One of the Family

May/June 2009

Tom Salome is not actually a member of the Lipsitz family, but the 52 years he's spent managing M. Lipsitz & Co. make him an integral part of that family scrap business.  

By Jim Fowler

There are scores of stories about scrap entrepreneurs who were born into a scrap family and grew up in the industry, working alongside family members and learning the business from a young age. Despite spending more than a half-century in the industry, Tom Salome is not one of them. Salome, president of M. Lipsitz & Co. (Waco, Texas), came from a family of grocers and fell into the scrap industry through happy circumstance, becoming a nonfamily executive in a family-owned scrap business. It's a long way from stocking grocery shelves to running a recycling company, but Salome followed his instincts and, in the process, found his true calling, one that he has enjoyed for the past 52 years.

Laying the Foundation 

Salome maintains that he's a native of Waco, though his birth certificate reads otherwise. When his mother—"a Dallas girl"—was pregnant with him in 1932, her family members convinced her to return to her hometown for the delivery so they could help her in those first few weeks with her newborn. "I was back in Waco" within the month, Salome says, and he has called that town home ever since.

Salome's father and uncle owned a 24-hour grocery store in Waco, where he worked after school, on weekends, and during the summer starting at age 8. "My dad put me in an apron at a very early age," he says, paying him 5 cents an hour to start. His duties covered the gamut, including stocking shelves, sweeping the floor, washing pans, waiting on customers, and even running the butcher department. "We sold everything from kerosene to ice," he recalls.

The Salome family sold the store when he was 14, and he suddenly found himself idle, which made him "bored to tears," Salome says. He took a job at another grocery store and continued to balance school and work. When he graduated from Waco High School in 1949, his father—a Lebanese immigrant who "never went to school a day in his life"—encouraged him to continue his studies. "My dad preached to me that I needed to get a college education," he says. With Baylor University just eight blocks from the family home, he enrolled there, becoming the first male on either side of his family to attend college. 

Though Salome didn't know it then, something else that happened at about this time would end up shaping the rest of his life. One of his younger sisters, Ann, took a job with M. Lipsitz & Co., a scrap company in Waco, when she graduated from high school in 1950. Through Ann, Salome met the Lipsitz family, an introduction that would prove invaluable.

At Baylor, Salome took every accounting course the university offered, earning all A's and B's. In his junior year, he stopped working in the grocery trade and started working part-time for public accounting firms in Waco. He also did some freelance accounting work for the Lipsitz family, tracking their personal expenditures. 

After receiving his bachelor of business administration degree in accounting in 1953, Salome made two big life decisions. First, he asked Martha Baur—whom he had met at a church gathering his freshman year—to marry him. "We dated through my four years of college and were married in Sep­tember 1953," he says. In those days, he adds, "no one got married until they could afford to get married." Second, he decided to continue his studies at Baylor, pursuing a master's degree in economics. 

Salome attended college against the backdrop of the Korean War. Realizing he would be drafted upon the completion of his degree, he opted for a commission in the U.S. Air Force through the university's Reserve Officers' Training Corps. Before he entered the military, the Lipsitz family asked him to come work for its scrap recycling company. Salome says he "expressed an interest" in the job, but he knew that he would have to report for active duty right after graduation. In fact, he received his induction orders 30 days prior to graduating, and he entered the service as a 2nd lieutenant in summer 1954.

After a year of navigation school at Ellington Air Force Base in Houston, Salome transferred to New Castle Air Force Base in Wilmington, Del., where he retrained World War II navigators. Although he flew to Europe and South America, he never saw active duty in Korea. 

Salome kept in touch with Melvin Lipsitz Sr., co-owner of M. Lipsitz & Co., throughout his military service. As his term of duty wound down in late 1956, he contacted Lipsitz and asked if the job offer was still valid. Lipsitz said yes. After his discharge in June 1957—and with no previous experience in the scrap business—the 25-year-old Salome joined M. Lipsitz, beginning his lifelong career in the scrap industry. 

Learning the Scrap Trade

M. Lipsitz was a small operation when Salome came onboard, employing 10 to 15 people and handling a few hundred tons of ferrous, nonferrous, and rag scrap each month. The company hired Salome with plans to train him to be a manager. "At that time," he recalls, "they had no management personnel, just foremen and hourly employees." As a neophyte to the scrap business, however, his No. 1 priority was simply learning the trade. Fortunately, he had a willing and able teacher in Lipsitz, who was then in his 40s. Melvin's father, Louis, had founded the company in 1895, and Melvin grew up in the business, taking over in 1933. His wife Thelma started working in the firm in 1948 and became a co-owner. "They were wonderful people," Salome remembers. "When I joined the company, they took me in as if I were one of their children."

Lipsitz taught Salome how to identify the various scrap metals, how the scale worked, and what the export items were. He brought him to meetings of the Institute of Scrap Iron and Steel and National Association of Recycling Industries, ReMA's predecessor organizations. "A lot of the information I garnered came from colleagues I met at these meetings," Salome says. "If Melvin didn't know something, I'd ask others, and they'd explain it to me." 

Salome's learning curve was steep, and some of his most frustrating moments came from trying to distinguish metals, such as die-cast aluminum and cast aluminum. "We didn't have any metal analyzers back then," he says, "so I'd ask, ‘How do you tell the difference?' Our sorters would say, ‘Well, you just know.' And I'd say, ‘No, I don't just know. Tell me some way I can tell the difference.'" Finally, a veteran scrap dealer told him to buy some acid and put a drop on the metal. If the acid turned black, the aluminum was die cast; if the acid remained clear, the scrap was cast aluminum. 

Salome also recalls having trouble learning to identify different gauges of scrap wire. His solution? He bought a wire gauge so he could determine if the wire was No. 1 or No. 2 grade. "That's the way it went," he says.  

"I learned as I went along, and I was very fortunate. People in the industry were good to me and helped me whenever I asked questions." 

As Salome eased into his scrap career and expanded his industry expertise, he began using his financial education to improve the company's operations. "With an accounting background, I took the initiative to create systems to track our inventory so we'd have a better idea of what we were doing," he says. Even as he formalized the company's business operations, he couldn't avoid the reality that most deals in those days were verbal. There were few paper contracts. "You lived and died on the word of your suppliers and consumers," he notes. "If you didn't perform as you should, word would eventually get around and you'd have difficulty buying and selling." 

Over the years, Salome also helped M. Lipsitz expand its operations, opening three new scrapyards outside of Waco by the 1960s. Melvin Lipsitz gave him a 25-percent ownership stake in each new operation. Salome says he was "more or less directing the company" in the mid-1960s, when Lipsitz's health began to fail. When his mentor died in 1969, Salome had some ownership in the company, but his role continued largely as before. 

In 1974, Salome decided it was time to install an automobile shredder at the firm's Waco plant. The bank insisted on having him co-sign the loan documents with the Lipsitz family. The family and Salome concluded that this was a good time to reorganize the company and for him to buy a 50-percent interest in the firm. "Thus began my partnership with the Lipsitz family," he says.

From 1969 onward, "the company grew like a mushroom, but with debt," Salome says. "We had to borrow a lot of money and live in debt from the early 1960s to the late 1980s, when we were finally able to surface from those obligations." The company accomplished that feat by directing a "good bit" of its earnings to paying down its debt. 

Salome readily admits his fiscal conservatism and cautious approach to corporate growth. For instance, he says, "I didn't want to have more locations than I could find good managers to run those plants." To accomplish that goal, M. Lipsitz initiated a management training program. The company prefers to hire young people, preferably right out of college, and teach them how to run a recycling plant. Within a couple of years, the firm promotes them to either an assistant manager or manager position. 

Given this investment in its employees, it's no surprise that many of them remain with the company for years. "We have many managers who have been with the company 20 years or longer," Salome says, noting with pride that his sister Ann is the longest-term employee, at 59 years. Another associate, Mary Lanier, has 43 years of service. "Very seldom does anyone ever leave our company," he says. An employee who does leave is gone for good—the firm will not rehire its former workers. Salome says he adopted that rule out of hard management experience over the years. "I found that if [employees] left our company for another job and then we rehired them, they'd leave us a second time." One time, before Salome imposed the no-rehire rule, an employee left the company three times and wanted to return a fourth time. "I finally said, ‘I've had enough of this. This is not an open-door deal where you can get another job and come back if you don't like it,'" he says.  

Salome also has strong opinions about the right way to run a family business, drawing from his experience as a nonfamily executive in a family-owned company. In his view, the people who run the business should have top-notch skills in their professional area and not get a job just because of their family position. "It's difficult to make a strong company if family members are the only ones who ever have any authority," he says. He also sees the wisdom behind requiring family members to work outside their family company for several years to establish themselves, gain perspective, and prove their mettle. 

Offering a personal story about the challenges of family business interactions, Salome notes that his oldest son, Bud, ran the nonferrous marketing department at M. Lipsitz for more than 15 years. Five years ago, Bud moved to Arizona to start his own business, first opening a steel service center, then a recycling facility. "We got along well, but you have to understand one thing—the most difficult relationship there is in business is the father-son relationship," Salome says. "I wouldn't recommend anyone having a family relationship in a business because it's the most difficult relationship you can have. The parent always thinks the kids are overpaid and underworked, and the kids always think they're underpaid and overworked." 

Family and business challenges aside, Salome and the Lipsitz family managed to lead the company to steady growth over the decades to the point where it now has nine operations—eight in Texas and one in Oklahoma. The firm built its success, Salome says, primarily by providing great service to its over-the-scale customers. Though the company has industrial accounts, it makes its living from small suppliers such as plumbers and electricians. "We don't care if the individual has only 3 pounds of material—we'll buy that," he notes. "The walk-up and peddler business is where we make our mark—we lean very heavily toward that type of business." 

No Second-Guessing 

Salome, now 77, started weaning himself from day-to-day management of M. Lipsitz about four years ago. "I was approaching my mid-seventies, and you just don't keep going forever," he says. In truth, he says, he realized that he no longer wanted to "deal with a crane that's down or a truck that turned over—all the day-to-day problems. I was ready to let that go." Melvin Lipsitz Jr.—the only son of Salome's mentor—oversees the company's daily operations now, assisted by his sister Lynne, though Salome still attends management meetings and keeps tabs on the firm's financials—always his strong suit. 

Although he does not believe his business philosophy has changed much over the years, he concedes that he has become more cautious about the company's business relationships due to ongoing credit risks. "In the old days, you really knew your consumers," he says. "Today there are a lot of new players, and I've become very nervous about offering our material and giving terms on payment. How do I know the strength of these companies?" 

In addition, though Salome has seen numerous scrap market cycles, even he was rattled by the dramatic market correction last fall. "It startled me when the steel mills bought so little scrap in November, December, and January," he says. "I thought to myself, ‘My God, the world is coming to an end.' I never remember a time [before] when there was just no market." 

Despite today's economic challenges, Salome asserts that "the industry will recover, and eventually the strong will succeed and go forward." It's helpful, he notes, to look back at previous market cycles to gain confidence that this downturn, too, will pass. Previous market cycles loosely followed a five-year pattern of at least one bad year, one or two mediocre years, and two or three good years, he says. The current dip could have a longer rebound time, however, because the market was so good for so long. On a more optimistic note, he adds, "Once we ride out this recession, we'll ultimately have good business again."

As Salome reflects on his five decades in the scrap trade, he affirms that he has enjoyed the journey immensely. "I never once felt like it was a drag to go to work," he says. "I particularly enjoyed putting the new plants together and seeing our employees become successful managers. I also enjoyed the relationships with our suppliers and consumers. I enjoyed all of it." 

Salome believes his success in the scrap business opened up many other opportunities for him as well. "It enabled me to volunteer in the industry associations and in community organizations," he says. "Both the industry and the community have been good to me." In the trade association world, for example, Salome served in all leadership positions of the ISIS Gulf Coast Chapter and as chair of the ISIS finance committee and ReMA convention committee. In the philanthropic arena, Salome has held numerous leadership posts, including his current duties as president of the Waco Industrial Foundation and the Waco Foundation. He also recently served as chair of the Challenge Greater Waco Campaign, which raised $7.5 million to fund the construction of a new "green" chamber of commerce building. To recognize his efforts, the group named the new building the Salome Commerce Center. In addition to his association and charitable work, Salome has pursued other business interests, particularly in real estate. He has bought and sold land for more than two decades, he notes, and he currently owns three small strip malls and has two subdivisions under development. 

"I don't look back with regret on most of the things I've done in my business career," he concludes. "You do what you think is right and trust that your decisions will be right more times than wrong. If you go back and say ‘I should have'—well, you just shouldn't second-guess yourself, and I don't." • 

Jim Fowler is retired publisher and editorial director of Scrap.