Rebecca Matthias, Mothers Work Inc. Upscale maternity clothes in 451 stores, divided among four chains: Mothers Work, A Pea In The Pod, Mimi Maternity and Maternity Works. Publicly traded (as MWRK on NASDAQ) since early 1993. From Fortune magazine of 3/21/94: "Matthias started the company in 1982 when she had trouble finding stylish maternity clothes to wear to her job as a civil engineer." Later her husband Dan joined as CEO (she is COO). The Matthiases were married in 1981 and have three children, ages 14, 13 and 7 at the time of the taping. Birthyear 1953, phone (215) 873-2200, HQ Philadelphia (PA).

Frank Gregorsky: Your titles are President and Chief Operating Officer. In functional terms, what do they mean? What roles do you perform?

Rebecca Matthias: I run this company with my husband. He is the Chairman and CEO, I'm the President and COO. I started the company and then he kind of joined in, after awhile. We share a lot of responsibilities -- and over the years they change. We kind of strategize together, plan together. But we have different operational responsibilities as time goes on. I've always tended to be the public persona, and also more the financial person. He's been more the marketing person.

FG: Interesting -- that's sort of counterintuitive.

Matthias: Yeh, it is. I'm an architect by training. So I tend to be more visual. I've also been more the merchandiser in this company. Dan has more been more the systems planner -- he's an electrical engineer [by training]. We see our company as a system. We happen to be selling maternity clothes. But we could apply our system to almost any consumer company. We are vertically integrated. We tie everything back from manufacturing to retailing in the stores -- and we like this, because it lets us control the whole process. We are a quick-response company, a consumer-oriented company: Whatever direction our customers are going, our job is to figure that out and respond to it. Our computer systems facilitate. So we have point-of-sale in every store which is tied back by modem, overnight. We know, the next day, everything that was sold in every store -- what was popular, what wasn't. We're constantly reacting to that information, by manufacturing on a quick-turn basis in Philadelphia. We are probably one of the only retailers and apparel companies that is 80% domestic -- we do this, even though it's more expensive to produce in the United States, because it's quicker.

FG: I was startled to see the description of the "TrendTrack" system [in the 1994 annual report]: Using the computers for "overnight polling" makes you "the first Real-Time Retailer." A pretty sweeping statement, but obviously you can document it. Have people from other industries come to you about moving this system over to their industries?

Matthias: No. People tend to be kind of myopic. I think people do things the way they've always been done. Neither Dan nor I comes from the garment industry. So, when we started, we didn't really have a frame of reference, and we made a lotta stuff up. Our company is very different from other retailers or other garment companies. I don't know they would even know how to approach things the way we do -- or that they would want to. Neither have we been approached by people [outside of those sectors]. Our board of directors, a couple of times, has tried to get us to market our system to other companies. You could carry it over to any retailer, or any retailer that operates on a replenishment basis, that wants customer input and wants to react to it. But that's a whole different business.

FG: Something happened 15 or more years ago -- an experience, a conversation, a revelation, some sequence of events -- that you can trace all this back to.

Matthias: I think it was probably a series of things. I grew up in a very entrepreneurial family. My father was a real-estate developer. His idea of a challenge was starting a company and growing it. I had the idea from early on to work for myself.

FG: How many siblings?

Matthias: Five. My brothers have each been in the real-estate business, my sisters are professionals. But I wanted to be an architect. I went to school for a long time [toward that end]. But then when I got out, I realized it really wasn't what I wanted to do. A bunch of things happened really fast. I met Dan and got married [in 1981]; we moved to another state, where I worked as a construction engineer. Then I became pregnant, and he started a company in the electronics/computer business -- all of this happened in rapid succession. I ended up helping him in his start-up company just 'cause I didn't know what else to do. I was a neophyte. I didn't know anything about anything. "Let's try this starting-a-business thing and see what it's all about." So I was kind of the catch-all person. I also ended up keeping the books, because nobody wanted to do it. I actually used Dan's Accounting Primer from business school -- I just read that thing thru, did all the exercises, and I was the Chief Financial Officer from there on out [laughter]. Thinking back, I kick myself, once a day, because I really should've gone to business school: I love business, I love doing what I'm doing -- but I just never knew that this was something I would be interested in. I always thought of "business" as this, you know, really dumb thing to do. But I love it.

FG: But if you had gone to business school, isn't the danger that they would have imputed too many systems and structures and theories?

Matthias: Oh absolutely. Things worked out fine [without business school]. But I feel I wasted so much time doing architecture. I guess everyone does that: Go back and try to relive your life, and do it the way you should do it [laughter].

FG: Retroactive reformatting. Were you "in rebellion" against your dad or your folks at any point? I mean, did you go into architecture because [unlike his world] it was predictable [and] left-brained?

Matthias: Well, actually I wanted to be an artist, and the result was a compromise with my father. I was also very mathematically inclined, so it was almost like, okay, Art plus Math equals Architecture. But I really knew nothing about what it was like to be an architect. He felt I needed to go to a university rather than an art school, so it was a concession I made to my father. And then things sort of took their course.

FG: So it's fair to say there might be a dozen other industries, types of businesses, you could've zig-zagged in to.

Matthias: Absolutely, absolutely. It's totally gratuitous that I ended up where I am. The question was, after my first baby: "What am I going to now? I have to stay home to raise this baby. I don't want to be a working mother and leave the kid in day care. So what am I gonna do? I'll try business at home" -- that was the first thought. Also, I felt I wasn't going to get anywhere working for somebody else -- I just couldn't see [doing] that. I don't consider myself a feminist, and this is probably the only time I'll sound anything like one. But I do have to say that I had this sort of "old boy" feeling that "they weren't gonna let me in." [NOTE: "They" refers here to males generally.] I would never be the President in a company started by somebody else and that involved men and women, because men always seemed to rise to the top. I didn't want to fight that battle -- I really didn't. The best way for me to cut thru all this was to go out and do my own thing.

FG: Can you describe a time in the first two, three, four years of Mothers Workwhen you faced a real crisis and the survival of this enterprise seemed at stake?

Matthias: That was every day [laughter], for the first five years. I can't tell you how many times I would've just given you this business if you had asked for it: "Take it, please." It was the hardest thing I've ever done in my life. That's what makes it so much fun -- when you finally emerge from the muck! Something has really formed. But the first five years were terribly hard. For the first three, I didn't have a salary. Every payroll was cash-crunch. Cash flow is what kills you -- that's the [typical] issue. And growth is never a straight line, it's fits and spurts -- three steps forward, two back.

FG: How old are the three kids?

Matthias: Now? 14, 13, and my little one is 7.

FG: Where did you get the money back then to do more than make payroll and rent? What financed expansion?

Matthias: About a year after I started the company, it became apparent there was something there, a market not being served -- even though I was not quite hitting it with my [early strategy] of mail-order catalogues. About that time, Dan cashed out of his business, resulting in $200,000 that, over the next three years, we sort of dribbed and drabbed into my business. At first, he was going to retire and write a novel. He did that for about four months, while telling me all the thinqs I should be doing. Finally I said: "Look, there's a desk, go at it." He couldn't keep his hands off because he really does like start-ups and business. He never went back to the novel. We kind of blundered along for three years. We heard from banks that a $50,000 loan would require a $50,000 CD as collateral. So we would need investors to go any further. Once we had some venture capital we also were able to get a bank loan. Those two things took us to the next stage. Once we were into that flow of bank debt and venture money, we did a lot more of that. "Venture capital" is the great divide -- between owning your company and letting other people in on it. All of a sudden, you have people you have to be responsible to: You are reporting to another person -- that was a very difficult thing. We also had to think about getting them liquid in the end -- in the end, they had to get the money back in some way.

FG: Did they call every week? Did you have monthly meetings?

Matthias: Monthly meetings, at first. We were fortunate, I'll have to say: All of our investors were financially driven; they were not operations-driven, and not from the garment business or apparel. Because they didn't know retail, they didn't try to tell us how to operate our business. But they were helpful getting bank loans and [for] meeting other venture capitalists.

FG: You went to a [VC] firm and they found these investors?

Matthias: The first round was thru just contacts. My accountant referred me to someone who referred me to someone else; it was sort of private -- you know, just networking. But then once we had venture capitalists on our board, we were a "venture-backed company," and they introduce you to other venture capitalists, and you can go to other venture "fairs." You're kind of in the door. That's why I say: It's like a great divide, between being in and being out. It's hard to get in. It's really very hard to get in. It took us a long time to find these people and to convince them we were responsible enough to take care of their money. Wall Street runs in herds. People don't want to be the first to invest. "If it's so great, how come no one else is in?" Once you get somebody to invest, then other people might become interested. They want validation from their buddies that it's a good deal. I don't know that I would be any different [if I owned the money rather than the business]. You do have to act differently as the keeper of somebody else's money than as the keeper of your own. Now you're thinking "growth," you have to buy into that -- they won't give you their money unless you promise that you'll become a big company. It's not fair to take their money if you're not -- and you don't want their money if you're not.

FG: In what ways, if any, have your views of women in Corporate America changed over the past 15 years, since you started out?

Matthias: I don't really view individuals as part of groups: Women here, men over there, and so on. And I'm not plugged into Corporate America. I've always been kind of small, growing, insular. We understand our company, I don't understand what goes on [in the really large ones] -- I don't even have an opinion [laughter]. I don't see the world that way; I don't think of women differently. I just think about people and their abilities.

FG: What about differences in management style, e.g. collaboration versus competitiveness?

Matthias: I do believe that, in general, women are not as aggressive as men are. To me, it doesn't come naturally to be kind of "killer" aggressive. I'm more intellectual about it -- I kind of "know what I want." On a personal basis, I don't think I'm as aggressive as men are. Which is another reason I decided I wasn't gonna make it working for another corporation: I didn't think I could climb that ladder.

FG: Now when you use the term "aggressive" you're really talking about relations with other people. Because your corporate philosophy -- expansion, acquisitions, leveraging -- reveals quite a bit of aggressiveness.

Matthias: Right, yeah. That's true. Sometimes, on the whole, the women that I see -- I guess mostly in "Corporate America" -- are more process-oriented. Men seem to be more into results, like, "I'm gonna get rich, I'm gonna make this company successful." Women seem to be more like, "I'm gonna have an interesting job." You don't meet as many women that kind of "go for the throat." They seem to be wrapped up more in interpersonal things, more process things. Which makes me think that maybe they would do better in large corporations like IBM. So I don't know -- I don't know what all that means.

FG: Who's your favorite author, fiction or non-fiction?

Matthias: "My favorite author" [pause] -- I don't have time to read that much, lately.

FG: Do you have any hobbies?

Matthias: I don't do anything except business and my children -- I don't have any time, it's one of those sad things in my life. I hardly have time to have friends. If I weren't married to my business partner, I'd never see my husband. We are so focused -- we have to be. To the extent I have any time left, it goes to my children. We do take a ski trip each March -- we started when my kids were in kindergarten. A week in Colorado.

FG: Are you antsy for the first three days?

Matthias: We're antsy every day [laughter]. We're on the slopes with our cellular phone! We fax-and-modem all week. I remember once we took a Club Med vacation -- preplanned, five days. After about two days, we were so anxious to get back. We paid $500 to come back early, it was an unrefundable ticket -- we paid to come back early to leave our vacations [laughter]. We said, "Let's not tell anybody we did this." But -- we just couldn't relax.

FG: Do you have any tax or regulatory changes you'd like to see on the national level?

Matthias: I don't know how frank to be [laughter] on these issues. The government has way too many taxes -- personal and corporate. They are stifling, demotivating. Two jump out at me. One is a state level [matter] -- the Workers' Comp. We pay almost a million dollars a year of Workers' Comp. That is 20% of my pretax earnings -- it's so outrageous I can hardly even bring myself to think about it. And there's nothing you can do. Pennsylvania is one of the worst states. And it's one of those "hidden" taxes people don't focus on: Because it doesn't come out of their paycheck, they don't see it. That would be my Number One -- it just hurts my performance so much. I know people are focused on capital gains right now, and I couldn't agree more. Everybody that's been here for a year [or longer] has some level of stock options. As a young public company, it's a real motivator to people, especially for recruiting good, talented people -- you know, they Work for that. I use it as an incentive. And to think that so much of it is going to go back to government -- where's the incentive? That's a big issue for me. Why kill yourself? I mean: We're enthusiastic, we are on a Mission here. My people work -- they really kill themselves. And they do it because they think they're gonna get rich -- someday, you know? And part of it is gonna come from those stock options. So [capital-gains taxes] are a big downer to me.

FG: Okay, the Four Ls: Law, legalism, lawyers and litigiousness.

Matthias: Big problem, yeah. Big problem. One of the companies we acquired was a public company [A Pea in the Pod]. When we acquired them, we acquired a shareholder lawsuit -- because [their] stock had crashed. These shareholder lawsuits are so frivolous. You have lawyer-shops set up, where they have 100 documents and they just send them out as soon as any stock comes way down. Why can't they be stopped? I don't understand that. We haven't had a shareholder lawsuit against Mothers Work, but inheriting [the one against A Pea In The Pod] has made me familiar with it. Why is that fair? Why is that right? Why should these companies spend so much time and money fighting this lawsuit that has no merit? It's so frustrating. We've spent many dollars on this. Why can't some Judge look at this and throw it out? I don't understand that -- I really don't. That, coupled with product liability -- again, why can't they throw away these frivolous lawsuits? I have been involved with a product-liability lawsuit, it was a long time ago, and it didn't end up costing us that much money. At one point Mothers Work was franchised. At one of our franchises, a very sad case, a baby died of SIDS [sudden infant-death syndrome]. They ended up suing our company because they happened to be sleeping in a baby-basket my franchisee was selling, sort of as an ad-hoc product, in her maternity store. It was a very sad case, but it wasn't something that our company -- I mean the parent company certainly did -- and we ended up in this big lawsuit, though it wasn't the worst of those consumer-type of suits. We ended up settling. In that case we had an insurance company that made us settle it. So much money is spent in this country on frivolous lawsuits -- because people can. It's a lottery. Why can't we stop that?

FG: Opportunistic suits sound, in some ways, like a bigger problem than taxes -- a bigger drain. And they're so random.

Matthias: It's a drain of money and energy. And it is so random, that's right -- it's anytime, against anybody. They should give some liability [financial risk] to the plaintiff: Institute a "loser pays" rule, and maybe people would think twice before bringing these lawsuits. It's not the kind of thing you can put your finger on, and maybe it's harder to stop -- but it's as big of a problem as high taxes. It's draining.

FG: The tax burden can be like an 800-pound gorilla: There it is, you gotta deal with it, it's big and it stinks. But litigiousness is more like poison gas slowly seeping thru the air vent.

Matthias: It is, it really is. And consumers think of it as a corporate issue. You can't have all those costs and not pass it on. Something's gonna give, it's not free money.

FG: Except in states with horrendous tort systems, it's very hard to get the public stirred up. They may all hate lawyers, but they think: "I may need one someday. Whatever I think about Johnnie Cochran's tactics in LA, I'd sure love to have him fighting for me." Don't you see that kind of a schizophrenia in public opinion?

Matthias: Well, lawyers are just a tool of people. You can't just say "I hate lawyers." They're only doing what people are feeding into. Maybe they facilitate it. People are the ones bringing these lawsuits. Or maybe in the shareholder cases, the attorneys are the driving force.

FG: Let's say, 10 or 15 years from now, you turn over active management to someone else and start a foundation for enterprise. If you had to make it real to high-school students, or advise small-business groups, how should they conceive of the urgency of legal reform if you want to avoid making it anti-lawyers?

Matthias: It's a much, much deeper issue. It's a question of personal responsibility in America. We don't have the level of personal responsibility we once did. Everybody wants to blame somebody else. Everybody wants help from the government; they want a free ride. The Puritan work ethic isn't out there anymore. So the shareholder suits, the consumer lawsuits, that arise are just one part of that whole social [trend] -- I mean, how do you fight that? I haven't the slightest idea. You're the politician. But you see it in so many ways -- in everything. Some drunk drives into an electric pole and sues the electric company because they broke their neck. FG: Yet juries vote for things like that.

Matthias: Because they want to feel that, if they hurt their neck, they can also get money. It's sick. "Free money." It's sick. So you got me on that one. All I can do [at this point] is teach my children right.

An Addendum from the Interviewee

Matthias: One thing you haven't asked me about is women and children -- you know, how can you get ahead and have a family. This is the biggest problem women face. Whatever balance you want, how do you combine those two big important things? So many women feel like you have to choose. Small businesses have been the answer for a lot of women, and I think it's a really good answer. And for those women, the issues -- in Congress and government and so forth -- are no different from what they are for any other small-businessperson. Just make the economics work better: Lower taxes, less regulation, and leave me alone -- let me go and start a business. So I just don't see it as a gender issue -- but it could be something attractive to women trying to combine work and family.

Related Links:

• Discovery Institute
• Joint Economic Committee
• Women Business-Owners in Post-Corporate America