Top 150 Public Companies
Survival Tactics for Public Companies
Employees used as strategic assets.
|PSS World Medical (No. 31)
Distribution centers: 41 throughout the country
Accolades: This year, named to both Forbes’ “Top 100 Most Trustworthy Companies” and Fortune’s “World’s Most Admired Companies.”
Sitting Pretty: Smith personally hired about 1,000 of the company’s more than 3,600 employees since joining PSS in 1987. The company’s Physicians Sales & Service division is the country’s largest distributor of medical supplies to doctors’ offices. Its elder-care unit provides supplies, equipment and billing services to nursing homes in every state.
When David A. Smith, CEO and chairman of PSS World Medical in Jacksonville, called employees to a town hall meeting in April, many expected the worst. Workers at the company’s headquarters and its huge distribution center on Jacksonville’s west side, where medical supplies are packed onto trucks and vans bound for doctors’ offices around the country, had seen layoffs throughout their industry. They figured it was their turn.
» 45% (67) of the Top 150 Public Companies posted a loss.
» Total losses among the 67 companies were $7.75 billion.
It was more than a feel-good gesture. In May, when Smith made the rounds with Wall Street analysts in New York and during the company’s year-end conference call, he unveiled his strategy to meet earlier growth goals despite economic upheaval in the industry. “We’re going to save 500 people and grow the business,” he declares.
Smith’s focus on his workers is in part personal. By his own count, he’s hired as many as 1,000 of the company’s more than 3,600 employees since joining PSS in 1987 from Coopers & Lybrand. A Jacksonville native who earned his accounting degree from the University of North Florida, Smith was named CFO in 1992 and initiated the company’s IPO in 1994.
In 2000, Smith disagreed with then-CEO Patrick Kelly’s efforts to sell off the company amid a financial crisis caused in part by PSS’ acquisitions binge. Kelly resigned after a merger with Fisher Scientific International fell through with PSS near bankruptcy. Smith says he had already packed up his office when the board asked him to stay and lead the company out of the crisis.
The board promoted Smith to president. He scaled PSS back from an unprofitable $2 billion in revenue to $1 billion, then focused intensively on his sales team to grow revenue back, profitably, to $2 billion. He halted an exodus of key staff and dramatically reduced turnover by creating a corporate metrics program that highlighted employee satisfaction and more strongly linked pay to company performance.
The board named him CEO in 2002. Under Smith, the company’s physician-sales division, Physicians Sales & Service, has become the country’s largest distributor of medical supplies to doctors’ offices. Its elder-care division, Gulf South Medical Supply, provides supplies, equipment and billing services to nursing homes in every state. As he worked to reduce debt and improve cash flow, the company’s share price grew by almost 400% in his first five years as CEO. PSS has outperformed both the market and its closest competitors, Cardinal and California-based McKesson Corp.
As he hired those 1,000 employees, Smith cultivated a culture that views all PSS workers as strategic assets and problem solvers. The company’s 1,000-member “consultancy” sales force moves products but also is a conduit for feedback from doctors and nurses, helping PSS develop new products. The strategy has been key to the success of its private-label medical products brand, Select. Feedback from customers, for example, led Select to develop wound-care bandages with a peel-off, sterile measurement grid on the package that makes it easier for nurses to note rates of healing with each bandage change. The product also eliminates the need for a competing supply company’s stainless steel wound-measuring tool.