Business history Archives

Cover image of Invisible Giants by Herbert H. Harwood, Jr.

Invisible Giants, Herbert H. Harwood, Jr. Indiana University Press (ISBN: 9780253341631) 2003.

Summary: The story of two brothers from Cleveland who built a rail and real estate empire centered on Cleveland’s Terminal Tower.

Terminal Tower. The main Higbee’s store. Tower City. The Rapid and its Shaker Heights line. Shaker Heights and Shaker Square. Railroads. All of these are part of my memories of the years we lived in the Cleveland area. But until I read this book I knew little of the two retiring but visionary brothers responsible, at least in part, for all of these.

Oris Paxton and Mantis James Van Sweringen grew up in poverty and failed at a number of businesses until they began to build a real estate and rail empire based in Cleveland. It began with a vision of a suburban community in east of Cleveland, a former Shaker settlement. They started slowly, acquiring options on a few lots. Then they realized that for buyers to be attracted to the suburbs, commute times to downtown Cleveland needed to be as short as possible. So they acquired right of way and started building tracks and stations for a rapid transit.

Over time, this meant connecting to railroad right of ways, and through East Coast ties led to acquisition of a railroad, the Nickel Plate Railroad, running from Buffalo to Chicago. Railroads, transit and a hub centered in downtown Cleveland led to development of the Cleveland Union Terminal Complex. This included a rail terminal, traction terminal, an office tower, hotel, bank, department store, and the city’s main post office. In an era of rail consolidation, this led to a fierce competition to buy up other railroads. In the end, this resulted in a railroad empire that nearly extended coast to coast.

This biography traces the complex financial and organizational operations, including the creation of holding companies, that gave the brothers control while having a relatively small personal stake, using various stocks, bonds, and loans, all of it premised on an increasingly profitable business. Holding companies also enabled them to operate free of Interstate Commerce Commission scrutiny. And throughout the 1920’s, it worked, culminating in the grand opening of the Cleveland Union Terminal complex in 1930.

By that time, the stock market had crashed, and with it, both rail traffic and real estate investment. These were the two pillars of their empire. Because their holdings were so highly leveraged in a collapsing market, it was a herculean feat to keep it afloat. Thus the latter part of the book is an account of how that effort broke their health. First Mantis, then Oris died. Ironically for Oris, it was during a train ride to New York to meet with bankers.

It seemed to me an incredibly sad story. Neither brother ever married, sharing a bedroom in a mansion. They had few outside interests. The hubris that drove them to build a transcontinental rail network may have been the overreach that brought them down. Specifically, the Missouri-Pacific offset profits in other parts. Likewise, the location on sloping terrain of the Cleveland Union Terminal, and the number of buildings added to their expenses. Even so, they might have made it were it not for the Depression. But in retrospect, the financing of their empire seemed like a house of cards. But in the 1920’s, everyone thought them geniuses.

Then or now, many Clevelanders knew little of them. Yet they left Cleveland some gems, including Terminal Tower, Shaker Square, one of the early shopping centers, and Shaker Heights with it wide boulevards, attractive homes, and transit lines. This biography is a valuable account for those interested both in Cleveland history and railroad history. On the latter count, it includes numerous photos of rail stock. The brothers may have been invisible giants but they left visible works of enduring value.

The ServiceMaster Story, Albert M. Erisman. Peabody, MA: Hendrickson Publishers, 2020.

Summary: A history of ServiceMaster, attributing its success to its ability to hold four ethical principles in tension and to the five leaders, who like overlapping shingles, led the company for over 70 years, including 29 consecutive years of revenue growth.

This book is fundamentally about four principles and five men, and the company that became known as ServiceMaster.

Four principles:

To Honor God in All We Do
To Help People Develop
To Pursue Excellence
To Grow Profitably

At one point, the last three principles were portrayed as arms balanced on the fulcrum of the first, to honor God in all we do. Erisman traces the development of the principles from early versions by founder Marion Wade, to this version, which existed for most of the company’s history and is still referenced by some franchisees. The first two were perceived as the ends, served by the other two, and this, in the author’s mind, was significant to the success of the company. Honoring God by acting with integrity, and valuing developing people as an end, rather than the means to profit led to highly motivated service employees, and management who valued them. It also led to the development of disciplined, highly ethical, and competent leadership.

This was done within a creative tension that valued excellence in products and services that made them an industry leader, and steady, profitable growth up until about the year 2000. The tension was not easy to maintain, and Erisman traces the questioning of investors of the religious commitment at the heart of the company, particularly as the company went public, and as it acquired diverse service lines.

The five men who led the company between its beginnings in 1929 and 2003 served as “overlapping shingles” to each other, developed by and succeeding each earlier leaders who remained in the mix bringing wisdom, continuity, and complementary strengths. The five were:

Marion Wade, the founder who started out in 1929 with a moth-proofing business that expanded into carpet-cleaning and disaster recovery. Wade not only was an innovator who found better products and processes but he laid down the ethical foundations that became the four principles.
Ken Hansen was hired in 1946 after a stint in Christian ministry. He had strengths in finance, sales, and organization that brought discipline to the company while adhering to and refining the ethical foundations. The company incorporated shortly after he came, first adopted the ServiceMaster name under his leadership, moved into hospital services. He oversaw revenue growth from $1 million in his first year as CEO to $100 million the year after Ken Wessner succeeded him and Hansen became Chairman. He played a critical role in developing the “overlapping shingles” ideal of succession, serving under Wade and mentoring and collaborating with Wessner,
Ken Wessner came to ServiceMaster in 1954, worked his way up through the company, leading ServiceMaster Industries, and its hospital services division. Wessner was responsible for finalizing the Four Principles, led the company into international expansion and research. His strength was processes and systems.
Bill Pollard joined the company as an Executive Vice President, leaving a legal career, in 1977. Pollard became CEO in 1983 and led the company into the acquisition of other complementary service companies, beginning with Terminix and Merry Maids. A real focus of Pollard’s work was to ensure the training of service workers in these businesses in the company’s principles and their implementation, particularly the intrinsic value of the person.
Carlos Cantu came into the company with the Terminix acquisition and became CEO in 1994. He continued the pattern of acquisitions developed by Pollard, but stomach cancer forced him to step out of the CEO position in 1999, at which time Pollard re-assumed the reins, as both Chairman and CEO

This began a transition as the company dealt with debt load from acquisitions, a changing marketplace, integrating acquisitions into the company’s culture, and dealing with pressures testing the company’s commitment to the four principles. Erisman deals more briefly with the post-2000 company that began to move away from the four principles under a revolving door of CEOs, spinoffs of parts of the company, including the powerhouse industrial services, acquisition by a private equity firm, and a move from the Chicago area to Memphis. It is a story of fluctuating revenues, transitions in personnel, and more importantly, the Four Principles, in which the first two were downgraded, with a greater focus on profitability.

This is a fascinating case study of whether religious principles could serve as an effective framework for a company, particularly work done to honor God and value the worker. The evidence of the narrative, summarized in a chart of revenue growth from 1957 to 2000 on page 203, argues for a strong “yes.”

This leaves a question. What happened after 2000? Erisman’s account made me wonder about earlier decisions. Until Bill Pollard, people were developed within the company with a vision of succession, the overlapping shingles. By the end of Pollard’s second term as CEO, there were no overlapping shingles, and the company went outside for its next CEO. One wonders if there needed to be an expansion of principle two to the personal development of top leadership. It also seemed that the company became less disciplined in its growth. After early acquisitions that were carefully integrated, the subsequent ones seemed less so, and the flurry of acquisitions incurred significant debt loads, along with the challenge of meshing competing organizational cultures.

All this suggests to me that both principle and people (as well as sound business practice) are crucial to developing and sustaining great companies–whether ServiceMaster or Starbucks. Erisman shows the dangers when profit becomes an end to itself divorced from God-shaped integrity and the intrinsic dignity and value of an organization’s people. Great businesses, such as ServiceMaster from 1957 to 2003, hold these in a creative tension. For those asking whether business may be done Christianly, Erisman offers an extensively researched case study of how this was done in one company at a high level for decades, and the challenges to be faced in sustaining that commitment over the life cycle of a company, and beyond one’s own leadership tenure.

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I received a copy of this book from the author. The views expressed in this review are my own.