SOUTHERN CALIFORNIA ENTERPRISE : Meeting the Bottom Line : Things Went Swimmingly for Odetics’ Employees Through 25 Profitable Years--Until the Firm Lost a Key Contract

Odetics Inc. was founded in 1969 by six engineers who wanted to build a company that valued employees as much as profits, and for a quarter century they succeeded.

The maker of high-tech video and data recorders saw 25 consecutive years of profit. During that time, Odetics also instituted a vast array of employee perquisites, ranging from a corporate swimming pool to generous bonus programs, earning the company recognition in the book “The 100 Best Companies to Work For in America.”

But the loss of a major contract last year put employees and profit at odds for the first time. Odetics executives slashed the company’s work force by 25% and required employees to take temporary pay cuts of 10% from January through March this year.

Remaining employees say the layoffs carried the message that they could no longer think of Odetics as a permanent nest, and company founders say the cuts ended the jovial atmosphere they had cultivated for more than two decades.

“I think it’s taken a toll on everyone,” said Jerry Muench, a co-founder and vice president at Odetics. “There aren’t as many smiles, and there are a few more closed doors as people wonder whether there’s going to be another round. People are saying it’s management’s fault, so it’s a heavy weight around our necks.”

Crandall Gudmundson, another founder and president of the company, says simply, “It’s a lot easier to grow than it is to shrink.”

Tucked in a small Anaheim industrial park just a few blocks east of Disneyland, Odetics’ 250,000-square-foot complex features some of the lighthearted touches of an amusement park. The facade resembles the red side of a Rubik’s cube, and visitors enter a lobby adorned with footstools supported by what appear to be human ankles and feet. The company’s labyrinth-like hallways are decorated with offbeat sculptures and stuffed likenesses of the company’s founders.

Unlike at many high-tech complexes, there are no security checkpoints. Employees are free to wander from one division to the next, or even into the executive wing, where officers wear tennis shoes, go by their first names and almost always leave their office doors open.

The pool and roomy fitness center--staffed by a full-time trainer--are enviable perks.

Employees say, though, that the company is no playground. They are expected to work long hours, and they receive pay that is in line with the rest of the industry.

Odetics’ real charm, employees say, stems from its collegial atmosphere.

“I’ve never worked anywhere before where I knew the chairman by name, let alone had him know mine,” said Carole Bales, an electronics assembly worker.

Much of the company’s playfulness emanates from its chairman, Joel Slutzky, a wiry 56-year-old engineer who works out nearly every day alongside employees in the fitness center. The man with the white hair and beard appears in dozens of pictures in the company’s halls, including one in which the founders are clad in gag costumes. In that one, Slutzky is reclining on the floor in front of the others--in a woman’s swimsuit.

Slutzky has been behind many of the company’s more enlightened endeavors, including the financial backing of athletic leagues and theater groups for employees and a revamping of the company’s cafeteria to introduce more healthful fare. (The menu on a recent weekday, for instance, included fresh broiled sea bass and white bean soup.)

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Slutzky has also directed the company’s shift away from government contracts in recent years toward more commercial projects. He is often portrayed as an avuncular captain, but these days he talks more like a beleaguered executive.

“I’m not a social worker,” he said in a recent interview. “You have to balance the needs of the company and the needs of the individual.”

That balancing act was a lot easier before last year, when the company lost a major contract with E-Systems Inc. of Dallas that accounted for 7% of Odetics’ annual revenue and 40% of the revenue for its division that makes high-powered computer data storage systems. Odetics and E-Systems have since filed lawsuits against each other, seeking damages for alleged breaches of contract.

Odetics posted a $4.7-million loss on sales of $87.7 million for the fiscal year that ended March 31, the first annual loss in the company’s history.

The company rebounded in the first fiscal quarter, recording earnings of $211,000 on revenue of $21.4 million. But the company’s stock, which had been trading above $10 per share last year on the Nasdaq market, is now plugging along at about $5, prompting some to question Slutzky’s priorities.

“The employees are taken care of better than the shareholders,” said James Schmitt, an analyst at Westcountry Financial in Somis, Calif.

Slutzky has heard such criticism before, but until recently he could deflect it by pointing to the company’s long string of profits. “This is the test of the [company’s] culture,” Slutzky said. “When you’re under the gun, analysts are screaming and stockholders are calling, are you anchored in your beliefs?”

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When the E-Systems contract evaporated, Slutzky moved quickly to inform employees of the sudden downturn, holding town hall-style meetings in each of the company’s five divisions. And even though employees were forced to take the 10% pay cuts from January through March, officers took 15% cuts, and Slutzky gave up 20% of his salary in the quarter. (His annual salary is more than $250,000.)

The company offered early retirement to many employees and gave them nearly three months to make up their minds. When that offer failed to meet the goal of cutting 100 positions, Odetics laid off 40 workers. A layoff had never happened at Odetics, and though employees say it was done in a humane fashion, it has left deep wounds.

“It was a reality check,” said Debra Eggeman, a quality assurance director in the company’s commercial products division. “After last year, I started thinking, ‘Gee, we are vulnerable.’ ”

Bob Lloyd, 58, who had worked at the company since 1982, said company officials “portray themselves as more employee-oriented than they really are.” The gym, swimming pool and other perks are there “because the founders like it,” he said.

Slutzky concedes such complaints are valid. “Maybe we could have saved one person if we didn’t have the gym,” he said. “If we cut off training, maybe we could have saved people.

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Odetics at a Glance

* Founded: 1969

* Headquarters: Anaheim

* Chairman/CEO: Joel Slutzky

* Employees: 450

* Products: Automated tape libraries, digital video processors, time-lapse video recorders and digital data recorders

Stock price

Monthly closes, and latest:

Friday’s close: $5.25

Source: Odetics, Bloomberg Business News, Wire reports.

Researched by DAVID NEIMAN and JANICE L. JONES / Los Angeles Times