Empire Builder

by Lee Goodwin and Meredith Spencer

When people look at Herb Chambers, they see the accoutrements of wealth and a stable of dealerships. So why would a guy at the top of his game give a damn if the mechanics’ bathrooms are clean?

When you understand that, you’ll begin to understand Herb Chambers.

You know the jingle. “We’ve got it. At Herb Chambers we’ve got it.” Herb Chambers

It could just as easily apply to the man. Herb Chambers has got it. He’s got the 40-odd dealerships including his palatial Lexus store in Sharon. He’s got homes in Boston and Connecticut, and he’s got a helicopter to commute between the two. For long distance commuting he owns a new Gulfstream 450 Jet. He’s got a rotating collection of 15 to 20 exotic and collectible cars in his garage, and he’s got a 188-foot yacht if dry land becomes dull. And now he has the 2008 Time Magazine Dealer of the Year nomination and he’s the state’s dealer of the year. When the press writes about Chambers, they follow a tight narrative. How as a youngster growing up in Dorchester, he thought the local dealer possessed untold wealth. With his nose pressed up against the showroom window, he marveled at how many cars the businessman “owned.” How, following a four-year stint in the Navy, he opted for a paycheck instead of school. He never attended college. How he founded a copy machine company that would go on to become the largest independent distributor of office equipment in the United States. And they always include how Chambers went looking for a Cadillac and ended up buying a dealership.

The Central Question

None of those stories asks the central question.

How did an outsider with no automotive experience build such a formidable organization? What keeps Herb Chambers – the man and the organization – going, and growing? Following his time in the Navy,

Chambers began working for a copy machine company, first as a technician and later as leader of its #1 sales team. He made the transition to sales by selling extended warranties while servicing the machines – so many warranties that management took notice and expanded his territory. Speaking to people in a sales context was difficult, but a Dale Carnegie course boosted his confidence. Today, he says, the key to sales is simply being nice to people.

A-Copy Becomes Ikon-ic

The office world was moving from mimeograph and carbon paper to photocopy. In 1965 he founded his own company with just $500 borrowed from his mother. He named it A-Copy, so it would be listed first in the phone book. Chambers used his savvy as both technician and salesman to purchase used copiers, then fix and resell them. His success snowballed. His competitors guaranteed repair in 24-hours. A-Copy promised to fill service requests in eight hours – and in the early days Chambers himself made the service call. Chambers sold his business in 1983 to Ikon, then known as Alco- Standard, which was attempting to consolidate independents like A-Copy. Chambers had become the largest Canon distributor in the world.

How to Buy Companies

The addition of A-Copy represented “a big feather in the cap” of Alco-Standard, lending its consolidation strategy “instant credibility” and helping the Fortune 500 company grow into one of the dominate players in the office equipment industry worldwide. Alco became a $20 billion dollar company and Chambers its largest single shareholder. “The first time I met him, I said to myself, ‘This guy is electric,’” recalls John Covell, director of Marketing and Training. He first joined Chambers at A-Copy in 1981 from Xerox. “He was so exciting and intense about what he was doing. There was this [atmosphere of] entrepreneurship.” Chambers stayed on for a while at Alco- Standard, in charge of mergers and acquisitions. He gained valuable experience in buying companies. He also learned how to delegate to others, and to trust others while holding them accountable. After completing a number of acquisitions, he started to shop around for a company of his own….in a different industry. He wanted a business involved in distribution, a mix of new and used products, and something service intensive. What he didn’t want was to compete any longer against the likes of IBM and Xerox.

No Pre-Conceived Notions

Not long after he purchased the first dealership in New London, Connecticut – where he walked in looking for an El Dorado and walked away owning the business – he set his sights on expansion. By 1997, just 10 years later, Chambers had 15 dealerships spread over Rhode Island and Massachusetts and sold 24,000 cars. From day one Chambers generated ideas of how to conduct business differently. A confirmed car nut, he began buying and selling cars in the Navy; nine in one year. “Automobiles became beautiful to me,” he recalls. At A-Copy, he once purchased 16 in a year. He frequently says that he understands the business from the consumer side. “He had no pre- conceived notions of what he could or couldn’t do,” says Quincy-based dealer Dan Quirk. “He put A-Copy on the map. He focused on customers. He brought the same principals to the car business.”

Keeping Up Morale

Adopting the mindset of a customer is just one key to his success. (Chambers’ service departments wash and vacuum every car that rolls through). His ability to inspire and turn over management control to others is also key. He expects his GMs – he refers to them as his “partners” – to fix their own problems and run their dealerships as i n d e p e n d e n t l y a s possible. He has a saying: “We lead people and manage information.” He also subscribes to the adage: Trust but verify. For example, he demands that

his technician bathrooms be inspected once a month. When he discovered one recently that was a mess, he hit the roof. “People may wonder why that’s important. The restrooms aren’t public and the techs spend more time with cars than customers. I ask, ‘What about morale?’ If they don’t enjoy good

morale, they may not fix the car right.’” On the sales side, new sales people spend two weeks with Covell. He likes to point out that new sales consultants win MVP honors every month along with seasoned employees at a monthly motivational breakfast. Every year Chambers hosts an elaborate

gala, rewarding top performers with Rolex watches and cash. Top sales figures won’t win at either event unless accompanied by high customer service marks to match. For managers, overall management combined with low turnover is a must. “He’s concerned with the total overall objective,” says Quirk.

“He has confidence in his ability and in his people’s ability. He absolutely, positively loves the business.”

The 40 Group Review

Every month the company’s 40-plus GMs gather together for a detailed review of their stores. Chambers lavishes praise on those who bring good numbers as well as good ideas to the meeting. The managers are expected to dig into minutiae at these meetings. They present their financials one manager after the other: units new and used, gross profit and per vehicle, F & I, service, parts, expenses by category, aging receivables, asset management and customer service.

Chambers, who has pored over the numbers earlier, sits ready to pounce: “What happened here? How about here?”

“He zeroes in. He finds where the opportunities exist,” John Covell says.

“There’s no question that he’s a big picture guy. But he believes in looking at the numbers and dissecting the numbers.” Constant Improvement. The discussion is designed to provide the type of focus they miss when dealing with day-to-day issues and questions. It also provides a forum for implementing changes swiftly among the entire group. For instance, while examining credit card expenses, someone discovered that taking a credit card number over the phone nearly doubles the service fee compared to swiping a card. Pennies, perhaps, but multiply the fee by hundreds of thousands of service customers, and costs quickly mount. It is an example of the Japanese concept of kaizen, or constant improvement, that Covell tirelessly advocates.

“If we didn’t have these meetings we wouldn’t be as successful as we are,” Covell says.

Chambers prods everyone, constantly, to find new avenues to improvement.

“I’m trying to convince each and every one of you how you can be better,” he tells his employees. “As a company, we can be so much better.”

Turning ‘Accessories’ into Profit Centers

Does Chambers take more pleasure in the rewards of his success, or the fact that he found a way to turn some of those “accessories” into profit centers? In addition to his legion of dealerships, he has amassed a collection of

real estate and exotic cars. He is quick to acknowledge that he has been very fortunate in business.

His properties include a country estate in Old Lyme, Connecticut and a spot at the new Mandarin on Boylston Street, slated for completion in 2008. Last year, he placed his Back Bay residence – a rare Beaux-Arts

style home – on the market for $14.95 million, breaking Boston’s single home sales record by $4 million. Chambers spent two years renovating he house before its sale, and says that it’s an “insane” property for someone without a family. In Old Lyme, Chambers keeps a stunning collection of cars – 15 to 20 exotics and vintage autos. The collection, featured in The Boston Globe and Chronicle television news program, includes a McLaren F1, a Mile Miglia tested 1955 Mercedes-Benz Gullwing, a 1959 Cadillac Biarritz Convertible Eldorado, a 1932 Ford Coupe and 4 Ferrari Daytonas. Even car nut Jay Leno has asked Chambers for a spin.

By Sea and Sky

And if tooling around the Connecticut countryside becomes tiresome, Chambers can head to the sky in his jet, take his helicopter for a spin, or board the Excellence III, his 188-foot yacht. Chambers was “intricately” involved in the design and building of the ship, traveling to Europe to personally meet with shipbuilders Abeking & Rasmussen.

He has built and sold several yachts – and leases the Excellence for much of the year (at $500,000+ per week). The plane also spends most of its time in the hands of others. In the words of longtime associate John Covell, Chambers is “driven, driven, driven.” Another associate, Jim Xaros, contends that the most difficult aspect of working for Chambers is keeping pace with him. No matter where in the world his boss may be, Xaros quips, his phone will ring at the end of the work day, everyday, and Chambers will be asking, “How’d we do today?”

The Evil Empire

Asked about Chambers’ expansion plans – specifically Central Massachusetts – John Covell calls Worcester and surrounding towns “a great market.”

Metro Boston may boast great demographics and high density population, but it suffers from a severe lack of space. However, that space is plentiful further from the Hub, and Chambers is missing a few brands from his 40-plus points – which run the gamut from Vespa scooters to Bentley.

There’s no Nissan. No VW. No Volvo.

Chambers is always looking for new opportunities, and if the location is right, and the deal makes sense, he’ll buy. What’s the hardest aspect of putting together a deal?

“It’s price,” Chambers says. “How bad do I want it, and how bad do they want to sell it? I’m not a

fire sale buyer. I’ve dealt with some very good negotiators. I wasn’t the best negotiator, but I’ve gotten better. ” Patience and Persistence Pay Off “

Occasionally, Chambers will invest himself in a deal but walk away from it. “Even at the 11th hour, because someone tried to change the deal,” Covell says.

Nor is Chambers afraid of a fight. He once pursued a lawsuit for nine years against Audi when the manufacturer cancelled his franchise “for personal reasons” that Chambers deemed unfair. A million dollars and a decade later, he vindicated himself.

One recent acquisition required extraordinary patience and persistence. Foreign Motors West, which Chambers picked up last year, was a dealership group that Chambers had wanted forever. “Herb was told repeatedly they wouldn’t sell it,” Covell said. Finally, the winds shifted. After two attempts by other suitors, including Penske Automotive Group went nowhere, it was Chambers’ turn. From the beginning, workers at the employee-owned FMW store regarded Chambers, a competitor, as “the evil empire.” Covell and Chambers met with small groups of employees over several weeks, dispelling misconceptions and reassuring employees about their jobs. Chambers’ willingness to listen, combined with his self-effacing manner and geniality, eventually won them over, and he secured employee approval by a near-unanimous vote.

Stay Visible in Showroom Controlling a large dealer group provides cost efficiencies. When he

purchased his first Honda dealership on Commonwealth Ave 20 years ago, the “blue sky” was $4 million, “an unheard-of amount,” he recalls. However, his ability to share existing advertising cuts costs and has allowed him to pay a premium for subsequent dealerships of the same brand. Still, he never allows the upside of a potential purchase to cloud his critical thinking. “I think long term. I think about things more. I consider ‘what’s the worst thing that can happen? How bad will it be?’”

And what if he were to throw aside his organization and return to just one or two dealerships.

Where would he focus? “I’d try to stay very visible on the showroom floor, and meet as many customers as possible – both service and sales customers. Plus you set an example for everyone else.”

Chambers’ Vice President Jim Xaros concurs, adding, “I’d pay a lot of attention to Service reception. You

have an opportunity to reach 50 to 100 people there every day.” Chambers still walks downstairs to meet customers in the Mercedes- Benz showroom below his corporate offices.

“It takes me 5 minutes,” he insists. “Nobody is that busy that they can’t take 5 minutes.”

The Jewel in the Crown

Herb Chambers Lexus in Sharon, the crown jewel in the crown of the Herb Chambers empire, took nearly three years to build and sprawls across 11 acres. Its 110,000 square-foot showroom features vaulted cathedral ceilings and abundant natural light. Customers are treated to complimentary espresso and sandwiches as they wait for their car in the dealership’s luxe lounge, complete with marble fireplace. Or perhaps they’d prefer to stroll the Zen garden. If that’s too slow paced, the dealership also offers a Wi-Fi equipped business center for customers. As soon as customers arrive at the service entrance, German-engineered doors zip up and then down in seconds. Either a personal service advisor familiar with their history, or valet, greets them. Behind the scenes, the service area accommodates 60 bays. Chambers scoured the country with an architect and a photographer, traveling to Texas, Las Vegas, South Carolina and Georgia to pluck the best elements from existing Lexus dealerships. He estimates

he’ll enjoy bragging rights for two years before someone outdoes him.

BY THE NUMBERS:

· 3 years to complete 11 acres of land in Sharon 1

· 10,000 square-foot showroom

· 40 cars fit into the showroom

· 50-foot cathedral windows

· $500,000 cost of showroom skylight

· 140 staff members, including sales and service department

· 5 lunch rooms for staff

· $30 million: estimated cost

A (Reluctant) Public Face Like many dealers before him, Chambers has become the public face for his dealerships. Despite his ads, Chambers is a reluctant spokesman; a commanding presence in small groups, but not someone known for leading the PR offensive. He feels nervous in front of the cameras, and he’s critical of the results. His eye-catching – some would say, provocative – ad campaign is built around the theme that his sales people won’t try to “sell” you a car, they’ll help you to buy one. That line originated with Chambers as he addressed his managers one day.

Boston ad agency Modernista enlarged the concept, painting Chambers as an “undealer;” a theme adapted by several other local dealers over the past year or two.

The idea is to play upon, and dispel, the public perception of dealerships in general, and sales people in particular. One ad in the series, entitled “Here Comes a Car Salesman,” angered a few local dealers when it first ran. Covell acknowledged that he was “personally concerned” about those ads.

“I don’t want our competitors to think that we’re disparaging them,” he said. “I respect our competitors….even if I want to beat them.”

Pursuing Opportunity Online

It takes more than a clever ad campaign to beat your competitor, of course. People still shop the aggressively-priced store, as well as location, selection and other key factors. But level the playing field, and who you buy from can become a factor in attracting customers.

Just ask Frank Perdue. Despite the success of the ads, and the enduring draw that newspapers hold for auto customers, Chambers continues to expand his online presence. He was an early adopter of the Internet, and with the help of in-house Internet guru Jay Gubala, Chambers continues to mine

online data with the same penchant for dissection that he brings to his stores’ financials. With its seemingly limitless ability to adapt and evolve, combined with a profound capacity for measurement, the online world presents the perfect environment for Herb Chambers. He remains, despite enormous

wealth and success, a man on a ceaseless search for opportunity – be it buried in numbers or just over the horizon.

LOW KEY CHARITABLE WORK

Can there be too much opportunity?

Herb Chambers would likely say no. But for nearly all dealers, including Chambers, one aspect of their business dictates “yes.” Every day, dealers are asked to donate money, new cars, and used cars to groups and individuals in need. If only business were as steady and reliable as requests for charitable contributions. Chambers prefers to keep his considerable charitable works low key. He responds most often to pleas from people he knows already, because he wants assurance that the funds will find their way to those who truly need them. “We don’t have a policy about giving,” he said. “We do it on a case by case basis.” He acknowledges an aversion to professional fundraisers. His most recent visible charitable work has been on behalf of the 200 Foundation, which honored Chambers as its Man of the Year last year. The Metrowest charity donates all of the money it raises directly to food pantries, counseling centers, respite homes and other organizations.

Keeping Up with Building Operations

Jim Xaros practically g r e w u p i n t h e automobile business. He joined the Chambers organization 16 years ago, and oversees dealership operations. For Xaros, keeping his a r m s a r o u n d t h e accelerated growth and construction presents one of his biggest challenges. Even with two fulltime staffers dedicated to construction, the Lexus store gobbled up much of his life for three years. Not to mention major projects ongoing or about to commence:

• A new Porche-Audi dealership in Burlington (a point purchased from Pass & Weisz)

• A new BMW in Sudbury

• A new Infiniti on Route 9 in Westboro

• A new home for the Providence Cadillac dealership

• A Mercedes-Benz expansion (doubling the size) in Lynnfield

• A complete renovation for Mercedes-Benz in Natick

• Completion of 2 new Smart Car centers

Asked for his view of the broader picture, Xaros said he expects the trend to continue for domestics, adding that the local landscape remains “over-dealered.” Long term, he predicted it will take more than

a year or two for things to “right-size” themselves.

18 february 2008 Massachusetts auto dealer www.msada.org