Timeless Values, Enduring Innovation
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TIMELESS VALUES, ENDURING INNOVATION T HE G RAYBAR STORY T H E G R AY B A R S T O RY by Richard Blodgett GREENWICH PUBLISHING GROUP, INC. © 2009 Graybar G b Electric El i Company, C Inc. I All Al rights reserved. Printed and bound in the United States of America. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without permission in writing from Graybar, 34 North Meramec Avenue, St. Louis, MO, 63105, except by a reviewer who wishes to quote brief passages in connection with a review written for inclusion in a magazine, newspaper or broadcast. Produced and published by Greenwich Publishing Group, Inc. Old Lyme, Connecticut www.greenwichpublishing.com Designed by Clare Cunningham Graphic Design Library of Congress Control Number: 2009936538 ISBN: 0-944641-77-6 First Printing: October 2009 10 9 8 7 6 5 4 3 2 1 Any trademarks in this book are property of their respective owners. PHOTO CREDITS: Pages 6-7 courtesy of John Nemec Pages 16-17 © Bettmann/CORBIS Page 20 © CORBIS Page 20 (inset) © Hulton-Deutsch Collection/CORBIS Page 28 (upper left) © Bettmann/CORBIS Page 29 (both) © Bettmann/CORBIS Page 30 (upper right) © Bettmann/CORBIS Page 44 courtesy of John Rodriguez Page 50 Smithsonian Institution SI NEG #EMP122.020 Page 79 (upper) © Bettmann/CORBIS Page 79 (lower) courtesy of AdClassix.com Page 104 © Joel W. Rogers/CORBIS Page 105 © Bettmann/CORBIS Graybar would like to thank Scott Smith and David Torrence, who have helped document Graybar’s history and milestone achievements through photography. All other images courtesy of Graybar Electric Company, Inc. Chapter Onne “Like Stteerliinngg—On a Silver Spopoonon” 8 Chhappter Twwo An Amaaziingng Worrld of Scieenncce and Ellecctricciti y 161 Chappteer ThT reee Westterern ElE ecctrtricic’ss $9 Milllion BBaabyy 366 Chapter FFour Fulll Sppeeede Aheh add in tht e Postwwaar Boom 7070 Chhapteer FiF vvee TThe pap cec of chchangege quiu ckkene s 989 Chapter SiS x Evveryty hing’’ss Neww, Evverythiingn ’s the Samme 1116 Acknnowledgments 1336 TiT mem lil nee 1137 InI deex 140 INTEGRITY EMPLOYEE OWNERSHIP LONG-TERM VIEW CUSTOMER FOCUS Graybar’s warehouses are stocked with electrical, communications, security and networking equipment for delivery to customers throughout the United States and Canada. C H A P TER ONE 10 TIMELESS VALUES, ENDURING INNOVATION ou are about to read the story of a Although the transaction was groundbreak- Graybar is entirely owned by its employees and retirees. ompany that has grown and changed ing, its timing could not have been worse. Just People “get a special sense with America—a story that highlights nine months after the deal was completed, the Y of pride from working at an the role of technology and entrepre- stock market crashed and the Great Depression employee-owned company neurship in the nation’s economy. The company began. Graybar and its employee shareowners such as Graybar Electric,” is Graybar, a leading distributor of electrical, suddenly faced the most difficult business envi- the St. Louis Post-Dispatch wrote in 2009. communications and networking equipment, ronment in American history. Graybar’s sales from basic products such as wire and cable to dropped 67 percent between 1929 and 1932. the latest high-tech communications gear. Yet Graybar and its people survived the hard Graybar is one of the oldest major compa- times of the 1930s and developed a corporate cul- nies in the United States and one of the largest ture that continues to drive the company’s success employee-owned businesses in the world. It today. This culture is based on four core values: traces its roots to Gray & Barton, a small firm established in 1869 to manufacture telegraph equipment. In 1872 Gray & Barton changed its name to Western Electric and eventually became the world’s leading manufacturer of telephones. During the 1890s, to supplement its manu- facturing operations, Western Electric developed a second business—the wholesale distribution of other companies’ electrical products. This second business became Graybar. In 1929 Graybar employees made history when they purchased their company from Western Electric for $9 million. B. C. Forbes, founder of Forbes magazine, called the pur- chase “an extremely important develop- ment,” noting that Graybar was the first large U.S. corpora- tion to be owned entirely by its employees. LIKE STERLING—ON A SILVER SPOON 11 integrity, employee ownership, long-term view tomers. It has distributed some leading brands, and customer focus. including General Electric, Klein Tools and Robert A. Reynolds, Jr., chairman, president Square D, for more than a century, a remarkable and CEO, says the company’s values guide testament to its long-term view and enduring Graybar people in the business decisions they business relationships. make each day. “Our values are very much Although Graybar is a Fortune 500 company ingrained in our work,” he says. “They make with more than 240 branch locations in the clear what we stand for and provide a compass United States, Canada and Puerto Rico, it for our people.” is not a household name to the These values, and how they are applied at public because it does Graybar, are recurring themes throughout not sell at retail or this book. to consumers. In 2001 BusinessWeek described Graybar as “an old-fashioned company.” This was said in praise as much as in criticism—and the descrip- tion is indeed true if integrity, long-term relation- ships, customer focus and treating employees fairly are old-fashioned. Distribution Facilities Nationwide Based in St. Louis, Graybar sells thousands of electrical and comm/data (communications and data) products to contractors, industrial plants, government agencies and other wholesale cus- 12 TIMELESS VALUES, ENDURING INNOVATION However, its name is renowned in the electrical equipment and comm/data industries. In 2009 Graybar was selected as the “most admired” company in the field of diversified wholesaling for the third year in a row in a Fortune magazine survey of executives, directors and securities analysts. Equally impressive, it was chosen as the “most admired” company in the world, regardless of industry, for quality of manage- ment and long-term investment. Graybar is also known for its use of advanced technology to fill orders quickly and accurately, control costs and meet the needs of customers and suppliers. In 2009, for the seventh year in a row, Graybar was named to the InformationWeek 500 list, which honors companies that use tech- nology innovatively. We’re All in it Together One of the more unusual aspects of Graybar is its ownership structure. Employees can buy stock once a year at $20 a share. They sell their stock back to the company at the same price if they leave before they retire. Retirees can hold on to their shares and continue to collect divi- dends, but their estates must sell the shares back to the company, also at $20. This tightly controlled arrangement allows employees to focus on long-term business results, shields Graybar from unwanted takeover bids and facilitates the continuous cycling of ownership Chip Pasley, manager of customer service in Denver, is pictured with the branch operational team. His father and grandfather both worked in the electrical business. “When I told my dad and grandfather back in 1985 that I got a job at Graybar,” he says, “they both told me, ‘You just hired on with some of the best people we have known in our careers, and a great company. Don’t ever take it for granted.’ And I never have.” 14 TIMELESS VALUES, ENDURING INNOVATION to new generations of employees. As of 2009 compensation is structured that way. Everything nearly 5,800 employees and retirees owned is structured for the long term.” Graybar stock. An important element of Graybar’s long- The shares have been priced at $20 since the term view is its promote-from-within philoso- 1930s. “People are surprised when they hear the phy. Every president in Graybar history started price hasn’t changed for years,” says Matt Geekie, in an entry-level job, typically in a company senior vice president, secretary and general warehouse, and learned the business from the counsel. “They scratch their heads and ask, ground up. ‘What’s that about?’ But if we allowed the stock Graybar is also unusual in being one of the to float, our people might manage and behave few Fortune 500 companies that does not have a more for the stock than for each other. It would corporate jet. Senior executives travel on com- be an irreversible change in our culture.” mercial flights, just like everyone else. “We don’t Robert A. Reynolds, Jr., A stock that never appreciates in value may have a corporate jet because it’s not a good use above, is chairman, president sound like a bad investment. But that is not true of our fellow shareholders’ money,” says Kathy and CEO. Below is an early at all. The company has paid cash dividends Mazzarella, senior vice president of sales and Graybar stock certificate. every quarter since 1929, including an annual marketing, comm/data. Moreover, Graybar does Opposite, John Veland is cash rate of at least 10 percent every year since not award stock options, which have made exec- manager of counter sales at the Birmingham, Alabama, 1941. It also pays occasional stock dividends. As utives at some public companies very wealthy. branch. a result, the stock has pro- Reflecting a “we’re-all-in-this-together” atti- vided an average annual total tude, its senior executives are well paid but not return well above 10 percent.