The Long Road Back

Nothing Is Easy Now: Lessons From the Aftermath

It may be years before life returns to normal in the Big Easy. Some 25% of New Orleans' housing stock (30,000 to 50,000 houses) faces demolition because of flood damage, according to some estimates, and half of the city's municipal employees have been laid off, including virtually all public school teachers. For midmarket companies already strapped for resources, the road back will be tough. And some won't come back at all. Amid Katrina's wreckage, you can count a number of corporate disaster recovery plans. From companies that had no idea what to do when the cell phone network went down to those that had never contemplated a scenario involving a total breakdown of municipal infrastructure, Katrina offered abject lessons in just how disastrous a disaster recovery failure could be. "You have to prepare for the impact of multiple disasters," says Michael Croy, director of business continuity solutions at Forsythe Technology Inc., a consulting firm based in Skokie, Ill. "After Katrina, companies need a different paradigm. The heart of American business is now IT. Business continuity needs to be part of daily operations. It's not an IT issue; it's a business issue, it's a corporate governance issue." And while the magnitude of Katrina was difficult to anticipate, many of the lessons apply to disasters on a far lesser scale. "We had great recovery plans for our clients but a miserable one for ourselves," says CommTech Industries President Darryl d'Aquin, whose IT management firm was driven from the city by the storm and, six weeks later, was still waiting to move back into its flood-damaged office. "The big issue was finding staff; they scattered. Text messaging [on cell phones] is how we found 90% of our staff." Even the companies where things went according to plan learned lessons. Consider Stewart Enterprises. The company, which was founded in New Orleans in 1910 and went public in 1991, is one of the biggest funeral home and cemetery owners in the U.S., operating in 27 states and Puerto Rico. Stewart evacuated its 500-person corporate office in New Orleans and ran operations from offices in Irving, Texas, and Orlando, Fla. In Orlando, a cemetery houses Stewart's help desk, and the company brought in two trailers of equipment to add 60 workstations for the IT department. "When you're down for weeks, you have to bring everything back," says CIO Kent Alphonso, whose house was flooded and rendered uninhabitable by the storm. "You can have the best plans, but you need the people to pull it off. We never planned for a total office move. You plan for critical systems; then you realize you have to run everything." Three of Stewart's funeral homes and five cemeteries in the New Orleans area were damaged by the storm, while the company's corporate office escaped with little damage. Stewart's national business wasn't directly impacted by the storm, although some of the company's sales systems were offline for a week, forcing funeral homes around the country to revert to paper for orders and invoices. And with the company's fiscal year ending Oct. 31, Stewart had to delay the reporting of its quarterly results to the Securities and Exchange Commission. "We lost six weeks," Alphonso notes. Stewart was also four months into an 18-month project to rewrite its aging client-server cemetery- and funeral-software management program in Microsoft's .NET -- a project that Alphonso now has to pick up again. Even when the company was able to return to its office, half of its area employees were without homes, and the Stewart parking lot was filled with trailers from the Federal Emergency Management Agency that temporarily housed workers. "We still have people in Orlando because they have nothing to come back to or no one to stay with," Alphonso says. Some companies came to the same decision. Indeed, just days after Katrina, Ruth's Chris Steak House announced that it wasn't returning to its New Orleans headquarters where it was founded but would relocate to Orlando instead. The uncertainty of when life in New Orleans will return to normal plays havoc with recovery plans. "The biggest timing issue that has never been discussed in any disaster recovery meeting I've ever been in is the children," says d'Aquin. "They dictate where people work and when they return to work." One of the overarching lessons of Katrina was the number of contingencies that DR plans can't encompass. D'Aquin, for example, received a text message on his cell phone from a client who was trapped in a building surrounded by flood waters and needed a boat. "Finding a boat isn't normally on your list of disaster recovery steps," says d'Aquin. --M.Y.

Part 2: The Company

In 1963, David Oreck quit his job as a sales manager at Whirlpool in New York to start his own company. A World War II veteran who flew bombing missions over Japan, Oreck noticed that Whirlpool couldn't seem to give away its upright vacuum cleaner. So he made a deal with the company to redesign the machine and sell it himself -- and Oreck Corp. was born.

On a winter day that first year, Oreck visited a poorly performing RCA distributor in sunny New Orleans. He bought the distributor, turned around its performance and decided to make New Orleans the headquarters for his vacuum cleaner business as well.

Oreck built lightweight but powerful vacuums marketed to hotels, 50,000 of which the company says have purchased its models since they were first introduced. The units proved so popular with maids that they asked to buy them for their homes too. Today, Oreck's range of products includes a $299 starter model and a top-end $699 machine, which comes complete with a 21-year warranty. The privately held company won't disclose its revenues, although a published account in 2000 estimated that Oreck sales were about $200 million a year.

Smiling and bald, David Oreck became the public face of the company, singing on radio commercials and promising to stop if listeners called his 800 number. And they did. Even after he turned the business over to his son Tom in 1999, David Oreck continued to personify the company. He flew vintage planes at corporate events and appears as an animated character on the Oreck Web site, hoisting a vacuum cleaner (the latest model of which features an FM radio built into the handle) above his head.

Oreck Corp. wasn't quite as innovative in its use of back-office technology, as Michael Evanson learned when he joined the company as its first CIO in 2003.

The IT department had a backlog of 700 projects and growing, dating back several years. New e-commerce and POS systems were in early development. Neither initiative had a project manager or even a project plan. The credit card settlement system routinely crashed.

"Everything was wrong when I walked in here as CIO," Evanson recalls. "We ran mostly Windows 95. The new computers were Windows 98. The network didn't work well. Our systems aren't really adequate. E-mail didn't work. We needed everything."

Evanson canceled the Web and POS projects and started a search for off-the-shelf systems. He spent nearly a year selecting CRS Retail Systems for POS and SAP for everything else.

When Katrina hit, Oreck was four months into its 18-month SAP deployment. "This was the worst time for me," Evanson says. "SAP would have replaced all this crap. It was a frigging disaster."

Part 3: The Recovery

From his hotel room in Houston, Tom Oreck vowed that he wasn't going to let a little hurricane wipe out the company that his father built.

The company's first task was to find its employees. Oreck set up a new 800 phone number for its scattered staff to contact the company, and the 15-year-old son of the company's marketing vice president put up a static Web site available at the company's old URL with the information. The company also posted pleas for employees to call in on local bulletin boards such as Nola.com.

If you had a job at Oreck before the storm, Tom Oreck promised his employees, you would still have one.

On Friday, Sept. 2 -- a week after Oreck closed its New Orleans office -- the company moved into a new office space: 100 cubicles crammed into an IBM business center in Dallas. Oreck flew up from Houston, and Evanson drove from Memphis. At the same time, a small staff was working at the Boulder data center.

Oreck assigned teams to find generators and mobile homes to, respectively, restore power to the Long Beach plant and furnish temporary housing for displaced workers. When an executive found three generators in Florida, Oreck put a $60,000 down payment on his personal credit card.

The first generator didn't arrive in Long Beach until the following Tuesday. Later that week, a convoy of more than 40 trailers arrived at the plant to provide emergency shelter for workers, followed by trucks loaded with food and water. The impromptu trailer park housed 150 employees and was dubbed "Oreckville."

The company's retail outlets had almost two weeks of inventory -- which might give the firm enough time to restart shipping and production at the Long Beach plant.

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