Cover Story
Head of the class
How Daniel Hamburger accelerated success at DeVry Inc. by admitting there were problems that needed to be fixed
By Mike Cottrill
Smart Business Chicago | January 2008
Daniel Hamburger has a PowerPoint secret he wants to share
with you.
“There’s a wonderful feature of PowerPoint, you hit the B key
and it blacks the screen in show mode, most people don’t know
that,” says Hamburger, the president and CEO of DeVry Inc.
When DeVry, the higher education holding company for DeVry
University, Ross University, Chamberlain College of Nursing and
Becker Professional Review, hit a rough patch, Hamburger got to
know that B button pretty well.
Because DeVry, which had once
posted 10 straight years of 20 percent or higher revenue growth,
had never really hit a bump in the road, Hamburger was presented
with a unique challenge. After revenue of $784 million in fiscal
2004, DeVry stubbed its toe and slipped to $781 million in 2005,
with net income dropping from $52 million to $18 million during
that same time frame. Student enrollments were slumping, even in
the company’s core categories like information technology and
computer sciences. The sudden jolt caused a stir with stockholders and employees.
Seeing that things had gone stagnant, Hamburger, then president and chief operating officer, decided to attack the problem
with a few priorities. First, his leadership team decided to candidly call the challenge a turnaround and address the fact that
changes needed to be made.
That’s when the B key came into play.
“We would go every couple of weeks to another location, and we
would always take the time to have a council meeting and one of
the things that made a difference was to just turn off the
PowerPoint,” Hamburger says. “So the PowerPoint is up, someone
introduces me, and I would just hit the B key. Usually it’s, ‘Here’s
the presentation, now who has a question.’ We turned that around
and said, ‘What do you want to talk about?’
“Often, there would be an awkward silence for a second, but
then they brought out really serious stuff and challenging questions. I didn’t always have the answers, but one of the things I
would always say was, ‘I will tell you if I know, I will tell if I don’t
know, and I will tell you if I can’t tell you.’ That builds credibility.”
Address your shortcomings
Maybe it’s a tired axiom, but Hamburger sees truth to the idea
that the first step in fixing a problem is admitting that it exists. At
DeVry, that subtle distinction made a world of difference on the
turnaround path.
“The first thing that we did was candidly call it a turnaround,”
Hamburger said. “That doesn’t sound like a lot, but it was a big deal.
Looking back, I’ve been asked what the biggest factor in our turnaround was, and I really think the biggest single factor was the psychological shift to turnaround mode.”
In just telling the 5,000 full-time employees spread around DeVry
that the company had to focus on righting the ship, the feel of the
stagnant company began to change. Hamburger’s team plugged
that message into every meeting, e-mail and memo that went out,
realizing that the best way to get things turned around was to push
the urgency of the situation.
“In a turnaround, the sense of urgency goes up; you make
changes a little faster than you might be able to at other times,”
Hamburger says. “When things are going really well, there’s that
tendency to say, ‘If it ain’t broke, don’t fix it,’ whereas in turnaround time, it’s very clear that you need to take action and you
need to take action now not tomorrow, today.”
Even though telling people that things need to change is an
admission that the current path isn’t the right one, Hamburger
found that people were excited to be part of the team that was trying to help right the ship. Along with that, both employees and
stockholders appreciated the candor and consistency from leadership, as that honesty kept them from fearing the worst while
addressing the situation clearly.
“I had a boss once who said, ‘I have one set of books,’”
Hamburger says. “There’s not two sets of books where there’s one
message for internal and one message for external. We had the
same message we were providing publicly to our shareholders and
the same message for our employees, and that was consistent.
“Communicate with candor, so call it like it is, embrace reality
rather than sugarcoat it. We were an organization that was sort of
used to always doing well; we really had never gone through such a
severe downturn. It was very important for the team, for any team,
to see that leadership is telling it like it is. If you go around saying,
‘Hey, it’s not so bad, just wait and marketing will turn it around,’ people are smart, they know that’s not the reality. It’s energizing and
motivating for all of us when our leaders communicate with candor,
and that’s the case with politicians or businesspeople, or whatever
you’re leading, that you call it like it is.”
Regain growth
Though a turnaround is usually centered on stopping a company’s slump, DeVry looked at it as an opportunity to grow. Because
a turnaround involves a company that once grew to success,
Hamburger found that studying up on a little organizational history was very helpful to the education company.
“The underlying emphasis was that it was a revenue-led turnaround,” he says. “We had to do a little bit on the cost side, but it
was mainly recapturing the growth that really powers our success.
So it was motivating to the team to say, ‘We’re not trying to do a
moon shot and do something that’s never been done before, we’re
just trying to get back to where we were. We’ve proven we can do
it; we just need to do it again.’”
That meant reanalyzing the data. With so much success, a basic
look at the metrics showed that there was no longer a growth mentality. Just because you’re big doesn’t give you an excuse to be
bloated, so Hamburger and his team studied the basics of where
the growth comes from.
“It was not an extensive paralysis by analysis,” he says. “By just
looking at good old metrics of direct marketing effectiveness and
productivity, you could see our cost per inquiry per student and
our cost per new student start was too high and was higher than it
had been in the past.”
In looking at the numbers, Hamburger realized there was enough
support to get growth back, but many things were broken or slowed.
He had DeVry attack avenues as if they were new, looking for revenue opportunities that had gone unnoticed while growth was
booming. What Hamburger found was DeVry focused on many
things that had been working for several years, even though they
began to get stagnant. In turn, marketing had underestimated the
power of the Internet and many of the degree programs were no
longer competitive in the market.
“First, we had to fix marketing because it was broken,”
Hamburger says. “Second, we had to regain productivity in our
recruiting organization which would be the sales force of an
industrial company and the word here was not fix, it was
regain because we’d been very successful; we just needed to get
back to where we were. The third thing was to re-engineer and
restructure our programs to make sure they were competitive.
Some of them were too long, too many credit hours and were
longer than was at market. Those first three points had to do
entirely with reigniting revenue growth; they were really top-line focused, instead of just staying with what had been working. That’s where you have to have a mental shift.”
Build your team
In order to keep a growth mentality, you have to continue to
grow your staff’s roles. Instead of downsizing, DeVry continued to
move people up in the organization and bring in new talent that
could grow certain areas during a turnaround.
Like any growth period, that meant that DeVry was no longer the
right spot for some people and Hamburger had some tough personnel decisions to make.
“That’s one of the key roles of a leader of an organization is
making those calls,” Hamburger says. “What I’ve found is you
need to assess the person’s performance relative to the objective
that you’ve set out. Assess their capabilities and competencies
relative to the challenges at hand. The first one is somewhat
backward-looking how did you do relative to what the goals
were for last year? The second one is more forward-looking
what are your competencies and how do those line up to the competencies that are needed for the task at hand going forward?”
That meant re-evaluating people’s roles and judging if the job of
growing a large company had simply been too big for them.
“There are situations where somebody did a pretty good job, but
they are really not the right person for the challenges going forward, so maybe there’s a better role for them,” Hamburger says.
“Those can be a little bit challenging for all of us as leaders because
it’s easier when the person is a poor performer or if they are pretty good but in some way they didn’t live the values of the organization or just did something wrong. But the tough one is you know
they are doing some things really well, but, hand on your heart,
they’re really not the fit. If that job was open, and they were one of
the candidates, you wouldn’t hire them even though they’ve been
around for a long time.”
Hamburger doesn’t profess that his heart-check method is
unique to him, but it was adapted by his team at DeVry to make
sure the staff was ready for growth.
“I’ve used that many times to challenge people where they’ve
been struggling,” he says. “And you just kind of see their body language and they just go, ‘You’re right, you nailed it, I wouldn’t hire
this person if it were open. So you say, ‘OK, now we know where
we need to go to help that person make a transition.’”
While adjusting the staff is never an easy thing for leaders to accept,
Hamburger assesses the situation by showing the double-edged
sword of promoting the wrong person.
“By the way, it’s a false kindness to keep them in that role.” he
says. “What happens in many organizations is they stick around for
10, 20 years and then, because you’ve allowed that to happen, you
are actually not serving your customers and you have a downturn.
Then guess who gets let go anyway, good ol’ Joe who you carried
for all those years without giving him the candid, honest feedback.
Now Joe is not really very well equipped for that next career move.
That was the cruel thing to do. That was the false kindness not
the person who 10 years earlier leveled with good ol’ Joe and said,
‘You need to make a move to another organization.’”
Putting people in the right place is the continuing step of keeping
DeVry’s growth consistent moving forward. Focusing on items like
online classes, Hamburger insists the growth strategy continues to
be the same as the turnaround strategy: an emphasis on reigniting
quality revenue growth and getting the right team together. After
addressing those troubles candidly and getting that growth mentality back, Hamburger’s adjusted team has the turnaround in full
swing, as DeVry had a record-setting year for fiscal 2007, reaching
$934 million in revenue, and net income climbed to $76 million.
“You cannot grow in the long run without quality,” he says. “You
can grow in the short run, but that will end in tears. We wanted to
ensure, and we did ensure, that the quality of what we were doing
with things like online growth was the equivalent to our history.
Once we had that, we have really turned the jets on and, in fact, are
consistently growing faster than the market for online education.”
HOW TO REACH: DeVry Inc., (800) 73-DEVRY or www.devryinc.com
