Don’t blow people off. You have to be responsive to a wide constituency of people, whether they be employees, customers, the press, analysts, bankers. There’s a whole host of people who will want your time, and figuring out a way to be proactive and responsive serves the company best. People want to deal with someone who is decisive. They prefer not to waste their time if something can’t happen. They want to have a relationship with a leader who can make it happen.
If something’s not going to happen, they would prefer to know that and why so they can move on. It’s always very frustrating when you invest a lot of time with someone or a company or entity, and they never had any intention of transacting with you.
Be proactive instead of reactive. Set the agenda. You don’t want to have the agenda set for you. The minute you get into a reactive mode, you’re already behind the 8-ball.
When you’re in a proactive mode, you’re establishing true leadership. People pick up on that. At the end of the day, people want to be associated with winners. They want to be associated with leaders.
If they think your company is just a ‘me too,’ you’re always going to be the Column B compared against the real leader.
Think big. Define the race. The race is more against yourself than anybody else. You can’t define yourself in the shadow of any other company. Define yourself in the company you want to be.
We want to be a significant technology company, and that sounds pretty open-ended, but it’s open for a reason. We don’t know how big this company can be, and we don’t want to limit ourselves.
When you take a look at some of the best vision statements that have ever been made, look at President Kennedy [who said], ‘We’re going to put a man on the moon in 10 years.’ People can rally around something that large, that grandiose, that exciting.
It’s a lot more inspirational to try and do something that is difficult and might mean being a little aggressive and ostentatious.
Keep the right people around. Most of the challenges as you move up through executive leadership come down to selecting the right people, motivating the right people and moving on the wrong people.
If you’re a student of leadership, never stop learning how to more effectively get into people’s skin and help them understand themselves, the company and customers. If you find somebody who’s bright, cares about the company, is passionate about the company, feed that. Provide as much fuel to that person as you possibly can.
Have 20 to 30 percent of your management team move around every one to two years. Get them a different assignment so the thinking is fresh. If you have everybody in the same job year over year, you get stagnated thinking. You don’t have the challenge. You don’t have that new idea focus. Coupled with that, you’re not grooming the next layer of management underneath you, and if they don’t see any opportunity for career progression, they’re going to leave. The lifeblood of our company is that next layer of management.
Be a winner. If a company is winning, they never have a morale problem, but if the company is losing, they do.
It’s weakness to focus on morale for morale’s sake. Focus on how you win. How do you go and set objectives that are stretch objectives and win? People don’t feel good when they do something easy. People feel good when they do something hard and they’re wildly successful.
That is a contagious feeling. You hear about marathon runners, and they get this endorphin high. It’s the same in business. When you have a taste of success in business, you want to surround yourself with people who can help get you back into that promised land.
Use experience to guide decisions. Have a sense of pattern recognition in order to have higher probability of successful decisions.
I remember I wanted this global job, and after I got it I said, ‘What the hell was I thinking? I’m on a plane all the time, and these plane trips aren’t three hours anymore. These trips are 13 hours.’ Work through that phase because sometimes what you think you want is not what you really want because you just don’t know better.
When you don’t have those experiences and you’re learning on the fly, some people learn quickly and can go from Step 6 to Step 10. Some people just can’t get past Step 6, or they just don’t want to get past Step 6.
Everybody has a different way of handling that. Be honorable to yourself and to your leader, and work with them to get out of that particular situation.
Know yourself. Nobody ever comes into my office with a question that’s black and white.
If they come with those questions, I haven’t done a good job with hiring or giving them enough autonomy to execute. The decisions that a CEO should make is going to be navigating through shades of gray.
Get comfortable with the fact that any decision you make is going to make a passionate person upset. Eventually you’re going to make a number of decisions that don’t go their way. The only way you can be comfortable in that environment is you have to have a well-grounded set of values. If you haven’t figured out the kind of leader you are and the value system you’re going to live by, those shades of gray become difficult or inconsistent. If they become difficult, you become indecisive and people won’t seek your counsel. If you become inconsistent, people will believe you to be disingenuous.
Think hard about your value framework. When decisions come across your desk that hit these shades of gray, you’re not going to have all the information, so you’re going to have to make a value call.
HOW TO REACH: Taleo Corp., (888) 836-3669 or www.taleo.com
Balance team and individual decisions. A team approach works best; however, I set aside certain decisions that need to be made by me or by my board of directors.
However, when I do that, I take it to my team, to my executive committee, and explain to them that decision is set aside and why. It makes them part of the day-to-day decisions and the large decisions.
Roll with the big dogs. I have a formula in my head. I give myself two minutes to immediately establish credibility by knowledge and intellect. Immediately jump in with what the purpose of the appointment is and then immediately go into points that are important in the industry. I’ll also go outside the specific agenda to talk about what’s going on in the market.
I immediately put the knowledge out there to establish the credibility, and from an intellectual standpoint, I’m on the same platform as the Wall Street firm. Once that credibility is established, then we’re on track.
Don’t build an ivory tower. Keep your finger on the pulse of the company. Being a CEO, it’s easy to not spend as much time going to see customers. When you do that, anything that your customer base is talking about or issues they have is always second-hand knowledge to you unless you’re there.
I was watching TV and [‘Today Show’ anchor] Anne Curry was on about the national campaign for literacy and the more you know, the smarter you grow. That’s the best advice.
You have to put time aside to spend with your people and to read about what’s going on in the market. You can’t let the ego get to you and get in this ivory tower-type mentality.
Roll up your sleeves and stay with your team. Go and see customers. Get out there and actually experience, and not just read about it in the paper or through reports. Reports are good, but outside of reports, there’s a live pulse going on that you have to keep your finger on.
Be patient. When you’re running a company, you get very passionate about it, and you want results immediately. Not all results can happen immediately.
You can get some immediate gratification, but for the most part, especially long-term decisions, you can’t ask every day how it’s going. You have to put some trust in your people and let it play out.
That comes over time. It’s easy to want to keep control on everything, but you’ll wear yourself out. You can’t do it.
I’ve learned to surround myself, and everyone on my team is company-minded. I’m not afraid to put intelligent people around me that could replace me someday. That’s the smart way to go. Some CEOs fear that they want to be the only person that can run that company, but that’s not a smart model.
You look better and are more effective if you’re surrounded by people who are talented. We have great ideas, we have creativity, and if I’m running the whole thing, then I’m going to stifle those ideas and that creativity.
Establish trust. That comes over time. I’ve been with the firm 14 years now, and I’ve worked up through the ranks, so I’ve been in other positions where people are already comfortable with me.
With trust, it’s just like personal relationships; you have to gain it. You can’t offer it out there and then not follow through. When I say I’m on your side, and your interest and the company’s interest are aligned, over time, it proves to be true.
Any CEO can destroy trust at any point in time. The way to destroy trust is to say one thing and do the other. You have to be consistent with your behavior. You have to be consistent with your message.
That goes into friends. That goes into children. It goes across the board. It’s a good policy to have.
Involve many people when hiring. It’s difficult for us to hire in our specific niche with the skills unless they come from a competitor, so we tend to grow from within.
We hire for a long period of time. If we’re going to put in all the effort to train and to grow, we want them to stay here for a long period of time. In the hire process, we’re going to spend time with that person and ask them questions outside of the norm just to see who that person is, what their personality is and if they’re trainable. What type of environment are you most comfortable with? Is it important to you that you enjoy your job? Is it something outside of just getting a check? We want this job to be a part of their lives.
That’s something that you have to get a feel for, and we’ll generally bring other people into the interview. If my sales manager is hiring, he’ll bring my CFO in to interview with a person or he’ll ask a training manager (to have) lunch with this person. That way we get a different perspective.
Throw new employees in. You learn faster that way. Sitting down and reading a manual is monotonous. Getting out there is exciting. It’s challenging. It keeps them interested.
If you do that on the onset, you’re going to get somebody on line with the company, whereas if you put them in a corner and give them a manual for three weeks, how does that align them? They feel somewhat ignored.
Stick to your guns. I’ve learned to just be me and not take the expectations of others. Be what works for you and what works for your company.
There’s a lot of expectations, and you can let those expectations drive you or you can drive. Once I let those expectations go and just be me, then people fall in line.
HOW TO REACH: Capital Institutional Services Inc., (800) 247-6729 or www.capis.com
When someone gets a new job, most people are happy for that person, and congratulatory greetings abound, but that didn’t happen for John S. Chen.
Instead, his friends laughed at him.
After working in Germany for some time, Chen returned to the United States to become chairman, president and CEO of Sybase Inc., a data management software company. But at that time, in 1998, the company was in major trouble.
While at a venture capitalist dinner party, he reunited with some old friends who got a great laugh at the news of what their friend was taking on. “Boy, this guy must be pretty bad!” they joked with Chen. “He can’t find a decent job, to work for Sybase! ”“Isn’t that company in trouble?” “They’re dying, right?”
Although the company was sinking fast, Chen was not deterred. He knew he had nothing to lose, so he began a series of plans, all to align with his single goal for his first year as the top dog: Make money. “The most obvious thing that can restore confidence is if you make money,” Chen says. “That involved a lot of tough choices one has to make, a lot of unpopular choices.”
The right people
Chen’s journey to turn around Sybase began with finding the right people, which proved a difficult task during the dot-com era when people were leaving faster than you could say IPO.
“Everybody walked around here thinking they should be a millionaire in the Silicon Valley,” Chen says. “All you have to say is, ‘We have an S-1 on file, and we’re going to be IPO any minute now,’ and you have a bunch of people joining you, mostly wearing jeans and sandals.”
With the turnstile of employees constantly moving, Chen recognized the difficulty he faced.
“If you have so many people turning over, you really cannot put a plan together that has any prayer of being successful because once you put the plan together, people take off, and you have to reset it and do it again,” he says.
To alleviate frequent changes, Chen devised a threefold blueprint of his management team. One-third of his team would consist of Sybase people from before his time because they could help him save time by exposing all the skeletons in the closets.
The next third consisted of people who understood how he thought and whom he trusted to quickly execute based on his past experiences with them.
To form the final third, he found new people from other successful companies such as Apple, Oracle and HP who could generate new ideas within the company.
When looking for executives who would stick around for the long haul, he searched for people willing to root for the underdog and try new ideas. He also needed people who were not easily discouraged and who were capable of working with a team.
“At a time where everything was kind of broken everywhere we looked, it was kind of laughable,” says Chen. “Not because someone did something stupid intentionally, but when things are not well, everything starts looking pretty funny and stupid.”
He says he needed a sense of humor to laugh things off so he could focus on solving the underlying problems. Motivation came from the fact that most people, both internally and externally, had already written Sybase off.
“Other people may have rung the death bell too soon, and I kept making sure people were focused on not just letting conventional wisdom drag us down,” says Chen. “We have nothing to lose. We might as well get committed and move forward, because if you second-guess anything, we’re going to run out of time.”
With no time for that employee turnstile to keep revolving, every potential executive interviewing with Sybase also interviewed with Chen, even if he or she would not ultimately report to him. The reason was simple: Chen had a brutally honest message for anyone considering joining his efforts.
“It’s worse than you think,” he says. “They look at me and say, ‘Boy, I thought I was meeting you for a pep talk.’”
Chen wanted to make it crystal clear to interviewees that the job would not be easy, and he had no time for the negativity and resentment that would be created by misleading them, so he refused to sugarcoat a thing.
“If I sweet-talk you into coming here, and you find out nothing got connected, everybody is busy updating their resumes, you’ll look at me and say, ‘You’ve got to be kidding. I don’t know what I’m getting myself into. I’ve got to get out of here.’ “If you come in and say, ‘Everything is broken, but I know how to fix things,’ and you have that attitude, then this is a great place for you.”
The right plan
With management in place, Chen was ready to re-establish Sybase’s credibility and illustrate its longevity plans to critics. But this proved difficult with Sybase’s extremely limited resources, as revenue dropped from $1.01 billion in 1996 to $868 million in 1998, while the net loss increased from $79 million to $93 million in that same timeframe.
In an early management meeting, Chen sat down with his team and told everyone, “Don’t ask me for the strategy, because we don’t have any muscle to execute it. Even if I had the perfect miracle, we just can’t execute it, so let’s pretend there’s one magic bullet out there somewhere. We don’t know if we’ll be successful at it, but let’s make a run at it, and we’ll die trying.” Chen and his team developed a three-year plan to keep everyone focused on staying afloat, but the key was finding what Sybase’s one magic bullet was.
Chen predicted it was mobility, and everybody laughed as, at the time, the market was only a few hundred million dollars. Despite the skeptics, he felt he was on to something and plunged forward.
“It was difficult to convince people that this was not just branch out into Never Never Land and never return again,” Chen says.
He constantly explained the benefits and possibilities of mobility to both employees and customers so that everyone understood where they fit in to the equation.
During this time of new product direction, Chen also sought out an aggressive track to keep customers, which would at least maintain revenue, and, he hoped, grow it while also easing employees’ worries.
Chen and his team devised a 24/7 support program for customers to connect with a human any time of day, any place in the world.
During the next six months, Chen also visited more than 300 customers around the world.
“They finally realized, here’s a company that would like to fight their way back,” Chen says. “It was very important at the time that I go out and that my management team go out and see these customers all around the world because they needed a face to relate to, whether they believed it or not.”
Chen also capitalized on the fact that many of Sybase’s clients were in mission-critical fields, where switching to another company would be challenging, so he kept communication open and honest, yet upbeat, to prevent the thought of switching companies from creeping into his customers’ minds.
He and his managers each personally called 10 customers at each quarter’s conclusion so they could communicate Sybase’s financial progress.
On top of these efforts, most of Sybase’s customers were preoccupied with the anxiety surrounding Y2K, so it bought the company additional rebuilding time.
The right acquisitions
Mix all these ingredients together, and the financials started falling into place. In 1999, Chen’s first full year as CEO, the company turned its $93 million net loss in 1998 into a $62.5 million profit, but growth does not stop with one good year.
With one solid year under his belt, Chen was ready for Sybase to become a market leader, and he began looking outside the company at what he could buy to aid the cause. Since early 2000, Sybase has successfully acquired and integrated more than nine companies, but leading up to Chen’s arrival, the company had made several acquisitions that brought more problems than help into the organization.
“At the time, each of them looks rather interesting and probably strategically correct, but in hindsight, the ability to digest and integrate that was not there,” says Chen. “So a good thing became a bad thing, and one thing led to another, so we started losing money, losing market share and losing people.”
Because of the previous acquisition problems, Chen wanted to ensure the company was not buying for the sake of buying, so he put purposeful procedures in place.
“We have a view of what the market looks like, and we try to have a view of what the market looks like for the next three years, and then we map that into our own capabilities, and then we decide what the gaps are,” Chen says. “Once we decide where the gaps are, we let engineering have one crack at it filling the gaps.”
If the engineering team cannot devise it, then he seeks to acquire a company that has or that can. Chen says there are some areas that Sybase has no prayer of filling, in which case an acquisition fills the void without letting the engineering team work on it first.
When looking at what to acquire, Chen has a disciplined approach and methodology. The company has to fit a certain financial profile in that it can lose money for the first 12 months but must grow after that. This factor rules out companies that Sybase may overpay for and receive little return on.
Once a deal is made, Sybase retains the engineers and sales channel but lets legal, finance and human resource staff go. Then it focuses on maintaining engineering talent and intellectual property protection and facing any other challenges that arise. Chen says it’s easy to communicate his vision for Sybase with its newest members.
“We don’t let a lot of uncertainty hang around,” he says. “Since we only acquire companies based on strategic direction, it’s easy to explain to the acquired company and their employees how they fit in to the vision. Since they’re already in the business, they can see it. As we got bigger and bigger, they said, ‘OK, Sybase does have a commitment, and they know what the plan is, and yes, it’s a lot bigger than us.’
“This is why you can’t randomly acquire companies. ... All the acquisitions are adding a piece to the puzzle, to our No. 1 in mobility.”
The right future
Chen’s original plans for Sybase are paying off, as the company posted 2005 revenue of $818.7 million and an $85.6 million profit, compared to an operating loss of $25.5 million in 2001.
To keep the numbers moving upward, Chen says the company continues to look a few years out and determine where profits will come from based on market shift predictions. He says that keeping a conservative to pessimistic view allows the team to clearly identify potential changes and how Sybase can fit into those changes.
He is confident in Sybase’s future and position as an industry leader, but he knows continued progress is not a casual stroll.
“I don’t think the bumpiness will ever go away in this industry,” Chen says. “I focus on: Is the company fundamentally strong? Do I have the technology and the talents? Do I have a good vision? Do I have customers that like us? Do I have enough cash to weather the storm?
“You check off all these as yes, then you have a fundamentally strong company. Then the bumps and bruises are just part of the journey.”
That journey has been a challenging one for Chen, but those difficult choices early on have paid off. Beyond the dramatic bottom line turnaround, 80 of the Fortune 100 companies now use Sybase’s technologies.
"We have the DNA of the company to make money,” Chen says. “The company scales and reacts very quickly, whether we’re in good times or bad. We have never looked back, and we’ve never lost money ever since. There is some goodness that came out of the whole thing, but it has been a long-term struggle.”
HOW TO REACH: Sybase Inc., www.sybase.com
Ralph Hawkins knew it was important that his company, HKS Inc., have a clearly defined set of values. But instead of just imposing them, he enlisted the company’s employees to help document what the values should be. Doing so not only established the 10 values that employees felt had always been present but never formalized, it also gained grassroots support for the values. Once the core values were defined and communicated, Hawkins and management slowly weeded out those employees that didn’t reflect those values. As a result, the firm went from $1 billion in construction five years ago to more than $14 billion in construction last year. Smart Business spoke with the president and CEO of HKS about how he works as a servant leader to his employees.
Let values guide you. Allow individuals to contribute to the company. The way they learn to contribute is through our values, but they have to have access and support to make sure they’re out there building our business up.
We are a firm that has strong values. We support those values, and we hire and we fire on those values. We create a feeling of support and collaboration. We’re always competitive, but internally, we’re very collaborative.
It’s much like a family. If you all have the same values, you tend to strengthen each other... The values are the rules of the game. If the values reflect poor ethics, most likely you’re going to hire a bunch of people with poor ethics.
But if you have high ethical standards and you promote that as a value, you find that everybody has high ethics.
Get people pumped. What motivates people is exciting projects and a great, supportive atmosphere. You don’t have to do a lot of things to motivate a staff internally.
If you’re not doing great projects and you’re not making a lot of money and not doing a lot of the things that make a successful business, people tend to lose their morale. But if you stay focused on your business so the business is successful, and you’re bringing in exciting projects, it almost takes care of itself.
Recruit and nurture young people. Our biggest challenge is getting the very best people. The way we’ve addressed that is we actively recruit students. That provides a lot of energy and excitement to bring that young blood into the firm.
It wouldn’t be a smart thing to be exclusive. Be inclusive with the new generations coming up, and it’s important that you set the stage for them to enjoy and grow in their careers.
Keep them and support them. Our competitors have said, ‘The best people we can get are the ones that we can recruit from HKS after a year or year-anda-half.’ The reason is because they’ve had a lot of training. We probably spend $15,000 to $30,000 a person on training the first couple years, so it’s important that we retain them.
You have to be competitive salary- and benefits-wise, but go a step further. People stay at firms because they’ve built relationships at the firm. We do a lot of celebrating among our staff.
Every few months, we stop work and talk about everything we’ve accomplished over the last few months. We celebrate it, and we have a lot of fun. It bonds us together.
Communicate. If you ask anybody, communication is probably the No. 1 problem at any company. We try to be as interactive as we can with our communication.
We tell them what’s going on, but we also have focus groups. I sit down with 20 staff members and we talk about different issues that have come up, and I get their response. It’s tremendously helpful to feel the pulse of our company.
We also had a full-day retreat. We went through the employee survey, and we talked about the top challenges and the top attributes of HKS, and we got feedback on how we could improve the challenges.
When you ask these young people, they’ll tell you exactly what they think you should do and what they’ve heard works at other companies. It’s a great resource to make us the absolute best place to work. You can’t overcommunicate.
Know how to beat the economy. If the economy downturned, we’re prepared to have an exit strategy. We maintain a very close check on the go/no-go process of what jobs we should pursue and what jobs we shouldn’t pursue. There are jobs that are in a gray area that we choose not to go after because we think it’s not the best use of our staff.
Second, we’re collaborative, and we’ve been able to work with a number of minority firms by outsourcing some of our work. It gives them a great opportunity to learn how they can conduct their own business even better and, as a result, we’re able to do more work without hiring (more) people.
If workload did drop, we have about 10 percent of our staff on a contract basis that we could drop, so we would never have to lay off our staff.
If one building market is up and one is down, we balance it out. If oil prices are down in Texas, and Texas economy is a little slow, it might be up in Florida, or vice versa, so that geographic diversification is important, too. Diversification is our greatest strength.
Enable your staff. Being a servant leader is key in making sure your staff has the tools and resources.
If you give these people the tools and resources and education and training, they’re going to do great things. To sit back and watch it is phenomenal.
Be prepared to go global. Look at what services you’re providing and what your strategy is. If they’re in a growth strategy, which is a successful strategy, consider going global at some point and working international.
Our clients are beginning to take us globally. We did the Fidelity headquarters here locally, and they called us and said, ‘We need to do a facility in Bangalore,’ so we took off and we went to Bangalore.
Even if you’re not interested in working globally, you may have certain clients that take you globally before you know it, so you better be prepared.
HOW TO REACH: HKS Inc., www.hksinc.com
When he founded Rug Doctor, Roger Kent struggled to make headway against larger and more established companies, but he continued to fight by focusing on doing a better job and having a superior product. The formula worked, and today the 800 employees of Rug Doctor, which manufactures and sells carpet cleaning machines and supplies, generate $150 million in annual revenue. Smart Business spoke with Kent about how he maintains focus and why a lack of growth isn’t necessarily bad.
Build trust and care for employees. To build trust, it’s a day-to-day thing over a period of years just your daily dealings with them, that’s what builds the trust. You can’t just hire somebody and say, ‘We’re a trustworthy company’ and then not show it.
If someone is associated with you for years and years and years, they know if you’re trustworthy or not because of what happens over a period of time.
We’re not the type of company that indiscriminately lets people go or changes or transfers people around the country to places they don’t want to live.
They stick around because they grew up with the company and have been treated fairly. If they want to go to another company, even if that company made them think they could get more money, they could be fired in six months when someone wants to reorganize. That happens all the time.
These companies are buying, selling, hiring, transferring people, and doing this and that. It’s like somebody upstairs just makes a lot of decisions without any real compassion for the results of the decision.
Don’t fear the plateaus. Just because you don’t have growth doesn’t mean that everyone’s not doing well. You can still make good money, and you can compensate your people without growth.
Sometimes you have a nice, profitable company, and you have to take time to work on other things, and you have good income from it. It’s not necessarily a bad thing.
Wall Street likes to see growth quarter to quarter, like you’re walking up stairs, but private companies aren’t always that way. Some companies get themselves into trouble growing too fast.
Determine what assets you have to grow the company and look for acquisitions, too. If you do start working with something new, sometimes it takes time to develop it, market it and play it out. When you hit plateaus, be satisfied that the plateau is still a nice plateau to be at, and it’s still making you good money.
If you haven’t had growth for two or three years, or even little growth, you can be working on growth for the future and start going up stairs again looking for that next plateau.
Maintain focus. It’s easy to get sidetracked, but it’s just using good business practices to maintain it. People come up with ideas every day, but [you have to] realize that an idea is only one-tenth of 1 percent of something.
It takes a lot of execution, and you just can’t go deviating off on different things just because it sounds good. If you do, you just bog your company down. Our business is renting carpet cleaning machines; it’s a good business practice to stay focused on it. That’s how you ultimately build your company.
Don’t try everything. You ever read all the reports on heart attacks? If you take (a prescription drug), it reduces your chance of heart attack 30 percent. If you take an aspirin a day, it reduces your chance of heart attack 40 percent. If you take the cholesterol pills, it reduces your chance of heart attack 40 percent, and blah, blah, blah.
I could keep going until they come up with 400 percent, but if you do all those things, you’ve still got a chance of having a heart attack.
Business is like that, too. People come in your office all day long, and they can prove
that if you do this, it’s going to cut your expenses by this much. You can have hundreds of different people prove it, but if you did all those things, when you combine them, they wouldn’t cut your expenses that much and you would go broke trying to implement all those things and paying them for it.
Over the years, we’ve tried things and we waste money on it, and you don’t see any difference. You could have just as well let that money drop to the bottom line. Discern which ones will really benefit your company and what ones won’t when you combine them all together.
It takes a real qualified person to make those decisions and determine those things. You can’t teach somebody how to do that. You have to have a business mind, be good at it and have some experience at it, too.
If somebody has to make 1,000 decisions over a period of years, I can’t tell them how to make those decisions because I don’t know what all the circumstances are. It’s impossible to teach that to somebody.
Even if you could, it would take several years to sit them down and give them all your experiences. You can’t tell somebody how to do it in 10 or 15 minutes, and you probably couldn’t tell them in a year.
Look at the big picture. Have a broad vision and understanding of business and what will economically work and what will not. Somebody who’s very sales-oriented may say, ‘I can sell a million of these,’ but if it costs $1.30 to sell something that sells for a $1, you have to be able to put the broad picture together, understand and be able to know what your cost is and will the economics work for what you want to do.
Anybody can go into business and take in some money, but the question is, can you take in more money than you spend? That’s important. A lot of people over the years have brought up ideas, and once you look at the whole picture, I can determine it won’t work because the economics of it won’t work.
That’s an important thing in leadership and business.
HOW TO REACH: Rug Doctor, www.rugdoctor.com
When Jeff Sprecher was 23 years old, he had 26 MasterCards and Visas because they were the only means he had to fund his business. Then he realized that was a poor way to finance a company, a lesson that has impacted the way he does business today as chairman and CEO of IntercontinentalExchange, an online marketplace for global commodity trading. Last year, his company had $156 million in revenue and didn’t use credit cards to raise capital. Smart Business spoke with Sprecher about the importance of setting a good example and why you can’t dwell on mistakes.
Reflect your ethics in the organization. Have a certain ethic that says you’re honest, trustworthy and fair. In any place in life, people respect those qualities. It’s hard to operate in an environment where you don’t have a highly ethical, highly honest work environment.
Set the example at the top of the organization. Just like a parent, you can’t say, ‘Do what I say, not what I do.’ People admire good leadership and want to work in companies that have good leadership. They want to emulate the actions of good leaders, so it’s important that you live by example.
Hire and surround yourself with people that reflect your own ethics and hope that they do the same. Over time, you can change the culture of an organization through individual employees.
Trust your people. Be a person that believes in the good. Have a ‘glass is half full’ attitude, and when things are going wrong, insert yourself and make sure that people recognize where things have gone wrong, and try to learn from those mistakes.
Businesses make mistakes. A good business will figure out the mistake early, correct it and move on, and not paralyze the organization in that process.
The worst thing you can do is admonish somebody who took a calculated risk that they felt was valid and was wrong. Reward somebody who takes a calculated risk, was wrong and corrects it.
Don’t create a fear-based company, where people worry about losing their jobs because they make decisions. Create an empowerment-based company, where people feel that they are required to make decisions and required to be responsible for them and take ownership of their mistakes.
Innovate. Go into a mature market, look at things and re-innovate.
I have grown up having always been able to order a pizza and have it delivered to my home. Yet people have come up with all different ways of making pizzas and delivering them to homes and create amazing franchises in a space where one would say the market is largely served. You can find that same kind of example in any industry where someone goes in, innovates and takes the calculated risk to invest and apply that innovation.
You need smart people that can see opportunities, and those opportunities are usually presented to you by talking to your customers about what their needs are or where others are not fulfilling their needs.
Don’t get ahead of yourself. Don’t hire people too much ahead of the need. One way to empower people is, as the company is growing, put more responsibility on people and not let them hire that responsibility away.
By running relatively lean, you’ll find those people that are willing to take on new responsibilities. Build businesses and growth areas around them.
In a growth environment, look to the people that have leadership skills and have good decision-making, and give them that part of the business and let them run with it. It’s almost a self-policing activity.
Raise money and think bigger. It’s easy to have great ideas but lack the resources to implement them.
It takes a certain amount of salesmanship and entrepreneurship just to raise the resources that you need to operate in business. Get that balance right because you can’t spend all your time raising money, because then you’re not doing the business, and you can’t do the business unless you’re raising money.
A lot of articles say there’s a lot of capital in the world looking for opportunities to invest. Finding the neck of the funnel where your ideas and those dollars come together is incredibly difficult. It takes just as much energy for an investor to invest $5,000 as it does to invest $5 million.
Anyone who is on the investment side of the business has a certain amount of due diligence that they want to do to protect any amount of money that they want to put into a venture. Once you figure that out, you’re better off thinking big and coming up with an idea that warrants the $5 million, as opposed to the $5,000 investment.
People come to me to ask for help for ideas they have that are relatively small. Can that idea be bigger? Can it be national or global? If it has applicability in what you’re doing locally, would it have applicability around the world? If it does, think about setting up a business for that because it may be easier to raise money for a good global idea than for a small regional idea.
Be prepared for change. The world and the capital markets have trends. Recognize that whatever you’re looking at in the market today is not constant and is likely to change. Always be evaluating: Is it going to change, and is it going to change for the better or the worse? What do I need to do to position myself for that change?
I made mistakes as a young person because I didn’t realize how rapidly markets and environments can change, and it’s not forgiving. You cannot control that change, but you can benefit from it.
You’re going to jump in a river. If you try to paddle upstream, you’re not going to make it. That river is going to take you somewhere, and you don’t really know where you’re going to come out at the other end.
What you can do is paddle to the left and paddle to the right. Make sure you’re going left when you need to go left, and go right when you need to go right, and avoid the rocks as you go down the stream.
HOW TO REACH: IntercontinentalExchange, www.theice.com
As president of Burnett Staffing Specialists, Burnett could have freaked out when her business plummeted from $63 million in revenue in 2000 to $37 million in both 2002 and 2003. But she was used to this; it was just another dip in the ride.
She manages with the mindset that a recession could hit any day. By closing offices, cutting staff and watching expenses, she remained profitable during those difficult years, and revenue grew to $58 million last year, a 57 percent increase over 2003.
Smart Business spoke with Burnett about how she manages her business so it can grow but still stay afloat when encountering murky economic waters.
How do you manage growth?
We run our company debt-free, and we want to make sure that that’s important.
We run our company fairly lean in the standpoint of we try to run it as though there’s a recession around the corner. We’re not frivolous with our money, and we keep a lot of money in the company. We finance our own payroll. We don’t borrow any money.
Business owners sometimes overexpend, and they start borrowing money, and then a recession comes along, and then they’re in real trouble. I’ve seen so many of my competitors have to sell because they hit the limit on their line of credit, and they can’t borrow any more money.
How do you stay debt-free?
If you’re going to grow, you need to be able to pay for your growth. We never open an office and borrow money to do it. We’ve always had enough money to afford to pay the rent on another office.
If you go into debt to pay for an office, and the office doesn’t work, and you’ve borrowed the money to do it, then you have a double problem you have a failure of an office, and then you have debt on top of it.
Watch expenses. I look at that American Express bill every month and every item. My staff knows that I’m going to do that because there are people that will take advantage of corporate credit cards. I look at the phone bills to make sure that we’re not having excessive long distance. I’ve had people in the past who’ve called all their relatives during the daytime.
We watch those kinds of things. We watch expenses. That’s very important.
Good times won’t last forever. People forget it. When the good times start rolling, they say, ‘Hey, this is going to last forever,’ and it is not. This is a rollercoaster. People have to understand that.
How do you correct those people problems when they arise?
Let them go as soon as possible. One of the biggest problems that business owners have is hanging on to mistakes for too long. When you know that you’ve made a serous hiring mistake, first you have to analyze, why is this person not doing well?
Is it a training issue? Or the office they’re in? Or the manager they’re working with? Or is there a personality conflict? What is that problem?
If you determine that the person simply is not the right person for the job because of their work habits or attitudes or whatever, then cut your losses and move on. One of the biggest mistakes I’ve made as a business owner is keeping people way too long and hoping that they will get better. Then the staff says when you let them go, ‘What took you so long?’
The staff sees that this person is not cutting it. They have more respect for a management that lets mistakes go versus letting that mistake continue to sit there.
One bad apple spoils the whole bunch; therefore, you have one bad person in the office, it kind of spoils everybody.
What inhibits a company from growing?
One of the things that keeps a company from growing is when your staff doesn’t think that the management is working as hard or as smart as they are. We’ve always led by example. We’re first in, last out.
They know that I’m out there selling the company constantly. I make about 120 company visits a year to clients. I make speeches. I’m out there publicizing the company constantly. They know that I’m out there working as hard as I can.
For business owners, when things start going well, they start playing golf, and they start coming in late and leaving early. Your staff notices those things, and they think, ‘Well, why am I working so hard if they’re not willing to work so hard?’
I never ask them to do something that I’m not willing to do.
HOW TO REACH: Burnett Staffing Specialists, www.burnettps.com
Hire and empower.
First and foremost, I like really intelligent people. Personality is really important, don’t get me wrong, but brains can’t be beat.
Intelligence is really important in business. It isn’t just raw intellectual capability, it’s the ability to understand problems, read other people and juggle 9,000 things.
Hire good people, give them responsibility and then let it go. They know that I won’t throw them under the bus if things go wrong. Everybody handles it differently.
I don’t have the patience or the mindset to spend a lot of time going over financial statements, even though it’s important to do. I’ve learned to hire a really good CFO and trust them and trust what they’re creating and how they handle the statements.
Make family yours and those of your employees a priority.
You can measure success a lot of different ways, but it’s very hard to lead people if you’re not sensitive to the issues that go on in their lives outside the hours they spend with you. You don’t get any of that if you don’t understand your people.
Communicate with them really well. Get to know their families. I have an open-door policy, and I know that sounds a little trite, but I interact with them. I try my best to be a regular guy. I stay away from closed doors.
I’ve seen very few successful executives in any business who are successful in business and unsuccessful in their personal lives. You’re not well-rounded unless you actively participate in your own family’s lives because what are you then? Just another suit.
I grew up with a father who worked very hard, and he always had time for me, and I try to do the same thing with my children. Pay attention to your family. Take care of your children. Be a good spouse. Listen. Get away when you can.
Don’t immerse yourself in (business) because it will burn you out.
Learn to let go.
I tend to develop from within and push a lot of people out of the nest good people that have gone on to other teams or businesses who have been really successful. I may have wanted to keep them, but it’s better for their development to move on.
Don’t be afraid of it. One of the people I worked for early in my career was always upset if they heard anyone talking about employment with another company.
It always seemed funny to me because I see it almost as a compliment. You hate to lose your best people, but from a management perspective, a little change is good sometimes.
Having people move and change isn’t a bad thing, and I’m never offended by people wanting to get ahead who work for me. Sometimes their career path may be blocked by really good people in front of them.
Keep your ego in check.
Great people can be involved in businesses that fail. Lots of things can bring companies down. A lot of times, it’s leadership at the top.
Some of the pitfalls are forgetting the principles that made you successful in the first place. Principles that got them to those situations sometimes go out the door. Ego begins to drive decision-making as opposed to sound business principles. That’s sometimes fatal.
They’re touched by celebrity, and they forget the reasons they were successful in other businesses and do things they would never do don’t empower their people, don’t stick to a plan; get amnesia, we call it. Amnesia can be a real problem ‘Oh, I forgot I was told that.’
Learn to delegate.
It comes over time. Some people can’t do it and don’t like to do it and can still be successful. I never had the time to not do it.
It’s so many little tasks that have to be accomplished to run a successful, $100 million business as large as ours. You can’t do it all yourself, nor should you.
I’m a conductor. I orchestrate, listen and go.
Be honest with yourself and others.
Go with your instincts. Try your best to evaluate and put the bullshit meter on people’s ideas, because there can be a lot of hype. Stay true to yourself and try to be honest.
I have to manage down, and I have to manage up. I have an owner, and I’m only one of any number of businesses he’s involved with. For every issue I have, he has 20, so don’t take him everything that you might. You learn what to inform him of.
You have to have the balls courage is a better term to stand up to your own boss and tell him the truth. Eventually, if you don’t, and you sweep problems under the rug, they come back to haunt you.
If you go in and ‘yes’ the things they’re suggesting all the time, you can get in trouble, and it can be a problem. If you’re delivering news that’s unpopular, you’re better off delivering it than sugarcoating it or worse, ignoring it.
Try to have fun at it. People are attracted to fun. They’re attracted to laughter. They’re attracted to a sense of humor. You get more out of people if you try your best to spend some time with them.
Whether you’re in a CPA firm, or doing what we’re doing, if you’re the CEO and you’re the boss, you want people to relate to you, so you better have some fun doing it or you’re not going to, ultimately, be successful.
HOW TO REACH: The Dallas Stars, www.dallasstars.com
As an adult, while working as a teacher and keeping books for local plastics companies on the side, one of those manufacturers left town, claiming there wasn’t money in Houston. Faulk’s entrepreneurial flair kicked in again, and she started her own business.
“I said, ‘This is a great opportunity. I’m a young, healthy woman that is not afraid to work, and if I can’t make this work, I can always go back to teaching,” the president and CEO of A&C Plastics Inc. says. “I’ll always have a roof over my head, so what’s the problem here?”
She saved $5,000, got an answering service and started “just kind of playing Monopoly and built it up from there.” She and her 37 employees work by the philosophy that they sell service and throw in the plastic for free, and that’s paid off. A&C posted $16.5 million in revenue last year, up 27 percent over 2004.
Smart Business spoke with Faulk about growing a company while growing as a leader.
What most inhibits a company from growing?
If you try to grow too fast, you can actually grow yourself out of business. You see all this business you can get, but you don’t have the capital to (act) on it, so you overextend yourself with your vendors. You don’t watch your cash flow. You’re not watching your spending. It’s a domino effect.
You’ve got to take baby steps one step at a time to get you to the next level. Don’t try to be the front runner and not have the cash flow, the inventory and your expenses to back it up.
How do you harness that energy?
You don’t want to do a little bit of everything and a whole lot of nothing. Stay focused on what got you where you are.
You’ve got to stay within your means but take risks to increase your cash flow and your business. You always have somewhere to go. You know it’s out there, and you know how to do it.
How do you lead growth?
If your employees know the market and know their job, they’re going to take you to that next level. If you don’t know what your competitors are doing, you’re kind of just chasing your tail. You’re in your own little world. You think you know what you’re doing, but you don’t.
You have to be aware of what’s going on around you and how the market’s going. You stay ahead of the market. You try to act.
What qualities do you look for in employees?
I hire for attitude and I train for skill, because you can teach anybody with a great attitude how to do something. Attitude is 85 percent of your job, but if you have 85 percent skill and a bad attitude, you’re dead in the water.
How do you gauge attitude?
You never know anybody until you’ve worked with them or lived with them. We give them different kinds of tests, and then we give them a job description and we always put on there more than what we’re going to expect out of them.
We watch them. What are they willing to do? How do they react to a lot of questions? I want to hire people who are looking for an opportunity and don’t just want to be on the payroll.
How do you nurture and empower employees?
Get out there and get your hands dirty. Go out there and be visible to all your employees and speak to them. Be hands-on, and let them know that you know who they are, even if it’s just by name.
The most important thing is putting your employees in the position they’re best at. They know they have the opportunity to grow with the company to the next level, which is where I come in and let them know, this is where you are, this is where you can go.
How do you grow as a leader?
Always be a student in your own business. You’re selling service. Stay in tune to your customers’ needs and your employees’ needs. Anyone can be replaced. Even the president and CEO of a company can be replaced.
My dad was a great inspiration to me. He always said, ‘All you have to do is get up early and stay late.’ It comes down to getting up early and staying late and loving what you’re doing and staying focused. It’s not a job. It’s a game - it’s a personal game.
HOW TO REACH: A&C Plastics Inc., www.acplasticsinc.com
The company does subsurface mapping for oil and fuel companies and grows by adding crews of new equipment and about 45 people. With such a hefty price tag for each expansion, this president and CEO has to keep his finances in check and cultivate his 468 employees so they’re ready to step into new positions when clients require more crews.
His leadership skills are paying off. The company added three to four crews in the last year and a half and grew its revenue to $30.9 million last year, a 53.7 percent increase over 2004.
Smart Business spoke with Whitener about how he keeps his employees and finances in check to lead growth.
What most inhibits a company from growing?
When you look at the real problems out there, it’s market conditions and having qualified personnel.
When the market’s good, it’s much easier to be on a growth or a steady pattern. When demand is down, there’s not a lot we can do about it.
Your hope is to keep the very best that you have of the personnel. You have to call on your more experienced and better people to carry more of the load to keep costs down through difficult times.
How do you maintain morale during hard times?
We just buck up and work our way through it and still keep some of the rewards for the personnel that are doing the job, even though it is tough times. You still have to let the employees know that you appreciate what they are doing.
Even though you’re not in a very high money-making mode, what they’re doing is keeping the company going for the time in the future when we have the opportunity to make a good return on the revenue.
How do you financially prepare for growth?
You have to really balance your debt. Hopefully your business is at such a level that internally you’re generating cash and you’re not overextending yourself in the growth mode that shadows either one of these, whether it be the borrowing or using up all your cash to generate the growth.
There’s a fine line there balancing all three of those in order to keep the growth going and keep enough cash to make sure you don’t have any cash problems and do just enough debt if things turn, you can manage that debt.
How do you maintain that balance?
Every time an opportunity becomes available to us, we weigh all three of those. We have to review where we are cashwise, where we are debtwise and whether we want to take on additional debt or if we have enough cash being generated internally to at some point go out and say, ‘OK, six months from now, we anticipate this cash expenditure putting out this new operation and we feel we can do that without taking on additional debt.’
How do you make decisions regarding growth?
Take advantage of the opportunities when they become available. If the business is there, you need to make the decision quickly and take advantage of it.
You want to look at the positive side of it on what opportunities are there for the company? What opportunities are there for the personnel? And what opportunities are there for the investors?
On the other hand, you have to look at if there’s a downturn eight months from now, where will we be? Can we service this debt? What will we do with the personnel? What will we do with the equipment? You have to weigh the pluses and minuses.
How do you get employees to buy into your decisions?
That’s the simpler part. You have your plan laid out, and you present it to them. ‘This is what we’re doing. This is what’s happening. This is when we’re going to do it.’ People have enough faith that they’ve seen it in the past that this is what’s going to happen, so everybody just moves forward.
If you went in there and started asking employees, ‘Well what do you think? What should we do?’ not a lot would get done. As a CEO, you have to formulate the plan for the company, take responsibility for that plan, and go in and get the employees to execute that plan for you.
How does that leadership style help the company grow?
Being able to lead the company in the right direction is critical. A lot of times, even in our market right now where demand is very high, people get complacent and say, ‘I’ve got all that I can handle right now. We’re doing great.’
It takes the CEO to step up and say, ‘Well look, we need to do more. We need to step out here. We need to put another crew out. We’re going to do it by such and such a date, and this is how we’re going to do it.’
Get everybody in the frame of mind that this is what we’re doing and we’re moving forward and keep the company moving.
HOW TO REACH: TGC Industries Inc., www.tgcseismic.com