O.C. Tanner Co.

views updated

O.C. Tanner Co.

1930 South State Street
Salt Lake City, Utah 84115
Telephone: (801) 486-2430
Toll Free: (800) 453-7490
Fax: (801) 493-3013
Web site: http://www.octanner.com

Private Company
Employees: 2,000
Sales: $300 million (2003 est.)
NAIC: 541612 Human Resources and Executive Search Consulting Services

O.C. Tanner Co. provides employee recognition tools to many of the world's leading businesses, including many of the Fortune 100. The company designs and implements employee recognition programs in the areas of service, performance, sales, and safety. Along with an award line that includes more than 2,500 products, the company provides custom Internet and on-demand print communication tools, administration solutions for companies, and presentation training for managers. O.C. Tanner ships 2.5 million recognition awards per year, 81,000 of which are sent outside of North America.

192738: The Early Years

Obert C. Tanner was a 17-year-old student at the University of Utah in 1921 when he started in the jewelry business as an errand boy and clerk at a local jewelry store. In 1927, Tanner, then teacher and principal at the Latter Day Saints' seminary in Spanish Fork, Utah, expanded upon his experience by selling high school and seminary class pins. His immediate goal was to pay off a $500 debt he had incurred while traveling in the Near East and Europe after completing his missionary year as a Mormon.

Tanner purchased 10-karat gold pins consisting of block letters, numerals, and a chain for two dollars from a jewelry manufacturing shop in Salt Lake City and sold them for $2.25. On his first order of 50 pins, he made $12.50. After a run-in with the seminary board over his liberalism in teaching, which marked "a turning point in [his] life," as he explained in his autobiography, he "began to think more about becoming financially independent. I started to work harder in my business for I felt that, at some future time, my intellectual integrity might be at risk."

Although he had no background in business and no capital, Tanner was inventive as a salesman, an attribute he ascribed to his prior training as dairy farm hand, railroad worker, carpenter, missionary, and teacher. After losing several class contracts to representatives of other more established class ring companies, he began to design his own class rings, focusing on expert craftsmanship and designs that were "original, harmonious, and sharp in every detail." Soon he had secured sufficient orders from schools that he needed to find other manufacturers to fulfill his contracts. In 1929, he expanded his territory to include high schools in eastern Idaho and added other items to his line, such as high school awards, club pins, and more.

Tanner placed great emphasis on the quality of the items he sold, and when the companies from which he purchased rings and pins disappointed him with their late deliveries or inferior products, he became his own manufacturer, going into partnership with two former students. The trio set up a drop-hammer in Tanner's mother's garage, and several years later, moved their shop to a downtown Salt Lake City location where they remained for 19 years.

The company's first nine years were lean ones. When finally in 1938 the O.C. Tanner Co. began to turn a profit, Tanner took on other partners and began to give away shares of his company. But even as late as 1945, Tanner's company struggled with being undercapitalized. During the war, manufacturing was limited due to the nation's rationing of metals, and Tanner opened a chain of three jewelry stores in Utah to help make ends meet. He later sold all but one of his stores.

194580s: Building the Market for Employee Recognition

Then in 1945, came the change that would distinguish O.C. Tanner Co. After 18 years of selling school and organization jewelry, the company began to market emblematic awards for employee recognition. At the time, the use of recognition awards was a new idea. Only telephone and utility companies used them and those were mostly bronze, sterling and gold-filled. Tanner traveled throughout the United States, meeting with corporate executives to make his case that "recognizing and motivating employees with beautiful, quality emblems would promote better employer/employee relations."

Business continued to grow and in 1954, O.C. Tanner Co. bought land on which to build the company's first factory, an 8,100-square-foot structure that became O.C. Tanner Manufacturing Limited, a wholly owned subsidiary. With the opening of the plant, sales began to increase. They continued to increase every year throughout the 1960s and 1970s. O.C. Tanner Co., committed to giving back to the communities in which it did business, began to make a point of donating at least 10 percent of its gross profits annually to community, educational, and charitable organizations.

Reward programs finally took off solidly in the late 1970s when the workforce shifted from industrial to knowledge-based skills and companies, at the advice of compensation experts, began dressing up salary offers with "emotional compensation." Recognition came to be viewed as an important way to spread pride in an organization, according to a 2004 Wall Street Journal article. Kent Murdock, who became O.C. Tanner's president in 1993 and third chief executive officer in 1997, later asserted that a good recognition program brought employees in line with "the company's essential strategy, vision, and imperatives."

Several changes occurred in tax laws in the 1980s that helped promote O.C. Tanner's line of business. In 1981, an addition to the new tax bill allowed companies to take deductions of up to $400 (an increase from $300) per employee award and up to $1,600 if the average award in the company's recognition program stayed below $400. Then in 1986, another change in the tax law made corporate service awards tax free. Both changes were actively and publicly supported by the management of O.C. Tanner Co.

1990s2004: Entering the International Recognition Market

By the late 1990s, a growing number of employers were aiming to improve employee satisfaction as a means of positively affecting corporate profit. Researchers ran mountains of data through elaborate computer models to measure the links between employee satisfaction, consumer satisfaction, and revenue. According to a Brookings report referred to in the Wall Street Journal on July 22, 1998, driving the effort was "the growing role of 'human capital' in corporate wealth. As little as one-third to one-half of most companies' stock-market value is accounted for by such hard assets as property, plant and equipment. The growing share lies in 'soft' attributes such as patents, processes and customer or employee satisfaction."

O.C. Tanner had customers in close to 170 countries and was producing thousands of customized awards per day, often in quantities of one as it reached the end of the 1900s. During this period, the company made innovations in short-lead, just-in-time manufacturing processes and automated distribution. It built its new state-of-the-art Automated Distribution Center, which improved inventory control and shipping accuracy and introduced an online ordering option to its customers. It also reorganized its workforce into cross-trained teams so that "everyone throughout the organization truly [understood] the goals of the company and [was] focused on exceeding customer expectations," according to a company press release.

The company's changes in distribution and workplace practices earned it the internationally recognized Shingo Prize for Excellence in Manufacturing in 1999. The Shingo prize, which promotes world-class manufacturing and recognizes companies that excel in productivity and process improvement, quality enhancement, and customer satisfaction, acknowledged what a 1999 survey of O.C. Tanner's clients attested: 99 percent of those surveyed responded that the company had met or exceeded their expectations.

The following year, O.C. Tanner was chosen to design and produce commemorative rings for all of the U.S. athletes who had participated in the 2000 games in Sydney. The company was also named the official Olympic victory and commemorative medal supplier for the 2002 Winter Games and the VIII Paralympic Winter Games in Salt Lake City. The company would also make U.S. Team Rings for the 2004 Summer Games in Athens.

O.C. Tanner also created a line of U.S. Olympic-related jewelry in 2000, with pieces ranging in price from $20 to $20,000 that it commissioned from designers such as Fabergé, David Yurman, Oscar Heyman, Christopher Radko, Peter Unger, Cunill Silver, Hoya Crystal, Wellendorf, Halcyon Days, and Native American artist Terry Wadsworth. The pins were displayed at the company's new retail store in Park City, Utah, which featured designer jewelry of all sorts.

The slowing economy of 2001 led to layoffs affecting 70 of O.C. Tanner's workforce of 2,000. With companies nationwide trimming their ranks, there was a reduced demand for service and sales awards, which led to cutbacks in the company's manufacturing teams. Partly in response to the need to run a tighter organization, the company's IT staff began the implementation of computer methodologies to improve productivity beginning in 2002, which won it CIO magazine's award as one of the "Agile 100."

Company Perspectives:

"At O.C. Tanner, our mission is to strengthen companies through employee recognition. To carry out that mission, we must innovate, innovate, innovate. Our business leaders and people have developed a marvelous synergy that drives innovation in client services, in the marketplace, and in our operations."

Kent Murdock, CEO

On the occasion of its 75th birthday in 2002, O.C. Tanner Co. recognized ten "Everyday Heroes" with $75,000 in donations to ten community organizations of their choice in Utah. That same year, the company received the American Business Ethics Award from the Society of Financial Service Professionals, one of three companies chosen nationally for its demonstrated commitment to ethical business practices through management and employee behavior. Continuing its commitment to charity, the company also matched all contributions received by The Road Home, Utah's largest homeless shelter, during the 2002 Christmas season. For this generosity, the shelter awarded O.C. Tanner Co. its Pamela J. Atkinson Outstanding Humanitarian Service Award in 2003.

By 2004, O.C. Tanner, which by then produced 81,000 awards each year internationally, began a thrust to move into the European recognition market. After it opened its European Distribution center in the Netherlands in 2003, it began to provide its European clients with European-specific award selections. O.C. Tanner also acquired B2B Initiatives Ltd., a U.K.-based promotion management services and evaluation firm in London that offered multi-brand award redemption, warehousing, handling, and delivery.

According to the latest research in 2004, high performance workplaces had one thing in commona culture of recognition. Reports also showed that acknowledging strategic behavior on a consistent basis yielded tangible dividends in terms of improved company performance and satisfied employees. O.C. Tanner Co. had a solid history of being well ahead of the curve. As the pioneer in its market, it seemed ideally positioned to capitalize on the 90 percent of North American companies that then offered some sort of recognition program for employees and to convert the remaining 10 percent.

Principal Subsidiaries

B2B Initiatives; O.C. Tanner Recognition Company Ltd. (Canada); B2B Initiatives (U.K.); Fraser Hart Awards and Incentives (U.K.).

Principal Competitors

Maritz Inc.; Jostens, Inc.; The Tharpe Company; Carlson Marketing Group.

Key Dates:

Obert C. Tanner starts selling graduation class rings and pins.
O.C. Tanner Co. starts selling corporate recognition awards.
O.C. Tanner builds its first factory.
Kent Murdock becomes president of the company.
The company wins the Shingo Prize for Excellence in Manufacturing.
The company begins to make Olympic-related jewelry.
The company begins to manufacture Olympic medals.
The company launches its European Distribution Center; acquires B2B Initiatives Ltd.

Further Reading

Abrahamsen, Lane, and Greg Boswell, "Nearly Nine in Ten Companies Offer Some Sort of Recognition Program for Employees," Work-span, December 2003, p. 25.

Crumpacker, John, "The Metal for the Medals," San Francisco Chronicle, February 7, 2002, p. 3.

Kovaleski, Dave, "Perception Problems," Corporate Meetings & Incentives, September 1, 2004, p. 9.

Mitchell, Lesley, "Salt Lake City-Based Employee-Award Firm Lays Off 70," Salt Lake Tribune, November 8, 2001.

Sandberg, Jared, "Been Here 25 Years and All I Got Was This Lousy T-Shirt," Wall Street Journal, January 28, 2004.

Shanker, Thom, "Fatter Deduction for the Gold Watch Handshake," New York Times, August 9, 1981, p. F21.

Tanner, Obert C., One Man's Journey, Salt Lake City: The Humanities Center at the University of Utah, 1994, pp. 15384.

Carrie Rothburd