This article first appeared on October 11, 2017 on Hooversworld.com.
“Far greater it is to dare mighty things, to win glorious triumphs, even though checkered with failure…than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory or defeat” – Theodore Roosevelt
We often tell the stories of unsung business pioneers and entrepreneurs. However, a far larger number of people have been a different breed – the long-serving employees and executives of the corporate world. Both of these groups have many lessons to teach us for today. Many of these corporate people spend their lives fighting valiant battles, innovating, and serving customers and stockholders, but their stories are rarely told. This is one of them, and one of the best.
Robert Elton Brooker, 1905-2001
It was 1961. Robert E. Brooker, who always went by “Tom,” had to make the hardest decision of his life.
Capping an illustrious career with retailer Sears, Roebuck, Tom Brooker had risen to join the Board of Directors. As head of manufacturing (Sears controlled many of its suppliers), he had orchestrated merging some of them into a new company, appliance maker Whirlpool. Whirlpool was Sears’ biggest supplier; Sears was Whirlpool’s biggest customer. Brooker had been named President of Whirlpool three years earlier.
He was 56 years old. He and wife Sally had just moved into a beautiful new custom home near Whirlpool’s headquarters in Benton Harbor, Michigan. Thanks in large part to Sears generous “share the wealth” policies, he was worth $2 million dollars (about $16 million in today’s dollars).
By 1961, Sears’ long-time archrival Montgomery Ward was in freefall. Sales were bad, profits were dismal and declining, the stock falling through the floor. Ward’s beleaguered chief, John Barr, desperately sought someone else to try to save the historic company. A retired Sears executive recommended Tom Brooker on his short list of candidates. Barr asked, would Brooker come try to turn around the struggling company?
The story of Tom Brooker is really three stories: that of Montgomery Ward, the original American “Amazon,” the creator of the general merchandise mail order catalog; the story of Sears, Roebuck, the Johnny-come-lately which took the lead; and the story of Tom Brooker – the man and the manager. One who took on “an impossible task.” The three stories are inextricably linked. The 90-year battle between Sears and Ward’s is one of the great business contests in American history, alongside Coke vs. Pepsi, General Motors vs. Ford, UPS vs. FedEx, and Crest vs. Colgate. Tom Brooker’s story cannot be understood without understanding the battlefield on which he fought.
The Beginnings
Aaron Montgomery Ward worked for a department store in Chicago. He sold to both retail and wholesale customers. The retail customers were city-dwellers who came into the store. The wholesale customers were small town merchants who served largely rural America. Those merchants marked up the merchandise, resulting in higher prices for America’s millions of farmers, ranchers, and small town residents. In this context, Ward came up with the idea of a full-line general merchandise catalog that would give everyone, not just city folk, access to quality merchandise at low prices. (Shades of Sam Walton!) While there had been many seed and other specialty catalogs, no one had offered “everything under the sun.” In 1872, Ward and his partner George Thorne issued their first, brief price list. By 1875 it was up to 72 pages; in 1883, 240 pages containing 10,000 items; by 1892, 568 pages. Sales hit $400,000 in 1878, $1.8 million in 1888. In 1898, Montgomery Ward received 1.4 million orders and generated revenue of $8.5 million ($250 million in today’s money).
The Competitor
Ward’s leadership did not stand unchallenged for long. In 1886, a 22-year-old Minnesota railroad station agent named Richard Warren Sears received a shipment of watches which the jewelry store said they never ordered. The manufacturer didn’t want them back and offered them to Sears at $12 each. Sears offered them to other station agents up and down the railroad for $14, and soon enough quit his job to form the R.W. Sears Watch Company in Chicago, issuing its first catalog in 1888. Ward’s was already a household name.
When Sears needed someone to repair the watches that didn’t work, he found Alvah Roebuck. Sears Roebuck was soon incorporated, and over time the company expanded into other categories. Sears, like Ward, understood the needs of rural and small town customers. But Sears was a better and more flamboyant copywriter. He was more ambitious and expanded faster. By 1895, the Sears catalog was up to 532 pages. In 1900, Sears did $10.6 million in revenue, surpassing Ward’s $8.7 million. Five years later, Sears exceeded $40 million, a level Ward’s would not reach until 1914.
Sears, however, was a workaholic who had dreams of becoming “an Iowa banker.” He hoped Roebuck would take his place, but Roebuck soon burned out and wanted to sell out. Chicago clothing manufacturer (and Sears supplier) Julius Rosenwald and his brother-in-law each bought a 23% interest in Sears, Roebuck in 1895 for $35,000. Rosenwald took an active role in management.
Rosenwald, an organizational genius, brought discipline to Sears. He improved product quality – about which Richard Sears cared little. Rosenwald toned down advertising claims, tested all products, and organized the massive mail order operation. In 1906, he built one of the world’s largest business complexes on the west side of Chicago to handle the millions of orders received each year (up to 27,000 letters per hour), and ship them promptly. The same year, Goldman Sachs took Sears public, rare in the age of railroads and giant industrial trusts.
A humanitarian, Rosenwald began giving stock in the company to virtually all employees in 1916, one of the first companies to do so. His new catalog plant included parks and other recreational facilities for employees.
Rosenwald’s brother-in-law had sold out in 1901 for $1.25 million, 35 times what he had invested less than six years earlier. A retired Richard Sears died rich with Sears stock worth $10 million in 1914, but was only 51 years old. Julius Rosenwald was in total control of Sears, Roebuck.
While Sears boomed ahead of Ward’s, both were household words across the United States. Their catalogs were reference books for every home, allowing product and price comparisons. The companies were referred to as “Monkey Ward” and “Rears & Sawbuck.”
The General
Aaron Montgomery Ward had retired in 1901, eight years previously turning over day-to-day management to the five sons of partner George Thorne. The Thornes eventually took control of the company. While in the armed services, one of Thorne’s sons, Robert, had been impressed by his commander, General Robert Wood. As a young West Point graduate, Wood had overseen all the supplies needed to build the Panama Canal, a massive and unprecedented task. In World War I, he was named Quartermaster General, in charge of all supplies and logistics on the European front.
There are two important things to know about General Wood’s military experiences. First, he found out that many suppliers were charging the government high prices. They felt they had to do this, as the cost of their ingredients – raw materials and commodities – fluctuated up and down. So they charged prices that allowed them to make a profit even when costs were high. Wood bought long-term contracts on the ingredients, delivered them to the manufacturers, and then cut large, multiyear, low-price contract deals with the suppliers. He ensured that everyone made a fair profit.
The second important thing about General Wood was that he was briefly ill and stuck in the infirmary in his Panama Canal days. The only thing available to read was the report of the US Census Bureau. Wood became fascinated with demographics and statistics. He reportedly read a page out of the main US statistics book, theStatistical Abstract, every day for the rest of his life. Few things would become more important to the future of the two companies than Wood’s obsession with data.
In any case, in 1919, Robert Thorne at Ward’s hired General Wood to be part of their executive team. Soon enough, in 1921, the United States had a major but short-lived depression. Prices dropped and both Ward’s and Sears were stuck with way too much inventory, bought at high prices. Rosenwald had to reach into his personal funds to bail out Sears, saving the company from bankruptcy. At Ward’s, the bankers took over and replaced the Thornes.
General Robert Wood stayed on with Ward’s under the new management. He brought his ideas of helping suppliers to the company, with success. Due to Wood’s vision and efforts, Ward’s actually became bigger than Sears in the emerging category of tires and automobile accessories. But his understanding of data and demographics led him to believe that the future was in the cities, not the rural areas. Ward’s should build stores in the cities, he argued. But his new boss only wanted to build the catalog business. In 1924, Wood was fired and locked out of his office.
By a twist of fate, Rosenwald was seeking to retire, and looking for younger leaders for Sears. With the agreement that Sears would test his idea of urban stores, Robert Wood joined Sears in November, 1924 and was made President in 1928. Sears opened its first retail store in 1925, and by 1931, over half of its sales were made in stores rather than from the still-powerful catalog ($185 million versus $162 million). These stores were not in the old downtowns, but in outlying areas of the big cities, with plenty of parking, which the older department store competitors lacked.
The Decline of Montgomery Ward
In the meanwhile, Ward’s suffered. For a while in the late 1920s, sales and profits grew, closing the gap with Sears, in part due to the initiatives of Wood. But then the depression hit. A man named Sewell Avery was brought in to “save the company.” He did well for a while, but never believed in the urban opportunity. He built stores in small towns to serve his same old customers. When World War II came along, he conserved cash and stopped building. Avery had charts showing that every war had been followed by recession or depression, and he was convinced World War II would be no different. He hoarded cash while Sears expanded and expanded. Avery was also a tyrant, and many good people left the company. Those that stayed learned the art of infighting and backstabbing. No one trusted anyone else. General Wood had taken some of their best people with him to Sears.
The company was not without a few successes. In 1939, Ward’s introduced Rudolph the Red-Nosed Reindeer, who went on to become a cultural icon.
Finally, in 1955, after 24 years of iron rule, Avery was ousted. His successor, attorney John Barr, inherited a mess and had few better ideas. By 1960, Ward’s profits had dropped to record low levels. The stock price hit new lows, and many thought the company hopeless. Ward’s would likely get bought or go away, despite its illustrious history and leadership in creating the mail order industry. Sears under Wood was setting records every year, the most profitable retailer in the world. Its biggest profit center was tires.
The Student
Now Tom Brooker enters the story. The son of a Cleveland baker, Tom earned a degree in civil engineering at the University of Southern California in 1927. After a successful six-year stint at giant power company Southern California Edison, he realized it would take a long time to move ahead in that industry, and was hired by Firestone Tire and Rubber. Thomas Edison’s friend Harvey Firestone saw the rise of Ward’s and then Sears in tires, and did not want to sell to them. So he started opening his own stores. Young Brooker signed up; he rose to the position of running all the Firestone stores in the Western states.
After ten years with Firestone, it was only natural that General Wood and his colleagues at Sears discovered Tom Brooker and offered him the position of buyer at Sears in 1944. Tires had become a critical part of Sears’ success. At Sears, Brooker rose through the ranks until his peak as head of manufacturing and a member of Sears Board of Directors, then President of the newly-formed Whirlpool Corporation in 1958. Brooker was not only a student of Wood’s, but he played regular bridge games with the General.
During those years, he learned the Sears system from Wood and company. First and foremost was working with suppliers on a long-term, mutually profitable basis. Wood would even threaten to cut off a supplier if Sears was their only customer – he wanted them to have a diversified customer base, and to improve their products by experience with multiple customers. At Sears, unlike Ward’s, buying was highly centralized – all decisions on what to produce and carry were made in Chicago or one of the handful of buying offices. The overwhelming majority of goods were sold under Sears’ powerful private labels – including Craftsman, Coldspot, Kenmore, and Allstate. Even Allstate cars made by Henry J. Kaiser for a brief period.
Next was the Sears tradition of treating people right, which began with Julius Rosenwald. By the mid twentieth century, the average Sears employee retired with over $50,000 worth of Sears stock – about $400,000 in today’s dollars. Sears had a collegial atmosphere in which everyone prospered, including the customers. Product quality was high, innovation valued, and satisfaction guaranteed.
On the retail side, Sears had studied the numbers on every market and every opportunity, and opened stores outside the downtowns, closer to where people lived as the post-war boom expanded the suburbs. Carefully designed stores – 3 sizes – were tailored to each market. But once the right size was selected, the stores were designed alike and carried the same merchandise. Unlike buying, store operations were decentralized – a handful of powerful regional vice-presidents had great power over the stores in their section of the country.
These policies had made Sears the world’s largest and most profitable retailer by the early 1960s. In General Wood’s 30 years at the firm, from 1924 until his 1954 retirement as Chief Executive Officer, Sears sales rose from $206 million to $3 billion, profits from $14 million to $141 million, and employment from 23,000 to 200,000.
Tom Brooker was not only a good student: he was a driving force in carrying out these policies.
The Impossible Challenge
As you have probably guessed, Tom Brooker said “yes” when John Barr offered him the job as President and Chief Executive Officer (CEO) of Montgomery Ward – with some important strings. First, he had to be in charge, in full control. Second, he wanted to get rid of some of the old-timers on the Ward’s Board, gradually replacing them with stronger people, including some of his own key executives. Third, and most important, Tom Brooker wanted to invest $1 million of his own money in Ward’s stock – half his wealth – making him Ward’s largest single stockholder.
In November of 1961, Tom Brooker became the first CEO of Montgomery Ward since the founder to have a real vision, one that just might work. Much can be learned from his style, as a manager and as a man.
Perhaps the most important single thing he did at Ward’s was to change the culture. For years, many of Ward’s best people had quit or been fired. Those who stayed were afraid to act or to speak up – afraid to innovate or try anything new. Brooker was no shrinking violet – he laid down the core policies and was swift to quell disagreement. But the execution of those policies was always open to discussion and experimentation, by anyone at any level. Managers throughout the company were encouraged to “stick their neck out.” People were not fired for trying things that did not work, a major change in the Ward’s culture. It took years to make this transition. Some Ward’s veterans rose to the challenge; others were soon gone.
At the same time, he began to import present and former Sears executives throughout the company. While this caused friction at first, over time only those people – whether from Ward’s or Sears – who shared in the goal of making Ward’s “great again” survived and prospered. Everybody had to get along. It was all about re-establishing trust. And everyone who met the straight-talking Brooker trusted him. He frequently invited his key colleagues to dinner parties at his home.
Managing people and selecting people – getting “the right person in the right seat” – is among the most important parts of a CEO’s job. Tom Brooker became famous for convincing people to take jobs they didn’t think they wanted, even sometimes temporarily taking a lesser role and a pay cut. Not an easy thing to do. He changed incentive systems, so that the managers of money-losing stores got big bonuses if they decreased the losses substantially. It worked.
Brooker inherited a big chain of small town stores whose sales were declining, and few successful stores in big metropolitan areas. The stores had a huge range of sizes and shapes, and rarely carried the same merchandise. Store managers often bought merchandise that was not carried in the catalog or other stores. All this was about to change.
Key to the future – right out of General Wood’s playbook – was entry into the best major metro areas. Not a bunch of cities all at once, but one carefully selected market. Brooker and his top research analyst studied the numbers, and determined there was a big opportunity in Los Angeles. LA and Chicago were Sears’ biggest turfs. Wood had ringed the downtown area with beautiful Sears stores ten miles apart. Brooker figured he could build new stores in two places – in the next ring of growth, further out from the center, beyond Sears; and also halfway between the Sears stores. He knew most customers shopped within 5 miles of their homes.
Brooker knew that what worked for Sears might not precisely work for Ward’s. So instead of spending a fortune on new stores in the Los Angeles area, he first tested the idea in smaller San Diego. And to do it, he recruited a top West Coast Sears executive, Ed Donnell. Sears executives have been quoted that their management was so deep that losing executives to Ward’s was not a major loss to Sears, with the possible exception of Ed Donnell.
San Diego worked and the march on Los Angeles began. Big new stores using the same size and shape, with the same merchandise, opened on a regular, well-thought-out plan. Los Angeles under Ed Donnell was soon profitable, and the stores produced much higher revenues than any in Ward’s history.
At the same time, Brooker had to get buying (“merchandising”) in order. Ward’s had too many suppliers. Merchandise was bought on an opportunistic basis – whichever vendor had the lowest price got the order – a small order. No two stores carried the same stuff. Advertising campaigns were incoherent. Again applying the Sears system, Brooker and his team of Ward’s and ex-Sears people cut the number of vendors. Multiyear contracts were signed, assuring suppliers of continuing business, allowing them to invest in new plants and product innovation.
Ward’s began developing its own product ideas, from an improved fishing rod to better refrigerators with ice-makers. In some categories, they passed up Sears. Above all else, all the Ward’s stores carried the same lines, now mainly their own private label goods including “Signature.” One of Ward’s biggest coups was convincing Firestone to make tires for them – the best tires Ward’s had ever sold.
Buying was centralized but store operations were decentralized, under a new territory system modeled after Sears.
Unique for the era, Brooker cared about the health of his key people. He had been an athlete since youth. On business travels and at home, he jumped rope 15 minutes every morning and again each evening. All his executives had to take complete physicals twice a year. Only one was overweight.
Yet another new idea at Ward’s was community involvement. Unlike Sears, most Ward’s store managers were not active in their communities. Tom Brooker made this a priority – even a requirement for success. Tom and his wife and their key executives were extremely active in their own communities.
Nothing showed this more than Brooker’s decision to keep company headquarters in a tough neighborhood northwest of downtown Chicago when they decided they needed a new office building. Sears was moving their headquarters from their rough west-side neighborhood to the Chicago Loop. But Brooker decided to stay where they were, near the infamous and dangerous Cabrini-Green public housing project. The new building, designed by Minoru Yamasaki who also designed New York’s World Trade Center, opened in 1972. (Brooker was renowned for his taste in everything from food to clothes to architecture.) Building in that neighborhood took guts. If nothing else, Tom Brooker had courage. This he admitted himself. Quoted in Booton Herndon’s bookSatisfaction Guaranteed, Brooker said that a leader had to have know-how or courage, and that “at least I had courage.”
Taking all this together, Ward’s began to “work” again. There were setbacks. When Brooker joined Ward’s, the financial situation was worse than he had been led to believe. Store managers were carrying massive amounts of unsalable old inventory, stuffed away in basements, but it was on the books at full value. The small town stores were sinking faster and the new stores not coming onstream fast enough. The company was low on cash.
But Tom Brooker was famous for his patience. Not just with people, but with strategies. He convinced his team to keep working at it, that everything would work out all right if they stayed the course. His own big investment in the company’s stock – and generously sharing stock and profits with his colleagues – proved his commitment and confidence.
Turning around a large company is never an easy task – the number of hours worked, the strains of change, maintaining confidence in the dark days. Few succeed.
By the late 1960s, Ward’s was posting sales and earnings growth rates faster than those of Sears. Ward’s 1965 sales were almost $1.9 billion, versus $1.4 billion in 1960, immediately prior to Brooker’s arrival. In the same five years, operating income rose from $46 million to $92 million. By 1968, 95% of company sales were of Ward’s private label merchandise. The new stores had succeeded: when Brooker began, Ward’s had 35 stores which did over $3 million each in annual revenue. By 1968, 96 stores did over $5 million, providing 58% of retail (excluding catalog) revenues. The big metro markets generated 54% of non-catalog sales and 65% of non-catalog profits. By 1972, Ward’s operating profit exceeded $200 million on sales of $3.2 billion.
The company started attracting the interest of tough Wall Street analysts in its future – and its stock. During this same period and into the 1970s, Sears began to stumble. The company made more profits from one of General Wood’s innovations – Allstate Insurance – than it did from retail and catalog merchandising. Perhaps Brooker and Donnell had been better students of Wood than those who stayed behind at Sears.
Epilogue
In 1966, Ed Donnell was named President of Montgomery Ward. Tom Brooker continued as Chairman and Chief Executive Officer until the mid-70s. In the interim, Brooker had engineered a merger with Container Corporation of America, a great Chicago company and the nation’s largest maker of cardboard boxes. Container brought cash flow and a strong management to the combination. Perhaps most important, both companies were potential take-over candidates, a likelihood reduced when a bigger company, Marcor, was formed through their merger.
in 1974, Mobil Oil, a descendant of John Rockefeller’s Standard Oil Trust, was looking for ways to diversify away from the oil business. Mobil bought Marcor, and Brooker, Donnell, and the many other stockholders realized a great return on their investment. But Mobil never really understood the retail business, and Ward’s eventually reversed back into decline. By 1985, it was losing money.
In 1988, more recent management bought the company in a $3.8 billion leveraged buyout. But it was too late. In 1997, it went through Chapter 11 bankruptcy, allowing it to keep operating, but in the Christmas season of 2000-2001, Montgomery Ward went through Chapter 7 (final) bankruptcy, closing its last 250 stores and laying off the remaining 28,000 employees.
Tom Brooker died in 2001, at the age of 95, only few months after the end of Montgomery Ward.
Today, even the great Sears, Roebuck appears headed for the end, due to a combination of bad management under its present owner, the rise of companies like Wal-mart and Home Depot, and the pressures of ecommerce. (Sears closed its catalog operation in 1993, the year before Amazon was founded.)
Those next generation of retailers in many ways take their lessons from the playbooks of Aaron Montgomery Ward, Julius Rosenwald, and General Robert Wood. Ironically, today the strongest company Brooker touched – and helped create – is Whirlpool, the company where he spent the least time. Whirlpool is today the world’s largest appliance maker, with annual sales of over $20 billion, despite intense competition from Asia and Europe. And Tom Brooker’s “new” headquarters building now sits in a trendy neighborhood, and has been converted into expensive condos.
Turning around a large company is no easy task. Lee Iacocca wrote one of the biggest business bestsellers of all time about his “turnaround” of Chrysler, but soon enough the company was back in the ditch, worse than ever. Lou Gerstner was widely acclaimed for his turnaround of IBM, but the company struggles again today. Tom Brooker’s turnaround also did not stand the ultimate test of time, but perhaps it gave the company, its employees, and its owners a few more decades of life. There is no question though that all of us can learn a great deal from Tom Brooker.
Tom Brooker, Community Activist.
This profile was compiled based on the following sources, in addition to financial reference books like those from Standard & Poor’s. Booton Herndon’s 1972 book Satisfaction Guaranteed: An Unconventional Report to Today’s Consumer is an in-depth, highly personalized look behind the scenes at Brooker and Donnell’s turnaround at Montgomery Ward. The First Hundred Years are the Toughest: What We Can Learn from the Century of Competition Between Sears and Wards, by Cecil Hoge, published in 1988, is a compilation of facts and anecdotes that covers the entire battle between these two companies up to its publication date. The definitive and excellent history of Sears is told in Catalogues and Counters: A History of Sears Roebuck & Company, published in 1950 by Boris Emmet and John Jeuck. Shaping an American Institution: Robert E. Wood and Sears, Roebuck by James Worthy (1984) is an outstanding book on this great business leader. Fortune Magazine contained extensive profiles of Ward’s in the November 1960 and May 1970 issues. Several other books exist on Julius Rosenwald and his philanthropic activities and about Sears; whereas relatively little has been published on Montgomery Ward.
This article first appeared on October 11, 2017 on Hooversworld.com.
