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.”
Farm Life Part 1: It Ain’t Norman Rockwell
The mere mention of the family farm is enough to conjure up the image of a Norman Rockwell illustration — a rosy-cheeked brood huddled around a blazing hearth, celebrating the virtues of togetherness and hard work. Indeed, Rosenbluth built much of its 1980s reputation on just such a warm-and-fuzzy management style. From the beginning, a single core value has eclipsed all others: Treat your employees well, and everything else will fall into place. In fact, Rosenbluth doesn’t even use the condescending term “employee” — everyone in the company is an “associate”; a manager is called a “leader.”
But for all the emphasis on the soft stuff, Hal Rosenbluth has consistently been willing to bet the farm on a much tougher and dicier competitive element: advanced information technology. After all, when you’re up against giants like American Express and Carlson Wagonlit Travel — or the emerging self-service possibilities offered by booking travel through the Web — cutting-edge information technology makes all the difference.
The family farm goes high-tech
The travel service business today is all about costs: demonstrating to your clients that you can help them control theirs, while doing everything you can internally to control yours. The key is efficiency, and Rosenbluth’s unrelenting focus on technology creates efficiency in all kinds of ways, large and small.
Overall, technology is the tie that binds clients, reservation agents, sales reps, and top management. It’s a lesson that Rosenbluth learned on another North Dakota visit, when his farmer buddy was running behind schedule. “When you need something, go to your neighbor,” Rosenbluth says. “It doesn’t cost you anything. It’s just that you better go running when your neighbor calls for some help.”
The Rosenbluth equivalent is its Global Distribution Network, which links every reservation agent at its 100-plus business units to AS400 mini-mainframes in Philadelphia which bulge with client-specific information. That means that any Rosenbluth agent anywhere in the world can draw on every client’s global travel data — or offer service to any client.
All of this is integrated with two proprietary Rosenbluth programs. One is called Res-Monitor, the travel-industry equivalent of a low-fare search engine. Linked up with fare information coming from all the major airlines, it finds the lowest rates at the moment of the client’s request — and then keeps looking for new, better deals up to the moment of departure. A second, more supple system, known as DACODA, takes into account a wide array of other criteria to help a client select not only the lowest fare, but also the best trip. It finds these options based on client data, from companies’ individual travel compliance rules to special deals a given client may have with specific carriers. The system also quantifies a range of hard-to-measure qualitative factors — the pitch of a seat, flying time, or time spent making ground connections. “The software’s formulas do those calculations,” says Diane Peters, a longtime Rosenbluth executive, now a consultant with the company. “That’s totally unique in our industry.”
By building this network, Rosenbluth has diminished the importance of the physical location of its agents. Back in the 1980s, it was the first agency to take advantage of its technology to create a massive reservation “nerve center,” where agents in a single location handled travel management for clients all over the country. That kept costs down; but as the company grew, Rosenbluth realized that similar “IntelliCenters” could be dispersed anywhere around the country. Now the company has major phone banks in areas where labor costs are low and the work ethic is high: North Dakota, Delaware, and Allentown, PA. Because of these lower costs, a client can save 30% to 40% per ticket by booking through an IntelliCenter, estimates Sales Vice President Joe Terrion.
The Rosenbluth network not only links all of its agents to each other, it also monitors them from the Network Operations Center on the fifth floor of Philadelphia headquarters. Staffed by a couple of associates who divide their attention between seven computers and a grid of nine video monitors, this screen-lit electronic tracking center provides a window on all the farms. With a few clicks, the staffers can check out any Rosenbluth reservation center: how many calls are coming in, how long clients are waiting on hold, how long each call lasts.
The center also acts as an early warning system for unanticipated developments that could cause a sudden spike in one area’s call volume or disrupt travel altogether. CNN or The Weather Channel shine out from the center screen, and information about airport conditions and major events in cities all over the world scrolls down other screens. If one farm gets hit with a flood of calls — or an actual flood — calls are seamlessly transferred to another center. During the Blizzard of ’96, for example, some 21,000 calls to East Coast Rosenbluth outlets were seamlessly rerouted this way.
This technology also translates into a number of micro-level efficiencies — which turn into small but critical productivity gains. For example, Rosenbluth noticed that its agents had to type the same words over and over during the course of a day, or even a single call, as they investigated fare possibilities for clients. So the company developed Custom-Res, a software platform with built-in prompts, requiring only a “yes” or “no” click. It also built in recurring client information, identifying each company’s specific travel guidelines, so agents don’t waste time creating options outside acceptable guidelines. The result: keystroke count was reduced by 75%. Fewer keystrokes means less waiting time for the client — and higher productivity for Rosenbluth.
By closely monitoring the call volume at each reservation center, the company can staff each one precisely. That cost management benefits the client indirectly, of course, but Rosenbluth also parlays its efficiency into a more direct client benefit. The company measures the percentage of calls answered within 20 seconds, the average speed of answer, the maximum amount of time spent on hold, and the percentage of “abandoned calls.” For each category, the company has specific operating standards, and if the numbers get out of whack, something changes — personnel are added or subtracted, calls are shifted.
All of this adds up to tough-minded cost control — of both hard and soft costs. Rosenbluth prides itself on using technology to offer its clients the lowest fares. But the company also recognizes that travel costs extend well beyond the price of the ticket. At a big company with lots of travelers, each trip can influence future travel decisions — if you collect and analyze the data. By dissecting travel patterns, for example, companies can discover new ways to fine-tune travel guidelines. Rosenbluth’s back-office software, VISION, generates detailed reports for clients — and saves administrative time for them by automatically filling out expense reports at the end of each trip.
The key to Rosenbluth’s growth is its blend of technology and marketing. And to make sure the two elements are integrated, Rosenbluth has put one person in charge of both: Dean Sivley, the former technology chief for Duracell who took over Rosenbluth’s IT department in 1995, now has marketing responsibility as well. “Most of the things that we’re doing in IT are driven by what we should be doing from a marketing standpoint,” he says. “It’s easier for one person to make a decision as to what’s most reasonable.”
One of Sivley’s first assignment was to come up with a “suite of products” to tie together the company’s technology pieces into an attractive package. “If you’re a company out there who’s into doing your own travel management in a big way,” says Sivley, “you want to deal with a company who knows you need an agentless reservation product, an integrated expense management system, and an integrated reporting tool.”
Sivley points to Wal-Mart as a good example. The giant retailer worked with Rosenbluth to create Local Area Network (LAN) electronic reservation systems accessible from the desktop — or laptop — of every traveler in the company. The agentless system, E-Res, allows Wal-Mart’s 7,000 frequent travelers to book their own air, hotel, and car reservations simply by calling up the program, entering their name, travel dates, times, and home and destination cities. Then, using Trip Planner, Rosenbluth’s booking system software, they get a grid of flight options, all selected according to Wal-Mart’s internal travel policies, arranged according to price. A few simple clicks, and the reservations are made.
For companies that don’t want the complexity of a LAN-based system, Sivley offers both a Web-based version and a simpler online system. “The best thing to do is develop a dial-up product,” he says. “You can just drop it on the user’s desktop. You don’t have to get the technology department involved. It isn’t elegant. But it’s much more realistic in terms of getting it installed, getting a groundswell of people using it, and then, when it spreads to the whole company, you move to a LAN environment.”
This kind of down-to-earth thinking shows why it just makes sense to have the marketing person and the technology person be the same person.
Farm Life Part 2: It Ain’t Dorothea Lange
If the first image of life on the farm is that of a Norman Rockwell illustration, the second is that of a Dorothea Lange photograph: a rail-thin, hollow-eyed man standing grimly in front of a shack — a reminder of the unforgiving demands of earth and weather. So if farm life is that hard — as hard as the climate in plenty of businesses — does a company like Rosenbluth start grinding everything to the bottom line, stop coddling employees, and get mean?
Out of the question, says Rosenbluth. Even as his company tries to position itself for an uncertain market, there is at least as much emphasis on what it wants to remain as on what it’s prepared to become. “At the end of the day,” says Rosenbluth, “I believe our only sustainable competitive advantages are the associates and the environment in which we work.”
But how do you keep that culture? How do you make sure that a desperate-looking Dorothea Lange photo isn’t lurking underneath that heartwarming Norman Rockwell painting?
Answer: Above all, remember that it’s a family farm.
Staff your farm with friends? Good idea!
“Our company is built on somethin’ that’s foreign to most companies,” says Rosenbluth. “We’re a company built on friendship. When I was in college, I was taught not to work with friends because you can’t get productivity out of ’em, you can’t make the tough decisions.” But, he argues, if your coworkers become your friends, you’ll never let each other down. “You can accomplish anything.”
This is Rosenbluth’s ultimate answer (and the subject, he says, of his next book): It’s exactly when things get tough that you want to work with your friends. In fact, if your people are anything less than that during a downswing, you’re in trouble.
In other words, the company still puts its employees first. Rosenbluth’s two-day orientation for new hires is already the stuff of legend. The first day climaxes in a high-tea service — on white linen, led by a top company officer. It’s a nice welcome, but it’s also something else, observes longtime Rosenbluth executive Frank Hoffman, who headed Learning and Development at the company for eight years. “The main purpose is for them to experience service that’s a cut above,” he says. “The product means nothing — in this case it’s water and tea bags — but the way you do it is everything.”
In day two, the new hires break into small groups and create skits based on good and bad service experiences. A facilitator pushes them to discuss how to fix what’s wrong — and improve what’s right. Says Hoffman, “How do we bring that up a notch? That takes special thought, a personal touch. That’s the point we’re trying to drive home. It’s practically a sacred program.”
Of course, promising a close-knit culture in a two-day, controlled session is easy. Follow-through is what counts. All Rosenbluth offices, for example, post schedules for company meetings, and let any employee attend. Want to know what a top Rosenbluth executive’s day is like? Any associate can sign up to “shadow” anyone in top management for a day. A month after signing on in Rosenbluth’s communications department in 1994, Jeanine Shumaker made a date to shadow Hal Rosenbluth. When he suddenly had to make a trip to Mexico City on that date, Shumaker went along. “I just sat there with my mouth dropped open and thought, This is too cool,” she says. “We were acquiring another travel agency, so I made a role for myself communicating that while I was down there. I was able to contribute.”
Rosenbluth leaders are used to being asked whether this sort of thing isn’t a bit of a distraction. Ralph Smith, vice president of associate and supplier relations, says a happy workplace is a key “psycho-benefit” that attracts good people and keeps them. It also weeds out problem employees. “There’s a lot of peer pressure here,” says Smith. “It’s less structured, more flexible. People have a problem with that. I mean, I had a problem with it at first.”
Bobbee Rose, who manages the Philadelphia reservation center, oversees the 60 reservation agents who work on the first floor of the company’s headquarters. A former agent herself, she spends her day circulating among current agents, scanning their faces for signs of trouble. If no one needs any help, she jokes, they send her back to her office. Occasionally she’ll work the phones.
Rose points to the example of a recent group leader there who didn’t work out. The problem wasn’t with the leader’s knowledge or skills; it was her reluctance to develop associates as demanded by the culture. “After a while, she realized that she couldn’t go that route. So she left the company. I know it was because of the pressure of the team, the discussion, and even the training,” Rose says. “It didn’t make sense to her.”
Learning benefits the worker first, the farm second.
As Rosenbluth changed the way it operated, it also changed the way its employees learned. Despite having a strong learning and development department, and a culture that encouraged — if not demanded — the acquisition of new skills, the old system put the burden on the leaders.
“No leader can really know all of the different options that exist within a company and be expected to do that kind of career counseling,” argues Hoffman, the former learning and development chief, who now holds the title Director of Human Capital. “They can’t. And let’s face it, they’re going to look out for what they’re responsible for, so they’re focused more on how you can help their particular function.”
In the old system people weren’t learning enough — and, more important, they weren’t getting enough back from the company. “What we really felt was, Nobody cares more about your career than you do. So why not say, Here are all the things we’ll make available to you as a company. We have HR, where you can get career counseling, we have a shadowing program where you can spend time in any other department and see what’s going on. But it’s up to you to pursue those things,” Hoffman says.
“Scavenger learning” is Rosenbluth’s term for this style of training, and the change has meant two things. First, as the company split up into leaner business units, each one appointed a “leader in learning,” who reports to the unit chief.
Those learning leaders may spend anywhere from 25% to 100% of their time dealing with the units’ learning and development issues. There are about 110 of these liaisons now, drawing on the extensive curriculum the company has already developed, and the skills of the 24-member L&D team in the Philadelphia headquarters.
Second, and more important, the company shifted the power to shape learning experiences to its associates. Each one has a customized learning plan developed in conjunction with his or her business leader and with human resources, identifying both long-term goals and short-term projects — like taking a class or spending time in another department.
Cross-department skills development benefits the company. But the real payoff is for employees, argues Vice President Ralph Smith, who counts this as another psycho-benefit. The kind of job security offered by IBM 25 years ago doesn’t exist anymore — even at IBM. In today’s job market, security comes only in the form of skills.
“All you can get out of a situation is experience, knowledge, and learning,” says Smith. “We’re actually competing for the same talent as the IBMs and the Motorolas at this point. We don’t have profit margins like some of those companies. So part of what we have is fun in the workplace, access to travel, and perks. And oh, by the way, 10 years at IBM? You’ll get that in two years here, in terms of experience and what you can get involved in.”
Farm Life Part 3: The Heroic Farmer
“The beauty of farming — and this is what’s wrong with a lot of business today — is that you can’t fake farming,” says Hal Rosenbluth. “I love that. I just love it. Either crops grow, or they don’t. Our clients are the crop. They either grow or they don’t.”
It’s a performance ethic that shows up in Rosenbluth’s deeply rooted, go-it-alone, stubborn independence. Privately held, the company remains uninterested in the scrutiny of shareholders that would follow even the most lucrative public offering. Earlier in the decade, Rosenbluth recognized the potential for global growth and started forging partnerships with agencies all over the world. It didn’t work out. Each agency had its own sweetheart deals with travel service suppliers, Rosenbluth says, and sometimes those deals weren’t the best thing for his company’s clients. Now disentangled from most of those relationships, Rosenbluth has been buying smaller agencies around the world and shaping each to fit the Rosenbluth mold.
Rosenbluth’s ultimate go-it-alone move was an aborted partnership with Microsoft to develop agentless travel software. The advantages of the deal were obvious — but Rosenbluth was already far along in developing its own product, and Microsoft, which went on to partner with American Express, loomed as a potentially dominant partner. Says Dean Sivley, “Microsoft doesn’t do travel, so they’re getting used to the idea of working with American Express. And they don’t do service like we do. We’ve grown up as a service company that’s now applying technology. Besides, I think people still like the idea that when something goes wrong, you can talk to a human. That’s the part we do better than anybody else.”
As for Hal Rosenbluth, for the moment he seems content working on the farm, preparing for the future of an industry that’s completely up in the air. “I get the most excited when I see a complete industry confused,” he says. “And the travel industry is confused. No one’s been able to explain what’s goin’ on.” It’s the kind of environment, in other words, where you have to watch where you step.
Rob Walker (email@example.com) , a senior editor at “SmartMoney,” has written for “New York,” “The New Yorker,” “Texas Monthly,” and other publications.
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