How Gregg Paradies steered The Paradies Shops through a recession Featured

7:01pm EDT January 31, 2012
How Gregg Paradies steered The Paradies Shops through a recession

Gregg Paradies started seeing signs of economic trouble in the summer of 2008 and knew right away he’d better take action.

Paradies’ company, The Paradies Shops Inc., had enjoyed a long, virtually unbroken streak of growth since its inception in 1960. In its lifetime, the retailer had grown from a single toy store at Atlanta Municipal Airport to more than 500 shops in 75 airports, plus a handful of hotels, across the United States. But now, suddenly, the winning streak was in jeopardy.

“We’ve had sales growth for 50 out of the 51 years we’ve been in existence, which is pretty remarkable,” says Paradies, who serves as president and CEO of the Atlanta-based company. “But that summer — 2008 — we started to see warning signs.”

The Paradies Shops’ business depends heavily on airport traffic, so when that traffic decreases, Gregg Paradies sits up and takes notice. And it had started to slacken, appreciably, in the middle of 2008 — a few months before the nationwide financial crisis hit its apex and the economic recession suddenly became front-page news.

“That summer, we saw enplanements — that represents the number of people getting on planes in airports, and we watch it very closely — we saw enplanements softening,” Paradies says. “And during that next year — during the 12-month period after the recession started — traffic in airports was down about 8 percent. In our industry, that’s as significant a decrease as we’ve had over an entire year, including 9/11, which was comparable.”

So Gregg Paradies faced a predicament: keeping The Paradies Shops on its growth path in the midst of a troubling economic climate going forward.

“That has probably been the greatest leadership challenge I’ve seen,” he says. “I guess the two are interrelated. The recession, of course, that hit throughout the country in 2008; that obviously was a major challenge in our industry, as it was in just about every other industry. And second of all, the growth we’ve experienced. So managing significant growth through these tough economic times has been my greatest challenge.”

Engage the teams

Paradies knew that tackling the problem was a far more complex task than he could manage on his own, so he enlisted everyone in the company — from his leadership team to the associates who work in the company’s stores — to take part in the effort to solve it.

“First of all, you have to get your senior leadership team involved in the decision making,” Paradies says. “It has to be a collaboration, a team approach to making the major decisions. We’ve always done this, and we always come out of these meetings with a better solution versus potentially what I had initially recommended.

“You sit down with the leadership team and you debate it, you hash it out. A lot of times it’s a lively debate. But by the end of the meeting, we’ve made a decision — I mean, the bottom line is I’m the one who makes the final decision — but we leave that meeting together as far as what we’re doing. And I always feel like we’re all marching together afterward. We may not all agree 100 percent, but we’re all marching together, because that’s the only way to come out as a leadership team: as a unified front.”

Paradies says he’s seen a number companies veer off course when facing major decisions because they failed to achieve a solid consensus among their leaders.

“That’s where companies have erred,” he says. “Where it’s a divisive leadership team, and they’re not all marching to the same drummer. And in turn the team knows that, so the team underneath the senior leadership group loses confidence in the leadership.”

The company’s senior leadership team wasn’t the only employee group Gregg Paradies enlisted to help tackle the problem. He also engaged his foot soldiers — the 3,500 associates who work in The Paradies Shops’ stores — via a companywide innovation-incentive program.

“I created an innovation award,” he says. “The way it works, very simply, is anybody in the company is encouraged, and this is on our website, to submit innovation ideas which benefit not only their particular location — so for example if it’s our Dallas manager or a Dallas sales associate, it may benefit their individual location — but it will also benefit the company as a whole. Through this program, we came up with some great ideas as to things we could do to reduce overhead, and ultimately to maintain jobs, because our team on the front line are the ones who see this day in and day out — where the opportunities are — better than we do here at our support center.”

Paradies says the company’s innovation awards are presented both quarterly and annually, and the prizes offer substantial incentives to employees to participate.

“We give out quarterly and annual winners,” he says. “Each quarterly winner, for the best idea of that quarter, gets a $250 American Express gift certificate. And the annual winner — actually winners plural, since we typically have two, three or four winners, depending on the ideas submitted — receive a major award, which includes an additional week of vacation plus a paid trip for two anywhere in the continental United States. So once again, there are a lot of great ideas, and the way it started was that as I traveled I would hear these good ideas, but it didn’t get outside that location. So we wanted to create a vehicle where it got to this office, so that the entire company could benefit, not just the individual location.”

Among the fruitful suggestions Paradies has received as part of the employee award program are merchandising and souvenir programs, new ways to set up store associates’ work and break schedules, green sustainability programs and cost saving ideas, such as paper-saving programs.

Rein in spending

When The Paradies Shops’ leadership team came to grips with the realization that the economy was headed toward a serious downturn, they made moves to tighten the company’s financial belt, challenging all overhead expenditures to eliminate “wants” while keeping “needs,” Paradies says.

“Yeah, we took immediate action as soon as we saw the recession coming,” he says. “And as we entered the recession, we obviously had to call some audibles, which we did.

“One of the first things we did was we looked at our overhead. And in some cases we reduced our overhead as we saw this thing coming. And then when the recession came, we once again closely evaluated the overhead we needed to run the business. We had to make prudent business decisions, as far as unfilled positions, travel expenditures. … So that was one of the most important things we did: We challenged overhead on a want-versus-need basis.”

The belt-tightening paid off, as many jobs were saved.

“Our team did a great job, because we were fortunate not to have a major layoff,” he says. “What we did instead was not fill open positions, which in turn stretched our people more than ever. But our people did a great job growing the business, in some cases with fewer people.”

Scatter seeds in new fields

Not long after the belt-tightening program was instituted, The Paradies Shops’ leadership team began to plan the company’s first foray into the airport food and beverage market. The impetus for that move came at the behest of business associates who observed the company doing a good job serving customers in one market and suggested they give it a go in a related sector.

“Airports for years had asked us to do their food and beverage, even though we were not in that business, because they wanted to maintain the same quality in food and beverage as we were presenting on the retail side,” Paradies says. “Many airports were frustrated because their experience in their food and beverage facilities was not nearly as good as their experience in retail facilities.”

Paradies says his company initially resisted those airport officials’ suggestions because they were hesitant to enter a realm in which they had little expertise unless the business climate dictated there was a good chance they could succeed at it.

“We waited; we told them, ‘No, we have our hands full on the retail side of the business,’” Paradies says. “But things change. And one of the things that was changing was airports started creating a lot more hybrid concepts — retail and food and beverage together — like bookstore cafes, or what we call travel marts, where you have food to go as part of a newsstand component. 

“So with all that happening, we knew, first of all, there were a lot of opportunities in food and beverage to grow the business. Second of all, we knew that to maintain our competitive position as the No. 1 airport retailer, we needed to expand, to build our expertise in food and beverage so we could compete for these hybrid concepts. And then the third thing that was happening was the food and beverage business in airports was outpacing the retail.”

The Paradies Shops’ entrée into the food and beverage market — coupled with some diligent preparation on the retail side, as well as some fortuitous timing with retail contracts coming up for bid — has paid off handsomely, Paradies says.

“A lot of times, these down times can be good opportunity times, provided you’re in a position to take advantage of them,” he says. “And we were well positioned, and ready. We had worked on a lot of these opportunities two and three years in advance. So we were ready to go on a lot of these opportunities that hit the street during the latter half of the recession. And we were in the financial position where we could do that, because of the way we manage our business.

 “And for that reason, right now we’re working on about 100 new stores in the next 18 months, retail and food and beverage combined, which is a record for us.”

Stay the course

Asked what philosophical advice he would offer other business executives, Gregg Paradies cited adherence to company values foremost.

“Always stay on course with your core values,” he says. “Never compromise them. We tell our people in the field, as well as our people in this office, that their responsibility is to do whatever it takes to take care of that customer, provided that it adheres to our core values and our mission statement.”

The Paradies Shops’ employees are thoroughly schooled in the company’s values.

“Every one of our associates can recite our core values,” he says. “It’s based on the acronym TRIFIC: Trust, Respect, Integrity, First-Class Service, Innovation and Family Culture.”

Paradies also says to make important business decisions promptly.

“I would tell them: Do not drag your feet as far as making the major decisions,” he says. “It’s easy to let these decisions linger. Make decisions quickly, and communicate them in a professional and timely manner to all those in the organization.

“A major pitfall is moving too slowly. When you see something coming that needs to be addressed, it’s better to be aggressive than to wait to make a decision. Err on the side of being more aggressive versus waiting, as far as the changes needed to maintain the profitability of your business.”

HOW TO REACH: The Paradies Shops Inc., (404) 344-7905, www.theparadiesshops.com

The Paradies File

NAME: Gregg Paradies

TITLE: President and CEO

COMPANY: The Paradies Shops Inc.

Born: Atlanta

Education: University of Texas: Degree in Finance, 1985.

What was your first job?

I went through the executive training program at Macy’s here in Atlanta. Straight out of college, I was running a $12 million business, and I had a lot of autonomy. It gave me great experience, especially in regard to managing people. When you’re right out of college, people sometimes try to take advantage of you. And I learned very quickly how to motivate people, how to deal with people. And I learned that as long as I was consistent and fair and had integrity, things went well.

Do you have any core business philosophies you use to guide you?

Yes: You can’t go wrong by doing right. Sometimes with tough decisions you don’t always win, but as long as you do the right thing — or as long as my team does the right thing — we win. We have a very strict code of ethics, and doing the right thing is, over the long term, the best decision. Short term it might not always win us a deal, but long term, that’s why we’ve been around a long, long time.

What’s the best advice anyone ever gave you?

When I was young, my mentor, Dick Dickson — our company’s current chairman — told me: Be yourself; don’t try to be somebody you’re not. I was going through a challenging negotiation, and that was good, sound advice. … Another thing I’ve learned is to have a healthy disrespect for the past. What that means is, even though last year may have been a very successful year, challenge what you do, because if you do the exact same thing as last year, you’ll end up doing less business. By having a healthy disrespect for the past, you’ll continue to improve. Because once you stagnate, your competitors will start to catch up with you.