Taking Charge

For Kevin Kleiner and Ken Dondero, owning a jewelry store wasn’t quite like the brochure said it would be.

Sure, business was good. Their store, Dondero’s Jewelry in Vineland, N.J., was doing about $1.8 million annually in sales. But sales had been flat for several years. Worse yet, their lives were in disarray. Every waking hour, it seemed, was spent at the store. They were involved in every aspect of the business, often duplicating the work of their employees. And the store itself, which they’d built from scratch, was as inefficient as the business structure.

By fall of 1998, they were ready for a change. “What we were doing to accomplish $1.8 million in sales was unacceptable,” Kleiner says. “We were working 60 to 65 hours a week, and it was very frustrating. We did a lot of administrative work, and we were wearing a lot of hats. The business was running us instead of us running the business. And the facility as it was didn’t provide what we needed. We were ready for some objective analysis.”

The big fix. In October 1998, the partners went to Jewelers of America (JA) for help in finding a consultant. JA recommended Kate Peterson of Performance Concepts, an education, training, and business development consulting firm. After visiting the store several times, Peterson returned in early 1999 with the following recommendations:

  • First, and most obviously, says Peterson, they needed to double the size of the showroom. This would require a massive redesign as well as construction of additional space.

  • Second, the business needed a well-defined organizational structure, with established job definitions and responsibilities.

  • Third, a new compensation package was needed to motivate staff and encourage cooperation.

Peterson says Dondero’s predicament was typical of smaller, family-owned businesses. In such cases, she notes, it’s important to look at how the company was founded and how it grew to the point of being unmanageable: “It was a very successful business that was still being run the way it was run when the business was in the basement.”

Her observation was literally true. Ken Dondero’s grandfather, Charles, had started the business in 1948, working part-time from the basement of his house. When Charles died in 1959, his son F.C. “Bud” Dondero and daughter-in-law Betty took over the business and ran it from the basement of their house. Bud’s son Ken purchased the business from his father in 1979 and ran it full-time from that same basement. In 1986, Ken sold half of the business to his brother-in-law Kevin Kleiner, and in 1991 the partners finally built their own store.

Although the store had 2,200 square feet of space, only 600 square feet were dedicated to the showroom. A large backroom space-nearly three times the size of the showroom-was used by the sales staff for administrative work. But sales associates occupied with paperwork in the back meant fewer people out on the floor selling. The backroom space also was used as a break area where staff would congregate-again, to the detriment of the selling floor.

“The most obvious problem was the physical use of the space and the layout of the floor,” Peterson says. “A larger space was needed to increase sales. Six hundred square feet of showroom space with 55 running feet of cases [half of which were wall cases situated behind the showroom cases] was just barely keeping up with sales. It could not support more sales. I never saw a building with so little space dedicated for merchandise.”

Doubling display cases (to 125 running feet) on the showroom floor was essential to the new business plan. The partners spoke with the contractor who had built the store and decided, after checking codes, that they could add 425 square feet and remove an internal wall to gain another 75 square feet. The decision to start construction was made in April 1999, with the goal of completing construction by November 15, in time for the holiday season. To meet their goals, however, they had to free up another 500 square feet of space.

Again, the owners went to JA and to Peterson for guidance on hiring an interior designer. Both recommended GRID/3 International of New York. Kleiner and Dondero met the president of GRID/3, Ruth Mellergaard, at The JCK Show in June 1999 and contracted with the company in July. Mellergaard and Keith Kovar, GRID/3 International executive vice president, consulted the contractor regarding the addition and met with Kleiner, Dondero, and Peterson to discuss the firm’s business objectives.

Business by design. Although Dondero’s handled a large amount of repair work, the store had no dedicated space for repairs, and at least half the store’s repair work had to be outsourced. Thus, a space for repairs-in an area where customers could see the work being done-had to be part of the new plan.

Another major problem was that only 30% of the merchandise was kept in the showroom-most of the stock was kept in a wall safe. Sales associates had to leave the floor to show additional merchandise to a customer-a task that often tripled the time it should take to close a sale, says Peterson.

Finally, the design had to meet the long-standing company goal of providing excellent customer service. “We wanted to provide an experience for our customers that they would remember,” Kleiner says. “Ken and I have a lot of differences, but we share an incredible connection when it comes to providing excellent customer service. We’re fiercely committed to that goal.”

The owners also wanted to be sure the new design would not communicate an air of exclusivity that would make customers feel uncomfortable. Dondero’s sells midrange to better-quality jewelry to predominantly middle-class, knowledgeable customers who prefer quality over glitz and are willing to pay a little more for that quality.

The solution. Mellergaard and Kovar returned in July with five floor layouts based on the owners’ specifications. By August 13, the owners had decided on the complete design, including finishes, and construction got under way.

Meeting the mid-November deadline wasn’t easy. To save time, the normal process of taking bids and making changes to the plan was eliminated. “We put an awful lot of trust in [GRID/3’s] advice,” Kleiner says. “All the advice given to us was based on our philosophy, goals, and approach to our business.”

The job of building the display cases went to Baltimore manufacturer Atlantic Store Fixtures & Design. Again, the tight timeline did not allow for bids. Instead, the company agreed to block time into its manufacturing cycle to do the work. The company built the cases based solely on GRID/3 specifications and didn’t see the store until the day of the installation. “[The cases] fit perfectly,” Kleiner says.

Just as important, the new showcases-a combination of sit-down, standup, and wall cases-met the goal of creating 125 running feet of showcases. In addition, 70% of the store’s merchandise now could be stored in the showroom, because the new display cases were equipped with locked storage facilities below the glass casing to hold additional merchandise. Sales associates would no longer have to leave the floor to show merchandise not on display.

In addition to the interior design changes and expansion, the owners replaced the air conditioning system; upgraded the wiring; expanded the computer system; and installed new lighting, sound, phone, and security systems. The work was completed on time, and the store remained open throughout construction. In the front of the store, which has a high ceiling and skylight, Mellergaard added windows with wooden window shades to bring in sunlight.

The new design keeps merchandise in front of customers at all times and allows the staff to watch customers as they walk through the store. It also provides continuity between the store’s different ceiling heights. Through the first few hundred feet, the ceiling (where the skylights are located) is 16 feet high; less than halfway into the store, the ceiling drops to a height of eight feet.

Just past the store entrance, on the left, there are sit-down showcases where diamonds are shown, as well as a workstation. The display cases curve toward the center of the store where the ceiling drops; behind these U-shaped display cases is another workstation. Standup showcases are located at the right corner of the store, forming a triangle; behind them is another workstation. After the curve, there is a pair of two-tier watch cases on the left. Behind the watch cases is the repair area (in view of customers, as specified), a wall case for clocks, and the safe room. To the left of the safe room are the owners’ offices.

The back of the room features a restroom that complies with the Americans with Disabilities Act (part of the upgrade), a desk for the administrator, a gift-wrapping area, more display cases, and additional seating.

To address the owners’ concerns about the intimidation factor, Mellergaard used neutral green colors and maple and cherry woods to create a more welcoming and less exclusive feel. “Maple and cherry are very ‘friendly’ and not as high-end as a dark mahogany,” she says.

Changing roles. During the renovations, the owners and Peterson worked on their plan to change the way the store operates. A significant portion of those changes dealt with staff organization and work responsibilities.

Previously, the staff consisted of five full-time employees, two part-time employees, the two owners, and some temporary help during the busy seasons. The plan called for more support staff and defined roles that would clearly distinguish between sales and support staff.

“[Dondero’s] had some really talented people not being used to their maximum potential,” says Peterson. “They’ve always been customer focused. We just took that philosophy to the front of the store.”

The staff was expanded to 18. A woman who had worked as a part-time administrator became a full-time manager-she had the skills, and the store had the need, Peterson says. Kleiner and Dondero also added a Gemological Institute of America-certified gemologist, a certified bench mechanic, an accountant, and a part-time Web master.

Six full-time sales associates received American Gem Society (AGS) certification (three part-time sales associates are not yet AGS certified). But most importantly, Peterson and the owners clearly defined staff positions. For the first time in the history of the company, sales associates could concentrate solely on sales, which should increase overall sales, say the owners.

Dondero and Kleiner assumed specific functions that match their strengths and interests. Dondero is involved with long-range planning and also helps develop marketing programs for the store; Kleiner manages and trains the sales staff.

“The lines are clear,” Peterson says. “We put it together in a way that made sense for the staff. We made it clear who they report to from an administrative end and an operative end.”

The company’s compensation plan was revamped as well. The previous program gave sales associates a base salary plus a reward for selling items in specific price categories. “It was very complicated,” Peterson says. “People were generally surprised rather than motivated.”

Sales compensation moved to a more incentive-based system. Sales associates now receive a base pay plus commission for meeting personal goals, and a bonus for meeting team goals. The new system bases awards on gross profits rather than total sales. The bonus grows by 1% when the store hits its goals, and another 1% when the store hits what is called its “stretch” goals.

How did the staff respond to the new incentive system? “We stressed patience-the better you perform, the more money you’ll make,” Peterson says. “Performers are really reaping the benefits, while sub-par performers are stepping up to the plate or going away.”

What price freedom? Revamping the Dondero’s Jewelry operation on such a short timetable was neither easy nor cheap. But the owners say the time and money put into the new operation was worth it.

Kleiner broke out the costs as follows:

  • $10,500 to GRID/3 for design and blueprints.

  • $29,800 to Performance Concepts for its consulting work (Dondero’s has an ongoing contract with the firm).

  • $58,000 for renovation costs.

  • $200 more per month for rent.

  • $56,000 for new display cases.

  • About $24,000 for expenses such as a new alarm system, phone system, fire-protection systems, sound system, and other system replacements and upgrades.

  • $120,000 in additional payroll costs.

Kleiner says he and Dondero are already reaping the rewards of the changes and that the best times are yet to come.

As for the partners’ quality of life, Kleiner says they’re on their way. “We work 50 to 55 [instead of 60 to 65] hours a week. We’re young guys, so we don’t mind the work. But now they are much more productive hours and more enjoyable hours. We aren’t spending as much time changing batteries on watches. Instead of having 10 customers, I’m closing on 10 sales.”

Knowing that the staff can manage the store while they’re gone allows the partners more time to spend at local business meetings and community functions.

Best of all, Kleiner says, the company’s sales are growing: The store is expected to take in $2.3 million this year. “But I feel the real sales growth is yet to come,” he says. “We grew in the past in spite of ourselves. Now we are creating a springboard for really serious sales growth in two to three years.”