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Ent MGMT Case Study Patrick Kelly

The document discusses the case study of Patrick Kelly and the rapid growth of his company Physician Sales & Service (PSS). Some key points: Kelly started PSS in 1983 selling medical supplies with a strategy of next-day delivery. By 1987 PSS had grown to $13 million in sales and 5 branches. From 1987-1996, PSS grew exponentially to $1.5 billion in sales, 56 distribution centers, and 1,800 employees across 48 states. Kelly attributed his success in managing rapid growth to setting goals, hiring and training employees, providing technology to employees, focusing on profits and financial controls, and raising equity from employees and going public.

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68 views2 pages

Ent MGMT Case Study Patrick Kelly

The document discusses the case study of Patrick Kelly and the rapid growth of his company Physician Sales & Service (PSS). Some key points: Kelly started PSS in 1983 selling medical supplies with a strategy of next-day delivery. By 1987 PSS had grown to $13 million in sales and 5 branches. From 1987-1996, PSS grew exponentially to $1.5 billion in sales, 56 distribution centers, and 1,800 employees across 48 states. Kelly attributed his success in managing rapid growth to setting goals, hiring and training employees, providing technology to employees, focusing on profits and financial controls, and raising equity from employees and going public.

Uploaded by

nkcollege.hegde
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Case Study : Patrick C Kelly

Many new ventures find that the most difficult stage of their life cycle is the
rapid growth stage. It is the period when management decision making becomes
most critical. Goal setting, financial controls, marketing planning, hiring new
employees, and even simple record keeping issues are only a few of the important
management activities that need constant attention during this stage. One person
who has not only survived this stage but has built a company from nothing to a $ 500
million company is Patrick C Kelly.

Kelly is the present CEO of Physician Sales & Service (PSS), which started in 1983
selling gauze pads, thermometers, diagnostic equipment, and other physicians’
office supplies directly to the physician. This business was not unique, but what Kelly
did have was a distinctive strategy for selling that no one else in the industry could
duplicate. His concept was to set up a warehouse and offer the doctors the next-day
delivery of any typical physicians’ office item. To reach the physicians he hired a few
salespeople that made direct sales calls to the physicians or the office manager. The
distinctiveness of this concept was that no one else in this market could match the
next-day delivery. Most of the competitors were using delivery services or were
including physicians’ requests with hospital deliveries. In turn for the fast delivery,
Kelly was able to charge higher prices, which provided a very fast profit growth for
the new venture. These high margins allowed Kelly to reinvest the profits in
computer tracking systems, new delivery trucks, and the hiring of new sales
representatives.

By 1987 Kelly had five branches in the state of Florida and a sales volume that
reached $ 13 million. This 4 year growth to $ 13 million was nothing compared to
what was to occur during the next 9 years. In this 9 year period Kelly’s venture grew
from five distribution centres to 56, from 120 employees to 1800, from operations in
one state to 48 states, and from sales of $ 13 million to around $ 1.5 billion in 1996.

Some of the important questions that many entrepreneurs would want to ask Kelly
are : How did you survive hyper growth? How were you able to build a quality staff?
Hoe were you able to control finances, sales, people, and marketing efforts during
such rapid growth? Kelly’s response would likely be based on some of the many
lessons that he learned during this time period. Many of these lessons that Kelly
learned are in fact important issues that an entrepreneur should address before
reaching the growth stage of his or her business. According to Kelly, waiting until
growth begins to happen is too late. An entrepreneur needs to be prepared for these
inevitable states before they actually happen.

One of the first lessons that Kelly learned was to set goals. Too many entrepreneurs
are only concerned about survival because things are moving so quickly. After
attending a seminar Kelly decided to prepare a mission statement and set goals for
the growth of his company. These goals also helped employees understand their
roles and where the company was going.
A second major lesson that Kelly learned was related to interviewing and hiring
quality people. His strategy was not to hire experienced people in the industry but to
train and grow his own employees. As a result the company established an
interviewing procedure, criteria for hiring, and then visited college campuses looking
for young people that were willing to work hard and had the right attitude to learn the
business. The company has also established a rigorous promotion within the
company policy that has enhanced the quality of its management from top to bottom.

A third important lesson that he learned was to provide employees with the most
modern technology to prevent them from becoming too bogged down with paper
work. Bureaucracy and red tape are a common problem for rapid growth ventures as
the volume of business surpasses the ventures’ ability to maintain an efficient
management decision making process. To deal with this problem Kelly decided that
salespeople should carry notebook computers that would provide them with up-to-
date information on customers and would be used for electronic ordering.

Kelly also believes that it is important for an entrepreneur faced with rapid growth to
focus on financial controls, particularly profits. Everyone in the company needs to
think about the profits. Each branch is a profit centre, employees get big bonuses for
making plans, and salespeople receive a bonus on gross margin, not on sales
revenues. Kelly strongly believes in sharing the success of the business with his
employees through these large bonuses and incentive programs.

The hypergrowth of PSS also made the banks very uneasy because the company
was not building equity but was using all its profits to sustain the rapid growth. At
one point Kelly needed more cash and was turned away by five banks. The banks
were concerned that his growth was too high (over 50 percent in some years) and
wanted to see him slow down. In response, Kelly decided he needed to grow his
equity. He accomplished this by asking his employees to buy into the company, by
setting up an employee stock ownership plan, by selling 20 percent of the company
to Tullis-Dickerson & Co., a small venture-capital fund, and by going public in 1994
raising nearly $ 16 million. These efforts improved the venture’s debt-to equity ratio
to 1:1.

Kelly and PSS are a good model for rapid growth ventures to follow. Kelly’s lessons
are important preparation activities for any venture entering into rapid growth stage.
He has faced the challenges of growth as well as potential serious health care
reform proposed by the Clinton administration. Now PSS, with Kelly at the helm, will
face the challenges of maintaining success as a multi-million dollar company.

1. Which specific entrepreneurial traits you could see in Patrick Kelly?


2. How could he manage hyper growth?
3. What are the key success factors of PSS?

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