Interview With A Trailblazer: DeWight Titus
Edition: September 1999 - Vol 7 Number 09
A pharmacist by training, DeWight Titus didn't enter the med/surg arena until the early 1970s. Over the next 25 years, he built a company that became recognized for excellence in selling to physicians.
Headquartered deep in managed care country, management and staff at F.D. Titus & Son learned how to adjust and thrive in a changing market. How? Through planning, persistence, staying close to the customer, empowering its own people and building bridges with manufacturers. The company was sold to General Medical in 1995.
Repertoire took advantage of the momentary pause in DeWight Titus's career to ask him how he built his family's company into one of the exemplary distributors in the business.
Repertoire: Tell us about the history of F.D. Titus and Son.
DeWight Titus: The company was started in 1935 by my grandfather -- a professional pharmacist. After he died, my dad [Frank] came into the picture. During World War II, he went into the Navy, and his sister ran it. The whole family were pharmacists.
When my dad returned from the service in 1946, he decided to go into the surgical supply business in addition to the pharmacy. He probably saw the synergies between the products, the physicians and the customers. But it was difficult to get the lines, because in those days, you didn't find pharmacy and med/surg together. The lines were slow in coming, but over time, medical supplies became a major part of the company.
The focus on the physician aspect was in part because of demand by physicians coming to us for supplies, then equipment. So, it was an evolution rather than a planned strategy.
Repertoire: How had physicians been getting their supplies?
DeWight Titus: There were some very small distributors in those days; but they usually sold equipment and very few disposables. These were companies like Deckert, Glendale Surgical Supply, Belair, Mission. None sold pharmaceuticals. But our guys had not only equipment and supplies, but injectables, pills, etc. This gave us an edge. We didn't have all the lines, so it gave our guys something to talk about.
Repertoire: How did you personally get involved in the med/surg business?
DeWight Titus: I graduated from pharmacy school in 1958 and we opened up additional pharmacies. At one time, we had four of them. We converted the original pharmacy to a home health care store. We also had a veterinary division, which we ultimately sold to Con Agra, as well as a long-term-care business, which came about through our pharmacy connection.
I practiced pharmacy for 10 years. Then, in the early '70s, an opportunity presented itself in the sales of medical supplies, so I made the transition.
Repertoire: How did you build the med/surg business?
DeWight Titus: We were one of the small guys on the block; we probably had five sales reps at the time. Our vision was to stay in business that first year. And the next year, we said, ‘We're still in business, and we're doing better.’ Seriously, so much was incremental growth. Everyone has financial restraints. You add salespeople as you can afford it; you expand as you can afford it; you make acquisitions as you can afford them. You can borrow to a point, but that has its limitations. No one was in the public market then.
One of the keys as we went forward was this: We very seldom lost business. So, the incremental growth was fairly predictable and always significant, because we weren't churning the business.
Repertoire: How did you maintain customers?
DeWight Titus: We were a strong service organization. We were not particularly free on terms, because we needed financing. But I always felt like we were on the cutting edge with things like our operating systems and our selling strategies. We were also fortunate to acquire outstanding people, who stayed with the company.
One of the other key things was that we seldom lost sales personnel. We had extremely low turnover in the sales force.
Repertoire: Why was that?
DeWight Titus: Our people had the opportunity to make a lot of money. The high service levels and support they got from management, marketing and operations -- in addition to their own efforts -- enabled them to be very successful.
Repertoire: How did you keep your people motivated?
DeWight Titus: When a sales rep gets a comfort level, the challenge is to motivate them. Part of that is the planning process. Jerry Neal, our CFO, was an incredible planner. Our planning process took weeks. We had growth built in. We'd sit down with the reps and review their plan for the year. Sometimes they would say they couldn't make it, sometimes they said they could. But when we were done, we both agreed that was the plan for the year. They were expected to make it. And in most cases, they did.
Repertoire: So, your growth in the med/surg business was evolutionary -- not explosive.
DeWight Titus: Exactly. We would get blips on the upswing when we made an acquisition. But all of them were made from a fairly strategic standpoint. A lot of the success is being able to take advantage of opportunities when they develop. That goes for sales reps too. Say a sales rep comes to your company because he's unhappy with his present situation. Three days later, he'll be OK with it. But if you catch him when he wants to come to work for you, you should do it on that day. Acquisitions are the same way.
This is not rocket science. You can feel when it's the right thing to do.
When we made an acquisition, we tried to keep some of their management people as well as their sales reps. They often became outstanding employees, staying with us for years.
So, why did our acquisitions work? We worked hard to assimilate people into our organization. Yes, we would take out redundancies. But we tried to keep key people. We always tried to bring them into the culture. And we'd continue to sell them on the culture. It works.
Repertoire: Can you describe the Titus culture?
DeWight Titus: There are some things you don't realize when you're in it, but you can see in hindsight. The family culture permeated the organization. People felt they were part of the family. I think they all felt they were treated fairly, from the standpoint of compensation and work environment.
Repertoire: Would you describe Titus as a fun place to work?
DeWight Titus: If people weren't having a good time, I felt something was missing. There may have been more laughing and joking around than at other businesses, but underneath it all, there was dead seriousness. We had certain objectives, and we were going to make them. But we were going to make them while having a good time.
Another thing we did: In any company that's growing rapidly or has a lot of aggressive young people, there's always an opportunity for misinformation to flow back and forth. So, we had a policy that nothing was a secret. We told our reps what the sales were, what the margins were, the profits. If you wanted to know what an item cost, you could go and find out. Or if there was a question of how we priced a product, we were totally upfront about it. It took away a lot of grumbling.
Because there were minimal terminations, the reps weren't afraid of what was going to happen to them. They knew what the performance standards were. They had a road map on how to get there.
Repertoire: It's been said that Titus was a place where people could grow. How did you foster that climate?
DeWight Titus: We were always clear about our expectations and what we were trying to achieve. But the people who worked for us were given broad latitude on how to get there. They knew the financial resources they had. They knew they had performance targets. But they also knew we wouldn't second-guess what they were doing on an hour-to-hour, day-to-day basis. I always tried to force decision-making down to the people involved.
In addition, the management felt empowered to make decisions. Oftentimes, there would be decisions with which I didn't totally agree. But I felt it was important that they were supported so that they could become more confident.
Titus also provided an environment in which people could make a mistake and not get shot. Our attitude was, ‘Hey, what did we learn from this? Let's make sure it doesn't happen in the same circumstances again.’ We allowed people to be risk-takers.
Repertoire: It's also been said that the support staff was equally empowered.
DeWight Titus: We would involve customers with everyone in the company -- operations people, IT people, etc. -- not just salespeople. We wanted everyone to get involved and support that customer. I would tell the salespeople, ‘You are only so good as the people in the warehouse pulling those orders.’ We always encouraged them to go back and thank those people. I don't think there was ever a ‘them and us’ attitude between operations and salespeople.
Repertoire: You mentioned Jerry Neal. When did you recognize that you needed a strong financial person?
DeWight Titus: Even when we got to $100 million in sales in 1989, I knew I didn't have good financial strength in the company as far as a CFO. Our sales were growing, our receivables were growing, everything was growing -- but we needed to institute a planning process.
Repertoire: You were in southern California, the heart of managed care. Tell us about the evolution of your market.
DeWight Titus: We were fortunate to be where we were. We saw opportunities and took advantage of them. We were in the strong-est physician market in the U.S. We understood how the physician thought, how he bought, what his structure was, until the advent of managed care and integrated systems.
At that time, we realized that a change was occurring in our customers. Some of them, e.g., the Mullikin group, became part of physician practice management companies. We saw Scripps go through changes. Fortunately, we had people who understood what was happening and we developed strategies accordingly.
Darrilyn Adams did a fantastic job of looking into that market and directing our sales efforts in that area. At one point in time, in all of California, there wasn't a major IDN group that we didn't have as a customer. We were relentless. We had strategies. We met their needs as they were evolving.
Repertoire: What was unique about the needs of the IDNs?
DeWight Titus: We helped them reduce their inventory days. We gave them reports that none of them had. They were coming together so fast, their systems didn't give them the information they needed. We could tell them their product utilization by department. All these types of programs fit hand in glove with what they were doing. We even had people onsite for some of the larger groups.
Repertoire: Did you see the decision-makers change?
DeWight Titus: The decision-maker became either the manager or the CFO of these groups, or even the operating president. The decision-maker was no longer the physician.
Repertoire: Did you have to change your methods of training and incentivizing sales reps?
DeWight Titus: Yes. The sales reps went through extensive and continuing education on how to service that customer. Our compensation worked all right, because it was part of a revised compensation matrix, rather than a straight percent of margin. Part of our success was the ongoing training of the rep. In addition, we spent a lot of time educating the customer.
Repertoire: Did the job become less fun for the reps?
DeWight Titus: The reps found it challenging in that the customer became more dependent on the management selling and relationship-building than on the sales rep relationship. They had to learn that management was playing a very active role with their customers. We had always done that with our customers, though, so it wasn't totally different.
Repertoire: How involved did you and your management team get with customers?
DeWight Titus: We as a management team spent more time with our customers than any other management team I saw. If something wasn't going right, management always knew about it before it was too late to fix.
The reps were very open in asking for help. It goes back to that trust we had in each other. They never felt threatened by bringing management in, and that was key to keeping the information flow going. There were no barriers in taking care of that customer. They also knew we were fanatical about losing customers. We had reports every month to tell us if we lost a customer or if his purchases were decreasing. And we had a system to check with that customer to find out what was happening.
Repertoire: Would you say that your relationships with manufacturers were different from that of other distributor executives?
DeWight Titus: Years and years ago, Ron Stephenson said at one meeting that we should look at the manufacturer as a customer. That stuck in my mind. If we treat the manufacturers the same as we treat customers, we'll be very successful.
Some distributors take pride in how much they can grind the manufacturer. For years, I've been a proponent of partnership. That's the most maligned word in our industry, because I'm not sure manufacturers and distributors ever went into it wholeheartedly. But we treated manufacturers just like we would a customer, with respect and friendliness. We wanted what we were due, but we didn't grind them for the last penny. We set up incentives for both of us to be successful.
We found that there was an enormous amount of manufacturer support that was not price-related. There's a myriad of things that a manufacture can do -- introduce you to key customers, provide field support, all kinds of things -- if you have the right relationship. I remember one HIDA meeting where 40 or 50 of our reps attended thanks to a contest offered by one of the manufacturers.
Repertoire: How big were you when you sold the company?
DeWight Titus: We were tracking at $170 million. Our territory was California; Nevada, Arizona, southern Oregon.
Repertoire: How big did you want to get, and at what point did you decide to sell?
DeWight Titus: From an estate planning point of view, it was obvious that we should sell. But the real driving factor was this: We had major managed care customers who were becoming part of national companies. Mullikin, for example, became part of MedPartners. If they wanted a single supply source, we couldn't be it. Also, we had the western United States for Hillhaven for its nursing homes. If we wanted to keep that contract, we would have had to be national. So, we felt we were at risk.
We had talked for several years with other distributors about putting the companies together. But we really didn't have the expertise to do it. Now the motivation was there. My concern was that we would be at a disadvantage vis-a-vis other distributors that had all market segments covered. Because so many of the IDNs we dealt with had a hospital component -- and in some cases, the hospital component was the driving factor -- we felt we were at a disadvantage.
Repertoire: How is the health care environment today different from what you had once expected?
DeWight Titus: I didn't expect the practice management companies to fall onto hard times. Another development is the consolidation of distributors into five or six major players.
One of the things that is interesting is the power or strength a manufacturer or distributor has now vs. 25 years ago. Back then, the manufacturer was dominant. Not today.
In the primary market, with the demise of practice management companies, and with managed care going through traumas -- I think primary care is potentially going back into another golden age. It'll be different than it was. Distributors will have to be much more sophisticated, and the sales rep will have to be different. And sooner or later, the order-taking process will have to change, though how fast that will happen I can't say.
But the customer base is fragmenting again. We know how to get higher service levels. We know how to take costs out of the system. There might be a dry spell of innovation and creativity in the market from a sales and marketing standpoint. That again will go into a different phase.
What the primary care distributor looks like today and what it will look five years from now will be totally different. You'll have your major players. And some will get a lot better, and some will stay as they are. But I think you'll see some strong regionals redevelop.