PROFILES: Business Hall of Fame Awards
Turnaround
Russell “Rusty” Hammer
President and Chief Executive
Los Angeles Area Chamber of Commerce
Two years ago, the Los Angeles Area Chamber of Commerce was an organization on the verge of irrelevance. Its membership had shrunk from a high of 2,800 businesses in 1990 to fewer than 1,300. Its core leadership of powerful downtown corporations had all but disappeared.
There was even talk about merging the chamber with other business organizations deemed more successful, such as the L.A. Economic Development Corp. or the Central City Association.
Faced with this continuing slide, the chamber’s executive board asked for the resignation of then-president and chief executive, Ezunial “Eze” Burts and launched an eight-month nationwide search for a replacement. The man they picked for the turnaround was 48-year-old Russell “Rusty” Hammer, who had successfully rejuvenated the Sacramento Metropolitan Chamber of Commerce.
Hammer brought with him a blend of political and managerial experience. He won his first elective office to the city council of the Northern California city of Campbell at 18. Three years later they elected him mayor. He then spent 15 years in the private sector before taking on the top spot at the Sacramento chamber.
In L.A., Hammer reorganized the chamber’s lobbying staff, bringing in high profile lobbyists from Washington and elsewhere. He overhauled its membership and public communications efforts and introduced a weekly “business perspective” column sent to thousands of members, the media and community leaders.
Suddenly, the once-silent L.A. chamber was leading the battle against secession and for a parcel tax to fund trauma care, endorsing candidates in local political races and bringing the region’s transportation officials together for the first time to present a unified front on transportation funding requests.
“We put in place both a structure and a philosophy that public policy and advocacy was important,” Hammer said last week.
Hammer also moved to stem the organization’s mounting losses, reducing staff and boosting membership outreach efforts. Last year, for the first time since 1990, the chamber increased its membership about 4 percent to 1,340 businesses. And, despite a shaky economy, the chamber broke even last year, Hammer said.
Along with an increasingly activist board, Hammer led outreach efforts to other business groups, offering ethnic and other local chambers of commerce seats on the board.
“We are trying to position the chamber to be the principal coalition builder in the region’s business community, to bring a significant business voice to the major issues confronting this region,” Hammer said.
Howard Fine
Employer
David Gold
Chairman and Chief Executive
99 Cents Only Stores
Son of Russian immigrants, David Gold still hews to an old-school paternalism in running 99 Cents Only Stores, the discount retailer he founded in 1982.
Last year, Gold wound up on the Business Journal’s list of richest Angelenos (along with his family), at $650 million. Even so, Gold extends stock option plans even to checkout clerks, and tries to infuse humor and a family feeling throughout the operation.
“Retail is an inherently low-paying industry,” said Gold, who is chairman and chief executive. “I feel the people in our stores and warehouses should get a piece of the American pie.”
The Gold family owns 40 percent of the Commerce-based company, which went public in 1996. Gold’s sons, Howard and Jeff, are senior vice presidents, and his son-in-law, Eric Schiffer, is president.
Dad keeps a tight lid on spending (living in the same house for 38 years). Executive compensation packages are devoid of fancy perks no secretaries or executive parking spaces. On road trips to grand openings, everyone stays at budget motels.
Gold himself draws a modest $181,000 annual salary and hasn’t gotten a bonus in four years, despite a 30 percent increase in the stock price.
But he is generous where it matters most to employees: rewarding them for the company’s success.
Every non-family member of the 5,674-person work force with six months’ longevity is eligible for stock options. (Gold’s family members are not eligible.) The board’s compensation committee consists solely of outside directors to ensure fairness.
Employees from truck drivers to warehouse workers to checkers have exercised options worth $65 million.
“Many of our employees don’t have college educations and some are even high school drop-outs,” Gold said. “Many of them don’t know about options when they come here. They basically know it’s a big extra thing that may allow them to buy a home.”
Buyers, a crucial ingredient in the 99 Cents Only formula, are paid $75,000 a year nearly twice the industry standard. They secure odd lots and merchandise that has sold poorly elsewhere or been discontinued, and the stores sell them in high volume at the 99-cent price point.
That helps explain an impressive 40.1 percent profit margin last year. But beyond the numbers is the fun that Gold brings to the place something he believes keeps folks motivated.
The advertising all created in-house is so offbeat that Gold is sometimes criticized for going too far. The chain once intentionally misspelled a new product Niagara Water in ads by substituting a V for the N.
Margot Carmichael Lester
Innovator
Rick Rosenfield and Larry Flax
Founders
California Pizza Kitchen Inc.
When California Pizza Kitchen opened in 1985, the gourmet pizza movement was in full swing provided you could get into tony restaurants like Alice Waters’ Chez Panisse or Wolfgang Puck’s Spago.
“We couldn’t,” admitted Larry Flax.
Law partners Flax and Rick Rosenfield were looking for a reason to get out of law when they saw an opening. “We saw an opportunity to take gourmet pizza out of the esoteric and into a more universal language,” Flax said.
The result was California Pizza Kitchen, a restaurant concept designed to appeal to people like themselves higher-end diners who wanted a gourmet slice on the fly.
Flax and Rosenfield developed their own recipes in a tiny Beverly Hills storefront restaurant and, avoiding the kitschy red-checked tablecloths and Chianti-bottle candleholders of most pizza joints, favored a sleek, white and yellow tiled d & #233;cor.
“We did for pizza what Baskin Robbins did for ice cream,” Flax said of their effort to develop new flavors based on current trends and tastes.
“We did the Thai pizza because Thai food was big then,” he continued. “We had a Cajun pizza, when everything was blackened, but when people lost interest, we took it off the menu. It could be reintroduced now, though, with the new interest.”
PepsiCo bought a controlling interest in the company in 1992, later selling it to Bruckmann Rosser Sherrill, a New York investment firm. The firm brought in industry veteran Frederick Hipp, and in August 2000, CPK went public at $15 per share. Today, there are 150 restaurants and a market capitalization of $466 million.
The chain has added to the convenience of its offerings by opening 24 CPK/ASAP “grab and go” locations in airports and malls, with scaled-down menus featuring favorites as well as specially designed items. CPK has also moved into supermarkets with frozen versions of favorite pies through a distribution deal with Kraft Foods.
Rosenfield and Flax have gradually retreated from daily operations, but itching to test their creativity again, have cooked up a new venture, LA Food Show.
Slated to open in the second quarter in a Manhattan Beach shopping center, the 7,000-square-foot restaurant will have a 50-item menu including alcohol but conspicuously devoid of pizza.
The concept is deliberately complementary to CPK. In fact, the Food Show location is near a top-performing CPK outlet. “It’s the same concept great food, great prices with great service but a different menu,” Flax said.
Flax hopes he and Rosenfield can hit again using the same guiding principles they deployed to make CPK a success. “We put on our common man hats and look at what upscale people are eating,” he said. “We don’t say ‘Eat what we say.'”
Margot Carmichael Lester
Upstart
Laurie McCartney
Chief Executive
eStyle Inc.
For a Web retailer, simply surviving the past three years is an impressive achievement. Laurie McCartney, founder and chief executive of eStyle Inc., has thrived.
Her Los Angeles company, which operates the Babystyle.com and Kidstyle.com web sites, raised new money last year to expand beyond online and print catalog sales. It opened its first retail store in Manhattan Beach three months ago, and a Newport Beach store will open on Memorial Day.
McCartney, a former marketing executive at Walt Disney Co., founded the online maternity and children’s clothing business while pregnant with her first child in 1999.
No other retail stores were doing a good job of packaging maternity and baby clothing, and McCartney saw that expecting mothers would welcome the convenience of shopping on the Internet. “There was an obvious space for making the lives of busy parents easier,” McCartney said.
All that was missing was a sharp approach to marketing and management. McCartney recruited former colleagues at Disney to join her, and together they produced double-digit revenue growth in 2002, and project a repeat this year.
“How have we made it through the tough times?” she said. “It’s been about building a brand that resonates with the consumer.”
In its early days, eStyle only sold clothes made by other manufacturers, a money-saving tactic that provided time to get the know the needs of the market. Later, McCartney and her staff looked for holes they could fill designing stylish yet basic maternity and baby clothes. As part of her research, she brought in potential customers to the company’s offices to try on prototypes.
Now eStyle produces most of its own clothes and sells them under its private labels, Babystyle and Kidstyle.
With its own merchandise established, eStyle is embarking on the third leg of its distribution plan, adding bricks-and-mortar stores to the mix.
“The stores will have items from all of the categories we feature on our site,” McCartney said.
Her success has satisfied her venture capitalist backers, who recently doled out a new round of funding (amount undisclosed) to finance the store-opening foray. Altogether, funding for the company approaches $100 million since inception, said David Lowrie, eStyle’s chief financial officer.
Lowrie won’t say whether eStyle is profitable. The company expects $30 million in revenue in 2003, representing a 26 percent jump from 2002.
Next step for McCartney: the world. “We’ve been approached by several international companies that want to bring our product overseas,” she said. “Ideally, we’d like to do that within one to three years.”
Michael Thuresson
Community Leader
Earvin “Magic” Johnson Jr. and Kenneth Lombard
Chairman and Chief Executive; President
Johnson Development Corp.
Since retiring from the Los Angeles Lakers in 1991, Magic Johnson has made the transition from a hardwood leader to a leader in community and economic development. His Johnson Development Corp., founded in 1993 and based in Beverly Hills, focuses on creating business opportunities, improving quality of life and fostering civic pride in low-income urban areas.
“We demonstrate the highest level of excellence in business performance by stimulating economic growth and financial empowerment in minority communities throughout Los Angeles,” said Lombard, a former venture capitalist and investment banker who joined Johnson a decade ago.
To date, Johnson Development has generated $150 million in development, creating more than 5,000 jobs, according to Kenneth Lombard, Johnson’s longtime partner and president of Johnson Development.
But success hasn’t come without some tussles. Johnson’s company was once interested in developing the Santa Barbara commercial and residential project (since renamed Marlton Square) in southwest Los Angeles.
Johnson was unable to corral the necessary support from public officials. The project is now moving forward without him in a development role, although the company is interested in opening a 24-Hour Fitness there.
Johnson Development Corp. was the first major developer to enter the area, opening a 15-screen stadium-style megaplex at Crenshaw Mall in Baldwin Hills in 1995. It was the first of the Magic Johnson Theatres, created under a partnership with Loews Cineplex Entertainment to build first-run megaplex theaters. It operates five other theatres nationwide.
Johnson’s company is involved in several other mixed-used developments, via the Canyon-Johnson Urban Fund, a closed-end real estate fund managed by Canyon Realty Advisors LLC and Johnson Development.
Canyon Johnson acquires and develops or redevelops urban real estate, and has secured a $50 million commitment from the California Public Employees Retirement System to develop retail centers in urban areas throughout the country.The fund is also a partner in the 90,000-square-foot mixed-use development at Sunset & Vine in Hollywood, which broke ground in June 2002.
Urban Coffee Opportunities, a venture in which Johnson Development and Starbucks each have a 50 percent interest, brings Starbucks to urban neighborhoods. That partnership was formed in 1998, and owns 42 stores nationwide with plans to open as many as 20 more this year.
Magic Johnson’s T.G.I. Friday’s restaurants, a 50-50 partnership with the chain’s Dallas-based owners Carlson Restaurants Worldwide Inc.
Margot Carmichael Lester
And the Winners Are…
Amid uncertain economic times as the U.S. prepares for a possible war with Iraq, optimism peeked out for at least a couple of hours last Wednesday as the Business Journal honored eight Angelenos at its annual Hall of Fame Awards Luncheon.
Praised as a man who helps the blind to see, the deaf to hear and the disabled to walk, MannKind Corp. founder Alfred Mann was honored as the 2002 Businessperson of the Year. The event at the Beverly Hilton also included awards in five leadership categories.
Mann was cited for a string of biotech and biomedical companies he started, including Second Sight LLC, which develops visual prosthesis, and Advanced Bionics Corp., which makes cochlear implants to restore hearing.
Now 77, Mann is using his estimated $1.1 billion estate to establish biotech and biomedical research facilities that will link academics with businesses and venture capitalists to commercialize products.
“He’s an engineer, he’s an inventor, he’s a brilliant businessman,” said USC President Steven Sample after introducing Mann to the 600 attendees. “But overall, he’s one of the greatest humanitarians I’ve ever met.”
Mann donated $113 million to establish the Alfred Mann Institute for Biomedical Engineering at USC. Another $50 million donation is in the works. “I told them I won’t do it until there is peace,” said Mann.
Last year, the Businessperson of the Year Award was given to Northrop Grumman Corp. Chairman Kent Kresa.
Among the other honorees last week:
– David Gold as best employer for founding 99 Cents Only Stores and giving full- and part-time employees stock options.
– Rick Rosenfield and Larry Flax as innovators for reinventing the pizza with their California Pizza Kitchen chain.
– Laurie McCartney as rising star for creating eStyle, an online maternity clothes retailer that has just opened its first brick-and-mortar outlet in Manhattan Beach.
– Russell “Rusty” Hammer as best turnaround executive for bringing vitality and financial stability to the Los Angeles Area Chamber of Commerce a year after being hired as president and chief executive.
– Earvin “Magic” Johnson and his business partner, Ken Lombard Johnson, of Magic Johnson Theatres and Johnson Development Corp., for community leadership in bringing business and job creation to low-income areas. “Unfortunately, you get the short guy,” said Lombard, accepting in Johnson’s absence.
David Greenberg
