The Adams Corporation (A)

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372-263

The Adams Corporation (A)

sales and profit. Our strategy was to make a quality product, distribute it, and sell it

cheap.

But that has all changed in the past 20 years. Our three major competitors

have outdistanced us in net profits and market aggressiveness. One of them-a

first

cIass marketing group-has doubled sales and profits within the past five years. Our

gross sales have increased to over $2 billion, but our net profits have dropped

continuously during that same period. While a consumer action group just

designated us as "best value," we have fallen behind in marketing techniques; for

example, our packaging is just out of date.

Structurally, Adams was organized into eight major division. Seven of these were regional

sales divisions with responsibility for distribution and sales of the company's consumer products to

retail stores in their areas. Each regional sales division was further divided into organizational units

at the state, county, and/or trading-area level. Each sales division was govemed by a corporate priee

list in the selling of company products, but each had sorne leeway to meet the local competitive price

developments. Each sales division was also assigned(by the home office) a quota of salespeople it

could hire and was given the salary ranges within which these people could be employed. AlI

salespeople were on straight salary with an expense reimbursement salary plan, which resulted in

compensation under industry averages.

A small central accounting office accumulated sales and expense information for each of the

several sales divisions on a quarterly basis, and it prepared the overall company financial statements.

Each sales division received, without commentary, a quarterly statement showing the following

information for the overall division: number of cases processed and sold, sales revenue per case, and

local expenses per case.

similar

Somewhat

information was

division.

Manufacturing division accounting was complicated by variations in the cost of obtaining and

processing the basic materials used in Adam's products.

in

largely beyond the control of the division. The accounting office, however, did

procurement-were

have one rough extemal check on manufacturing division effectiveness: a crude market price existed

for case lot goods, sold by smaller firms to sorne large national chains.

These variations-particularly

from the manufacturing

obtained

Once every quarter, the seven senior sales vice presidents met with general management in

St. Louis. Typically, management discussion focused on divisional sales results and expense control.

The company's objective of being number one-the

group

attention to sales as compared to budget. All knew that last year's sales targets had to be exceeded,

no matter what. The manufacturing division vice president sat in on these meetings to explain the

product availability situation. Because of his St. Louis office location, he frequently talked with

Jerome Adams about overall manufacturing operations and specifically about large procurement

decisions.

largest selling line in its field-directed

The Adams Corporation had a trade reputation for being very conservative with its

compensation program. AU officers were on a straight salary program. An officer might expect a

modest salary increase every two or three years; these increases tended to be in the thousand-doUar

range, regardless of divisional performance or company profit position. Salaries among the seven

sales divisional vice presidents ranged from $150,000to $220,000,with the higher amounts going to

more senior officers. Jerome Adams's salary of $250,000was the highest in the company. There was

no corporate bonus plan. A very limited stock option program was in operation, but the depressed

price of Adams stock meant that few officers exercised their options.

The corporate climate at Adams had been of considerable pride to Jerome Adams. "We take

care of our family" was his oft-repeated phrase at company banquets honoring long-service

employees. "We are a team, and it is a team spirit that has built Adams into its leading position in

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The Adams Corporation (A)

372-263

this industry." No member of first-line, middle, or senior management

could be discharged (except

review of his case by ML Adams; as a

in cases of moral crime or dishonesty) without a personal

matter of fact, executive turnover at Adams was very low. Executives at alIlevels viewed their jobs

as lifetime careers. There was no compulsory retirement plan, and sorne managers were still active in

their mid-70s.

The operational extension of this organizational philosophy was quite evident

For over 75 years, a private

and managers.

members

in medical

scholarships,

members to give corporate and personal

of the Adams organization.

family trust provided

led its industry

Adams

insurance for employees and managers,

time and effort to community problems and organizations.

emergency assistance

in the granting

and in his encouragement

to employees

to all

of educational

of its

Jerome noted two positive aspects of this organizational philosophy:

We have a high percentage of long-term employees-Joe

at

East St. Louis, completes 55 years with us this year, and every one of his brothers and

to retire with a

sisters has worked here. And it is not uncommon for a vice president

in

industry

pin-that

blue

manufacturing

low price for

decades.

and this pride is shown by every from

janitors to directors.

l am proud of our accomplishments,

quality control, and value for

40 years

innovation,

service. We have

means

process

Gidy, a guard

led this

of

lndustry sources noted that

there was no question that Adams was number one in terms of

manufacturing

and logis tic efficiency.

ln December 1993, the annual Adams management

conference gathered over 80 members of

senior management

Adams's

announcement

the award of the "Gold Flag" to the top processing

plant and sales division for exceeding targets, and the award of service pins to executives. AlI

expected the usual social good times.

It was an opportunity to meet and drink with "old buddies."

of 1993 results and 1994 budgets,

in St. Louis. Most

routines-the

the usual

expected

formaI

After a series of task force meetings,

the managers gathered in a banquet

room-good

naturedly referred to as the "Rib Room" since a local singer, Eve, was to provide entertainment.

the usual fashion, a dais with a long, elaborately decorated

Sitting at the center of that table was Jerome Adams. Following tradition, Adams's vice presidents,

order of seniority with the company,

corporate staff, and a newcomer soon to be introduced.

ln

head table was at the front of the room.

in

sat on his right. On his left sat major

family shareholders,

After awarding service pins and the Gold Flags of achieve~nt,

Adams formally announced

what had been corporate secrets for several months.

control position on the board of Adams.

CEO of Adams.

Second, Price Millman would take over as president

First, a new investing group had assumed a

and

Introducing Millman, Adams pointed out the outstanding record of the firm's new president:

"Priee got his MBA in 1985, spent four years in control and marketing, and then was named as the

youngest divisional president

ln the past years, he has made

in the history of the Tenny Corporation.

his division the most profitable in Tenny and the industry leader in its field. We are fortunate to have

him with us. Please give him your complete support."

ln a later

for Adams's past accomplishments

informaI meeting with the divisional vice presidents, Millman spoke about his

respect

and the pressing need to infuse Adams with "fighting

spirit" and "competitiveness." He said: "My personal and organizational philosophy are the same-

the na me of the game is to fight and win.

l almost drowned, but l won my first swimming race at Il

years of age! That philosophy of always winning is what enabled me to build the Ajax Division into

Tenny's most profitable operation. We are going to do this at Adams,"

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372·263

The Adams Corporation (A)

ln conclusion, Millman commented:

The new owner group wants results. They have advised me to take sorne

time to think through a new format for Adams's operations-to

get a corporate

design that will improve our effectiveness. Once we get that new format, gentlemen,

1have but one goal-each month must be better than the past.

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