Enterprise became America's largest car rental by hiring 'amiable jocks' straight out of college, and it might help it survive the car rental apocalypse
by Rachel Premack- Hertz filed for bankruptcy on May 22, claiming $19 billion in debt.
- Hertz's problems began when Enterprise began eating up its market share in the 1980s.
- An unusual hiring strategy stressing college athletes and Greek life leaders powered Enterprise's rise to become America's No. 1 largest car rental company.
- Visit Business Insider's homepage for more stories.
Hertz is the latest big-name firm to declare bankruptcy amid the coronavirus pandemic.
But its problems began before social distancing crippled the American travel economy — and even prior to Uber and Lyft gobbling up much of the $93 billion car rental industry.
Industry watchers started to worry about Hertz's future in the 1980s. That's when rival Enterprise started to flex its muscles in the car rental scene and, under a new CEO, embark on a period of booming growth.
By 1994, Enterprise had edged out Hertz and Avis to become the largest car rental company in the US. It remains in the top slot today.
Do you work in the car rental industry? Email rpremack@businessinsider.com.
Enterprise used a few tricks to get ahead, particularly its initial focus on storefronts in suburbs and cities, rather than pouring cash into pricey airport rental car real estate. It also saved marketing spend by having ultra-productive salespeople on the ground swaying new dealerships and car repair shops to direct its own customers to Enterprise.
'We hire from the half of the college class that makes the upper half possible'
Perhaps Enterprise's most unusual maneuver to beat Hertz and Avis, though, was its method of hiring swaths of fresh college graduates — particularly student-athletes or students involved in fraterneties and sororities. Enterprise employs more college graduates than any other company, according to a Kellogg School of Management case study on Enterprise.
In a 1996 Fortune article, writer Brian O'Reilly captured the unusual mix of talent:
Hang around Enterprise people long enough, and you'll notice that despite their informal exteriors, most seem to have the competitive, aggressive air of an ex-athlete. It's no accident. Brainy introverts need not apply, says Donald L. Ross, the company's chief operating officer.
As the then-CEO told Fortune: "We hire from the half of the college class that makes the upper half possible. We want athletes, fraternity types — especially fraternity presidents and social directors. People people."
Ultimately, 25% of newbies leave the management program within six months, and the other quarter within two years. But for many of the 8,500 newbies who join each year, they're quickly able to advance throughout the company, which almost exclusively promotes from within; its CEO and COO both started in Enterprise's management training program.
Enterprise did not provide a comment for this story.
Competitive and sociable, Enterprise's hires are naturally attuned to become salespeople. Amplifying their recruits' natural tendencies, Enterprise designed its program to encourage employees at different branch locations to compete with each other.
Enterprise branch managers and staff are responsible for increasing sales in their region, and their bonuses weighed on just how many new repair shops and car dealers they managed to coax to Enterprise. As two Kellogg professors wrote in their 2012 case study on Enterprise:
The former athletes and fraternity presidents thrived in the competitive Enterprise environment; managers were encouraged by the home office to place bets with each other on staff performance, with the loser paying for dinner or working extra hours at the winning branch. "We're this close from beating out Middlesex," said one area manager from New Jersey. "I want to pound them into the ground. If they lose, they have to throw a party for us, and we get to decide what they wear."
The car rental giant's "amiable jocks" helped it eat more and more of Hertz's and Avis' market share throughout the past few decades. Today, Enterprise claims 44% of the US car rental market — more than than the four next largest companies.
Before the coronavirus. Enterprise was thriving. It's the No. 13 largest private company in the US, claiming nearly $26 billion in revenue last year.
Now the St. Louis, Missouri-based company is struggling amid the coronavirus. It had a "mass layoff" last month, and a former employee is suing Enterprise in a proposed class-action suit, claiming it did not properly notify employees.
But, thanks to much more solid ground, Enterprise's long-term chances of survival still best Hertz and Advantage, two rental car companies that have filed for bankruptcy this month.
Do you work in the car rental industry? Email rpremack@businessinsider.com.
Read more about the rental car industry's collapse
The CEO of Hertz will get a $700,000 payday as his 102-year-old company crumbles into bankruptcy