RTOHQ: The Magazine October - November 2008

Complete issue of RTOHQ: The Magazine by APRO

The Dedicated by Kristen Card

RTO and the Financial Crisis by Ed Winn III 

Who is Your Vice President of Sales Prevention? by Bud Holladay

Vendor Spotlight: The Gerwe Family by Kristen Card




The Dedicated 
by Kristen Card 

Customer loyalty is one of the key elements for success in the rent-to-own business. You know you’re doing your job correctly when you experience that loyalty in your stores. Holding on to valuable employees is equally gratifying and it’s also a challenge. Employee turnover is an unfortunate corollary of modern business. But occasionally we do encounter rent-to-own employees who have bucked the trend by dedicating themselves to our industry over the long haul. Recently, APRO has profiled those who go the extra mile for rent-to-own on Capitol Hill (“The Connectors”) and the heads of RTO’s public companies, Aaron Rents and Rent-A-Center (“The Titans”).

In this issue of RTOHQ: The Magazine, we salute “The Dedicated,” longtime rent-to-own employees who have been in the trenches—on the floor, in the store—and maintain a zeal for working in our industry. They might not be running their own companies, but they’re responsible for helping make their companies run. Dennis Adams, Angelo Gughiocello and Craig Shewmake each exemplify the model employee, helping nurture the growth of the companies for whom they work—Full-O-Pep Appliances, Partners Sales and Leasing, and Briley Investments/Aaron’s, respectively. Their longevity in rent-to-own is an inspiration in a business climate that typically sees employees come and go in rapid succession. If turnover is an accepted part of the business, then these guys are exceptions-and exceptional.

 

—Neil Ferguson

Craig Shewmake
Briley Investments / Aaron's, Abilene, Texas

For someone who almost proudly purports to be “boring,” Craig Shewmake, vice president and controller for Abilene, Texas-based Briley Investments, dba Aaron’s, has a perspective on his career in the rent-to-own industry that’s really rather interesting: with 25 years of rent-to-own under his professional belt, Shewmake still doesn’t consider himself an RTO guy. “I’m the guy who deals with all the numbers, so what I’m doing isn’t industry-specific,” Shewmake explains. “I think my favorite thing is working for Robert, and he happens to work in rent-to-own. If he were running Dairy Queens or something, then I’d probably still be working for him. Whatever Robert decides to do, I’m going to be there with him.” “Robert” is company owner Robert Briley. The two have worked together for almost 30 years, having originally met at Western Marketing, a local petroleum distributor for Conoco products.

Briley left that business to run his own Curtis Mathes franchise and, a couple of years later, hired Shewmake to handle the company’s accounting. Among their commonalities, the pair share West Texas roots, a self-deprecating sense of humor and strong mutual esteem. “Intellectually, I’m not that bright,” Briley laughs. “I’m a big-picture kind of guy. I was never interested in learning—I was interested in figuring out what the requirements were for me to make money. Craig’s always interested in gaining knowledge and he retains everything.” It’s that love of learning that helps Shewmake stay satisfied professionally. A champion of innovation and creativity, he’s everseeking— and self-teaching—new technologies to help make his work more efficient; often he can be found lunching with the company’s IT staff, talking over the latest firewall software or e-gadget. Briley’s “big-picture” ideas keep Shewmake on his toes, too.

“Robert keeps it fresh for me to some extent,” Shewmake says. “He’s always changing and growing, so we’re not stagnant. There’s always something new—we’re buying or selling stores, he’s exploring a new opportunity or new areas of business to get into. Whenever he returns from a meeting, he’ll have 15 or 20 ideas he’s all excited about to drop in my lap. He calls me the devil’s advocate, because I consistently take a more pragmatic and pessimistic view of everything.” “I’m overly optimistic and aggressive,” Briley concedes. “Craig will be the first one to tell me ‘no, you shouldn’t do that’ or ‘you should do this.’ Whatever he says, I believe it. He’s a total reality check.” Briley says he frequently calls upon his friend and colleague for much more than just Shewmake’s “financial oversight” job description. “Craig enjoys doing for others,” Briley says. “He’s a good listener, extremely thoughtful and conscientious. He can be anything he wants to be—he could be the operations manager, he’s strong at advertising, he’s a great trainer, he’s incredibly organized and thorough.

He’s got it all. He simply prefers to do the accounting part of the business.” “I used to be in marketing and management and I like the accounting side better because the numbers are always there when you want them, they don’t talk back, they don’t walk off the job, and you can always count on them,” Shewmake only half-jokes. All joking aside, the disciplined, detail-oriented Shewmake revels in the methodical nature of his numbercrunching— and marvels at his good fortune in finding the ideal combination for a successful career—in rent-toown, or anywhere. “You’ve got to find work you like to do and people you like working with,” quips Shewmake. “And if you can find a company that will let you grow and develop into your full potential, then that’s the best.”

Angelo Gughiocello
Partners Sales and Leasing, Texas City, Texas

When Angelo Gughiocello finally arrived in Texas City, Texas, it had been a long, strange road trip from his home in New York state—a two-day journey in an $800 van (that lost a wheel in Mississippi), with his three kids, about 15 boxes of his life belongings and a store manager job waiting for him with John Spangle at Partners Rental (www. partnersrental.com). “The kids had essentially been raised in the rent-to-own stores Angelo had worked in,” Spangle remembers. “So the first day, his middle son, Michael, who was 10 at the time, comes walking into the store and doesn’t say a word. He walks all the way around the store— it’s about 8,500 square feet—comes over to me, looks me straight in the eye and says, ‘I’m Mike.’ I shake his hand and say, ‘Hi, Mike. It’s good to meet you,’ and he says, ‘I’ll have this all cleaned up in a week.’

That’s the work ethic Angelo’s got and he has definitely instilled it in his kids.” The moment classically characterizes the interweaving of Gughiocello’s personal and professional lives into the extended familial structure that it is today. And by all accounts, this big family is also a happy one. Gughiocello has been with the company—now named Partners Sales and Leasing—for almost six years, where he’s now operations manager overseeing six Texas locations—three in Texas’ coastal region and three in the Austin area. “He’s everybody’s best friend,” Spangle says. “The customers just love him. Angelo’s as honest and fair as the day is long, he just walks and talks integrity. And his greatest strength is collections; he knows how to talk to people, how to be respectful and be firm, so he can say, ‘Look, it’s time. You need to come in to pay me.’

To be a good collector, you have to have good relationships. That’s what Angelo’s all about.” Gughiocello’s relationship with Spangle actually originated in 1996, when Renter’s Choice—where Gughiocello had been working since 1989—acquired Magic Rent-to-Own— where Spangle had been working since 1990. Spangle, a company vice president, promoted Gughiocello from store manager in the small city of Hornell, New York, to a regional manager way down in Louisiana. Gughiocello amped up the area’s profit from 2–3 percent to 13–14 percent within six months. But when he was confronted by his homesick spouse, Gughiocello requested a demotion so he could return with his family to New York. He and his wife eventually separated, but with full-time custody of his children, Gughiocello continued to turn down promotions and a few earlier proposals from Spangle to avoid excessive hours at the office. He accepted the Partners offer in large part because of Spangle’s clear understanding and support of his single-dad status.

“John was always ‘family first,’” says Gughiocello. “When I came to take over the Texas City store, we set up a playroom on the second floor for the kids to be after school and on weekends, so they had somewhere to do homework, watch TV, play video games or whatever. I’ve learned a lot about family values working with John.” Long hours are no longer a concern, but are now commonplace for Gughiocello, who’s biggest challenge at work, according to Spangle, is going home. “I literally have to forbid him to work seven days a week,” Spangle says. “He’s not ignoring his kids—they’re with him. It’s just what he loves to do. The people coming in and out of the store, they’re his family. So if I tell him he can’t go to work, then I’m telling him he can’t go to family.” Though Spangle frets about burnout, Gughiocello—going into his 20th year in rent-to-own—says Spangle himself has been vital to his friend’s staying power.

“Keeping it fresh has a lot to do with who you work for,” Gughiocello explains. “I think burnout comes not from just being somewhere, but from not enjoying your job and who you work for. I really enjoy dealing with people, and John and I work well together. I really owe my success to my family—my kids first and foremost: Anthony, Michael and Katie—as well as my family in rent-to-own.”

Dennis Adams
Full-o-Pep Appliances, Bloomington, Indiana

I’ve never stayed home one sick day. I’ve never gotten up and said, ‘I really dread going in to work today.’ Every day, I’m ready to go.” Full-O-Pep/American Rental (www.americanrentals.com) District Manager Dennis Adams likes his job. Which is a good thing, as it’s been more than 30 years since the Bloomington, Indiana, native started working—straight out of high school—in a local appliance store, repairing televisions. Within a few years, the store was sold to Jim Hammond, who remains the now-retired owner. Within a few more months, Hammond, Hammond’s brother-in-law David P. David and Adams were talking about transforming the company into a then-new-fangled business called rent-to-own. “Jim bought an informational packet about the rental business from Bud Green up in Michigan,” Adams remembers.

“For $100, you got a packet with an outline of the business and all the forms you would need to run it. And part of the deal was you could go up to visit his operation to see what he was doing and how it worked.” The three men did, indeed, take a field trip up to Kalamazoo Rentals to spend the day with owner Green—who must have been persuasive, because the trio decided en route home that they were going to try the rental business. Adams managed the company’s first rental department. Today, Full-O-Pep/American Rental has a flourishing 50 stores and three RNR Custom Wheels & Performance Tires locations across four states. Adams has helped open many of those locations and he oversees 10 key central Indiana stores. David, now vice president and general manager, characterizes Adams as fiercely loyal, brutally honest, extremely hardworking and passionately enthusiastic. “Whenever Dennis likes an idea, he just can’t wait to get out and share with other people,” David says.

“When something needs to be done, Dennis doesn’t think twice about getting in there, rolling up his sleeves and taking care of it. For example, every holiday season, he hooks up this long trailer to his truck and hauls product around from store to store to make sure the stores are stocked with what they need to take care of their customers. Dennis understands the importance of taking care of things—especially customers, making sure they get what they need when they want it. And he’s definitely not afraid to get his hands a little dirty doing it.” “Our customers want what everybody else wants,” Adams says. “But they just don’t have the ability to get it. We create that for them. We’ve got customers today who are thirdgeneration— it was the parents, then their kids and now their grandkids coming into our store, and that’s so satisfying.”

At the same time, Adams—who competed in track, basketball and football all through school and who has shared season tickets to Indiana University basketball games with his dad for more than 30 years—has a competitive streak that continuously keeps him striving for more. “I’m never satisfied,” Adams admits. “No matter how successful a store is, in my mind, it’s still not where it could be. I love our busy seasons; I enjoy being out in the stores, moving a lot of product, carrying product back and forth between stores and searching for items they need. It’s different every season, every day.” Which is how a rent-to-own career—with more than three decades at the same company—stays fresh for Adams.

But beneath the ever-changing daily work landscape, he credits three essential elements with his rent-to-own success and stamina: a solid work ethic, a positive attitude and a deep caring for his business and its people. “I treat the stores and the company like I’m part of it,” Adams says. “When I spend company money, I feel like it’s my own money. I feel like the more successful the stores are, the more successful I am. I always treat it like it’s my business as much as anybody’s business. I feel like part of a family.” 

RTO and the Financial Crisis
by Ed Winn III

  Most companies have at least one. He’s the chief culprit behind the missed goals and prolonged sales slumps heretofore attributed to everything from high gas prices to global warming. Sometimes he is easy to spot, but some digging may be required to identify this person who is at once the most expensive employee in the company and its greatest obstacle to steady growth. We’re talking about the Vice President of Sales Prevention. You may believe that no such position exists in your organization and you could be right—unless any of the following describes your business lately: Whether you spend 2 percent or 6 percent of your revenue on advertising, the only things that go up are payroll hours and the owner’s blood pressure.

Things that go down include profit and cash flow. Everyone in the company has read the policy manual, the procedures manual and the latest executive essay on the value of customers, but returns—or, for those still stuck in the ’70s, “pickups”— only slow down when the truck is in the shop or the store is closed. The company is considering a three-day workweek. While the local population has increased, the number of rentto- own, sales-to-leasing, lend-lease and move-to-own stores has steadily decreased as a result of mergers and acquisitions. But you have yet to reap any benefit from this game of Last Man Standing. In fact, your rate of customer growth begins with a decimal point. Finally, you will know your Vice President of Sales Prevention is on the job when you give serious consideration to a new sales contest: Fewest Customers Lost. The one unassailable metric in the rent-toown industry is customer count.

Arguably it is the most definitive means of measuring how effectively we deliver on our promises, present and past. Businesses grow by various means that always boil down to two factors: either more customers keep coming through the turnstiles or management figures out a way to soak the customers who already came through the turnstiles. In the second case, growth is manufactured through cleverness and maybe some tricky accounting. In the first, it is developed through careful research, wise strategies and responsive tactics. It isn’t hard to figure out which organization will hit the wall first. The real measurement of any company’s health is the number of new customers it is able to attract and retain, thus fueling revenue growth. Nipping all that in the bud is job one for your Vice President of Sales Prevention. But just identifying him isn’t enough—the enabling bureaucracy must be dismantled and offsetting positives developed.

Any talk of lost business usually begins with the way employees handle late payers. In this case, that would be an incomplete exercise. It is unlikely that any assistant manager facing hard deadlines and intractable quotas is thinking about customer growth when she needs another four payments to win this month’s “Keep Your Job” contest. But that person makes up only about a fifth of the work force in most companies. So a good number of other people share significant responsibility for the things that hinder growth. It is fairly easy to spot a pickup or return that needn’t have occurred. A little retraining or direct involvement can stop or at least slow down most of those. A much tougher proposition is accounting for a rental sale that was never made to a customer who was never recorded, by a person who doesn’t see either of those as a problem. Sometimes the answers are far from what they appear to be.

A little rent-to-own store in Ohio was in a slow downward spiral despite heavy advertising, aggressive promotion and well-intentioned staff and management. Deliveries never exceeded the relatively low levels of returns and writeoffs. Meanwhile, the company’s other store across town was thriving. Ideas emanating from home office included hiring commissioned salespeople and paying outrageous incentives for new orders. Then someone with no agenda other than growth and no loyalties except to sales and profit spent a few days poking around the store. Soon, it was clear that getting orders was not the problem. Traffic was good and staff selling skills were generally high. Trouble was, nobody could turn all those new orders into deliveries. The process of verifying, tracking, organizing and scheduling was so dysfunctional that fewer than half of all orders written ever made it out the door.

Once the potholes were fixed the store moved into the fast lane and stayed there. The lesson is that sales and deliveries are two very different processes, requiring vastly different skills and abilities for successful execution. The well organized manager must be complemented by a high-energy, hellishly competent and money-driven sales leader who can generate a steady supply of good orders that the manager can then turn into customers by doing all those “back-of-the-house” things correctly. When these roles are reversed or confused, employees lack guidance and the door is open for a Vice President of Sales Prevention to step up. It can be anybody: store manager, assistant manager, district manager. It is ironic that the concepts and processes that make up Rent-to-Own 101 can also be a blueprint for developing highly effective Vice Presidents of Sales Prevention. All that’s required is a little misdirection and a few misplaced assumptions in the following areas:

Job Descriptions.

When these are little more than a long list of seemingly unrelated tasks and functions, apparently unrelated to getting new customers or satisfying existing customers, the right conditions exist for developing a Vice President of Sales Prevention. When hours must be devoted to process or detail with no clearly defined outcome, little time is left to create new sales opportunities or capture existing ones—two things that have very clear outcomes. Vice Presidents of Sales Prevention resolve this conflict by posting complicated work schedules and inventing new reports and forms to replace the ones currently not in use to record things that are not happening. Go into a store and ask who is in charge of sales. If you hear “We all are,” you can be sure that no one is.

Goals and incentives.

The best compensation plans create significant rewards for producing well-defined outcomes, which are always measured in concrete terms over reasonable periods of time. The worst are obscenely complicated and contain more loopholes than a mail-order dental plan. Top performers always gravitate to workplaces where the pay plan is transparent, goals are attainable and sufficient resources are available. Ignoring this, Vice Presidents of Sales Prevention revel in maze-like action plans with hopelessly optimistic outcomes and incentives apparently based on Mayan astrology. Their idea of a good delinquency- reduction plan is clearing more space in the back for returns. During sales meetings they whisper knowingly that sales incentives are designed for people in good markets where there is no competition and prices are lower.

Collection policies.

Vice Presidents of Sales Prevention create 200-page manuals that focus on ways to win court cases, understanding repossession laws, the efficiency of auto-dialers versus sound trucks and the mechanics of cell phone triangulation. Nowhere will customer retention or corrective strategies receive mention, but clear instructions will be given on skip tracing, skip prevention, skip recovery and the spending limits on skip-recovery celebration. Customers who pay early and pay often are prized. Others have a short shelf life. This VP prefers employees with backgrounds in security work, correctional facility management, nuclear submarine safety and homeland security. Although the company—like most thriving rent-to-own stores—has replaced “collections” with “account management” or “customer development,” the Vice President for Sales Prevention has not.

Rental criteria.

In the summer of 1982, a few rental guys sat in a Waffle House in Charlotte, North Carolina, and came up with a matrix that, among other things, predicted which customers might be expected to move to nations that do not have extradition treaties with the United States or trade their rental furniture for a bass boat or pay late around Christmas and during factory layoffs. The group had plenty of time for such visionary output because none managed a store with more than 200 customers. The effective Vice President of Sales Prevention will expand on that seminal work and remove all risk from the rental equation by approving only orders from customers who don’t need it this month, don’t have the money yet or haven’t made up their minds. If the company embraces a new marketing strategy— say, “guaranteed approval”—its Vice President of Sales Prevention ensures that same-week delivery never becomes part of the bargain. You will know this one’s on the job when you find manila folders stuffed with unmarked, undelivered orders in a carton with last season’s fliers or in a file drawer labeled “MISC” or “CNCL.”

Customer service.

Progressive rent-to-own companies pride themselves on receiving generally better satisfaction ratings than other service businesses. Much of this can be attributed to a highly competitive marketplace and the growing cost of acquiring new customers. It’s simply cheaper to hire folks who are friendly and responsive. Put a Vice President of Sales Prevention to work on this and he or she will come up with a raft of rules and initiatives which, if properly managed by your Director of Customer Dissatisfaction, will discourage anyone from offering a referral or reopening a closed account. At the top of the list is keeping the policy manual at the sales counter so that all issues can be quickly resolved with the magic phrase, “It’s company policy.” Another is the use of strategically placed warning signs that point out the consequences of irritating management with irresponsible actions such as writing a check, asking to use the bathroom, failing to stay home during your scheduled delivery week, even thinking about a refund and parking in the wrong spot or wanting more nice things than the VP of Sales Prevention believes you can afford. Of course, that’s in addition to providing wrong or incomplete answers during the investigation surrounding your recent request for service.

Advertising.

Usually the domain of corporate managers or owners, the advertising department can be the straightest path to the top for potential Vice Presidents of Sales Prevention. You’ve probably seen their handiwork in sales circulars picturing goods that only remotely resemble those on the floor, or in commercials running on cable channels that cater to wine lovers and house renovators and offer exotic vacation trips to any suicidal advertising managers willing to commit their entire budget to that station. At least a few times a year, the Vice President for Sales Prevention will demand detailed information on every shopper that—when collected, massaged and extrapolated months later—will offer convincing proof that, while the advertising is highly effective, store personnel are not doing their jobs and all managers are significantly overpaid. Positive reinforcement will never be the hallmark of your Vice President for Sales Prevention. A marketing manager for Sears once told an audience of retailers that the venerable merchandiser’s most effective marketing strategy could be summarized as not letting Aunt Bea’s refrigerator get scratched up before it gets to her home.

Anything more complicated than that, he said, was unlikely to be executed with any degree of precision and would only divert attention from everyone’s real job, which was ensuring a nice shopping experience in the local Sears store. The fact that Sears bought the carcass of K-Mart willingly and in broad daylight should not influence your opinion of their marketing strategy. By the time your shop has been in business as long as Sears Roebuck & Co., it is guaranteed that you will have found and fired all your Vice Presidents of Sales Prevention. Just don’t repeat K-Mart’s mistake and replace them with your Directors of Customer Dissatisfaction.

Vendor Spotlight: The Gerwe Family
by Kristen Card

I did a lot of due diligence,” Mike Gerwe Jr. says, referring to his life-changing decision to accept a sales/marketing position with RES Accessories (www.resacc. com) in 1994. “I talked with about eight close friends who were involved in [that sort of] business and the word was, it was either something that would work really, really well, or it would be terrifically challenging.” Mike elected to join RES and fortunately, it’s worked really, really well—mostly due to the longtime, close relationship he shared with the company’s owner—his dad, Mike Gerwe Sr. “We’re quite close, so I knew it would probably work favorably,” Mike Jr. acknowledges. What he might not have guessed is just how his entrance into the family business would ultimately turn RES into the rent-to-own industry’s go-to vendor for all the little things that help them create big success.

RES Accessories offers about 2,000 different items that support rent-to-own products, covering several categories: appliance accessories, such as dryer/range connectors or clamps; computer accessories, like replacement keyboards and mice or cables; electronics accessories—universal remote controls, batteries, etc.; refurbishment/cleaning accessories, such as furniture polish or leather cleaner; and warehouse accessories—appliance carts, furniture pads, etc. “When Mike Jr. came into the company, we were carrying about 30 to 40 accessories for rent-to-own and servicing about 100 stores,” Mike Sr. remembers. “He saw an opportunity and became very involved in APRO, TRIB Group, state [rental dealer] associations and with individual rent-to-own stores as customers; rental-purchase has been the bulk of our business ever since. We provide stores and chains with real one-stop shopping for items they might have had to go to as many as 15 or 20 different vendors for before.”

Today, Mike Jr. serves as RES Accessories’ president and CEO, the company services about 145 rent-to-own companies representing about 3,000 storefronts nationwide and this niche business is saving its customers more than just considerable cash. “Our biggest competitor is local procurement,” Mike Jr. notes, “when [store personnel] pull money from the cash drawer and run up to Lowe’s or the corner hardware store at the last minute, spend three times the money for a dryer cord, on company time/payroll/insurance, using the company truck and they’re not in the store serving customers. They can customize a program through us and we ship same-day—the intrinsic savings, beyond just the cost of the items, become extremely clear.”

Indeed, the Gerwes say their goal is to do whatever they can to make their customers’ jobs and lives easier. “The single most important lesson we’ve learned is to listen,” says Mike Sr. “Let the customers come to you and tell you exactly what they need. If you’ve got an open mind and you listen to what they’re saying to you, then you’ll have incredible opportunities presented to you.” “We work to understand what their business is all about,” Mike Jr. seconds. “I try to take all of our personnel to rent-to-own stores individually, to see how they operate, what their daily life’s about and how we can help them. We see the amazing one-on-one personal relationships they’ve developed with their customers and by being there, we’re building the same sort of working relationship with them.”

The Gerwes’ approach to their own business mirrors those close connections. Originally launched by Mike Sr., and his wife, Joyce (they’ll celebrate their golden anniversary next summer), RES now employs a tight-knit, crosstrained “family” of 15, led by what Mike Jr. calls “an extraordinary management team.” Mike Sr., sidling toward retirement, today holds the official title of company chairman. His son honors the important role his father still plays within the business by calling him “Guide.” “I’ve had no problem whatsoever in letting go of responsibility and transferring it to [Mike Jr.] from day one,” Mike Sr. says, “because we’ve always been so in-sync in how we think, work and deal with the challenges we face daily. We’ve already concluded a succession plan—and it isn’t an end, it’s a new beginning. We’ve successfully gotten here without missing a beat and we intend to be around a long, long time.”