Back to the Farm

Hal Rosenbluth must have considered and rejected a dozen ways to reorganize Rosenbluth International, the world's third-largest travel service company. But it wasn't until he was standing in a field on his ranch in North Dakota near a company operations center that inspiration hit. With a flop.

"I was standin' in a bunch of cow shit just about to call it a day," says the 44-year-old Rosenbluth, whose Philadelphia roots are clear in his Rocky Balboa accent and meandering speaking style, "when a close friend of mine walked out into the field and we started talking." The friend was a farmer, and the more he talked about the operations of a family farm the more it sounded like the solution to Rosenbluth's business problem.

Which was, things were about to hit the fan back in Philadelphia. Rosenbluth needed a new design for his high-flying, fast-growing organization. Since joining his great-grandfather's modest travel business in 1974, he'd grown it into one of the country's top agencies. In 1984 he gained a contract to provide all of DuPont's travel services, and in the process saved his client $150 million in travel and entertainment expenses. In 1992 he wrote "The Customer Comes Second, and Other Secrets of Exceptional Service," arguing that Rosenbluth's unconventional management style -- focusing on the needs of employees and creating a genuinely humane workplace -- would lead to cut-above service for customers. The book attracted a national following to the company: Tom Peters took notice, the business press began to write about Rosenbluth, and the company flourished.

But by 1993 Rosenbluth could see problems ahead; the travel business, he believed, was about to change. In fact, airlines were on the verge of capping travel agents' commissions. Companies like Rosenbluth would need to renegotiate their deals with their clients in a hurry. No longer would they pay large companies with huge travel budgets for the chance to handle their business. Instead, they have to convince those companies to pay them for value-added service. In a companywide memo in January of that year, Rosenbluth told his people, "This price sensitive marketplace of the '90s is a dramatic shift from the marketplace of the '80s -- the era of Rosenbluth's explosive growth and success. We must meet our current and future clients' needs more consistently, more effectively, and a lot faster."

The solution, it turned out, wasn't in Rosenbluth International's nine-story headquarters building in downtown Philadelphia. It was in that cow-pie-spotted field in rural North Dakota. "What I'm beginning to see," says Rosenbluth, "is that the family farm is the most efficient type of unit I've ever run across, because everybody on the farm has to be fully functional and multifaceted. And what I'm looking for is an organizational design that can communicate that change."

Before you dismiss the family farm as an endangered species, more suited to coping with the business climate of the last century than with the next one, consider Rosenbluth's argument. Farming -- like travel services and plenty of other businesses -- is all about merging cutting-edge technology and down-to-earth people. The demands are the same: to survive on razor-thin profit margins, react instantly to unpredictable changes, control resources meticulously, and come up with new ways to sell a commodity that, at first glance, seems indistinguishable from the other guy's product.

With that in mind, Rosenbluth broke his company into more than 100 business units, each functioning as a farm serving specific regions and clients. Corporate headquarters became the equivalent of the farm town, where "stores" like human resources and accounting dole out what the farmers need. On the Rosenbluth farm, decision making and learning would be localized. In the face of impending tough times, it was an attempt to recreate the spirit of the young, supersonic Rosenbluth environment; if the whole company was too big to be a farm, at least each unit could be one.

The transition wasn't easy. In spite of a specific pledge in The Customer Comes Second -- "We don't subject our people to layoffs, downsizing, or cutbacks in personnel" -- Rosenbluth jettisoned 217 employees when the crunch hit in 1994. But the farm-inspired reorganization softened the blow, and today Rosenbluth is back in top form. A company that grossed a modest $20 million in 1978, Rosenbluth topped $2.5 billion in sales in 1996. Its 3,500 employees are spread out in more than 1,000 locations in 41 countries, and write nearly 4 million tickets each year. In addition to DuPont, its clients include Wal-Mart, Merck, Intel, and Oracle.

"So many businesses get into trouble because times are good," says Director of Human Resources Development Cecily Carel, looking back at the travel-agency-as-farm maneuver that seemed strangely at odds with the company's success at the time. But without the radical reorganization, say Carel, "we never would have been positioned to make this global growth. We were losing it."