At Alberto Culver, Daughter Knows Best
For Carol and Howard Bernick, business has always been a family affair. Since the day she graduated from college, Carol L. Bernick has worked for Alberto-Culver Co., the toiletries company her father, Leonard Lavin, founded in 1955. Husband Howard, who has also worked for the company for decades, became CEO in 1994. Carol has been the creative brains behind many of Alberto-Culver's most successful products, Howard the numbers man. And Carol's dad, 79, couldn't be happier about the arrangement. "The best thing she ever did for the company," he joked at the annual meeting, "was to use all her wiles to get us a fine CEO."
Easy to laugh now. But back in the fall of 1994, relations between the Bernicks and Lavin weren't nearly so jovial. Although the company had had its share of hit products--remember Alberto VO5 shampoo and hair cream?--for much of the previous decade, Alberto-Culver had faced sluggish growth and deteriorating market share. For five years beginning in 1988, earnings seesawed between $50 million and $65 million, while sales grew sluggishly. Meanwhile, year after year, the stock price hovered in the low teens.
GHOST TOWN. Carol and Howard Bernick watched in frustration as Lavin scrimped on marketing and passed up acquisition opportunities. Meanwhile, Alberto-Culver's biggest brand names languished. The patriarch had become so set in his ways that the company's headquarters in Melrose Park, Ill., hadn't been refurbished since the mid-1950s. And with the company's salaries similarly behind the times, most of Alberto-Culver's best talent had long ago departed for more modern giants such as Procter & Gamble Co. and Unilever.
Even the Bernicks were thinking of jumping ship. Instead, in September, 1994, they marched into Lavin's office and presented him with an ultimatum: Either hand over the reins as CEO or run the company without them. It was a huge blow for Lavin, forcing him to face selling his company to outsiders or ceding control to the younger generation. Unwilling to sell, he reluctantly stepped down, though he remains chairman.
How does it feel to push aside your own father and wrest operating control of the company he created? "It isn't an easy thing to do with the founder of any company, whether he's your father or not," says Carol Bernick, 46, now vice-chairman and president of Alberto-Culver North America. To boost investor confidence, the Bernicks also insisted on adding three outside directors to the nine-member board of Alberto-Culver, a public company since 1961. Lavin declined to be interviewed.
COMEBACK. Whatever rift existed appears to have healed. It hasn't hurt that the Bernicks, who together with the Lavins own 41% of the company, have substantially improved its performance. Operating profits jumped 10% in 1998, to $141 million--85% higher than when the Bernicks took over in 1994. Sales have grown to $1.8 billion, about 50% higher than in 1994. Trouble in Asia and Latin America has knocked the stock price down from a high of 30 a year ago to about 22--but this is still substantially above what it was when the Bernicks took over.
The Bernicks started by tossing out Alberto-Culver's "patriarchal and secretive" culture, with its top-down management style. They polled employees and generated a to-do list that ranged from fixing compensation inequities to such basics as restocking office supplies. They also set up a review process that called for employees to critique their bosses. And the Bernicks started aggressively wooing outsiders and targeting acquisitions. One promising new brand they recently nabbed: St. Ives shampoos and skin-care products.
These days, there's also a more friendly feeling inside the company. Where the atmosphere was once downbeat and divisive, offices now overflow with balloons, gift baskets, and food to make sure that sales victories, promotions, and even routine anniversaries are recognized. To accommodate the gift-giving, a large supply room is filled with everything from ice buckets ready for engraving to novelty jars filled with m&ms. "Carol engineers moments for the organization," says Richard J. Hynes, director of sales.
Hynes's experience at Alberto-Culver is typical. When he was considering a job offer from the company six months ago, his friends advised against it. But one of Carol's gift baskets arrived at his home crammed with items geared to his wife's and children's interests. "It was clear they knew a lot about us and had done their homework," he says. Intrigued, Hynes took a second look at the company. Thanks to that kind of pampering, employee turnover has been cut in half, to the industry average of 10%. And more outside managers are being persuaded to join the team, including executives from Procter & Gamble, Kraft Foods, and Frito-Lay. "It's a remarkable change," says James J. Drury III, a headhunter at SpencerStuart.
There's more to Alberto-Culver's turnaround than balloons and flowers. With a reenergized workforce and a beefed-up marketing campaign, Alberto-Culver is holding on to space on store shelves for 40-year-old brands such as Albert VO5 and TRESEmme shampoo even as newer offerings, such as tcb hair products, sell briskly. And it is revving up expansion of Sally Beauty Co., a 2,000-plus-store chain that sells to both licensed stylists and consumers.
The company's revived prospects mark a high point in the Bernicks' professional relationship, which has been tightly knit since they married in 1976. Back in 1974, Carol Lavin worked in Alberto-Culver's marketing department. While still in college, she created Static Guard, an anti-cling spray, which turned out to be a hit product for her dad. Recalling college dances, she says: "The dresses were this crepe material, and you just looked horrible when it clung to your legs." Later, Carol came up with salt and butter substitutes Mrs. Dash and Molly McButter, forging a new line of food products. Although retiring in social settings, she isn't shy about her knack for innovation. "Not everyone can do what I do," she says.
STYMIED. Howard Bernick, 46, came into the Lavin family after arriving in Chicago from his hometown of Toronto. The son of a well-to-do real estate developer, Bernick wanted to strike out on his own. So after graduating from Toronto University, he took a job with First Boston as a securities trader. Not knowing a soul in Chicago, he called Carol, whose number he had gotten from a mutual friend. Howard, who says he's wanted to run his own company since he was a teenager, describes himself as lousy in all sports. His greatest pleasure as a kid was to cozy up with the latest edition of The Wall Street Journal. "Everybody knew what to get me for my bar mitzvah--stocks," he says. Just the sort of guy for Carol.
Bernick also impressed his father-in-law, and in 1977, a year after marrying Carol, he joined the family business. While raising their three children, Carol rolled out new products and Howard tended to the finances. He tried to bring in modern financial controls to boost earnings and the stock price. But he found himself stymied under his father-in-law's strong hand.
What's next? The Bernicks are beefing up the sales force and plan to boost the marketing budget, including a $20 million campaign for St. Ives. And they have big plans to sell their products, now available mainly in grocery stores and big discounters like Kmart, in national drugstore chains.
That would be good enough for most executives. But Carol Bernick also wants to promote another key goal. "I want Alberto-Culver to be one of the 100 top places to work," she says. If the company reaches that mark, you can bet there will be balloons and flowers for everyone.