01 Jun 2006
One-on-One with Tom Oreck
CEO, Oreck Corporation, Home of the Oreck XL 8 lb. Upright Vacuumby Roger ThompsonTopics:
When Tom Oreck (OPM 26, 1998) took over the family vacuum cleaner business seven years ago, his biggest challenge was to transform the firm from an entrepreneurial “one-man band” founded by his father, David, in 1963 into “a symphony orchestra.” Under the elder Oreck’s guidance, New Orleans–based Oreck Corporation had steadily grown into a national brand known for its lightweight, powerful vacuums. As it prospered, the company acquired a manufacturing plant eighty miles east in coastal Long Beach, Mississippi.
Tom Oreck took center stage with solid grounding in every aspect of the business. “I like to tell people that I rose up the ranks through the sheer force of nepotism,” he deadpans with self-deprecating humor. He made HBS his last training stop before taking over as president and CEO in 1999. Since then, the privately held firm has expanded its home-cleaning product line, opened nearly 500 company stores, and doubled sales (it doesn’t disclose figures). The future looked bright — until last August 29.
That’s when Hurricane Katrina almost ruined everything. In the storm’s aftermath, Oreck, 54, faced a crisis he never imagined possible: Katrina knocked out operations at the New Orleans headquarters and the Long Beach plant, pushing the business to the brink. Advanced planning saved vital data and operations, but Oreck credits employees with actually saving the company. Incredibly, the Long Beach facility, where half of the company’s 1,200 employees work, reopened just ten days after Katrina wrought destruction of “biblical proportions” on the Gulf Coast community. Oreck recently talked about that experience and the future.
Were you prepared for Katrina?
We had always planned on the possibility that either our New Orleans headquarters or our Long Beach facility could be taken out by a hurricane. One of the things we didn’t anticipate was a storm that was massive enough to take out both locations simultaneously.
Ahead of the storm, we backed up and shut down our computer systems and transferred all the data to a site in Boulder, Colorado. The building next door to our Long Beach plant is our call center. We shut that down and transferred that function to third-party centers in Phoenix and Denver. We also did a planned shutdown at the plant and moved certain critical components off-site.
From the Houston hotel where you evacuated with your family, how did you learn that the Long Beach plant withstood an almost direct hit?
In a day or so we got a report from one of our employees who had chain-sawed a path through trees on the roads to check on the plant. He found it was damaged but not destroyed. Once we heard that, we knew we were going to be able to put it all together again. We told people, “If you had a job at Oreck before the storm, you still have a job at Oreck.” And we continued to pay people even as we were trying to put things together.
What was your reaction when you heard that the levees in New Orleans had been breached?
Our employees had evacuated New Orleans, as they had in advance of previous storms. I left my home with only three changes of clothes. And when I heard that the city was filling with water, I thought, “OK, returning is not a matter of days any longer. This is months. Who knows, maybe never.”
Did you ever consider declaring the business a total loss?
As bad as it was, and as great as the uncertainty was, there was never a question about whether we were going to get up and running. No one on the management team ever said, “What’s the point? This is a lost cause.”
What did you do first?
The first thing we did was try to find our people. And of course, one of the problems was that cell phones didn’t work. So we immediately set up an 8 a.m. company-wide conference call on an 800 number. We did that every day, seven days a week, for more than two months until we were back in our New Orleans office. Any employee could dial into the conference call. And we did what you’re supposed to do, which is to give people the facts. That communication was vital.
What role did the company play in helping its employees recover?
Our first responsibility was to our employees — period. The business could wait; the people could not. The Long Beach plant’s parking lot was turned into what we called Oreckville. We very quickly purchased trailer homes from all over the country and brought them in. We delivered food and water by truck almost immediately. We brought in trauma doctors, and we brought in insurance specialists to help people make insurance and FEMA claims.
When you reopened the Long Beach plant on September 9, did everyone get right back to work?
The first thing we did when the lights went on powered by hastily purchased generators from Florida was invite employees and their families to a cookout. The idea was that in the middle of this train wreck people could do something normal that would give them hope.
You clearly put people ahead of the business in the aftermath of the storm. Had that been part of your advance planning?
The people issues involved in this were certainly the one thing we had not been prepared for. It never occurred to us that we would have to deal with such personal devastation. We put people first because it was the right thing to do. As a result, they saved our business. That’s the bottom line. We did the right things for our people, and they in turn saved the business. I’m not overstating it. If our employees had not done the heroic things they did here in Long Beach and elsewhere, Katrina could easily have put us out of business.
How did you keep the New Orleans headquarters operations functioning?
There was no power in New Orleans, but more importantly, there was no access and no housing. Within five days of the storm, we were operating in an IBM business recovery center in Dallas, where we sent about 120 employees and their families. We had 100 computer terminals there, and they were connected with our backup computer system in Boulder.
What’s currently your biggest challenge?
At our Long Beach plant, we are still understaffed. Labor is scarce, and there is tremendous competition for the labor that’s available. Even with a dramatically smaller staff than we had before Katrina, December was the biggest shipping month in our history.
In New Orleans, a big issue for us is recruiting. It’s very difficult right now to recruit white-collar talent to New Orleans. That may change, but for now that’s an issue.
In the aftermath of Katrina, have you considered moving manufacturing inland or offshore?
Because of the way we go to market, there’s a real need for significant flexibility and nimbleness. That kind of nimbleness is impossible if you’re dealing with an overseas manufacturer.
We now understand the vulnerability we have, and by the next hurricane season we will have a second manufacturing facility away from the coastline. That does not mean we’re less committed to this region, or the plant, or the people here. We actually need a second site for growth.
Are you optimistic about the future of New Orleans?
The future of New Orleans and the region depends upon the politicians being redirected by the citizens and the business leadership. If real reform can take place, then this city and this state can flourish. If not, the future will not be pretty.
Did your HBS experience help prepare you for the challenges you have faced since taking charge of the company?
HBS was probably the most significant educational experience I ever had. It really did have a dramatic impact on who I am and who I have developed into as a businessperson. I can’t stress how important I think it was in helping me transition into this job.
Class of OPM 26