The financial meltdown that rocked the economy in late 2008 damaged U.S. businesses in myriad ways — but LeasePlan USA Inc. was one of the unfortunates that got hit from several angles at the same time.
LeasePlan, which provides automobile fleet management services and manages about 385,000 vehicles for its clients across the United States, is basically in the business of financial services. It helps companies finance and service their vehicle fleets. When the meltdown happened, liquidity and credit dried up practically overnight, making things very tough for LeasePlan.
“All of a sudden, these things became a huge issue for us,” says Mike Pitcher, LeasePlan’s president and CEO. “In that environment, a lot of our clients were under a great deal of financial pressure. And so were we, with regard to liquidity, cost of funds and simply doing business as usual. Financial services and the entire industry were very challenged.”
At the same time that liquidity and credit were drying up, the recession began to stifle many sectors of the economy, sending some of LeasePlan’s key corporate clients into downturns of their own. Consequently, those companies started looking for ways to save money. And one of the line items they began to scrutinize closely was vehicle fleet costs.
“Some of our clients were starting to downsize,” Pitcher says. “Their fleets were getting smaller, and they started looking at different options for vehicles as well.
“A telltale sign for us was that, before this downturn, the six-cylinder engine was always the predominant engine in our industry. Nobody ever ordered four cylinders for fleet. But we started seeing some of that. We started seeing some of our clients not only downsizing the number of vehicles in their fleets but using smaller vehicles. And they were holding onto vehicles longer instead of replacing them.”
All of these factors put strong downward pressure on LeasePlan’s business.
“In ’09 and ’10, we saw our overall fleet — the total amount of cars we finance — go down quite a bit,” Pitcher says. “I can tell you that our overall fleet went down by thousands of vehicles. It was a substantial drop. It got our attention. These were significant client behavioral changes we were seeing. It was an indication that some fundamental changes were happening in our industry.”
Focus on controllables
Pitcher pulled his management team together to come up with a practical plan aimed at pulling LeasePlan out of the down spin it was falling into.
“One one hand, we knew we had a credit crisis going on,” Pitcher says. “The availability of credit and liquidity was a serious issue for us. But that was really at a macro level and largely beyond our control.
“So what we decided to do as a company and as a senior management team was we started talking about how we could get back to the basics and get all the basics right.”
The result of these deliberations was a new five-year strategic plan dubbed Triple Crown, which LeasePlan put into effect near the end of 2009.
“Our Triple Crown initiative was based on our performance in serving our three main groups of constituents,” Pitcher says. “Those constituencies are our employees, our clients and business partners, and our shareholders. And we said that none of those were more important than the others. Each was critical and fundamental to our business.”
LeasePlan’s Triple Crown five-year plan set forth concrete objectives regarding how effectively the company serves each of those three stakeholder groups. The plan laid out methods to measure employee engagement and client loyalty and goals to be reached in both of those areas based on those measurement methods.
LeasePlan’s shareholder return objective was to achieve a double-digit percentage increase over the five years covered by the Triple Crown initiative.
“We started to measure employee engagement — not just satisfaction but employee engagement,” Pitcher says. “We started to measure customer and client loyalty — again, not just satisfaction but loyalty — with the key definition of loyalty based on whether the client would refer us and whether they had an intent to repurchase and do business with us again.”
LeasePlan hired a consulting firm, TNS, to periodically survey its employees as a means of measuring their level of engagement in their work.
One of the initial findings was that LeasePlan has an unusually high percentage of workers classified as “drivers” — that is, passionate, already highly engaged employees who act as if they have an ownership stake in the company and work hard to deliver exceptional service every day. They learned that with such a high percentage of “drivers,” communication becomes even more critical than usual.
“We learned that with a group like this, you can never communicate too much,” Pitcher says. “Part of the reasoning for this is that in the absence of truth, people will start to make stuff up. If you don’t tell them the truth — clearly and consistently — they’re going to make something up. And usually it’s something far worse than things actually are.
“So we started having regular town-hall-type meetings and monthly communications from myself and our CFO regarding our financial performance and monthly emails from our chief sales and marketing officer talking about accounting and departures.”
LeasePlan also pledged not to lay off workers except as an absolute last resort and managed to live up to that pledge, even through the recession’s darkest days. The company implemented a two-days-a-week, casual-dress program and a weekly “dress for success” day, as well as an employee health program called HealthyU that includes free biometric testing, a weight-watching program and a running group that participates in 5K races — all of which have been popular and have helped increase the company’s employee engagement scores.
“We’ve received great feedback from our employees,” Pitcher says. “They love these programs. They’re great morale boosters, and they cost the company little or no money.”
As part of its Triple Crown five-year strategic plan, LeasePlan engaged an outside firm to interview its clients by phone to measure their degree of loyalty as well as their perceptions about LeasePlan’s customer responsiveness, its level of innovation, its technological know-how and the value of its service vis-à-vis how much it charges for that service.
“Client loyalty is really about a lot more than client satisfaction,” Pitcher says. “It’s about a client’s intent to repurchase. Will (clients) be willing to spend additional dollars with you as a vendor? It’s about expanding services and share of wallet and whether they’re willing to be a referral for you if another client would call. Those are the factors that drive client loyalty.”
Pitcher proudly notes that LeasePlan is now laying the groundwork for a new five-year strategic plan because it achieved all the goals of its Triple Crown five-year plan in just three years.
“We laid out a five-year plan, but our team hit all the metrics we set forth in that plan within three years,” Pitcher says. “We achieved them all during 2012. This plan brought us back to pre-credit-crisis levels of profitability.
“We hit our metrics in all three areas — employee engagement, client loyalty and shareholder return. So now we’re back to the drawing board, looking at what our next five-year plan is going to look like.”
Asked what key pitfalls he has learned to avoid while leading LeasePlan through the credit crunch and financial downturn, Pitcher says he strongly suggests resisting a common mistake.
“One of the biggest pitfalls is surrounding yourself with people who always tell you you’re right,” he says. “If you get a big enough audience with very diverse and original ideas, you’re going to find out you don’t have all the answers. As a CEO, you can become very insulated, and people won’t bring you the real problems and the real challenges. You have to stay away from a group of advisers or managers that simply always tell you you’re right.”
Pitcher also recommends empowering the rank and file to help find the solutions your company needs when it gets in a tight spot — and be sure to acknowledge those contributions.
“One of the things we learned is that your team members really want to be part of the solution,” Pitcher says. “They want to be heard. And they usually know best how to attack a problem or an opportunity and find the solution. Our best recommendations and suggestions almost always come from front-line employees.
“The other thing is — and I know this sounds trite, but it’s really not meant to be — people want to be recognized for a good job. People do a lot of good things, and it’s leadership’s responsibility to catch people doing things right, make a point of to others and say thank you.”
How to reach: LeasePlan USA Inc., (770) 933-9090 or www.us.leaseplan.com
The Pitcher File
President and CEO
LeasePlan USA Inc.
Born: New Orleans, La.
Education: Bachelor’s degree in marketing, University of Louisiana at Lafayette; MBA, Emory University
Looking back over your years in school, do you recall any important business leadership lessons you learned that you still use today?
That you can learn from any experience, good or bad. From good leaders you can learn good aspects of leadership — but you can also learn from bad leaders, what not to do. There are role models on both sides of that coin, and if you take every experience as a learning experience, I think you can become a very well-rounded leader.
Another important lesson is that attitude is everything. In the face of crap, you can say, “The whole world is falling apart, and there’s nothing I can do.” Or you can say, “This is an opportunity.”
What was the first job you had, and what business lessons did you learn from it?
I was a painter and sandblaster on oil rigs in the Gulf of Mexico. I worked 21 days straight, 15 hours a day. In other words, I worked a 105-hour week for three weeks in a row. And the lesson I learned is that I wanted to make a living with my mind, not my back.
Do you have a main business philosophy that you use to guide you?
It simply would be that people have an inherent desire to be successful, and management’s main objective should always be to harness their passion and find ways to show them how they can succeed.
What trait do you think is most important for an executive to have in order to be a successful leader?
If I had to pick one, it would be integrity.
What’s the best advice anyone ever gave you?
Never do anything your mama wouldn’t be proud of. My older brother said that. Having been raised by my mom for a long time, I would say that’s up there.