Head-Chopping, As Usual

Rising young executives at Montgomery Ward & Co. have one big incentive: they know there is always room near the top. This is the settled policy of terrible-tempered Chairman Sewell Avery. In the 21 years since he took over, Avery has lost, through resignations or firings, no fewer than 60 top-level Ward officials, including four presidents and 31 vice presidents.

But in Ward's ever-changing palace guard, President Stuart Ball has always felt secure. He has been with Ward's for 20 years; no executive was closer to Avery.

It was Ball, as company counsel, who advised Avery to provoke the U.S. Government into carrying him out of his plant in 1944, thus getting the case into court--where Avery wanted to be. Three years ago it was Ball who prompted Avery to use the phrase "a very real conspiracy" to explain why he had lost so many of his top men. And at a meeting in 1950, when stockholders objected to Avery's iron-fisted rule, it was Ball who sprang to the defense of the boss. "We know each of us is under a test," said Ball. "There are weaknesses in all of us, and we expect Mr. Avery to point them out to us ... But we are not working here in fear. We are working in a spirit exactly opposite that which is represented."

Situation Normal. One day last week, Sewell Avery called a three-man quorum of his executive committee without telling President Ball about his plans. In the office next day, Stu Ball got the shock of a lifetime. In strode Controller Edmund A. Krider, 40, with the word that Ball was out as president and that Krider was in. Sewell Avery let it be known that so far as he was concerned. Lawyer Ball had never got "comfortable" in his retailing job. But Ward employees gossiped that Stu Ball had simply become a mite too independent for the boss's liking. Out with Ball went Ward Treasurer Arthur Cahill, who was replaced by 42-year-old Assistant Controller Howard S. Kambestad. Said new President Krider calmly: "We regard these things as normal here. It goes on all the time."

Such "normal" head-chopping of executives has made Montgomery Ward a merchandising oddity. Though it is the second largest general retailer in the world, not one of its top-echelon men has had solid retailing experience. Half of its six-man top operating committee, including new President Krider, came up through the accounting department--men who are scornfully referred to in the company as "scorekeepers." Sewell Avery has put most of the emphasis on cost-cutting rather than selling.

Flooded Basements. Instead of expanding like Sears Roebuck during the postwar boom, Ward has lopped about 30 stores from its retail chain (current total: 602). As part of his 6-in.-thick manual of "standard operating procedures," Avery ruled that any outlays for maintenance and improvement that exceeded $15 (and in emergencies $200) would have to be approved by him personally. "You could have a basement full of water," said one Ward alumnus, "and not be able to do anything about it until you got Avery's name on a piece of paper. If you wanted to put up an awning, you'd have to explain it to him for half an hour; tell why you wanted it on this side of the building instead of some other place." Avery also put the lid on wages, and steadfastly refused to grant such incentives as the liberal pension and profit-sharing plans of Sears ("uneconomical" is Avery's word for such frills).

By such rigid cost-cutting and cautious retrenchment, Avery has developed what Chicagoans laughingly refer to as "the only bank in the world with a store front." He has built up Ward's cash reserves and Government securities to a towering $230 million. Ward's owes no money. Since 1945, unlike other big stores, it has used its own cash to finance credit for its customers (present total: $164 million), pay for its inventories (now $275 million).

Dollar Hoard. Avery is tucking into his "bank" every possible dollar in preparation, for the depression which he has confidently predicted for the last five years. When & if the depression comes, Avery will expand. He figures that he will get much more then for his dollars (but he has overlooked the fact, as Chicago bankers like to point out, that his hoard of dollars is worth much less now than five years ago).

While waiting for the depression, Avery has lost out on the boom. In the past ten years, though Ward's profits have doubled (to $54 million), its sales (up 75%) have done little more than keep pace with rising prices (the cost of living has jumped 64%). At the same time, Sears Roebuck, which has furiously expanded, has nearly tripled sales (to $2^ billion) and quadrupled earnings (to $111,500,000). Ward's, which in 1938 had 40% of the U.S. mailorder business, now has only 28%, while Sears has 66%.

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