Mark G Scott
Amber Cox has never had a bad day working at California Pizza Kitchen. That doesn’t mean every day is free of stress or that she never faces situations that require her to step out of her comfort zone.
As a bartender at one of CPK’s new prototype restaurants that recently opened at Westfield Topanga Mall in Canoga Park, Calif., Cox often has to think fast to keep things moving.
“I have a regular who comes in quite often,” says Cox, who started bartending at the Topanga location in July and rapidly moved up to become the bar trainer. “When he does order, it’s usually on the complicated side. There was one occasion where he asked us to do something that we actually don’t do.”
Cox dashed back to the kitchen and found the expediter that night. She mentioned that this was a regular guest who brings lots of business to the restaurant and added that it was important to her personally that CPK find a way to take care of this guest and his request.
“The expediter was like, ‘No problem. What do you need?’” Cox says. “The guest was touched that the expediters, the managers and the servers were all rallying together to make sure he got exactly what it was that he needed. That kind of thing happens so often at this store and that’s why I love it.”
Let personality shine through
The experience between Cox and this particular patron is an example of the culture that G.J. Hart envisioned for CPK when he became CEO in August 2011. He wants employees who are more focused on guest satisfaction and less concerned about following a mental checklist each time a guest walks into the restaurant.
“Think about your favorite restaurant that you frequent often,” Hart says. “Why do you do that? Inevitably, the answer is not food first. It’s because they know who you are. It’s the old ‘Cheers’ model. They give you this great experience, it feels great, they know who you are and oh, by the way, the food is good.”
So how do you build a culture where employees are eager to find ways to satisfy your customers and can do it with a smile? It begins with letting people bring their natural personalities to work.
“We hire people because we like them, we like what they are saying and we like how we feel when we speak to them,” says Matthew Ross, an assistant general manager at the Topanga CPK. “When you hire them for that, and then you turn around and go into a service model where it’s, ‘Do these nine steps exactly this way,’ you’re contradicting the whole point. It’s a lot easier to say, ‘Hey, we really like you. Bring that to the table.’”
Lauren Rose, who works with Ross and Cox and has been with CPK for about three years, remembers what it was like before Hart arrived. She says the new way of doing things has made a big difference for everyone.
“It’s way less robotic,” Rose says. “We used to have a script that we would say when we went up to a table that included offering a specific starter, an alcoholic beverage and a non-alcoholic beverage. We’re supposed to move past that now and become more comfortable with the guests and really make them feel like they are getting their own personalized experience.”
The effort to make CPK more and more appealing with each visit stretches beyond the guest experience at the table. Rose says employees are engaged in all aspects of the way CPK does business.
“We’ve had new uniforms, improvements in our menu and one of the most recent changes of adding gluten-free pizza dough, which we highly anticipated,” Rose says. “The company is always evolving and does a great job of figuring out what interests people and how to keep them coming back. CPK is becoming way more modern and is reaching out to a younger demographic.”
Talk about what works
Building leaders in your organization comes down to the same principles, whether you’re a chain of pizza restaurants, a manufacturer, a marketing firm or any other kind of business.
“It’s really about wandering around your troops,” Ross says. “I like to wander around and go from group to group, table to table, or from the bar to the back of the house and to the dish area. I’m just wandering around to get a feel for what’s happening in the restaurant. The more you spend time with the staff and speak to them before their shift, during their shift and after, they’ll tell you more and more and share with you.”
Ross has identified a couple of people at his restaurant who have leadership potential just by the way they act when they are at work.
“Nobody has any idea that these two would want to move forward,” Ross says. “They don’t tell anyone anything about it. They don’t particularly coach others. But I can see it in them. I can see the light. That’s where the leadership of management comes in. You start to move in their direction and say, ‘How would you like to run the safety committee? How would you like to do a walk-through of the restaurant with me and see how things really operate?’ It’s that light that comes on in their eyes. You can see it right away.”
Another part of it is having open conversations with employees about what they are doing right and why it’s working so well.
“You just say, ‘Lauren, tell us how you sold so many desserts last Friday? How are you speaking to your guests to get so many compliments? Or Amber, how are you driving these repeat guests in a store that has only been open for four months?,’” Ross says. “That’s attributed to their happiness on the job and leads to their ability to teach others and they always jump at the chance to do that.”
CPK plans to continue to roll out its new “de-chained” restaurant model and Cox says she can’t wait to see what happens next.
“This is the first company that has made me stop and go, ‘Wow, I actually have a potential future here,’” Cox says. “All the managers I talk to love what they do and I haven’t had a single experience yet that has dissuaded me from wanting to further my career with this company. I’ve had nothing but encouragement from my management staff and all the other higher-ups I’ve had the opportunity to interact with.”
Execution has been and will continue to be the key, Ross says.
“The line of demarcation has been broken down,” Ross says. “G.J. invites our employees to have lunch with him and have meetings with the corporate teams. There is just this exchange of information, ideas and feelings that just was not there before. It’s a pleasure to see it unfold and see all the things they talk about happen.” •
How to reach: California Pizza Kitchen Inc., (310) 342-5000 or www.cpk.com
G.J. Hart was a big fan of California Pizza Kitchen before he took over as CEO in August 2011. One of the reasons he liked the restaurant chain so much was its willingness to be different from its competitors in the pizza industry.
“It was unique, a place that created a special experience for folks because it dared to be different,” Hart says. “You can’t rest on the status quo in any business, but in this business in particular. It just moves too fast.”
When he arrived at California Pizza Kitchen, Hart, who previously helped Texas Roadhouse grow from $63 million in 1999 to more than $1.2 billion in 2011, saw an organization that wasn’t quite as pioneering as it once was.
“CPK had gone through significant ups and downs, ownership changes and challenges,” Hart says. “It had just morphed to where the innovation wasn’t as forefront and top of mind as it was over the years.”
Hart wanted to get the company back to its innovative roots. He felt CPK and its 13,180 employees were at their best when they stepped out and tried new propositions instead of following a more conservative philosophy.
“I felt it was an iconic brand that had made its way in casual dining in a way that was unique and different than many others,” says Hart, who is also the company’s president and executive chairman.
When CPK opened its first restaurant in Beverly Hills in 1985, it used an open kitchen to prepare hearth-baked pizzas such as The Original BBQ Chicken, Thai Chicken and Jamaican Jerk Chicken. The company has expanded from California to more than 260 locations in more than 30 states and 11 countries, as well as in airports, concession stands at sporting events and the frozen food aisle of grocery stores.
“How do we effectively bring what was the best of CPK and CPK’s history forward and make it relevant today?” Hart says. “I like to say it’s brand evolution and not revolution, which is why we call our strategy the next chapter. It’s really getting people to be open-minded and to use their brains more than going through the motions because it’s worked over the years.”
Build your foundation
Hart’s initial goal at CPK was to talk to people at all levels of the organization. It involved speaking to thousands of employees, as well as managers and general managers in 40 cities over a period of four months. Hart wanted to share his thoughts, but he also wanted to hear what his employees thought about what CPK could be.
“They get to know you by the way you interact with them,” Hart says. “So for me, it’s seeking to understand where they are, where they want to go as individuals, where they feel like we are as an organization and truly listening to them and asking a lot of questions.”
As employees saw how curious Hart was in what they were telling him and how engaged he was, they began to share their feelings.
“As I ask the questions, they’ll sometimes think twice about how to answer,” Hart says. “That leads to the next part, which is, ‘OK, what would you do about this?’ It’s starting to build that collaborative spirit, which is done through communication. And it’s through communication that people start to build trust. Trust is earned over time, it develops and they start to feel more confident.”
In those first encounters, Hart was fully aware that people were trying to get a read on him just as much as he was trying to get to know them.
“There has been a lot written about my leadership beliefs,” Hart says. “Right or wrong, they are mine. I like to take ownership of them.”
When you can be transparent and confident in who you are and can get the people you lead to do the same, you begin to develop a framework to make things happen.
“They test you on that,” Hart says. “It’s like, ‘What are you doing when no one is looking?’ I always feel someone is looking, so the behavior needs to be real and genuine. Once they figure that out, you start to break down barriers and things start to come together.”
Understand what you do
During his first 15 months at the helm of CPK, a lot of time was spent on what Hart likes to call the “blocking and tackling” of the business.
“Are we doing the business fundamentals the correct way?” Hart says. “Are there ways that we need to address hospitality? There were many. Are there things we need to address with the menu and execution? There were many. Do we need to continue to work on being able to deliver guests the experience they deserve for their hard-earned money? There were a number of ways we looked at that.”
The dialogue was ongoing with back-of-the-house employees, front-of-the-house employees, dishwashers, hosts, etc. Summits and roundtables were held to get at the key factors that would separate CPK from its competitors.
One of the results was the creation of a mission statement, something that many organizations have, but don’t follow.
“Most mission statements tend to be too long and diluted,” Hart says. “Ours is pretty easy to understand and people really latched on to it. It talks about passion, being committed to inspire and California creativity. We got people aligned around that and then we started to develop a longer-term strategy based on those near-term needs that we learned.”
A critical component to any company in the restaurant industry is customer service. On paper, it seemed like CPK had an effective system that covered all the bases.
“We had a very structured approach to service,” Hart says. “There are nine steps you take to execute a guest experience once you arrive at a table as a server. ‘My name is so and so and I’ll be your server. Would you like a drink?’ And so on.
“That was great, but it had not evolved over time to have sensitivity for the overall guest. We were treating a couple with two screaming kids the same way we might be treating a couple that was on a date night. That sensitivity got lost because the structure wouldn’t allow it.”
Hart didn’t want CPK customers to get the service they expected. He wanted them to get service that went above and beyond expectation and would resonate with them — to the point that they would want to return and tell their friends and family to check out CPK.
“We started to focus on the overall experience of hospitality,” Hart says. “We went from a sequence of service to being much more sensitized to the guest’s needs. How do we wrap those needs around providing a model that gets them addressed, but still stays focused on the details that matter?”
When Hart talked to employees, he would discuss situations and ask whether a particular action taken in response made sense. It got them thinking. Then he introduced a scenario in which they had just met Hart and a group of his friends who made plans to visit that person’s house for dinner in the near future.
“Let’s go two weeks out and tell me what you might do to prepare for that dinner,” Hart says. “Then I’d go from two weeks to one week to the day of the experience. It wouldn’t take long until they’d say things like, ‘I would make sure I learned more about you and what you might like for dinner.’ I’d say, ‘Why would you want to do that?’ They would say, ‘I want to make you happy.’”
It would continue until employees began to think about what they could do to please customers and no longer think of just a checklist.
“The lights start to go off,” Hart says. “Let’s make it stimulating enough that they want to be part of the solution. When you do that, it starts to make sense and when it makes sense, it’s because you answered the ‘why,’ the ‘what’ and the ‘how.’”
As employees become engaged in more personal customer service, CPK has also started changing physically. The company has opened two new locations as part of its “de-chaining” strategy, which moves away from the “expected, shiny feel of a fast-casual restaurant” to a more local, earthy scheme that is “rustic, organic and relaxed.”
One new location opened in Canoga Park, Calif., another in Sawgrass, Fla., and more locations are in the works under this new model.
“It’s creating discipline and the systems in place to allow, or at least try to allow the voices to be heard,” Hart says. “We’re pretty good at that and we’re getting better over time. It will improve as this collaborative approach is really embraced and understood totally in this environment.” •
- Ask lots of questions.
- Give some thought about what you do.
- Let employees think.
The Hart File:
Name: G.J. Hart
Title: President, CEO and executive chairman
Company: California Pizza Kitchen Inc.
Born: Hilversum, the Netherlands
Education: Business management degree, James Madison University. In 2012, Hart was elected as a charter member of the JMU Hospitality Management Hall of Fame. About receiving the honor, Hart says, “It’s probably one of my proudest moments. You always think about your history and about growing up and I worked through college. It’s cool to be able to be recognized.”
What were some of your earliest jobs and what did you learn from them? I was a Little League umpire, a dishwasher at Howard Johnson’s and then a teller at Kmart. They taught me about being around people and being in the people business. More important than that, is hard work. I’ve never lost sight of the fact that what a lot of folks do every day to make their living is hard, hard work. You have to be willing to pay the price and earn it.
Who has had the biggest influence on you? A fellow who was my first major boss, and who has since passed away of Lou Gehrig’s disease, a big German guy named Jerry Steinpres. I worked for him when I was in the poultry business. He’s a very tough, hard-nosed guy. He was a mentor in a lot of ways because he cared about me and my development. I also learned what not to do.
What is your favorite menu item at CPK? I have lots of favorites, especially since I’m helping to develop some of them, but The Original BBQ Chicken pizza is still my favorite.
California Pizza Kitchen Social Media Links:
How to reach: California Pizza Kitchen Inc., (310) 342-5000 or www.cpk.com
Alco Packaging was a troubled company when Melvin Berlin purchased it in 1988. At the time, he offered his son, Andrew, the chance to be part of the negotiating process and then serve as general counsel and director of marketing at the newly acquired company. Within a year, Andrew became the company’s president.
A second-year associate at a Chicago law firm, Andrew had grown up soaking in every bit of knowledge he could from his father about how to succeed in the working world.
“I didn’t know he was my mentor at the time, I just knew he was my dad, and I looked up to him and respected him greatly,” Berlin says.
“The thought at that time was we would be in this company together and would turn it around, make it a nice company and flip it in a few years,” he says. “But here we sit 25 ½ years later, and I never got around to flipping it.”
When the Berlins bought Alco, sales were at $69 million. Today, the company — now known as Berlin Packaging LLC — is pushing $800 million in sales and has 535 employees.
“I give my father a lot of credit,” says Berlin, who now serves as chairman and CEO. “He had a lot of faith in me, gave me the opportunity and trusted me enough to do what I felt needed to be done to turn the company around and not only make it profitable, but turn it into a juggernaut.”
For many leaders, the success Berlin achieved rebuilding the packaging business would be enough to leave behind an impressive legacy. But it wasn’t enough for Berlin.
In 2011, he bought the South Bend Silver Hawks, the Class A affiliate of the Arizona Diamondbacks.
Based a little more than an hour away in South Bend, Ind., the team was another troubled organization that needed an infusion of strong leadership and passion to get things turned around.
Berlin, who is also a limited partner with the Chicago White Sox, was confident he was just the man for the job.
“What I provide is a lot of money and a lot of tyranny,” says Berlin, the minor league baseball team’s chairman and owner. “And tyranny is with a small ‘t.’ It’s not really tyranny. I just have a lot of great ideas.”
Put your cards on the table
When Berlin got his first taste of leadership at the company that would soon become Berlin Packaging, he had two things working against him.
“I was young and I was a lawyer,” Berlin says. “It was very difficult, but the company was sinking, and we had to make dramatic changes. But I learned how to be a good recruiter. I focused on creating a sense of Camelot where you could finally do and be and behave and accomplish the things and engage in your dreams in a way you never could before.”
The key component of Berlin’s turnaround plan was the psychological contract he made between the company and its employees. It would later become the subject of a case study in the book, “The Human Equation: Building Profits by Putting People First” by Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business.
It lays out a series of promises that the company will make to its employees. In return, there is a list of expectations to which the company will hold employees accountable.
“It’s a deal we make on day one,” Berlin says. “I promise to give you these things and you promise to give me all these things. This is how we’re going to govern and measure our relationship.
“At the end of the day, we didn’t hold any patents where nobody else could sell the product we were selling. It was a very competitive industry. So we had to create a competitive advantage through our people.”
Here are the five things Berlin promised his employees:
- Outstanding compensation — “We’re going to pay you superior compensation, not competitive compensation. I’m talking about significantly more pay for the same job than anyone else.”
- Growth — “We will give you a chance to grow in your position, your compensation, your title and intellectually, we will help you grow as a businessperson.”
- Strong leadership — “This company is going to invest dollars, time and energy in making sure not just that good leaders are in the executive suite, but at every level of the organization.”
- A helping hand — “We’ve had instances where family members passed or someone needed help with money or their home burned down, and we wrote them a check to help them replace their wardrobe overnight without expectation of being paid back.”
- Skill development — “We’re going to invest in training. That won’t get cut because it’s important you be better the next day than you were the day before.”
In return for these promises, Berlin laid out his own expectations for his team.
“I expect you to help us increase our profit,” Berlin says. “You either have to help this company sell more, reduce our operating expenses or improve our productivity. Those are the only three ways to be more profitable.”
As an employee, you are also expected to be productive, be a contributing member of the team-oriented culture, embrace innovation and be 100 percent loyal to the organization.
“Only when there is trust can you criticize each other,” Berlin says. “You can fight with your friends and your family, and it’s alright, as long as you trust each other. If you don’t trust each other, that conflict can get pretty ugly.”
The numbers would support the notion that Berlin’s contract with his employees has been a smashing success, but like anything in life, it hasn’t been perfect, and it has required significant effort.
“In order to pull this off, you need good leaders to believe it, teach it, intellectualize it, communicate it and hold people accountable to it,” Berlin says. “The process and the policies and the leadership around this T-chart took a lot of work to create. What a lot of companies get focused on is the short term.”
Berlin has never forgotten a saying from his father about the fleeting nature of great ideas such as the one he had for a contract between his company and its employees.
“My father once told me that anyone who has ever had a shower has had a good idea,” Berlin says. “Every company has a bucket full of good ideas. The difference isn’t the good ideas; it’s whether or not you’ve found the right person to execute them. Did you train them well? Do you have a retention strategy to keep them there?”
And are you willing to accept that all great ideas don’t need to originate with you?
“Don’t let anybody believe you think you’re the smartest guy in the room,” Berlin says. “You’re not. You just have a unique perspective. The best ideas in our company don’t come from the executive suite. They come from the people who are really doing the job and making things happen.”
Berlin found strong leaders at the packaging company, and he took a similar approach when he bought the Silver Hawks. He hired a strong team president named Joe Hart and let him do his job while keeping the focus on being the best. He figured out who had the best ballpark hot dogs, who played the best music and who had the most lovable mascot, and quickly adopted each item or concept for his own team.
And to gather names and contact information for a customer database, Berlin launched Flat Screen Fridays. At each Friday night home game, the team would giveaway a flat-screen TV every inning. Fans would fill out their contact information on each entry form and in less than two years, Berlin had more than 200,000 names that he could call on to see how he was doing in satisfying his customers.
“It’s doing everything first-class,” Berlin says. “It’s really focusing on that customer thrill, that surprise and delight and being able to measure it, quantify it and change the way you do business to get people to want to do business with you and to promote you, which helps you grow.”
Berlin looks deeply at each touch point in his business. At Berlin Packaging, it’s the conversation with a sales person, the delivery and the response when there is a problem. For the baseball team, it’s what you see when you drive up to the ballpark, what you smell on the concourse and what you hear when you’re sitting in your seat.
It all begins with a healthy relationship between you and your employees.
- Set clear expectations.
- Build trusting relationships.
- Be the best.
The Berlin File:
Name: Andrew T. Berlin
Title: Chairman and CEO, Berlin Packaging LLC; chairman and owner, South Bend Silver Hawks
Born: Highland Park, Ill.
Education: Bachelor’s degree in political science, Syracuse University; law degree, Loyola University Chicago.
Who has had the biggest influence on you? My father. He taught me the measure of a person is not based on a W-2. It’s based on a warm heart and a kind soul. To that end, I begin every relationship with the expectation that until someone gives me a reason not to, I believe in it.
Berlin on working hard without results: If you have an employee who is putting in the effort, usually you can find a way to turn that effort into profit and help them work smarter. Someone can work 10, 12 or 14 hours, but I’m not sure all of that work is smart. What are you doing during your day? Let’s do timesheets together to break into categories over the next couple of weeks what you’re doing, and how you’re doing it. Together, we might discover some activities that aren’t yielding results.
Berlin on creating value: If you’re going to do something, do it first class. I hate value engineering. I like going in and doing everything just so because I think my customer or my fan is going to appreciate that they get a first-class experience at a very fair price. That’s what leads people to say, ‘I’m spending this money on this, but I feel like I’m getting something really great in return.’
When Rich Wilson joined CertaPro Painters in 2003, the company was taking in about $50 million a year in sales. That doesn’t seem like a bad number, but the residential painting franchise company had become stuck at that level, and there wasn’t much reason to believe it was going to change anytime soon.
As he started to talk to people to learn more about how the 50 employee, 340 franchisee operation worked, Wilson discovered there was an intense focus on how things were done at the company. The problem was that it rarely got beyond that foundational level of dialogue.
“They were great at creating pictures and eloquent language around how to get a lead or produce a job or hire a painter,” says Wilson, the company’s president and CEO. “But they had no relevance to what the franchisees needed to inspire them to grow. They were more concerned about writing policies and procedures about how to do mundane things in the field. They weren’t connected to the goals and aspirations of the franchisees.”
When Wilson joined the company, he was brought in with a very clear mandate.
“I wasn’t brought in to maintain,” Wilson says. “I was brought in to grow the business. In the first meeting I had, I asked them to rate the group dynamic on a scale of one to 10. We were at a 4.6, which was really bad.”
The culture had to change and Wilson used two words to define how he wanted it to happen: Results matter.
“We should know how our franchisees are doing versus their goals versus the marketplace versus competition,” Wilson says. “We need to find ways to inspire them to grow and then have programs that will actually help them facilitate that growth. So it was a sea change and a culture shift.”
Wilson wanted both employees and franchisees to think big.
“We needed people who had the competency, commitment and skills to be able to execute our vision of growth,” Wilson says. “They bought a franchise or came to work for us because they wanted to grow a business. If they just came in to replace an income or just be complacent and good with the status quo, I didn’t want them on the team.”
Sort out your players
Wilson may have drawn a line in the sand with employees at CertaPro, but he says he didn’t join the company with the intention of firing people.
“There were people who repelled the message that results matter and there were people who embraced it,” Wilson says. “Ultimately, with the people who embraced it we worked together to build a program that would drive the company forward.”
Wilson wanted to hear what was on everyone’s mind. He wanted to give those with concerns a chance to express them rather than just show them the door.
“I can look at a report and go, ‘OK, here are my conclusions,’” Wilson says. “But what really matters is the people who have to carry out the execution of all that. I need to understand where they are coming from. I may not agree with it, but I do need to listen and understand.”
About 40 percent of the staff did not buy in and left CertaPro within the first four to six months of Wilson’s arrival.
That’s a lot of turnover, and Wilson made sure to let others know every time someone decided to leave the organization. It wasn’t about criticizing people who were leaving; it was more about Wilson wanting employees to see transparency at every turn.
“In the absence of information, people think the worst of everything,” Wilson says. “So if I just had a conversation where someone was exiting the company, I’m going to be on the phone to at least my direct reports, and then I’m going to tell them to get on the phone with their direct reports immediately. Quick communication helps the culture.”
What also helps is letting those people who won’t buy into your plan leave, even if you think you can eventually get them to come around.
“If I think, ‘OK, I just need to keep this person for another day, another quarter, another month, whatever — that’s the wrong move,’” Wilson says. “I’m doing the wrong thing for the company and for that person. Who wants to have a job that really in your gut, you know you’re on the way out?”
This process, while difficult at times, gave Wilson an opportunity to move forward and build a plan with the people who were excited about the company’s growth strategy.
“I could come up with the best MBA plan in the world from Harvard Business School and say this is what we need to do and this is what we’re going to do,” Wilson says. “That’s not going to work anywhere near as well as the plan that the people who have to execute it actually participate in creating.”
Lead with a steady hand
Wilson had an objective in his mind from day one of what CertaPro could achieve in terms of profitability and when that goal could be achieved.
“I had an idea, a hypothesis of what the vision should be,” Wilson says. “But that was shaped and is still being shaped today through experience. The vision is an aspirational one, but you have to be willing to adapt to the environment and other opportunities and present them.”
In other words, the great idea you come up with today may not look as good to you six months down the road.
The thing that needs to remain steady for the sake of yourself and your employees is your strategic direction. So when Wilson wanted to focus on results at every level of the organization and engagement about how to drive those results, the strategic approach had to remain consistent.
“It’s a big deal when you change your strategy,” Wilson says. “We’ve altered it twice since I’ve been here in 10 years. When you start to respond with a knee-jerk reaction, you come across as muddled and no one knows where you’re going. It’s impossible for everyone to row in the same direction.”
One thing Wilson tries to do that has been helpful is being concise when talking about what CertaPro does.
“I give speeches all the time,” Wilson says. “The key is being able to passionately and genuinely describe your company in five to seven minutes. Being very clear on what the values of the company are, what the mission and vision are and what the objectives are. People use those words interchangeably, but I can tell you all four of them and I’m pretty certain 85 percent of the company can do the same. My goal would be to have 100 percent.”
Consistency will also prove helpful to you when you have to make a decision others don’t agree with, but you feel is in the best interests of the organization.
“I believe very strongly in collaboration and I don’t believe in top-down management,” Wilson says. “I want feedback, and I want most people to agree with where we are going.
“However, it is the CEO’s job to make a decision. If 30 percent or even 60 percent of people don’t agree with that decision, but you believe strongly it’s where you need to go, stand firm. Your job is to be the compass. If you’re not sure and you hesitate, obviously you’re not.
“You lead through influence, not power. If it’s in the best interest of the franchisee, and they are inspired to go in the direction you want them to go, they will go there. It’s the same thing with an employee. You could be lazy and say, ‘You’re going there because I pay your paycheck.’ But it’s so much better to inspire them to go where you want them to go.”
Don’t rest on your laurels
Wilson’s collaborative culture paid immediate dividends. The company grew by an average of 23.5 percent from 2003 to 2007.
“We were crushing it,” Wilson says. “But if we were arrogant enough to think that what allowed us to crush it from 2003 to 2007 was going to get us through 2008 and 2009, we would have failed dramatically. I always caution people to be very careful to not become arrogant and think you’re the best because of what you did yesterday.”
The team did adapt and the growth at CertaPro has taken off once more. Sales totaled $227 million in 2012. There are plans to have 50 new franchise locations opened across North America by the end of this year and Wilson wants to hit $500 million in sales by 2016 and $1 billion by the end of the decade.
“When people from outside the company come in and experience our company today, whether they are prospective employees, prospective franchisees or even customers, what they’ll comment on is our culture,” Wilson says. “It’s a culture of performance, of collaboration and of very hard work. But it’s also a fair amount of fun.” •
- Think before you act.
- Limit your surprises.
- Keep trying to get better.
The Wilson File
Name: Rich Wilson
Title: President and CEO
Company: CertaPro Painters
Born: Frankfort, Germany
Education: History degree, Dickinson College, Carlisle, Pa.
What led you to choose history? I was going to be a premed major, and I didn’t do very well in organic chemistry. I do love reading and I’m still an avid reader, so that’s why I fell back on history.
What was your first job? My first paid job was landscaping and farm work. I cut lawns and baled hay for $2.15 an hour.
Who has had the biggest influence on your life? Probably my mom. She died when I was 20 after a horrible divorce. She had brain cancer, but she really held it together for my two siblings and I. In terms of tenacity and temerity, she found a way to live until my college graduation.
What is your favorite book? “Atlas Shrugged,” by Ayn Rand. It’s about self-determination, rugged individualism and getting stuff done yourself and not counting on the government.
What person would you like to meet? It would probably be Gandhi. The courage he had to face down the British Empire was phenomenal. He inspired so many people like Martin Luther King Jr. I’d love to understand the thought process and the mettle that it took to embark on what he did. It was incredible.
How to reach: CertaPro Painters, (800) 689-7271 or www.certapro.com
Bjorn Rebney was not to be denied, even after spending 16 months meeting with 61 investors and walking out each time without a financial commitment to support his dream.
“I characterize myself as pleasantly relentless, and I tested the limits of my pleasantly relentless personality when I was going out trying to get funding,” Rebney says.
He had been hoping to get funding to launch a mixed martial arts business, a sport of which his passion for stretches back 20 years.
“It’s as pure and straight forward as it gets,” Rebney says. “It’s one man vs. one man in a ritualized combat scenario. Mixed martial arts is the most perfect example of those attributes, drivers and factors that we love about sports.”
Rebney fell in love with mixed martial arts as a fan, but now he wanted to turn that love into a thriving and successful business. He spent three years from 2005 to 2008 analyzing the mixed martial arts industry to figure out what was working, what wasn’t working and what he needed to do to build the right business model to succeed.
Bellator MMA is the product of all that determination. Rebney founded the company in 2008 when he located an investor who believed in his vision. Up to that point, he fully understood why it was taking so long to find support.
“It was so new and the only player in the space that worked was UFC (Ultimate Fighting Championship), which was privately held and closely guarded their financials,” says Rebney, founder and CEO of Bellator. “There was no way for investment groups to look at any kind of tried and true track record of other businesses and say, ‘This would make sense from an investment perspective.’”
There were two other companies involved in the MMA business at that time, both with financial records open for inspection, but in this case, that wasn’t going to do anything to help his plight.
“They were failing miserably and were losing tens of millions of dollars each year,” Rebney says. “Anyone who looked at their financial models as publicly traded companies and looked at their books would say it looked like a complete disaster.”
His tenacity certainly played the biggest part in his ultimate victory. But it didn’t hurt that he met an investor who may have been an even bigger MMA fan than he was.
“He was tracking the UFC, understood their business model and had been pitched by all of the other failed entities as they were getting ready to go out of business,” Rebney says. “When he listened to me, we clicked immediately. He said, ‘This could work.’”
Be truly unique
Rebney can point to a number of factors that help explain why Bellator appears in more than 100 million homes across the nation each week. But his ability to provide consumers with a real and different point of view from UFC is perhaps the biggest reason for his success.
“One mistake people make in business that I see often is they try to create a point of difference for the sake of creating a point of difference,” Rebney says. “Sometimes, they lose the connectivity to realizing that even though it’s different, that doesn’t mean it’s going to be attractive to consumers.
“It doesn’t mean people are going to buy the product or watch the product or log on to learn more about the product. Your point of difference has got to be substantive. It has to be something that people point to and say, ‘Whoa, that’s a great reason for me to watch this content as opposed to the other content.’”
Rebney wanted to create an organization that was built on the premise that athletes would advance through skill and competition. This would differ from how it was setup in UFC.
“The UFC uses a formula where they have a guy who sits behind a desk and decides who fights who for what and when,” Rebney says. “They choose who fights for the world title based on what they think they can sell to consumers. There’s nothing inherently wrong with that, but that’s very entertainment-centric.
“That’s like a casting agent who picks a certain star for a film because they believe people will buy tickets to watch that star perform. What I did was create a dynamic and a model that said this is going to be pure sports competition. It’s going to be tournament-based, and if you win the tournament, you’ll earn the right to fight for the world title.”
Rebney’s goal wasn’t to put UFC out of business, nor was he claiming that it had a flawed business model. Clearly UFC has experienced success with the way it does things. But being a copycat of another business, even a successful one, is not always the best way to build your own profitable business.
“More often than not, when someone just tries to duplicate that model, it results in failure,” Rebney says. “If they try to look at what that other group has done and establish a substantive point of difference, even if it’s a slight difference, it can catapult that second player into a very prominent position in the industry. And in some instances, it can catapult that second player into the first position.”
Be willing to adapt
As it turns out, Rebney’s idea struck a chord with MMA fans. In fact, the growth took off to such a degree that it became a bit overwhelming. The company launched in 2008 and today has a presence in 117 countries around the world. It has 70 employees, as well as 25 local hires that are brought in for each event the company produces.
“We were coming out of the tail end of our alliance with Fox and getting ready to make the move over to a new alliance we had with Viacom,” Rebney says. “There was an amazing amount of movement going on at that moment. I recognized very clearly that it was a seminal moment for the company in terms of what the future would hold.”
The biggest aspect of this challenge was the fact that as Bellator continued to grow and draw interest from potential media partners such as Viacom, the parent company of the Spike TV network, the company’s key leaders were spread across the country in New York, Chicago and the company’s headquarters in Orange County.
“We were crisscrossing the country with key information,” Rebney says. “It wasn’t just about setting conference calls to solidify the understanding of what needed to happen next. It was the development of content, the production of TV shows and the orchestration and operation of events that were in arenas with 10,000, 15,000 and 20,000 people.”
Bellator does 25 to 30 live events a year with million-dollar production budgets and countless support staff, in addition to the fighters. Rebney quickly understood the distance was adding a lot of unnecessary stress to everyone’s work.
“From my perspective, you can never underestimate the power or importance of being able to sit with your people in the same room and strategize with them and talk to them about objectives and goals and how to deliver on both of those,” Rebney says.
So he made the decision to move his teams out of New York and Chicago and bring them together under one roof in Southern California. It solved a big problem, but Rebney still faced the challenge of finding the other people he needed to fill positions in an industry that was still very new.
“It was a lot of times finding people for positions who we thought would be great fits because they had great intensity and motivation,” Rebney says. “But you still couldn’t look at someone’s resume and say, ‘Oh, I see in our exact business, you did A, B, C and D.’ That made it difficult.”
So Rebney had to get creative. He had to think about the potential pitfalls and challenges that exist in the MMA world and pose those hurdles to job applicants in their interviews.
“The scratch-and-sniff tactic I’ve employed has been to give people legitimate tasks that apply to our company in a real world situation,” Rebney says. “You could say, ‘This is the conundrum we’re facing. Let me know what due diligence questions you’ve got so I can supply you with all the substantive data from Bellator and what we’re trying to do. Can you get back to me with some answers and a memorandum that addresses these issues?’”
Rebney dug deeper to increase his odds of making good hires and he ended up with a stronger team as a result. But that doesn’t mean he’s eased up on his own workload.
“It was 5 ½ years ago that I took my last vacation with my wife,” Rebney says. “To the detriment of my personal life, I’ve kept my personal connectivity to the business.”
Rebney says he doesn’t see himself as a micromanager since his involvement does not stem from fear that his people can’t make important decisions on their own.
“The big difference is in trusting your people and recognizing that you’re not always right,” Rebney says. ●
- Find a true differentiator.
- Make the tough decisions.
- Find people you can trust.
The Rebney File
Name: Bjorn Rebney
Title: Founder and CEO
Company: Bellator MMA
Born: Los Angeles
Education: Undergraduate degree in philosophy and master’s degree in sports business, Ohio University; juris doctorate degree, University of the Pacific, McGeorge School of Law. Passed the California bar exam.
Why did you pursue a law degree? When I was young, I looked around the landscape of top executives, CEOs and chairmen of major companies. There was one standard thread that seemed to run through almost all of them. They had their law degrees and they were attorneys.
Who has had the biggest influence on your life? My wife. She drives me to be a better person and a better man. I’m in a very aggressive business and industry. She’s kept me very grounded in terms of interpersonal communication skills, working with people and analyzing things from a very calm perspective.
What one person would you really like to meet? I had the privilege, really the honor, of having dinner with Nelson Mandela in a small group of about six people around 15 years ago. I literally became tongue-tied. What he did and what he was willing to give up for what he believed in and his desire to achieve something was so dramatic and so powerful. I only wish I had been able to have a bit more maturity and age to have been able to ask him more questions and engage him in more conversations.
Rebney on his tenacity: Very seldom do you hear someone say, ‘Well, I came up with a business plan, and I wrote it and I had three meetings and on the third meeting, they gave me $25 million.’ It just doesn’t happen like that. As my dad used to always say, ‘If it was easy, everybody would be doing it.’ It’s not easy, but it’s incredibly satisfying.
How to reach: Bellator MMA, (949) 222-3400 or www.bellator.com
It didn’t seem like the best time for Lisa Sachs to start her own business. It was the early 1990s and the recession that would ultimately cost President George H.W. Bush his job had taken hold of the U.S. economy.
Sachs didn’t see it that way, however. In her eyes, this was a great time to start a business.
“That was an opportunity for me because the company I was working for went out of business,” Sachs says. “The clients I was servicing bought me out and wanted to know what I was going to do about it. So that became an opportunity to start my own business.”
And so Construction Controls Group Inc. was born. As a registered architect and certified construction manager, Sachs launched her business and things began to take off. But soon, she was faced with another challenge. The business was growing too fast.
“What I quickly learned was when you grow quickly, which started to occur in the late ’90s and early 2000s, in order to sustain that growth, you have to continue to grow and that’s another challenge,” Sachs says. “I needed to either seek a partnership or consider an acquisition or merger.”
Anyone who has built a business of his or her own has a high level of confidence in the ability to make things happen. But the best leader is rarely the one with the biggest ego.
“Servicing clients was what I could do very well,” Sachs says. “But sales and marketing was going to be my downfall downstream. Knowing in the back of my mind what that weakness was, I went in with a very strong opinion of either a strong partner that would have that strength or a strong firm that would have that capability. I knew if I didn’t do something, I was going to be in worse shape. But it’s still a tough decision.”
Think before you jump
As you begin searching for a partner to either merge or sell your business, you need to make sure you’re clear in your own mind as to why you’re taking this step.
“If you’re doing it just for the money, it’s not going to be successful,” Sachs says. “Maybe it’s successful for you, but it’s not successful for the team you’re leaving behind. You have to stay involved and have skin in the game to really make a transition successful.”
When Sachs began searching for a partner for her business, she set some clear parameters to guide the process.
“You need to figure out what company is the right fit for your organization, your vision and your culture,” Sachs says. “I’ve seen companies get swallowed up by larger firms and they lose themselves.”
Sachs was proud of what she had built at CCG, and she didn’t want to just throw all that away. But she recognized that it would be useful to have a third party that could help steer her toward a partner that matched her desires.
“Don’t go after something like this on your own,” Sachs says. “Get a consultant. It’s very important to have a third party that knows how to do the research and investigate what types of firms to go after. More importantly, in the negotiations, they know how to negotiate on your behalf better than you could on your own.”
The consultant Sachs hired gave her insight on marketing her company and the kind of information that potential partners would want to know before making a deal. A consultant can provide a lot of support, but they can’t make the final decision for you.
“You definitely have to trust your instincts and read people,” Sachs says. “If you’re not just selling and jumping ship and you’re going to stay involved in the business and sign an agreement for a period of time, it’s a marriage. You want to make sure you like who you are getting in bed with. You have to trust them, but you also want to like them.”
Sachs and her team built a list that grew to 20 potential partners and was eventually whittled down to four to six firms. But one of the names that had always been high on the list for Sachs was Finlay Cumming and Cumming Corp.
“I had known Finlay Cumming for many years before that,” Sachs says. “I knew what he was made of, I knew his culture and beliefs, and I really felt a connection to him.”
Sachs acknowledges that doing business with friends often isn’t a good idea. But in this case, the relationship between Sachs and Cumming was professional.
“I never had worked with him or for him,” Sachs says. “If we had worked closely, it’s like going into business with family. There is always a danger that you have expectations and once you work with someone, you’ll be sorely disappointed.”
Lead with integrity
As negotiations moved along between Sachs and Cumming, she wanted to make sure her people were not left in the dark about what was going on. She couldn’t tell them exactly what was happening, but she didn’t want to mislead them either.
“What we did was we explained we were doing an internal audit process, which was the truth,” Sachs says. “Never lie. So that worked out very well. We also had a Christmas party that December, and I announced that there were some exciting new changes ahead in the coming year. I didn’t expand on what that would be, but I wanted to give them a heads-up that something was in the works.”
When the deal was finalized in January 2008, Sachs immediately set up site visits to her company’s two locations in Los Angeles and Orange County.
“We made a breakfast, a lunch and an evening cocktail time,” Sachs says. “We gave people the option of going to any one of those three, depending on where they lived. We presented what was going on and made sure to have the leadership of the new organization as well as myself at these meetings.”
As much as you talk about the benefits of a merger or the great things that can happen now that your company has been acquired, it’s going to create some nervous moments for your employees. The best thing you can do is keep the best interests of your people in mind and find ways during the negotiating process to make the transition as seamless as possible.
“Cumming was very open to letting us operate the way we had been operating for quite some time and with very little interference,” Sachs says. “The biggest impact was the benefit changes because there are obviously bigger plans when you’re part of a larger organization. That was the part where we had to show you were getting apples to apples. It took a lot of work to structure that for people so they understood. You have to make people feel whole during this process.”
Set the right tone
In the interest of making the transition easier, Sachs and her group kept the CCG name for a while after the deal had been completed.
“We gradually transitioned it to CCG, a division of Cumming Group and then within two years, I realized we just needed to be called Cumming,” says Sachs, who is now a managing principal at the $50 million company, which has about 250 employees. “It’s better not to confuse people and to move forward to complete the transition.”
That doesn’t mean it was easy when Sachs saw the legacy she had built begin to fade away.
“I’ll never forget my first meeting with the marketing director,” Sachs says. “It was, ‘OK, now we’re going to change your letterhead and everything else to Cumming.’ It was like a slap in the face. I don’t think of myself as a person with an ego, so I can imagine a person with a huge ego and how that would have hit them. It really hit me hard and took two years before I was really willing to let go of the name.”
When you’re becoming part of another organization, you have to find your place initially to become part of the new team without forgetting certain things that you think are good principles with which to run a business.
“If you bring up every little thing that bothers you and you’re a negative person, it’s like the little boy who cried wolf,” Sachs says. “They’ll start to ignore you and not pay attention. If you bring some valuable ideas to the table and you prioritize what’s really important and approach it in a positive, constructive manner, you can be very successful.”
Sachs is pleased with the organization she and the team at Cumming Corp. have built together and has high hopes for the future.
“Bring value and you will be respected and appreciated,” Sachs says. “Most of all, have a sense of humor and never take yourself too seriously. That goes a long way toward gaining acceptance.” •
- Think before you act.
- Remember your team.
- Pick your battles.
The Sachs File
Name: Lisa Sachs
Title: Managing principal
Company: Cumming Corp.
Born: Melrose, Mass.
Education: Rhode Island School of Design
How did your life change at 10 years of age? My mother at a very young age had breast cancer and was basically told she had four years to live. So my father sold his business, sold the house in a day and because she knew some French, we decided to go to France. As it turned out, my mother only died a few years ago, so there’s a good story to this. It brought our family very close together to go on a Robinson Caruso adventure.
What was it like going through that at that age? It definitely influences you as an adult having to learn to cope with new situations, languages and cultures at an early age. It probably helped me be the strong individual I am and someone who doesn’t hold a chip on their shoulder because I know how to communicate with people and have empathy for the differences. So what could be a negative turned out to be a positive. Some people in those changing situations don’t adapt well. But being a positive person, I think I was able to benefit from it.
What one person would you like to have met? Golda Meir. When I was in Israel, I believe she was the prime minister or maybe it was before I was there. She was such a strong woman who had so much integrity and had a family and did everything she set out to do, but was so important and relevant in history. What an amazing experience that would be to sit down and talk to her.
How to reach: Cumming Corp., (888) 676-3211 or www.ccorpusa.com
James R. Scapa has never been fond of sitting back and admiring what he has built. He has more fun taking a big chunk of it apart and putting it back together in a different way to see if he can make it work even better.
One thing he really likes to tinker with is Altair Engineering Inc., the business he launched more than 27 years ago.
“I tend to reorganize the company every year, which is very shocking to some people,” says Scapa, the founder, chairman and CEO of the simulation technology and engineering services company. “People usually hate change and are frightened by it. But here at Altair, they kind of expect it and it creates a lot of opportunity for people to change, adapt and learn.”
In the early days, Altair had only Scapa and his two partners. They had an idea to operate a consulting business in the new field of computer-aided engineering. The company now has more than 1,800 employees with offices in 19 countries and develops its own software.
The growth has forced Scapa to build a stronger infrastructure to support his business. But it hasn’t changed his view on the value of building a business that can be easily reformulated from time to time.
“As a company grows, you have to add levels of structure to every aspect of what you do,” Scapa says. “But I do find as the company gets larger that people sometimes make decisions that are a bit anathema to the way I would think about things. I still tend to think about things in an entrepreneurial way. When my people get away from that, I just try to bring the culture back and try to communicate to them a different way of looking at things.”
It’s hard to argue with the strategy as the company — with revenue topping $237 million in 2012 — has more than 3,000 clients representing the automotive, aerospace, government and defense and consumer product markets. It also has a growing presence in the electronics, architectural engineering, construction and energy markets.
“We’re very aspirational and we see that this company can continue to grow very significantly for many years,” Scapa says. “That’s not going to happen if we’re doing the same exact thing we’re doing today.”
Promote open communication
It didn’t take long for Scapa to identify his first big change at Altair. The company was doing computer simulations for customers and quickly realized the value of developing its own software to do the work. The change required a different focus from both Scapa and his team.
“We still do a lot of engineering, and we’re one of the best engineering companies in the world,” Scapa says. “But to be a software company, there’s a different level of marketing and branding that goes on to really do it at a high level. It’s very international and originally, we were very Detroit-based doing automotive related things.”
It’s the kind of change that requires a lot of communication and Scapa works hard to create forums for open discussions that will lead to the best ideas. The effort is even more critical when you’re expanding into new locations and bringing new people into your organization.
“If I go to our office in France where there are two major offices with about 60 people each, I’ll usually bring everyone in, and we’ll go around the room and people will introduce themselves,” Scapa says.
“They can tell me what they are working on or ask me a question, and I’ll be very candid and very open with our strategy and answer any questions that they have. I tend to pepper them with questions as well. Hopefully that communicates a persona and a philosophy for openness in our company.”
The focus of the company has been to work with customers to examine different technologies and develop products that will meet customer needs as effectively as possible. It’s often a very fluid process.
“It’s partially because technology is always moving and some of the things we do today will be irrelevant in the future,” Scapa says. “And it’s partially because we’re looking for new opportunities that take our core competencies and allow us to apply them elsewhere. We’re also adding other new core competencies so we can go after businesses that we think fit well with what we’re doing now.”
Over time, strong relationships have developed through this regular communication with both employees and customers. Altair has its own software, but is willing to augment its own tools with those found on the outside. And customers who were used to developing their own simulation tools in-house grew more willing to reach out to partners such as Altair.
“It’s a journey,” Scapa says. “We go out and experiment in markets, and we often fall on our swords. We have lots of failure at Altair. But we regroup and decide how we’re going to make changes either in development or in our go-to-market strategies. We continue to move on.”
Don’t be afraid of risk
So what makes for a good business opportunity? You should begin by looking at the size of the potential market that your idea best benefits.
“If there isn’t a large enough addressable market, then it’s not worth investing to go do it,” Scapa says. “It has to fit in some manner with the larger strategy the company has for its business. We’re looking for an area where we’re going to be able to create some competitive advantage and differentiation. That’s either through the technology or the business model we’re able to bring to market.”
Of course, even if your preliminary analysis finds that there is a sizeable market to be captured for the product or service you want to create, there are no guarantees.
“You have to experiment a bit, and that’s a lot of what I tend to do,” Scapa says. “Some of the experiments, you learn from and they just go away. Some are huge successes. Some transform themselves during the process from what you started out trying to do to something different, but something that actually is going to have traction.”
Key things that will always be relevant to customers in any industry are the ability to make decisions faster and create products that are more innovative.
“Speed to market and the ability for our customers to experiment with different designs is probably the biggest thing we’re looking for,” Scapa says.
Scapa doesn’t want people to get the wrong idea when it comes to his need to continuously transform his business or his openness to trying new things and taking risks.
“That doesn’t mean everyone is running around like a drunken sailor,” Scapa says. “But people have to have the confidence that they can try to do things and if they fail, they’re not going to get beaten up over it.”
Keep building your team
Scapa doesn’t remake his company to make everyone’s life difficult. He does it to adapt to the environment and to give his people more opportunities to grow.
“People are bringing their ideas to the table in a fairly aggressive way, and they tend to be able to have a voice here pretty easily,” Scapa says. “We’re very competitive, and we like to win. But it’s not a nasty kind of competition. This is a competitive place, but with a lot of ethics and people value that.”
It starts with having a clear vision that everyone can rally around as a foundation.
“There has to be a sense that you’re all trying to get to some place together,” Scapa says. “There aren’t people with special advantages. Everyone has the same opportunities.”
Scapa says he works hard to keep politics from becoming an issue at Altair. He doesn’t want people thinking someone else has an unfair advantage or is using information to get ahead in the company.
“I think everyone understands that as an organization, we have to go one direction,” Scapa says. “We make a lot of decisions and in the end, I make decisions where I’m very often wrong. Part of the culture is to admit you’ve made a bad decision and talk about where we’re going to change going forward. It’s all human relations.”
One thing that has kept the culture fresh and lively at Altair is a regular dose of new hires straight out of college.
“They bring excitement and energy into a business,” Scapa says. “I’m just looking for really bright people who are energetic, have ideas and want to learn. When you’re hiring someone with more experience who has worked in another culture, very often they struggle to make the transition.”
As Scapa looks ahead, he says success will be determined by the ability of everyone in the business to keep working together to make the best decision for Altair.
“Decisions are made and people get in the boat and they just row,” Scapa says. “But not before there is a healthy exchange of ideas and arguing and hopefully coming to a consensus.” •
- Don’t fear change.
- Engage people in solutions.
- Promote value of debate.
The Scapa File
Name: James R. Scapa
Title: Founder, chairman and CEO
Company: Altair Engineering Inc.
Born: I grew up in New York. My family is originally from Greece, and I’m the first American citizen. My sister was born in Greece.
Education: Bachelor’s degree in mechanical engineering, Columbia University; master’s in business administration, University of Michigan.
Previous experience: Prior to establishing Altair, Scapa served as an engineering consultant to the automotive industry. He began his career with Ford Motor Co. in 1978.
Scapa on listening to customers: I’m learning from what they are doing. But I will also argue with customers if I think they are not seeing things in the right way. That honest dialogue comes from me either way. We have a lot of technical people who are out visiting the customers, holding their hands, training them, spending time with them and then bringing that knowledge through this communication system that we have in a pretty aggressive way.
Most of our customer interactions end up recorded and broadcast pretty widely here. That makes its way back to the product groups, strategy groups and marketing groups and is assimilated into where we are going.
But not everything the customers want us to do is the right thing for us to do. We absolutely want to understand what their problems are because we’re trying to find solutions to their problems. But sometimes they want to tell us what the solution is. Some of those solutions we listen to and implement. Some we do not.
How to reach: Altair Engineering Inc., (248) 614-2400 or www.altair.com
When all the dollars and cents were added up for 2012, cleverbridge’s revenue topped $363.5 million — and co-founder Craig Vodnik realized the company had come a long way from when he answered phone calls in his Chicago basement.
“I was also out prospecting for new leads and new business, so I would do that when I wasn’t answering the phone,” Vodnik says. “We didn’t have venture capital or angel investors, so we bootstrapped it ourselves.”
Cleverbridge is a full-service e-commerce provider for companies that sell software and software as a service.
“Cleverbridge was launched because my partners and I were working in this industry at a previous company in Cologne, Germany,” says Vodnik, who also serves as vice president of operations. “That company was acquired by the market leader. When that happened, we all looked at each other and said, ‘This isn’t what we want to do. We want to control our destiny, and we’d rather go start our own company.’”
The challenge for Vodnik in those early days was bigger than just having to work out of his own basement. It was the fact that he was the company’s only employee in the United States. The other co-founders, Christian Blume, Martin Trzaskalik and Peter Blunck, were all in Germany.
“As the volume, the number of things to do, the strategy discussions and features we wanted and the market all started picking up, my time was filling up fast,” Vodnik says. “I said, ‘I need some help to come in and answer the phones and take some of the randomness out of my day and make it more structured so those calls could be answered by someone else.’ I just couldn’t be interrupted all the time.”
What followed was a series of valuable lessons in team-building that enabled Vodnik to get the help he needed to grow the company to where it could sell its services to at least one person in every nation around the world, including Antarctica. Here’s a look at how he did it.
Focus on the opportunity
Vodnik needed to focus on strategic direction and growth issues and what actions he and his co-founders needed to take to build cleverbridge into the company they wanted it to be.
“I went to some of the universities around here and I started posting advertisements for part-time help for customer service because that was something I knew I could train somebody to do,” Vodnik says. “I knew I could push it off and theoretically, students would be interested in finding part-time work for $10 to $12 an hour.”
Vodnik sweetened the deal by focusing on the company’s international presence and the need for people with foreign language skills or technological expertise. This was a growing company and they would get a chance to apply their skills toward helping it expand in tangible ways.
“So I was hoping by finding people who were internationally focused or savvy, they would build more of a rapport with cleverbridge and possibly stay on down the road after they graduated,” Vodnik says. “That model really resonated with people.”
The lesson learned was that whether you’re a business on the ground floor like cleverbridge or an established multimillion dollar organization, you can gain a lot by engaging the people you hire in your efforts to grow the business. This is especially true of younger people who are just getting started in their careers.
“It’s about helping them understand where this can lead them and making it a mutually beneficial situation so that they realize there is something in it for them as well,” Vodnik says. “I can go across the board at cleverbridge and show you all these different people where we went in and said, ‘Let’s hire this young person and give them a chance. Let’s invest in them upfront, give them knowledge and spend time with them.’
“The benefit we’ve attained from a profitability perspective has probably been two or three times what we would have received from an equivalent person we got off the street who had five years of experience working someplace else.”
You get people who are willing to work for a smaller salary to gain valuable experience in the real world of business. At some point, if they really have the skills and help your business grow, you owe it to them to compensate them more appropriately or risk losing them to a competitor.
But you’ll earn a whole lot of valuable loyalty during those more difficult times.
“When the going gets rough, these people, if you’ve invested in them and treated them the right way, will give you the benefit of the doubt and choose to stay rather than go at the first sign of a storm,” Vodnik says. “You also get people that you can train the way you want them and that has a huge payoff in terms of efficiency. You’re not trying to break someone’s bad habits that may have formed somewhere else.”
Don’t wait to train
Flash forward a few years and cleverbridge was no longer a bootstrap operation working out of Vodnik’s basement. The company was now doubling its office space every two years and broadening its reach to additional clients. Vodnik recognized the need to become even more proactive about preparing employees for a steep growth curve.
“We created a structured training program within the organization so that anybody in the company — and this applies from customer service up to any senior manager — has the ability to take these classes,” Vodnik says.
“It’s a great way to develop internal talent so that we don’t have to compete with the market. We get to know the person before we actually put them in the position to make a value judgment about whether they will be the right fit for the team or not. It’s identifying skilled talent and training those people before we need to fill those positions.”
Vodnik began talking about the training opportunity a few months before the classes actually began. It was done in a repetitive fashion and the goal was to find the people who were really interested in learning and weed out the ones who didn’t have their hearts in it.
“We’ve sold it to people as something that is really going to benefit you,” Vodnik says. “This is something you would have to pay for if you went outside the company, and we’re offering it to you during the day while you’re already here.”
The people you choose to do the training will also go a long way toward determining its effectiveness.
“You want somebody who has some patience and can clearly explain things and do a lot of the pre-work of organizing materials in a very clear manner,” Vodnik says.
“What we see as a problem with a lot of training is people try to dive way too deep into something. If the person doing your training is a very verbose person, that generally isn’t going to be a good trainer. They’re going to be standing up there talking and not reading the audience to know if they are hitting the mark.”
Sharing the spotlight
The plan to focus on younger talent and groom future leaders in the company through in-house training has paid off in big ways for cleverbridge. The company has been profitable since 2007 and now has more than 220 employees.
One of the keys to its success is the continued engagement between leaders and employees.
“It’s very important for the leaders of the company to be up in front on a frequent basis,” Vodnik says. “Talk to the people. Talk about what’s important and talk about what’s going on, but don’t hog the spotlight. Make sure you’re allowing other people to share. Delegate that responsibility. Give other people who are the next line of management in the company the opportunity to talk so that they feel they are contributing and are seen the right way in the organization.”
If you have people who have something to say or contribute, but aren’t as comfortable being up in front of people, go up there with them.
“Some people aren’t as comfortable getting up in front of a whole group of people, especially on their own,” Vodnik says. “There are ways to work around that.”
The lesson is that successful companies keep their peoples’ best interests in mind and do what they can to help them grow along with the business.
“You treat them right and invest in them, and you’re going to see a much bigger payoff down the road,” Vodnik says. “You can’t do this model across the board with every single position. But if you’re growing for the long term, it’s a great way to go.” •
- Respect the energy of youth.
- Help your people develop.
- Find people who can listen.
The Vodnik File
Name: Craig Vodnik
Title: Co-founder and vice president of operations
Education: Bachelor’s degree in nuclear engineering, University of Illinois, Champaign.
How did you get into nuclear engineering? I was going after aerospace engineering. Because of the timing when I was going to school — the Cold War was ending — they were cutting the number of aerospace engineers they accepted into college. The cool part about nuclear was it was an advanced topic, but the class sizes were very small. It was like being at a small university, but with the benefits of a much larger university.
Who has had the biggest influence on you? My mom. I’m a lot like her. She started her own business and did what she had to do to get things done and make ends meet. She was a single mother of two boys. She worked very hard and didn’t let a lot of things bother her. A lot of that came through in me.
If you could speak with anyone from the past or present, with whom would you want to speak with? President Abraham Lincoln. I’ve always been very interested in history and in Lincoln. How did he get to the point where he said, ‘I’m ready to take the U.S. to war with itself in order to save the country.’ I just think that whole process of getting to that point had to be a gut-wrenching decision.
How to reach: cleverbridge, (312) 922-8693 or www.cleverbridge.com
It became so quiet, so fast, that you could have heard a pin drop in the conference room at Independence Blue Cross.
Daniel J. Hilferty had been talking to his team about health care reform and the ways it could impact the 7,472-employee health insurance provider in the near future.
“So I’m in the middle of giving my point, and I’m being forceful,” says Hilferty, the company’s president and CEO. “And Paul Tufano, our chief counsel says, ‘Dan, I disagree, and this is why.’ The whole room went silent. He articulated a point of view that when he was finished, I came to realize that my position was flawed, and he was right. I admitted it in front of the group, and we went with his position.”
After the meeting, Tufano approached Hilferty, unsure what his leader’s response would be to his words of disagreement during the meeting.
“As we’re walking out of the room, he says to me, ‘Are you OK with that?’” Hilferty says. “I said, ‘OK with it? I wanted to hug you. This is what we’re trying to build.’”
Hilferty was excited that his team was showing it wanted to help Independence Blue Cross prepare employees and customers for the changes coming to health care as part of the Affordable Care Act.
“We have a strategic goal of being recognized by 2016 as the best performing Blue and a magnet to partner with other Blues in all sorts of business,” Hilferty says. “The challenge is to put a strategy in place that our board of directors and our senior management can get excited about and rally behind.”
This wasn’t about politics for Hilferty. He simply wanted his people to be ready to respond to whatever changes were enacted. Still, while he is careful not to jump too deep into the political fray when it comes to health care reform, Hilferty is a firm believer that something needs to change with health care in the United States.
“If you look over the past decade, the cost of health care in this country is now 16 or 17 percent of the gross domestic product,” Hilferty says. “If the costs are left unchecked, they could be 20 to 25 percent of our GDP. And you have more than 50 million Americans uninsured. Those two statistics alone point to the need for change in our health care system.”
But it wasn’t Hilferty’s job to solve America’s health care problems. His focus needed to be on preparing Independence Blue Cross for whatever changes were on the way.
The Affordable Care Act, also known as Obamacare, had become a hot topic of conversation in 2010. Hilferty’s employees, however, needed to be able to do more than just talk about it at the water cooler. It was going to be their job to help customers adapt to the changes reform would bring to health care.
“We started a series of meetings throughout the company that educated us,” Hilferty says. “We had people who became experts and we brought in external experts who would educate us on what reform meant, what we needed to do to prepare for it and what the timelines were to get ready.
“We took all that, broke into subgroups and developed plans and resource allocation through budgeting to map out how we were going to prepare for reform.”
Organizations that effectively adapt to major changes are able to focus on three keys in their transition strategy. The first key relates to corporate culture.
The cultural aspect begins with leaders and their awareness that just because they are the leader, they are not blessed with the right answer for every question.
“We want a feeling within the meeting room and around the organization where everybody feels comfortable with being open,” Hilferty says. “This isn’t about any one of us. It’s about achieving what’s best for our customers. We’re a traditional top-down organization, and we had to make people, regardless of their position in the company, feel comfortable about respectfully disagreeing or offering a different point of view.”
The situation at the meeting between Hilferty and Tufano was a prime example of what Hilferty wanted to see.
“Is it a perfect science?” Hilferty says. “No. But we’ve realized we’re a stronger company because folks are willing to weigh in with divergent points of view. Even though they might not win the day, they tend to get lined up behind whatever the final solution is because they feel like they had a voice.”
You’ll give people that voice by stepping back a bit when it’s a topic you’re not as familiar with as your department experts are.
“You’re the leader in setting the vision, organizing the company and getting everybody to sign off on a strategic and financial plan,” Hilferty says. “I’m not an expert in human resources and certain areas that go around that. So it’s about listening to those who have that expertise, who have that training and who understand the dynamics related to personnel and human resources and understand how to effectively achieve the company’s goals. Be willing to listen.”
The other keys are discipline and communication.
“Be disciplined at making sure you are being honest with yourselves, with each other and with the team about where you are ahead of pace, where you’re having difficulty and where you are spending more than your allocated budget to do things,” Hilferty says. “Do that in a way that is open, isn’t critical and keeps the focus on accomplishing the overall goal.”
Be up front with people
As Independence Blue Cross moved into some of the operational changes that would need to be made to be ready for health care reform, it became clear that efficiency would be really important.
“The biggest issue for us as a health insurer is there are new taxes, primarily a premium tax that will cost us tens of millions of dollars a year in additional federal taxes,” Hilferty says. “One of the key things we focused on related to that was using technology to really get the real-time data we needed to work with providers, our members, doctors and other health care professionals. We needed to improve our processes through the use of technology. When you do that, it can have an impact on people.”
It’s that impact, especially when you start talking about achieving workplace efficiency, that can stir fears in employees. Hilferty did not shy away from that possible outcome, but he did offer a plan to help people caught in the middle of the transition.
The plan would begin with offering employees, whose position was eliminated, the training they needed to move into a new position within the family of companies that Independence Blue Cross belongs.
If that new opportunity was available through a company that Independence Blue Cross has agreed to partner with, an effort would be made to “rebadge” that employee to work at the other company.
“We’ll work with the new company and hopefully you can transition to work with them,” Hilferty says. “If at the end of the day, there isn’t a position you’re interested in and there’s not a rebadging opportunity, we want to have a comprehensive effort whether it’s in terms of a severance package or outsourcing professional services that would assist you to advance your career somewhere else.”
Don’t make the stress of change worse by trying to sugarcoat it or by hiding behind false promises that will never be kept. Be upfront.
“It’s not easy to do that,” Hilferty says. “But in order to be competitive and be a really effective organization, we needed to face those challenges and we’ll continue to need to face those challenges.”
Reduce your stress
With an issue as complex as health care reform, it’s easy to get lost in all the details, deadlines, facts and figures that come with it. You’ve got to make sure you and your people don’t work yourselves to the point of being unproductive on the job.
“You have to enjoy what you’re doing every day,” Hilferty says. “When your work is finished, go home and get refreshed. Turn your BlackBerry off. Focus on your friends, your community, your pet — whatever it might be. When you come back, you’ll be more refreshed and ready to tackle it. We’ve really worked hard over the past three years to build that culture.”
As employees at Independence Blue Cross await the next few months and years for the changes in health care reform and the Affordable Care Act, Hilferty says he’ll stay focused on letting the people on his team at the $10.5 billion health insurer do their jobs.
“I’ve always gone into a position believing that if you have the right culture and you allow people to bring their strengths to the surface and you encourage them to be part of the process using their strengths, people do things that they never thought were possible,” Hilferty says. ●
- Prepare for the job.
- Help people fit in.
- Avoid burnout.
The Hilferty File
Name: Daniel J. Hilferty
Title: President and CEO
Company: Independence Blue Cross
Born: Darby, Pa.
Education: Bachelor of science degree in accounting, Saint Joseph’s University, Philadelphia; master’s degree in public administration, American University, Washington, D.C.
What was your first job and what did you learn?
When I was 12, I was a dishwasher at the Chatterbox Restaurant in Ocean City, N.J. I learned early that if you work well with the waiters and waitresses and you are polite to people, your job gets done more effectively. We’re about collaboration and truly being a leader in health care innovation. This is all benefiting the organization.
Who has been the biggest influence on you?
There are two people; the first would be my mother. My father passed away when I was 3. I was the youngest of five. My mother raised and educated all five of us and instilled the value of hard work and sticking together and working together. The second is a man who I had the good fortune of working for. He was the president and CEO of Mercy Health System. His name was Plato Marinakos. He taught me the value of creative thinking and team building.
Who would you most like to meet and why?
I mentioned that my father passed away when I was 3. I would love the opportunity to sit down and have a beer with the guy and just understand what made him tick. It would just be fun for me to understand who this guy was.
How to reach: Independence Blue Cross, (800) 275-2583 or www.ibx.com
When Rupesh Shah saw headlines about companies cutting costs, staff and basically whatever they could to stay afloat, he wanted to take another course as the recession that began in 2008 tightened its grip on the American economy.
“Anyone can cut costs, and that’s probably the low-hanging fruit,” says Rupesh, co-president at M S International Inc. “But we view cost-cutting as a last resort. If everything else fails, let’s look at cost-cutting. We said, ‘Let’s take a hard look at our business. If we know the industry is contracting, how can we expand our addressable industry?’”
MSI is a distributor of countertop, flooring, wall tile and hardscaping products. The company of more than 900 employees manages 50 million square feet of inventory and has international purchasing offices in India, China, Turkey and Brazil.
Rupesh and his brother, fellow co-president Rajesh Shah, have taken the company that their parents founded in 1975 and have made it even stronger.
Now they needed to find a way to battle through this tough time and give their customers a reason to continue doing business with MSI.
“What else are our customers buying that we’re not selling them?” says Rupesh. “Are those industries we can get to? What are we losing to our competition and what can we do to regain that? What can we do to get more market share?
“We didn’t engage in layoffs — probably one of the few companies that did not do that. Instead, we started expanding our product line and started getting into new product lines where we could use our same sales force to sell the same set of customers.”
It’s not always an easy strategy to follow, especially when it goes against the grain of what everyone else seems to be doing.
“The outside pressures and priorities, both internally and outside, can take over if you’re not disciplined about it,” Rajesh says. “They can take over your thinking, and you can slip on the disciplines that made you good. You can easily fall into the simple and quick versus what may be a little more difficult, but longer term, and is the right thing to do.”
Set your course
Before the company embarked on this growth strategy, a meeting was convened with the management team to list the company’s options.
“We can aggressively do cost-cutting and downsize our business by 20 to 25 percent,” Rupesh says. But before the company did that, Rupesh presented an observation.
He posed the growth opportunities as he and his brother saw them and attempted to calculate what it might take to make them work.
“Let’s make some reasonable market share calculations,” Rupesh says. “How long will it take? Can we stomach it financially? Should we do it? It helped get our culture and all our management team to move in that direction. We had a series of meetings on it.”
Certainly there is emotion involved when you’re in the midst of a recession and jobs and business relationships are potentially hanging in the balance. But Rajesh says he and his brother focused more than ever on taking emotion out of the equation and trying to make decisions based on facts.
“With the downturn happening and business slowing down, we said we’re going to survive and thrive, but the only way it works is if we make data-driven decisions and prioritize quickly,” Rajesh says. “We don’t have infinite manpower, resources or investment dollars. So we have to use all these approaches to decide how we unleash those resources and use them, including their own time being one of the biggest resources that we had limits on.”
Once the decision was finalized to not make cuts, but to instead pursue data-driven growth opportunities, it was critical that everyone was on board to make it work.
“Failure is not an option,” Rupesh says. “Changing course is not an option. As a distributor, you have vendors, salespeople and customers. You’re creating a view that this is not optional — it’s mandatory.
“We start judging salespeople by how many new products or product lines they are selling. You look at it very analytically. It’s not just the sales. It’s why aren’t you selling porcelain? Why aren’t you selling quartz? Why aren’t you selling wall tile? Get them to feel the pressure of it.”
One of the keys to being effective with limited resources is the ability to know what doesn’t work for your business.
“We tell all our managers your what-not-to-do list has to be longer than your what-to-do list,” Rajesh says. “It’s funny, but most people don’t believe in that. They always want to show what you did do. People don’t get objective credit for not doing something. We internally believe some of the best things we ever did are the things we didn’t do.”
If your business has products that had been big sellers but aren’t anymore, and you’re still trying to push them instead of promoting a new product that has a lot of potential, you’re asking for trouble.
“It’s a discipline change, and it’s not simple,” Rajesh says. “It’s a change of thinking. You need to make it a priority and continuously communicate it. You can’t just stand up and say, ‘We’re doing this. We’re done.’ It’s an ongoing process. And you can only do it by example. You can’t make decisions on gut instinct yourself, and then expect everyone else to do it with knowledge.”
The effort to drive results has to be constant to maintain momentum and reinforce the message that this is a very important thing you’re doing for your business.
“Let’s create a culture and an environment where everyone is thinking, ‘OK, right now, most customers are buying 15 to 20 percent of their product from us. Can we get them to buy 30 percent, and what will it take to do that?’” Rupesh says. “So we made a very strong push and created a culture. Everyone from 2008 to 2011, all they thought about was market share, market share, market share. How can we get more market share?”
MSI has positioned itself to succeed in the post-recession economy, but that doesn’t mean the evolution is over.
“You have one set of challenges to go from $40 million to $100 million in revenue,” Rupesh says, “another set to go from $100 million to $250 million and a third set to go from $250 million to $500 million. And now we’re looking at what it’s going to take to get us to $1 billion. That’s kind of the next major milestone for us.”
Just as it was in recovering from the recession, the makeup and attitude of MSI’s employees will be crucial in determining whether the company reaches that ambitious milestone.
“With our current set of employees, the majority of them have done a great job adapting,” Rupesh says. “So first, we look internally and say, ‘For the changes that need to take place, what skill sets do we have to have?’ Where there are gaps, we look to the outside.”
And while they want people who have experienced success, they also want employees who have experience setting a goal and working hard to achieve it.
“We’re very cautious and wary of hiring people who have just been in large organizations,” Rupesh says. “They probably have tremendous experience, but they worked in an organization that was already set up for what we want to get to. Ideally, we’re looking for people with transitional experience.”
The goal is to find people, either within your current ranks or externally, who can continue to identify those new opportunities and help the company take steps to better serve its customers.
“How are they going about solving problems?” Rajesh says. “Make sure when you interview or you’re promoting from within or reviewing within, that you’re grading on that question. How do you solve problems?”
The ability to solve problems and process data to make smarter decisions is a key reason why MSI has grown as quickly as it has.
“In 10 years, we’ve grown tenfold,” Rajesh says. “I don’t think we would have taken the market share we have taken because we would have been correcting a lot of wrong decisions. Of course, a decision isn’t always right or wrong. It can also be the wrong priority. This is a lower priority thing, and if we had done the higher priority thing, it would have generated faster or better results.”
If you have concerns about the systems you have in place to manage your company and its potential growth curve, the best advice is not to wait to act.
“The longer you wait, the harder it becomes,” Rupesh says. “To do a change in systems when you have several hundred employees is a lot more challenging than when you have 30 employees. As you think about any company’s transition, think first and foremost if you have the systems in place. If you don’t, how are you going to put them in place?” ●
- Agree to a plan.
- Hold your team accountable.
- Keep your eye on the future.
The Shah Files
Names: Rajesh Shah and Rupesh Shah
Company: M S International Inc.
Born: Fort Wayne, Ind.
Education: Finance and accounting degree, Wharton School of the University of Pennsylvania.
Who has been the biggest influence on you? My parents, Manu and Rika Shah. They always taught us to not be afraid to do things in life just because it’s risky.
What one person, past or present, would you most like to meet?
I actually wrote my college entrance essay on this. Wile E. Coyote, the cartoon character. No matter what he goes through, he just gets up the next morning and keeps trying it again. I would just love to talk to him. ‘You fail every time. What makes you get up and want to try again?’
Education: Bachelor of science in economics with a focus on finance and strategic management, Wharton School of the University of Pennsylvania.
Who has been the biggest influence on you?
It would have to be my parents. One thing my father did which has been very helpful to my brother and me is when we started, he never took the approach, ‘I’m going to show you the way to do things. This is what you’re going to do.’ He gave us a lot of autonomy to try things, and he provided a lot of support in those endeavors.
What one person, past or present, would you most like to meet?
I really admire Steve Jobs. He came to an industry and revolutionized it. I’ve read his book, and what I still don’t understand is how does someone like that have the vision he had and feel so passionate about it and execute on it.
How to reach: M S International Inc., (714) 685-7500 or www.msistone.com