoral. It is now 50 percent. I suppose the reason for the heavy estate taxes is to keep a few families from owning the country. However, many businesses have to be sold, many large family ranches have to be sold, just to settle the estate tax problem. On a business like ours, which is good for people and helps people to grow, prosper and to accomplish what America stands for, it seems that some other way could be worked out. I think that upon our deaths, (Dorothy and I), if the government would make its audit and say. . . you owe X dollars. Then the amount is settled. But you don’t have to pay that amount until the company is sold, just pay interest. And the interest should be reasonable. Then the company could continue to grow, continue to offer opportunity for young people, continue to be a stable business. If our company is in as good a financial picture as it is today, I think we will be able to get through this period; but it will slow up our growth, and it will take away the opportunity to build more stores for the great young people coming up, young people with stars in their eyes who have worked so hard to take the steps up the ladder. We’ll make it some way, and we’ll keep growing; but the estate tax payment is 220 Pride In Performance going to slow up our company. Will the company be the same after I am gone? Look at the O. K. Rubber Welder Company, look at J. C. Penney, look at General Tire. Yes, they are still in business (except for O. K.) but they aren’t the same. Today they are just big corporations. Some people cuss big corporations. Who made it this way? . . . government regulations, rules and taxes made it come out this way. We are going to do a better job than most, because we care about people, our people, and not just the stockholders. Zoning Problems — Portland I started in a shack, no water, a two-holer out back. A pump for water. A young man can’t do that today, in no way could he ever get a building permit. We wanted to remodel in Ashland. College towns are often the worst. In order to remodel we had to do a lot of crazy, unbelievable things before we could get our permits. One of them was that we had to take down our high Les Schwab Tires pole sign; it couldn’t be any more than five feet off the ground. And we had to landscape around it. Our sign is four feet and the landscaping just about hides the sign. I guess that is what they want; to hide what they think are unsightly signs. To me, the Les Schwab sign is beautiful. I made the remark to Ken McRae, our building man, that at least this did something for us. And that is, I told him, it makes it almost impossible for a young Les Schwab to start up in competition with us. But that is wrong. I like to hold down my competition; but not in that way. When I started expanding, I thought about going into the smaller stores and skipping the bigger towns and cities. I was actually afraid of the company stores, the Goodyear stores, Firestones, Sears, and Wards. But they are the good competition today, and we found out in time that the large towns are easier to make a profit in than the small towns. That, of course, is why the large chains skip the small towns, and this is why the small towns are fading and the businesses in small towns are closing. Keep It Going! 221 People are going to the large shopping centers, medical centers, etc. - [like to be in the same area as Goodyear, Firestone, Sears and Wards. They don’t give away tires; their prices are at least with our prices and most times higher. We can give better service, I _ think. The price competition most times comes from the business that can’t afford to discount so much, usually the small independent tire dealer. I wonder why they think they have to discount so much; they would be so much better off if they took good care of their customers and built a following, not on price, but on quality and service. Many of them go bankrupt; it is needless and foolish. Our first store in the big city of Portland was on 82nd and Knapp. The Hamberg Brothers (again an O. K. store) started there with their father about 1940. They joined us with our member dealer program. Then we bought them out, and we are still friends. But our business grew, and we were bursting at the seams. Neighborhood groups began to form, and a couple of our neighbors wished we were not there and started a campaign to see if they could get rid of us. We had cleaned up the store a lot, in fact we are the best looking store in the area now. We went to the planning board meetings, and we attempted to live up to all the regulations. The back half of the lot was zoned wrong. We couldn’t park on it. We asked for a meeting with the City Council, and we thought we were going to get it zoned so we could use it. But the neighbors presented their side and we lost. They had pictures five years old, but, boy, did they have pictures. We paid $90,000 for a 5,000 foot lot next door. That is $18 a square foot. It was a massage parlor once, but had been an office lately. We took down one building and made a parking lot out of it. Our neighbors checked to see if we had a building permit to make a parking lot out of it. We didn’t know we needed a permit to park, as it was zoned correctly. We got fined $500 (which we haven’t paid), and now we have to tear up the concrete, blacktop it, and mark it all off with yellow lines. The problem is, we really don’t know how we want to use it. And worse yet, we have to landscape it and use a good portion for flowers and bushes . . $18 a square foot and by the time we plant the flowers and 222 Pride In Performance shrubs, we could have $30 a square foot in the useable area. Life is hard. We bought a building that had a similar garage on Sandy Boulevard. It housed a tire dealership years ago. Have you noticed how much more space it takes to do business today over 25 or 30 years ago? Anyway, we are crowded, but very successful in this location. Bob Brown Tire Center joined us. He’s located on 122nd in Portland. We bought a service station (a nice one) on Lombard Street in the St. Johns area. We got a home next door, so we have more room here, and it is very successful. We now have four locations in the city limits of Portland, but none of them are our nice new buildings. We have the city surrounded, though, and we are the largest tire dealer by far in the area. We bought another ex-service station that was selling marine equipment, boats, etc. We went to the city, showed them our plans before we closed the deal. They okayed them, and we bought the lot. But after our problem on 82nd and Knapp, they sent us a letter and rescinded our deal. In attempting to draw up plans that would pass, the cost got so high that I dropped it and thought about selling the location. Another idea entered my head, and that was to file a lawsuit against the City of Portland, which we did. I hope we win. I did personally meet with the people in Mayor Clark’s office, and they do want to work it out. In order to do tire business in Portland, the way it is now we have to completely enclose the areas where we change tires. We have to have roll-down doors. It’s okay to leave the doors open, which makes it look just like our plans, but we do have to have doors. In order to work on any truck tires, we have to completely enclose the service area. We need a barn of a building, just to fix a truck flat tire. Keep It Going! 223 Box Canyons — People Most companies that have grown large must have had many of the same problems that we have had. I think many times of the many things that have happened that could have stopped us from growing any more. If Frank Canady had failed in Redmond with our first store. If the large commercial account I had that owed me so much money had gone broke at the wrong time. They owed me just about the same amount of money that I had in net worth. If I hadn’t won my fight with O.K. If the foreign tires hadn’t been available to us, I’m sure we wouldn’t be in truck tires today. If Ihad not been able to get through the period of the blow up between my partners and me. Actually, if any of my first five or six stores had failed, it would have stopped us. If I hadn’t gotten out of ranching the first time, and got my mind on business. And many, many more ways that could have stopped the growth of the Les Schwab company. And you wonder why? Why walk the floor nights? Why not quit, surely I had enough money? What was it that kept a man going? And when I think about all of it, I really think it is my people that kept me going. I don’t talk about the ones who failed; I talk about the great people we have today, not yesterday. I really believe what I say in my speeches; I really mean it. And how can you get up before 150 or more young men, make all the statements I do, and then sell them down the river? I ask them to hold their heads high, surely I must do the same with mine; and I couldn’t... if I lied to them, if I misled them, if I wasn’t open and honest with them. At least with what I consider openness, and honesty; because I do have to live with my conscience, and that is important. 224 Pride In Performance Gary Wanderscheid Letter Here’s another letter that just came in, and was sent down to me at my winter retirement home. Gary was recently promoted to manager of our new Lake Grove, Oregon store. Dear Mr. Schwab: I wanted to sit down and write to you and thank you for the opportunity you have provided for myself and everyone else in this organization. You have established the greatest opportunity for anyone with the desire to be successful. I have worked on the outside and owned a business of my own, and believe me this is the greatest job in the world today. You have done a fantastic job. It’s great to be able to have the chance to work for your goals and your dreams. This opportunity was made entirely possible by your hard work and great ideas. Thanks again for making it possible for a young man to have this fantastic opportunity to be successful. Gary Wanderscheid Manager, Lake Grove Gary started, the same as all our people, changing tires at our Klamath Falls store. Then into sales along with service, then to assistant manager at Klamath Falls, and then to manager of our new Lake Grove store. In our 34 years of business, we have never hired a manager from the outside, nor have we ever hired an assistant manager directly to that job. Every single one of our more than 250 managers and assistant managers started at the bottom changing tires. They have all earned their management jobs by working up. Keep It Going! 225 Original Ideas I think back, too, of the many original programs we have created. When we create programs, we are successful. Follow their programs, and they are successful. I don’t claim to have any type of genius ability, but if I do have any special ability, I think it is in the line of creating a program that works. To think it through, to take the bugs out, to have it clean and open and then throw it out to our employees, and the sky is the limit. If they make money with it, encourage them to make more. I also think I have the ability to see the total picture quickly. What is the action and reaction from taking different positions? What happens to A, if you push B first? Iam not good on really fine details, but I quickly see the total picture and what might happen to employees, customers, family, and business if the wrong course is taken. I do have ‘“Common Sense.”’ To review some of our programs that we’ve created, and they aren’t all of them... 1. Probably the most important one is the profit sharing contract. A partnership by contract. We won’t give out copies of this, but anyone can create their own. 2. The simple LS/MFT advertising program and other advertising we had earlier that attracted a lot of attention. We also had a time spot, about 15 seconds . . . time is now 9:15 Les Schwab Tire Time, and then a plug on tires. We had people repeating this. A different and personal approach to advertising. 3. The centralized retreading plant whereby we took all equipment out of our stores, giving the stores a better chance to be clean and to look better. 4. The Supermarket Tire Store concept whereby we had several thousand tires in the showroom giving the appearance of a ‘‘Tire Supermarket.”’ 226 : Pride In Performance 5. The Les Schwab Sign, whereby we took down all rubber company signs and display only the LES SCHWAB TIRES sign. This made a much neater appearing building, not all cluttered up with a bunch of signs, just one neat sign that said it all. 6. The walnut-sawdust combination tires used exclusively by our company for many years. 7. Free flat tire repair for ladies. Ladies, don’t attempt to fix that flat tire, it could be dangerous. The state of Oregon made us quit this, but our men do help the ladies a lot even yet. 8. Our fresh Western style, Eastern Oregon approach to television advertising. People have told me that the ads are refreshing, and a pleasure to watch. 9. Our percentage rent program, making it easier for a new store to start. 10. Our new store development program, again making easier for the young men to pioneer a new store. 11. Our employee Trust fund, which now has it. What a great thing for employees. nesses do it? it $26,500,000 in Why don’t more busi- 12. Our cash bonus program for employees, in fact our total employee program. The motivation from this gives us the No. 1 tire service people in the United States. 13. Our More Mile® retreading program, an exclusive withour company, and it is trademarked nationwide. 14. Our Snow Flex® winter tire retread. The soft rubber. Our company helped develop the soft winter rubber. marked nationwide. 15, The Les Schwab over 25 years. Written Warranty Also trade- that we’ve used for Keep It Going! 227 16. Our annual Free Beef promotion that we’ve used for 23 years. And many more, and we hope many more for the future. Because our future depends upon us creating our own programs for the future. If we fail to create, then we will die on the vine, like so many other companies have done in the past. 34 Years and Ending After 34 years in business, where do we go from here? I’ve done everything I can to set up everything so that it can go on for 100 or more years. I have a lot of faith in our people and in our programs. I do not want our company to be a public company; I hope estate taxes don’t force us to sell stock on the public market. I want the money that I’ve made in my life to be used to help young people in business. | want it to be used to sponsor these young people with the programs that I’ve helped to create. I wish them the best. God be with them. My younger grandchildren spent the Christmas days with us during 1985, the days I was finishing this book. It was often the subject of conversation, the Les Schwab book. Leslie, 9, started pecking away at the typewriter and wrote several short stories. One of them... In 1917 A NEW LIFE BEGAIN THE LIFE OF LESLIE B. SCHWAB MY GRANDFATHER. IN i952 HIS FIRST TIRE STORE OPENED. AND HE HAS STILL KEPTED THE BISSNESS RUNNING. AND FROM THIS DAY FORWARD HE IS STILL ALIVE. BY LESLIE DENTON 228 Pride In Performance And what a nice way to end this book. “‘From this day forward he is still alive.’? And may the work that I’ve done in my lifetime, the programs that I’ve created, the business that I’ve helped to build. . . may it live on from this day forward. . . for hundreds of years. Keep It Going! 229 1986 to 1989 It’s now November, 1989; just three short years since I wrote this book. We printed 10,000 copies, and we are sold out. We didn’t put them in book stores; but some book stores did buy some through our stores. We sold the entire 10,000 copies through our stores and by mail orders. I’ve been extremely impressed that this book proved to be as popular as it has been. Also very pleased, as I’ve:never claimed to be an author. Maybe the honesty in which I told the story, the critical remarks made about suppliers (justly earned by them), and our attitude toward our employees and our customers are subjects anyone who has attempted to be a business person could relate to. America is such a great country. We owe so much to so many for the inheritance we receive. The entrepreneur, the independent businessman, must fight hard to earn his success. I truly believe there is a strong relationship between the success of our country and the success of the small businessman. In this day of the left wing movement I hope we aren’t destroyed by the ‘‘do gooder’’ movement. If we are, God help America, as it will never be the same thereafter. Many great things have happened in these three short years. Our company has almost doubled in size in this short period. Probably what I’m the most proud of is that our employee Trust fund has doubled, and that is a great reward for a bunch of great people. We passed the $50,000,000.00 mark, and by this time next year we will have close to $60,000,000.00 in the employee Trust fund. This is 100 percent employee money, and not even $1.00 can ever come back to the company or to the stockholders. We now have over 3,000 families who make their living selling Les Schwab Tires. We have added many stores in Montana, the Seattle area, and northern California, and at this date the total is 207 stores. We must continue to add stores constantly, as this creates the opportunity for more great young people. 230 Pride In Performance This year, 1989, we added 255,000 square feet of buildings to our Prineville complex. This brings our Prineville warehousing, retreading, distribution, and office space up to nearly one million square feet of buildings on 45 acres of land. We had to catch up at our headquarters before we could build more stores. We won’t have to do much more in Prineville for many years, or about 50 more stores. It had to be done. We haven’t changed anything in our programs of any significance during these three years. I’ve worked hard to see that this company goes on long after I’m gone. I am now 72 years old; time is running out. The inheritance tax is now 55%. I’ve never found any solid way we can avoid paying this. It’s going to hurt a lot, and the sad thing is that it will hurt a lot of great people. We’ll do our best; we’ll keep going some way. The ranch has made a profit for the last three years. I was beginning to think it never would get into the profit column. However, if the movement to eliminate cattle from the public land succeeds, the L. S. Ranch, along with thousands of ranch families, will be severely damaged. I still get phone calls wanting to know if I will sell the company. Most of these calls come from companies who specialize in selling family-owned businesses. I sometimes talk to them, just for fun; but the company is not for sale. It will go on long after I’m gone, if we can settle the estate problems. I also, like most of us, get a lot of calls about donations. You make a couple, and then you go on the computer list. A few months ago, at dinner time, I got a call, a really high-toned English accent. The conversation went like this...‘‘Could I speak to Mr. Schwab, please?’’ My answer, ‘‘Mr. Schwab...he died three days ago.’’ His answer, ‘‘Oh, I’m so sorry, please pardon this phone call.’’ My wife said, ‘‘Dad, are you losing your mind or getting childish in your old age?’’ Whatever, I bet he marked his list ‘“‘deceased,’’ and maybe this ran back through the computers, and, just maybe, I got off 50 or so mailing and phone lists. Life is hard. Two items that concern me somewhat about the next 20 years are, first the possibility of shutting off, through tariffs or laws created by bureaucrats and politicians for votes only, the supply of foreign tires. Second, the possibility of continued under- Keep It Going! 231 production and shortage of tires. This would create an entirely new ball game. - However, I am optimistic; as the larger we get, the more buying power we have; and, even though we have always been hard buyers, we have always treated our suppliers with respect and have kept a good relationship with all of them. We have such great employees in this company. I hope we never let them down. I get so many letters from customers complimenting us on our employees. We attempt to make all plans so future employees will have the same opportunities past employees have had. My family thinks the same way; they, too, want this company to continue. We still make our plans for 20 years ahead. It’s going to be interesting to see what happens. Anyway, we have, and are putting up, one hell of a fight. 232 Pride in Performance —1995— Just after the second edition of this book was printed, Patty Roberts, editor of our monthly “Les Schwab Recap” at that time, and I convinced Dorothy that she should write a column for our “Recap.” I know our present and future employees will enjoy reading it, and I hope the public will, too. Looking Back...By Dorothy Schwab When I received a note from Patty a few days ago asking me to write an article for the “Recap,” my first reaction was to say no! I don’t do this! But after thinking about it for a few days, I decided— why not! So much has happened in the 53 1/2 years Les and I have been married. When I look back, the first thing I always think is, “it sure hasn’t been dull!” Our first few years, when Les was working as circulation manager, were not a typical home life. We lived in two rooms—one was a converted. sun porch—and we shared a bath with three other couples. When we bought our first home two years later we moved in and two weeks later Les was transferred to Eugene. We were there about nine months. Both of us were very homesick kids. ae couldn’t wait to get back to Central Oregon. When Les was transferred back to Bend with a much larger district to manage, we needed to clear up some debts we had accumulated. We decided the way to do this was to live more or less out of our car. We stayed in motels wherever we happened to be for the night, and when in Bend we stayed with my mother and father. The motels in those days were not much more than simple cabins with kitchens. We did this for about a year. When I became pregnant with Harlan we moved to a small apartment in Redmond. This was a very lonely time for me. Les was gone all week at least three weeks out of the month. Whenever he could, he would drop his report in the mail and drive home late at night just to be home early. Shortly after Harlan was born we built a small home in Redmond. We did this for $2800! These were happy times, too. We had a lot of friends and did many fun things. The Bend Bulletin job opened up and this was an opportunity for Les Keep It Going! Ne to be home -- no more traveling! He jumped at the chance and I couldn’t have been happier. We sold our home for $3400 and rented in Bend. ' Pearl Harbor happened while we were still in Redmond. Les’ draft number was so low we knew at any time he would be called up. When it happened, Les beat the draft by volunteering for the Air _ Cadet Corp, which meant another upheaval in our home life. We sold everything we owned -- even our car, as I didn’t drive then— and I moved back to Redmond to live with my parents. They had moved to Redmond several years earlier. Les was sent to San Antonio, Texas for his training. After about six months I was able to join him if I worked as a maid. We (Harlan and I) lived in the maid’s quarters of an officer’s home in exchange for housework I did for the family. By the way, Les didn’t live with me. He had to stay with his cadet corp, and just came to visit Harlan and me on week ends. Les earned extra money himself by baby sitting for officers and their wives in the evenings when he was free. On occasions, we had passes to leave the base. We would join other cadets and bus into San Antonio. We took Harlan to his first zoo, and we had picnics in the many parks there. Then it came time for Les to go on with his training. He moved to San Antonio Aviation Cadet Center, which meant if I wanted to see him at all I had to learn how to drive. I had to drive right through the busy center of town, and that is how Les taught me to drive. He was 35 miles away and for 3 months he couldn’t leave the base. I could only see him on Wednesday and Friday evenings. He spent most of our money on a Ford Coupe. Then it came time to move to Monroe, Louisiana. Les was in the final training to become a navigator ona B29. This meant that Les had to get special orders from his commanding officer to move his family. Wives and children were not even recognized as existing for an Air Corp Cadet. But move we did, and this time into an old maid school teacher’s home. She had no curtains at the windows and the mice played hide and seek in and out of the gas fireplace. All the house plumbing, including bathroom, just ran out on the ground at the back of the house about 100 yards away. She didn’t have washing facilities. I washed our clothes and bedding and other things in an old fashioned tub on the back porch, and wrung them out by hand. had just one small room and kitchen privileges. We 234 ; Pride in Performance Harlan and I were able to eat at the base with Les on the week ends. This was pure heaven. The food was wonderful—at least it seemed that way at that time. Free too. We paid a high price for the filthy room, but we were thankful, with the big Air Force base there, to find anything at all in which our son and I could live. These times were rough but we had fun too. I wouldn’t want to live those times over, but I wouldn’t have missed it for the world. All this leads up to where we are today. You all know our story of how we started in the first “dumpy” little store with rubber dust everywhere, cobwebs hanging from the ceiling, and a two-holer for a toilet. Les worked such long hours, as many of you folks do today. It wasn’t easy. From the time we first started going together in high school at age 17, I knew Les had a burning desire to be a businessman, to own a business of his own. He always had the idea to sponsor other people, to work through people. He just knew it would work. We looked into several businesses but couldn’t raise the money. When the O.K. Tire Store was available in Prineville, we decided to wait no longer to get started. My life was in an upheaval again. I loved my little home in Bend, and we had many friends and many activities that I hated to give up. I was pregnant with Margie and felt lousy. But this was to be our beginning, and I was all for it. Never, never did either one of us dream that in 38 years we would see this business grow into what it is today. Les had accomplished so much in his desire to work through people—from Frank Canady, the first young man, to the many now, and the many more in the future. No, it has not been easy, as we have had numerous heartbreaks and set backs. But it has been so rewarding to see the dreams of the one you love and respect (even though you could box his ears at times) accomplish what he wanted to do...to be a successful businessman. We must keep it going for all those young people now and in the future who also want to become successful business people. They, too, want their dreams to come true. I am proud to be a part of the Les Schwab organization. you are just as proud as I. Dorothy Schwab I hope Keep It Going! 235 Every five years we take our managers and their wives to Hawaii. In 1994, Dorothy and I decided we wouldn’t take the trip. I asked my daughter to make the company speech for our annual meeting. She did such a great job, I would like to have it in this book. We Believe in The Same Dream by Margie Denton You are getting to be an impressive group. Who would have ever thought we would get to be this size. Thinking back, I can just barely remember that first tire store. Dad used to take me there once in a while on Saturdays. I can remember it being kind of dark inside. And surprisingly it smelled like rubber. Dad’s desk was back in a corner, and he used to let me play with one of those old crank calculators. I know this is dating me, but it was fun. In fact, it has been fun growing up with this company, because it has been like a member of my family. When I was younger, it was always at the breakfast table and the dinner table. If we went for a ride or to the store, it went with us. Even when we went on vacation, we always talked about Les Schwab Tires. So it has been a very important part of my life for a long time. This company means a great deal to me. Because of this, it is with much pride that I stand up here today. Not in myself, I play a very small role. The pride is in you. And the pride I have is in Les Schwab Tires. Through your efforts, Les Schwab Tires is now Big Business. And because it is also a big responsibility, I have asked myself, “Are we going to be able to keep this company going? And as big as we are getting, are we going to be able to avoid developing that Big Company attitude?” Because I usually get an answer when I talk to myself, the answer has always been “YES.” Because we are going to stand on that foundation of basics that this company was built on forty-two years ago. From that foundation comes the strength to build this company on for generation after generation. But, we are going to be one of the lucky ones. Do you realize that only thirty percent of family owned businesses 236 Pride in Performance survive to the second generation? And only thirteen percent survive to a third? Pretty scary, huh? So how are we going to avoid being eliminated? Well, we have already taken a couple of very important steps to insure the survival of this company. Along with these, and if we don’t abandon the principles that we now believe in, we are going to make it! One of the main reasons that a family business fails is simply because the founder won’t face the inevitable; they are not going to be on the face of this earth forever. Because of this, they don’t plan for estate taxes, so they don’t provide for the liquidity of their company after their death. Also, they are reluctant to give up control now, so they don’t plan for succession, and therefore take an attitude of “I’m not going to be around, so let the chips fall.” But, in our case, in 1974 Dad began transferring his stock to the rest of the family, with the majority of these shares going to me, my niece Diana Tomseth, and my nephew Alan Schwab. This was a gutsy move, at the time we were still pretty young. I was twentyone, but Alan and Diana were only ten and twelve. They weren’t even teenagers yet. But if he had not done this when he did, and he had died back then, we would have been hit with a fifty-five percent inheritance tax that could have destroyed the relia or at last left it stagnant for years until we caught up. When I look back on this, I think, “Man Padi were you ever lucky. Because you really didn’ t know how we were going to turn ut.” But, I guess after all those breakfast and dinner table conversations, we believed in the same dream. Even now, at our ages, Diana, Alan and I, along with Tom, spend more time on estate planning than any thing else. And always, at the top of our mind, is what is best for the company. Our kids are going to be fine. Our number one goal is to insure the survival of Les Schwab Tires. Now, as long as Dad is around, and that better be for a long time, as long as he is around, he will be the hub of this company. He is definitely still the boss. And I wish he was here. I know he hates to travel long distances, but I don’t think he realizes how much we miss his presence. And, as his family, we don’t have any dreams of ever being able to fill his shoes. There is never going to be another Les Schwab. But, maybe we can walk in his footsteps. Keep It Going! eg! We will just use a little different method. We are going to work more as a team. It would be very difficult for Diana, Alan and me to be in charge of the day-to-day operations of the company. And besides, we have in place one of the best management teams in the country. It would be foolish for us to not stand back and let them, and all of you, “take care of business.” Now, this is not to say that we are not involved. Actually, just the opposite. This company is such a responsibility, and it is imperative that we stay on top of things, and that we stay informed. Otherwise, how could we make correct decisions now, or for the future, if we don’t know what is going on today? The number one strength‘our family has is the benefit of years and years of exposure to Dad and his thinking. Because of this, we have a good feel for the direction of this company. Our family will focus on the long term future, expansion, and the philosophy that this company was created to provide opportunity. We must all remember and remain true to this philosophy; for the greatness of our company will not so much be measured or remembered by our sales figures, but remembered more by the strength of our people. This family’s golden rule has been and always will be, to leave the profits in the company, to work for the company, to grow, to expand, to create opportunity. But, just creating opportunity isn’t enough. We also have to give the next generation the ability to achieve it. We have to teach them. And no one is more important in this than you. No matter what store or department you manage, it is imperative that you share your knowledge, it is imperative that you give them the tools to succeed. And teach this next generation well, for their success is a direct reflection on you. But even this in itself isn’t enough. To insure our survival, we must be able to communicate. To do this, each of us in this room must remain open, accessible and willing to listen. This is the only way to keep a Big Company attitude from creeping in. This is the only way, as big as we are getting, to avoid adding layer upon layer of bureaucracy. To communicate efficiently, we have to stay up to date on our technology and continually research ways to better exchange information. We must not allow ourselves to stagnate, or bog down, 238 ; Pride in Performance just because we are comfortable with the status quo. We must hold tight to the morals that are the backbone of this company; for Les Schwab Tires was built on trust and honesty. This is probably the quality of our company I admire the most, and the one that hurts the.most to protect. It becomes so personal and so many lives are affected by the outcome. The only way we can handle this is to take each case individually. Foremost, we want to be fair, even though many times we are legally bound to react in a certain manner. And even as hard as it is, we must not let this company lower its values, for if we do, we will erode the trust we have in one another. And in the long run, this would be the downfall of our company. Pride in Performance. How often we have heard these .words, and how important these words have become. Pride in accomplishments well done. But, we must never confuse pride with ego. Pride commits us to do the job better. Ego tricks us into believing we can do no wrong. Concentrate on being the best each day, one day at a time; putting the customer first, and treating employees with respect. These are the traits that create Pride in Performance. These are the traits that will keep us humble. In closing, I would like to thank you for choosing a career with Les Schwab Tires. You can be proud, for what you have accomplished in forty-two years is phenomenal. And what about the next forty-two years? I can’t wait, because it is wide open, it is just up to us. We only have to reach for it. And one thing is for sure, through teamwork, belief in the basics, and that good old Pride in Performance, we are going to succeed. We are going to be one of the survivors! Thank you. Margie Denton Keep It Going! Third and Last 239 Edition This will be our third, and last, edition of this book. We have sold out again, which makes 20,000 copies sold. I have been surprised and pleased with the results. It will be early 1996 before this third edition is printed. We will have sales of well over $600,000,000 for the year 1995. We now have 261 Les Schwab stores with over 5,000 people selling and servicing Les Schwab tires. I never in my wildest dreams ever thought it would grow this large. Phil Wick has been our president for over 12 years now and has been with the company for over 30 years. He, along with a great executive team, has been the main reason for our growth the past ten years. I’m 78 years old now and am semi retired, working maybe five hours a day. I work a lot on new property, and I hope I help in guiding the business along the proper course. One thing that I’m positive of is that this business will live on long after I’m gone. The programs for employees I’ve help to create will give them the right to hold their heads high, and will help with the inspiration needed for them to continue. I hope this book, in many ways, will inspire other businessmen to create employee programs, so the employee also has the opportunity to create a better life for himself and his family. Mr. Businessman, why not share more with your employees? They are the ones who will make you successful. They are also the ones who can make you a failure. Which way would you rather have it? And with that I’ll sign off, hoping that this book has accomplished something worthwhile. Ge fi {229. ‘i) ~~ iq Hoos oe a~ Phe Ft ey aea3] 3 are os ~~ Laine 0!) Cont‘d. from front flap... unique sharing plans ever created for employees. This book tells in detail how these plans work, and he encourages all business people to adopt such a plan. He believes in sharing with those who have helped him be successful, and he is not strong on large donations to colleges, hospitals, and such causes. There has been much prestige built into the Les Schwab sign with good employees, sudden service, warranties in writing, and complete honesty. Sales in 1986 will exceed $180,000,000. This book is about successful people; not just Les Schwab, but also the 2,000 families associated with him. It is his wish that his company will continue with the same policies and programs long after he is gone. Since this book was written, Les Schwab has been nominated to the Tire Industry Hall of Fame. He received the award September Z, 1986 at the National Tire Dealers’ Convention. He is the ninth one inducted, and is among such notables as Harvey Firestone of Firestone Rubber Company and Frank Seiberling who started Goodyear and later Seiberling Tire and Rubber Company, and other notables of the tire industry. ISBN: 0-89288-151-8 : Re ss er 4 otra ga Ate +.

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