Turnarounds
Beating the unknown
How Erik Vonk led changes at Gevity HR that resulted in an 800 percent increase in profitability
By Brian Horn
Smart Business Tampa Bay | July 2007
When Erik Vonk joined Gevity HR Inc. in early 2002, the company had just announced a $20 million loss for 2001.
While it wasn’t the ideal situation to jump into, Vonk was ready
for the challenge.
Despite the business’ struggles, he didn’t come in , clean house
and build a management team from scratch. While there were
changes that needed to be made, making immediate personnel
moves wasn’t necessary.
“I felt that would be even more overpowering while, on the other
hand, this was a strong company and had been a strong company
in the past and had strong people,” says Vonk, who serves as chairman and CEO. “So I focused energy on trying to convince people
who were here to hop on the train.”
Vonk set his sights on stopping the bleeding and producing
even a small profit, but to do that, he had to convince the
employees to buy in to his turnaround plan.
The company had been a successful professional employer
organization since the mid ’80s but was also involved in selling
health care and workers’ compensation insurance, which
began to hurt the bottom line.
“In the past, the company relied on insurance margins as its
primary income source,” says Vonk. “What we did in early 2002
was declare that had been a good idea in the past, but given the
company’s existing distribution reach within the small-business community on one hand, and the existing technology platform on the other, it made much more sense to start focusing
on delivering HR-related services to small businesses.”
Vonk says it can become a sensitive issue to convince people
associated with successes based on a previous business model
that a change is for the best in the long run.
“What you are really asking people to do is change the known
for the unknown,” he says. “Gathering momentum behind the
unknown is hard and takes a lot of personal convincing ... [on]
how a set of new ideas can lead to even better successes in the
future without dismissing what the achievements were in the
past.”
To drive change through the company and get buy-in from its
1,000 employees, he had to communicate clear goals, deal with
those who resisted and revitalize the culture.
Communicate
When change is necessary, you have to tell people why if you
want to get them to buy in to your plan.
“If I was part of a company, and someone would come in and
say, ‘Marching southeast over the last 20 years was great, but
we’re going northwest from now on,’ I’d want to know why and
be able to ask questions and share my thoughts and opinions,” he
says. “That is why I felt it was important to give people the opportunity to do that and create, as much as possible, a common platform in thinking and approach around the business.”
You have to have a simple, understandable, transparent logical message and the ability to provide context. From there, it’s
a matter of keeping everyone updated on what’s going on.
“Everyone in the company gets together and spends several
hours on updating what has happened in the quarter just
behind us and what was on the docket for the quarter ahead of
us, creating ownership around the new ideas, challenges and
goals, and developing enthusiasm around them,” says Vonk.
“On the other hand, it provides a forum to listen and give people who had been associated with the business a long time an
opportunity to share their views and experiences and their
input and questions, as well as criticisms and thoughts about
why things would be wrong.”
Vonk tries to communicate goals in person as much as possible, and through e-mail as little as possible.
“E-mail is a blessing and a curse of this day and age,” he says.
“It’s a curse in that we are all part of meetings where there are
four people around the table and two people are under the
tables working their BlackBerrys. On the one hand, it’s terrible.
On the other hand, it makes us much more effective in our ability to communicate.
“The emphasis should always be in person or face-to-face. If
that doesn’t work, then telephonic. If that doesn’t work, videotape something or make a CD. Last are written communications, but a letter with a signature in ink is better than e-mail.”
Facing resistance
With any change, there will be some resistance to the new
direction.
Vonk says gradually getting everyone aligned behind the new
direction can be challenging, but it is important to achieving
success.
Resisters need to be dealt with patiently but also with a certain firmness.
“I felt it was very important to show the respect that everybody deserved who had been here building a business that had
been very successful,” he says. “Take a lot of time to demonstrate that respect and use that respect as the basis to convey
thoughts and ideas on a new direction.”
Vonk says you eventually have to make it clear that the train
is leaving the station, and everyone has a choice of either hopping on the train or staying on the platform.
“At a certain point, you also jeopardize progress and you are
withholding success from other people if you decide to delay
the train,” he says. “It is important to explain, and take a lot of
time to explain, when the train is leaving, what the destination
is and what the journey is, and give the people an opportunity
to board the train or make a conscious decision not to board
the train. At some point, you either come along or not.”
Vonk found out who was on board by asking questions and gradually seeing whether the answers were increasingly congruent with the overall direction of the business. Over the
course of 2002, it became clear to Vonk who was on board with
the new direction, who wasn’t and who was undecided.
“It was much more under the surface,” Vonk says. “You
would get together with two or three or 20 people and discuss
the next steps, plans, budgets and goals. When everyone gathered in one room, everyone said, ‘Yeah, yeah, yeah, great.’ And
I said, ‘Thumbs up, great,’ only to see that I was the stranger
and the group was a group that had been familiar with each
other for a long time. As soon as they left the room, they would
advertently or inadvertently say, ‘Yeah, right.’
“Or, [I would] think they were in agreement and they’d go
back to their desks and 48 hours later were back in the old
grind and nothing changed until the next meeting. I would say,
‘Hey, last week we discussed A, B and C. How far are we on
that?’ In varying degrees, people would say, ‘Oops, never got to
it.’”
The people who followed through without being told again
were, in most cases, the ones who rose to the top.
“They made a choice and saw something in it and said, ‘Yeah.
We are on to something here,’” he says.
Repairing the culture
After years of success, the descent of the company’s bottom
line also put the company’s culture in bad shape. Vonk knew he
needed to improve the mindset of the company as a whole to
get things back on track.
“When something like that develops over a two- to three-year
period, you have to be very careful for the mood not to be negative and the culture to start to unravel, and that is what had
happened,” he says. “It was a fairly gloomy environment,
where a lot of people had lost faith in the business. The company was housed in a dilapidated building, and it was dull gray
inside and had worn-out carpet, and the whole picture was not
very bright.”
Though now in a new building, Vonk says employees fixed up
the old building while they were still working out of it.
Volunteers spent weekends painting everything yellow that
was gray.
“On Monday, hundreds of people came into the building and
said, ‘Wow, what is this?’” he says.
Plastic plants were replaced with living plants, worn-out carpet was replaced, broken desks were fixed, and the overall
environment changed.
“In many cases, people spend more hours in an office than
they do at home,” says Vonk. “We believe it is very important to
create an environment where people feel at home. We have a
rejuvenation zone. We have a room with massage chairs and
corners where you can relax, and we have an Internet café and
areas where people can walk away from what they are doing,
from intensive work and say, ‘I am still in my Gevity home but
can catch a breath.’”
Vonk says allowing employees to take a mental break results
in a more productive staff.
“It’s year of the Lord 2007,” he says. “The Industrial
Revolution was 150 years ago. You need to be part of an environment that is inspiring and rejuvenating instead of one that
wears people out.”
Gevity also gives employees March 4 off as a break and as a
reminder to keep goals in mind.
“Basically, it is to provide an opportunity for all of our colleagues to march forth the rest of the year to March 4,” he says.
“We’re telling everyone on March 4, we take the day off to do
something meaningful or to take the day off to take the day off.
See if there isn’t something in your private life you wanted to
do and have a special day for. That in itself is a mechanism that
can help people to bond. That is us marching forth to the next
March 4. Now, we are gradually beginning to be in a stage
where we’d like to take March 4 as a community-building effort
of our clients to recognize March 4 as their day.”
Vonk’s efforts to change Gevity have paid off. Profitability is
up 800 percent since he took over, with revenue hitting $648
million in 2006.
While the numbers are impressive, Vonk says revenue is the
result of hitting goals but shouldn’t be seen as the ultimate
measure of success.
“Do not set revenue or profit goals as end goals, but recognize revenue and profits as the outcome of the sum of certain,
specific actions,” he says.
HOW TO REACH: Gevity HR Inc., (800) 243-8489 or www.gevity.com
