IT Hall Of Famer Izzy Schwab On D&H's Employee Owned Advantage, Why He Loves Distribution And The Secret To Maintaining A Fourth Generation Family Business
Secrets Of A Distribution CEO Titan
D&:H Distributing CEO Izzy Schwab, who handed over the day-to-day reins to his co-president sons Dan and Michael Schwab nearly a decade ago, says his proudest moment is a decision 20 years ago to start the employee stock ownership plan (ESOP) at the company.
"The best thing I ever did was start the ESOP 20 years ago," said Schwab. "It is a people business. We can have all the warehouse equipment, computers and everything else, but people make the business go. Now that employees share in the success of the company it has really meant a great deal to the morale and the people here."
Schwab, who built the company into a nearly $4 billion national computer and software distributor power, says one of the key ingredients to the company's success, even as it has grown, is making sure that it does not lose that "family business mentality."
You are celebrating your 60th year at D&:H. What keeps you going?
I have two spectator sports I love: football and distribution. And I love distribution better because I get to sit in on the huddles.
The business amazes me. It has changed. It changes every year. It changes every week. And change keeps me young.
What is the biggest change you have seen over the last 60 years?
I go back to the period when we were a county-by-county, landlocked distributor with exclusive franchises. We had a vendor that every time the rep came in he looked around to make sure we weren't selling something competitive.
What is the strength of the business model today versus 60 years ago?
I was going through my desk and I found an 80th anniversary speech I had given (20 years ago). I could give it today for the 100th [anniversary which D&:H will celebrate beginning Jan. 1, 2018]. Everything we do is the same but we do it differently. We still service the customers whether they be a retailer or a VAR and we still support the manufacturers. That is what we do for a living.
Talk about your early days at D&:H and how you learned the business?
When I got out of the Army they put me on the sales desk. I took every order. I posted it in Kardex forms. I hand wrote the invoices and that was our business. Today we can do 100,000 invoices a day.
Talk about the D&:H focus on the small and medium business customers which some competitors have shunned?
Those SMB customers are the bread and butter of D&:H. That hasn't changed. They need our support and we need their business. They are the fun people we do business with.
What has been the key to maintaining the strong focus on customer service?
As we have grown we have always made sure that we don't lose that family business mentality. We have a lot of new managers here. We just have to be very careful that we just don't become a factory.
How important is the fact that D&:H is an employee owned company?
The best thing I ever did was start the ESOP 20 years ago. It is a people business. We can have all the warehouse equipment, computers and everything else, but people make the business go. Now that employees share in the success of the company it has really meant a great deal to the morale and the people here.
Is the fact that you made D&:H an employee-owned company what you are most proud of?
Yes. It is the right way for a company to run its business. I studied ESOP plans and the impact on businesses. I thought it was the right way to go and we went that way. It really took three, four or five years until the co-owners recognized the value of the ESOP.
What kind of impact has the ESOP had on the culture?
All of a sudden if the guy working on the desk next to you makes a mistake, it used to be no big deal, that was his problem. Today you are affecting my ESOP. Employees take it very personal and put forth the extra effort.
I think it gives us a great edge. It has created team effort, camaraderie. They have a vested interest. It is not just a job or a paycheck.
You have your sons Dan and Michael as co-presidents. What it is like working with them?
The biggest thing I do around here is stay out of their way. It is a young man's business. I had problems with elder partners. I don't want to put them through that. My only real function is to tell them if something is not going to work. I have experience under my belt. Other than that the boys run the business.
What was it like when you handed over day to day responsibilities to Dan and Michael?
It was like a hot potato. I told them – 'It's up to you now.' I also gave them a book – "You Can't Fire Me. I'm Your Father."
What is the secret to keeping a fourth-generation family business together?
We run it as a business, not as a family. We have had two non-family presidents over the years. Believe me, we keep family out of the mentality other than the culture of a family business.
Family members come in as an employee on the bottom rung. Look, there have been cases where I have had to let family members go. They didn't fit.
What is the D&:H culture?
It is a long-term mentality. We don't worry about a quarterly report. That is the advantage of being a privately held company.
We see it all the time. We see competitors tell the stock market this is what we are going to do and towards the end of the quarter they do all kinds of stupid things.
What are you proudest of as you celebrated your 60th anniversary?
I am proudest of the company and where it is today and how it will keep changing as the years go on.
What do you think when you look at the next 60 years?
My long term planning today is next Tuesday.