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WINTER 2004

Cover Story

Business Leader of the Year

A Master of Business:
Williams-Sonomaís Howard Lester Turns Good Taste into a Billion Dollar Business

by Marguerite Rigoglioso

Howard Lesterís life has taken him from humble beginnings in Oklahoma to the upper echelons of household couture. The wizard behind one of the countryís poshest retailers, Williams-Sonoma, Lester has virtually created the "casual elegance" niche for the kitchen and home. Along the way, he has also generously given back to the community, serving on many industry and philanthropic boards, including that of the Haas School, and endowing the schoolís Center for Entrepreneurship and Innovation in 1991, named in his honor. For his outstanding contributions to the retail business and the school, Lester was recently named Haas Schoolís Business Leader of the Year.

Lester grew up in Durant, Oklahoma, in a family that was, as he describes it, "dirt poor." "My father was in and out a lot, leaving my mother to raise my younger brother and me," he told CalBusiness during a recent interview in his elegantly appointed corporate office overlooking the San Francisco Bay. When his father left the family for good, the 13-year-old youngster was forced, he says, "to grow up quickly."

Yet Lester says he had a strong role model in his mother, whom he describes as "hard-working, god-fearing, and honest. "Her favorite slogan was, ĎThereís no such word as canít. Thereís only canít hardly,í" he recalls admiringly.

Still, Lester was, by his own account, "a bit lost" as a young man, attending the University of Oklahoma only to drop out a year later. He credits the US Army, which drafted him shortly afterward, with further instilling values such as discipline and orderliness into his life. The army also taught him another important lesson. "Unlike your family or your school, the military doesnít have your best interests at heart," he explains. "It was good training for business."

After being stationed in Munich, Germany, during the Korean War, Lester returned to the University of Oklahoma, where he finished up as a business major and immediately went to work selling IBM computers. But the enterprising streak instilled in him by his mother quickly emerged: Lester simultaneously opened an employment agency, and later started his own small computer services company. Both of these ventures, he says with a laugh, "ended up in failure," but Lester gathered the lessons, raised $100,000 to start an automated services company, and became the president of his own firm in 1962 at the tender age of 26.

Over the next 15 years, Lester purchased, developed, and sold a number of computer software companies, including Centurex, which he led to become the largest seller of packaged software to commercial banks in the 1970s.

In 1976, Lester made the sudden decision to step out of business to reevaluate his goals. "At first I enjoyed saying íI can do anything I want today,í" he says, "but after six months it turned into ĎI donít have anything to do today.í I knew I needed to find something else to get me up in the morning."

Putting the word out to his colleagues in the banking world that he was looking for another venture, Lester was eventually led to a small company in the San Francisco Bay area called Williams-Sonoma, a specialty kitchen retailer with four stores and a mail-order catalogue. The company was eking out $4 million in sales and suffering financial losses. Its founder, Chuck Williams, was more a merchant than a manager, and needed someone to rescue his operation. Lester found a partner and bought the teetering enterprise for a mere $100,000.

"I came to San Francisco, went to work, and 26 years later, Iím still here," says Lester, who served the company as CEO until 2001, when he stepped down to become chairman of the board. "Running this business has been a total joy," he continues. "Itís never been about money, itís always been about loving what I do and being proud of the people I work with."

Yet under Lesterís deft leadership, the money assuredly has followed. Williams-Sonoma has grown at a compound rate of over 30 percent for the past 25 years, and sales now exceed $2 billion a year. The company went public in 1983.

Lesterís retailing giant not only sells the top-of-the-line culinary and casual entertaining merchandise through its hundreds of tony Williams-Sonoma stores throughout the country and its catalogs, and e-commerce sites, but it also has expanded to include items for the rest of the house. Lester purchased the home furnishings outlet Pottery Barn in 1994, which is aimed at the middle market. Pottery Barn subsequently spun off two new brands, Pottery Barn Kids and PBteen to reach the under-20 youth markets. Williams-Sonoma has also launched West Elm, a low-end home furnishings brand for young adults, and Hold Everything, a company that provides creative home-storage options. In 2005, the Williams-Sonoma brand itself will branch out beyond kitchen and entertaining-related merchandise into upscale furnishings and items for the rest of the home.

Lester says that he has built the Williams-Sonoma line on the cache that founder Chuck Williams established more than four decades ago when he began selling unique kitchen items from France to American aspirants of the gourmet lifestyle. "Williams is the best housewares merchant in the country and he has impeccable taste," says Lester of the now-octogenarian founder, who maintains a guiding hand in the company. "His first stores were in the right places, such as Rodeo Drive in Los Angeles. Iíve continued what he started by making sure weíre thought of as couture. When shopping malls try to put us next to the food court, I make sure weíre next to Neiman Marcus instead."

Patrick Connelly, executive vice president for marketing at Williams-Sonoma, who has worked with Lester for almost 25 years, credits Lester with consistently having provided a clear vision for the company. "Howard has had the ability to envision a future for us at every stage of our growth, and then to make that vision become a reality," Connolly says. "He has tremendous determination; he never lets temporary setbacks keep him from accomplishing his goals."

Lesterís determination, which harkens back to the values instilled by his "never say canít" mother, is what has allowed Williams-Sonoma to successfully push past at least three recessions during the companyís history, including the current one. "Weíre executing well, and thatís the key to maintaining and gaining market share, even in a down economy," he says. "The past few years have actually been the best ones in Williams-Sonoma history."

Lesterís emphasis on corporate creativity plays no small part in keeping the company buoyed along on rough seas. "Typically, as firms get bigger, they have a harder time maintaining their entrepreneurial energy," he explains. "We actually have the opposite problem at times ó too many ideas! Our challenge is keeping focused."

The former CEO has presciently recognized that one of the main ways to keep a company energized is to have a lot of women around, and he has been something of a pace-setter in providing solid professional opportunities for women. "About 80 percent of our employees are women," he says. "They are just great, not only because they have creative ideas, but because they are fanatical about details. Many of the people in our top managerial positions, our CFO and most of our store vice presidents and regional and district managers, are women."

As chairman, Lester still maintains a strong hand in the companyís affairs, though these days he spends more time on his board work and philanthropic activities for organizations such as the Boy Scouts of America, the Retail Institute of Santa Clara University, the San Francisco Museum of Modern Art, and the Haas School, where he occasionally serves as a guest lecturer. He also devotes time to his wife, Mary, and his three adult children and three grandchildren. And he indulges a fierce passion for golf.

An inductee into the Hall of Fame in his home state of Oklahoma, Lester says he feels deep satisfaction looking back on his personal and professional life. "Itís a long way from Durant, Oklahoma, to the corporate offices of Williams-Sonoma," he reflects. "If youíve traveled the journey I have, youíve got to be proud."

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Howard Lester

Howard Lester in the demonstration kitchen of the new Williams-Sonoma flagship store in downtown San Francisco.
 
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