Switching gears Featured

7:00pm EDT February 24, 2008

Sometimes the best move you can make is to admit that someone else is doing it better than you are. That was the case three years ago when Larry Gerdes, chairman and CEO of Transcend Services Inc., acquired a company that had some very impressive customer-centric culture initiatives in place.

In a move that runs against the grain of traditional management practices, Gerdes molded his entire operation to fit the culture of the business he was acquiring. It wasn’t easy, and he met with a good deal of resistance, but Gerdes made it happen.

“It is a CEO’s responsibility to provide a strategic direction or road map,” he says.

The medical transcription company’s new direction has improved customer relations while continuing its pattern of strong revenue growth, posting 2006 revenue of $33 million, up from $25 million in 2005.

Smart Business spoke with Gerdes about what to do when the business you’re acquiring has a better culture than yours.

Q. How did you build a customer-centric culture?

I got lucky. I made an acquisition of a company in Florida that had a very customer-centric culture — much better than ours.

So when we made that acquisition, we left that company alone to only integrate as the need arose. In no way would we change the way they did business.

Slowly but surely, we embraced their culture and brought it into the entire company. It took about two years.

Now, the company is totally focused on the customer. The customer is our partner; we figure things out together.

Not only is it very different, it required that I made several management changes, as well.

Q. How did you identify which managers would accept the change and which would resist?

They told me. It wasn’t fun at the time, but it was pretty simple. We reorganized the field operations around the customer. We developed a field organization that was much closer to our employees and our customers.

Then we had the good fortune that one of the founders of the Florida company became our head of operations. As a result, she was able to continue to make that transition. Then it just took just training, focus, direction and a commitment to quality.

Q. How do you get employees to buy in to your vision?

First of all, you need to pick the right people. Hold them accountable, so they know they have to deliver.

You need to give them enough of a run where they feel like, ‘This guy’s going to let me do my job and get it done. I’m responsible for it, but at least he respects me enough to let me make the decisions I need to make from a day-to-day standpoint and grow my team.’

Boy, the first time a leader thinks he has to be involved in every major decision and micro-manage, you’ve totally limited yourself and your ability to grow.

Q. How do you manage business growth?

You have to stick to the basics. You have to keep your focus on your core business. You also have to have a scalable model of field managers that can handle the growth. You don’t necessarily manage growth through just sheer numbers of people, but it’s more or less teaching people how to do the right thing the first time as much as possible.

When you do that, it’s not as hard to grow because you’re not putting out fires, you’re anticipating them. That’s a much more positive way to go. So we try to inspect everything we do every time we do it, so we can incorporate if we could have done it better.

For example, every time a customer installs a system, we ask the customer what we could have done better. Many times, customers are amazed we would want to go back and get their opinion ... but that’s the only way we get better.

Q. How do you stay focused on your core business?

We’ve had to regain our focus before. At one time we were a broader outsourcing company that outsourced all the activities in the health information management department to hospitals. That area handles lots of disparate functions all having to do with patient information. We attempted to re-engineer those departments but also manage those operations in an ongoing way.

That became unwieldy and hard to maintain a consistent level of quality and commitment to service. So we took one major function in that area — transcription — and shed all the other aspects of the business and decided to focus on transcription only.

Q. What effect did refocusing the business have?

It made it easier to make decisions; it made it easier to develop strategies. Then the final thing our company had to do to totally turn ourselves around was make some changes to our culture to be entirely focused on the customer.

We wanted to become customer-centric, both from an organizational standpoint as well as an attitudinal standpoint.

HOW TO REACH: Transcend Services Inc., (800) 555-8727 or www.transcendservices.com