Kristy J. OHara
When Phillip Carter was 25 years old, he spotted a dilapidated house that at one time had obviously been a beautiful home, and he decided to see if it was for sale.
When he asked the man at the bank if he could buy it, he challenged Carter to make him an offer. Carter said $8,000, and the man said, “Sold.” Carter immediately knew he had paid too much, and it became evident that he had no idea what he was doing in the process of actually buying it.
Despite that, he got a home improvement loan for $10,000 and fixed the place up, and two months later, he sold it for $58,000 — a $40,000 profit.
That’s when he knew he was on to something.
What started as one house is now a $20 million business called Texas Cash Cow Investments, where he serves as president.
Smart Business spoke to Carter about how he’s grown his business over the years.
What have been the keys to your success over the years?
My grandfather told me a long time ago that customer service is the best product you’ll ever have. I can’t tell you how true that is. There’s going to be competition in the marketplace for everything. But it comes down to treating your customers well. Customer service is a dying breed. We’ve built our whole company off of customer service. It takes a little bit longer to build your business that way, but you have customers for life. We have customers who buy with us over and over.
The market changes all the time. It’s providing customer service and owning all the businesses, quite frankly that’s why I own the investment company, the construction company, the property management company, the warranty company, because I can control my customers’ experience throughout the whole process. If we outsource any part of that, I couldn’t control their experience.
What’s the most important thing you have to do to have good customer service?
Communication is a big part. I talk to my customers often, and I form personal relationships with them and I meet with them and shake their hand. No matter how good the product is, [you have to] form that relationship with the customer, communicating with them and educating them. There’s a huge void of quality information out there in real estate right now.
When communicating, what questions do you ask to understand them better?
One of the first things we do is I have a conversation with them about what their goals are. Are they getting close to retirement? Are they young? We have several different types of products — long-term retirement or sell-it-in-a-couple-years to make a bunch of money. Get to know what their goals are.
What advice can you give other leaders to understand what their customers’ goals are?
Probably getting to know the customers and asking the questions. That goes back to the customer service, as well. Developing a personal relationship with your customers — that’s your future. You might have the best product right now at the time but there’s always competition and there’s always going to be stuff coming out. People will look at your product and people will try to duplicate it, but having that personal relationship and your customers’ best interest at heart and being honest and open with them, you’re going to retain that customer for a long period of time. They’re not going to go anywhere.
If another product does come out and you don’t have that bond with those customers or know them well, you’ll probably lose that customer. We strive to ensure that we keep in communication with them. It’s not just always about sales. We get to know them personally. Quite frankly, that’s where all of our business comes from is from referrals. We’ve never advertised. We’ve grown this to a $20 million company, and we’ve never advertised. It’s all through word-of-mouth. We’ve gone global, and it’s all through word-of-mouth.
How to reach: Texas Cash Cow Investments, (214) 683-0984 or www.texascashcowinvestments.info
Barry Davis’ company, Crosstex Energy Inc., had always been extremely successful since he started the midstream energy service business in 1996.
“We averaged a compounded annual growth rate of about 100 percent a year,” Davis says. “It was an incredible journey and everything was up and to the right.”
The company continued growing — going from $1.8 billion in revenue in 2006 to $2.6 billion in 2007 to $3.5 billion in 2008.
“One of the key learnings for us in this experience is whether it’s personally or as a company, sometimes our greatest strengths can become a significant weakness,” he says. “It was in our DNA to grow and be very growth-oriented. If you grow at 100 percent per year for every year for six to eight years, at some point, that gets difficult to manage.”
By 2008, the organization was showing signs of stress from the rapid ascent.
“We were thin organizationally, and that includes people and processes,” he says.
Then the financial markets began to come apart. Crosstex had a number of natural disasters hit, including a fire at one plant and a hurricane that affected its Gulf of Mexico operations. Then there was a significant downturn in commodity prices that dramatically slowed the company’s development activity.
“We had built an infrastructure with an anticipation of continued growth,” Davis says. “All of those things came together to create the perfect storm and a period where we had to regroup and really step back and reset the company, if you will.
“Had any one or two of these things happened in 2008, we would have been fine, but when you compound several, it became quite a mountain to climb.”
It was unlike anything the company had faced and was going to be incredibly difficult to overcome.
“[It was] two years of the most challenging period we may ever face as a company that really became a fight for our life as a company,” Davis says.
Talk to customers
One of the first steps Davis took to turn things around was to solidify relationships with customers during this time. The company had done so well for so many years, news of its trouble sent shockwaves throughout its customer base.
“In the middle of 2008, Crosstex had one of the most successful stories in the midstream business in the last couple of decades,” he says. “We had great good will in the industry, so we had a lot of people who were pulling for us and wanting to do everything they could. Most people were just shocked because they had seen, for a dozen years, that everything had been so positive and were just confused by what had happened, so it was important for us to share what had happened.”
So he went out and started talking to them about how their troubles had come about but also how they were going to solve the problems.
“We spent a lot of time with our customers and trying to ensure their confidence that we were going to be there and we were going to be able to provide the services they had contracted us to buy,” he says.
Davis went out and met with other CEOs to share his plan and the confidence he had in the organization going forward. He would also talk to them about how they could be helpful in that plan.
“People want to see the confidence and see into the eyes of the guy at the top,” Davis says. “Are you demonstrating that you’re going to get through it, and do you have a plan? Are you committed or are you wavering in your commitment? There was never a wavering.”
He says very few of the top executives sold any of their holdings in the company, which was a further demonstration that he had confidence in the company so the customers should, too.
“We’re emotionally invested, and in a time of challenge, it’s usually more powerful than financial conviction,” he says. “It was important for our key customers to see that all the way to the top.”
Davis decided this was also a great time to look at ways to cut costs.
“We had a lot of expense in our organization that was focused on growth,” he says. “We immediately reduced all of our resources that were being spent outside core areas. In our physical operations, we essentially took away everything that wasn’t necessary to run the business — any idle equipment, anything being spent on unnecessary things.”
They also renegotiated contracts with key vendors. The entire industry was in this mode, so they were sensitive to the battle Crosstex was fighting.
“Every organization, in tough times, has certain places to look,” he says. … “There are always things we’re investing in for the future and when tough times come, it’s all about the now. What do we need to be spending right now? For a period of time, let’s cut out the cost of the future.”
When all was done, he and his team were able to drive out $20 million in costs from the business in 2009.
Another big thing Davis had to do was trim the portfolio. The company had six major assets and it wanted to get down to three.
“It was straightforward and logical,” he says. “We needed to sell something of size.”
Its treating business was attractive to the industry. It had been started as a grassroots business in 1998, and by 2003, it was the largest treating business in the industry and had the No. 1 position in gas treating. It was sold, as were some smaller assets.
Make the tough decisions
The bigger challenge in this was parting ways with the people associated with those assets. Some of the people went with the assets that were sold, but he also had to do a reduction in force because of the reduced operations.
“In our company life, we had to be able to look back and say we did that with great excellence,” he says.
As such, they planned it thoroughly and executed it well.
“Be very clear and generous in the exit process, meaning the severance that you give people, the time you give them to find other jobs, to be generous in the support you give them in finding those other jobs,” Davis says. “Be quick and decisive in the process — these are things that need to be done in a short time frame and not drug out over a period of time. It needs to be as deep and as broad as you can think — don’t make multiple reductions. One time needs to get it done. Be generous, be supportive and do it in one time, and be very caring in the execution.”
They made the cuts in one day. Davis personally met with almost every affected employee.
“I had the opportunity to visit with them and share the emotion of the challenge we were going through together and express some good intentions for the future,” he says. “It was like family, and it was like part of the family was being left behind or separated.”
Those kinds of situations are never easy to handle, but he says there are ways you can do it so you can, in fact, look back and say you did it with excellence.
“First of all, focus on the person,” he says. “It is a relationship, so you have to focus on the person. Second, be very diligent in the planning process because the execution is critical at the time, in the moment. You have to have a great plan. Then, thirdly, be real. Be a human, be transparent and be loving. That’s a word we don’t use often in business, but I think everything really comes back to that and to love the other people just like they are family.”
As Davis met with people, he was shocked by the support employees had for each other and the amount of care they were showing for each other as opposed to themselves. This care and concern inspired Davis.
“The good news is that whatever negative emotion we experienced, for 12 years prior, we were very full as an organization and prepared emotionally to deal with a downturn,” he says. “It was the relationship, the culture, the bond that we had that allowed us to endure during that time.”
In 2009, Davis and his team began to define the future state — the end they had in mind. But he involved the people and asked them what was important to them. Recurring themes came up.
“One of the things that was always at the top was to be on the winning team,” he says. “For the 12 years, they felt like they had been on a winning team, and in the downturn, that was something they didn’t feel, so it was very compelling for them to get back to a point where they could feel like a winning team.”
As he moved the company forward, he applied lessons he learned in the middle of this crisis.
“What we learned was to manage our strengths and be more conservative in our growth,” he says. “Secondly, we learned that one of the things you have to protect most dearly is your balance sheet. We actually had too much leverage — too much debt.”
Crosstex repositioned its balance sheet in 2010 and reached a number of milestones.
Revenue increased in 2010 to nearly $1.8 billion after the decrease in 2009.
“This is where we did some of the best work we’ve ever done in our 15-year history,” Davis says. “What we did is what we’ve always done well … we simply executed everything in our plan. The market supported us in rebounding. As a result, really in a very short period of time, in 18 months, we went from the lowest point in the downturn to being repositioned.”
And this year the company announced several major growth plans, including increasing its core from three major areas to five.
“As we entered 2011, we felt it was a turning of the page to focus on the future,” Davis says.
On top of the financial success, he’s seeing a change in morale, as well.
“We’re right now at an all-time emotional high as a company,” Davis says. “The energy has returned and has grown dramatically because of the success we’re experiencing as a company.”
While they were challenging years, Davis knows that they’ll also be good ones in the story of Crosstex and sees the company’s biggest challenge ending happily ever after.
He says, “I believe we’ll look back on those as two of the richest and exciting years for our company and the richest chapter in the story of Crosstex.”
How to Reach: Crosstex Energy Inc., (214) 953-9500 or www.crosstexenergy.com
The Davis file
Barry Davis, chairman, president and CEO, Cross Energy Inc.
Education: Bachelor of business administration degree in finance from Texas Christian University
As a child, what did you want to be when you grew up?
I always wanted to be part of creating something, and my entire life I have been. I started with creating businesses — a lawn-mowing business, and ultimately in college, I started, ran and staffed baseball camps in the summer. I’ve always been about building organizations, so as a kid I wanted to be a part of creating something significant.
What inspires you to create businesses?
I think it really is about the story. I like to be a part of creating a story. I like the life that comes from doing that with other people. I believe what we have here at Crosstex is a great community of people who are doing life together. I’m driven by growth because I want to keep adding people to our team.
What’s your favorite board game and why?
I don’t play board games. One of my favorite games is the ring game that we play at my lake house. It’s a ring-on-a-string game that I love to play with family and friends at the lake, and it gets very competitive.
If you weren’t in your current position, what would you be doing?
I would be spending a lot more time in ministry. I love sharing with people the life and I love sharing the experience of more life with people. I could do that with spending more time in ministry. That goes back to the Crosstex story — our mission and right in the center of our mission statement is to improve the quality of life for our employees. On our doors, every employee has ‘more life’ boards. On those boards are represented what more life to us means. We have pictures, quotes, family stories, whatever it is that represents more life to you. You could say I’m already full time doing what adds more life, but I would do that in other places.
Emmanuel Glover has been named senior vice president and director of community
development for Fifth Third Bank. He will support the bank’s community development initiatives and compliance with the Community Reinvestment Act and fair and responsible lending. Glover joins Fifth Third Bank with more than 17 years banking experience, most recently with KeyBank where he was vice president of Key’s community development banking division and held the title of underserved market manager, focusing on community development market activities throughout 14 states.
The Society for Vascular Surgery elected Sean Patrick Lyden as a distinguished fellow during its Vascular Annual Meeting in June in Chicago.
The designation of distinguished fellow is bestowed upon an active, international or senior member of the SVS who has made substantial, sustained contributions in two of three categories — research, service or education. The application process requires three letters of support from SVS distinguished fellows.
Lyden is an associate professor and the medical director clinical supply chain at Cleveland Clinic Lerner College of Medicine of Case Western Reserve University. Board certified in general and vascular surgery, Lyden also has a registered physician in vascular interpretation degree.
Vitamix was inducted into the Made in the USA Foundation Hall of Fame for its contribution to job creation, accurate labeling, promotion of American-made products, and labor and environmental standards.
League Park Advisors hired Wayne Twardokus and Ari Deutchman as members of its middle-market investment banking team.
Twardokus joins League Park from Harris Williams & Co., where he worked as a vice president originating and executing mergers and acquisitions for middle-market companies. While at Harris Williams, Twardokus was active within the specialty distribution and industrial manufacturing verticals. He also previously worked as an associate at National City Capital Markets and Brown Gibbons Lang & Co.
Deutchman was previously with Ally Commercial Finance in New York City. While at Ally Commercial Finance, he managed a private equity fund investment portfolio, as well as a secured credit facilities portfolio in the industrial manufacturing, health care, transportation, retail and energy sectors.
Please send your executive-level promotions to firstname.lastname@example.org.
When Tom Oakley started as president and CEO at ChanTest Corp. last year,
he quickly recognized his biggest challenge.
“I’ve followed founders before, but this is the first time I’ve come in to a company where the founder was hanging around,” Oakley says. “He’s a great guy — he’s a rock star in this space. He’s an incredibly bright scientific mind, so my challenge has been to come in here and establish this role, which is a new role for the company and forge this relationship with the founder while making substantive changes to how we do things around here.”
He had to make changes at the 75-employee company, a developer of ion channel services and products, while also respecting what had already been accomplished.
Smart Business spoke with Oakley about how he did that.
How do you lead change while also respecting the past?
You have to respect the past but have a vision for the future. But don’t be afraid to make changes. You have to respect what’s been accomplished. They didn’t get where they are for no reason, so it makes a lot of sense to understand what the best parts are and keep those and leverage those strengths. You have to get a feel for the company and the people in the company and understand what motivates them and then pull them in and make them understand what’s in it for them so we’re all rowing in the same direction.
I’m a finance guy, but I’ve run organizations that were over 500 people. When you come into a scientific organization, they really look at business guys and sales and marketing guys as lower life forms — ‘The science is science, and it’s special,’ or, ‘We have a great reputation, and we don’t need you guys because people just call us.’
The key has been to ask a lot of questions and listen to what the founder has to say and listen to what the scientists have to say and understand what they’re doing and what motivates them and work with them to communicate how what you think your vision is will help them get to that place.
It’s really about communication and building relationships and respecting what’s been accomplished thus far and finding a way to craft a message that ties together their internalized objectives with the objectives of the company, where you want to go.
How do you communicate in those situations?
I’ve spent a lot of time talking and a lot of time selling. You’re always selling, even if you’re not in the sales job, just helping to establish what we need to do to accomplish the objectives we have for the company.
Being a business guy without a scientific background — I’ve been in scientific industries a long time — these are really smart people, and I certainly don’t understand the depth. I understand generally what they’re doing, but I don’t understand the depth.
I’ll start out with, ‘What do you do? Tell me what are you working on and how does that relate? What do clients use this for?’ It’s just generally having a conversation about what’s going on, how does it work. I also like to ask things like, ‘What are three things that you do that you think are stupid and you would stop doing tomorrow if you thought that you could?’ It’s a variant of the ‘What can we do better question?’ If you’re looking at how can I make your job better, how can I make it easier, what are your challenges, it’s a lot of the same questions you ask.
You have to listen and understand, then obviously you need to take action. … Understand what the issues are. Try to incorporate their input into the solution. If you get a solution that’s team-based, you’re going to get a much better solution and you’re going to get much better buy-in.
How do you determine what things you can act on and what things you can’t?
I think it’s a question of balancing resources and understanding the biggest impact we have. Another way to prioritize is if you have a vision for the company and you have a plan … you need to follow your plan. It’s not rocket science, so if you have a vision and you have a plan, then the plan can act as the filter against those ideas. Anything that helps get you to those objectives, you figure out how you do. Anything that doesn’t quite get you there, that’s something you save for later.
How to reach: ChanTest Corp., (877) 828-1777 or www.chantest.com
When most leaders think about ways to build wealth, the idea of insurance often doesn’t register with them.
It’s for that reason that Howard Slater joined forces with other financial planners and wrote “Plan of Action, Strategies to Help You Build and Preserve Wealth.” Slater is the founding partner for Cedar Brook Financial Partners LLC in Cleveland, and the fifth chapter of the book is his and addresses insurance.
“One of the keys to my practice is helping people understand the importance of insurances,” he says. “It’s a dirty word in the financial planning world — people either believe in it or they don’t, it’s a religion-like thing. The reality of it is, insurance is an asset, and it needs to be used properly.”
For example, unlike many of your other traditional forms of investments, if you make a huge mistake with your insurance, it could be detrimental to your portfolio because you often don’t get a second chance, which is why it’s so important to focus on upfront.
“You get ill, and it’s difficult to be underwritten by more insurance,” Slater says. “Insurance planning as part of financial planning is truly a key asset that gets overlooked.”
So what should you do? Slater says you have to write down all of your insurances. What benefits do you have at work? What group benefits do you have? Are they one-time, or do you have the ability to buy more? What do you have individually? What does your spouse have?
“Make a list and make sure you know exactly what the benefits are,” he says. “Then through your own research or analysis or working with somebody, determine where you need to be. What is appropriate given what your situation is -- where you’re at now and your future.”
He says you also need to plan for immediate situations, such as if you were to die tomorrow or become disabled. Look at who’s dependent on you now, and who’s dependent on you in 10 years.
Then he says to do an annual review of your insurances to make sure you’re still covered well and your needs will be met.
By doing these things, you can better ensure your future.
How to reach: Howard Slater, (440) 683-9207 or email@example.com
Bill Conner was constantly busy as the president and CEO of a publicly traded company.
In leading the security solutions company Entrust Inc., he and his team had so much to keep up with, and it was exhausting. So he decided to take the company back to being privately held about two years ago. It freed up his and a lot of other people’s time.
But the decision wasn’t just good from a time management perspective; it also gave them a new opportunity to really focus on new capabilities and customers and transform the business, which had more than $100 million in revenue last year.
Smart Business spoke with Conner about how he led the changes in his organization.
What’s the key to leading a transition in your organization?
Understand if your corporate strategy fits the environment you’re in. There are a lot of discussions about how big do you need to be to be public these days. I think that’s a real question.
We were certainly not big enough and simple enough to be a public company. Our products are very complex. Our customer base is 45, 50 percent government contracts. That’s hard to get predictability for an average investor or even a sophisticated investor, so understanding how your corporate capability and vision and industry fits and in what kind of market was the first thing we had to really look at in terms of assessing that and we did that.
Then really understand your customer and how you differentiate to that customer. Is it customer service or technical support, or is it your product or your sales and marketing and how you get your product to your customer?
How can you assess your business to know if you’re in the right environment?
The first thing is a good dose of reality. It’s always hard to look at yourself in the mirror and say, ‘Yeah, I’m getting a few years older — the gray is showing.’ But you really have to have the ability to look at it and say, ‘What’s working and what’s not?’ and not take it personally, and take the personal action to get it out and see if the team agrees or disagrees with that.
What tips can you give for leaders to be brutally honest?
Always start with data and the numbers — good old GAAP. Some people think you can take them out, but they’re pretty good numbers. If your competition is doing better than you by the numbers, nine times out of 10, it’s not that they don’t have integrity and they’re faking their books — it’s they’re doing something different.
What we did here was look at the revenue line to see if maintenance was going the way it should, was product revenue going the way it should, and was professional service going the way it should. We measured all of those and then we looked at all our products and how they were doing. How are they competitive with the products out there? What were customers telling us about them? Then we looked at the cost side. Be brutally honest. Were we spending too much in sales? Was our sales force making their quotas? Who was the best? Who was not the best? Did they have a plan or were we going to get rid of them? R&D — is it working or are they just putting more features and functionality on there and it’s taking it longer?
Most people, if they’re honest in that first stage and do the analytics around that stage, the numbers aren’t going to lie. The only thing that’s going to lie is your own team, and that starts with you not lying about what you think is good and bad and communicating that, and them not lying to themselves or being conflict avoiders to avoid it.
How do you avoid lying to yourself?
It’s easy to do. It’s kind of like sand — you squeeze it in your hand, and the harder you squeeze it, the less it’s there. We try to say, ‘OK, our hands are pretty full of sand, let’s mold it and not try to squeeze it just because we’re stressed.’ We just try to control it. You have to control it but you have to control it in a different model, in a different framework.
How to reach: Entrust Inc., (888) 690-2424 or www.entrust.com
“As a sales rep, you can sort of get into a rut or the same routine and get to your wit’s end, in some cases, in trying to reach people,” says Michael Pace, vice president of Americas direct sales for Infor Global Solutions, a $1.8 billion business software and services provider.
Because of this, Infor is always looking for ways to improve. Enter Vorsight, a Virginia-based company that specializes in sales training and meeting scheduling. Some members of the Vorsight team came in and worked with Infor about utilizing different sales techniques.
Pace says one of the first keys for your sales force to improve their approach is to use Web tools, such as Hoover’s, LinkedIn and the prospective company’s website, to do more research and understand that organization better. It sounds simple, but it goes far.
One of the other keys Infor learned about was learning how to leave better voice mails that would generate interest on the recipient’s end in returning the call. About half the calls Infor’s team makes end up in voicemail, so this is critical.
“When you leave a message, make sure they understand you know who they are and what their business is,” says Tim Young, regional vice president, distribution sales for Infor. “Try to relate something that might be of benefit.”
For example, your salesperson could say something like, “X company is a customer, and they’ve really benefited from our product. I see that you’re similar to X company, so this might also really help your company, and I’d like to set up a meeting to talk about it.” This approach shows a genuine care for the prospective company.
Additionally, Chris Huard, regional vice president, channels distribution sales for Infor, says your sales team has to be very strategic in how they leave their messages.
“Each time you’re leaving it, don’t overload them,” Huard says. “Make it short and sweet. Leave our number once at the beginning, and leave it again at the end. Speak clearly and slowly. Each time we leave a message, leave a piece of value with that customer to make them want to call back.”
Another key is to make sure your team doesn’t stop at just leaving a voice mail. Take it a step further.
“A lot of people leave voice messages, and some people leave e-mails, but statistically, they’ve proven that a combination of e-mail and a voice mail are three times more effective in getting a response,” Young says.
Sometimes it can be difficult to get people who are set on their approach to try new techniques, so part of the training consisted of Vorsight and Infor people making calls right there in the training to put these techniques in action. Huard says seeing the training team making these calls using these techniques and having success — right there in front of everyone was a huge buy-in booster. That buy-in is critical, so showing people how it can help them will help them personalize what it will mean for their success.
“If you have sales people who are motivated by money, and if they use a successful sales technique, they’re going to get more at-bats and be more successful at bat and hopefully hit more homeruns,” Young says.
As a result of the training and trying new sales techniques, Pace sees a clear difference.
“At a high level, we’re much more efficient in reaching the people that we want to reach,” Pace says. … “We’re more efficient at doing that, we’re more creative, and I think our pipelines are more accurate and cleaner because we are able to deal at the executive levels, at the decision-maker levels because we’re having conversations with the team, and the deals we’re working are more real.”
Infor used Virginia-based Vorsight, a meeting scheduling and sales training company, to help it improve its approach to sales. Steve Richard is the co-founder of Vorsight, and he says one of the biggest tools you can have your sales team use is the switch-board operators at the companies you’re calling on.
“Most people approach the switchboard the wrong way,” he says. “When they call the switchboard, they either identify themselves, or they start trying to get transferred through to the right person instead of getting the information from the switchboard first.”
For example, in some cases, you may be trying to reach the CFO, and you may know who the CFO is, but perhaps you don’t know who the CFO’s assistant is or what his or her e-mail address or direct phone number is.
“Getting that simple information first, and then by calling into that direct dial number, you have a much higher probability of getting that person on the phone,” he says.
He says that clients tend to see better results when taking this approach.
“They were finding that the connection rates were much higher, and they were able to engage these people in discussions that were qualified appointments, and, in turn, qualified opportunities,” Richard says.
Something Hal Uhrman has learned in all his years of running 14 full and six half marathons is that you have to pace yourself. With that kind of distance, you can’t sprint out of the starting line or else you’ll run out of gas quicker than you think. It’s a steady, consistent approach to the race that will get you to the finish line.
He uses this same approach to run State Industrial Products, the cleaning products company where he’s been president and CEO for more than two decades. The $111 million company celebrates its 100th birthday this year, and to stay in business that long, you have to think long term.
Build on cash
One way Uhrman does that is by only buying in cash.
“There are all kinds of four-letter words, and the only good one is cash,” he says.
His cash-only policy even goes for buying other companies and facilities — one of which was 11 years old and sat on 10 acres of land.
“If we can’t pay for it, we don’t buy it,” he says.
“You can never get in trouble if you don’t owe money.”
He bought six companies before the recession started, but when it did kick in, he stopped because he didn’t want to run out of money.
Now that the recession is over, Uhrman is looking to make acquisitions again.
Two types of companies that he targets are family-run businesses, where owners are looking to get out, and struggling organizations.
Once he buys a company, he wants to keep as many of the field employees on as possible as well as the owner, if he or she still wants to be involved in some capacity. But there are certain areas where there’s duplication and he knows he won’t need some of those people.
“We don’t need their billing system or their collection system, so some of their employees would get eliminated,” he says. “Anybody who’s out in front of customers, we need all of those. Our payroll is all done here, so if they have a payroll department, we don’t need that.”
If he has good people who he doesn’t need but may be effective in other areas, he’ll look at moving them to a different position.
“If we can find them other jobs, we will, but we have to do what’s right for the company,” he says.
He says it’s key to make these changes right away instead of letting them linger on your to-do list.
“I try to do it as quick as possible because a lot of these companies aren’t making much money,” he says. … “You can’t do it [from the heart]. You have to be objective on who stays and who doesn’t. If they’re a good worker and there’s a place for them, we absolutely want them.”
Hire the best
Having good workers who are dedicated to the business is crucial for State Industrial’s success, and he’ll only hire people who fit that mold, because you can’t build a strong team if people aren’t dedicated to helping the company. He starts with people who are willing to take the time — even sometimes outside of work hours — to handle problems that arise. Getting these people starts with taking your time in hiring.
“You look at their track record to see what they’ve done,” he says.
If they come in right out of college, you don’t have a way of knowing for sure, but he says you can see if they’ve been involved in team-oriented activities in their past, such as sports.
He’s also dedicated to making sure they’re taken care of. This starts at the most basic level with making sure they have their job, even when times are tough.
“Most companies, when things get tight, they start cutting back people because they don’t have any money, and if you have money, you can kind of wade through, and that’s really what we did,” Uhrman says.
It goes back to his cash-is-king mentality, so he was able to take care of his team through the downturn. Beyond that, he says that good benefits and a 401(k) program are important, but it’s even more than that.
“The best culture for employees is one where they have the opportunity to help the company achieve its goal and achieve its personal success,” he says. “As you provide a large group of people with challenging work and the responsibility to get the job done and reward them for a job well done, the enthusiasm is contagious.”
He says that taking care of people also comes down to looking out for their long-term desires and needs.
“You have to be honest with them in everything you do, and if you get somebody out of school, if they don’t see a position with you where they can move up, they’ll leave you,” he says.
Additionally, he says you have to make work a fun place for them. One way State Industrial does this is by regularly participating in the Corporate Challenge program where companies compete against other local companies in various athletic competitions.
“We get nonathletes to do something,” he says. “They really contribute. When they have this Corporate Challenge, they have a cookout down there. We do things to try to make it fun.”
When you have a strong culture like that, it will show in how your employees treat your customers. A huge part of State Industrial’s success is that it takes care of customers well.
“If you do the right things for your customers or employees, it works,” Uhrman says. “If you take advantage of either one, it doesn’t work.”
One way he and his team takes care of customers is by looking out for their best interest. Every quarter, his team goes to each customer and shows them exactly what they’ve spent and what they can do to control costs better.
“Trying to make more money off the customer is narrow-minded,” Uhrman says. … “You have to take care of the customer.”
Taking care of the customer ensures you don’t lose that customer.
“If you don’t lose customers, you have to win,” Uhrman says. “Every company for one reason or another loses customers. We really try to do a job on them to convince them they’re spending less money.
“If a customer thinks that he is being treated fairly, you won’t lose him. … If you take care of customers, they will stay with you.”
In addition to treating his customers well, he also strives to make sure the product offerings they have are the absolute best. About six years ago, as he and his team went to different trade shows, they started to notice a trend: more and more companies were starting to come up with environmentally friendly products.
“Our challenge is to do it better than some of our national competitors and knock them out,” he says.
That meant that State Industrial needed to start adapting its product line, as well, so that customers had safe, effective and environmentally friendly products to choose from.
For that to happen, he had to get buy-in from his team. He started with his top people to lead a change process.
“Bring them in, indoctrinate them on what has to be done, and we train them, and their job is to go out and train their people, and it’s easy for us,” he says.
Overall, he says you have to continuously encourage and gently push people into changing.
“You can’t do it with a sledgehammer,” Uhrman says. … “If they don’t change, one by one they’re going to lose their customers. If it’s not to us, someone else will come in and convince them.”
How to reach: State Industrial Products Corp., www.stateindustrial.com
In the last five fiscal years, Carlos Sepulveda has grown Interstate Batteries from
about $700 million in revenue to $1.5 billion in revenue. In that time, he’s invested in facilities and people, and now has more than 1,600 employees at the Dallas headquarters.
The growth, while impressive, has created its own problems, including the conflict that comes from deciding which opportunities to pursue.
“It really comes down to a matter of we need to vet the opportunities we’re going to pursue because everything can’t be a priority,” Sepulveda says.
Different people evaluate opportunities based on different criteria most relevant to their position and experience, which can create conflict over which opportunities should be pursued.
“Conflict generally has a negative connotation in society, but I really don’t see it that way,” he says. “I see it as an opportunity to vet different perspectives and opinions and synergistically come up with a superior answer just from the dynamics of a well-functioning team. My challenge has been having our leadership team get to that higher level.”
While difficult, during that time he succeeded in making his team better at resolving conflict by having open meetings, having the best team and embracing reality.
“I see that we’re making progress on some very big initiatives, and we have other initiatives queued up that we believe are going to be next … so [we have] a focus and the results reflecting that we are doing better at communicating alternatives and having more open conversations around the leadership table that are reflecting a deeper degree of respect and even trust and the ability to talk about these things.”
Have open meetings
One of the first keys to getting his team to embrace conflict was increasing the flow of communication in meetings.
“When most people hear [communication], they’re thinking of transmitting, so we really tried to put the emphasis on receiving,” Sepulveda says. “It’s making it a part of the leadership culture to emphasize listening well and asking appropriate questions to enhance absorption of what’s really being attempted to be communicated. That’s not a natural skill.
“People typically default to being better at transmitting than receiving. You can see that in a variety of ways, but one way you can see that is when a discussion of reasonable intensity is going on and one party is communicating to another, you can almost see that other party stop listening to start formulating what their response is going to be on what they’ve heard so far.”
One way he deals with this common problem is to “hit pause.” The team may be having a substandard discussion, so in the middle of it, Sepulveda will simply say, “Let’s hit pause here.” He’ll then ask the team to make observations about how they’re communicating. How are they doing with listening? What do they see that indicates that they’re listening well? What indicates that they could do better listening? What kind of effect is that having on everybody?
“I don’t mean to make it sound psychoanalytical — it’s business driven, and it’s about generating the maximum value, so it’s about sharpening the ax — not just swinging the axe harder,” he says.
That took about a year to perfect, because it’s hard for a team to adjust to.
“First, it’s a bit awkward and unusual and people are wondering how safe this is, and it takes time for any team, in my opinion, to have enough revolutions to build a respect of that team to understand we’re genuinely pursuing the delivery of value here,” Sepulveda says. “When people see that metaphorical ax get sharpened, over time people say, ‘Wow, there is a value here,’ and next time we debrief and critique ourselves stylistically, there’s more inputs.”
The other way he increases communication at the meetings is to have open agendas instead of set ones. Each Monday, Sepulveda meets with his 12 top officers at 1:30 p.m. Nobody submits anything in advance, but instead the agenda is broken up into four main categories: housekeeping, revenue/gross profit updates, major things happening this week, and then challenges, problems obstacles and opportunities.
“The value there is for everyone to be present to be able to participate on the achieving of what we do or what we don’t do,” he says. “No system is perfect. As long as people are involved, they’re not going to have a perfect system, but it’s valuable.”
Because of how the agenda is structured, sometimes the meetings may go until 3:30 and sometimes 7:00, but everyone always blocks off the entire afternoon so they can make sure to get through everything anyone wants to bring up.
“The primary benefit is you get superior results,” he says. “The primary benefit a CEO can get is a greater confidence that the leadership team’s decisions are market relevant — they have a robustness for success and a competitive marketplace that they would not necessarily have if that decision were made in a vacuum.”
But that’s not the only benefit to taking this kind of approach.
“Those officers then go off and own the culture within their subculture, and then what you get is a leader in that subculture that knows, ‘Hey, I was there, I know what we’re doing, I can explain it,’” he says. “They can handle any question that comes up and do it within their capabilities of handling it in an excellent fashion so that other parts of the organization know that their subculture leader is genuinely at the table when things are being decided and genuinely has an opportunity to have an impact on that.”
Hire the best people
Another factor that was critical for Sepulveda in getting his team to better resolve conflict was to make sure he had the most qualified, competent people sitting around the table. He started with 10 senior officers, and he now has 12, but of those 12, seven of them were not here seven years ago.
“Sometimes that happens because the CEO decides it needs to happen, other times it just happens,” he says. “Regardless of what initiates it, when that change takes place, it’s vital for the president and CEO to get the right fit to impact that team. Every time one of those members around that table changes, it changes the dynamic of the entire team, and then there’s a resettling to get your pace back.”
To make sure you get the right people, it’s part art and part science.
“The science part is looking at experience, looking at education, asking the right kind of questions in interviews, listening very carefully,” he says.
Make sure potential employees have the right expertise so that if there’s a financial issue at the table, you’re confident that the person with the financial expertise knows what they’re talking about. Do this for any area that could affect evaluating opportunities.
Then the art part is just paying attention to the sense you get when you’re around them. He likes to take a candidate and their spouse to dinner with himself and his wife to see how they act in that setting.
“If someone I’m with treats the wait staff in a way that’s not reflective of appropriate, respectful appreciation, I’m done,” he says. “That’s all I need to see. That’s how they’re going to treat other parts of the enterprise. Maybe not their direct reports, but that’s how they’ll treat other team members.”
Other factors that contribute to the art side of the equation are how they spend their time outside work.
“If they’re doing things with vigor outside of their career, that’s a real positive,” he says. “If they take personal responsibility for their physical health, that’s a real positive.
“One of my personal theories is that no one will ever lead anyone else better than how they lead themselves, so I look to see how they’re leading their self.”
If you bring in top people, you’re going to get better results when it comes to resolving conflict and choosing opportunities.
“It really doesn’t do you any good to have a facilitated, interactive leadership forum if it’s void of competence,” he says. “I don’t think any company would get very far, and I certainly wouldn’t want to participate in that.”
The last key to getting his team to embrace conflict was a principle Sepulveda actually learned as a teenager.
As a child, his parents divorced and his father was an alcoholic. He saw how addictions affected people and distorted reality, so as a 15-year-old leaving home to find a better living environment, he learned that being tethered to reality was critical.
“Addictions are a tremendous deflector of absorbing reality,” he says. “So [it was] just seeing what I would categorize as suboptimized leadership to maybe even just dysfunctional leadership — good benefits don’t flow from inoculating yourself from the reality of the situation.”
That lesson is something he keeps in mind as a leader today.
“We cannot deliver value if we don’t have a good, solid absorption of what the current state is,” he says.
Often leaders like to avoid reality, but he says as the CEO, you can’t do that.
“It’s not if, but when, CEOs can be confronted with reality,” he says. “Maybe you can defer it or delay it, but it is unavoidable that whatever the market realities are, they’re going to reach your desk. … Let’s not be so enamored by our current understanding of what’s going on in the market that we miss shifts or changes and therefore are delayed in being able to respond or harvest value as a result of those shifts or changes.”
This is one of the hardest things to get your team to do though.
“You can’t make your team do anything,” he says. “You can only provide the opportunity, invite them into it and allow the team to see the successes that happen as that opportunity gets laid hold of, and then those successes generate momentum and that momentum builds, and then the velocity accelerates because of proven successes.”
He’s also quick to point out that this isn’t the only way of leading a business.
“I’m not saying you have to embrace reality,” Sepulveda says. “You don’t have to have an open culture. I’m just saying results are enhanced if you embrace reality, if you have a leadership culture where you have confident, ambitious individuals who are invited into a full discussion of the relevant business issues. … There are companies that are having success without doing this. The difference is, that’s awesome, but how sustainable will that success be? It’s important to factor in. We’re in our 60th year here. We plan to be around another 60 years at least.”
How to reach: Interstate Batteries, (866) 842-5368 www.interstatebatteries.com
The Sepulveda file
Education: Bachelor’s degree in business administration, University of Texas at Austin
What’s the best advice you’ve ever received?
Colossians 3:23 — Do your work unto the Lord rather than men, knowing that it’s from the Lord that you shall receive your reward. That’s a paraphrase. It’s an awesome verse. I came across a Bible when I was 15 years old, and I’ve been a student of the Bible for the past 39 years. I view my studying and equipping myself with that knowledge as a strategic advantage in living a better life. It’s really almost unfair — but it’s out there and everybody could do it, but it doesn’t appear that many are. Quite frankly, I’d say it’s the only reason I’ve made it from 15 to 54.
What was your first job?
I was 15. I had just left home. I left my mother in Oklahoma City, went to my dad’s in El Paso, stayed there nine weeks, that didn’t work out, so I went back to Austin where I had been previously until my mother had moved to Oklahoma City and contacted the football coach because I was a pretty good football player. I told him I needed a job before I checked into school, so I got a job bagging groceries, pretty much through high school. In the summer, I did fence construction.
What did you learn from that job that still applies?
By way of example, at the grocery store, maybe three nights a week I would close the store. There were like seven or eight steps to closing the store – taking out the trash, stuff like that. One of them was sweep under the candy racks. I did that, and it didn’t take me long to figure out I’m the only guy sweeping under the candy racks, because there’s no way they’re getting this dirty in one day. I thought, ‘It is what it is, so I’m going to keep sweeping.’
It wasn’t too many weeks after that the manager said, ‘Do you realize you’re the only guy who does that?’ I said, ‘Yeah, I figured it out.’ He said, ‘Why do you do it?’ I said, ‘Because it’s on the list for closing and that’s what I’m going to do.’
It wasn’t too long after that I got moved to cashier, even though some of the bagboys had more tenure than me. Any individual can only decide how they’re going to be valuable, then it’s up to that organization, whether it’s part of their culture, to reward that individual being valuable or not. If I worked for a government entity, there’s no way they’d move me from bagboy to cashier because other bagboys had been there longer. That’s one reason I’m a big fan of delivering value in an entrepreneurial business, because you let value adjudicate when opportunity gets harvested.
When Martin Richenhagen joined AGCO Corp. nearly a decade ago, he says the company was like a Volkswagen Beetle with a Ferrari engine.
“We had certain elements,” the chairman, president and CEO says. “We had good designs and strong features, but we didn’t make it a complete product range.”
At the time, the company, a global manufacturer of agriculture equipment, had grown through mergers and acquisitions.
“We had a lot of very traditional brands and products, but the approach of previous management was to do acquisitions instead of investing into your business,” he says. “That was not bad in order to basically buy the right pieces and in order to get up to a certain meaningful size, but that means if you want to do that on a continuous basis, you would have to have new targets all the time.”
That’s a problem when the industry is already very consolidated, so the idea of buying products or missing technologies from the outside wasn’t going to be as effective moving forward. To continue growing, he was going to have to change the strategy.
Richenhagen says, “That means you need to invest in your own organization, and that is much better than what we did before.”
Richenhagen started the process by making sure he knew what the company wanted to accomplish and looked at it from every angle.
“You do a (strengths, weaknesses, opportunities and threats) analysis where you compare your product and market analysis with your competition,” he says. “This shows you where you have gaps in your product offerings.”
Some gaps could include having a product that’s not state-of-the-art, having a leading product that is too expensive, or even not having a product at all for a certain market.
It’s absolutely critical to be honest when evaluating your products.
“You have to look at your product range and you need to ask yourself the question, ‘Is this the best product, or are there competitors that are better than I am?’” he says. “American cars are not sold outside of America because they’re lousy cars — not because people in Europe prefer European cars. The technology isn’t leading technology and leading quality. Today, you need to be able to lead in technology and lead in quality and have a competitive cost position.”
When you honestly look at your products, it will help you see where your strategy should be heading.
“When you map your product and compare it with the competition, then you know exactly where you need to be, and then that hole has to be based on your strategy,” he says.
For example, AGCO’s strategy is to have high-tech solutions for professional farmers feeding the world. He doesn’t mind having small lawn and garden tractors someone might need, but he wants to have all the leading-edge technologies for professional farmers in his suite of product offerings.
“You have to talk to your customers to identify future needs,” he says. “You could have a different vision. The vision could be low-cost tractors for family farmers in the U.S., for example … but there are certain implications coming from your company’s vision.”
He says you also have to look at the market and where it’s going.
“Define supply and demand and then you need to look into your own industry and you need to look into factors that influence the market demand in the markets you’re in,” he says.
For example, in his industry, the ability to get financing is critical and will affect demand for his products.
Get the right people
AGCO was spending about $50 million a year on R&D efforts, but Richenhagen knew it would take more than that to truly be the technology leader. He was going to need the right people to lead those increased R&D efforts. This came down to first creating job descriptions and then hiring the best person.
Beyond just the general characteristics that make up most employees within the company, he says it’s important that you know what specifically the job is you’re hiring for.
“We have a job description and profile for every position, so that means we try to invest some time in order to find out what is really needed and what we’re looking for,” he says. “This, of course, has to be updated every time you’re looking for someone else or hiring from the outside.”
It’s important to update these descriptions every time you’re looking to hire someone new for that position because the world changes so much, often the requirements for the job will change, too.
“You need to sit down and think about it, and you need to think about how sometimes that has a mirror impact on your organizational structure — you do it, and you find out you have overlap between two or three positions, and you may want to change your organization because sometimes there’s waste of energy.”
He says you need to work with a small team and brainstorm what you think are the key important areas of responsibility for each position.
“What we always do is discuss it with the guy who has the job, because I think it would be very bad if you have a job description, and the guy who’s doing the job would say, ‘That’s not me,’” he says. “That happens sometimes. If it’s getting too theoretical and you only have human resources involved or someone from the outside, this could happen.”
As you put together your job descriptions, it’s important to think big picture.
“You need to keep things simple in a way but also very pragmatic,” Richenhagen says. “This means don’t make it too long on details. The most important part of a job description is to describe the area of responsibility in the form of results you are expecting. Instead of describing what you expect somebody to do — he has to come into the office at 7 o’clock in the morning and open his door and start to make phone calls — describe activities and describe results you expect the leader to generate.”
This has been a critical recruiting tool for AGCO, because by defining results instead of job minutia, people are attracted to that kind of culture and want to be a part of it.
“With people who are more and more qualified and who have a very good experience, this is also much more motivating, because you leave the way how to get there more to themselves,” he says.
When you have job descriptions created, then you can actually look at bringing people on board. Make sure you get the right people with the right skills.
“First off, you need to have a pretty good understanding about the skills of your own people,” Richenhagen says. “Sometimes it’s very surprising, because when you look into it, you have people who have a lot more knowledge than you think. That needs to be documented and mapped out in a structured way.”
He says he had a strong HR leader, so he worked with her and a consultant to do a high-potential assessment of the organization. But from that assessment, he learned that he had really good people, but he didn’t have enough. He needed to hire more young, high-potential people from strong agriculture and technical schools as well as some leaders with strong team-worker skills and multiple language capabilities.
“What is also helpful is if you can also describe target industries where you might find those skill sets,” he says.
For example, he knows that looking at automotive, construction equipment, mining equipment, forestry equipment, the truck industry and other related fields will be the likely industries where he’ll find people with the skills needed to be successful at AGCO.
While he uses consultants to help him, he says not to use too many.
“Focus on maybe one or two,” he says. “Maybe you need to have some guys who are specifically good in a certain region. … The firms don’t make a big difference — it’s mainly the people. You need to have somebody you know and somebody who is on the same wavelength as you are, so he needs to understand what you’re looking for.”
The best indicator of that is to describe to them what you need, give them two or three weeks to identify a few candidates and then make an assessment.
“You meet the candidates and you know right away if the consultant got the message or not,” he says. “It means a very good relationship between you and your consultant to make things easy. It’s like in matchmaking a little bit.”
Once he has the right people in place, Richenhagen pushes people forward by holding them accountable to detailed objectives.
“The objectives have to be ambitious because it’s motivating, but on the other hand, they also have to be achievable,” he says. “If you give someone a target that can never be achieved, that doesn’t motivate that person. Second, in order to get there, objectives need to be agreed upon. It doesn’t help if you just give people objectives without talking about it in detail. That means it needs to have some kind of negotiation process.”
This allows the person to talk about what they think is achievable or not and gives them buy-in to the goals.
Then the goals need to also be measurable.
“It doesn’t help to have a target that says to develop a nice product,” Richenhagen says. “This is a weak definition. You need to define the measureable objectives you’re shooting for, including a measureable time frame, and in engineering, it’s also helpful to define the budget you allocate — if you’re not in a position to make it on time, very often it’s getting more and more expensive.”
As he moved AGCO forward, R&D spending increased about 20 percent each year. By 2008, he knew he was on the right track as the company reached $8.3 billion in net sales. Even as the recession hit, the company suffered with revenue dropping to $6.5 billion in 2009, but despite that, he continued on his plan of increasing R&D money. The company even invested in some huge factory capacity additions during this time
“For two years, I was hanging out of the window with the tips of my feet inside, and then my guys were holding me,” he says. “Maybe they wouldn’t have held as firm as they could and I would have fallen out of the window. It’s a personal risk. It’s hard, but this is why the chairman and CEO makes more money than other people, because he needs to take more risks once in a while.”
That risk certainly paid off for AGCO.
“Due to the fact that it came back and we had invested, we’re also in a position to benefit and deliver on time while some of our competitors, who were more careful, now have certain capacity restrictions,” he says.
This has allowed AGCO to become a market leader.
“With every market, when you see your market share is increasing, you know you’re on the right track, but it’s also an entrepreneurial decision,” he says. “In the area of product development, you can fail easily by just developing the wrong product, so you’ve spent the money and nobody wants to buy it — you need to show some leadership if you want to make it.”
On top of that, revenue increased last year to nearly $6.9 billion. Now the company spends between $250 million and $300 million a year on R&D. While it’s a lot of money, he says he expects the company to continue growing and anticipates still increasing that R&D spend 10 to 20 percent each year. That VW body with a Ferrari engine has certainly changed these days as a result of his efforts.
“We have certain leading-edge technologies and certain brands that have a strong brand image,” Richenhagen says. “When you make this a company vision, all your brands benefit from that, and the whole company image is getting into the direction of technology leader. If you compare yourself with your competition, we now, from our customers, are more seen as the BMW or the Mercedes of our industry while some of our competitors are seen as the General Motors or the Fords of the industry.”
How to reach: AGCO Corp., (770) 813-9200 or www.agcocorp.com
Martin Richenhagen, chairman, president and CEO, AGCO Corp.
Born: Cologne, Germany
Education: University of Bonn (Germany)
What was your first job ever as a child?
My first job was helping a neighboring farmer to harvest potatoes, and this was paid by 25 cents per hour at that time in the late ’50s. [I learned] that farming is very tough.
As a child, what did you want to be when you grew up?
I always wanted to be a train conductor. We had a train track passing by, and I liked the idea that you could travel for free while working and I was attracted to speed and noise and engines.
What’s the best advice you’ve ever received?
I think good advice I received from my father is one should have a goal in life, and second, you should do every job as good as you can.
If you weren’t doing what you are now, what career would you have?
When I was a student, I always wanted to become a famous Olympian in horse riding. I went with the German Equestrian team to the last Olympics but as the coach, not as a competitor. We came back with a gold medal, so that means we did a very good job.