In Need of Repair

SPECIAL TO THE TIMES

The bramble of emotions entangling father and son has made passing the torch of ownership a difficult and painful process at Angel Appliances, essentially stopping the company in its tracks as sales stagnate in the leadership vacuum.

Bronx native Hal Kassner, who started the North Hills company in his spare bedroom in 1955, has hit the traditional retirement age, but until recently he had no plans to leave. He thought he might cut back to a few days a week, maybe in a consulting role. How that would work was unclear, given his aversion to sharing power.

"I cannot work someplace unless I am the boss, unless I'm in charge," said Kassner with characteristic bluntness. "I'm not apologizing for it; that's who I am."

For his son Scott, 41, an 18-year company veteran, the consultant scenario looked to be an excruciating extension of the professional limbo he says he has been in for years.

"He is who he is, and being critical is where he is, so it seems unlikely that he'd ever wake up one morning and say, 'OK, Scott. You've jumped through all the hoops. You're ready.' "

But something happened between father and son earlier this year to change Hal's mind about leaving. Although Hal wouldn't disclose details, he has decided to retire at the end of 1999. He'll sell the company. If Scott wants it, he can buy it, Hal says. If not, an outsider will do.

Scott was only a little more forthcoming about the split. "In essence, I said, 'I'm not jumping through any hoops. . . . Enough of this, I want a succession plan.' "

Since then, though, the two men have continued to operate in their separate spheres at the Sepulveda Boulevard building Hal Kassner owns. From his executive-style chair at an old metal desk, Hal oversees the company's most profitable division, which leases coin-operated washers and dryers to apartment management companies. Division sales were $1.56 million last year and generated a $50,000 profit, after salaries, and enough cash to subsidize the other parts of the business. Hal also handles the books and does the hiring and firing.

Scott has carved out his own territory in appliance sales, something his father has no interest in. ("It worked out as something where I got less criticism," Scott said.) He also manages the parts business, where he takes pride in the company's reputation for being able to locate hard-to-find items. A service manager handles the repair end and helps out in parts.

But Scott's end of the business is struggling. At $700,000 last year, revenue was down about a third from its level of five years ago. Operating losses grew to almost $57,000 in the fiscal year ended March 28--four times what they were two years ago.

Scott and his father blame outside forces: the arrival of deep-pocket competitors such as Sears and Energy Pacific (an affiliate of Southern California Gas Co.) in the repair business. They also point to an influx of fly-by-night operators with rock-bottom rates and little experience. At the same time, consumers today often choose to replace rather than repair an appliance.

Company's Long Success Is on Line

Business consultant Michael Russo acknowledged the outside forces battering the company, and he praised the business for its solid reputation in the industry. He was impressed with Hal's natural entrepreneurial instincts and success at creating a company that has lasted for almost half a century.

But that success could be in jeopardy, he said, because of the lack of vision, including a succession plan. His basic advice: Dump the victim mentality on all levels. Stop managing the past; start creating a future.

"As the world changes, if you don't reinvent yourself to meet customer needs, then you are going to have difficulty staying in business," said Russo, a certified public accountant who has created a training program for entrepreneurs.

The first order of business for the Kassners is to agree on a succession or sale plan for the company. In addition to settling disputes, a properly prepared plan will increase the value of the business and save more than $1 million in taxes, Russo estimated.

After a meeting with Russo, Scott Kassner was less sure he wanted to own and run the company when his father leaves. Russo, he said, made it clear that extraordinary results, the kind the company needs to thrive, come only when there is a passion and commitment to achieve them. Although Scott had resented his father for not sharing power in the past, the son is now pondering whether he himself has the drive and desire to acquire the needed entrepreneurial skills.

"He's basically a parts manager waiting for Daddy to give him the business," Russo said. "As an entrepreneur, you don't wait for anything. If he had the skill set to run that business, he would have taken it over a long time ago."

Scott, who has a bachelor's degree in political science, says that when he drew the line with his father, "It didn't mean necessarily that at that moment I was qualified" to run the company. "But it's time to look at it a different way. So now you're going to help me instead of slamming me. And instead of creating hoops, try coaching."

For his part, Scott said, "I have to do everything I can to be coachable and try not to look at everything on a personal level."

Russo suggested the two men hire a consultant as a neutral outsider to coach them through the succession plan, help build communication and entrepreneurial skills and achieve results.

And now that the elder Kassner has decided to step down, the company could use the counsel of a board of directors that includes non-family members, Russo said.

The company also is long overdue for a major shift in vision, he said. It's no longer viable to think of Angel Appliances as a repair business. (Both Kassners agree they probably wouldn't get into the repair business today, he said.) Instead, the company should take a broader focus of home service. That's the way Sears and other big competitors view the business, the consultant said. Yes, they repair appliances, but they also provide a range of home products and services and the convenience of one-stop shopping with a trusted name.

Business, Action Plans Are Needed

Angel's new mission should be laid out in a business plan that includes the goals needed to shift the company toward home service, an action plan to meet the goals and a system to monitor results.

Could Angel possibly compete with Sears? Russo thinks so, if the smaller company made better use of being invited into the homes of 4,500 new customers each year. Currently, only 1,500 of those customers decide to have Angel repair their appliances, and only 125 end up buying a replacement machine from the company, Russo said.

The employees who visit those homes should receive training in sales and people skills, Russo said. The company should make it simple for a customer to buy a replacement appliance while the repair person is still in the home. He suggested a promise of 24-hour installation, extended warranties and application of the $50 service charge toward the new purchase, for example.

The company also needs to create new products and services of its own and in cooperation with other home service providers in growth markets such as home security, painting and window treatments.

"You either transform the business so you are serving a broader level of services or sell it," Russo said. Too many of the company's resources are tied up in the ailing appliance business.

The first target for the new services should be past and present customers who know the company's reputation, he said. To attract their attention, the company needs to update its image, the consultant said. That includes everything from the company logo--an angel hovering over a group of appliances--to uniforms, company trucks and the retail facility itself.

Although the coin-operated washer and dryer business has fared better, and is strong enough to stand or sell on its own, Russo recommended that Angel set up a sales force to actively recruit new customers.

Whether or not Scott ends up buying the company from his father, the business will be stronger and more valuable when the founder leaves 16 months from now if the two learn to work together, Russo said.

"The two of them have to get rid of their ego issues and understand that they have a common goal," the consultant said.

Hal, who says he wants his son to succeed him in the business, was cautiously optimistic after the meetings with Russo.

"He's telling him things I want to but haven't, because my wife won't let me," Kassner said. "All of a sudden, I found him doing things he should have been doing all along . . . so we'll see how it flies."

For his part, Scott Kassner is philosophical. "If you want to complain or whine about how life is, you can, but the reality is, you choose what you want to do next," he said. "In retrospect, I didn't realize how many hoops I was jumping through trying to learn everything he did in the management realm. I shorted myself on the entrepreneurial side."

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

This Week's Company Make-Over

* Name: Angel Appliances

* Headquarters: North Hills

* Type of business: Coin-operated washer and dryer leasing; appliance repair, sales and parts

* Status: Family-owned corporation

* Owner: Hal Kassner

* Founded: 1955

* Start-up financing: $250 bank loan

* 1997 sales: $2.25 million

* Employees: 22

* Customers/clients: Apartment management companies (coin-operated machines), local residents and restaurants (repair/sales/parts)

Main Business Problem

Father and son have different, often unspoken, expectations about roles, management and succession.

Goals

Increase sales and market share.

Recommendations

* Agree on a plan for succession or sale of the business. Put it in writing.

* Create a board of directors that includes non-family members.

* Create a sales force for the coin-operated business.

Shift company from appliance repair to broader home service focus, and then:

* Start a sales training program for repair people.

* Create new products, services and marketing programs aimed at growth markets.

* Modernize company image, including retail area, logo, uniforms and trucks.

* Hire a consultant to coach company through the succession plan and improve entrepreneurial and communication skills and financial performance.

Meet the Consultant

Michael Russo, a certified public accountant and business consultant, is the creator of the Extraordinary Results (TM) Business Transformation program. He founded Michael Russo & Co. in Los Angeles in 1984.

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