Barry Davis’ company, Crosstex Energy Inc., had always been extremely successful since he started the midstream energy service business in 1996.
“We averaged a compounded annual growth rate of about 100 percent a year,” Davis says. “It was an incredible journey and everything was up and to the right.”
The company continued growing — going from $1.8 billion in revenue in 2006 to $2.6 billion in 2007 to $3.5 billion in 2008.
“One of the key learnings for us in this experience is whether it’s personally or as a company, sometimes our greatest strengths can become a significant weakness,” he says. “It was in our DNA to grow and be very growth-oriented. If you grow at 100 percent per year for every year for six to eight years, at some point, that gets difficult to manage.”
By 2008, the organization was showing signs of stress from the rapid ascent.
“We were thin organizationally, and that includes people and processes,” he says.
Then the financial markets began to come apart. Crosstex had a number of natural disasters hit, including a fire at one plant and a hurricane that affected its Gulf of Mexico operations. Then there was a significant downturn in commodity prices that dramatically slowed the company’s development activity.
“We had built an infrastructure with an anticipation of continued growth,” Davis says. “All of those things came together to create the perfect storm and a period where we had to regroup and really step back and reset the company, if you will.
“Had any one or two of these things happened in 2008, we would have been fine, but when you compound several, it became quite a mountain to climb.”
It was unlike anything the company had faced and was going to be incredibly difficult to overcome.
“[It was] two years of the most challenging period we may ever face as a company that really became a fight for our life as a company,” Davis says.
Talk to customers
One of the first steps Davis took to turn things around was to solidify relationships with customers during this time. The company had done so well for so many years, news of its trouble sent shockwaves throughout its customer base.
“In the middle of 2008, Crosstex had one of the most successful stories in the midstream business in the last couple of decades,” he says. “We had great good will in the industry, so we had a lot of people who were pulling for us and wanting to do everything they could. Most people were just shocked because they had seen, for a dozen years, that everything had been so positive and were just confused by what had happened, so it was important for us to share what had happened.”
So he went out and started talking to them about how their troubles had come about but also how they were going to solve the problems.
“We spent a lot of time with our customers and trying to ensure their confidence that we were going to be there and we were going to be able to provide the services they had contracted us to buy,” he says.
Davis went out and met with other CEOs to share his plan and the confidence he had in the organization going forward. He would also talk to them about how they could be helpful in that plan.
“People want to see the confidence and see into the eyes of the guy at the top,” Davis says. “Are you demonstrating that you’re going to get through it, and do you have a plan? Are you committed or are you wavering in your commitment? There was never a wavering.”
He says very few of the top executives sold any of their holdings in the company, which was a further demonstration that he had confidence in the company so the customers should, too.
“We’re emotionally invested, and in a time of challenge, it’s usually more powerful than financial conviction,” he says. “It was important for our key customers to see that all the way to the top.”
Davis decided this was also a great time to look at ways to cut costs.
“We had a lot of expense in our organization that was focused on growth,” he says. “We immediately reduced all of our resources that were being spent outside core areas. In our physical operations, we essentially took away everything that wasn’t necessary to run the business — any idle equipment, anything being spent on unnecessary things.”
They also renegotiated contracts with key vendors. The entire industry was in this mode, so they were sensitive to the battle Crosstex was fighting.
“Every organization, in tough times, has certain places to look,” he says. … “There are always things we’re investing in for the future and when tough times come, it’s all about the now. What do we need to be spending right now? For a period of time, let’s cut out the cost of the future.”
When all was done, he and his team were able to drive out $20 million in costs from the business in 2009.
Another big thing Davis had to do was trim the portfolio. The company had six major assets and it wanted to get down to three.
“It was straightforward and logical,” he says. “We needed to sell something of size.”
Its treating business was attractive to the industry. It had been started as a grassroots business in 1998, and by 2003, it was the largest treating business in the industry and had the No. 1 position in gas treating. It was sold, as were some smaller assets.
Make the tough decisions
The bigger challenge in this was parting ways with the people associated with those assets. Some of the people went with the assets that were sold, but he also had to do a reduction in force because of the reduced operations.
“In our company life, we had to be able to look back and say we did that with great excellence,” he says.
As such, they planned it thoroughly and executed it well.
“Be very clear and generous in the exit process, meaning the severance that you give people, the time you give them to find other jobs, to be generous in the support you give them in finding those other jobs,” Davis says. “Be quick and decisive in the process — these are things that need to be done in a short time frame and not drug out over a period of time. It needs to be as deep and as broad as you can think — don’t make multiple reductions. One time needs to get it done. Be generous, be supportive and do it in one time, and be very caring in the execution.”
They made the cuts in one day. Davis personally met with almost every affected employee.
“I had the opportunity to visit with them and share the emotion of the challenge we were going through together and express some good intentions for the future,” he says. “It was like family, and it was like part of the family was being left behind or separated.”
Those kinds of situations are never easy to handle, but he says there are ways you can do it so you can, in fact, look back and say you did it with excellence.
“First of all, focus on the person,” he says. “It is a relationship, so you have to focus on the person. Second, be very diligent in the planning process because the execution is critical at the time, in the moment. You have to have a great plan. Then, thirdly, be real. Be a human, be transparent and be loving. That’s a word we don’t use often in business, but I think everything really comes back to that and to love the other people just like they are family.”
As Davis met with people, he was shocked by the support employees had for each other and the amount of care they were showing for each other as opposed to themselves. This care and concern inspired Davis.
“The good news is that whatever negative emotion we experienced, for 12 years prior, we were very full as an organization and prepared emotionally to deal with a downturn,” he says. “It was the relationship, the culture, the bond that we had that allowed us to endure during that time.”
In 2009, Davis and his team began to define the future state — the end they had in mind. But he involved the people and asked them what was important to them. Recurring themes came up.
“One of the things that was always at the top was to be on the winning team,” he says. “For the 12 years, they felt like they had been on a winning team, and in the downturn, that was something they didn’t feel, so it was very compelling for them to get back to a point where they could feel like a winning team.”
As he moved the company forward, he applied lessons he learned in the middle of this crisis.
“What we learned was to manage our strengths and be more conservative in our growth,” he says. “Secondly, we learned that one of the things you have to protect most dearly is your balance sheet. We actually had too much leverage — too much debt.”
Crosstex repositioned its balance sheet in 2010 and reached a number of milestones.
Revenue increased in 2010 to nearly $1.8 billion after the decrease in 2009.
“This is where we did some of the best work we’ve ever done in our 15-year history,” Davis says. “What we did is what we’ve always done well … we simply executed everything in our plan. The market supported us in rebounding. As a result, really in a very short period of time, in 18 months, we went from the lowest point in the downturn to being repositioned.”
And this year the company announced several major growth plans, including increasing its core from three major areas to five.
“As we entered 2011, we felt it was a turning of the page to focus on the future,” Davis says.
On top of the financial success, he’s seeing a change in morale, as well.
“We’re right now at an all-time emotional high as a company,” Davis says. “The energy has returned and has grown dramatically because of the success we’re experiencing as a company.”
While they were challenging years, Davis knows that they’ll also be good ones in the story of Crosstex and sees the company’s biggest challenge ending happily ever after.
He says, “I believe we’ll look back on those as two of the richest and exciting years for our company and the richest chapter in the story of Crosstex.”
How to Reach: Crosstex Energy Inc., (214) 953-9500 or www.crosstexenergy.com
The Davis file
Barry Davis, chairman, president and CEO, Cross Energy Inc.
Education: Bachelor of business administration degree in finance from Texas Christian University
As a child, what did you want to be when you grew up?
I always wanted to be part of creating something, and my entire life I have been. I started with creating businesses — a lawn-mowing business, and ultimately in college, I started, ran and staffed baseball camps in the summer. I’ve always been about building organizations, so as a kid I wanted to be a part of creating something significant.
What inspires you to create businesses?
I think it really is about the story. I like to be a part of creating a story. I like the life that comes from doing that with other people. I believe what we have here at Crosstex is a great community of people who are doing life together. I’m driven by growth because I want to keep adding people to our team.
What’s your favorite board game and why?
I don’t play board games. One of my favorite games is the ring game that we play at my lake house. It’s a ring-on-a-string game that I love to play with family and friends at the lake, and it gets very competitive.
If you weren’t in your current position, what would you be doing?
I would be spending a lot more time in ministry. I love sharing with people the life and I love sharing the experience of more life with people. I could do that with spending more time in ministry. That goes back to the Crosstex story — our mission and right in the center of our mission statement is to improve the quality of life for our employees. On our doors, every employee has ‘more life’ boards. On those boards are represented what more life to us means. We have pictures, quotes, family stories, whatever it is that represents more life to you. You could say I’m already full time doing what adds more life, but I would do that in other places.
In April, J&J Snack Foods Corp. announced that it had a deal in place to acquire several frozen-food product lines from ConAgra Foods. The acquisition added up to $50 million in annual sales for Gerald Shreiber’s company, but it also added new production facilities in North Carolina and Oregon, new people to integrate and new inventory to manage.
But as the economy slowly crawls out of the pits of the worst economic nosedive in almost 80 years, the acquisition is a reflection of Shreiber’s philosophy on running a business: Don’t be afraid to take a calculated risk in the name of growth.
“We have expanded our business almost every year,” says president and CEO Shreiber, who bought the company that would become J&J Snack Foods at a bankruptcy court in 1971, and grew it to $696 million in net sales last year. “Sure, we’ve been through three — or four or five — economic downturns, and we know it’s occasionally going to be bumpy out there. But we’re not going to manage our business out of fear, we’re not going to crawl into a hole and wait until it’s over. We’re going to expand our niches and expand our portfolio of products.”
Lean economic times may prevent you from spearheading across-the-board growth. You might find that certain areas of your business are treading water better than others. But you should, if at all possible, look for the select few growth opportunities that still make sense for your business, and capitalize on them.
At J&J Snack Foods, finding those growth opportunities means listening to customers, allowing team members to innovate, and maintaining a business structure that is always ready for growth and expansion.
“It is tough to grow a business and maintain levels of profitability when you’re faced with cyclical adjustments with respect to the economy and sales,” Shreiber says. “The fact that we’ve been able to meet those challenges speaks volumes for our people, our customers, our partners and our suppliers.”
Serve your customers
With a portfolio of products that includes cookies, soft pretzels and frozen beverages, Shreiber’s company has felt the pinch of consumers reining in their spending on trips to the supermarket. As more consumers stripped their shopping trips down to the basics of meat, vegetables, bread and milk, snack foods became expendable items on many families’ shopping lists.
“We realize that our products are not mainstay items,” Shreiber says. “They’re not meat and potatoes. They’re impulse items; they’re treat items. All of our items are not part of the everyday shopping experience.”
As shrinking budgets altered the way consumers spent, Shreiber and his leadership team have had to find new consumer touch points. They’ve had to look past the traditional concept of selling snacks in packages in a store aisle.
Customer feedback pointed Shreiber toward spaces where consumers were more likely to buy snack foods — such as sporting events, theme parks and schools.
“Now, we’ve developed a big presence in sports venues, from high school all the way to the professional ranks,” he says. “We have a big presence in sports, leisure and entertainment. With schools, we’ve had to reformulate several of our product lines that were being sold to school and education systems. We’ve had to eliminate most of the sugars, reduce some of the fats and reform some of our standards. But we’ve done it, all the while maintaining our sharpness and edge.”
The traditional method of soliciting customer feedback has been to collect it in the field, utilizing a salesperson at the customer interface point, talking to consumers and store operators about what they want and need. However, like the heads of many large companies, Shreiber has formalized the system beyond that.
“It’s a matter of getting good feedback, good marketing, good interactivity and good integration between our marketing people and our salespeople in the field,” he says. “Today, our research and development department likes to measure the opportunity that is being requested. We operate 12 plants throughout the country, so in that situation, you have to know where the request came from and start to get a reading on how you can best implement the thought and idea. That process has allowed us to invent new products, expand our product lines and development. I believe a good company has to take the box, shake it up and down, and reinvent itself from time to time. That’s where customer feedback comes in. They’re the people who are buying our products every day, somewhere, in some venue.”
Invest in growth
Even as the economy has faltered and Shreiber’s team has had to get more creative about finding new sales avenues, Schreiber has still maintained a willingness to invest in his company’s future. It is a major reason why J&J Snack Foods has remained in growth mode each year, regardless of the economic climate.
You might not always be able to invest large sums of money in large-scale growth initiatives, but if you are able to save what you can and carefully select the time to strike, you can still make a move with a lasting positive impact for your business.
“You do have to budget,” Shreiber says. “I like to say we’re flexible, but we’ve also been very conservative over the years. We don’t spend more than we earn, we’ve eschewed debt and stayed solvent. If you don’t shoulder a lot of debt, you give yourself more flexibility. We’ve had the availability of both cash and credit to look at expansion.”
Growth opportunities can help you expand on an existing area of strength, or can help you broaden your product offering. In Shreiber’s case, he’s looking for product lines that can supplement his company’s existing portfolio.
“If you look at a good football team with good management, they’ll find the missing pieces,” Shreiber says. “The good teams will do it constantly all the time. It’s a matter of making your resources fit properly. Occasionally, we’ll look at a dozen to 15 things before we think we’ll have found something that fits us — the right company, the right location or the right portfolio of products.”
Investing in new growth also means investing in the people involved. Shreiber refers to it as “installing new batteries” in the people, particularly if growth means acquiring a new business unit.
“We want to kind of give them a new energy,” he says. “That’s the whole point of installing new batteries. In the case of the recent ConAgra acquisition, we brought our key plant people to visit us here at our headquarters just before we closed on the business. We had two or three days of sales and strategy meetings, and had some of their other people visit our facilities.”
Shreiber’s staff and the incoming unit leaders collaborated on a series of lists, between 10 and 12 items in length, each with a 100-day goal in mind. At the end of the fiscal year, Shreiber and his team reviewed the progress against the stated goals.
“Above all, you’re looking at how this product line fits in with what we’re doing, how you’re getting the message out to existing customers in areas that you weren’t operating in before, and how we’re getting it out to new customers,” Shreiber says. “I’m cautiously optimistic about our situation with this acquisition, that we’ll get this to work and be on to the next challenge in a relatively short period of time.”
Investing in growth also means investing in the support structure to accommodate growth. Though a self-admitted computer novice, Shreiber has invested heavily in IT support over the past decade — an effort to make his company more efficient, more scalable and a better conduit for information.
“If nothing else, that technology gives the CEO good, concise, clear information all the time,” he says. “So you can’t be afraid to grow and invest in your company, and that is something I encourage other CEOs to do. Even though we area a public company and answer to shareholders, I’m still the controlling shareholder and as long as I’m around, my mantra will never change.”
Plan for growth
Even if growth isn’t an option right now, if you want to grow again at some point, you should continue to operate with growth at the center of your long-term plans. That means fashioning a strategic plan with aggressive yet realistic goals and ensuring that you don’t backslide on the principles that made your business a success to begin with.
“Sometimes it’s a little more difficult if gas reaches $4 a gallon,” Shreiber says. “People drive less. If they drive less, they go less often to the places where we sell most of our products. So we are often challenged that way. That’s when you’re looking to ensure that your merchandising remains a priority, that you’re taking a good look at the locations where your products are delivered and that you’re delivering good value to the customer and, ultimately, the consumer. It’s almost like a running train. All of the cars are connected in there, and if something comes loose, there is going to be an issue. As the leader, you have to be the supreme conductor to make sure nothing comes loose. If it does, you make sure that someone reconnects it right away.”
Shreiber tries to plan for the short-to-medium term, but refrains from looking five-to-seven years down the road. Too much can change in the economy and in the industry in half a decade to accurately assess the plan of action.
“If you plan for five or seven years from now and you get everybody following that plan like a book, there are things that can happen in the short term that can affect that,” Shreiber says. “You want to be able to respond and react to opportunities, so our long-term planning stays within three years.”
Every business is different. Each business has its own market to serve, its own processes, its own structure and different methods of management. But the same principles of facilitating growth apply no matter what product you make or what service you provide. You have to know what your customers want, know what your business is set up to provide, and you have to continually invest in initiatives that will help spur growth.
“Every business is different,” Shreiber says. “We turn over our inventory 12 to 15 times a year. If you’re in the auto industry or heavy construction, maybe it’s a little different. But we’re buying our raw materials, packaging and ingredients on a regular basis. You have to invest in the business and invest in the opportunities you find, as opposed to throwing a cover over yourself because of the recession. Good companies are impacted by the recession, but you get through it by doing more things more often, and doing them in a better way.”
How to reach: J&J Snack Foods Corp., (856) 665-9533 or www.jjsnack.com
In addition to his business career as founder, president and CEO of J&J Snack Foods Corp., Gerald Shreiber is also an animal enthusiast and lifelong supporter of animal rights organizations in Philadelphia and southern New Jersey. Supporting animal rights causes has become one of Shreiber’s passions, and Smart Business recently spoke with him about it.
As a child, I always had an affinity and love of animals, particularly dogs, but certainly all animals including horses, cats and rabbits. I would find homeless dogs, bring them home and fib to my mother that they just followed me.
At 11 or 12 years old, I would clean horse stalls to ride for free. I always believed there was some magic in communicating with dogs and that I had some of that magic. Later when my career flourished, I felt a responsibility to give back and do what I could to help animals.
The Shreiber Animal Foundation Enterprise is a corporation organized and operated exclusively for charitable and educational purposes and for the prevention of cruelty to animals. I also support organizations such as the American Anti-Vivisection Society, the National Humane Education Society, the North American Wildlife Park Foundation, PETA and the Pennsylvania SPCA.
I believe animals should be treated with respect and dignity at all times and I support those causes that share my beliefs.
Three years ago, Matt Carter was the president of a business unit that was anything but booming.
The competition was, however.
Carter was the president of Boost Mobile, part of Sprint’s prepaid wireless group. Boost had made its name catering to lower-income customers in urban centers. But staying confined to that niche wasn’t helping expand the division’s market share.
“It was a very challenging situation,” says Carter, who is now the president of Sprint Global Wholesale Solutions Group, an Irvine-based division of Sprint Nextel Corp. that generated $1.8 billion in revenue last year. “Boost was in a category that was growing, but we were the only brand in the category that wasn’t growing. So it became very critical to give people a sense of reality, but it couldn’t just be me that was standing up there and saying, ‘Here is the state of the business.’ Half the deal was really presenting facts and data, and letting folks come to that conclusion themselves and buying in to the need of finding new ways of doing things.”
Carter needed to leverage the brainpower of his people to help redefine the Boost brand. But in order to get people at Boost thinking, he had to engage them in the process of developing new ideas. This meant everyone under Carter’s leadership umbrella had to realize their input and opinions mattered to management.
“It’s critically important in that situation that you let folks know that you are the leader, but you aren’t going to do this all by yourself,” Carter says. “This isn’t Moses laying down the Ten Commandments. You have to let folks know that you’re there for them, that you’re here to serve them and that you want them to buy in to what you’re doing and trust you in leading them. But you can’t force it. You have to figure out a way to get them to want to believe in you and what you’re trying to accomplish. That’s the type of trust that helps you move a business forward.”
Envision the vision
Carter was the leader, but he was also the new guy. He had people on his staff who were much more familiar with the Boost brand than he was and could see the potential directions for growth more than he could. Early in his tenure at Boost, after talking with a number of employees, Carter started to see the brand through the eyes of his people — and it was a brand with a great deal of untapped potential.
“Many of our people felt that there was a great deal more underlying value here that can appeal to a broader segment of the population,” Carter says. “Not just credit-challenged people, but people who are simply looking for good value.”
Carter developed a vision for Boost as a company that could appeal to consumers of different age groups and different income levels, in the city, suburbs and outlying areas. Boost began developing a diverse selection of marketing campaigns, broadened its product distribution and expanded its product offerings.
It sent a strong message to consumers, and it also sent a strong message to Carter’s work force.
“They started to see that, ‘Hey, he’s listening to what we have to say,’” he says. “There is greater potential here than just where we’ve been. Everything from our devices to marketing to distribution, it was all affected by the input I was getting from our people out there.”
Carter gathered the input by getting on the road. He spoke with customers and employees. Many company leaders pound the pavement, interacting with stakeholders and soliciting feedback, but Carter says the most critical step is the one he took next. He turned the talk into action in a short period of time.
“What happens in that process is that as you get their input, they start to see action that reflects the things they were talking about,” Carter says. “It makes them feel as though they had a vested interest in the process, in the outcome, in the decision. It wasn’t just me as the leader, sitting in a room by myself. It was really me getting input from a lot of smart, passionate, engaged people. As most folks saw that, they bought into what we were doing. They felt like, ‘Hey, I’m being heard.’ You can’t underestimate the importance of that. It just makes people more engaged.”
Make it cultural
Once you’ve set a tone of collaboration, it’s up to you to continue reinforcing that message to your employees. If you start out working hard to seek input and turn that input into action, but let the momentum trail off over the following months and years, you’re going to kill the cultural seeds you planted at the outset.
To make collaboration and engagement a part of your culture, you need to hire the best people, define their roles and continually show them how their work benefits the organization as a whole.
Ultimately, Carter says that as a top-level executive, you’re not in the business of manufacturing your company’s product or providing your company’s service. That’s the job of those under you. As the leader of the team, you’re in the people business.
“I view myself as a player-coach,” Carter says. “I’m in the game, but I also coach and provide guidance. As a leader, your first job is about people. You have to make an evaluation around the type of people you have on your team, who is working collaboratively, who are the people who will help us get to where we need to go. At the same time, you also have to make the tough decisions around those who are not part of those plans. So, it’s being really clear about how you maximize the team’s capabilities. That is absolutely numero uno for me as a leader. It is my belief that it is all about how you maximize your team’s capabilities.”
You need the right puzzle pieces on the table, but you also need them to fit. Fitting the pieces together requires you to define roles for the people on your team. If your team is comfortable with collaboration and sharing ideas, your people need to know what you expect of them and what they can expect from you.
“I don’t try to come in and prejudge people,” Carter says. “I try to give them the benefit of the doubt. Some people work better with certain types or leaders or in certain types of situations. What you try to do is come in with an open mind and a clean slate. This is what I need from you and your team, and this is what you can expect from me. And that starts the evaluation process. How are they performing against the expectation that is required for the team to be successful?”
Some people will perform above expectations, some will perform at the level of expectation and some will fall below. If someone falls below, you take corrective steps. If those don’t work, then you are forced to make a judgment call on whether you can move forward with that person as a member of your organization.
“The worst thing you can do is keep bouncing around people who are not performing,” Carter says. “You have to protect the integrity and the performance of the team.”
Develop solid practices
Carter says there are few things more important in business than defining metrics and goals and consistently executing on them until you’ve gotten it right. Without practice and execution, Carter and his team would never have seen their vision for Boost Mobile come to fruition. It’s a lesson he’s seen illustrated in pro sports.
Former NBA league MVP Allen Iverson once famously ranted to the media after he was criticized by his coach for missing team practices.
“Maybe Allen Iverson didn’t completely believe in practice, but you have to practice,” Carter says. “You have to be able to work on your game. So I have put in practices that allow us to have good habits as an organization.”
Carter and his leadership team continually assessed Boost’s performance with a series of metrics and used some tools they formulated to help keep everyone abreast of how the company — and their department — was performing against the metrics.
“Every week, we made sure everyone was clear on the state of the business,” he says. “We had a weekly scorecard to indicate how we were performing against all the key metrics. It was set up like a gas gauge, with red, yellow and green. Green meant you were performing at or above the plan, yellow was kind of a warning area and red meant you were underperforming. The goal of that was to get everyone performing from the same sheet of music, the same metrics we were going to use to evaluate the business. Everyone has a common language. And you don’t want to underestimate the importance of that. Having a common language is what allows everyone to have a robust conversation as an organization.”
If you don’t have that method for uniform measurement that allows for consistency in your execution against your goals, you end up like the Lakers did this past spring when they were swept in the second round of the playoffs.
“The Lakers are unquestionably one of the best teams in the league, and what happened to them? There were all kinds of personality issues, emotional distractions, psychological drama,” Carter says. “They’re people, and they weren’t all operating on the same page. And they collapsed. L.A. could still have lost that series, but I don’t think they should have been swept four games to none. And the same thing applies in business. People come to work, they have all kinds of things going on, and you as a leader have to figure out how to keep people together and focused on helping the team best the best that it can be.”
With that approach, Carter had refashioned Boost as a prepaid wireless services brand with appeal to many different market segments by the time he was promoted to lead Sprint’s 4G network expansion in 2009 and to his current post in 2010.
“It just keeps coming back to the fact that it wasn’t just one person as the head of the business, telling everyone else what to do,” Carter says. “We had a forum that was collaborative but invited dissent. You get different points of view and then encourage debate around those points. At some point, if you reach a stalemate, the leader has to make a decision. But you get everyone to understand where we’re going, how we’ll get there and the pros and cons of any decision.
“Having that as part of the process was absolutely critical to getting people to buy in to the vision. And that’s really what you’re trying to do — establish habits and routines. Practice still makes perfect, and you have to put some form of practice in place.”
How to reach: Sprint Global Wholesale Solutions Group, wholesale.sprint.com
The Carter file
Sprint Global Wholesale Solutions Group
Education: Radio, TV and film major at Northwestern University; MBA, Harvard University
First job: I did the newspaper thing. I used to deliver the Boston Globe back in the day, when people used to read the paper.
What is the best business lesson you’ve learned?
It is about people. You get things accomplished through others. As soon as you understand that as a leader, the better off you are.
What traits or skills are essential for a business leader?
You have to be competent at what you do. You have to have confidence, exude optimism and communicate. You don’t have to speak like Barack Obama, but you have to have a willingness to reach out and engage people. And you have to have trust. People have to see that you as a leader are trustworthy. You need to have their back.
What is your definition of success?
It’s living up to your capabilities. If your capabilities can only get you onto the junior varsity team, then so be it. For me, success is really about giving it your all, to the best of your capabilities. Don’t be like Mike. Be like you, do the best you can do. If you can’t live up to what Michael Jordan did, you don’t need to feel like a failure. You give it your best try. It’s when you don’t give it your all that you fail.
Jim Hallett sees his termination as a CEO in a 2005 corporate shakeup as a very humbling experience.
“It was a good thing,” he says. “I needed to leave the company because the culture was getting so bad, and I needed to go away, but from the day I went away, I always knew I was going to try to raise the money and be able to come back.”
But that goal was not out of vengeance.
“There was no retribution whatsoever,” he says. “I was not interested in retribution; I was not interested in getting even. I was interested in getting the company back, getting my job back and putting people in place with the passion, experience and energy to run this company.”
The company, ADESA vehicle auction and its finance division, was doing well financially when Hallett was fired, but by 2007, times had changed, particularly with its culture. Unbeknownst to Hallett, the company had put itself up for sale while he was looking for backers.
“The building was not a very happy building,” Hallett says. “I would be taking over a company that was floundering ? a company that was not performing, a company that was bureaucratic, political, stale. People didn’t enjoy their jobs, people didn’t like to come to work, people didn’t talk to each other. They didn’t interact with each other.”
Hallett solidified a $3.7 billion deal with the help of private equity investors for ADESA, a finance division and a salvage auction division, named it KAR Auction Services Inc. and as CEO, set out to transform the culture in 60 days.
Here’s how he accomplished it in 30.
Lay the groundwork
Turning around a company culture takes analysis and effort. But Hallett had a position of advantage with his firsthand experience. He was familiar with the players in the organization, and even after his termination, he followed the company, tracked the stock and anecdotal information on the street.
He was faced with the realization that turning around the dysfunctional situation would be his biggest challenge.
Hallett would be the CEO, the cheerleader as it were, and he envisioned a loyal and passionate work force listening to his encouragement.
“A cheerleader is what companies sometimes lack,” he says. “They need that guy who can rally people, who can create a culture, create a vision, and then get everybody to line up and march in the same direction.”
Hallett told his new management team he would have the company marching in lock step in 60 days. By using his skill at getting people to line up and buy in to a common vision, it took half that time.
Evaluating the senior management was a critical experience, and it led Hallett to decide to clean house.
“I looked at everybody,” he says. “Every one from the old guard left. I brought some people back into the organization. I recruited some people into the organization. The most senior management completely exited the building. They did an ‘exit left’ and I entered right.”
The evaluation process was straightforward and involved a simple formula.
“I was really identifying people who knew and understood this business, who had experience, who were passionate about this business and loved what they do every day and then who were relationship-driven with our employees internally and our customers externally and with the industry,” Hallett says.
“Anybody who had any of those qualities was shoved aside when I got fired because the new chairman didn’t want to have anything to do with anybody who had dealt with me. If he thought they were somehow still speaking with me, they were history.”
The procedure requires a bit of intestinal instinct as well.
“You use your gut,” Hallett says. “Use your uncommon common sense, street sense, people sense and knowledge, passion and drive for the business. Know what the company needs and know what the industry wants.”
About three to four months in advance of the takeover, Hallett had the plan for his team in place.
“Know exactly who you want, know exactly what you want the organizational chart to look like,” he says. “Quietly and confidentially put the chart in place and have everyone show up on the first day.”
Spread the culture
Sharing the message among employees that a new culture is entering the building takes the skill of a negotiator and the charisma of a leader. Sometimes a bold statement at the beginning of the transformation shows it’s not business as usual anymore.
Hallett removed the main entrance reserved parking spaces for management executives on the first day, and the message was clear ? all employees were going to be treated equally.
“So if you get there first, you should pick your parking spot,” Hallet says. “That in itself says more about the culture without saying a word. You’ll hear, ‘Oh, my God. All this reserved parking’s gone. We don’t have to look at the expensive cars. We don’t have to go by these things when we walk into the building.’”
Next on the agenda was setting the frame of mind for management. Much as military forces have rules of engagement in dealing with the enemy, management alignment spells out standard operating procedures and rules.
“Then hold a management alignment meeting; it could take a couple of days,” Hallett says. “What you’re doing is aligning management and establishing the rules of engagement with your senior management team saying, ‘This is the way we are going to behave. This is the way we are going to talk to each other. This is how we are going to conduct ourselves, how we will handle conflict, how we will handle these different situations. This is how we are going to act with each other.’”
Management needs to commit to the program.
“If you can’t sign up, then walk out,” Hallett says. “Because you know what? The biggest thing we do as human beings is we need to know how to talk to each other.”
It’s important that the CEO and senior managers need to be secure.
“They need to understand what they do well,” Hallett says. “They need to understand what they don’t do well. They need to give everybody the opportunity to be able to express themselves and bring a good idea to you.
“Sometimes the best ideas come from the most unlikely sources. We just need to give them an opportunity to tell us. And I have to be willing to talk about it without feeling threatened or without feeling somebody’s overstepped their bounds or that someone’s taken over my job.”
Being direct needs to be the standard approach.
“When I want to say no, I need to say, ‘No, we’re not going to do that,’” Hallett says. “On the other hand, people have a hard time doing that. They want to beat around the bush, and they want to hem and haw, and they want to take days to do something that you can do in 10 seconds.”
Establishing the rules of engagement allows you to create a culture where employees feel that the door is open.
“They can walk in and we can agree to disagree, but we are always going to be respectful of one another,” Hallett says. “Have the rule in writing. So when senior management agrees to that, make sure you take that a level down, to your direct reports, and make sure your direct reports take it to their direct reports and all of a sudden, it filters through the entire company, and you’ve really created a culture.”
Along with the rules of engagement, Hallett created a mission statement and core values. “The first thing is, somebody said, ‘If you don’t stand for something, you stand for nothing,’” Hallett says. “So you’d better stand for something. We created our core values, such as honesty, integrity, customer service. So what do those core values do? You need to reference those whenever you’re making decisions. That’s how simple it is.
“When you have to think about whether you’re going to do something or not, whether something is within integrity or whether it has to do with employee relations or customer service, or if it has to do with one of the values of the company, you reference your values, and they’ll pretty much guide you as to what decision you ought to make.”
Build the success
Getting employees to engage in the new culture is a process that is accomplished a little bit at a time. It requires coaching, with frequent huddles to make sure everyone is on the same playbook.
By holding breakfast meetings every Friday with 20 employees from different areas of the company, Hallett got the chance to meet the entire company over a year and a half.
“I told them about me, the history of the company, the vision for the company and some of the things we wanted to do and where we’re going ? however we are going to get there ? and got them to tell me something about them,” Hallett says.
“I’d start those meetings with, ‘OK, let’s go around the room, and let’s tell the group something that nobody in the room would know about you.’ It’s amazing how people engage. Then tell them something they didn’t know about you.”
Gestures like that established employee willingness to buy in to the culture. To make the transformation less intimidating, managers should be aware that cultural learning experiences will be many, and at many locations.
“Culture happens in the hallways, culture happens in meetings, culture happens in the parking lot, in the coffee shop,” Hallett says. “Culture happens everywhere around you.”
Watch for red flags that could derail the infusion of company culture ? gossiping is a sign that there could be a problem.
“Nobody would ever walk into my office and complain about somebody else without bringing the other person with them,” he says. “When you feel people being political, people might be saying something but meaning something else and that’s just street sense — you know the guy’s full of it. He’s really making a statement about something else but he’s really trying to make a statement about himself. That just comes to bad street sense, right? It’s pretty hard to get that stuff past me.”
Hallett says that he must not only set an example for employees but set the pace.
“The speed of the boss is the speed of the game,” he says. “I know that everybody watches what I do, what I say, how I behave. I think that rubs off very quickly. I’ve gone to people and said, ‘Hey, you know what? I think you maybe need to not have sharp elbows — maybe you need to be a little more careful with the way you handled that situation or the way you spoke to that person.’ I’m not afraid to tell someone, ‘You know what? That probably wasn’t the best way to handle that situation.’ We are really a company that tries to focus on these values.”
Aside from the intangible aspects, tangible improvements such as upgrading technology go far in enhancing company culture.
Hallett realized that employees were becoming disenchanted with outdated computer systems and had to address the situation and those feelings. It meant spending enough to bring office technology up to speed.
“First of all, it really reinforces to your employees that you are committed to the industry, and you’re committed to them,” Hallett says. “Secondly, the customers absolutely feel it in the way that they do business and transact with you. If they’re not feeling the technology spend and the investment in technology, quite frankly, they’re not going to trust you to do business with you.”
The results of the culture change were dramatic, and business exploded at KAR Auction Services for its 13,000 employees. Revenue topped $1.8 billion in 2010.
“It was like hitting a light switch,” he says. “Customers were basically saying, ‘Where do you want me to send cars?’ ‘How can I help you?’ I mean, not every single customer, but our business took off like a rocket.”
If management is committed to employees, that fact will encourage a harmonious working relationship that leads to longevity — and low turnover.
“Make everybody feel like they’re loved, and they’re well-compensated and they’re fairly taken care of ? and yes, there will be challenges, like everybody else,” Hallett says. “But at the end of the day, nobody will be looking to get out the door.”
The Hallett File
Born: Kingston, Ontario, Canada, on the beautiful St. Lawrence River. My father was a railroader and my mother was a stay-at-home mom with three little babies. My dad died when I was 8 months old. So I never knew my dad and my mom never remarried. We were dirt poor. I lived in a house that burnt coal in the winter and had an outdoor toilet.
Education: I went to Algonquin College in Ottawa, Canada. I got a degree in recreation management. I was going to college because all my friends were going to go, and I didn’t want to have to study anything really hard.
What was your first job?
I mowed lawns and shoveled snow. Then I became a newspaper boy. If you’ve ever had a newspaper route in the country ? in the city, you can deliver 100 newspapers in 20 minutes ? in the country, it would take you an hour and a half.
What is the best business advice you’ve ever received?
A guy once told me, a great mentor, a great friend of mine, ‘You know what, Jim? There’s nobody better than you.’ And he elaborated, saying, “You’re no better than anybody else, but there’s nobody better than you.’ The same guy also told me, ‘You know what is the difference between you and the guy you admire or the guy that you look up to or the guy that you want to be?’ And his answer was, ‘One good year.’ And that’s the truest thing that’s ever happened in my life. It took me one good year. That’s all it took.
Whom do you admire in business and why?
I admire a guy by the name of Pat Butler. He owns multiple car dealerships and multiple RV dealerships in Canada. I admire him because, first of all, of his entrepreneurialism. He is very quick, very fast, very decisive, very agile — all those words that go with an entrepreneur. I’ve kind of modeled myself after that. I like the fact that on the outside he’s a crusty, rugged old character and on the inside he’s the most compassionate man I’ve ever met in my life. We talk every week.
What’s your definition of success?
Professionally, when everybody wins. Employees, customers, shareholders. And you know, that was really the big thing. When that management team was here for two years, there were some that took care of themselves and ran off with a pot of gold. When I’m done, there will be hundreds, thousands of people that will be taken care of. I think I can say that with a great deal of clarity.
How to reach: KAR Auction Services Inc., (800) 923-3725 or www.karauctionservices.com
When Gary Kovacs joined Mozilla Corp. a year ago, the company was on track to release the next version of its browser, Firefox 4.0., with immense anticipation from the user community. While everyone was excited about the 2011 release, Kovacs also saw that approximately 15 months were lapsing between each update. With the increasing speed of innovation, he knew the company couldn’t afford waiting another year or longer to introduce Firefox 5.0 if it wanted to stay competitive. Fifteen months might as well be 15 years in the Internet space.
“What I came in and helped all of us understand, which is something that everybody knew but we didn’t really internalize, is the market’s moving at a different pace than it did even a year ago, and our mission is to lead in the creation of the open Internet that gives the user choice,” says Kovacs, CEO of Mozilla. “Lead means continuing to push new features, new products at a pace that is ahead of others in the market, and we weren’t doing that.
“Coming in as a leader, what I understood and I think everybody understood is that the pace of the Internet is moving at a very rapid rate. We needed to continue to evolve our offerings and our processes and organization to keep up and to continue to lead. That requires some changes and adjustments.”
While Mozilla had already been growing when Kovacs arrived — generating $104 million in revenue in 2009 — his ability to expedite change through his leadership has been instrumental in expanding the company’s scope, offerings and size over the last year. By reenergizing Mozilla’s mission through swifter execution on several key initiatives, Kovacs has made sure Firefox remains a leader in the evolution of the Internet.
Reframe the issues
Transitioning the Firefox browser to a rapid-release cadence was just one opportunity Kovacs saw for Mozilla to move quicker in adapting to the change around it. However, one of timeliest areas he wanted to address when he came in as CEO was how to handle the Internet privacy issue of Web tracking. After many months of going back and forth, the company had still not reached a decision on whether or not to add a “do not track” feature to Firefox 4.0, which would enable users to opt out of being tracked by websites they visited online. So to get closer to a decision, Kovacs says he needed to put the issue into a different context for his 350 employees.
“Sometimes I make the decision and surface it and socialize it with the group,” he says. “Sometimes I just facilitate the decision getting made. A practical example would be on do not track. I asked a question. I felt this wasn’t exclusively my decision to make, but I felt we had to make one. … I asked, ‘What’s stopping us from making a decision?’ — which is a really different question than, ‘What do we think we should do?’ ‘What’s stopping us from making a decision to implement this?’”
When a decision is at standstill, asking people to examine it from a new perspective can help them identify what are the most significant roadblocks and obstacles to progress.
“I call it the yellow car syndrome,” Kovacs says. “You don’t realize all the yellow cars on the road until you buy one, and then you realize all the yellow cars on the road. After you see the behaviors a few times, you start to recognize them. The behaviors sound like this: When a team or a group or a community is debating on an issue, they start covering the same points and then they cover them again. At that point it’s like ‘OK, done. Time for a decision.’”
When the same, familiar answers came back about the do not track feature, Kovacs reframed the issue for his team again, this time as a question of mission accountability.
“I came back and said, ‘Our mission is to lead the Internet where users are in control and choose, and this is an issue with privacy where users aren’t in control” he says. “‘So do we think some solution is going to be needed this year?’”
Everyone agreed it was.
“Then our only question was are we truly going to be a leader or are we going to wait until somebody else develops something and then fast follow it?” Kovacs says. “The former was the only one that felt right to people. I said, ‘OK, then the harsh reality is, we’re going to have to take a step sometime before knowing the final outcome because the answer can’t be created until you take many steps toward it. Let’s take this first step.’”
Sometimes getting people to see the urgency of taking action begins with getting them to think about choices in new ways. Reframing an issue as how it ties into your vision, mission or core values for instance can help people who are caught up in the initial challenges of a decision see the larger value and implications of making a change. Once Kovacs got his people to redefine Mozilla’s mission and vision of leadership, the team recognized the necessity of making changes to execute both moving forward.
“Everybody to the core said, ‘Absolutely. Time to lead. Time to move,’” Kovacs says. “Once we created that highest order vision, which really tied closely to our mission of leadership of the open Internet, then the work of leadership turned into the work of management, just making sure the processes and structures were in place to actually drive what everybody wanted to do anyway. But it was really calling that out and making that something that was visible.”
By redefining the challenges at hand, you can help your team turn the corner to move forward on a tough decision. However, to balance a participative decision-making culture with efficient execution, you have to have mechanisms to hold people accountable to progress. By providing your people time constraints and clear responsibilities, you can give them input and encourage dialogue without letting a participative culture turn stagnant.
“Doing anything where it involves the ‘I’ word — ‘I think’ or ‘We’re going to do this because I say so’ — that’s death,” Kovacs says. “There are organizations that benefit from that type of leadership. It’s not here. That doesn’t mean that you have to be slower than if it was just you, but you have to be much more inclusive in your leadership style. … The second thing that is negative is if we confuse communal with no need for crisp execution.
“People will follow you, but they want to know that you are going to execute crisply, effectively and things are going to get done. You are going to stay true to your word. If you say you are going to do something or the organization says it’s going to do something or starts to do something, they’ll do it. So the execution, the metrics around that, the processes around execution, getting things done is really critical. And the negative, of course, is if it’s just sort of arm-wavy and nothing gets done.”
If you want to remain competitive, you can’t afford to let your organization stall in its decision-making. Ensuring decisions are made decisively is easier if you set parameters to steer people toward the end result by keeping everyone accountable to progress.
After asking each of his senior leaders if a week would be long enough to research the different aspects of a do not track decision, Kovacs gave them the time period to investigate the issues and then report their findings to the rest of team. He also set a two-week time limit on the final decision. In two weeks, a call would need to be made one way or another. When the team regrouped before the deadline, it reached a decision in favor of the Do Not Track feature.
“Then we moved right to ‘OK, let’s talk about how we are going to execute this over the next three weeks,” Kovacs says. “‘How are we going to communicate it? How is it going to get built into the product? Who is going to own each piece?’ We put a dashboard of operations to it. That’s my approach. You give people an opportunity, but you don’t give them an infinite time to exercise their opinion. You time-bound it, you make it specific, and then you execute based on that.”
Explain your reasoning
If you were in Mozilla’s corporate office, you would see huge boards and monitors constantly rolling user feedback from mechanisms built into the Firefox product, beta channels and its external channels pushed out into the user community. Mailing lists, briefings and community meet-ups that Kovacs attends also provide ongoing consumer feedback to help the company make decision about its direction and product.
Yet while Mozilla relies heavily on input from its user community, Kovacs understands that the company is never going to please every one of Firefox’s 400 million users with a decision.
“If I make a decision or send an email or think through a strategy or even ask an opinion, I’ll get a wide range of feedback that will be everything from, ‘Hey, that’s great. I love it,’ to really in-depth how it could be better, to ‘You’re an idiot, and I’m not sure why you are leading that organization and that’s the dumbest thing I’ve ever heard,’” Kovacs says. “If you are uncomfortable with who you are and uncomfortable receiving that kind of feedback in as plain form as it comes sometimes, it’s not going to work.”
Although it’s probably impossible to have every customer back your decision every time, when you communicate why you made it clearly and assertively, you make it easier for people to meet you halfway and buy in to it long-term. That’s why once Mozilla decided internally to implement its do not track feature — being the first in the market to do so — Kovacs made sure the company reached out fully and transparently to its user community, using every one of its community touch points to explain and discuss the reasoning behind the decision.
“We posted,” Kovacs says. “We blogged. We helped them understand our rationale. We shared all of that, and we expected some to be upset with it. What came back was ‘I’m not happy that you did it, because we don’t have the full solution, but I really get why you did it and once I understood it, I think it was the right thing.’
“You can’t manage by averaging the opinion because then you please no one. In the end, there is a judgment call that needs to be made. What we have learned and what I certainly have learned and has been reinforced … is people will accept a decision. They’ll accept a judgment, but what they also expect is that you’re clear about how and why you made that decision.”
In order to inspire confidence in the long-term vision of growth, transparency is critical. Even if people don’t agree with some decisions you make, if you are clear that you have the mission and core values guiding your choices, they will be able to buy into your judgment as a leader.
“People see you make those decisions – and we’ve made lots of them in the last six months – where we’ve had to say this might result in more revenue, or might be more interesting or might move us in a better direction short-term, but it wouldn’t be good for the mission so we don’t do it,” Kovacs says. “The mail that we get back constantly is ‘Way to go. Way to stand up.’
“You have to be comfortable servicing that point of view, comfortable taking feedback, but the most important piece then is over some period of time, and not too long [saying], ‘OK, we’re going west and we’re going west for these reasons. I’m going to communicate it openly ? but we’re going west.’ Then sometimes there is sort of a hailstorm of negative feedback and you have to push through it. If you believe and you create that belief for the right reasons, then you push through it. It works.”
How to reach: Mozilla Corp., www.mozilla.com
The Kovacs File
Born: Toronto, Canada
Education: completed undergraduate and graduate degrees at the University of Calgary
Who are your role models for success?
My father — due to his outstanding integrity, fairness and keen ability to clarify thoughts — and Lou Gurstner. I admire him for his steady resolve, absolute simplicity and clarity of thought in the face of tough obstacles. I also find Reid Hoffman extremely inspirational as a leader.
Who were your mentors in transitioning to the role at Mozilla?
I had some of the greatest people who have led major organizations and major missions both in the Valley and globally. I’m very pedantic about this. I sat down with them prior to coming to Mozilla. I asked their opinion. I involved them in the decision and then I put the touch on them. I said, ‘Look, I’m going to need help and perspective, and I would love to be able to come to you. I gave them a frequency — we’ll have a glass of wine or we’ll have a dinner — and I’m going to be thoughtful and mindful of your time. I think I can give something back to you. So we created a little bit of a mentorship agreement. When I faced some of the toughest challenges or decisions or issues, I relied on the mentor network to help me navigate through them.
What can California do to create a better environment for business?
We have to improve our fiscal plans and budget in order for businesses to be more effective. I think as a state we need to take steps to make major improvements to the primary education system in California. Great education is fundamental to the success of future generations.
What is one part of your daily routine that you wouldn’t change?
Every morning, I get to enjoy my first cup of coffee with my family. This helps to keep me grounded and allows us to spend quality time together. Also, some sort of physical activity is essential in my day to day.
Something Hal Uhrman has learned in all his years of running 14 full and six half marathons is that you have to pace yourself. With that kind of distance, you can’t sprint out of the starting line or else you’ll run out of gas quicker than you think. It’s a steady, consistent approach to the race that will get you to the finish line.
He uses this same approach to run State Industrial Products, the cleaning products company where he’s been president and CEO for more than two decades. The $111 million company celebrates its 100th birthday this year, and to stay in business that long, you have to think long term.
Build on cash
One way Uhrman does that is by only buying in cash.
“There are all kinds of four-letter words, and the only good one is cash,” he says.
His cash-only policy even goes for buying other companies and facilities — one of which was 11 years old and sat on 10 acres of land.
“If we can’t pay for it, we don’t buy it,” he says.
“You can never get in trouble if you don’t owe money.”
He bought six companies before the recession started, but when it did kick in, he stopped because he didn’t want to run out of money.
Now that the recession is over, Uhrman is looking to make acquisitions again.
Two types of companies that he targets are family-run businesses, where owners are looking to get out, and struggling organizations.
Once he buys a company, he wants to keep as many of the field employees on as possible as well as the owner, if he or she still wants to be involved in some capacity. But there are certain areas where there’s duplication and he knows he won’t need some of those people.
“We don’t need their billing system or their collection system, so some of their employees would get eliminated,” he says. “Anybody who’s out in front of customers, we need all of those. Our payroll is all done here, so if they have a payroll department, we don’t need that.”
If he has good people who he doesn’t need but may be effective in other areas, he’ll look at moving them to a different position.
“If we can find them other jobs, we will, but we have to do what’s right for the company,” he says.
He says it’s key to make these changes right away instead of letting them linger on your to-do list.
“I try to do it as quick as possible because a lot of these companies aren’t making much money,” he says. … “You can’t do it [from the heart]. You have to be objective on who stays and who doesn’t. If they’re a good worker and there’s a place for them, we absolutely want them.”
Hire the best
Having good workers who are dedicated to the business is crucial for State Industrial’s success, and he’ll only hire people who fit that mold, because you can’t build a strong team if people aren’t dedicated to helping the company. He starts with people who are willing to take the time — even sometimes outside of work hours — to handle problems that arise. Getting these people starts with taking your time in hiring.
“You look at their track record to see what they’ve done,” he says.
If they come in right out of college, you don’t have a way of knowing for sure, but he says you can see if they’ve been involved in team-oriented activities in their past, such as sports.
He’s also dedicated to making sure they’re taken care of. This starts at the most basic level with making sure they have their job, even when times are tough.
“Most companies, when things get tight, they start cutting back people because they don’t have any money, and if you have money, you can kind of wade through, and that’s really what we did,” Uhrman says.
It goes back to his cash-is-king mentality, so he was able to take care of his team through the downturn. Beyond that, he says that good benefits and a 401(k) program are important, but it’s even more than that.
“The best culture for employees is one where they have the opportunity to help the company achieve its goal and achieve its personal success,” he says. “As you provide a large group of people with challenging work and the responsibility to get the job done and reward them for a job well done, the enthusiasm is contagious.”
He says that taking care of people also comes down to looking out for their long-term desires and needs.
“You have to be honest with them in everything you do, and if you get somebody out of school, if they don’t see a position with you where they can move up, they’ll leave you,” he says.
Additionally, he says you have to make work a fun place for them. One way State Industrial does this is by regularly participating in the Corporate Challenge program where companies compete against other local companies in various athletic competitions.
“We get nonathletes to do something,” he says. “They really contribute. When they have this Corporate Challenge, they have a cookout down there. We do things to try to make it fun.”
When you have a strong culture like that, it will show in how your employees treat your customers. A huge part of State Industrial’s success is that it takes care of customers well.
“If you do the right things for your customers or employees, it works,” Uhrman says. “If you take advantage of either one, it doesn’t work.”
One way he and his team takes care of customers is by looking out for their best interest. Every quarter, his team goes to each customer and shows them exactly what they’ve spent and what they can do to control costs better.
“Trying to make more money off the customer is narrow-minded,” Uhrman says. … “You have to take care of the customer.”
Taking care of the customer ensures you don’t lose that customer.
“If you don’t lose customers, you have to win,” Uhrman says. “Every company for one reason or another loses customers. We really try to do a job on them to convince them they’re spending less money.
“If a customer thinks that he is being treated fairly, you won’t lose him. … If you take care of customers, they will stay with you.”
In addition to treating his customers well, he also strives to make sure the product offerings they have are the absolute best. About six years ago, as he and his team went to different trade shows, they started to notice a trend: more and more companies were starting to come up with environmentally friendly products.
“Our challenge is to do it better than some of our national competitors and knock them out,” he says.
That meant that State Industrial needed to start adapting its product line, as well, so that customers had safe, effective and environmentally friendly products to choose from.
For that to happen, he had to get buy-in from his team. He started with his top people to lead a change process.
“Bring them in, indoctrinate them on what has to be done, and we train them, and their job is to go out and train their people, and it’s easy for us,” he says.
Overall, he says you have to continuously encourage and gently push people into changing.
“You can’t do it with a sledgehammer,” Uhrman says. … “If they don’t change, one by one they’re going to lose their customers. If it’s not to us, someone else will come in and convince them.”
How to reach: State Industrial Products Corp., www.stateindustrial.com
In the last five fiscal years, Carlos Sepulveda has grown Interstate Batteries from
about $700 million in revenue to $1.5 billion in revenue. In that time, he’s invested in facilities and people, and now has more than 1,600 employees at the Dallas headquarters.
The growth, while impressive, has created its own problems, including the conflict that comes from deciding which opportunities to pursue.
“It really comes down to a matter of we need to vet the opportunities we’re going to pursue because everything can’t be a priority,” Sepulveda says.
Different people evaluate opportunities based on different criteria most relevant to their position and experience, which can create conflict over which opportunities should be pursued.
“Conflict generally has a negative connotation in society, but I really don’t see it that way,” he says. “I see it as an opportunity to vet different perspectives and opinions and synergistically come up with a superior answer just from the dynamics of a well-functioning team. My challenge has been having our leadership team get to that higher level.”
While difficult, during that time he succeeded in making his team better at resolving conflict by having open meetings, having the best team and embracing reality.
“I see that we’re making progress on some very big initiatives, and we have other initiatives queued up that we believe are going to be next … so [we have] a focus and the results reflecting that we are doing better at communicating alternatives and having more open conversations around the leadership table that are reflecting a deeper degree of respect and even trust and the ability to talk about these things.”
Have open meetings
One of the first keys to getting his team to embrace conflict was increasing the flow of communication in meetings.
“When most people hear [communication], they’re thinking of transmitting, so we really tried to put the emphasis on receiving,” Sepulveda says. “It’s making it a part of the leadership culture to emphasize listening well and asking appropriate questions to enhance absorption of what’s really being attempted to be communicated. That’s not a natural skill.
“People typically default to being better at transmitting than receiving. You can see that in a variety of ways, but one way you can see that is when a discussion of reasonable intensity is going on and one party is communicating to another, you can almost see that other party stop listening to start formulating what their response is going to be on what they’ve heard so far.”
One way he deals with this common problem is to “hit pause.” The team may be having a substandard discussion, so in the middle of it, Sepulveda will simply say, “Let’s hit pause here.” He’ll then ask the team to make observations about how they’re communicating. How are they doing with listening? What do they see that indicates that they’re listening well? What indicates that they could do better listening? What kind of effect is that having on everybody?
“I don’t mean to make it sound psychoanalytical — it’s business driven, and it’s about generating the maximum value, so it’s about sharpening the ax — not just swinging the axe harder,” he says.
That took about a year to perfect, because it’s hard for a team to adjust to.
“First, it’s a bit awkward and unusual and people are wondering how safe this is, and it takes time for any team, in my opinion, to have enough revolutions to build a respect of that team to understand we’re genuinely pursuing the delivery of value here,” Sepulveda says. “When people see that metaphorical ax get sharpened, over time people say, ‘Wow, there is a value here,’ and next time we debrief and critique ourselves stylistically, there’s more inputs.”
The other way he increases communication at the meetings is to have open agendas instead of set ones. Each Monday, Sepulveda meets with his 12 top officers at 1:30 p.m. Nobody submits anything in advance, but instead the agenda is broken up into four main categories: housekeeping, revenue/gross profit updates, major things happening this week, and then challenges, problems obstacles and opportunities.
“The value there is for everyone to be present to be able to participate on the achieving of what we do or what we don’t do,” he says. “No system is perfect. As long as people are involved, they’re not going to have a perfect system, but it’s valuable.”
Because of how the agenda is structured, sometimes the meetings may go until 3:30 and sometimes 7:00, but everyone always blocks off the entire afternoon so they can make sure to get through everything anyone wants to bring up.
“The primary benefit is you get superior results,” he says. “The primary benefit a CEO can get is a greater confidence that the leadership team’s decisions are market relevant — they have a robustness for success and a competitive marketplace that they would not necessarily have if that decision were made in a vacuum.”
But that’s not the only benefit to taking this kind of approach.
“Those officers then go off and own the culture within their subculture, and then what you get is a leader in that subculture that knows, ‘Hey, I was there, I know what we’re doing, I can explain it,’” he says. “They can handle any question that comes up and do it within their capabilities of handling it in an excellent fashion so that other parts of the organization know that their subculture leader is genuinely at the table when things are being decided and genuinely has an opportunity to have an impact on that.”
Hire the best people
Another factor that was critical for Sepulveda in getting his team to better resolve conflict was to make sure he had the most qualified, competent people sitting around the table. He started with 10 senior officers, and he now has 12, but of those 12, seven of them were not here seven years ago.
“Sometimes that happens because the CEO decides it needs to happen, other times it just happens,” he says. “Regardless of what initiates it, when that change takes place, it’s vital for the president and CEO to get the right fit to impact that team. Every time one of those members around that table changes, it changes the dynamic of the entire team, and then there’s a resettling to get your pace back.”
To make sure you get the right people, it’s part art and part science.
“The science part is looking at experience, looking at education, asking the right kind of questions in interviews, listening very carefully,” he says.
Make sure potential employees have the right expertise so that if there’s a financial issue at the table, you’re confident that the person with the financial expertise knows what they’re talking about. Do this for any area that could affect evaluating opportunities.
Then the art part is just paying attention to the sense you get when you’re around them. He likes to take a candidate and their spouse to dinner with himself and his wife to see how they act in that setting.
“If someone I’m with treats the wait staff in a way that’s not reflective of appropriate, respectful appreciation, I’m done,” he says. “That’s all I need to see. That’s how they’re going to treat other parts of the enterprise. Maybe not their direct reports, but that’s how they’ll treat other team members.”
Other factors that contribute to the art side of the equation are how they spend their time outside work.
“If they’re doing things with vigor outside of their career, that’s a real positive,” he says. “If they take personal responsibility for their physical health, that’s a real positive.
“One of my personal theories is that no one will ever lead anyone else better than how they lead themselves, so I look to see how they’re leading their self.”
If you bring in top people, you’re going to get better results when it comes to resolving conflict and choosing opportunities.
“It really doesn’t do you any good to have a facilitated, interactive leadership forum if it’s void of competence,” he says. “I don’t think any company would get very far, and I certainly wouldn’t want to participate in that.”
The last key to getting his team to embrace conflict was a principle Sepulveda actually learned as a teenager.
As a child, his parents divorced and his father was an alcoholic. He saw how addictions affected people and distorted reality, so as a 15-year-old leaving home to find a better living environment, he learned that being tethered to reality was critical.
“Addictions are a tremendous deflector of absorbing reality,” he says. “So [it was] just seeing what I would categorize as suboptimized leadership to maybe even just dysfunctional leadership — good benefits don’t flow from inoculating yourself from the reality of the situation.”
That lesson is something he keeps in mind as a leader today.
“We cannot deliver value if we don’t have a good, solid absorption of what the current state is,” he says.
Often leaders like to avoid reality, but he says as the CEO, you can’t do that.
“It’s not if, but when, CEOs can be confronted with reality,” he says. “Maybe you can defer it or delay it, but it is unavoidable that whatever the market realities are, they’re going to reach your desk. … Let’s not be so enamored by our current understanding of what’s going on in the market that we miss shifts or changes and therefore are delayed in being able to respond or harvest value as a result of those shifts or changes.”
This is one of the hardest things to get your team to do though.
“You can’t make your team do anything,” he says. “You can only provide the opportunity, invite them into it and allow the team to see the successes that happen as that opportunity gets laid hold of, and then those successes generate momentum and that momentum builds, and then the velocity accelerates because of proven successes.”
He’s also quick to point out that this isn’t the only way of leading a business.
“I’m not saying you have to embrace reality,” Sepulveda says. “You don’t have to have an open culture. I’m just saying results are enhanced if you embrace reality, if you have a leadership culture where you have confident, ambitious individuals who are invited into a full discussion of the relevant business issues. … There are companies that are having success without doing this. The difference is, that’s awesome, but how sustainable will that success be? It’s important to factor in. We’re in our 60th year here. We plan to be around another 60 years at least.”
How to reach: Interstate Batteries, (866) 842-5368 www.interstatebatteries.com
The Sepulveda file
Education: Bachelor’s degree in business administration, University of Texas at Austin
What’s the best advice you’ve ever received?
Colossians 3:23 — Do your work unto the Lord rather than men, knowing that it’s from the Lord that you shall receive your reward. That’s a paraphrase. It’s an awesome verse. I came across a Bible when I was 15 years old, and I’ve been a student of the Bible for the past 39 years. I view my studying and equipping myself with that knowledge as a strategic advantage in living a better life. It’s really almost unfair — but it’s out there and everybody could do it, but it doesn’t appear that many are. Quite frankly, I’d say it’s the only reason I’ve made it from 15 to 54.
What was your first job?
I was 15. I had just left home. I left my mother in Oklahoma City, went to my dad’s in El Paso, stayed there nine weeks, that didn’t work out, so I went back to Austin where I had been previously until my mother had moved to Oklahoma City and contacted the football coach because I was a pretty good football player. I told him I needed a job before I checked into school, so I got a job bagging groceries, pretty much through high school. In the summer, I did fence construction.
What did you learn from that job that still applies?
By way of example, at the grocery store, maybe three nights a week I would close the store. There were like seven or eight steps to closing the store – taking out the trash, stuff like that. One of them was sweep under the candy racks. I did that, and it didn’t take me long to figure out I’m the only guy sweeping under the candy racks, because there’s no way they’re getting this dirty in one day. I thought, ‘It is what it is, so I’m going to keep sweeping.’
It wasn’t too many weeks after that the manager said, ‘Do you realize you’re the only guy who does that?’ I said, ‘Yeah, I figured it out.’ He said, ‘Why do you do it?’ I said, ‘Because it’s on the list for closing and that’s what I’m going to do.’
It wasn’t too long after that I got moved to cashier, even though some of the bagboys had more tenure than me. Any individual can only decide how they’re going to be valuable, then it’s up to that organization, whether it’s part of their culture, to reward that individual being valuable or not. If I worked for a government entity, there’s no way they’d move me from bagboy to cashier because other bagboys had been there longer. That’s one reason I’m a big fan of delivering value in an entrepreneurial business, because you let value adjudicate when opportunity gets harvested.
When Martin Richenhagen joined AGCO Corp. nearly a decade ago, he says the company was like a Volkswagen Beetle with a Ferrari engine.
“We had certain elements,” the chairman, president and CEO says. “We had good designs and strong features, but we didn’t make it a complete product range.”
At the time, the company, a global manufacturer of agriculture equipment, had grown through mergers and acquisitions.
“We had a lot of very traditional brands and products, but the approach of previous management was to do acquisitions instead of investing into your business,” he says. “That was not bad in order to basically buy the right pieces and in order to get up to a certain meaningful size, but that means if you want to do that on a continuous basis, you would have to have new targets all the time.”
That’s a problem when the industry is already very consolidated, so the idea of buying products or missing technologies from the outside wasn’t going to be as effective moving forward. To continue growing, he was going to have to change the strategy.
Richenhagen says, “That means you need to invest in your own organization, and that is much better than what we did before.”
Richenhagen started the process by making sure he knew what the company wanted to accomplish and looked at it from every angle.
“You do a (strengths, weaknesses, opportunities and threats) analysis where you compare your product and market analysis with your competition,” he says. “This shows you where you have gaps in your product offerings.”
Some gaps could include having a product that’s not state-of-the-art, having a leading product that is too expensive, or even not having a product at all for a certain market.
It’s absolutely critical to be honest when evaluating your products.
“You have to look at your product range and you need to ask yourself the question, ‘Is this the best product, or are there competitors that are better than I am?’” he says. “American cars are not sold outside of America because they’re lousy cars — not because people in Europe prefer European cars. The technology isn’t leading technology and leading quality. Today, you need to be able to lead in technology and lead in quality and have a competitive cost position.”
When you honestly look at your products, it will help you see where your strategy should be heading.
“When you map your product and compare it with the competition, then you know exactly where you need to be, and then that hole has to be based on your strategy,” he says.
For example, AGCO’s strategy is to have high-tech solutions for professional farmers feeding the world. He doesn’t mind having small lawn and garden tractors someone might need, but he wants to have all the leading-edge technologies for professional farmers in his suite of product offerings.
“You have to talk to your customers to identify future needs,” he says. “You could have a different vision. The vision could be low-cost tractors for family farmers in the U.S., for example … but there are certain implications coming from your company’s vision.”
He says you also have to look at the market and where it’s going.
“Define supply and demand and then you need to look into your own industry and you need to look into factors that influence the market demand in the markets you’re in,” he says.
For example, in his industry, the ability to get financing is critical and will affect demand for his products.
Get the right people
AGCO was spending about $50 million a year on R&D efforts, but Richenhagen knew it would take more than that to truly be the technology leader. He was going to need the right people to lead those increased R&D efforts. This came down to first creating job descriptions and then hiring the best person.
Beyond just the general characteristics that make up most employees within the company, he says it’s important that you know what specifically the job is you’re hiring for.
“We have a job description and profile for every position, so that means we try to invest some time in order to find out what is really needed and what we’re looking for,” he says. “This, of course, has to be updated every time you’re looking for someone else or hiring from the outside.”
It’s important to update these descriptions every time you’re looking to hire someone new for that position because the world changes so much, often the requirements for the job will change, too.
“You need to sit down and think about it, and you need to think about how sometimes that has a mirror impact on your organizational structure — you do it, and you find out you have overlap between two or three positions, and you may want to change your organization because sometimes there’s waste of energy.”
He says you need to work with a small team and brainstorm what you think are the key important areas of responsibility for each position.
“What we always do is discuss it with the guy who has the job, because I think it would be very bad if you have a job description, and the guy who’s doing the job would say, ‘That’s not me,’” he says. “That happens sometimes. If it’s getting too theoretical and you only have human resources involved or someone from the outside, this could happen.”
As you put together your job descriptions, it’s important to think big picture.
“You need to keep things simple in a way but also very pragmatic,” Richenhagen says. “This means don’t make it too long on details. The most important part of a job description is to describe the area of responsibility in the form of results you are expecting. Instead of describing what you expect somebody to do — he has to come into the office at 7 o’clock in the morning and open his door and start to make phone calls — describe activities and describe results you expect the leader to generate.”
This has been a critical recruiting tool for AGCO, because by defining results instead of job minutia, people are attracted to that kind of culture and want to be a part of it.
“With people who are more and more qualified and who have a very good experience, this is also much more motivating, because you leave the way how to get there more to themselves,” he says.
When you have job descriptions created, then you can actually look at bringing people on board. Make sure you get the right people with the right skills.
“First off, you need to have a pretty good understanding about the skills of your own people,” Richenhagen says. “Sometimes it’s very surprising, because when you look into it, you have people who have a lot more knowledge than you think. That needs to be documented and mapped out in a structured way.”
He says he had a strong HR leader, so he worked with her and a consultant to do a high-potential assessment of the organization. But from that assessment, he learned that he had really good people, but he didn’t have enough. He needed to hire more young, high-potential people from strong agriculture and technical schools as well as some leaders with strong team-worker skills and multiple language capabilities.
“What is also helpful is if you can also describe target industries where you might find those skill sets,” he says.
For example, he knows that looking at automotive, construction equipment, mining equipment, forestry equipment, the truck industry and other related fields will be the likely industries where he’ll find people with the skills needed to be successful at AGCO.
While he uses consultants to help him, he says not to use too many.
“Focus on maybe one or two,” he says. “Maybe you need to have some guys who are specifically good in a certain region. … The firms don’t make a big difference — it’s mainly the people. You need to have somebody you know and somebody who is on the same wavelength as you are, so he needs to understand what you’re looking for.”
The best indicator of that is to describe to them what you need, give them two or three weeks to identify a few candidates and then make an assessment.
“You meet the candidates and you know right away if the consultant got the message or not,” he says. “It means a very good relationship between you and your consultant to make things easy. It’s like in matchmaking a little bit.”
Once he has the right people in place, Richenhagen pushes people forward by holding them accountable to detailed objectives.
“The objectives have to be ambitious because it’s motivating, but on the other hand, they also have to be achievable,” he says. “If you give someone a target that can never be achieved, that doesn’t motivate that person. Second, in order to get there, objectives need to be agreed upon. It doesn’t help if you just give people objectives without talking about it in detail. That means it needs to have some kind of negotiation process.”
This allows the person to talk about what they think is achievable or not and gives them buy-in to the goals.
Then the goals need to also be measurable.
“It doesn’t help to have a target that says to develop a nice product,” Richenhagen says. “This is a weak definition. You need to define the measureable objectives you’re shooting for, including a measureable time frame, and in engineering, it’s also helpful to define the budget you allocate — if you’re not in a position to make it on time, very often it’s getting more and more expensive.”
As he moved AGCO forward, R&D spending increased about 20 percent each year. By 2008, he knew he was on the right track as the company reached $8.3 billion in net sales. Even as the recession hit, the company suffered with revenue dropping to $6.5 billion in 2009, but despite that, he continued on his plan of increasing R&D money. The company even invested in some huge factory capacity additions during this time
“For two years, I was hanging out of the window with the tips of my feet inside, and then my guys were holding me,” he says. “Maybe they wouldn’t have held as firm as they could and I would have fallen out of the window. It’s a personal risk. It’s hard, but this is why the chairman and CEO makes more money than other people, because he needs to take more risks once in a while.”
That risk certainly paid off for AGCO.
“Due to the fact that it came back and we had invested, we’re also in a position to benefit and deliver on time while some of our competitors, who were more careful, now have certain capacity restrictions,” he says.
This has allowed AGCO to become a market leader.
“With every market, when you see your market share is increasing, you know you’re on the right track, but it’s also an entrepreneurial decision,” he says. “In the area of product development, you can fail easily by just developing the wrong product, so you’ve spent the money and nobody wants to buy it — you need to show some leadership if you want to make it.”
On top of that, revenue increased last year to nearly $6.9 billion. Now the company spends between $250 million and $300 million a year on R&D. While it’s a lot of money, he says he expects the company to continue growing and anticipates still increasing that R&D spend 10 to 20 percent each year. That VW body with a Ferrari engine has certainly changed these days as a result of his efforts.
“We have certain leading-edge technologies and certain brands that have a strong brand image,” Richenhagen says. “When you make this a company vision, all your brands benefit from that, and the whole company image is getting into the direction of technology leader. If you compare yourself with your competition, we now, from our customers, are more seen as the BMW or the Mercedes of our industry while some of our competitors are seen as the General Motors or the Fords of the industry.”
How to reach: AGCO Corp., (770) 813-9200 or www.agcocorp.com
Martin Richenhagen, chairman, president and CEO, AGCO Corp.
Born: Cologne, Germany
Education: University of Bonn (Germany)
What was your first job ever as a child?
My first job was helping a neighboring farmer to harvest potatoes, and this was paid by 25 cents per hour at that time in the late ’50s. [I learned] that farming is very tough.
As a child, what did you want to be when you grew up?
I always wanted to be a train conductor. We had a train track passing by, and I liked the idea that you could travel for free while working and I was attracted to speed and noise and engines.
What’s the best advice you’ve ever received?
I think good advice I received from my father is one should have a goal in life, and second, you should do every job as good as you can.
If you weren’t doing what you are now, what career would you have?
When I was a student, I always wanted to become a famous Olympian in horse riding. I went with the German Equestrian team to the last Olympics but as the coach, not as a competitor. We came back with a gold medal, so that means we did a very good job.
Deborah Fine is pretty good at shaking things up.
Three years ago, when she joined Direct Brands, the largest distributor of physical multimedia products such as books, movies and DVDs was in desperate need of transforming its business model to better compete in an increasingly changing marketplace.
Fine’s problem was pretty straightforward: Many of the company’s holdings had strong brand recognition, such as Rhapsody, The Literary Guild, Columbia House, QPB and The Book Of The Month Club, but those and other brands had lost their luster. And with the shine went some of the corporate revenue.
Aiming to provide more for the customer and recapture brand loyalty, Fine introduced a largely fresh marketing team and implemented new Web and social media strategies. She also took a new look at traditional, proven methods.
“We realized pretty quickly that between the database of scale and owning the ability to power a direct consumer channel, inherent in those lie two very, very large opportunities for growth,” Fine says.
Smart Business sat down with the former president of iVillage to discuss what it took to turn Direct Brands into a digital age company.
Q: On day one, what challenges did you walk into this job and face?
I walked into the success of a model that was largely unchallenged for decades, so there was nothing wrong with this model for a very long time. A mere three years ago, this was a billion-dollar business. The challenge is that the landscape changed so quickly. This is a company that saw throughout its legacy Red Box, Amazon and the changes at Barnes & Noble. It saw radical change around it, and frankly, it didn’t respond with the speed that the company now thinks and executes with.
Q: Did you find there was an urge to leverage your existing resources to expand outside the company’s core competencies?
Yes and no. We identified our growth strategy on several fronts. The first job was to go back to our roots and execute against core, direct marketing tools and best practices to increase loyalty retention — all the things that belied our heritage.
The second was to take the 24 businesses we own — those in physical form as well as their digital companion sites — and bring related business into the fray. For example, if we have amongst our audience several hundred thousand members of The Good Cook, (we have) a reasonable opportunity to monetize that audience and sell them the related casserole dish, spices and kitchen gadgetry.
The third (job) was recognizing the turnkey legacy value and expertise needed to power that model — with best-in-class distribution and customer service components — enabling us to enable others.
Q: You’ve been in industries where disruptive innovation is necessary. How are you bringing disruptive innovation to this organization?
Most disruptive about what we’re doing is exposing the company to new ways of running a business, as well as bringing in new disciplines. Titles such as ‘head of business development’ and ‘chief transformation officer’ were not titles that existed before. So I think I say it sort of in jest, but not really — the biggest change was showing up and bringing in a CEO to transform the entire management team. I changed 80 percent of the management team in my first year. Talent is the silver bullet, and there are very few business practices that are silver bullets.
Q: How are you balancing traditional channels with the new channels for doing this business?
It’s really a hybrid. When I arrived at the company from working as president of one of the largest online sites for women at NBC with iVillage, the perception was that I was going to show up with the world’s largest shredder and literally shred every piece of paper, every catalog and every piece of collateral material that we used to run our business. But no business today, regardless of genre, is able to throw the baby out with the bathwater.
So for us, I subscribe to test, learn, repeat; test, learn, repeat. And that’s what we are doing. Social media is a great example. There’s no way I’m going to walk away from 60 million pieces of direct mail, 500 million e-mails and 27 million cartons that can be marketed in, on and around in favor of a new discipline that may or may not work for us. But common sense says that because our demo is there, because our customer is connecting online, because our customer is active in social media, we have to be there.
Q: So how does this look in practice?
We’re certainly not abandoning our traditional tools, tactics and strategies, but based on demography, it’s the fastest growing segment. It’s requisite for us to be there, and I think it’s a combination of analytical tools, research, training, learning and business processes.
As a example, we had a situation where we had a consumer registering a complaint and posting it. Actually, we had two situations happening at the same time because of that: We had customer service react almost immediately, people who are monitoring those pages, but then we also had our loyal fans, de facto brand ambassadors, come to our defense.
You can go on the site and read their posts: “I’ve been a member for 20 years, 30 years, 40 years, you know. I‘ve never had this problem with the company. The service has always been a hallmark.”
So re-engineering the company is as much about new systems and processes as it is about changing the psyche.
How to reach: Direct Brands, www.directbrands.com
Interviewed by Dustin S. Klein / Story by Jessica Hanna
After Rosetta Stone’s original founder passed away in 2002, the then-small company of 90 employees needed a new leader with passion and direction.
At the urging of his lifetime friend, Tom Adams met with the founder’s family and asked to come on board with the company as CEO.
Swedish by birth and raised in both France and England, Adams said he brought his lifetime experience of learning languages to the company. When he was 10 years old, he moved to England and was placed in school without knowing the English language. He said he learned through immersion.
“It was a very painful experience, but it developed a lot of intuition about what works, what doesn’t,” Adams said. “I kind of just feel it.”
As president and CEO of Rosetta Stone, Adams uses his experiences to enable others to learn languages more rapidly and efficiently.
Q: You came in as CEO; on day one, what did you bring to the table?
I know what learning strategies deliver results when you are trying to acquire a new language. I learned other languages after (learning English). But beyond that, I think people who know me know that I am very competitive. I’m also a visionary in the sense that I have a vision of where things need to be, and that allows me to be bold.
My core is passion and a vision of how language learning should be. It should be much easier than most people have experienced; it should be much more effective. And technology can deliver a much better experience now, especially if you adopt the right methods, the right pedagogy. You can have much greater success than people have experienced in school.
Q: What were some of the challenges you faced in taking over the organization?
We had less than $1 million of cash in the bank. We didn’t have the budget to spend on a big media splash. What we had to figure out was how we could advertise to create a little awareness, and make sure that that little bit of awareness actually paid off.
We developed very technical approaches to marketing, inspired by other companies, but developed organically within the business. People developed their own solutions to the problems of doing micromarketing, and we embraced that and started scaling it. As we found things worked, we repeated the things that worked. We didn’t repeat the things that didn’t work, and so we got scale.
Q: So what worked?
Print advertising, where we would run an ad that essentially explained our method and stipulated who was using us. We had a phone number that they should call, and by having that unique phone number, we knew which publications worked. We were successful with the Atlantic Monthly and then with The New Yorker, and from that base, we continued to build.
Q: What didn’t work?
In the beginning it was a lot of the administration systems and managing external vendors. We found that incredibly hard because we were trying to build an e-commerce system that could handle thousands and thousands of transactions seamlessly that it would all flow through.
You would read the (information) from the vendors of these IT systems, and with enough money, they work the way they describe them. But as a company that was getting off the ground, it was just really expensive. So we had a false start and had to reflect if we should continue and put more money into the company to get a result from all the investment.
But we did eventually decide to put more money in (and buy the systems). In the end, we believed that we had very strong potential and that we would become a large company. We’re still on our way there, but having that technology as a back end supporting our growth was key.
Q: How long did it take before you were getting traction on sustained growth?
It was about six to nine months before some of the ideas started proving themselves. We were so excited. And, we were so experimental. I find it hard to pick a time when we knew were going to succeed because we thought we were going to succeed the entire time. We thought it was just a matter of testing, with enough frequency and enough different ways, as well as having the discipline to interpret results.
Q: Did you find that you had to continually communicate to your staff, asking them to trust you on what would work?
Our staff is just as passionate about the course, so we are a fortunate company in the sense that Rosetta Stone is a much bigger thing than a company. It’s more of a movement to change how people learn languages. As a result, our staff tends to base their expectations and their tracking of the company on things other than just the economic performance of the business.
But sure enough, we had economic success, and so it was reinforcing the overall hypothesis of how we would build Rosetta Stone into the game changer in the language learning industry.
Q: How do you see your role at Rosetta Stone these days versus when you took over?
When I started out at Rosetta Stone, I was really about working collaboratively with the senior team to figure out what we were going to do. Once we had done that, my job became to be the chief cheerleader, so once we committed around a vision, I was the evangelist of it. I was the one who would take the hardest stance to defend that core mission we developed.
How to reach: Rosetta Stone, www.rosettastone.com
Interview by Dustin S. Klein / Story by Jessica Hanna