Big Changes At The Big

There was a time when the “Orkin Army” ruled the pest control world. Customers flocked to the company. Aspiring technicians beat a path to its door. Competitors feared the entry of “Big Number 1” into their market. But times have changed. No longer does Orkin instill the sense of fear and awe reserved for the country’s truly dominant firms like Wal-Mart, Microsoft, and Boeing. What happened to the company that Fortune magazine once described as the “General Motors of exterminating?”

“In the early days of the industry, Orkin created the market,” observes Bob Russell, a longtime Orkin executive who now serves as technical director for Arrow Exterminators in Atlanta, Ga. “The industry hated and feared them. Today, a sophisticated small operator can compete equally with Orkin.”

Times have changed so much, in fact, that Orkin isn’t even the largest pest control company in the country any longer. Terminix International, based in Memphis, Tenn., now holds that distinction with estimated customer service revenues in excess of $650 million. “Orkin hasn’t performed very well in recent years,” says a prominent industry insider. “At the same time they were experiencing relatively flat revenue, Terminix was achieving between 5% and 10% bottom line growth. Out of financial necessity Orkin has had to take a critical look at their operations.”

One former employee with insights into the inner workings of the company said Orkin’s lethargic financial performance is rooted, in large part, to its inability to change with the times. “There was a time when clean trucks, regimented training and sophisticated marketing programs were state-of-the-art stuff. Now everybody’s doing it. Those qualities aren’t enough any longer to dominate a marketplace.”

In addition, there’s much more competition at all levels of the marketplace than in Orkin’s early days when the industry was experiencing impressive double-digit annual growth. Large regional and national players with significant ad budgets and sophisticated marketing campaigns have nibbled away at Orkin’s market share, while thousands of small, local companies able to offer quality pest control with a “personal touch” continue to represent a formidable challenge for the Atlanta-based pest control giant.

“Twenty years ago there were probably 75 percent less companies in the industry than today,” says Russell, who still speaks fondly of the company he retired from in 1990. “Orkin, to a large degree, created the pest control market, but now they’re just one of numerous options available to customers.”

As a result, the company finds itself at a crossroads. Either reengineer itself or run the risk of becoming just another pest control company, albeit a large one. Dr. Michael Potter, a former technical director for Orkin, echoes the view of many in the industry when he says, “They’re still a great company with unlimited potential. Orkin’s challenges (i.e. employee turnover, liability issues, training, etc.) are no different than those faced by the rest of the industry, but they must be dealt with on a much larger scale. It will take a bold commitment from Orkin to break out of the box and move forward more aggressively.”

And there are signs Orkin’s parent company, Rollins, Inc., is doing just that. The most dramatic illustration of the company’s renewed sense of commitment to the pest control industry occurred this fall with the sale of Rollins Protective Services (RPS) and Rollins LawnCare and Plantscaping in two separate transactions totaling approximately $240 million. In a statement to employees following the sale of RPS in early October, Orkin President Gary Rollins said the “the nucleus of Rollins, Inc. (translation: Orkin Pest Control) remains intact.” He reinforced that point by stating that Orkin Pest Control “provided 98% of the entire company’s profits, and approximately 85% of its revenue, locations and employees” in 1996.

Amid rumors of a possible sale of Orkin itself, Rollins added that the company’s recent actions were “two distinctly different and totally unrelated events” and “is not an indication of more events to follow. Orkin Exterminating Co., Inc., is not for sale,” he assured the company’s 10,000 employees. On the contrary, he said, the divestiture of Orkin LawnCare and Plantscaping and the sale of RPS will permit the company’s management team to focus all of its time and resources on its pest control business.

“The ability to be singularly purposed in creating the World’s Best Pest Control Company will be beneficial to all of our employees, customers and shareholders,” he said.

GROWING INTERACTION. Another illustration of Orkin’s renewed commitment to the pest control industry is apparent in its growing interaction with the marketplace. In the past, with a few obvious exceptions, company representatives weren’t particularly visible at industry trade shows and educational events. “For a long time, Orkin became somewhat insular and didn’t interact as much with the rest of the industry,” admits Glen Rollins, the highly regarded son of the president who serves as vice-president of corporate development. “I think that has changed and changed fairly quickly, which has made us better.”

Orkin’s more open attitude has benefited the industry as well, according to Michael Katz, vice president and general manager of Western Exterminator Co., Irvine, Calif. “We’ve always enjoyed an open and sharing relationship with Orkin, but I think it’s true that they’re beginning to open up more to the rest of the industry. I applaud them for their efforts in this area. I think it will benefit both Orkin and the pest control industry as a whole.”

Clearly, the company’s lukewarm financial performance in recent years has contributed to its decision to look critically at its own operations, as well as those of its key competitors. “Orkin is more open now out of necessity,” says one former company insider. “To remain competitive, they’ve had to be more open.”

This more open business philosophy has been particularly apparent in the company’s Commercial Division, which appears to be the prototype for Orkin’s reen-gineering efforts as it approaches the next century. Clyde Cobb, the division vice president responsible for leading the group, said when he joined Orkin 31 years ago “it seemed like we had every commercial account in town, but we abandoned the market.”

As the company’s television advertising produced more and more residential leads, its commercial operations became less visible to the customer. “There was not a conscious effort back in the 1960s to emphasize our residential business and de-emphasize our commercial business,” says Orkin President Gary Rollins. “It was simply a phenomenon of low-hanging fruit.”

That all changed several years ago, however, when Orkin learned through a series of focus group meetings that a growing number of customers viewed the company as a residential pest control firm. “There was a lot of good will and respect for Orkin’s name,” Cobb said, “but many of them thought the company was not specializing on the commercial side of the business, which wasn’t true at all. We’re the largest provider of commercial pest control services in the country, so we had to do something to change those perceptions.”

What Orkin did was create a commercial division fully dedicated to the commercial market. “We brought in a senior level vice president and management team to run the division and gave them the latitude to change pay plans, change the way the sales force was structured and trained, and do whatever else was necessary to be successful,” Rollins said. “We really broke some paradigms.”

The results have been impressive. Their commercial division boasts an account list that features some of the largest and most respected companies in the country, including Kmart Corporation, Delta Air Lines, Tropicana Products, Blockbuster Video, Nei-man Marcus, Burger King, and Taco Bell, just to name a few.

Orkin currently operates 405 company-owned branch offices with 42 fully dedicated to the commercial market. Within the next year, the company plans to open seven or more additional commercial offices in major markets throughout the country. In addition, Cobb says, “We’ve identified 112 major markets that could support a dedicated commercial operation.”

To achieve that ambitious goal the company has invested significant financial resources in its commercial operations, particularly in the area of training. “One of the requirements of becoming an Orkin Certified Commercial Technician is they must take the AIB (American Institute of Baking) and Purdue Correspondence Course and successfully pass them,” Cobb says.

In addition, technicians undergo 11 days of classroom training and 30 days of on-the-job training. “The classroom training program is headed by specially dedicated commercial trainers,” he says. “We have a goal that all technicians and salespeople will be certified sanitarians.”

As part of its commercial operation, Orkin also launched a Food Safety Division in 1996 that offers both pest management and sanitation services. “It’s targeted at regulated customers who retail food and at food processors,” Cobb says. “They are kind of like our green berets. They’re even more specialized than our commercial technicians.” The company’s Food Safety Division currently employs about 5% of the Commercial Division’s 866 employees. Other specialty commercial markets include Orkin Agribusiness and a successful Dairy Farm Fly Program that has expanded rapidly throughout the United States and Canada. To support its Commercial Division, Orkin has a fully dedicated marketing staff that produces state-of-the-art promotional materials, trade magazine advertisements (see examples, page 17), and customer literature that have played a critical role in its success, further enhancing its visibility in this highly competitive market.

“We are becoming very active in trade shows and advertising in the trade journals,” Cobb says. “In the past, we have not dedicated the resources to reach the commercial customer via the media, but now we are and it’s paying dividends.”

As a result of these and other more targeted marketing efforts, Orkin’s commercial revenue is experiencing 22%-26% annual growth, according to Cobb, and generating more than $150 million in business. “We’re really surprised at our success because we’ve got some very good competitors out there,” Cobb says. “We think the market capacity and our share of that market could easily be three times where we’re at now. We’re very optimistic about the future of the Commercial Division.

That sentiment is shared by President Gary Rollins, who says after going through a period of “self examination” Orkin is rededicating itself to the pest control industry and “looking at more unconventional ways of growing the business.”

Too often in the past, he says, the company has “given everybody the same sauce and not looked at things from a market to market basis. I think our success in agribusiness has shown us that there are a lot of good commercial niche markets out there and we need to provide the resources to reach those markets, while at the same time continuing to serve our residential customers.”

“We’re dealing with some growing pains within the company,” admits Glen Rollins, “but I think we’re poised for greatness.” With 1.5 million customers, $553 million in annual sales, and more than 400 company-owned branch offices throughout the United States, Orkin is already one of America’s great pest control companies. What remains to be seen is whether or not the “General Motors of exterminating” can once again ascend to the top of the pest control world at a time when market conditions are very different from the company’s golden era in the 1950s and ‘60s. Whatever happens, you can bet that their competitors – both large and small – will be watching.

The author is publisher of PCT magazine.

Sidebar: BUSINESS 101: INNOVATE OR DIE

Some industry observers attribute Rollins’ stagnant financial performance in recent years to its top-down management style. “They’re a very conservative company,” says one former executive. “Everything has to come out of the home office, so there’s not a lot of independent decision-making. It’s like mushing on a sled to get something through the company.”

“They’ve never altered their top-down management style,” adds another former employee. “When you create a top-down budget, the man down there never accepts it.”

Nonetheless, the company is attempting to be more responsive to change — both internal and external. “As a company, we have a responsibility to continue to innovate, to continue to expand the business, and to continue to work on perfecting our profession,” says President Gary Rollins.

“We’re all aware of leaders in other industries who took their eye off the ball and suffered the consequences. It’s not assured that because you’ve had a leadership position in the past that you’ll maintain that position in the future,” he says.