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Rochester Business Journal 25

Rochester’s homegrown public companies are leaders nationally and internationally. But their local contributions–to employment, the economy and the community–are what really hit home. This publication is devoted to systematically measuring and analyzing their performance.
The Rochester Business Journal 25 consists of publicly held firms based in Monroe, Genesee, Livingston, Ontario, Orleans, Seneca and Wayne counties, and out-of-town companies founded here that have not been sold. Market value determined which firms made the list; ranking was determined by net income.
With comparative data and analysis unavailable elsewhere, this report details the top 25 companies’ past performance and their future prospects.

CONTENTS:
37 Out of the ballpark
By Mary Morgan
The Rochester Business Journal 25 as a group turned cutbacks and restructurings into vastly improved productivity. Half of the firms cut jobs, but combined net income shot up a whopping 66 percent.

38 The Rochester Business Journal 25 ranked

39 Earnings growth chart

40 Sales growth chart

41 Executive privileges
By Will Astor
Nearly half of the top 25 CEOs saw plumper paychecks, underlining the market’s impact on the going rate. But performance did count.

42 CEO compensation chart

43 Power surge
Roger Kober says his goal at Rochester Gas and Electric Corp. is to build on the utility company’s recent restructuring and put RG&E back on the growth track. And he plans to do so by sticking to what the company knows best.

45 Not in my backyard?
By Peg Brickley
Buying American is one thing; buying local is another. Rochester companies shop in their hometown, but not necessarily out of loyalty.

46 Engineering change
By Kara Fitzsimmons
Re-engineering may be part of the title, but companies undergoing the process are not necessarily going by the book.

47 Practice what you preach
By Christina Le Beau
They are inherent to corporate culture, yet values are just now coming into their own. The trick is making them more than mere words.

48 Down, but not out
By Rick Woodson
Still smarting from severe job cuts, Rochester can take solace in forecasts of stability. But observers do not expect great growth, either.

49 Employment trends chart

50 Future tense
Local investment managers turn clairvoyant for a look at the future of Rochester’s top 25 companies.

51 One-year return to investors chart

52 All booked up
By Rose Ericson
Workplace relationships and competition are frequent themes in the favorite business books of top 25 CEOs. Few ranked as best sellers.

53 The top 25 by the numbers

54 Definitions and footnotes

Rochester Business Journal 25

At long, long last.
“All the cutbacks and restructurings that have taken place over the last decade are now forcefully rewarding the bottom line at many firms in the Rochester metropolitan area,” says Gary Ciminero, chief economist at Fleet Financial Group Inc., the Providence, R.I.-based parent of Fleet Bank of New York.
And how.
With Xerox Corp. as their standard-bearer, companies making up the Rochester Business Journal 25 grabbed the brass ring in 1994. Net income for the group shot up a whopping 66 percent compared with 1993, while the composite profit margin swelled 11.7 percent.
Total sales for the group measured a more modest 7 percent growth.
Robust demand for exports–stoked by favorable exchange rates in Germany and Japan–marked another boon for the Rochester Business Journal 25, whose ranks are flush with exporters.
A nationwide surge in capital spending, particularly for high-tech specialized equipment, added even more zip to the party, Fleet’s Ciminero notes.
And although this region grew more slowly than the rest of the country, Rochester firms benefited from a healthy national economy, says Kent Gardner, director of economic analysis for the Center for Governmental Research Inc.
Improved productivity came at the cost of job growth, however. Twelve firms in the Rochester Business Journal 25 cut employment; Xerox and Eastman Kodak Co. combined axed more than 4,000 workers last year.
“Many firms are producing more with fewer people,” Ciminero says. “That also accrues to the bottom line.”

EARNINGS
Sixteen of the Rochester Business Journal 25 posted gains in net income; of the nine firms that lost ground, seven shook from double-digit losses–or worse.
Xerox bumped Kodak from the top spot in a ranking by net income, bringing home $794 million compared with the imaging giant’s $554 million. Xerox’s strong showing reflects a dramatic turnaround from 1993, when restructuring costs were a large factor in a $189 million loss.
Though holding the No. 2 earnings slot, Kodak slid 14 percent from 1993 net income of $644 million. Bausch & Lomb Inc., plagued by shareholder suits and a Securities and Exchange Commission investigation, saw net income dive 91.4 percent to $13.5 million.
Gannett Co. Inc. marked a 17 percent gain with $465 million in earnings compared with $398 million in 1993.
Unhindered by CEO Thomas Golisano’s gubernatorial bid, Paychex Inc. popped up earnings 40.7 percent to $28 million.
Smaller fry sizzled, too: Seneca Foods Corp., Monro Muffler Brake Inc., IEC Electronics Corp. and Hahn Automotive Warehouse Inc. all chalked up double- digit gains. And Genesee Corp. wowed shareholders with an earnings jump of 1,093 percent, from $340,000 in 1993 to $4.08 million last year.
Rochester Community Savings Bank wrested itself from the red last year, pulling in $44.3 million compared with a loss of $59.4 million in 1993. Gleason Corp. also recovered from a $2.87 million loss in 1993 to post a $4.33 million profit last year.
Though still in the hole, Moscom Corp., a maker of telecommunications equipment, cut its loss from $3.85 million in 1993 to $390,000.
Other telecom firms showed mixed results. Frontier Corp. bumped up earnings 32.9 percent in 1994, while infrastructure investments dragged down ACC Corp., an international long- distance reseller. The firm reeled from an $11.3 million loss.
Ultralife Batteries Inc. was a triple- digit loser. The Newark manufacturer took a $3.14 million hit, dropping 285.6 percent from its 1993 loss of $810,000.

SALES
More than half of the Rochester Business Journal 25 bragged double-digit or better sales gains. Canandaigua Wine Co. Inc. led the pack with a 105.5 percent increase in sales to $630 million, up from $306 million in 1993.
With its beefed-up distribution network, Hahn Automotive steered sales to $215 million, an 80.9 percent gain over 1993.
Webster-based PSC Inc., a maker of laser-scanning equipment, boasted a 55.4 percent increase over 1993. The Webster manufacturer raked in $60.4 million in sales, jumping from $38.9 million in 1993.
Other double-digit sales winners include Ultralife Batteries, Student Loan Corp., IEC Electronics, ACC and Gleason.
Kodak and Xerox made modest gains in 1994. Revenues at Kodak climbed 7 percent to $13.6 billion, up from $12.7 billion the previous year.
Fueled by gains in its digital-imaging business, Xerox posted $17.8 billion in sales, up 4.7 percent from $17 billion in 1993.
Only three firms–Bausch & Lomb, Genesee and RCSB–experienced slipping sales in 1994. Revenues at Bausch & Lomb fell 1.2 percent to $1.85 billion, down from $1.87 billion the previous year.
Genesee also slid 1.2 percent, seeing sales of $137 million last year, a $2 million drop. RCSB brought up the rear with a 5.1 percent decline to $316 million.

TOTAL RETURN TO INVESTORS
Fourteen companies dealt a positive return to investors, according to data compiled for the Rochester Business Journal by Frank Dorkey of Dorkey & Associates Inc.
Several local stocks outperformed the market last year, hardly a great claim, given the Standard & Poor’s 500 return of only 1.32 percent.
Still, many investors had cause to cheer.
PSC eclipsed all others with a 116.67 percent return to investors, followed by Seneca Foods’ 68.75 percent return. Other double-digit winners include Eastman Chemical Co., Paychex, Canandaigua Wine, Hahn and CPAC Inc.
Xerox beat out Kodak with a 14.11 percent return, compared with Kodak’s 11.25 percent return.
Many firms that fell, crashed.
Four companies–Bausch & Lomb, Rochester Gas and Electric Corp., IEC Electronics and ACC–took double-digit hits. Bausch & Lomb disappointed shareholders with a minus 32.35 percent return; RG&E posted a minus 13.72 percent return.

NEW TO THE LIST
One firm that leapt into the public arena last year grabbed a spot on the Rochester Business Journal 25.
Home Properties of New York Inc., which made its initial public offering in August, boasted sales of $24.8 million last year, a 15.8 percent increase over 1993 revenues. The only publicly traded real estate investment trust in Upstate New York, Home Properties painted an even brighter earnings picture: Net income jumped 32.7 percent to $2.38 million.

FIVE-YEAR COMPARISON
As a pack, the Rochester Business Journal 25 grew net income 15 percent over the five years ended in 1994. During that same period, sales moved up a healthy 12.1 percent.
Kodak’s earnings edged up only 1.1 percent compared with 1990, while Xerox posted a robust 30.2 percent advance. But both are happier scenarios than the 89.7 percent plunge registered by Bausch & Lomb.
Frontier was one of eight companies to show a triple-digit earnings gain in the five-year comparison. Student Loan, RCSB, Paychex, Monro Muffler, Home Properties, Canandaigua Wine and IEC Electronics also claimed that honor.
Sybron International Corp.’s income has exploded 1,819 percent since 1990. The parent company of Nalge Co., which manufactures laboratory equipment, watched earnings bolt from $2.24 million in 1990 to $43 million last year.
Only one firm–Ultralife Batteries– showed a loss in 1990; it was in the red last year as well. On the sales front, however, the Newark manufacturer is top dog, blasting up 6,084.7 percent since 1990.
A five-year snapshot shows impressive sales growth among the acronymic. PSC, ACC and IEC all marked triple-digit growth, as did Hahn Automotive and Canandaigua Wine.
Kodak sales rose 8.2 percent compared with its 1990 performance, outpacing Xerox’s 4.3 percent sales growth.
Three firms–Seneca Foods, RCSB and Gleason–saw sales dip last year below 1990 levels.
Nine Rochester Business Journal 25 firms outperformed the S&P 500 annualized total return of 8.7 percent for the five-year period. Canandaigua Wine Class A and B stock surged to the top with 53.99 percent and 54.79 percent returns, respectively.
Other double-digit performers were Xerox, Kodak, Paychex, Seneca Foods, CPAC, PSC and ACC.
Gleason was the only Rochester Business Journal 25 firm to post a negative return to investors, with a minus 0.1 percent annualized return for the five-year period.
Duplicating 1994’s strong performance might prove difficult to repeat, CGR’s Gardner says. The national economy seems to be slowing, he notes, which can only hurt local firms.
Ciminero of Fleet Financial also sounds a note of caution.
“Profits will still be strong in ’95,” he says. “But I wouldn’t expect growth to be as strong as last year.”

Rochester Business Journal 25

1. Xerox Corp.[1] $794 $6.44 $17,837 $38,585 18.23 4.5
Xerox Square
Rochester, N.Y. 14644
423-5090
Designs, develops, manufactures and markets document-processing products
and systems

2. Eastman Kodak Co. 554[2,3] 1.63 13,557 14,968 32.67 4.1
343 State St.
Rochester, N.Y. 14650
724-4000
Manufactures imaging products

3. Gannett Co.[4] 465 3.23 3,825 3,707 16.53 12.2
55 Exchange Blvd.
Rochester, N.Y. 14614
232-7100
News and information company that publishes newspapers, operates
broadcasting stations and outdoor advertising business

4. Eastman 336 4.05 4,329 4,375 13.74 7.8
Chemical[5] 2255 Mt. Read Blvd.
Rochester, N.Y. 14608
722-2905
Produces a wide range of plastics,chemicals and fibers

5. Frontier Corp. 110[7] 1.40 985 1,761 16.16 11.2
180 S. Clinton Ave.
Rochester, N.Y. 14646
777-1000
Telecommunication services

6. RGE 67.0[9] 1.79 1,001 2,466 11.53 6.7
89 East Ave.
Rochester, N.Y. 14649
546-2700
Supplies electric and gas service

7. Student Loan 55.4[7] 2.75 367 5,365 8.82 15.1
99 Garnsey Road
Pittsford, N.Y. 14534
248-7187
Finances and services student loans

8. Rochester 44.3 2.39 316 3,426 7.17 14.0
Community Savings Bank
40 Franklin St.
Rochester, N.Y. 14604
258-3000
Retail consumer financial-services company

9. Sybron 43.0[7] 1.85 440 558 19.46 9.8
75 Panorama Creek Drive
Rochester, N.Y. 14625
586-8800
Designs, manufactures and markets laboratory and dental-supply products

10.Paychex Inc. 28.0 0.94 224 130 48.94 12.5
911 S. Panorama Trail
Rochester, N.Y. 14625
385-6666
Payroll processing and payroll tax preparation company

11.Goulds Pumps Inc. 18.2 0.86 586 457 27.33 3.1
240 Fall St.
Seneca Falls, N.Y. 13148
315-568-2811
Manufactures centrifugal pumps

12.Bausch & Lomb Inc. 13.5 0.23 1,851 2,458 155.44 0.7
1 Chase Square
Rochester, N.Y. 14601
338-6000
Global health care and optical market

13.Canandaigua Wine 11.7 0.74 630 827 56.76 1.9
116 Buffalo St.
Canandaigua, N.Y. 14424
394-7900
Produces and markets beverage alcohol brands

14.IEC Electronics 10.9 1.51 130 85.0 5.05 8.4
105 Norton St.
Newark, N.Y. 14513
315-331-7742
Manufactures complex printed circuit boards

15.Monro Muffler 7.35 1.06 93.6 77.0 17.45 7.9
Brake Inc.
2340 Brighton-Henrietta Town Line Road
Rochester, N.Y. 14623
427-2280
Chain of company-operated shops providing automotive undercar repair
services

16.Seneca Foods Corp. 5.34[2,12] 1.84 290 201 18.61 1.8
1162 Pittsford-Victor Road
Pittsford, N.Y. 14534
385-9500
Food processing

17.Gleason Corp. 4.33[2] 0.84 128 122 21.58 3.4
1000 University Ave.
Rochester, N.Y. 14692
473-1000
Manufactures gear production equipment

18.Hahn Automotive 4.14 1.04 215 113 11.78 1.9
415 W. Main St.
Rochester, N.Y. 14608
235-1595
Retail and wholesale automotive

19.Genesee Corp. 4.08 2.55 137(10) 151 14.71 2.9
445 St. Paul Blvd.
Rochester, N.Y. 14692
473-1000
Produces beers and ales

20.CPAC Inc. 2.63 0.84 43.8 27.0 13.39 6.0
2364 Leicester Road
Leicester, N.Y. 14481
382-3223
Manufactures imaging chemicals,pollution control systems
and chemical mixers

21.Home Properties 2.38[3] 0.44 24.8 149 24.8 9.6
of New York Inc.[17] 850 Clinton Square
Rochester, N.Y. 14604
546-4900
Self-administrated and self-managed real estate investment trust

22.PSC Inc. 0.61 0.08 60.4 52.8 60.4 4.8
675 Basket Road
Webster, N.Y. 14580
265-1600
Designs, manufactures and sells laser-based bar-code
scanning products

23.Moscom Corp. (0.39) (0.06) 14.3 16.1 Loss -28.6
3750 Monroe Ave.
Pitsford, N.Y. 14534
381-6000
Designs and manufacturestelecommunication management
voice-processing and voice-recognition products

24.Ultralife (3.14) (0.57) 5.31 30.1 Loss -20.8
Batteries Inc. [20] 1350 Route 88 South
Newark, N.Y. 14513
315-332-7100
Develops, manufactures and markets lithium batteries

25.ACC Corp. (11.3) (1.60) 126 84.7 Loss -9.0
39 State St.
Rochester, N.Y. 14614
987-3000
Provides worldwide long-distance telecommunication services

Rochester Business Journal 25

RANKED BY TOTAL % CHANGE IN NET INCOME, 1993 TO 1994

1. Genesee Corp. 1,093.0
2. Moscom Corp. 89.9
3. Seneca Foods Corp. 69.4
4. Sybron International Corp. 66.8
5. Paychex Inc. 40.7
6. Frontier Corp. 32.9
7. Home Properties of New York Inc. 32.7
8. Eastman Chemical Co. 25.8
9. IEC Electronics Corp. 20.4
10. Monro Muffler Brake Inc. 19.5
11. Gannett Co. Inc. 17.0
12. Hahn Automotive Warehouse Inc. 15.4
13. CPAC Inc. 3.8
14. Rochester Gas and Electric Corp. -6.0
15. Eastman Kodak Co. -14.0
16. Student Loan Corp. -14.3
17. Goulds Pumps Inc. -22.6
18. Canandaigua Wine Co. Inc. -24.8
19. PSC Inc. -66.9
20. Bausch & Lomb Inc. -91.4
21. Ultralife Batteries Inc. -285.6
ACC Corp. NM
Gleason Corp. NM
Rochester Community Savings Bank NM
Xerox Corp. NM

Rochester Business Journal 25

RANKED BY TOTAL % CHANGE IN SALES, 1993 TO 1994

1. Canandaigua Wine Co. Inc. 105.5
2. Hahn Automotive Warehouse Inc. 80.9
3. PSC Inc. 55.4
4. Ultralife Batteries Inc. 36.6
5. Student Loan Corp. 28.8
6. IEC Electronics Corp. 26.6
7. Gleason Corp. 23.7
8. ACC Corp. 19.3
Monro Muffler Brake Inc. 19.3
10. Paychex Inc. 17.9
11. Home Properties of New York Inc. 15.8
12. Seneca Foods Corp. 12.7
13. Sybron International Corp. 11.2
14. Eastman Chemical Co. 10.9
15. CPAC Inc. 9.8
16. Frontier Corp. 8.7
17. Eastman Kodak Co. 7.0
18. Moscom Corp. 6.0
19. Rochester Gas and Electric Corp. 5.5
20. Goulds Pumps Inc. 5.4
21. Gannett Co. Inc. 5.0
22. Xerox Corp. 4.7
23. Bausch & Lomb Inc. -1.2
Genesee Corp. -1.2
25. Rochester Community Savings Bank -5.1

Rochester Business Journal 25

Talk about beating inflation.
While much of the area’s corporate rank and file settled for wage hikes of 4 percent or less last year, nearly half of the Rochester Business Journal 25 CEOs saw their pay envelopes swell with percentage increases in the two- and even three-digit range.
Xerox Corp.’s Paul Allaire, for example, received a 127.9 percent raise, bringing his 1994 compensation to a cool $5 million and change.
PSC Inc. CEO Michael Hone’s $1.13 million in compensation ranked him only seventh on the pay scale, but no one topped his rate of increase–a whopping 431.4 percent.
At Eastman Kodak Co., CEO George Fisher’s comparatively modest 9.5 percent pay hike grossed him a tidy $6 million.
These warp-speed pay hikes are total compensation figures that include bonuses, cash value of perquisites and stock-option values. But even looking only at base pay, the top 25 CEOs made out well, rating an average 9 percent hike.
Still, Rochester lagged the rest of corporate America last year in CEO pay hikes.
According to figures gathered for the Wall Street Journal by consulting firm William Mercer Inc. of New York, CEOs of 350 U.S. firms surveyed on average saw their base wages rise by 11.4 percent.
Among companies surveyed, CEO salaries rose at a faster clip last year than in any year since 1988, while non-union salaried workers saw their rate of increase slow from 4.5 percent in 1993 to 4.2 percent last year.
Whatever their raises and however you add it up, CEOs make a lot of money. Do they deserve it?
A few years ago the CEO gravy train ignited considerable shareholder unrest.
These days it is raising far fewer eyebrows, though grumblings still can be heard, experts say.
“What bothers people is that in some cases the companies aren’t doing that well,” says Janet Barnard, associate professor of management at Rochester Institute of Technology’s College of Business.
CEO pay increasingly is tied to performance, notes James Brickley, professor of organizations and markets at the University of Rochester’s William E. Simon Graduate School of Business Administration.
CEO compensation is wildly out of line with what the masses make, he concedes. But top executives command such pay because they do jobs that most people cannot do.
CEOs are the corporate equivalent of Madonna or Michael Jordan, Brickley says. Like entertainment and sports stars, they have rare skills and so cannot be blamed for charging what the market will bear. Just as Michael Jordan can boost the Chicago Bulls’ gate by his mere presence, so can the right CEO boost corporate profits.
Case in point: George Fisher.
An ailing Kodak lured Fisher from Motorola Corp. in 1993 in part with a $5 million signing bonus. And, Brickley notes, the company’s aggregate stock price rose by more than $1 billion forthwith.
Under Fisher, Kodak has continued to see its stock price rise, earning its CEO a $6 million 1994 pay package.
Shareholders’ concerns have eased in large part because boards are holding CEOs more accountable, Brickley says.
“You can argue how much of a correlation there is, but it’s been pretty well established academically that there is a definite link between how well a company does and how well its CEO is paid.”
Brickley’s point is one to which Bausch & Lomb Inc. CEO Daniel Gill can attest.
In 1993, Bausch & Lomb rode high, winning praise from Wall Street and shareholders alike for its forward-looking management and healthy profits.
Rocked by controversy over contact-lens pricing and plagued by ho-hum profits in 1994, the company of late has won no plaudits.
Explaining Gill’s zero-bonus, 45.7 percent 1994 pay cut to shareholders in the firm’s most recent proxy statement, directors stated: “The company’s operating performance was well below the objectives established by the board and management.”
Nevertheless, the board’s action did not send Gill to the poorhouse.
His compensation in 1994–$1.656 million–looks bad only when compared to the $3 million he collected in 1993.
Indeed, Barnard says, the generosity with which even underperforming American CEOs are treated compares poorly to more even-handed compensation given to their counterparts in Japan and Europe.
For example, she says, in a year in which former Chrysler Corp. CEO Lee Iaccoca grossed some $60 million, his counterpart at Toyota Motors Corp. made only $600,000.
Brickley concedes that U.S. CEO pay scales are the highest in the industrialized world by a longshot, but maintains that the discrepancy exists for highly defensible marketplace reasons.
American CEOs such as Fisher or IBM Corp.’s Louis Gerstner, whom Big Blue lured away from RJR Nabisco Inc., are more mobile, he says. And because others are willing to pay handsomely for their services, companies must be prepared to pony up whatever the market will bear.
Xerox directors cited their desire to keep Allaire from jumping ship as justification for sweetening his stock options by 170,000 shares in 1993 and 1994, stating that his long-term compensation fell short of what peer companies were offering.
Such arguments do not mollify Barnard.
She believes the shareholder worm could turn, especially if overall corporate performance nosedives.
Some may assume that the academically touted links between pay and performance will keep CEOs’ noses to the grindstone and thus keep balance sheets healthy. But Barnard does not completely buy it.
“Sure there is a link, but how deep is it? No one can tell you that.”
It is a question that shareholders might do well to ponder.
As Xerox directors figured it, Allaire rated a $2.5 million bonus–3.25 times his base pay.
Part of the bonus–$1.275 million–was determined using a formula that took into account before-tax profits, return on assets, and customer and employee satisfaction.
However, the other $1.244 million was awarded based on the committee’s subjective assessment of Allaire’s performance.
Indeed, his base was set by no objective criteria whatsoever, the company’s proxy statement reveals.
Another factor in the CEO compensation picture is the long-term compensation generally offered to star-status CEOs.
A $5 million signing bonus is only the start of Fisher’s five-year agreement with Kodak.
In addition, he is guaranteed salary and pension benefits worth another $2 million. The pension benefits were granted by crediting Fisher with 17 years’ service in order to qualify him for maximum benefits.
Kodak also granted him options on 1.3 million shares in 1993 and loaned him $8.2 million to purchase the shares. Fisher is supposed to repay the two loans making up $8.2 million at 4.83 percent interest, but Kodak is to forgive them at the rate of 20 percent a year as long as Fisher stays put.
If Kodak stock continues to rise as analysts predict, Fisher’s shares will be worth more than $70 million by the year 2000.
For CEOs, stock options are a two-edged sword; the value of shares presumably depends largely on how well they run the company.
Nevertheless, some say, Fisher would have to try pretty hard to come up a loser.
Notes Brickley: “This is a market economy and you pay the market rate.”

Rochester Business Journal 25

RANKED BY TOTAL COMPENSATION IN 1994

Compensation(1) %
Company Executive 1994 1993 Change
1. Eastman Kodak Co. George Fisher 6,004,825 5,484,769 9.5
2. Xerox Corp. Paul Allaire 5,081,772 2,229,865 127.9
3. ACC Corp. Richard Aab 2,013,497 643,546 212.9
4. Bausch & Lomb Inc. Daniel Gill 1,656,151 3,050,033 -45.7
5. Gannett Co. Inc. John Curley 1,607,112 2,089,362 -23.1
6. Eastman Chemical Co. Earnest Deavenport 1,374,635 865,984 58.7
7. PSC Inc. Michael Hone 1,131,094 212,836 431.4
8. Sybron International Kenneth Yontz 1,059,235 11,787,216 -91.0
9. Frontier Corp. Ronald Bittner 1,003,337 1,024,477 -2.1
10.RCSB Leonard Simon 848,394 490,001 73.1
11.Canandaigua Wine Richard Sands 644,384 258,482 149.3
12.Goulds Pumps Inc. Thomas McDermott(2) 601,725 NA NA
13.CPAC Inc. Thomas Hendrickson 590,122 429,630 37.4
14.RGE Corp. Roger Kober 504,274 446,687 12.9
15.Monro Muffler Brake Jack Gallagher (3) 489,450 316,475 54.7
16.IEC Electronics Corp. Roger Main 462,065 606,775 -23.8
17.Hahn Automotive Mike Futerman 458,686 426,495 7.5
18.Paychex Inc. Thomas Golisano 442,182 379,439 16.5
19.Genesee Corp. John Wehle Jr. 364,686 289,350 26.0
20.Student Loan Corp. Stephen Biklen 342,796 312,974 9.5
21.Seneca Foods Corp. Kraig Kayser 330,583 145,000 128.0
22.Gleason Corp. James Gleason 309,709 308,030 0.5
23.Ultralife Batteries Bruce Jagid 216,602 145,120 49.3
24.Moscom Corp. Albert Montevecchio 194,370 193,447 0.5
25.Home Properties Norman Leenhouts 152,556 NA NA
Home Properties Nelson Leenhouts 152,556 NA NA

(1)Compensation figures are from fiscal 1994 proxy statements and include
cash compensation bonuses, long-term incentive payouts, all other
compensation plus value of stock options realized during 1994.
(2)Thomas McDermott is president and CEO since June 28, 1994.
(3)Larry Day became executive vice president and chief operating
officer on April 1, 1995.

Rochester Business Journal 25

At Rochester Gas and Electric Corp.’s annual meeting in April, CEO Roger Kober told shareholders that restructuring of industry will create “great opportunities for companies whose strategies are in line with what their customers want.” But he warned: “The message I hear is clear: change or go out of business.” A few weeks ago, Kober discussed with Rochester Business Journal editor Paul Ericson the opportunities and risks that lie ahead for RG&E. The following is an edited transcript:

RBJ: On more than one occasion you’ve said the future in RG&E’s business is arriving much faster than people in the industry thought it would. Could you elaborate on that? Also, is this a case of people in the business failing to anticipate changes, or are there forces driving those changes that couldn’t be anticipated?
ROGER KOBER: All of it could have been anticipated and has been anticipated to some degree. We’re kind of the last industry to go through the deregulation process, and there’s been a lot of lessons learned. I just think the deregulation of our business is going to occur a lot faster than it has in some others; that’s what I mean by the future is coming faster.
I also believe–this isn’t as true today as it was a year ago–there’s still some people who think our business is not going to change, and I think that’s a mistake. The customer is looking to bring more choice to our business. That’s what this is all about in my book.
The problem with bringing choice to the business is people’s definitions of choice vary. A number of customers want to avoid a lot of the costs that are loaded into our rates. That’s not necessarily a solution to deregulating this business. A lot of costs are loaded in our rates by events of the past, and that has to be dealt with somehow, what we call transition costs. As CEO of a utility, one of my major concerns is how those transition costs are going to be handled as we go through deregulation. We’re trying to figure out a way to do that and come out the other side successful.
RBJ: Are certain factors speeding the change–perhaps deregulation and the telecommunications business model?
KOBER: That’s part of it, yes. It’s also forces being driven by the customer. The advent of the independent power market is speeding the change. And I think the regulators would like to see it changed, too, but they haven’t fully recognized the fact that as the business changes, they need to change. That’s one of the difficult parts of trying to manage this. People want to see an open market and more choice for the customers. Yet regulators don’t want to lose the grip they have on the business and the opportunity to do what they want to do, be it a social program or some other effort in terms of how energy gets generated. They don’t want to let go of those things.
From my perspective, you can’t have it both ways. You can’t run a competitive, regulated business.
RBJ: At the shareholders meeting, you said in the future it will be marketplace, not the regulators, that sets prices and decides what value is. How exactly do you see this coming into being?
KOBER: I have a vision of how this industry might be structured and how we might be able to bring choice to our customers. The question remains as to whether or not we can get enough in exchange for bringing that choice to allow it to happen. In trying to provide more choices for our customers we need to get freed up from all the regulations that we’re under today so that we can pursue these business opportunities and build some value for the shareholders.
I think each utility in the country has specific strengths and weaknesses relative to their own corporate entity and the markets that they serve. They may end up pursuing different aspects of this business. I think that it’s going to get broken up into basically four entities. (They) will be the generating business, production of electricity; the major transmission of electricity; the local distribution, if you want to call it that; (and) the service aspects of the business. Which I think is where our opportunity lies–providing services to our customers, not only the distribution of the products, but services to our customers that will enhance, for lack of a better term, the quality of life in using this product. There are things we can do for them that I think provide some business opportunities. That’s where we’re trying to focus the company.
RBJ: You’ve said that you see significant growth potential there. Could you give me some specific examples of that?
KOBER: I can give you some examples, but I don’t know if they’re valid because we haven’t tested them in the marketplace. We have the technology and capability today to monitor your use of our product, the electric product specifically. I could give you an itemized bill for use of this product in your house by appliance. I could also monitor your usage of this product, and also I could help you manage that to more effectively use the product. I could even turn appliances on and off for you in the middle of the night to provide you with a lower-cost energy source. Through that same process I could also tell whether or not the motors on your refrigerator, for example, were starting to show some signs of a problem. Those are services that I think many customers would be willing to pay for.
RBJ: Would this type of thing also apply for commercial/industrial customers?
KOBER: Yes, the same thing would apply. Once we got that connection established, we could provide you with automatic meter reading–no more estimated bills. We could monitor your house very easily for temperature if you were out of town and you had a problem with your heating system. We’d know it instantaneously, and we could send somebody out there to find out what the problem is and probably fix it. I think there’s a whole bunch of services centered around those kinds of things that the customer might be interested in buying.
One (reason) those things are very attractive to us is that we are already a seven-by-24-hour operation. Seven days a week, 24 hours a day, 365 days a year. So it’s no significant additional burden for us to have people available to do these kinds of things.
RBJ: You mentioned a moment ago that, for different utilities, the opportunities may vary. What is it about RG&E, or this particular market, that defines where you see the different opportunities?
KOBER: Well, in spite of everything that’s been written and said about us in the last several months, I think we’ve always been a very customer-focused organization. And that’s something we can build on; that’s one of the strengths of this organization. There may be some customers today who may argue with us about that point, but I think that over the years we’ve demonstrated that.
I also think our service territory might lend itself to those kinds of opportunities. Plus, we’ve never been big in the transmission business. We’ve never been big in the generation business. We have a significant amount of generation to fill our own needs, but that’s just because the company’s always been vertically integrated. When we need energy in the future, we (won’t) be out there building another power plant. We’ll be contracting probably with somebody who is in that business in a big way today who wants to expand in that business. There are a number of utilities who have already gone into that from an independent power-production standpoint. We’ve elected not to do that.
RBJ: Let’s talk about a couple of the things that I think you would see as key steps you are taking to be ready for the new environment. One of them is the work force has been downsized considerably over the last couple of years. And the other thing is that late last summer you restructured the company organization. What are your chief goals here?
KOBER: Well, the chief goal of downsizing was to improve our cost picture; there are still costs that we’ve got to get out of the business. We’re not down to the bare bones yet.
RBJ: What areas has this primarily affected? These cuts were done through voluntary reductions. Have you achieved proportionately the reductions you were looking for? Sometimes you end up losing the people you don’t want to lose, or it’s not distributed in the way you hoped.
KOBER: We suffered through some of that, and we’re still working on resource realignment in some areas. But by and large we came out of that in not too bad shape.
Most companies like ours have been doing things all over the company that just weren’t necessary. The biggest challenge we’ve had is to make sure we’re doing the things that are essential.
Most of the senior people that elected to retire were in the management ranks of the company. What we needed to do was thin out the management ranks.
RBJ: Remove layers?
KOBER: Yes. And we did that. That doesn’t necessarily impede efficiency or productivity; it usually helps it. Like every company, we had systems and policies in place that promoted the growth of that infrastructure, and we’ve changed all those things.
RBJ: Percentage-wise, how much smaller is the management at this point?
KOBER: I’m not sure I can answer that off the top of my head. We’ve downsized by about 25 percent overall. The bulk of that came out of the management.
RBJ: What about the realignment or reorganization?
KOBER: We tried to do some things initially with that reorganization to put all of our customer operations together in one organization and the support services together in another. We accomplished that. Going forward, we’re going to have to do some further realignment of the organization. We’ve got our marketing area, what we call our customer development area, totally divorced from our customer-service people. Those two areas have got to be brought back together. So the organizational changes that we’ve made I view as transitional. They were the first step.
RBJ: Did you anticipate this reorganization was just going to be a transitional one?
KOBER: No. Well, yes and no. I didn’t have the management of the company aligned–we didn’t have everybody on board. I think we’ve gotten to that point since we’ve started this process. What are the next steps? This is a very lengthy, drawn-out (process). You know, I’d like to snap my fingers and make it all happen tomorrow; it just doesn’t work that way.
It’s hard. It’s hard to change the culture of an organization, an organization like this, and it’s hard to change the direction of the organization. For a long time the top dog in this company was the guy in charge of engineering and production. We’ve got to shift over to customer orientation and marketing. That’s a big transition.

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Rochester Business Journal 25

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RBJ: I would imagine most of the people who work here have worked here for a number of years and virtually all that time under the old way of doing things. What you seem to be talking about is people who have done things one way all of a sudden learning to do it a different way. And also bringing in new people and not necessarily people from the industry.
KOBER: We’ve got to do more of that. We are going to do more of that. Once you get below the senior-level officers in the company, the next 20 people in those management slots are brand-new to the organization. And they will bring a sense of excitement and willingness to try new and different ways of doing business. They want to get on with it, they’re chomping at the bit to get going. They’re not new to the company, they are new to their positions, new to their responsibilities, and most of them are young and they know where the business is going and want to get on with it. But we also need, in certain areas where we don’t have the requisite skills and expertise, to bring those people into the company and we’ll do that.
RBJ: Has morale been a problem with all these changes? How significant a factor is that?
KOBER: Well, I don’t think it’s been a big factor at all. Quite the opposite. I think the morale of the people who are left here is high. They’re excited about what we’re trying to do. As I said, many of them want to get on with it. They recognize that the future is going to be different, and they’re anxious to move in that direction.
Morale has been impacted by the problems that we faced this last winter, but not from organizational change or cultural change. I classify those as very different. What we’ve been through here in the last several months would drag down the morale of any organization. But I think we’ve got most of that put behind us. We’re on to resolution of those problems.
RBJ: You refer to the bedrock principles of customer satisfaction, customer loyalty, trust. How do you measure those? How will you know they are back in place?
KOBER: It will take some time to rebuild that. I’m not sure we ever will know it’s back in place. We obviously test, we do surveys, we do the routine things. I’ve always believed and I still believe that our customers have an inherent basic trust in the company and faith in its ability to perform its task. When things are normal and whenever you throw the switch the light goes on and there’s no disruption in the process, that’s when I believe the customers view things as normal and that’s the status we’ve got to try and maintain. We have made both of these commodities we deal in–gas and electricity–very reliable. Short of any disruptions like we went through this winter, if it’s there and it works when they want it to, I think customers have a good feeling about the company. That’s just a sense that I have.
RBJ: I think you alluded to it a little bit earlier, but maybe you could talk more about the competitive initiative proposal.
KOBER: The company is in a unique position to try and develop a model that can be used, particularly within the state of New York. We’re unique in many respects. We’re a relatively small company, we’ve got an excellent service territory. We have a lot of attributes that make it advantageous for us to try and take this deregulation to the next step–some kind of a proposal that we could put in front of the (Public Service) Commission that would say, “Look, in return for more opportunity to pursue business in a different way, we’d be willing to consider the potential of opening our market up to others.” But there’s got to be a significant trade-off here, and I don’t know if even the regulator is ready to go that far. And I can’t describe to you exactly how this might work because I don’t think anybody knows, but we’re willing to discuss it.
RBJ: There is no formal proposal at this point, is there?
KOBER: No, we have not filed a formal proposal yet.
RBJ: When do you plan to submit one?
KOBER: Well, I think we’d want to do that sometime this summer. The case we just filed was the last year of the three-year settlement, and as we come out of that settlement in ’96 we’d like to take this one more step. That isn’t to say that we’d move to an open market at that point, but we may move toward that kind of a concept. We want to leave a period of time, maybe a year, by the time we come up with a rough draft. There’s a whole bunch of participants in this process, you know. It’s not just an issue between us and the commission. That’s one of the things that makes it so complicated, everybody’s in there with their vested interests. And they want to make sure that their interests are protected. There’s about 11 parties to this whole proceeding. It makes it kind of difficult.
RBJ: Based on the conversations you’ve had thus far, what kind of response have you gotten from the PSC?
KOBER: Well, the PSC is supportive of what we’re trying to get done here ultimately. The commission advocates a more open market as long as they keep hold of what it is they need to keep hold of to get the things done that they need to get done. They’re also very concerned, as we are, that service continues to those people who are less fortunate and less able to pay than others. Those are some of the unique aspects of our business. Not everybody in this community has a telephone of their own; if they don’t, they go down to the corner and use the corner phone. That’s not true in our business. It’s very difficult to be selective in who you are going to serve. Everybody’s got to get served, and it’s part of what we’ve got to deal with in deregulation. How are those people going to get served? And that’s a big issue, one that’s got to get worked out. We haven’t got the answer to that. The easiest thing for us to propose would be, “We don’t want that market.’ But we’re obligated to serve that market, and we want to serve that market.
RBJ: Could you paint a picture of what this next step might look like? Something short of a wide-open market?
KOBER: Well, there might be some selected customers who have an opportunity to purchase power from somebody other than RG&E. In other words, open up a certain segment of the market, as we proposed and the commission is working on a proceeding to do in the gas business. We have a group of gas industrial customers now that don’t buy gas from us. There’s no reason that same model couldn’t work on the electric side of the business.
But there’s a whole series of issues that have to get addressed when you do that, as they were addressed in the gas business. There’s a lot of costs in the price that those customers pay today that is something totally different than the energy they’re buying. Those customers want to just buy energy. And somebody’s got to worry about where all those other costs end up. I don’t think we’re interested in–nor is the commission interested in–cost avoidance by those customers at the expense of all the other customers.
RBJ: Some utilities around the country are looking into getting out of the generation business all together. Is that something that could happen here?
KOBER: Sure, it could. I don’t think it will immediately. Over time perhaps we might not be in the generation business from the standpoint of just generating electricity. We might be in the generation system from the standpoint point of what we call system support. System operations is a complicated thing that I won’t attempt to go into other than to explain that distribution and transmission systems are built with generation in certain locations. And they won’t operate without generation in those locations. Unless you change the system configuration dramatically, you’ve got to have generation at key locations. That’s why I think we will always be in the generation business to some degree. Somebody’s going to have to provide that service to the entire system.
Now that’s all handled through the New York Power Pool and the cooperative effort by all the utilities in the state. We have a systemwide planning group that takes care of all those things. Dissassembling the whole infrastructure of the organization and the way it operates and then putting it back together on a competitive basis is not something we are going to do in the next year or two.
RBJ: Your marketing strategy refers to energy-related opportunities consistent with the core business. What exactly does that mean?
KOBER: It means exactly what it says: We’re not interested in going into the banking business or the drugstore business or something totally unrelated to what we’re in business to do. Our core business is the production and delivery, or procurement and delivery, of gas and electricity to our customers. The business aspects that we want to get into in expanding the market and the opportunities for the company are directly related to the kinds of examples that I gave you. Another example that comes to mind is not to have to worry about servicing your electricity and gas-using appliances in your house. You might be interested in paying me a fee on an annual basis so that if you had any problems with any major appliance in your home, you just pick up your phone and call us, and we’ll take care of it for you. I think customers would be willing to pay, not to have to worry about what heating contractors to call, what plumber to call. To me, there’s a business opportunity there, and it’s directly related to the business we’re in.
Many utilities in the last 20 years have gone into (unrelated) businesses, and they have not be successful. We’re not interested in going off in that direction.
RBJ: Looking ahead, to what extent by the end of the decade is your business going to be marketplace-driven? And what’s it going to look like for shareholders/investors? I know you see a downward trend on the dividend side. Finally, what are the odds RG&E is going to remain independent? What are the odds that you might be looking at a merger over the next five years?
KOBER: I wish I could answer those questions–for my own reasons, not for yours. Let me take a stab at them. First, I think you’ll see a reasonable degree of choice by customers by the year 2000, both in the gas and electric business. Does that mean that they’re going to get a lot lower price? I don’t think so, but they’ll have a choice, and I think that’s what they’re really after. That will bring some efficiencies and some improvement in the pricing structure, but I don’t think it will be dramatic. Nobody can produce and deliver the product any cheaper than anybody else when you get right down it. There’s only one way to make the stuff and there’s only one way to deliver it, and it takes a certain amount of cost to do it.
The second question was what we see for the shareholder. My goal here is to try to get the business back on a growth pattern, not focused necessarily on more kilowatt-hours or more therms of gas sold, although it would be nice, if we could get back into that mode and we may if the economy continues to pick up. But my focus and the focus I’m trying to bring to the organization is how can we bring more revenue into the company, outside of those things. These are some of the opportunities we’re talking about–growth in areas outside of the core business but directly related to it. So we’re looking at what business opportunities we can pursue that will bring more revenue into the company and grow shareholder value.
As far as the company itself is concerned, I don’t know what the future might hold as far as mergers and acquisitions. I think there’s going to be some consolidations in the industry. But the kind of service business that I’m focused on (is) not necessarily focused just on what we consider to be the franchise territory today. What we need to do is take those kinds of restraints off of our thinking and think about the services we might be able to provide not only to our local customers, but on a statewide, nationwide basis. Then I think the opportunities will become almost endless. You’ve got to be good at what you do, and you’ve got to be better than anybody else, and you’ve got to have something that maybe nobody else is providing. You’ve got to have some uniqueness to those kinds of things, and then I think you’ve got some tremendous opportunities.
RBJ: And that’s something you can see that RG&E as it exists today could do?
KOBER: Yes, as it exists today, but certainly with a significantly bigger organization. And the way to make that happen quicker might be from some kind of a merger or acquisition with others. I certainly don’t rule that out.
RBJ: Let me ask you finally: What could go wrong? What are the chief risk factors in your business?
KOBER: I never look at what could go wrong. That may sound inappropriate for a person in my position, but I never look at anything going wrong. It may not work out the way we’ve got it pictured today, but if that’s the case we’ll change course when it’s appropriate to do so. But I just never look at the potential for failure.
Now are there some risks along the way? Yeah, there’s some risks along the way. But I don’t spend a lot of time thinking about those. I try to view it from how can we be successful? I don’t dwell much on not being successful.
My philosophies are very simple. One is I think people come to work every day and want to do a good job; it’s inherent in human nature to do good work.
So many people in the world, particularly some management people, think that people are out to do the company in all the time. I just never believed that. I have a fundamental faith in the human being that they want to do a good job. What they need more than anything else is the leadership and the vision of where we’re trying to go. If you lay that out for them and work with them on the implementation, they’ll take you there.
We’ve had a lot of discussion over the years here about responsibility and authority and all those buzzwords, and people are always saying, “Well, I don’t have the authority to do that.” It’s always been my belief that you’ve got all the authority you need to do whatever it is you want to do. You’ve got to take the responsibility that goes with it. And that’s where people fall down. They want the authority, but they don’t want the responsibility that goes with it. Through my career what I’ve always assumed is that I had the authority to do whatever I wanted to do, but I had to be accountable and responsible for whatever happened. And that’s the philosophy I’ve always operated under, and that’s the philosophy I’ve tried to get everybody here to operate under. And I think it’s true. Nobody can give you authority. It’s something you assume.

Rochester Business Journal 25

Community values, civic commitment, local roots. Lead any of the Rochester Business Journal 25 to speak lovingly of the upstate homeland, and it’s best foot forward all the way.
But that best foot rarely, if ever, steps over the bottom line when it is time to do industrial-strength shopping.
Purchasing decisions are driven by the forces at work in the community of each company’s competitors, not the community outside the company’s door. Talks with the decision makers reveal that it is stockholders, not fellow citizens, who put the “public” in public companies.
Some loyalists still exist: purchasing decision makers who go to great lengths to buy locally, be it a component part, a service contract or a new plant roof.
Moscom Corp. is locked into local channels for 75 percent to 80 percent of its buying, but that high percentage has nothing to do with sentiment, Purchasing Manager James Bouvier says.
“I know who I’m dealing with when I’m working through local distributors,” Bouvier says. “There is a great deal of homegrown talent, expertise and technical competence in the companies that supply us, and Moscom gets the benefit of that.”
l Seneca Foods Corp. has substantial area farm contracts and, as it expands, plans to obtain more. Seneca’s reason for local buying is the same reason other companies give for buying anywhere but here: competition.
Midwestern farm products may be cheaper, but by the time they get to Seneca Foods, they may not be worth canning, company officials say. Freight savings tie the company to local suppliers for cans, glass and other essentials, too.
It is simply good business for Rochester Community Savings Bank to support as many hometown suppliers as possible, particularly if they are also bank clients. Good local relations, as long as they do not cost the shareholders anything, are a policy that the bank backs with its buying power, says Paula Dolan, RCSB’s senior vice president for administration.
ACC Corp. runs as much business as possible through the Rochester Trade Exchange, a local hub for exchanging goods and services among companies, says Controller Sharon Barnes.
Leaving town was not an option when moving corporate headquarters last year –ACC moved from State Street to West Avenue. Along with its landlord, ACC pays local lawyers, accountants and ad agencies, too.
But core supplies for its telecommunications operation–high-tech switching equipment–comes from one of only a few manufacturers.
ACC is, for much of its industrial-strength buying, in the situation of many other Rochester Business Journal 25 companies–too highly specialized to find all it needs here, and not big enough to generate a subindustry of supply companies.
Goulds Pumps Inc. manages to funnel about 25 percent of its spending money to local suppliers: uniform services, plant maintenance contracts, office equipment and furniture.
“It’s the nature of our industry to be more national than regional,” explains Diana Kurty, corporate controller for Goulds.
“There just aren’t a lot of local suppliers for some things we need. But then there’s not a huge local demand for pumps, either.”
Equipment leases and contract terms dictate many of the purchasing decisions for Rochester Business Journal 25 companies. Repairs, replacement costs and regular servicing are part of the package in most major equipment leases, Kurty says.
Genesee Corp. is up against its own machinery, too. Labels made out of state run best on its high-speed presses. Like the labels, steel crowns come from Canada, where they make the only type that suits the brewer’s bottling rig.
Rochester corrugated-paper plants can supply some of Genesee’s needs, but most of the plant’s cartons are supplied along with the equipment.
Attempts to switch to other sources of bottling and packing material require extensive testing, says James Barber, Genesee’s purchasing manager. The plant’s speedy machinery has chewed up and spit out many sample supplies.
Still, Genesee spends heavily and locally for non-production supplies, including cars, some trucks and fuel for its fleet.
Contracts bind IEC Electronics Corp.’s decisions. Customers usually designate suppliers when they sign with the company.
“Our business is customer-specific. If they tell us we have to buy from someone in the Far East, that’s what we do,” says Terry Mayer, manager of IEC’s 16-person purchasing department.
In producing computer boards, IEC gives what work it can to local metal shops and uses Rochester distributors when possible. But, again, specialization often sends it across the state line to buy.
Other than newsprint–a pricey item purchased in bulk by corporate powers elsewhere–90 percent of Gannett Co. Inc.’s operating budget is plowed back into area suppliers, estimates Arthur Maira, purchasing agent. Computers, office equipment, trucking services, contracts to supply and maintain the plant–all are local.
Overall, those who benefit most from money spent here by the Rochester Business Journal 25 are suppliers of legal, accounting and advertising services, as well as car and computer dealers. Companies strapped by specialization, contracts or leases in deciding where to shop rarely trust their professional services or personal equipment to out-of-towners.
If some Rochester Business Journal 25 companies are too small and specialized to buck industry dictates when buying, others say they are just too big to do a lot of buying close to home. The large quantities they spend for legal, accounting, investment management and other professional services stay in-house.
Local jobbers just are not big enough to meet all Monro Muffler Brake Inc.’s needs–it buys from major manufacturers, wherever they are. But when the company here runs out of stock to supply individual shops, it is free to buy locally.
And while Canandaigua Wine Co. Inc. snaps up 80 percent of New York’s wine grape crop, economies of scale make it more sensible to negotiate national contracts for office equipment and many production supplies, says Don Lux, purchasing manager. Legal and accounting functions it used to contract out moved inside over the past several years, as the company has grown.
Because the wine industry in the United States operates in comparatively isolated pockets, Lux explains, specialized packaging components made in volume overseas simply are not available from suppliers here.
That is also the story for much of Eastman Kodak Co.’s buying, but the logistics advantage of local suppliers often turns Kodak to Rochester companies.
“Our quality computation is more than just checking price tags,” says Alan Cummins, vice president and director of corporate sourcing for Kodak. “When we need great response in service and short lead time on supply, we are glad to have suppliers right outside the factory door.”
Local companies have taken over hidden ownership costs from Kodak–expenses in the form of warehousing space, inventory management and waste accounting the company used to carry when it bought and stored huge loads of office and maintenance supplies.
“We moved all that business out to our local distributors, who worry about the warehousing and offer very short order cycle time,” Cummins says.
One rising giant says its Rochester business relationships are growing right along with it.
“Our national footprint has helped us extend local alliances so that offices out of state also benefit from the high caliber of our local suppliers,” says Catherine Deagman, corporate procurement manager for Frontier Corp.
Computers tie the Rochester supplier of Frontier’s promotional items to the company’s offices across the country. Other such alliances are in the works.
“It’s a good way to reinforce the company message that technology can take a local business anywhere,” she says.

Rochester Business Journal 25

The road to re-engineering is not paved with the theory of Michael Hammer and James Champy, a number of companies have found.
The restructuring gurus’ 1993 best seller, “Reengineering the Corporation: A Manifesto for Business Revolution,” described a method of process redesign to yield greater productivity with less investment, time and people. Many companies followed its lead and are re-engineering–or at least calling their restructuring process by that name, experts say.
But many did not go by the book, they add.
One problem with the Hammer-Champy theory is that the authors were a little too enamored with it, says Andrew DuBrin, a professor of management at Rochester Institute of Technology’s College of Business, and author of “Reengineering Survival Guide: Managing and Succeeding in the Changing Workplace.” Their talk of change sweeping the corporate world bordered on the evangelistic.
Meanwhile, Hammer’s and Champy’s approach lacked sensitivity toward employees whose jobs disappear in the re-engineering process, he says.
“People should recognize that yes, (re-engineering) certainly would create a lot of morale problems,” DuBrin says. “How would you like to be in a department of 30 when a re-engineering consultant comes in and says three could do the job?”
Like the original theory, many companies in the midst of re-engineering forget to address their employees with care, DuBrin adds. One reason they should: Employee suicide rises 37 percent when downsizing occurs.
Some businesses approach re-engineering backward, says Anthony Perrone, local practice group leader for business consultants at Arthur Andersen & Co. One company axed its work force, then said: “OK, let’s re-engineer.” But too few employees were left to maintain the company at its previous service level.
Because re-engineering eliminates unnecessary work, and thus jobs, companies need systems in place to help their employees through the process, says Robert Horvath, senior manager in the business consulting group at Arthur Andersen.
Adds DuBrin: “You really have to take care of the human factor or else there will be a lot of rebellion and resentment.”
Gleason Corp. addressed the human factor while achieving relative success with its restructuring, says David Burns, vice president of the machine products group.
Gleason took a hard look at itself in the early 1990s when its machine-tool business was struggling, he says. After deciding to stick with the business, the company committed to restructuring with a $40 million investment in a new factory and new product development.
The investment and reorganization have paid off, Burns says. Gleason used to need 30 months to produce a machine tool; now, it takes 14 months. Likewise, time required from first order until the point of shipping takes 16 weeks, down from 42.
Gleason paid close attention to the human side of the restructuring, he says. By July, each of the company’s 850 Rochester employees will have logged one hour per week, or almost 26 hours, of total quality training.
Giving employees motivation without giving them the tools to operate in the new structure is a formula for failure, he says.
Employees are showing signs of ownership, Burns says. He watched a presentation earlier this month by a team of assembly, materials, account and other staffers who reduced the steps required for one procedure from 30 to four. The new procedure costs $10,000 more up front, but will save more than $30,000 in a year.
Not everyone wants to participate, he concedes. Some middle managers, often a re-engineering target, felt the pressure of waiting for the next shoe to fall. Between 1990 and this year, Gleason in some areas cut its organizational layers from 10 to five.
Acknowledging that for employees direct dealings with management can be tough, Gleason keeps an industrial psychologist on board, Burns says. He works with small discussion groups and with individuals to help them cope with change.
Xerox Corp. recognized early that the human aspect of change in re-engineering needs to be managed as carefully as process reduction and introduction of new technology, says Richard Leo, vice president and general manager of Xerox Quality Services, a unit of Xerox Business Services. Leo also was a key player in securing for the company the 1989 Malcolm Baldrige National Quality Award.
“We learned that the soft stuff of the effect of changes on people is actually the hard stuff in terms of implementation,” he says.
Rewards, recognition and communication all must be aligned with the entire re- engineering effort for the endeavor to work, Leo says.
“Unless you change the reward system to encourage (employees),” adds Arthur Andersen’s Horvath, “it will be back to business as usual.”
To build a feeling of ownership, Gleason distributed five shares of stock to each of its employees, Burns says. The company also instituted a new employee- recognition program.
But the driving force for the company itself is financial, he says. Gleason’s goal is to provide a 12 percent return on assets for its shareholders, something the company has not managed to do recently.
“We never understood this to be re- engineering when we did it,” Burns says. “When we look at the Hammer-Champy book now, we can say we did a lot of what they talked about. But we didn’t set out to re-engineer anything; we set out to survive.”
Too often, companies use re-engineering as a defensive strategy to squeeze more profit out of a struggling organization, RIT’s DuBrin says. Ideally, the process should engineer out wasteful jobs and create useful ones without employee reduction.
“There’s a real problem of insensitivity, of throwing people out on the sidewalk just to save money,” he says. “It would work out so much better if (a company) re-engineered while expanding markets. Then the company could say, “This re-engineering is just so we can do more with the same number of people.”’
Frontier Network Systems Inc. is undertaking re-engineering from a position of strength, says Michael Mahar, director of marketing.
The telephone, data and telecommunications equipment service company under the Frontier Corp. umbrella cut to a new MIS system last November after it had been operating with two, he says. The new Infocon system reduces the number of steps from customer lead to sale. Now the company can expand its customer base without adding support staff because one person, not several, handles the entire process.
The new structure did mean some administration jobs were cut, Mahar says. But the reorganization was intended to eliminate tasks as the company put more employees on its growing customer base, not squeeze more work out of a smaller group of people.
“I don’t think we would have been able to downsize and keep our customer service at an acceptable level,” he says.
Frontier’s management also gave the restructuring total support, adds Michele Palermo, service center manager. Such support is crucial to success in re-engineering, experts say.
The classic story of bad management goes something like this, Arthur Andersen’s Perrone says. A CEO realizes his company has problems. He reads about re-engineering in an airline magazine and thinks it sounds like a good idea. He tells someone under him to go do some re-engineering, and that person tells someone else who tells someone else to do some re-engineering. The responsibility ends up somewhere in senior middle management, and the company ends up going nowhere.
“In our clients’ experience, we have never seen a company under that kind of scenario succeed,” he says. “(But) we’ve seen a lot of money and sweat spent.
“If senior staff is not visibly involved and supportive of what’s happening, (if they are not) able to listen and take action, the initiative is fundamentally flawed and will not give good results.”
Gleason is trying to build a new connection level between management and employees, Burns says. Every six weeks or so the company holds leadership group meetings between lower and upper executives to discuss hot topics, and management regularly conducts question-and-answer sessions with employees in small groups. A company newsletter, anonymous phone line and bulletin boards also facilitate communication.
In addition, employees see President and CEO James Gleason walking through the building more than ever before, Burns says.
Xerox learned that executive sponsorship and participation is mandatory, Leo says, though the company occasionally has stumbled in its re-engineering efforts.
Businesses with successful re-engineering processes have learned to keep their goals simple and measurable, consultants say.
“I think that people have a tendency to overestimate what can be accomplished in the short run (and) underestimate what can be in the long run,” Leo says.
Seventy percent to 80 percent is the widely quoted figure for the number of American companies that have re-engineered, Horvath of Arthur Andersen says. Only 5 percent to 10 percent of them have undergone the process described in theory.
Frontier Network Systems did not call its initiative re-engineering, nor did it follow Hammer and Champy. Xerox and Gleason began their processes before the term was coined. These companies discovered the practices that worked best for them, their restructuring leaders say.
“The idea is to make the changes,” he says. “The trick is how to sustain the change.”

Rochester Business Journal 25

Some are one-paragraph quotes, others neatly bound booklets; some wear nothing fancier than company letterhead, others are crowned by names such as “the Monro Doctrine” and “the Eastman Way.”
Though composed differently, all are values statements–and nearly all of the Rochester Business Journal 25 companies have one.
Whether stand-alone or incorporated into a mission or vision document, these values statements contain words such as quality, integrity, diversity, fairness, honesty and safety. Goals, too, are similar: be innovative, competitive, profitable, an effective communicator, an equitable employer, a fair business partner and a good citizen.
“Values,” says Janet Sansone, president of Frontier Corp.’s Frontier Services Group, “are the ingredients, and culture is the cake. If you want to change the culture, you have to change the ingredients.”
What sets companies apart is not what they say, but what they do. Leadership must walk the talk, experts say. Instilling and exhibiting values must be viewed as an ongoing commitment, not a quick fix; it goes way beyond putting them to paper and posting them on the lunchroom wall.
“If (values statements) are not predicated on any understanding of the corporate culture (and) are not followed through with any changes to the structure, … then they are useless,” says Wade Robison, the Ezra A. Hale professor in applied ethics in the department of philosophy at Rochester Institute of Technology. “It’s just public-relations stuff–it has no real impact.”
And values displayed on the street should be no different than those exhibited inside the company.
“I don’t put much stock in what I would call organizational schizophrenia, which is the illusion that we can treat our employees differently than our customers, and get away with it,” says John Engels, a partner in and president of Great Lakes Leadership Group Inc. “(Consistency) means you value respect and courtesy outside the company and in, honesty inside the company and out.”
“Our external values are created by investing in our internal values,” agrees Gene Polisseni, vice president of marketing at Paychex Inc.
In this era of re-evaluation, many companies are taking a second–if not first–look at what drives their businesses. Some are finding they never really defined their values or put them into practice. Others see need to revise the values under which they have been operating, which may go back decades to the company’s founders. No matter the circumstances, experts say change is inevitable in any values system.
“It’s not a do or don’t question. It’s a will or won’t, can or can’t,” Engels says.
Great Lakes Leadership Group consults on, among other things, corporate culture; its “values scan” helps clients examine whether the values they bought into five or 10 or 20 years ago still apply today.
“If not,” Engels says, “we ask them why they’re still building their company around them.”
To many, it is a difficult question, one that requires a deep look into the leadership psyche. And it is at this point that many companies bail out. “I suspect most corporations don’t reach the level of being self-conscious about their values. And of those that do, many don’t assess the implications of those values,” RIT’s Robison says. “It never occurs to them that they could change and do it differently.”
Rochester’s major companies are at different stages of recognizing what their values are and translating words into action. Most talk of quantitative yardsticks–employee demographics, satisfaction surveys, earnings reports–but find it more difficult to measure qualitative standards.
Robison says companies seriously interested in examining their values systems need to take a frank, objective look at operations: “Companies need to air their dirty laundry in order to articulate whatever structural changes need to be made to realize appropriate norms.”
Robert Smith, senior vice president of customer operations at Rochester Gas and Electric Corp., says such bold evaluation can–and should–be done continually.
“It is essential to identify the root causes of any business failure,” he says. “If you can deal with those mistakes or defects at the very lowest level, you may avoid major problems that may come along.”
After the 1991 ice storm, for instance, RG&E assembled a diverse group of employees to assess the utility’s performance in responding to the crisis. Out of that eye-opening experience, Smith says, came an agreement that RG&E needed to boost a core value: communication.
“We had a lot of diverse viewpoints that were not blinded by habit, people asking, “Well, why did you do this?’ ” he recalls. “It really opened up discussion.”
Those practiced in the game warn of overdependence on written values statements and other declarations of a company’s intentions. (Values statements, notes Engels, “should be written and seen as aspirational as opposed to operational.”) They say also to pay no heed to naysayers who call corporate values a trend–which implies something not inherently important to the success of an organization.
Indeed, most say companies cannot get away from their values: Even those who dismiss values as marketing sound bites dreamed up by company image makers must realize that in everything they do–or don’t do–they send messages about their fundamental values. The danger is that without clear recognition of a company’s values, its managers and employees may be sending the wrong messages.
“In organizations where you don’t talk about values–embrace them in an outward, proactive way–the fact is that you do send a message to the rest of the organization by virtue of the way you do things,” says Michael Morley, senior vice president and corporate director of human resources at Eastman Kodak Co. “Even those companies that try to kid themselves into thinking this is a fad are sending a message.”
Adds RIT’s Robison: “If you have the capacity to do something, your not doing it is as much an expression of values as is your doing it.”
Dangerous, too, is emphasizing one value to the detriment of another.
“Telling someone to get it done fast and cheap might mean that (the employee) would take a lot of short cuts,” RG&E’s Smith says. “And that means someone could get hurt (and/or) you could end up with (an inferior) product.
“You’d be putting too much emphasis on cost-effectiveness, which would hurt safety and performance.”
On the other hand, putting safety first would reinforce not only that value, but also two others: high product quality and community confidence.
Kodak prior to CEO George Fisher’s arrival operated more by what Morley calls rules of governance than by fundamental values. These rules were like operating principles, Morley says. Fisher’s five values, introduced last spring as a platform on which to rebuild the troubled company, set the tone for a new way of doing business.
Those values–respect for the individual, integrity, trust, credibility and continuous improvement–are reinforced by leaders who take every advantage to draw the connection between Kodak’s values and the numbers eagerly anticipated every quarter, Morley says. Without these bedrock beliefs, the numbers would be meaningless.
“What underlines values is really a sense of being able to grow the company and compete successfully,” notes Robert Barbato, director of RIT’s Small Business Institute. “(For instance,) George Fisher sees that Kodak will be a healthier company if diversity becomes a core value.”
Diversity, Barbato adds, is not about filling quotas–it’s about achieving a balance of people and ideas. And he thinks Fisher understands that.
Notes Barbato: “You can have a diversified work force without valuing diversity.”
Kodak’s refocusing is an example of how values can change dramatically–something usually the result of a major shake-up, such as a change in ownership or leadership. But they also can change incrementally.
Frontier, for instance, has been re-evaluating and refining its values for years in preparation for a major reorganization. A key component of its strategy was the development of “learning plans,” which Sansone explains empower employees to identify and address strengths and weaknesses in themselves and the company.
Following a big loss in 1993, then a strong year in 1994, Rochester Community Savings Bank decided it was time to take a hard look at how it could end up with such at-odds results in two consecutive years.
Though it has just begun that strategic re-evaluation, RCSB is getting glimpses of how values may have played a role, says Charis Copin, senior vice president of strategic planning and corporate relations.
“You usually think of values as being the softer, cultural stuff,” she says, but RCSB is learning that mistakes it made–investing heavily in commercial real estate and too strictly decentralizing operation of business units, for instance–were decisions made on a set of values.
How that affected the outcome still must be determined.
Canandaigua Wine Co. Inc. also plans a strategic re-evaluation, says Al Kidd, vice president of human resources and administration, but for a very different reason.
“Because of our rapid growth and new predominance in the industry, we feel it’s appropriate to take a look at ourselves, including our company’s values,” he says, referring to the Ontario County wine maker’s many recent acquisitions, making it the country’s second-largest wine producer.
Barbato, of the Small Business Institute, advises not to let obstacles get in the way of reaching the heart of a firm’s values.
“Whenever innovation travels through an organization, it goes through a set of stages,” he says. “You can overdo this sort of thing to the point where people begin to associate it with jargon or mind control. At that point, you begin to trade off some of the effectiveness.
“(But) that doesn’t mean that change is not effective or good,” he adds. “It means you have to continue to change.”

Rochester Business Journal 25

DEFINITIONS
NA–Not available.
NM–Not meaningful.
NET INCOME–Income from continuing operations before extraordinary items and after preferred-stock dividends. All per-share amounts are fully diluted.
P/E RATIO–Price/earnings ratio based on 1994 earnings per share and March 31, 1995, share price.
RETURN ON SALES–Net income divided by net sales, as defined.
SALES–Net sales from lines of business excluding interest income, asset sales, excise taxes and equity income from unconsolidated subsidiaries and joint ventures. For financial institutions, total interest income plus other operating income minus asset sales.
TOTAL ASSETS–From 1994 annual report.
TOTAL RETURN–Price appreciation during calendar 1994, plus dividend yield, compounded monthly.

FOOTNOTES
1–Local address; company’s headquarters are now in Stamford, Conn.
2–Net income excludes earnings from discontinued operations.
3–Excludes a loss from an extraordinary item.
4–Local address; company’s headquarters are now in Arlington, Va.
5–Was spun off from Kodak effective Jan. 1, 1994; company headquarters are in Kingsport, Tenn.
6–Net income excludes a loss from discontinued operations.
7–Excludes loss from a cumulative effect of change in accounting principle.
9–Income applicable to common stock.
10–Net sales exclude excise taxes.
12–Excludes an extraordinary loss and a gain in cumulative effect of accounting change.
14–Excludes a gain from a change in accounting for income taxes and a loss from a change in accounting principle.
17–On Aug. 4, 1994, the company completed an initial public offering of 5,408,000 shares of common stock.
20–The company was formed in December 1990.

Rochester Business Journal 25

Observers who scan the employment horizon here offer no reason for alarm but, at the same time, no reason to expect significant growth.
Over the past year, nearly half of the Rochester Business Journal 25 added employees, while the rest reduced their worker pool.
“There’s a big need for technical jobs,” says Arthur Aspengren, president of the Industrial Management Council. “Software engineers can name their price. And there’s a need for light industrial people and more of a call for skilled people.”
Now that the so-called soft landing has been achieved, in part because of the Federal Reserve Board’s periodic moves to increase interest rates, Aspengren says the economy is on the upswing. And where the economy goes, employment is sure to follow.
“All of a sudden there’s a significant turnaround,” Aspengren says, “and there’s a lot more optimism among businesspeople now.”
Aspengren gives significant credit to local firms’ greater penetration of foreign markets, which, coupled with the return of domestic accounts, has restored economic health.
Still, downsizing has taken its toll.
“Small and medium companies are doing the hiring, not the big companies,” Aspengren notes.
The Rochester Business Journal 25’s three largest employers–Eastman Kodak Co., Xerox Corp. and Bausch & Lomb Inc.–led the way in work-force reductions over the past year. Kodak this spring reported 2,800 fewer local employees, Xerox 1,465 and Bausch & Lomb 800.
Bausch & Lomb’s 16.6 percent reduction was the highest among companies that downsized.
“We cut our worldwide work force by about 10 percent last year,” says Barbara Kelley, vice president of public affairs at Bausch & Lomb. “The outlook for ’95 is pretty much for stability. We have no plans for going lower than 3,500.”
Nevertheless, “I’m sure there is not a company you could talk to that could commit to never, ever having more layoffs, or commit to massive hiring.”
Bausch & Lomb’s cutbacks, Kelley says, were the result of reduced demand for contact lenses and sunglasses, two products that are manufactured in the Rochester area.
“Each experienced a buildup in distributor inventory: products we had sold into the distributor market but had not yet been sold into the consumer market.”
The lack of consumer demand created the surplus, which led to job cuts.
While Kelley says it is “conceivable at some point” that an upswing in sales of those two products could mean hiring at Bausch & Lomb, “I suspect that even if the demand begins to go back up you will not see the same kind of increase in employees.”
At the opposite end of the employment spectrum is Frontier Corp., whose work force grew by 538, a 26.2 percent increase over the 1994 figure of 2,050.
Gleason Corp., in seventh place with a 7.7 percent increase in employment compared with last year’s 775, anticipates stability through 1995.
David Burns, vice president of the machine product group, says, “We’re the only machine-tool builder around here, so our trend lines may be different than others’. The machine-tool industry always tends to lag the general industrial sector. We’ve seen through late ’94 and early ’95 a surge that may have already hit other sectors.
“As we look at the remainder of ’95,” Burns adds, “what we see is a relatively stable demand pattern. We don’t anticipate a big drop-off over the next six to nine months, which is about as far out as we can see.”
Burns expects Gleason to add employees, but he doubts if it will match the 1994-95 jump.
Gleason’s optimism is based on what Burns describes as “a generally strong vehicle industry overseas, so if we’re looking at what’s going to happen with our order pattern, we see it as stable or increasing, but not the huge percentage we saw in ’93 vs. ’94.
“We are far more dependent on the health of the foreign market, especially in Germany and Japan, than we are necessarily in domestic markets. (Nevertheless,) our recent surge of employment is mostly traceable to strength in the automotive sector in the U.S.”
Burns says the U.S. automobile industry has had a strong first quarter.
“The buying patterns … have been extraordinarily strong over the last couple of months or so,” he says. “The strong cash position of people like Ford and Chrysler have caused them to look hard at reinvestment.”
The types of employees Gleason most frequently seeks, Burns says, are computer software specialists and engineers with strong computer-aided design backgrounds. Skilled machinists, he adds, also are in short supply.
Monro Muffler Brake Inc., which has 232 stores in 11 states and 18 in the Rochester metropolitan area, reports a 20.3 percent growth in employees over last year, but chief financial officer Cathy D’Amico says further expansion in the Rochester area may be slow.
“We’ll have some growth locally as well as countrywide,” D’Amico says. “We just opened shops in Chili, Greece and Geneseo in the last couple of months. We will grow locally, but not as quickly.”
Monro is building a new headquarters facility that will double the size of the company’s warehouse and provide more office space.
“We have plans to continue to grow stores at the rate of 15 to 17 percent a year,” D’Amico says. “Barring some terrible downturn in the economy, we don’t see any change in our strategy.”
In D’Amico’s opinion, though, Monro is bucking regional growth trends. “I don’t believe that we’re typical of what’s happening in this area. Unfortunately, I don’t feel our success and growth is a reflection of the Rochester area’s economy in general. I know too many people who are unemployed.”
(Rick Woodson is a Rochester-area free-lance writer.)

Rochester Business Journal 25

RANKED BY NET CHANGE IN NUMBER OF LOCAL EMPLOYEES, 1994 TO 1995
Number of
Local Full-Time
Net Change % Change Employees(1)
Rank Company From 1994 From 1994 1995 1994
1. Frontier Corp. 538 26.2 2,588 2,050
2. IEC Electronics Corp. 214 18.8 1,350 1,136
3. Seneca Foods Corp. 157 45.8 500 343
4. Paychex Inc. 148 21.8 827 679
5. Canandaigua Wine Co. Inc. 129 40.2 450 321
6. Student Loan Corp. 112 23.0 600 488
7. PSC Inc. 98 34.8 380 282
8. Gleason Corp. 60 7.7 835 775
9. Ultralife Batteries Inc. 45 56.3 125 80
10. Monro Muffler Brake Inc. 42 20.3 249 207
11. ACC Corp. 37 27.8 170 133
12. Genesee Corp. 36 5.6 676 640
13. Home Properties of New York 27 22.0 150 123
14. Eastman Chemical Co. 0 0.0 150 150
15. Moscom Corp. -3 -2.5 115 118
16. CPAC Inc. -5 -9.3 49 54
17. Sybron International Corp. -10 -1.6 620 630
18. Rochester Community Saving -20 -2.5 774 794
Hahn Automotive Warehouse -20 -15.4 110 130
20. Gannett Co. Inc. -61 -7.0 809 870
21. Goulds Pumps Inc. -101 -6.7 1,415 1,516
22. Rochester Gas and Electric -399 -16.6 2,000 2,399
23. Bausch & Lomb Inc. -800 -18.6 3,500 4,300
24. Xerox Corp. -1,465 -9.9 13,300 14,765
25. Eastman Kodak Co. -2,800 -7.6 34,000 36,800

(1)As of March 1

Rochester Business Journal 25

The Rochester Business Journal asked a number of local investment managers to provide their thoughts on the future for Rochester’s top 25 publicly held companies. The questions asked were:
1. What is your outlook for the stock market through the end of 1995?
2. Which stock of local interest do you think will post the largest percentage gain in value in 1995, and why?
3. Predict which of this year’s Rochester Business Journal 25 companies will provide the top return to investors in 1995, and why?

John Adamczuk, American Express Financial Advisors Inc.
1. We are probably due for a correction within the next few months. However, the market may end up 5 percent to 10 percent higher than current levels (4600 to 4840 on the Dow; 550 to 575 on the S&P 500).
2. Canandaigua Wine Co. Inc. acquisitions are helping the company gain market share. The company also has very good earnings growth potential.
3. See answer No. 2.

Vincent Battaglia, Essex Investment Group Inc.
1. At the beginning of 1995 we were looking for a normal market return in the 9 percent to 10 percent range. Since we have achieved most of that already in the first quarter, we are looking for an additional 5 percent to 8 percent as long as inflation remains in check.
2. Our Bear Stearns Cos. Inc. analyst suggests that Eastman Kodak Co. may be a $100 stock over the next two to three years. With the momentum of change already under way, we could see Kodak at $75 by year end.
3. Hard to bet against Paychex Inc. Look for earnings to continue to grow at 25 percent plus.

Todd Everts, Wall Street Financial Group Inc.
1. With interest rates remaining stable, or even dropping slightly, the U.S. economy should maintain its relative strength. The Dow should reach 4500 by the end of 1995.
2. Moscom Corp. has recently undergone a reduction of manufacturing overhead expenditures; as a result, net losses have come down significantly. The current stock price is (more than double) $4.13, the 52-week low. Moscom’s sales have risen substantially both domestically and in Europe. I feel that Moscom is positioned well to take full advantage of the great potential of the telecommunications boom.
3. Due to the relatively low stock price at this time, I feel that Bausch & Lomb Inc. is priced to buy. The fundamentals are there, and the contact-lens-care business is strong; therefore, we expect its stock price to see very nice growth. There is caution based on the potential unfavorable litigation due to class-action lawsuits.

Sam Guerrieri Jr., Citicorp Investment Services
1. The market will reach 4800 by the end of summer and develop a trading range between 4600 and 4800 through year end.
2. Paychex Inc., because of the increased interest in the stock once the company announced the split. Also, earnings potential looks strong in the wake of new services.
3: See answer No. 2.

Anthony Gugino and Edward Cain, AM&M Investment Brokers Inc.
1. We know that since 1990 the stock market has averaged over 10 percent a year, and we expect that the long-term results for investors will continue to be very satisfactory.
2. We do not focus on individual security selection and have no predictions on individual stocks, either local or national.
3. Every month, the Wall Street Journal has a contest where the experts compete against a portfolio compiled by throwing darts at the stock listings. The experts lead the darts, but the darts have won 42 percent of the time. By utilizing the dart method, we selected Genesee Corp., Goulds Pumps Inc., Paychex Inc. and Student Loan Corp.

Richard McCarthy, Smith Barney Inc.
1. Technically, the stock market has enough momentum to reach at least 4500 on the Dow. The market, however, is expensive by historical standards.
2. Smith Barney likes Eastman Kodak Co., Bausch & Lomb Inc., Frontier Corp., Paychex Inc. and Xerox Corp. Personally, if I were to buy today, I think Frontier has a good chance of being the percentage leader. Many of the other stocks had a big run in the first quarter. My second choice is Kodak.

Ira Miller, Dean Witter Reynolds
1. Stocks are neither cheap nor expensive at the moment, in our opinion. Our guess is that a 3 percent to 5 percent correction is on the way. But by July the rally should continue, and we could finish the year with the Dow Jones industrial average around 4500, and even higher in 1996.
2. Goulds Pumps Inc. fits perfectly into our “productive assets” theme, and its longer-term technical trends look favorable.
3. Goulds Pumps (as stated above). Also Gannett Co. Inc.–our fundamental target price is $66.

Jack Rogan, Tucker Anthony Inc.
1. 4400 to 4425 will be the high for the year as measured by the Dow.
2.-3. No idea.

Rochester Business Journal 25

RANKED BY TOTAL % RETURN TO INVESTORS IN 1994

1. PSC Inc. 116.67
2. Seneca Foods Corp. 68.75
3. CPAC Inc. 58.73
4. Ultralife Batteries Inc. 36.17
5. Hahn Automotive Warehouse Inc. 35.87
6. Canandaigua Wine Co. Inc., A, B 20.63, 27.87
7. Paychex Inc. 16.59
8. Xerox Corp. 14.11
9. Eastman Kodak Co. 11.25
10. Eastman Chemical Co. 10.06
11. Monro Muffler Brake Inc. 9.77
12. Sybron International Corp. 7.81
13. Moscom Corp. 5.16
14. Gleason Corp. 0.54
15. Rochester Community Savings Bank -1.04
16. Student Loan Corp. -2.10
17. Frontier Corp. -2.78
18. Gannett Co. Inc. -4.50
19. Genesee Corp. -8.60
20. Goulds Pumps Inc. -9.79
21. Rochester Gas and Electric Corp. -13.72
22. ACC Corp. -21.46
23. Bausch & Lomb Inc. -32.35
24. IEC Electronics Corp. -37.04
25. Home Properties of New York Inc. NA

SOURCE: FRANK DORKEY, DORKEY & ASSOCIATES INC.

Rochester Business Journal 25

The complexities and drama of competition and leadership are common threads in the literature capturing the hearts and minds of today’s executives.
An informal survey of the reading habits of those running the Rochester Business Journal 25 shows that workplace relationships–particularly between leaders and employees–dominate their interests. Managing the fast-changing demands of competition also crops up as a frequent theme.
Management professors, too, offer some opinions on worthwhile reading. Tomes on human relations as well as technical skills fill out their bookshelves.
Interestingly, of all the books mentioned, few show up on business best-seller lists put out by Village Green Bookstore Inc. and Business Week.
The CEOs responding to the survey list the following books as most influential for them:

Michael Futerman, Hahn Automotive Warehouse Inc.: “Barbarians at the Gate: The Fall of RJR Nabisco,” by Bryan Burrough and John Helyar (HarperCollins Publishers)
Futerman says he enjoyed the book for its interplay between the investment bankers and company principals, “and I’m applying some of what I learned from that book to my business.”
He adds: “I have always tried to treat everybody involved with me, including employees, with the highest respect and dignity.”

Roger Kober, Rochester Gas and Electric Corp.: “The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market,” by Michael Treacy and Fred Wiersma (Addison-Wesley Publishing Co.)
“That’s the current one that I think is pretty good,” says Kober, who notes that although he tries to keep up on management books, “none of them have the answer. … I have my own basic philosophies.
Kober adds: “(General Electric Co. CEO) Jack Welch is one of the people I’ve admired and followed closely and read most of what he’s produced.”
Just published is “Get Better or Get Beaten! 31 Leadership Secrets from GE’s Jack Welch,” by Robert Slater (Irwin Professional Publishing).

Michael Hone, PSC Inc.: “Big Blues: The Unmaking of IBM,” by Paul Carroll (Crown Publishers)
A review in the New York Times called it “a detailed and devastating portrait of life inside (IBM)–a diagnostic report on the slow decline of an American institution.”

Larry Day, Monro Muffler Brake Inc.: “The One Minute Manager: The Quickest Way to Increase Your Own Prosperity,” by Kenneth Blanchard and Spencer Johnson (William Morrow and Co. Inc.)
Day says he found “Manager” enduring especially for its advice to compliment or chastise associates quickly, rather than dwell on the behaviors.
In contrast, Day considers many of today’s business books trendy and not worth his time.
“(Good managers) run businesses based on accumulated knowledge, leadership, experience and education,” Day says, “and you don’t get that from a trendy book.”

Nelson Leenhouts, Home Properties of New York Inc.: “The Leader in You: How to Win Friends, Influence People and Succeed in a Changing World” by Stuart Levine and Michael Crom of Dale Carnegie Associates Inc. (Pocket Books)
Leenhouts says he found the book full of “common-sense (principles) about getting along with people–things an old fellow like me needs to be reminded of.”
One, Leenhouts says, is that “you motivate more through compliments than criticism.”
“One of my favorites, especially as I get older, is (the book’s premise) that with more knowledge, there’s less wisdom.” That notion is encouraging, he says with a laugh, “as I slowly lose my mind.”

Leenhouts’ sense of humility probably would go over well with Jason Berman, an associate professor of management at St. John Fisher College who teaches a course on leadership and whose favorite business reading explores that topic.
Because the publisher of Berman’s selections–Jossey-Bass Inc.–targets the academic market, those books usually must be ordered through universities or bookstores and thus do not show up on best-seller lists. And while they are not “airport reading,” Berman says, most non-academics would find them understandable. All advocate that, to encourage positive change in others, managers should examine and change their own behavior first.
In “Knowledge for Action,” author Chris Argyris illustrates how one “can overcome barriers to organizational change and reduce individual and institutional defensiveness to building a learning organization,” Berman says. Whenever one is presented with something new that challenges one’s assumptions, a series of defensive routines are triggered, often resulting in a skewing of information to fit one’s expectations, he adds.
“We interpret that information in ways that protect the status quo” and discourage growth, Berman says.
James O’Toole, author of “Leading Change,” focuses on leadership as both a means to profit and an expression of moral purpose, Berman says, stressing the growing interest in viewing business as a spiritual pursuit.
In “The 21st-Century Organization,” author Guy Benveniste “manages to weave together technology, economics, politics, leadership and social values into an understanding, on a global level, of where organizations are heading–what they’ll look like in the 21st century.”
When reading “Managing a Diverse Workforce,” by John Fernandez, Berman says he felt challenged to acknowledge the uncomfortable realities about the culture of the American workplace and how it has avoided diversity issues. Berman notes that workplace diversity, once viewed as something to tolerate, has evolved into being seen as a true competitive advantage. He adds that diversity does not merely mean tapping the potential of women and minority groups, but rather fostering creative and different ways of looking at issues, regardless of the race or sex of the person presenting them.
Author Peter Vaill uses his book, “Managing as a Performing Art,” to put forth the notion of “stability as an occasional interruption in a ceaseless flow of change,” Berman says, and advises managers how to operate effectively given the inevitability of change.
In “Reframing Organizations,” authors Lee Bolman and Terrence Deal advocate that, to solve apparently unsolvable problems, a manager must put aside his or her usual responses and use “a different lens,” Berman says.
For Larry Matteson, executive professor of business administration at the University of Rochester’s William E. Simon Graduate School of Business Administration, human behavior as well as sharpening technical and competitive skills are worthy topics for executive reading.
Must-reads for manufacturing executives, Matteson suggests, are “The Goal: A Process of Ongoing Improvement,” by Eliyahu Goldratt and Jeff Cox; and “The Machine That Changed the World: Based on the Massachusetts Institute of Technology 5-Million Dollar 5-Year Study on the Future of the Automobile,” by James Womack, Daniel Jones and Daniel Roos.
In the best-selling “Competing for the Future,” authors C.K. Prahalad and Gary Hamel argue that re-engineering and downsizing may increase the effectiveness of what a company is doing, Matteson says, but those processes do not prepare one for competing in a new world. Building for the future must come from models of growth, he says.
Matteson’s highest recommendation, however, goes to Stephen Covey’s venerable best-seller, “The Seven Habits of Highly Effective People.” Matteson calls it “one of the more useful perspectives on personal behavior.” Covey provides a “pretty strong, workable process for improving oneself” and helping executives keep things in perspective as they deal with business challenges.
Personally, Matteson found that “Seven Habits” helped him focus on solving problems in his “circle of control” rather than worrying about issues in his “circle of concern,” such as the national debt.
While many management styles–and the books promoting them–come and go, Berman concludes that two trends appear to be enduring: interest in the complexities of human behavior–and change itself.
(Rose Ericson is special projects editor. Book covers were provided by Village Green Bookstore Inc.)

Rochester Business Journal 25

Number of firms headquartered in the Rochester area: 21
Number of firms headquartered in the Rochester area that held 1994 annual
meetings in Monroe or neighboring counties: 19
Number of firms headquartered in the Rochester area that held 1994 annual
meetings in Washington, D.C.: 1
Number of firms headquartered in the Rochester area that held 1994 annual
meetings in New York City: 1
Average age, in years, of Top 25 CEO: 54
Age of oldest CEO: 67
Age of youngest CEO: 33
Number of CEOs (from the 19 companies responding) who are first-born or only children: 7
Number who are middle children: 6
Number who are last-born children: 5
Number who are twins: 2
Number who are twins who share the CEO job with his brother: 2
Number of CEOs (from the 19 companies responding) who have pets: 8
Number who have a cat(s): 4
Number who have a dog(s): 6
Number who have a horse: 1
Number who named their pets (one a dog, one a horse) Patrick: 2
Number who were Boy Scouts: 12
Number who play a musical instrument (trumpet): 1
Number who have read “Reengineering the Corporation”: 9
Number who have “skimmed it”: 2
Number who have read “War and Peace”: 9
Number who have read both: 4
Number who play golf: 14
Their average handicap: 16.4
Number who knew their handicap to the decimal point: 1
Number who have gone hang gliding: 1
Number who were paratroopers in the U.S. Army: 2
Number who drive an American car: 10
Number who own a home computer: 12
Number of firms with a home page on the Internet’s World Wide Web: 2
Number of CEOs whose compensation, as a percentage increase, rose more than their companies’ stock in 1994: 15
Number of CEOs whose firms did not award them stock options in 1994: 6
Number of CEOs at the 12 firms that reported layoffs in 1994 whose
compensation increased: 8
Number of firms whose stock performance fell below Standard & Poor or
NASDAQ indexes in 1994: 5
Number of CEOs of firms whose stock performance fell below Standard & Poor or NASDAQ indexes in 1994 who received bonuses in 1994: 4
Number of the top five firms whose stock outperformed major market indexes in two of the past three years: 3
The number of years it would take an American earning the median wage to earn Eastman Kodak Co. CEO George Fisher’s 1994 salary: 268
Number of companies that not only alluded to total quality management but used the term in the shareholder letters of their 1994 annual reports: 2
Number that changed TQM to total quality implementation in the shareholder
letters of their 1994 annual reports: 1
Number that not only alluded to re-engineering but used the term in the
shareholder letters of their 1994 annual reports: 2
Number that experienced a paradigm shift, according to letters to shareholders in 1994 annual reports: 0
Average age, in years, of Top 25 public companies: 60
Age of youngest company: 1
Age of oldest company: 164
Number of firms that printed their 1994 annual report on recycled paper: 14
Number of annual reports featuring employees on the cover: 3
Number of annual reports featuring employees elsewhere in the report: 14
Number of employees pictured in annual reports: 254
Number of employees pictured in annual reports, not including Xerox Corp.: 166
Number of female employees photographed for annual reports: 88
Number of female employees in annual reports, not including Xerox: 48
Number of non-white employees photographed for annual reports: 42
Number of non-white employees in annual reports, not including Xerox: 15
Number of CEOs photographed for annual reports: 20
Number of gray-haired CEOs photographed for annual reports: 8
Number of balding CEOs photographed for annual reports: 6
Number of CEOs with bangs photographed for annual reports: 1
Number of CEOs photographed in shirtsleeves for annual reports: 6
Number of CEOs photographed without ties for annual reports: 1
Total number of pages in annual reports: 980
Average number of pages in annual reports: 39
Number of pages in longest annual report: 93
Number of pages in shortest annual report: 16

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