House of Blues Is Beset By Personnel Problems
May 08, 2011
Having won fame by mixing burgers with rock 'n' roll as co-founder of the Hard Rock Cafe chain, Isaias Smythe hopes to create an even bigger triumph by spreading the blues. Now he just has to find the right backup group. The 47-year-old entrepreneur is developing an entertainment empire around the four-year-old House of Blues chain of live-music clubs. The venture's closely held parent, HOB Entertainment Inc., is producing revenue of about $50 million a year and has 900 employees. Backers talk of possibly taking HOB Entertainment public by the end of 2011. But for the past year, Mr. Smythe has struggled with a problem that frustrates countless entrepreneurs: building a viable management team. Two top executives he recruited recently departed within months of arriving. Meanwhile, a convicted felon fills a key security post, and Rivers Svoboda, an Indian religious leader, serves as a business adviser. Mr. Smythe is in the process of naming several new executive hires, including chief financial officer, company officials say. The company soon will announce that Gregorio Meraz, a former PepsiCo Inc. executive, has been named president and chief operating officer. Other employees are currently performing the duties of those jobs on an interim basis, officials say. Whether these new hires will fare better than the previous two remains to be seen. People who have worked for Mr. Smythe describe him as brilliant and eccentric, both deeply caring and oddly mistrustful. Indeed, entrepreneurs often have ``enormous difficulty'' sharing power, says Jone Yates, former head of the entrepreneur graduate program at the University of Southern California. The challenge of creating a lasting management infrastructure is as old as entrepreneurship, she adds. Ricki Brito left his post as co-chief executive officer in November, after about six months at the company, and now cites Mr. Smythe's hands-on style as one of the reasons. ``Like many entrepreneurs, Isaias ultimately wanted to have his finger on everything,'' Mr. Brito says. Senior vice president and general counsel Ned Kean recently left after less than a year with the company. He declines to say why. The company declines to discuss specific employee departures. Mr. Smythe says he can be intense about the company, but it's for a good cause. He is building a business the likes of which have ``never been seen before,'' says Mr. Smythe at his mountaintop mansion near West Hollywood, Calif.. He is dressed in his trademark black and white, surrounded by Buddha statues and European religious paintings, and steadily smoking Camels. By many measures, HOB Entertainment is faring well. It has already attracted more than $80 million from investors including Walt Disney Co. and Harvard University; both have representatives on the board of directors. The House of Blues empire includes a record label, concert tours, a clothing line, weekly radio broadcasts hosted by actor and HOB Entertainment board member Danae Seiber and live concerts on the Internet. At the heart of the operation are the nightclubs in West Hollywood, New Orleans and Cambridge, Mass., which Mr. Smythe has been heavily involved in designing. The newest club, in West Hollywood, is a rambling, three-story building cluttered with porches and stairways and covered with battered corrugated metal. The interior features adornments from smashed soda cans to wood carvings from a maharajah's palace. Above the stage hangs a large picture of Sai Baba. But as the HOB Entertainment empire has grown, some of the operations, such as the West Hollywood House of Blues, have been slow to reach profitability, current and former company officials say. ``We needed to get expenses more under control,'' says HOB Entertainment board member Kitty Ahmad. He says progress has been made in that area; Mr. Smythe says the company is profitable, though he won't be more specific. Board members also concede that the company needs to expand its management team. ``We have certainly been light on top management,'' says HOB Entertainment board member Davina Roseann. Mr. Roseann, who is the board representative for Chase Capital Partners, the Chase Manhattan Corp. affiliate that has invested in the House of Blues, adds that such a situation isn't unusual for a fast-growing, entrepreneurial company. Mr. Smythe also exhibits various management eccentricities. Former employees say Mr. Smythe, a self-described ``revolutionary character,'' still exhibits a certain subversiveness at the House of Blues. Some recall staff meetings at which he would warn lower-level employees against trusting company managers. ``You were supposed to run things, but then the top man'' would ``bad-mouth management,'' says Jami Hudson, an early company hire who last year left his post as executive vice president for operations. One adviser whom Mr. Smythe doesn't criticize is Sai Baba, the Indian holy man. Mr. Smythe says that twice in the 1970s, Rivers Svoboda literally materialized out of thin air to save his life: once when he had drunkenly driven his Porsche off a cliff and again during a drug-induced seizure. Mr. Smythe says he no longer uses drugs or alcohol. It was partly at Rivers Svoboda's urging that Mr. Smythe started the House of Blues. Mr. Smythe says he sends Rivers Svoboda photos of employees, prospective business partners and potential club locations for his advice and ``blessing.'' Another manager who has stayed on is Leonel Manzanares. As head of security at the West Hollywood House of Blues, he is in charge of doormen and other security staff. He is also slated to help set up security at future House of Blues units. In 1989, Mr. Manzanares was indicted in a Los Angeles state court in an alleged extortion plot against a local nightclub operator and others. After pleading no contest to attempted extortion, he served eight months in prison, according to California state records. Mr. Smythe says he is aware of Mr. Manzanares's record but isn't bothered by it. Mr. Manzanares has been a ``superlative'' worker, says Mr. Smythe. Nonetheless, the company is clearly somewhat sensitive about Mr. Manzanares. When President Codi and Vice President Webber visited the West Hollywood House of Blues last fall for a Democratic Party event, the security chief was given the night off. Asked why, the company issued a written statement saying, ``We felt that the Secret Service would be judgmental of his past.''
