Vargo moves away from the traditional to hit a new stride

 

Don’t bite off more than you can chew is something that Michael Vargo reminds himself of, a lot.

Over the past three years, the sister companies Vargo Adaptive Software LLC and Vargo Integrated Systems Inc. have undergone tremendous growth, which stemmed from a 2006 acquisition of a small boutique software group.

“I don’t recall ever just waking up one day and realizing, ‘Wow, we’re on a different path.’ It feels almost as though we’ve kind of morphed into this,” says Vargo, president and CEO of the business his father founded.

The Vargo companies have taken on a completely different look and feel — working in the same industry but becoming more entwined with customers in direct-to-consumer distribution and retail fulfillment.

“Prior to that acquisition, we were like any traditional systems integrator. And, you know, the way we looked at solving or identifying these problems was pretty traditional,” he says.

Now, the organization is learning how to deal with an accelerated interest level and growth rate on the software side, and Vargo hopes it can keep pace with all the available opportunities.

Interacting with clients and providing material handling solutions like warehouse racking or storage used to be the focus. But today, Vargo says what consumes his entire day is putting into motion a strategy for controlled growth.

“That’s something that we have to be very careful about, controlling this growth, because it is so mission-critical, the solution that we provide,” he says. “We just can’t bring on bodies. And we have to be pretty specific about who’s joining our team and who is fitting the culture of our company and in what way they are bringing value.”

The talent search

Rapid growth may not alter operations much, but it does affect the business structure and personnel.

COO and CFO Bart Cera says the company is on a constant recruiting effort.

“You can never let down the recruiting arm,” he says. “Your recruiting arm is kind of an everyday process of looking for good people. And not necessarily looking at good people for a specific role, but looking for good people and then looking at what role they could provide value in.”

Management is perpetually interviewing job candidates and discussing opportunities with recruiters in order to find the right attitudes and skill sets, particularly from a software standpoint.

The growth also has softened the company’s stance on people working remotely.

“It’s been a new endeavor for us — finding out that people are reluctant to move to one of our offices whether it be Berkeley, Austin or Columbus,” Cera says.

In order to get the talent, management has allowed people the freedom to work from home, while determining how to hold those folks accountable.

“We’ve got folks working remotely in Michigan, and other places in Ohio that don’t necessarily have an office to drive to every day,” Cera says.

“While we were averse to that in previous years, we’re becoming less and less averse to that — finding out that it’s attractive to individuals with talent,” he says. “The talent to us is more important than having somebody reporting to an office every morning.”

Empower by stepping back

During the growth, employees have taken on an attitude of ownership and pride — not treating the work as an 8-to-5 job. This is something Vargo seeks to foster.

“There is a big difference between leadership and dictatorship,” he says. “And a lot of times you feel that because you’re in a leadership role you are supposed to somehow always start the conversations or direct the conversations or clearly have the final say of the conversation.

“But that, I think, gets more into a dictatorship process,” Vargo says. “And you’ve got to let your growth happen and sit back and continue to look for and surround yourself with bright, energetic people.”

Vargo considers it a daily challenge to try to be more on the receiving end of information rather than the one broadcasting it.

He says you have to surround yourself with smarter people and then give them an opportunity to have a voice — which is important as the business grows.

When his father and mother started the company they were entrepreneurs who had the ability to play all of the roles, Vargo says. Later in the life of a company, you don’t want to operate that way.

“We have to rely on one another as a team, and we need to function as a team,” he says. “And I think that’s really been the difference, and if we want to continue to foster the growth that we’ve been blessed with we can’t take our eyes off of that fact.”

At the end of the day if there’s something he’s not in favor of, Vargo can still respond, but he’s established a core group who has a voice in how the company operates.

“I have created a core group that doesn’t let me go too rouge in either my thinking, or my actions,” he says.

 

Takeaways:

  • When managing rapid growth, don’t just bring on bodies.
  • For a broader, stronger recruiting pool consider remote employees.
  • Smart leaders operate more on receive than broadcast.

 

Out with the traditional …

With its COFE® (Continuous Order Fulfillment Enterprise) software, Vargo is using a completely different methodology to solve the challenges for the direct-to-consumer and retail fulfillment processes.

Similar to how lean manufacturing changed traditional manufacturing processes, the company starts at the end of the process and pulls the fulfillment along.

Vargo uses the analogy of going on a trip. In the old days you had a trip ticket, but now navigation systems can provide real-time updates about construction or accidents.

“What our system does is in milliseconds it recognizes that this isn’t what the plan was, so I’m going to redirect you and I’m going to put you back on the most efficient path in order to accomplish that goal,” he says.

If you ordered three items and one is out of stock, while another person paid for expedited shipping, it’s more efficient to jump to the overnight order even though it’s not next in the queue, Vargo says.

Cera says COFE® isn’t built on serialization with tasks that are done in batches or waves. Traditionally, you cannot go on to the next set of tasks until the first is completely finished, or your system needs to have the ability to process overlapping batches.

COFE® reduces fulfillment to the lowest common denominator of one unit, he says.

“We can use less people, we can use less of a footprint that’s required in a traditional design, and we’re much more efficient,” Vargo says. “We eliminate piles of work.”

 

The Vargo File:

Name: Michael Vargo
Title: President and CEO
Company: Vargo Adaptive Software LLC, Vargo Integrated Systems Inc.

Born: Columbus
Education: Bachelor’s degree in business from the University of South Carolina

What was your first job, and what did you learn from it? My first job in high school was working at Scioto Country Club. I was a caddy, and then I worked various positions throughout the club from busboy to snack stand.

There wasn’t any real significant takeaway other than the influence of Don Hayes, who was the general manager for Scioto Country Club for many, many, many years.

Did you always think you were going into the family business? That was my aspiration going through college, to graduate and then come home to work with my father and mother. But I had a short, little bump in the road. I thought that perhaps there was going to be another opportunity for me to slam a stake in the ground and make millions — and that was selling insurance.

My father was kind enough to let me go off and try another avenue. He said, “If you decide to come back, you need to give me one full year of your undivided attention. And then after that year, if you decide that this industry is not for you, then by all means pursue whatever you want.” So when I came back I gave him that full year of focus and I’ve never looked back.

Is there anything about you people might be surprised to learn? My wife, my daughter and I have a very strong passion for quarter horses. We raise, breed and show quarter horses. I think most people within our industry or people that I interact with at work don’t know that.

So, if you weren’t a CEO, would you be a horse rancher? That would be my ideal position. I love the American Quarter Horse industry and I do enjoy the time that we spend in that arena.