Family Business Legends: David Oreck

John Resnick: David, you are 86 years old. You founded the Oreck Corporation in 1963. Is it just as exciting to come to work today as it was back then?

David Oreck: Yes, it is. I am doing different things. But it certainly is exciting, and it gives me an opportunity to work with people who are younger than I am.

JR: Give us a snapshot of the Oreck Corporation as it exists today.

DO: Well, they sell throughout the world. It is a large company. They have, if my memory serves me right, around 1,500 employees. Over 10 million [Oreck vacuum cleaners] have been sold. And the company today sells air purifiers and other devices for the home, including chemical products that are “green” and can be used for cleaning and disinfecting and so on. So the company has grown immensely and the width of its product line is much greater than it was and, I suspect, will continue to grow…. The vacuum cleaners are built in America, and I am very proud of that fact.

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JR: David, I understand that there are literally hundreds of Oreck floor care centers around the U.S. What percentage are corporate-owned and what percentage are family-owned franchises?

DO: About 20% are company-owned; 80% are owned by private individuals. Many of them had not been in the vacuum cleaner business before and have done extremely well.

JR: Where were you born, and what was life like as a kid?

DO: Well, I was born in Duluth, Minn. Life was very cold! My father and mother were both born there. We were a middle-income family. I have traveled a lot, but I still consider myself a Midwesterner.

JR: Did your parents encourage you to become an entrepreneur?

DO: No, not really. All they did encourage is that I stay out of trouble. And that I have done. I went away to college, and I hadn't been there but a few months and along came Pearl Harbor, and not long thereafter I joined the Army Air Corps. And later, after the war it became the Army Air Force and I served in World War II on B-29s running bombing missions over Japan. And it was a long time ago but still fresh in my mind.

JR: When you got out of the military, you moved to New York City. Am I correct?

DO: That is correct. I got a job working for the RCA wholesale distributor as a salesman, and I had never sold anything in my life except the Saturday Evening Post, as a kid…. However, I worked my way up until I ran all the sales of that company. And so that is where I cut my teeth.

On the side I ran a charter air service and did a lot of the flying myself at night. And had a few other things. I ran a mail-order company which taught radio and television repair in the mail, entirely in Spanish. Which was pretty good because I didn't speak much Spanish, but we did have people that did.

And [I] started a master antenna company, where we installed master antennas on the top of buildings in New York…. And that is what preceded the cable TV business, as it turned out.

JR: When you were in New York City I understand that you were very fortunate to have a powerful mentor in General David Sarnoff.

DO: Yes, I did. He was a remarkable, brilliant man. And he was a tough taskmaster…. He expected you to tell him everything that he should know, whether he asked you that question or not. And if he found that you didn't do that, you weren't long with him.

He founded RCA, the National Broadcasting Company and all that went with it. It was a company at that time that had 125,000 employees [and] was the leading company in electronics in the world.

JR: You had worked your way up to general sales manager, the top salesperson. But some pivotal event happened in the early '60s and you moved to Louisiana. What -happened?

DO: Well, I decided at age 40 that I would start a company on my own. I had been with the distributorship for 17 years and had done well for them. I just felt like I wanted to strike out on my own. And so I started, and it just happened to have been vacuum cleaners. It could have been widgets; it didn't make any difference.

So I started the vacuum business thing, and shortly thereafter RCA called me and they said, … “Why don't you take over the distributorship in Louisiana and New Orleans?” That was a wintery day that they called me. I was in Chicago, I recall, and I got on a plane and went down to New Orleans, where I had never been. And it was in December and it was a glorious day down there, the palm trees were waving, and I came in a heavy coat from a snowstorm in Chicago. And I thought, my God, I have been missing something here. So I called them up and said I will take it.

Having an RCA franchise was a big deal. You couldn't buy them; they had to appoint you and so on. And they were then in last place in terms of market share. Within a couple— two or three—years, I had them up in first place. And at the same time I was working the vacuum cleaner business, which was a small business at that time.

JR: I understand that Whirlpool was owned by RCA, correct?

DO: No, at that time RCA was a stockholder. A minority stockholder.

JR: Oh, OK. Well, wasn't it Whirlpool that actually abandoned a design that you thought you could be successful with?

DO: Whirlpool had a design that they fiddled with that didn't work and was nothing but trouble, and they abandoned it. I felt that there was a great deal of potential in that. I rectified the problems, and that is essentially the vacuum cleaner that Oreck sells today.

JR: That was the upright. Why did they feel that upright model didn't work? And what did you see that others didn't?

DO: I felt that it should work, and I liked the idea that it was lightweight. It weighed only eight pounds, which was a fraction of what vacuum cleaners weighed then… And I felt that it was worthwhile to … resolve the problem mechanically, which I did.

However, the second problem was that because it was light my competitors all said it's no good; anything that light just won't last, it won't work and so on. The fact of the matter is that weight had nothing to do with it, except that it was tremendous convenience for the customer. And to this day people rave about the fact that it is so lightweight, it is so easy to use and yet it weighs so little.

JR: Is that when you transitioned from using the Whirlpool name to the Oreck name? Is that when you acquired that model?

DO: Not quite. What happened was that Whirlpool's other big customer was Sears Roebuck. And Whirlpool made vacuum cleaners for Sears, as they do now…. The president of Sears at the time was on the board of Whirlpool. For some dumb reason Sears thought I was a threat to them. And so my contract was, ah, lapsed. Sears instructed Whirlpool to get rid of me. When your biggest customer says get rid of somebody, you do it. And they did. And so it was at that point that I decided, well, I will make them myself, and I had to have a name other than Whirlpool. I tried a bunch of different names and they were all taken. So finally I said, well, I will use my name. Which meant nothing to anybody at the time. But today it is known worldwide.

JR: David, when you got let go from Whirlpool, how did you internalize that? And what advice do you have on how to accept these devastating setbacks and turn them into something positive?

DO: I would say if you've got a good idea you've got to stick to it. You could fail, that is true. But I'm going to presume on the front end that you are comfortable with the fact that you have a good idea, good product, good service—whatever it might be. And then you have to be tenacious and stick to it.

JR: How long did it take until you were able to turn things around and become profitable?

DO: Well, I am guessing … I think it must have been seven or eight years of steady plugging until I began to see the light of day. And then things began to happen fast. I used a lot of techniques selling and building a brand that I had learned over the years. You have to make a lot of mistakes to figure out what is right and what is wrong.

JR: David, when you were going through those seven or eight years of struggle, did you have a family at this time?

DO: Yes, I was married and had three children. And fortunately I was able to spend time with my kids. My wife did a great job, too, while I was traveling, so it was a partnership.

I am grateful to say I have three boys. And they are all quite successful. My youngest is Bruce; he is the U.S. Ambassador to Finland, and my middle son [Tom] is the chairman of Oreck Corporation. My oldest son [Stephen] is a hand surgeon in Wisconsin. And they all have done very well, and I am proud of them. And their children are doing nicely…. Sometimes, ah, you can have three kids and they are all raised the same way and one of them turns out to be a bad boy or a bad girl, whatever. And the other two are fine and folks say, “Well my God, I raised them all the same way; how come?” It is tough. And I would hate to be raising children today simply because there are so many bad influences that they come across—drugs and all kinds of stuff. When I was a child I thought a drug was an aspirin.

JR: David, in 1999 you decided to transition the family business to your son Tom's leadership. How long had Tom been working there before he took the reins?

DO: He had been involved with me for ten years, I would guess, in various capacities.

JR: And was that difficult? I mean, let's face it. How does the next generation fit in the shoes of an icon? Is that a challenge for Tom?

DO: I think it is, and I think it is difficult. But you know, in my case and in most cases, you raise your kids to be independent. Then when they are independent you say, “Hey, what are you doing?” So yes, be prepared to turn loose at some point and hope for the best. You will not agree with everything that they do, I am sure. I know that I don't.

JR: And how do you and Tom agree to disagree?

DO: Well, when I turned over the reins to him I stepped aside. I was there if he needed me, but I did not intrude. And that is very difficult, by the way, to do.

There are things that I think that, ah, had he asked me and taken my advice he might have done better at it. On the other side of the coin, he made his share of mistakes, I am sure, just like I did, and I think he is better for it. He is a good business manager, and he will do just fine.

JR: Was there any resistance from your long-term employees and stakeholders on the transition of leadership?

DO: Yes. There was, and that is understandable. Fortunately, I was around and I have always had an open-door policy and, again, I think that being a good listener is very important…. And frequently the very fact that I would just listen to what [the employee] had to say, even if I said, “Look I hear you and I understand it and that is a problem that we just can't help”—well, the fact that that individual could talk to somebody who would listen, even though I didn't change anything, he left feeling a lot better.

And I think that listening is an art form… People don't talk as fast as you think or something like that. And so you want to interrupt right away and finish their sentence for them and finish their thought for them and all like that. Well, I am sure I was like that when I was younger. But … experience has shown me most certainly that listening is critical. And I feel there is not nearly enough listening. An awful lot of talking but not enough listening. And it makes a huge difference in the big things and little things.

JR: One final question: What is the secret to building a great brand and sustaining it?

DO: I am going to presume that you are building a good product. And as a matter of fact, anybody who is on the market for any length of time is probably building a good product because otherwise he wouldn't last. So I think that building a good product is a given.

I like to build a quality product. I like to to charge for it … price is not the major consideration. Value is the major consideration. Price is a component of value. And so if you've got something that lasts longer, is warranted longer and it is priced consistent with that, it makes it possible for you to sell a product not at the cheapest price and offer excellent service for it.

Do the right thing by the consumer and, I know it sounds a little quaint, but tell the truth. It hasn't gone out of style.

John Resnick is the creator and host of the radio program “Legends of Success,” which is syndicated on more than 100 affiliates and 58 digital cable television systems (audio channels) nationwide (www.legendsofsuccess.com). He is also a business succession and estate planner with Resnick Associates, a second-generation firm with offices in Harrisburg, Pa., and Overland Park, Kan.

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