Franklin Covey Company
Franklin Covey Company
Franklin Covey Company
Incorporated: 1983 as Franklin Institute, Inc.
Sales: $554.9 million (1999)
Stock Exchanges: New York
Ticker Symbol: FC
NAIC: 61143 Professional and Management Development Training
Franklin Covey Company, formerly known as the Franklin Quest Co., is a leading provider of time management training seminars and products, including the well-known line of Franklin Planner books. The firm’s clients include 82 of the Fortune 100 companies and more than two-thirds of the Fortune 500 companies, as well as thousands of other companies and governmental agencies at all levels. The company has also created pilot partnerships with schools systems across the United States, teaching the “7 Habits” to both administrators and teachers from kindergarten to college. The company’s offerings are based on its comprehensive “Franklin System,” which is designed to help individuals identify goals and prioritize tasks, as well as the 7 Habits as outlined and explained in Stephen R. Covey’s The 7 Habits of Highly Effective People. The company has sales offices on four continents and operates more than 130 retail stores worldwide. Its products, including books, audio tapes and CDs, and software programs, are available in 32 languages. Franklin Covey markets over 1.5 million books and trains in excess of 750,000 seminar participants annually.
1981–91: Foundation and Early Growth
Franklin Institute, Inc., the forerunner of Franklin Covey Co., was incorporated in 1983 by Hyrum W. Smith, Dick Winwood, Dennis Webb, and Lynn Webb; Senator Robert F. Bennett joined the company the following year as chairman of the board. However, the company was actually founded by Smith in 1981. The 37-year-old Smith, a graduate of nearby Brigham Young University, decided to start a business providing management seminars. He set up shop in his basement and was soon providing his homemade management courses to groups of business executives.
Benjamin Franklin served as the inspiration and guiding philosophy for the courses. In fact, Smith attributed his own achievements and the success of his company to Franklin’s ideas about human values and quality of life. It was after reading Franklin’s autobiography that Smith decided he would build his own time management program based on Franklin’s proven self-improvement philosophy. Smith interpreted Frank-lin’s philosophy to mean that peoples’ happiness and inner peace do not come from owning things, but from identifying what is important to them and then making their lives conform with those goals.
“Time is the stuff life is made of,” Franklin is quoted as saying, and few Americans have used time as effectively as Franklin. In his 84 years of living, Franklin rose from apprentice to statesmen, making valuable contributions along the way in the areas of science, social philosophy, education, and the arts. Franklin achieved greatness, in part, through his homemade self-improvement and time management system. The program was based on a checklist of 13 virtues, which included frugality, industry, sincerity, and temperance. “If you’re not doing what you value, you don’t value yourself, so you won’t value your time and make good use of it,” Smith posited in the December 1992 issue of Success.
Using Franklin’s ideas, Smith developed a time management and motivational seminar program. The program’s basic goal was relatively simple: to help people realize what they really want to accomplish, to help them do things for the right reasons, and to motivate them toward action. Although he targeted his courses primarily to corporate groups and business executives, he engaged in relatively little formal marketing after he started giving his seminars. Instead, he focused on creating an excellent product and allowing word-of-mouth to do the rest. Franklin Institute’s guiding tenets became “How many people can we reach?” and “Do we have a product that works?”
After joining forces with Franklin Institute’s co-founders in 1983, Smith and his team began giving their seminars all over the United States to just about anybody who would listen. In an effort to build a reputation, Smith accepted every opportunity to speak. Sometimes he found himself tutoring groups of only three or four people after expecting to work with a gathering of 30 or more. Smith would later calculate that between 1983 and 1990 he had spent four-and-a-half years either on a plane or in a hotel room. It was Franklin Institute’s efforts in those early years that provided the foundation for its rapid rise during the late 1980s and early 1990s.
Franklin introduced the Franklin Day Planner in 1984 as a means of helping its seminar participants better implement the Franklin time management system. The Franklin Day Planner consisted of a ring-binder with paper planning aids, monthly and annual calendars, and various personal management aids. Besides boosting revenue from its seminars, the company then benefited by selling refill materials every year to its growing base of customers. In fact, the company estimated that approximately 90 percent of the people who purchased the planners through the seminar later bought refill materials or other products related to the Franklin Day Planner, an estimate that would continue to hold true into the year 2000.
In addition to offering the Franklin Day Planner to add value to its time management seminars, Franklin Institute also offered the Planner and several other related time management products beginning in 1984 through a catalog. The catalog represented Franklin’s strategy of maintaining strict control over all distribution and customer service operations. By ensuring that its customers interacted only with trained Franklin employees, management reasoned that it could achieve much greater customer loyalty than it could if it sold its products through independent retailers.
Franklin’s management seminars and Day Planner achieved immediate market penetration. By 1985, in fact, people who had heard about the Franklin System and wanted to try it provided a steady stream of walk-in traffic at Franklin’s warehouse and catalog distribution facilities, demonstrating the company’s growing reputation. As a result, Smith and his co-managers decided to experiment by opening a local retail store that sold the Day Planner and a growing inventory of related Franklin merchandise. The initial success of the store prompted the company to initiate an aggressive outlet store program. Staffed by trained Franklin Institute employees, the stores would be situated in high-traffic areas, such as malls, that would attract walkin customers. Because many of the new customers would be unfamiliar with the Franklin System, the stores would also serve as a marketing tool for the company’s seminars.
Franklin Institute realized fast growth in its product sales during the early 1980s. However, its Franklin System training services remained the focus of its efforts during that period, only later giving way to the popularity of the Day Planner. Although the company relied heavily on word-of-mouth advertising, it also marketed its seminars by means of a direct sales force to institutions and the general public. Franklin, over time, developed a seminar entitled “Increasing Personal Productivity Through Effective Time Management.” The “consultants” that administered the seminars were certified by Franklin only after a rigorous training program. Attendees received a Franklin Planner along with instructional materials and order forms for new filler materials.
Franklin often worked with institutional clients beforehand to create a tailored seminar that would emphasize the particular goals of that organization. During the 1980s, Franklin developed an impressive list of seminar clients, including MCI, Intel, Procter & Gamble, Eastman Kodak, and the Internal Revenue Service. The company also offered those customers its Franklin Flex Training (FFT) service, whereby employees of those institutions were trained and certified to give video presentations of Franklin’s seminars to in-house employees. Franklin reached individuals and smaller companies through standardized public seminars that it offered in selected cities throughout the United States, and later in Hong Kong, Canada, and the United Kingdom.
The 1980s proved a perfect time for Franklin Institute to enlarge its fledgling time management company. Indeed, as U.S. corporations suffered from intense foreign competition and slowing domestic market growth during that decade, they began to search for ways to increase productivity and efficiency. In addition to laying off millions of middle managers, U.S. corporations and institutions turned to consultants like Franklin Institute to get more out of their decision makers. Franklin offered a seemingly perfect solution to much of what ailed corporate America. Through one or a series of simple seminars, it would essentially show a management team or group of individuals how to achieve a higher set of goals in a shorter span of time. Furthermore, it would boost their morale by helping them to focus on what they really wanted out of life. Franklin would even give them the tools they needed, such as the Day Planner, to make it happen.
Franklin Covey Co. is a 4,500 member international firm whose mission is to inspire change by igniting the power of proven principles so that people and organizations achieve what matters most. Franklin Covey’s vision is to be the premier personal and organizational effectiveness firm in the world, impacting millions of lives each year and building a great enduring company—a model of what we teach.
By the end of the 1980s, Franklin Institute was garnering more than $10 million annually from its seminars. Most importantly, perhaps, sales of its Day Planner and related time management products had taken off. As seminar revenues swelled to $10.5 million in 1989, sales of Franklin’s products reached an impressive $20.3 million. Although much of the growth in product shipments was a result of increased first-time catalog and retail sales, Franklin was also starting to benefit from its strategy of cultivating customer loyalty. While Franklin steadily attracted new customers through seminars, its old customers continued to purchase annual refills for their planners and to buy new Franklin offerings.
The strong growth of Franklin Institute and some of its competitors during the 1980s prompted many analysts to dismiss the popularity of time management systems as a corollary of the “go-go” 1980s. According to the critics, daily planners and motivational management seminars were simply a fad, destined to fade away when people realized the planners often consumed more time than they actually saved. Franklin rejected these appraisals outright, believing that its system offered a truly unique and effective method of giving greater meaning to the lives of its customers. Franklin’s patrons supported their convictions; as the United States plunged into a deep recession during the late 1980s and early 1990s, Franklin’s revenue and profit growth accelerated.
To augment sales from its profitable catalog and seminar divisions, Franklin decided to significantly expand its retail store operations in the early 1990s. It began opening stores, mostly in shopping malls, in areas that already had many Franklin clients, hoping that existing buyers would supplement new customer sales. The strategy was extremely successful. From just $710,000 in retail store sales in 1987, revenues vaulted to more than $34 million by 1993 from a chain of 28 outlets in 14 states. Furthermore, catalog sales grew at a record rate during that period, pushing total sales of Franklin products to $60.5 million in 1991 and to $130 million in 1993. Revenues from seminars gained at a slower though still healthy pace, reaching $35.5 million by 1993.
1992–96: Emergence as Franklin Quest, a Public Company
In 1992, Franklin Institute, Inc., went public, selling five million shares on the New York Stock Exchange at $15.50 per share. The company also changed its name to Franklin Quest Co., reflecting its ongoing diversification into markets other than training and seminars. The public offering was performed, in large part, to raise $23 million in cash for Franklin’s planned purchase of three separate companies that provided training, business communication, and various consulting services. Franklin expected the acquisitions, which would be completed in 1994, to enable it to penetrate a range of new markets and to bolster the presence of its existing divisions. The price of the shares nearly doubled by late 1993 to more than $30.
In addition to market diversification, Franklin’s growth plan in the early 1990s included a steady stream of new product introductions. The new merchandise would allow it to capitalize on a loyal base of customers already comfortable with purchasing its goods. One of its most successful entries was the pocket planner. Introduced in 1992, the planner was designed to fit in a suit coat pocket or small purse while offering the same features as the popular Franklin Day Planner. After only one year Franklin had shipped more than 70,000 pocket planners for a gain of $7 million. Similarly, the company brought out a line of decorative filler pages for its planners; these were highlighted in floral patterns to coincide with the seasons of the year. Sales of that line topped a surprising $1.6 million during the first five months of 1993.
Perhaps Franklin’s most notable new endeavor during the early 1990s was its foray into personal information management (PIM) computer software. In late 1991, Franklin unveiled its ASCEND software program, which was designed to be used in conjunction with the paper-based Day Planner or as a stand-alone time management system. The program was offered in a complete package with time management guide books and audio cassette tapes. ASCEND represented Franklin’s effort to capture a piece of the burgeoning market for computer-based time management devices, such as personal digital assistants (hand-held electronic personal information devices).
Going into 1994, Franklin Quest continued to expand into new markets and to increase sales of its existing products and seminars. Since 1987, Franklin had trained more than one million people, including 280,000 during 1993 alone. The company had overseas sales offices in Taiwan, Great Britain, Hong Kong, Japan, and Australia, and was targeting several new foreign markets. Furthermore, during the first six months of 1994 Franklin opened 11 new retail stores and had developed plans to start several more before the end of the year. As if the company itself were a testament to the effectiveness of the Franklin System used by its managers, Franklin’s sales and profit growth continued to accelerate into 1994. The three million people who were regularly using the Franklin System suggested a rich future for the company.
- Hyrum W. Smith begins home-based business providing management seminars.
- Franklin Institute, Inc. is officially founded by Smith, Dick Winwood, Dennis Webb, and Lynn Webb.
- Company introduces the Franklin Day Planner.
- Franklin introduces its ASCEND personal information management software.
- Company goes public as Franklin Quest Co.
- Franklin acquires Covey Leadership Center Inc. and is renamed Franklin Covey Co.
- Firm enters an alliance with At-A-Glance.
- Robert A. Whitman becomes company chairman.
However, beginning in 1995 there were signs that some new strategies were necessary. For the first time in three years, there was a shortfall below the company’s estimated earnings, sending Franklin Quest’s stock into a 33 percent nosedive. The necessary growth in seminar attendance had begun to flatten out. To counteract the slowing down of growth in its seminar attendance, the company sought to increase its product line through additional acquisitions. In 1996, it purchased Productivity Plus, providers of planning materials for military customers, and the following year bought Premier Agendas, makers of student planners.
1997–2000: The Franklin-Covey Merger
Perhaps its most important move, at a cost of $160 million, was a May 31, 1997 acquisition-merger with the Covey Leadership Center, a company that had been formed in 1980 by Stephen Covey, a former professor at Brigham Young University and author of motivational books, including the bestseller The 7 Habits of Highly Effective People (1989). Although the merger initially seemed very promising, the integration of the two firms proved much more difficult than the two parties had expected. Franklin and Covey maintained separate headquarters, which promoted an “us-vs.-them culture,” as Franklin Covey board member Robert H. Daines noted. Furthermore, keeping its personnel in Salt Lake City caused the sales force to lose touch with its customers, which not only violated Habit No.5 of Covey’s book (staying connected with customers) but also greased the competitive rails for rival companies. Other problems included Covey’s reluctance to augment its rather cumber-some day-planners with alternative electronic planning devices, its failure to sell off its tangential assets in a timely fashion and eliminate redundant jobs, and its delay in achieving an equitable compensation system for the two staffs.
As a result of these problems, Franklin Covey did not fare well during 1997 and 1998. Overhead costs actually rose, climbing to 40 percent of its sales in 1998, up from a pre-merger figure of 35 percent in 1996. Although revenues increased from $433.3 million in 1997 to $546.6 million in 1998, the gross profit margin barely nudged less than one percent. The next year, although revenues increased to $554.9, the company reported a net loss of $8.8 million, down from a positive net income of $42.1 million in 1998.
Jon Rowberry, who had been promoted from CFO to CEO in March 1998, tried to counter the flat sales by divesting nonessential assets, including Covey’s in-house printing operation and a 61-acre nutrition and fitness camp. However, these actions did nothing to heal the rift between the two merged companies. As a result, in July 1999, Rowberry resigned, and Robert A. Whitman, the new chairman, was made CEO as well, presumably on an interim basis. Whitman, former CFO of Trammell Crow Co. and an experienced troubleshooter credited with salvaging Forum Group Inc., a chain of retirement homes, had no prior connection with either Franklin or Covey until his investment group bought $75 million of Franklin Coveys preferred stock.
While hunting for a permanent CEO to replace him, Whitman was busy reorganizing the company. He shut down the Provo, Utah, office and developed major plans to set up eight regional retail sales offices, a restructuring strategy to put the company’s sales force back in touch with its customer base. He also bought a major sales-training firm as well as a company that measured consulting effectiveness. At the same time, Whitman sought to reduce operating costs by cutting overhead, including a 600-job downsizing of the company’s work force. With Whitman still at the helm, Franklin Covey opened the first of its regional retail stores and training centers—the Franklin Covey Effectiveness Center—in Irving, Texas, in September 2000.
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—updated by Jane W. Fiero