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Goodwill leader helps in St. Louis area

Friday, December 23, 2011 | 2:19 p.m. CST

ST. LOUIS — December is the busiest time of year for donations at MERS/Goodwill, and the king of thrift, Lewis Chartock, shouts for one of his secretaries.

An enormous flat-screen television bolted on the wall across from the chief executive's desk isn't working. It's supposed to update sales every 10 minutes from 39 retail stores, many that have sprung up like cash crops in Missouri and Southern Illinois under Chartock's charismatic leadership.

To his left, three more screens show security video from the stores of his choice. Chartock wants another monitor to easily see whether any trucks shuttling inventory throughout the region are off schedule by a couple of minutes.

"You lose a truck full of goods, you are going to lose 10,000 bucks," he says.

Many trucks are headed to the new Goodwill outlet on Market Street in St. Louis, where competitive shoppers pay 79 cents a pound for shoes, clothing and random toys — everything from a remote-controlled car to a three-headed plastic dog — that didn't sell at the other stores. The outlet, which used to be a Famous-Barr, then Macy's, distribution center, is another move by Goodwill to squeeze more revenue out of tons of donations.

Ten years ago, Goodwill had 21 stores in the region. Goodwill's revenue has since more than tripled, to $116 million, including employment and job training contracts, and the organization employs more than 2,000 people. The nonprofit spends nearly $2 million a year in advertising and has moved into online shopping, which garnered $1 million in book sales alone this year.

The expansion has happened without borrowing a penny since 2007. Goodwill, on track to make $4 million in profit this year, has $6 million cash on hand.

The poor economy has fueled demand for thrift shopping and for services to help the jobless.

"Nobody realizes how huge this thing is," Chartock said.

Goodwill also has huge advantages. It sells donations. And as a nonprofit, it doesn't pay property, sales or income taxes in Missouri. There's low overhead, too. Goodwill reports that just 6 percent of expenses, including fundraising, is spent on administrative costs.

Goodwill's mission is to help people with disabilities and other barriers to employment get and hold jobs. The organization said it placed 615 people in jobs in 2001; by 2010, it placed 3,929 people. The organization also runs a halfway house, a day care and several other programs that tend to operate at a loss. Serving about 25,000 people a year, Goodwill is one of the largest human service groups in Missouri. That's largely because of a $5 million contract to administer welfare-to-work programs in 54 Missouri counties.

But retail is the hot topic these days. And the frenzy of growth has come with some pain, such as the conviction this year of a Goodwill executive who embezzled more than $1 million from the organization. Goodwill also wrestles with nearly 100 percent turnover a year at its retail stores, where most employees don't have health care benefits that managers have.

The organization's trajectory, though, has helped make Chartock the highest-paid executive in his field in Missouri.

By 3:30 p.m. on the day the TV in his office locked up, the screen in front of his desk was fixed, and Chartock could see that 6,315 customers bought $73,615.53 worth of goods. The leading store was in south St. Louis County, with new stores in Carbondale, Ill., and Columbia, Mo., right behind.

"The proof is in the pudding," he would say later.

The doors say "stay back," but shoppers at the Goodwill outlet on Market Street have a tendency to creep close, as every 10 minutes or so a new blue cart of used goods hits the floor.

People swarm like "piranhas," said Sandi Hinchey, 41, shopping there on a recent day. "Somebody was trying to get my chair," she said, pointing to a small piece of furniture with a blemish on it. "I already had a good grip on it."

Standing at 4 feet 3, Hinchey pushed a full cart — a pair of shoes for a Christmas party and a pile of blankets. She has a disability and supports herself on government assistance. She said she could only afford one or two blankets if she bought new.

Not far away, Joni Hackett, 37, of Florissant, filled her cart with children's books, toys and crafts. She wore a large wedding ring and a baby blue North Face fleece jacket, which she bought at the outlet for less than a buck.

She comes once a week. If it was closer to home, she would be there more often. She and her husband, a pilot who was laid off from United Airlines a few years ago, have two children.

"The money I save by buying toys and clothes, we can spend it on vacations and restaurants," she said. "I don't think there is any reason to pay full price for items if you can get it in just as good of condition at a thrift store."

Much of the outlet merchandise otherwise would end up in a dump or at recycling plants. The location has sold more than 1.5 million pounds of donations since it opened in May.

But beyond the city, Goodwill has planted stores in rural and suburban locations, in places like the Chesterfield Valley. There, near a Home Depot and a Sam's, a Goodwill store offers a much quieter ambiance.

"It's not what I expected," said Dave Anthes, 47, an oil salesman, as he milled around on a recent day looking for 1980s-style clothing for a Christmas party.

Faith Sandler, executive director of the Scholarship Foundation, which has two "boutique" thrift stores, said Goodwill is helping ease a stigma. She said Goodwill's marketing, including 34 billboards around St. Louis, "is fresh and interesting."

"It helps make it cool to donate or shop resale," she said.

Today, communities that didn't used to want a thrift store often want the business, jobs and access to affordable goods. Goodwill, for example, plans to open a store in St. Peters, in a vacant space across from a Schnucks.

"MERS/Goodwill has upgraded their look to the community," said St. Peters Alderman Jerry Hollingsworth. "Way back, Goodwill had the drop-off bins that looked cluttered. It's a completely different operation now."

Goodwill's growth has affected other thrift stores that also use sales revenue to support their charitable missions.

The Salvation Army has become more aggressive in acquiring donations with, for instance, an automated telemarketing campaign. Its thrift and car donation revenue supports a program for men with alcohol and drug addictions.

Goodwill "has impacted us as they opened one or two or three or seven stores in the past few years," said Capt. Gerhard Scheler, who oversees the rehab program.

The growth of Goodwill has been fostered by Chartock, 70, who grew up in New York, the son of a salesman and a community organizer. A background in music and calling square dances during his youth helps explain why Chartock is comfortable on his feet.

He often drops by stores, where he's on a first-name basis with many employees and freely cracks jokes. He uses sign language to visit with deaf clients. His booming voice tends to echo through Goodwill headquarters on Locust Street, where he recently paraded around with a Wall Street Journal story titled: "Should Philanthropies Operate Like Businesses?"

"Of course, we have to operate like a business," said Chartock, who's fond of repeating the mantra, "No margin, no mission."

Chartock, though, doesn't have a background in business.

He was an Army captain and earned a doctorate in social work and research. As a professor at Yeshiva University, he taught students how to evaluate the effectiveness of social programs. A stint as an administrator at the Federation of Jewish Philanthropies in New York led to another opportunity to direct a large school for the deaf. In the early 1990s, he arrived in St. Louis to run the Jewish Center for Aged, a job that lasted less than a year. "The board and I did not see eye to eye," he said.

Then, Metropolitan Employment and Rehabilitation Service, or MERS, hired him to lead the organization, first paying him $100,000 a year. When he found out that Goodwill was struggling in St. Louis, he said, he helped orchestrate a "natural merger" in 2001. Both agencies offered job training services, and Goodwill had retail stores throughout the region that he thought were poorly managed.

"It was so easy once you saw what was there," Chartock said.

His compensation also has grown exponentially. Asked how much he gets paid, Chartock said he wasn't sure.

"I think it's slightly less than half a million," he said, adding that he is not rich but "comfortable."

Chartock is pegged as the highest-paid director in his field in Missouri, according to an analysis of recent IRS filings by ERI Economic Research Institute, of Redmond, Wash. The firm says the average base salary in Missouri for executive directors of human service organizations with $100 million in revenue is $220,385. Nationally, the average is $270,701.

Chartock's base salary in 2010 was $400,000, with another $74,000 in bonuses and other compensation.

Despite the fact that most retail jobs at Goodwill start at minimum wage, Chartock said nobody has questioned his salary. But the head of Goodwill in Portland, Ore., was scrutinized in 2004 over his compensation, which led to a pay cut from $831,508 a year to $634,477, according to news reports. At the time, it was the most profitable Goodwill operation in the country and served 34,000 people a year.

"If the board chooses to reward me, I can't apologize for that," Chartock said. "If you said, 'Lewis, would you do this job for $100,000,' I'd say certainly."

Goodwill Board Chairman Kraig Kreikemeier, a retired president of a construction company, said that although Chartock doesn't have a formal business pedigree, he is "astute" and often consults with the board. Kreikemeier defended Chartock's salary, not only for the growth in retail, but also for the organization's services.

"It is run very aggressively on a business basis," he said. "We want to serve people."

Goodwill's growth also has come with setbacks.

Store managers have been fired for theft in recent years in Washington, Mo., Florissant and St. Louis. But the most egregious incident involved Ronald Partee.

He started as a caseworker in 2003 and was promoted to assistant vice president of human resources. In January, he pleaded guilty of crimes that included swindling Goodwill out of more than $1.1 million, primarily in unemployment insurance payments that he manipulated.

Partee had even persuaded Goodwill to pay $45,000 in law school tuition, according to court records. He would leave work early, saying he was headed to class. He threw a graduation party for himself at the Chase Park Plaza hotel. A Porsche, travel and sporting event tickets might have seemed a stretch on a $35,000 annual salary. But he told co-workers he was playing the hand of successful real estate dealings. It turned out that Partee didn't even go to law school.

Insurance covered most of the losses for Goodwill. Still, the case stung. Chartock thought Partee had the talent to run the organization someday.

"It could have happened in about any kind of business with a guy who was that bright and that manipulative," Chartock said.

High turnover is also an issue, as it is in most of the retail industry. And Goodwill doesn't provide many employees with health insurance. Board member David Roberts raised the issue at a recent meeting.

"I care about people who are working — everybody ought to have health insurance," Roberts said in an interview later. "The question is, can you afford it. If you end up providing health insurance, what else doesn't get provided in the business?"

Goodwill is studying the issue, though it hasn't committed to a plan.

For Chartock, the focus for now is on continued growth. Still, he likes to start each board meeting with a story from one of the organization's clients to remind everybody of Goodwill's mission.

At the last meeting, Tim Paplanus of Des Peres stood in front of the large room. With help from a Goodwill case manager, he had recently been hired as a dishwasher. It was his third job in a short time, but this one seemed to stick.

"It's a good feeling, that you go to work and you get a check," he told the board. "Too many people on Social Security, and it causes the government to really struggle, especially when people just don't do work. So the way I see it, I need to go to work to try to do the best I can because I do love my country."

The emotional testimony drew applause.

Then the meeting continued, dominated by talk of pushing retail into new areas. Goodwill plans to add four more stores in 2012.

 


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