A Publication of WTVP

Thomas E. Spurgeon, president and CEO of Lincoln Office Supply Co., Inc., purchased the company – originally a stationery and office supply store – in 1988 from the Thudium family of Lincoln, Illinois. The company had 98 employees at the time. Over the past eight years Lincoln Office has expanded into an office environment company, with additional locations in Peoria (two), Champaign, Springfield, Bloomington, and Galesburg, Illinois; and Valparaiso and Munster, Indiana – resulting in over 200 employees prior to a recent divestiture. Today Lincoln Office employs approximately 150-155 people.

Lincoln Office’s business more than double from 1988 to 1995, and finished last year with sales in the low $60 million range. It is one of Steelcase’s 10 largest dealers in the world, and is the 18th-largest office furniture dealer in the U.S.

Tom began his business career in 1966 – after graduating from Purdue, Indiana, and Stanford Universities – as general manager of Industrial Field Sales & Service for Cummins Engine Company of Columbia, Indiana.

From 1979 until 1985, he was owner, president and COO of Gott Corporation of Winfield, Kansas.

From 1985 through 1986, Tom was employed as president of Peoria’s L.R. Nelson Corporation, before serving as chairman of Cosco, Inc. of Columbus, Indiana from 1986-1988.

Tom currently serves on the boards of Commerce Bank, Peoria; Excel Foundry and Machine. Inc.; Proctor Hospital; and United Methodist Church Foundation. He is on the Associate Board of Trustees of Bradley University and the Bradley University National Council of Advisors, and the Heart of Illinois United Way Pillars Committee.

Tell us about the acquisitions and divestitures Lincoln Office has made over the past year.

Lincoln Office, in experiencing changes within our industry, established an overall goal of growing – to grow through new acquisitions or through developing new services. Most recently we have been looking into expanding our geographical coverage, and we’ve done so with acquisitions in Indiana. We are now in Northwest Indiana in some 10 counties, after two office furniture dealerships with owners ready to retire were willing to sell their businesses to Lincoln Office. Both dealers were Steelcase-affiliated dealers, and the acquisitions gave us an instant Indiana representation. The acquisitions represented a growth in business of about 10 to 15 percent for us.

At the same time, in looking at what I call the “office environment” business, we were evaluating the direction of our business and our long-range goals. One of the areas in which we were historically involved – and what was the origin of the company – was office supplies, like markers, paper, paper clips, pencils, rubber bands, etc. Lincoln had done very well in that market over the years and, in the last fine years, had two acquisitions in that area. That enabled us to grow that part of the business to a size that was attractive to other companies. In looking at that business, however, we were concerned that, as other larges businesses developed, we might eventually find ourselves at a competitive disadvantage. Moreover the other part of our business, which we believed contained important growth opportunities, was requiring significant investment dollars. So we made a strategic decision and decided to leave the office supply side of the business.

How difficult a decision was that?

It was a difficult decision, because there was a lot of emotion in it, largely because the people involved in that side of the business had been with the company for many years. It was very important to be able to protect our people and our customer base. We certainly didn’t want to do anything to alienate our customers; we wanted to give them a transparent, seamless transition.

Fortunately there was more than one company interested in that particular operation. They approached us, so we sought the one best suited to our goals. It turned out to be U.S. Office Products. They wanted our people and guaranteed them a salary and fringe benefits identical to what they had with us. Moreover, we’ve continued a relationship with them, providing them furniture. The arrangement has been good for the overall growth of our company and the changes we are going through, while providing a lowest supply cost situation for our former customers.

To what extent do the large discount chains or mail order houses affect your business?

They really don’t affect us that much. The large supply houses, like Office Max and Office Depot, are basically retail establishments that have as their niche the single user or small offices more than the larger companies. Surveys and studies we made indicate that we are more than competitive with them. In fact, it was better to buy office supplies from the former Lincoln Office Products than it was to buy from them, if you were a large customer. And we provided many added services they did not provide. Although they are going through an evolution and are becoming more service oriented, they’re still managed nationally, and often times don’t respond to local situations.

As part of our operation here in Peoria, we also have a retail furniture store called Options. That has worked out well, because Options is aimed at the smaller business and the home office. Furniture is available for quick delivery.

What will your business have to do to stay competitive in the coming years?

I think the industry and the business has evolved to where it’s no longer a business of selling furniture; it’s a business of evaluating the needs of individual companies and partnering with them. Each company is different; each has different needs. In addition, it is necessary to address the office environment, not just furniture.

For example, in the case of AT&T, Ameritech, General Telephone and Illinois Power, we really have become their facility management department. When they have a need for expanding electrical services, installing new floor covering, painting, plumbing, or whatever, they contact us and we either perform that service for them or subcontract it to someone else.

More and more larger companies are outsourcing such projects, as they concentrate on what they do best. They want to be able to concentrate on the telephone business or the energy business – not painting or putting up signs, etc. Over the last several years we have geared ourselves toward providing the support services they need.

What trends in today’s workplace are most affecting your business?

One of a company’s largest costs is simply facilities – the building. If you live in New York City, for example, and you lease your work space, there’s a high cost attached to each square foot. So the question becomes, “How big should the work area be for any given individual?” What we’re seeing with telecommuting is that people are spending more time away from their work stations, so work areas don’t have to be as large as they once were. The standard office size for a manager used to be 10 by 10 feet or 8 by 10 feet; today we’re seeing that come down to 8 by 8 feet or even 8 by 6 feet.
Not as much file space and work surface are required today; many company operations are on computers. I think we’re going to see further evolution, where a CRT is only two inches deep and is just hung on a systems panel – like a picture.

In the mid 70s, statistics indicated that workers spent 70 percent of their time as their desks and 30 percent away, in meetings or whatever. Today, it’s flip-flopped. In 1996 they spend 70 percent of their time away from their desks and only 30 percent of their time at their desks. Hoteling – providing a work space for use by several workers 00 is becoming more common. Often a single unit will have different storage areas and different keys assigned to several people who utilize the work area. Each person can have their own private storage space, but they use the work surface as they come and go. The cellular phone and the laptop computer have all impacted this.

More workers are telecommuting today, working from their homes rather than from company offices. In the case of natural disasters, whether a large snowfall in the Midwest or an earthquake in California, we’ve learned that people can function very well from their homes.

With the advent of telecommuting and corporate employers working from their homes, has Lincoln Office actually gone into a worker’s home, at the request of a company, to set up a workstation?

We have not done that yet, although we’re working with Caterpillar to evaluate something similar right now. But some of our peers, in Chicago for example, have done that several times. A good example is AT&T, which now has a program where identified employees have a choice or working out of their homes or in a company office. If they say they’ll work out of their home, the company provides them literature illustrating what office furniture is available for their homes; and the company will subsidize it up to a certain amount, including fax machines, computer, etc.

We have two workers here at Lincoln Office who are involved in a similar scenario. They basically buy their own computer, the company proved software and a modem, and pays the telephone expenses.

How is rapid, widespread computerization and the Internet affecting your business?

I don’t honestly know all the ramifications. We’re in the embryonic stage, trying to understand that. We’re evaluating the Internet through consultants. Our major supplier, Steelcase, has developed a major advertising program throughout the U.S., and the Internet is a focal point of the program. As part of that Internet program, a prospective client can identify your company as a Steelcase dealer in Central Illinois. The concept is that they will then be able to pull up our services via the Internet and even review product catalogs.

To facilitate the service, we’re getting involved with product literature via CD ROM. Potential clients will be able to look at our furniture through the CD ROM venue via the Internet – in terms of exploring it and seeing how it’s built – even to the point of being able to distinguish fabric patterns.

We are beginning, and I would say, under normal conditions, we would probably be a year or year-and-a-half away, but at the speed Steelcase is moving, it’s hurrying us. So our intent right now is to be fairly well down the road within six months, and there are companies here in Peoria that are helping us do that.

How have temporary workers impacted your business?

It’s impacted us more as employers that is has as suppliers. But as suppliers, we have a regular program where, as companies bring in temporary workers, within 24 hours we can have full workstations on site and available for those temporary workers to use – desks, file cabinets, credenzas, chairs, and portable workstations. If a company needs a temporary worker to come in and work for three days, but doesn’t have the place to put them, we will bring a portable unit in with a computer. All the employer has to provide is a phone line and the software. When the task is completed, we will return and take it away.

On the other end of the spectrum, our company is a customer of temporary workers. In our business, we have volume fluctuations, and we can’t really employ for these spikes, so we turn to temporaries. It’s interesting, and a bit discouraging, how some of our clients react to temporary workers.

We identify good temporary workers, put them on a roster of temporary workers, train them, put them in uniforms and so on. Yet some clients look at these people and say, “They haven’t worked for you for five years, so they really don’t know what they’re doing, and we don’t want them. We want your full-time people. I don’t think we should have to pay as much for those people.” And yet we’ve gone through the process of selection and training and really, these workers are no different than someone we would go out and hire full-time; they are just at a newer stage in the training process, but when mixed with the full-time people, good installation teams are developed.

How is the relationship between companies in your industry and suppliers and manufacturers changing?

A big trend we see today with Steelcase is an even closer partnership. With the merging of many new manufacturers who can provide a full array of products, so you don’t need a myriad of manufacturers. Lincoln Office establishes a much closer relationship to a particular manufacturer. Also, the manufacturer’s size enables him to provide more services and more attention so our customers are better served. For example, the manufacturers we represent provide a large amount of our individual training. This includes product, installation, methods, and computer training. They are not transmitting much of our training by satellite directly to our locations. Again, it’s a partnership.

Are your suppliers driving your business to a greater degree?

I don’t feel that. I feel we are still independent because we have choices. In fact, in the Steelcase world, we have an organization of dealers separate from the Steelcase organization; it’s our own organization. We invite an officer of the Steelcase company to every meeting, yet we make our own decisions. But there is not independence to the extreme of animosity. We’re very much partners and working for the same things – we just have a larger, unified group in which to express our opinions.

How has the sales process changed for your company and your industry over the last decade?

It really has changed quite a bit in the sense that, in years gone by, we sold furniture. Today we’re more of a consultant for the entire workplace environment. The client is trying to wring all the costs he can out of his company, and the office environment is one of those areas where he feels he can reduce cost.

Companies today are looking at their work process, the organization process, the technology process, and the environment process. Those are four big cost areas. They’re areas that have always been there, but more companies today are realizing they are linked. So I might buy the latest and greatest computers, the latest and greatest software, but at the same time, if I don’t evaluate how it will impact my work process, I don’t know that I can really capitalize and increase my productivity. At the same time, I’ve got all this technology and I’ve looked at my work process, what does that do to my work environment? What are my space considerations? Our clients today are taking a much broader look at everything that is going on, and we, as a potential supplier and consultant, are evaluating processes to identify cost savings.

What general business trends will be increasingly important in the 21st century?

One of the things we’re seeing that’s impacting our business is the spin-off of what I just mentioned. Corporate organizations are changing, They’re changing in that there’s less hierarchy. It’s the concept of flat organization. Flat organizations often require more collaboration among people. This means different work environments. Also, companies are better evaluating long-term cost of ownership. All these concerns dictate that Lincoln Office expand our services. As a result, we have developed activities to support the healthcare market, provide floor covering, provide lighting, and offer leasing agreements.

What issues in the area of government regulation affect your business most? What regulatory changes or reforms would you like to see enacted at the state or federal level?

There are regulations that impact the way we do business with other companies, the Americans With Disabilities Act for instance; and there are regulations that impact us as a company.

Right now there’s been two years of effort within the Illinois Legislature to enact legislation that would regulate design; that is a serious issue for us. The architectural lobby is saying that even though we have degreed designers, and these designers have professional certification just like CPAs and lawyers, they shouldn’t really be allowed to design because of health and safety standards. For two years now they have been pushing for legislation that would ban our designers from doing projects without an architectural sign-off. I see it as a perpetuation of their industry. We are not assisting in developing legislation that would allow the two parties to co-exist, but it’s been a big issue. Lincoln Office has been one of the leaders in the state design organization to help make legislators aware of what the real issues are. We’ve spent a lot of time and money on that because our design team of sixteen people provides a valuable service that deserves recognition.

Workers’ compensation is a big issue. As I talk to my friends in neighboring states, I find they don’t have some of the same concerns to deal with that we do. We have worked with insurance carriers and others to analyze our workers’ compensation costs and bring them down. It involves a combination of attention/awareness training.

Ergonomics became a big issue a few years ago. Can a business bring its workers’ compensation costs down by utilizing ergonomically correct office equipment?

That’s a portion of it. I also think management attention and management awareness are vital. For example, I’m part of a Steelcase program where I evaluate other Steelcase dealerships to determine whether or not they’re performing they way they should be. I recently visited the Boston dealership, which was having extraordinary workers’ compensation claims and costs. About 18-20 months ago, they instill an incentive program for their workers, so the workers would be more attentive to situations where there was potential for injury. It set up a quarterly reward system, where employees were rewarded for being injury-free. In 1995 they reduced their workers’ compensation costs $120,000 net of the incentives that they gave.

What is your philosophy of management?

I believe in having good people within your company and letting them do their thing. Is that empowerment? Not totally. I don’t do that far. I’m still from the old school. We come together as a group and participatively develop a direction and a strategy to achieve our goals. From there, everybody’s on their own and they go forward.

I also have what I call my philosophy of “reserves on the bench.” I will look for good, qualified workers, even though I might not have a specific job open for them at the time. I’ll bring people in and give them challenging opportunities evaluating some new kind of business that we’ve been thinking about, and maybe that person takes it and runs with it. There’s a cost to this, but I think it’s worked out well for us. We’re not a big company, up until our recent divestiture we ere about 210 people. But you need good people, people that are really into the company cultures and ready to go. Finding good, competent people is touch, and it’s frustrating to me many times.

What are some of the other frustrations you face in your business?

We have an extremely difficult time finding good sales people. Working with the Illinois Employers’ Association, we attempt to understand what going-rate wages are for given activities, and pay a little more than that. For example, if you work in this company and sell $1 million of furniture in a given year at a little less than what I call “average gross profit margin,” your earning with our company will be $55-$58,000 a year. That seems like good income. You’re probably going to have to work 45-50 hours a week to get all the things done. We just have a very difficult time finding people who seek to excel in sales.

Why do you think you have a difficult time recruiting good workers? Is it particularly difficult in Central Illinois as opposed to other areas?

I don’t know if it’s because people have an aversion to sales, or if it’s a new breed of younger people, but it’s a frustration. Certainly State Farm doesn’t have difficulty because they have good, active college recruiting programs. Yet they are a large company. We read more and more every day that the real growth in today’s business world is with small companies. So I wonder why we can’t bring more people aboard. I’m back to my “reserves on the bench.” If I find the right people, I’ll bring them in and challenge them. One of the things we do with our sales people is guarantee their salaries; we’ll guarantee their income for 12 to 18 months to ensure they get a good foundation.

Other dealers have similar problems, unless they’re in major metropolitan areas.

I don’t know where you could find a much nicer place to live than Peoria. Yet, amazingly, in using national recruiters to help us find people, I’ve been very surprised at the number of people that give Peoria a bad rap up front and won’t even come talk to us. The people that do come and give Peoria a chance, love it. But yet, it’s difficult to attract newcomers.

How does your company view corporate community involvement?

I am a big supporter of community involvement. This is the city where we live and, as such, have an obligation to the community. At Lincoln Office, we put a fixed percentage of pre-tax income into our community fund that we utilize to support various community activities. We do that in Peoria, but also in Bloomington, Champaign, and everywhere we’re located.

If you work at the Lincoln Office, you’re encouraged to participate in your community, and are given time off to participate.

What message would you like to give the Peoria business community?

Peoria businesses should try to do business locally first. Caterpillar sets a super example for everyone in the community in that they deal locally first. There are a lot of companies in this area that are the beneficiaries of Caterpillar’s efforts. Not everybody does that. That’s not to say that you should only do business locally. Local companies have to be competitive in price and service, etc. But I think too many companies go outside the community, and I don’t think that’s showing good community involvement.

What new ventures are on the horizon for Lincoln Office?

We’re continuing to evaluate expanding geographically. Right now we are looking at more than one potential acquisition. I don’t think well do all of them, but we hope to acquire two of them, and I’m excited about that.

I’m even more excited about our facility management thrust, which includes offering refurbishing services to companies. It involves refurbishing office panels. It should be buying, refurbishing, and reselling furniture from a company that’s downsizing. In addition, it provides for storage, asset management, project management, floor and furniture cleaning, and work environment resizing. Because of this thrust, we need additional facilities, and are evaluating four different locations in the Peoria area. Before this year is out, we will build a 40-50,000-square-foot facility that will provide new jobs. Part of it will be warehousing, and part of it will be refurbishing. It should bring approximately 30-35 new jobs to the area, so we’re excited about that. IBI