Inside Auto Club Orange County Business Journal Monday, September 24, 2007 By Sherri Cruz In the 1980s,

Costa Mesa-based Automobile Club of Southern California was broken down and in need of a tow. Prices in Auto Club's dominant insurance business were too high. Service was poor. "It was a stressful time," Chief Executive Thomas McKernan said. "The hardest part is facing up." To understand Auto Club's corporate culture today, you've got to look at how it was forged from trying times. McKernan, who was named chief financial officer in 1985 and chief executive in 1991, needed to look inward and make changes. "I had to bend the culture, not break it," he said. "We didn't want to destroy that service gene." McKernan was a more forceful, autocratic leader back then. He said he had to be. He brought in a hand-picked team of lieutenants, including Wendy Sabins, a strong manager from banking, and Michael Johnson, who had experience in marketing across states. Sabins is Auto Club's senior vice president of marketing, product management and publishing. She oversees all of the company's services. Johnson is senior vice president of member services and administration.

He oversees call centers and district offices. McKernan has backed off a bit. "We spent a lot of time on this notion of team," he said. "I'm surrounded by smart people." With a blend of newer managers and longtime executives, Auto Club has its groove back. The company, a not-for-profit run for the benefit of members, has more than $3 billion in yearly revenue. Auto and other insurance policies bring in about $2.4 billion annually. Travel services are $700 million a year. The driving mantra: serving members. Executives talk about serving card-carrying members like public company executives might talk about serving shareholders,and then some. "When you have a common purpose that everybody can relate to,the members,that's what it's all about," said Diana Meinhold, vice president of travel products and services. Auto Club's trademark roadside services bring in business for the insurance and travel arms. "The Auto Club name opens the door," said Ken Livesay, vice president of California insurance sales. "People are so familiar with our company, they trust us. There's automatic piece of mind." The club is an institution in Southern California, founded in 1900. The headquarters moved from Los Angeles to Costa Mesa about 10 years ago.

Southern California households make up half of the membership. In Orange County, 68% of households are members. In all, the club has 10 million members in 14 states, including 6 million in California. By year's end, it'll be selling insurance in 22 states. The company's headquarters, amid houses off the San Diego (I-405) Freeway, is one of the bigger local corporate campuses. The lobby has antique autos and a friendly greeter. There's a cafeteria that seats 3,000 and a store where employees can drop off dry cleaning or buy aspirin. There's a selection of health plans and a pension plan as well as a 401(k). A group of five top executives, including McKernan, oversees things. Beyond that, there are dozens of vice presidents and managers. The core team of executives meets weekly. Some get together daily. Robert Bouttier, chief operating officer and president,the latter as of January,meets daily with McKernan. So does Johnson. Communication is both formal and informal. "We have spirited discussions," Bouttier said. "We have people who are not afraid to speak up. We foster that." Often the biggest debate is where to best allocate spending, said John Boyle, executive vice president and chief financial officer. The executives figure that out through cost-benefit analyses, he said.

The team meets Tuesdays to talk business, usually at the cafeteria. Meetings don't need to be planned. Top executives pop into one another's office,all on the same floor,or catch people in the hallway. Some are armed with Blackberrys. California field sales head Livesay speaks almost daily with his regional managers and meets with them once a week or so. Planning sessions are held monthly and quarterly. Meinhold meets with other travel executives on a weekly and monthly basis. Special projects can bring weekly meetings. Seven product managers who report to Meinhold meet with her for an hour each week. Casual Lunches There are lunches where the executives put business aside and get to know each other. "With the speed that we go, a lot of times we can't take a step back and say, 'How are the kids?'" Sabins said. "If it's business all the time it's not that much fun." The varied businesses at the club call for close working relationships. "I'm in charge of insurance and Wendy is in charge of insurance marketing," Boyle said. "Neither one of us can do it alone. If you're a superstar, don't come to work here." There are telltale ways to know if someone can work with a team, according to McKernan. One is if they use "I" more than "we," he said. Another is if they put more emphasis on themselves.

He said he listens to how they share their experiences. There is no formal "team building",climbing ropes or jumping from cliffs. "Thankfully, no. I feel very grateful," Sabins said. The workweek is long. Some days the executives don't wrap up until 8 p.m. Sabins said she works at home on the weekends. The company culture is flexible enough to allow time for booster clubs, children's volleyball games, a sick kid or whatever else might come up, she said. Most of the executives have children of varying ages. That flexibility is important to Sabins. It was one of the key factors in her decision to move up to the senior vice president position in April. "That was a tough decision for me," she said. "I want to be able to be here to deliver what you need me to do. I know what this job entails. But by the same token, I have a really important job and that's being a mom." Most of the people at the club also are parents, Sabins said,"They get it." Sabins and Johnson came from First Interstate Bancorp, which was bought by Wells Fargo & Co. in 1996. It had had a similar culture, they said. "Customer service was the ultimate goal," Johnson said of First Interstate. He helped recruit Sabins.

"Our preference is to develop and grow people," Johnson said. Johnson is hands on, as are the other executives. "I learn more in district office visits and call center visits than any meeting I attend," he said. It also sends a message to far-flung workers, he said. Calls from members are monitored for speed and interaction, he said. The call center will receive about 8 million calls this year, he said. The district offices get 6 million visitors a year. The club's challenge is to make members aware of other products in a way that's not overtly sales oriented, Johnson said. Traditional marketing,TV and direct mail,isn't as effective as it used to be, he said. "The companies that are going to do very well in the future are the ones that take care of the needs that they came to you for," he said. At the same time, the club is trying to balance service quality and cost through automated systems. The automated phone, for one, will be able to provide members updates of when a tow truck will be arriving. Moving Up Performance dictates moving up at the club. Sabins progressed by heading up a big initiative. She came in as vice president and handled a member relationship management project. The goal was to integrate all of the club's services so employees could better know a member and market other products. "We watched how she got it done," McKernan said.

The mission handed to Sabins: "Go and come back and tell us what you think you can do," she said. She didn't have a budget at first. She knew other companies spent $30 million on customer relationship management software that didn't work out. "We had some fun with this," she said. "We brought Microsoft and IBM into a room." Microsoft offered to build a prototype for free, Sabins said. "We did small releases every six to eight weeks, which helped us save money," she said. The various businesses offer challenges for executives who want to move up. "I love the opportunity to learn," Johnson said. "I have more challenges than I ever anticipated." There is a prideful aspect of working at the club. Executives say if they mention they work for the Auto Club, people will whip out their cards and point to how long they've been a member. "This is going to sound a little bit corny," Boyle said. "We're providing a service that's meaningful to people's lives. That's a pretty neat career." The Team Thomas McKernan : chief executive. Public face of Auto Club, stars in the company's commercials. Started handing out maps at Pasadena office in 1966. Worked in data processing for 14 years. In 1985, became chief

financial officer. In 1990, elected executive vice president; CEO the next year. Led company out of 1980s woes. Has grown club into one of the largest auto, home insurers in the state. Student of management styles. Studied under Peter Drucker at Claremont. Likes golf, tennis. Married for 36 years to Judy. Two grown daughters, one drag races. A car guy, Lakers fan. Has a home in Nevada. Robert Bouttier : president, chief operating officer. Seven senior vice presidents report to him. Longtime club employee. Started as insurance claims adjuster in 1969. Held various sales, office management, marketing positions at club offices. Was a sales agent in Century City, where Doris Day, other movie stars came for services. Worked with McKernan in Pasadena. Served as senior vice president of marketing, member services before becoming chief operating officer. Has directed club's expansion of insurance, travel, auto, financial services. Wanted to stay in Southern California, where he has family. Three children, all involved in sports, grandchildren. John Boyle : executive vice president, chief financial officer. Directs insurance business, serving double duty as interim financial chief as company seeks a permanent hire. Became club member at age 16. California native. Started as an auditor at KMPG, where the club was a client. Spent 10 years as chief financial officer. Started working for the company in 1989 as controller. Leading the expansion of insurance business into Texas. Spends a lot of time on the road. Likes to golf, play tennis. Two daughters. Michael Johnson : senior vice president, member services, administration. Was longtime employee of First Interstate, then Western Financial (now Wachovia). Recruited to club by finance vice president in 2001. Joined as vice president, marketing, product management. Promoted to senior vice president of products, services in 2005. Promoted to current position this year. Oversees 4,000 people, mostly

call center employees. From Toronto. Moved to U.S. with family when he was 15. Went to UCLA. Shares two daughters, one son with ex-wife. Bodysurfs, lives near the Wedge in Newport Beach. R. Wendy Sabins: senior vice president, marketing, product management, publishing. Newer management recruit, oversees Westways magazine, marketing, management of club's travel, insurance products. Johnson, whom she worked with at First Interstate, helped recruit her in 2002 as group manager, product management, marketing research. Promoted to managing director, member relationship management, worked with technology department to integrate club's services. Promoted to vice president in 2005; in April, senior vice president. Two sons. Likes saltwater fly fishing with family. The R is for Rosemary, her mother's name. Avery Brown : senior vice president, general counsel. Joined as vice president, general counsel in 2002. Became senior vice president in 2004. Prior, was partner with O'Melveny & Myers in Los Angeles. Received economics bachelor's at University of Pennsylvania's Wharton School of Finance and Commerce. Earned law degree at UCLA. Galen Eicher : vice president, office of the chief executive, planning, enterprise integration. In current post since 2006. Joined as insurance sales agent in 1999, top producer that year. Held several positions including insurance district sales manager in La Quinta/Palm Springs, sales development manager for central region. Bachelor's in business from Arizona State University. Ken Livesay : vice president, California field sales. Oversees insurance sales agents. Assumed current position in 2006. Started career with the club as a sales agent in 1992. Became district sales manager, regional sales manager, then group manager prior to becoming vice president. Holds bachelor's in music from California State University, Northridge.

Diana Meinhold : vice president, travel products, services. In current post since 2002. Oversees development of travel products, services. Worked at travel companies in Washington, D.C., area before opening own agency. Worked at AAA Northwest Ohio, Auto Club of New York. Was sales, marketing director at national office. Political science bachelor's, George Washington University. Pamela Shepherd : vice president, life insurance sales. In current position since 2005. Was district sales manager in Northridge, Glendale, Burbank, then regional manager for south region. Joined in 1995. Bachelor's in marketing, California State University, Hayward. Past member, Crenshaw Chamber of Commerce. Past board member, Los Angeles Chapter of Life Underwriters. Suzanne Wisdom : vice president, marketing, product management, since this year. Responsible for developing products, marketing. Joined as group manager, product management in 2004. Was vice president at Irvine's Westcorp, now Wachovia. Earlier worked at Home Savings of America, Western Financial Bank. Bachelor's in business from California Polytechnic State University, San Luis Obispo.