Richard Howe wouldn’t call himself a “turnaround guy,” but based on his track record of turning around struggling companies, some of his peers might.
“I’m not a ‘turnaround guy’ just because I’ve done three turnarounds,” Howe says. “You get kind of branded that way, but I’m not really the turnaround guy. Really, I’m a business grower.”
As president and CEO of Inuvo Inc., Howe has already helped reposition the $50 million company to generate fourth quarter revenues 46 percent higher than the same quarter of 2009, which was also the year he joined Inuvo. Part of his strategy to accomplish this was improving Inuvo’s organizational structure to eliminate inefficiency and better carry out the company’s vision.
“I’ve run about a dozen businesses and three of them were turnarounds, and they all have similar characteristic traits to them,” Howe says. “One specifically, is the company has been excessive in its spending of money, so that needs to be curtailed. The costs need to get under control. Two, the team, the people around you often need to be changed, retooled and improved.”
One of the biggest expenses most companies have is in employee head count.
“I believe in team, so I spend a lot of time making sure we have the right people in the right roles in the company,” Howe says.
“You go through an exercise of evaluating staff. We created a system and the system had variables in it, different characteristic traits for what constitutes a great employee and what constitutes a not-so-great employee, and we rank ordered them. We took a look and said, ‘Going forward, what are the parts of the company that we’re going to focus on? From the collection of resources that we have and scores that we’ve gotten from everybody, who’s best to help us achieve the vision of the company?’”
Rather than set a specific head count number of employees to keep or cut, you should simply look at ways to structure the leadership more effectively. Sometimes that can involve small changes in personnel, but in other cases — at Inuvo it was also a matter of consolidating subsidiary businesses — it can mean creating an entirely new organizational structure and changing out entire management teams and boards.
While making personnel decisions is always difficult, reassessing your leadership team is a key part of getting your company back to operating efficiently and profitably on a cash-flow basis. It also demonstrates to existing employees that you’re giving them the leadership they need to achieve growth.
“The whole company was re-energized and re-motivated when they finally realized that we actually did have a senior leadership team at the company that was committed to the success of the company, one,” Howe says. “Two, they felt like they were a part of something that was going to be very successful and grow.”
Howe saw that personnel headcount was the biggest expense base for Inuvo and a key area to improve cost efficiency; yet, before making these decisions it’s important to look at all your areas of business to examine cost saving opportunities.
“Every single expense line in the company we just systematically went down through them and said ‘Why are we spending this money? Why are we spending this money?’ And, is it giving us a return or not?’” Howe says.
Most important, once you have a plan to reduce expenses, you need to enact it quickly.
“When you first do a turnaround, you’ve never done one and you get in there and you tend to over analyze the problems,” Howe says. “It causes you to take too much time to make the kinds of expense cuts you need to make to get the operation under control.”
How to reach: Inuvo Inc., (727) 324-0211 or www.inuvo.com
There will always be unforeseeable challenges and problems that arise to threaten a company’s growth, but according to Rich Howe, the most successful business people are those who undertake such challenges with strong intent and determination.
“It’s one of the single, greatest characteristic traits that I’ve found in successful business people; it’s the sense of urgency,” says Howe, the president and CEO of Inuvo. “It’s waking up and realizing that today is the best day to call someone or do something or get something done. … I’ve just found that those people tend to be able to get the impossible accomplished.”
Even when things aren’t going their way, these people won’t let themselves be steered off course.
“In business, you are going to encounter rough periods,” Howe says. “It’s just going to happen. It seems like some individuals have the ability to get punched in the face and get back up and keep going, and others seem to not be able to deal with those challenges, and they end up failing as a result. The most important characteristic trait of any leader: Can you take a punch and get back up and keep fighting? And if you can, then there’s a good chance that you are going to be successful, because it’s the getting back up part that’s the key.”
When G. Michael Bass walked into his role as president and CEO of what is now Piedmont Newnan Hospital a little more than five years ago, it was caught in a downward spiral.
Revenue was in the red. Patients were migrating out to competing hospitals. The management team was dysfunctional. While it did go on to become part of the Piedmont Health system in 2007, at the time, there was much speculation and debate about whether it would join a larger entity and whether to build a replacement hospital for the outdated facility — which caused many negative headlines in the local news and made employees embarrassed to work there.
“That’s what I walked into,” Bass says. “I must be slightly masochistic, because I’ve walked into three situations like this in my career where it’s just terrible. I thrive in that kind of environment. I don’t know what I’d do if I walked into a hospital and all I had to do was come into work. You look around and say, ‘How do we get this aircraft carrier turned around?’”
Replace disengaged managers
In his first 30 days on the job, Bass didn’t do anything except observe. In the first department directors meeting, he sat in the back and listened as the chief financial officer ran the meeting. He couldn’t believe what he saw — apathy. Even when it was announced that the hospital had lost $500,000, he said it seemed like yawns through most of the room. At the end, he asked the CFO if he could speak for a few minutes, to which he agreed.
“I went to the front of the room. I said, ‘I’ve been here 30 days observing, and let me tell you my perception of the management team here in front of me.’ I started using adjectives that they had never heard before. I said, ‘Basically, you’re disengaged, you’re not committed, you’re not accountable,’ and I went on and on and on.”
It was an interesting atmosphere after that as he looked around the room to gauge reactions.
“Half of the room would have stabbed me if they had a knife,” he says. “The other half, I could see them nodding in agreement, and you could see it in their eyes, ‘He’s right.’”
One of the first things he did was let two vice presidents go. A few months later, he worked with the vice president of human resources and the vice president of patient care services to create a leadership training institute.
“You give everybody every opportunity to develop the skills and be successful, and it’s up to them to seize the opportunity or not,” Bass says.
The purpose of the institute was to teach his managers the skills they needed to be successful. There were about 12 different learning modules that were offered covering the basics that he wanted to see in his managers.
“We basically walked through what we thought were some of the key tools that any manager needed to be successful, whether it be counseling or hiring, coaching skills, anger management, conflict management, professional presence,” he says.
The institute required mandatory attendance by all department directors and above, and that’s when the positive changes started to occur.
“Some embraced it and everything about it, and some thought it was a waste of their time,” he says. “Those are the ones that are most likely no longer with us.”
The next step in determining who to replace was to hold people accountable. Each fiscal year, goals are set by department, and those include everything from financial to patient and employee satisfaction to personal development. At the end of the year, if scores aren’t where they need to be, then that’s an indicator that the manager needs to be replaced.
Bass looked for A-plus people to bring onto his team as replacements.
“The A part is technical competence,” he says. “The plus is that intangible that truly differentiates an incredible leader and an excellent manager.”
Bass stays away from asking about technical qualifications and instead digs into what cranks them up on a Monday morning and how do they feel successful. His goal is to sort the canned answers from the real ones.
For example, when he was looking for a replacement for that disengaged CFO, he interviewed many candidates who had all the right credentials and were highly competent, but none of them seemed to have the plus.
But then one woman came in. She talked about not only what she could bring to the table but also what she believed her role in an organization was, what her role on an executive team was and what her role as a CFO was and how she would depend on other team members for her to be successful.
She was easy to speak with and had a comfortable confidence — not cockiness — about her. When she left, they looked around at each other and said, “That’s the plus.”
“The individual who is comfortable is relaxed,” Bass says. “They pause, they think about their response. They’re inquisitive but yet they are knowledgeable.”
He says that person will seek to understand the culture of the organization he or she is coming into instead of just learning what the organization can do for them.
“The cocky person is usually the person who you can’t get a word in edgewise,” he says. “They just want to go on and on and on.”
Another key that Bass says was crucial was the willingness to be patient. With that CFO, she was honest and said that if she were offered the position, she would need to give 90 days’ notice to her current employer. The hospital was losing money like crazy, so this was a tough decision. Bass and his team looked at each other and asked if they could afford to go another three months — for a total of nine months — without a chief financial officer.
“The answer was yes,” Bass says. “We could pick an A player, because there were plenty of them and hope for the best, or we could pick this A-plus player and wait the time out and have her come on board and know that she was the person, and that’s what happened. Sometimes you have to wait until you find that plus. Sometimes it takes a little longer.”
Another thing Bass did early on to lead the turnaround was start trying to build trust with employees.
One aspect of this was setting expectations and following through on them. For example, he created a program built around having respect for each other, what each person brings to the team and how that translates into patient care. It was a mandatory, six-week training period; however, about 30 employees chose not to complete the program. At an executive team meeting, someone raised the question of what happens to the 30 who didn’t go through the program. Bass asked what they had been told would happen, and the executive responded that they were told their employment would be terminated.
“I said, ‘OK, then terminate their employment,’” Bass says.
Outcry ensued. Employees yelled that they didn’t know that mandatory really meant mandatory and that it wasn’t fair to them.
“It was setting expectations,” he says. “When you walk into any organization, not just hospitals, that isn’t functioning well and is in crisis and so forth, it’s true that a lot of the turning it around is setting clear expectations and staying the course.”
Following the terminations, the employees who remained felt hopeful and liked that there were actually consequences for those that hadn’t spent the time to take the classes.
“How do you build trust? There are several ways. No. 1, you say what you’re going to do, and then you do it so that employees know that if I say that this is what we’re going to do or this is what’s going to happen, then I’ve got to make sure that that’s exactly what we do and we don’t deviate from that. Trust is being open and telling it like it is.”
One of the other challenges Bass faced in building trust was whether or not to spend money. By early 2007, it had become part of the Piedmont Health system, so there was a lot of excitement about that, and as part of it, they would build a new hospital. But with a new hospital on the horizon, questions started to arise.
“Even though we knew we would eventually have a new hospital, there was a feeling that because of that, we shouldn’t be doing anything here to fix it up, catch up or anything because, after all, why waste money if we’ll have a new facility,” Bass says. “My approach was, ‘No, that’s not right.’ We’re going to be here for X number of years; therefore, we have to look like a hospital we want to be.”
He started spending money — and not just $10,000 here or $10,000 there. He revamped the cafeteria and dining area so they had a nice place to take a 30-minute break. He completely overhauled the women’s and children’s services areas. He renovated the emergency department and every nursing floor, and he made the locker rooms nicer as well.
“We pumped money — hundreds and hundreds of thousands of dollars — into it, knowing we’re going to walk away from it, but if employees don’t feel proud of where they work, then, quite frankly, that’s reflected in behaviors and attitudes, and it affects patient satisfaction,” he says. “It’s like a spider web. You can touch one part of the spider web, and the whole thing will vibrate, and that’s how those things work.”
And employees took note. They were gaining trust in this leader who actually cared about them and their work environment. As their attitudes shifted, the hospital was becoming one where they were happy to say they worked.
“It’s the little things,” he says. “It’s taking 50 little things that by themselves don’t do anything, but you put them all together, and that’s how you make changes occur. It’s constantly focusing and reacting. If you hear something that’s a major morale issue, focus on it and then communicate it — ‘This is what we hear, this is what we did, this is where we are now as result of that; thank you for your input.’”
As improvements were made, Bass gained more trust and employee satisfaction scores continued to rise. And as employees saw changes occurring, they came forward with more suggestions and concerns.
“If you ask someone their opinion and you never follow it or you never use it, then why in the world would they ever want to give it again?” Bass says. “But if you ask people their opinion and say, ‘To every extent possible, we’d like to take your ideas and make things better, and they see that we actually take ideas and implement it and use it to create a better work environment, it’s synergistic and it just grows.”
His decision to spend money turned out to be more necessary than he could have realized. Little did he know that just two months after they broke ground on the new hospital, construction came to a halt for 14 months because of the economy. It created anxiety in the employees of whether the new hospital would actually come to fruition, but in the meantime, they at least had a better place to work because of the improvements he had made, so all hope was not lost.
And today, things are quite different at Piedmont Newnan. Construction has restarted on the new hospital, so excitement is again brewing. Bass says morale is very high among his 1,000 employees — with the most recent survey yielding the highest participation of any of the Piedmont hospitals.
“Our employee satisfaction score has gone up by leaps and bounds,” he says. “It’s exciting around here. … There’s a bounce in everyone’s step right now.”
On top of that, in the last fiscal year, the hospital had a positive operating margin for the first time in a long time. Because of that, employees received success-sharing bonuses for the first time in their history, which was another reiteration of Bass doing what he said and gaining their trust.
“What was interesting was that we told them that these are the marks we have to hit, and if it happens, this is what will happen,” Bass says. “By God, it happened, and employees said, ‘We heard you, and we were hoping, but it really did happen — we really did get the bonus.”
How to reach: Piedmont Newnan Hospital, (770) 253-1912 or www.piedmontnewnan.org
The Bass file
Born: San Diego
What’s the best place you have ever lived?
The best place I’ve ever lived is where I currently live. I was a Navy brat, so we moved. I remember as a youngster we’d be complaining, and my dad would say, ‘The next place you live will be the best place you’ve ever lived. The next friends you make will be the best friends you’ve ever had.’ Isn’t it interesting that that’s the way it always turned out?
Education: Bachelor’s degree in business administration; North Carolina Wesleyan; master’s in business, Campbell University
As a child, what did you want to be when you grew up?
A chemical engineer. The sad part of my life’s story is I graduated from high school in Virginia and was accepted at NC State University as a chemical engineer, but in five semesters as a chemical engineer, I realized it wasn’t what I wanted to be. I dropped out of college and got a job working for the state of North Carolina at a lab and shortly thereafter was drafted by Uncle Sam for the United States Army in 1969.
I had six years in the U.S. Army, which introduced me to health care. Back then, at age 20, when I got drafted, I was 6 feet 2 inches and weighed 128 pounds. I must have had an overactive thyroid because I ate nonstop anytime I was awake. After three days in Fort Bragg, N.C., I decided I wanted to have more say about, No. 1, more food that I would eat and, No. 2, how dangerous my job would be, knowing that Vietnam was going on full blast at that time.
So I went to a recruiter and I said, ‘I understand if I enlist for a third year — so I become an enlistee versus a draftee — I can choose what I want to be.’ He said, ‘Yes, sir, that’s how it works.’ I said, ‘I’ve been told I need to find something that’s in a hospital because they’ll have the best and the most food and should be one of the safest places.’ They pushed the list across the desk of MOS’s — mode of service, which is your job description — and I ran my finger down the list to the first one that had medical in it — medical equipment repairmen. He said, ‘We’ll send you to school in Denver, and we’ll teach you how to repair medical equipment.’ I said, ‘I’ll be working in the hospital?’ He said, ‘Yep,’ and I said, ‘I’ll take it.’ Thus launched my health care career.
What’s the best advice you’ve ever received?
I don’t know if there’s a specific one, but I’m the eternal optimist, always have been, so somewhere along the lines, someone must have told me to maximize the positives and minimize the negatives.
Oct. 27, 2009, wasn’t the happiest of days for Darron Anderson.
It was the day his company, Express Energy Services, filed for Chapter 11 bankruptcy protection.
But for Anderson and the employees at Express Energy, it was far from the demise of the company; it was a rebirth of sorts. In just nine weeks, the company emerged from the reorganization prepared to do better than before.
“Emerging out of Chapter 11 on Jan. 1, 2010, I would say by the end of Q1, the Chapter 11 process was pretty far in our rearview mirror,” says Anderson, CEO of the $300 million oilfield services company. “I always tell people I have the greatest job in the world. Since taking over as CEO in the end of 2008 in a very, very depressed market and leading a company into a Chapter 11 process and successfully leading a company out of that process and now watching the company grow and flourish. It has been such a wonderful environment.”
A bankruptcy doesn’t create what most people would consider a wonderful work environment, but Anderson and his 1,475 employees survived the process and have gone on to good results.
Here’s what he learned along the way.
Communicate key messages
From 2004 to 2008, the energy, oil and gas industry enjoyed a stretch of very profitable years. In that same year, Express Energy Services was in the process of being acquired by an outside capital group. When the transaction took place, any additional debt was leveraged to complete the deal. That process, combined with the condition of the industry, is what put the company in Chapter 11.
“The business couldn’t support the new balance sheet and the industry had fallen off so drastically, there wasn’t going to be any help from the marketplace,” Anderson says. “It was pretty clear early on, even with the new owners, that Chapter 11 was the process that needed to be taken for the benefit of the organization and the people of the organization.
“From an internal standpoint … I think one of the best things we did was hiring a public relations firm that helped us craft messaging not only from an external standpoint but an internal message.”
While the natural inclination when times are bad may be to withhold information from employees, Anderson didn’t do that.
“We took the exact opposite approach,” he says. “We kept our employees up to speed from day one. We did that with phone communication, conference calls and site visits to let the employees know we were going through Chapter 11. We had to let them know what that meant to them personally, what it meant for their jobs and giving them the security that it was going to be business as usual. That ultimate communication we had with our employee base was one of the things that led for a successful emergence from Chapter 11, because our internal team was involved in the process and really supported the organization. That external communication and … internal communication were the keys for the success.”
When facing a problem as challenging as a reorganization, there will be a number of things calling for your attention. You need to figure out which ones should be dealt with first to give the company the best chance to succeed. For Anderson, one of his top priorities was to develop more of a team atmosphere.
“Express was a very entrepreneurial company,” Anderson says. “With an entrepreneurial company, you have a lot of individual initiative, individual attitudes, and one of the biggest issues was that Express should be about the company, not about the individuals.
“As an organization we had responsibilities to our employees, our vendors, our shareholders and to the public,” says Anderson. “As a result, there were a significant number of changes that occurred early on in the process. Some were painful changes, but we had to say, ‘Although we’re making short-term sacrifices, we know that they will set up the organization for the long run, and we are going to have a solid team that is 100 percent supportive of our organization and materializing our five-year strategic plan.’”
It is critical that executives of companies facing these types of issues communicate each step of the process to create a smoother transition.
“You have to talk to your people,” Anderson says. “You can’t accomplish everything overnight. That is something I personally struggled with, because I’m very driven, very competitive, and there are things that you want to change, things that you want to put in place and things that you know can bring great benefit to your organization. You have to listen to your team around you and as a group decide what are the priorities and remember whatever your horizon is, it’s not all going to be done overnight.
“You cannot overwhelm the organization. You cannot create too much change too fast. What you can do is listen to your organization, listen to your team members and turnaround and act upon what they have said and make sure it’s clearly visible that you have reacted and get their feedback to your reaction. What happens is, the organization realizes that they have a voice and that management is listening to them and management took action and they see a positive behavior. What it breeds is the next initiative or the next decision is that much easier and accepted and before you know it, it becomes an environment, it’s a culture. It’s a culture of getting feedback. It’s a culture of taking that feedback and making the best decision and putting things in action and seeing the success of that.”
Create a plan
Getting the right feedback is critical during a turnaround but making the right decisions and having a plan for action is even more important.
“We sat down as an executive leadership team, and the first thing we did was went out to our operation-level managers who have the most day-to-day interaction with most of our employee base,” Anderson says. “We asked them specific questions regarding what we do well as a company. What we can improve upon as a company? What are the issues you deal with on a day-to-day basis with your employees? What are the things your employees are coming to you with? We did a very detailed survey process, and we took in information and then spent the better part of a week just combing that information and really seeing what our organization had to say about our current condition.
“Then we looked back and said, ‘If this is where we are today as perceived by our organization, where do we want to be in five years?’ That really started to develop the strategy of our five-year plan. We took where we were and asked ourselves, ‘What do we all think the ideal Express looks like in five years?’”
From that process, Anderson and his team developed several key areas of focus, including financial performance, employee retention, safety performance, customers and how customers view the company.
“We asked ourselves, ‘What must we get done in the next 12 months? What must we get done in the next two to three years, and what do we need to get done within five years?’ That is so far from where this organization was two years ago — that was very short-term focused that the only metric was a financial metric. Now we have so many other metrics and we know that if we perform well in all these key elements of the business, the financial performance is going to be there.”
Unify the team
It is critical for companies that are going through change or restructuring to not send different messages to different areas of the business.
“If you’re going to have any change, you have to be unified,” Anderson says. “We spend a lot of time discussing, analyzing and critiquing different issues. We don’t always get immediate buy-in at the first meeting or even the second meeting. After everything has been discussed, it is very important that the leaders of your organization are delivering the same message, because you don’t want your employee base to get confused. You don’t want your employee base to think that they are expected to perform a certain way here, but if they go over there, they are expected to perform a different way. In doing that and delivering a common message and getting all of your employees bought in to it, now you can take out the message to your customer base.”
A turnaround creates a lot of change within a company, and it is imperative that employees are willing to follow new plans in order for a turnaround to be successful. There is no room for resistance.
“It’s very important to give the naysayers an opportunity to get on board and give them a full chance to make sure that they understand the message and direction,” Anderson says. “When you go through things like this and people just haven’t done it before, there’s always a lot of fear, and fear is going to bring on some level of resistance. You have to be patient with individuals and make sure that they have all the knowledge and the correct knowledge. A lot of times, the information they have been told or possibly heard is incorrect. It’s important that they understand what the facts are and what the truth is.”
But once you’ve gone through the education process and they have all the facts and have had an opportunity to ask any questions and are still choosing not to get on board, at that point, you have to make a decision.
“At that point in time you have to ask yourself, ‘Is it better for this person to remain in the organization with potential negativity or with hesitation?’ I would bet most CEOs would say that’s something that they cannot have is a person not fully supportive of the organization. Whatever short-term pain that may create, it’s better for the long term and it definitely pays off.”
Anderson and his team looked for new employees who had experience with companies that were doing the things Express wanted to strive to do following their turnaround. “Entrepreneurial companies tend to have a level of drive, a level of can-do attitude,” Anderson says. “We had to balance that with individuals who came up in larger organizations, more professionally managed organizations and system processing organizations. That was an element we were missing. We rounded out a management team that has different experiences from different types of companies because we want to keep that element of an entrepreneurial attitude but marry it with a more professionally managed company and that has been refreshing and provided success for us.
“Part of the integrating process is that you cannot be afraid to communicate what you think some of the opportunities for improvement are within the organization. It is very difficult to say, ‘We just came out of a Chapter 11, and we are the best company out there, don’t worry about that.’ You have to communicate to [new employees] what you think the issues were that led up to it, what improvement steps you’ve taken and what you could expect they could provide to help the organization meet its long-term goals. You have to tell them that there is going to be change in the company, and we’re bringing you in to help with that change. “
Make sure the individual agrees with your vision and understands that flexibility is key.
“We know where we want to get to, but in getting there, there may be different paths,” Anderson says. “As we bring on people, we want them to come on with their experiences and values that they’ve had previously. You have to have that strategy as a CEO and be able to lay out to a new prospective candidate and be willing to admit that the organization is not 100 percent perfect and be willing to admit that we want and we need your help. Be willing to admit that it’s going to be challenging because it’s change.”
HOW TO REACH: Express Energy Services, (713) 625-7400 or www.eeslp.com
The Anderson File
Darron Anderson, CEO, Express Energy Services
Born: Corpus Christi, Texas
Education: Graduated from the University of Texas with a degree in petroleum engineering. He worked for Chevron right out of college and also started his own business in 1998. Through those experiences and the people he met and learned from, he says that’s how he earned his “homemade” MBA.
What was your first job and what did you learn from it?
My very first job was mowing lawns in my neighborhood at the age of 13. That really taught me the satisfaction and joy of being an entrepreneur. It also taught me to have a good work ethic.
What is the best piece of business advice that you have received?
What doesn’t get measured doesn’t get managed. I’ve taken that adage and used it tangibly to make sure we measure things that we want managed but not just making sure we measure them but making sure we communicate them.
Who do you look up to or respect most in business?
Jim Woods, the former chairman and CEO of Baker Hughes. Mr. Woods was on the board of directors of the first company that I sold, and he has been a great mentor. You look at a company of the caliber and size that he ran and to be able to have him give you advice about how he looked at things was totally invaluable. He is the person I’ve learned the most from and have the highest respect for.”
If you could do something dangerous one time with no risk at all, what would it be and why?
I am not a racecar fan, but I would want to try driving a racecar in an actual race. It requires split-second decisions, you’re moving extremely fast, there’s a side of gut feeling, an amount of technical know-how and that would be an amazing experience.
In December 2008, William Toler arrived at Pierre Foods Inc. as its new CEO. A food industry veteran, Toler was hired to help the company get through the immediate crisis of facing Chapter 11 bankruptcy protection and then finding ways to make the company stronger moving forward.
“I was first attracted to the opportunity, because Pierre was a supplier to my last company and I knew that the products the company made were excellent and the team here was, largely, very good,” Toler says. “Obviously, there were some things that had caused them to go into bankruptcy, but they were pretty fixable.”
In a twist of fate, the four members of the new leadership team all ended up living in the same hotel when they moved to the Cincinnati area.
“The four of us were relocated here at the same time and we ended up living at the same hotel for a year,” Toler says. “So we found ourselves working out together in the mornings, working all day together then going to dinner and talking about the business from 6 a.m. to 11 p.m. four or five days a week. It really helped to create core camaraderie among the senior team that still exists today. So the fact that we were all relocating here at the same time and ended up living in the same hotel really gave kind of a dawn-to-dusk platform to discuss the business and get to know each other at the same time.”
And with the company facing several challenges, the extra time was a plus.
Pierre Foods’ struggles, while difficult, were not too severe that the company would never recover, and Toler knew that when he took over as CEO.
“You have to make sure you know that you have a good company under the problem,” Toler says. “Is the company the problem, or is the problem the balance sheet? In this case the problem was the balance sheet. It was a fundamentally good business inside of the problem, and a lot of times, it’s not. Make sure you’re doing the due diligence and the assessment upfront to make sure you’re going into a business that can be fixed. Does it have the fundamentals to be fixed? Is it a business that’s cyclical with the economy? Is it one that has a real competitive advantage that can be leveraged? Or is it a business that’s just a problem? In the case of Pierre, it was a strong business that had some unfortunate things happen to it all at once. I knew that we could get in here and fix it because it was a fundamentally good business underneath.
“The kind of business that you’d want to avoid is one that has parts undifferentiated or where you are in a commodity business where one product can be replaced easily for another that customers don’t value. That would be a problem or scenario that you’d be hard-pressed to go in and fix.”
Unprecedented inflation in the food industry in 2008 left Pierre without the systems, analytics or tools to understand how that inflation affected its products.
Toler’s first priority was to fix the obvious problems.
“They didn’t really know what the profitability of their various items or the profitability of their various business segments were,” Toler says. “They were unable to properly price the business to make sure they stayed up with inflation as that hit in 2008.”
Oftentimes when a new CEO takes over a company, the amount of data needed to successfully right the ship or move in a new direction is unavailable.
“We had quite a bit of limitations on data here,” Toler says. “We didn’t understand our profitability by item. We brought in an outside firm who developed a profitability tool and model for us that we still use today that essentially allowed us to understand the profitability by item. We also didn’t have all the plants on one ERP, so we moved all the plants to one ERP and got common visibility and common information across all the items. That allowed us to understand where we made money and where we didn’t and be able to take appropriate pricing and be able to work constructively to make sure that we knew what businesses to stay in and what businesses to get out of.”
Data is usually available; it just usually isn’t pulled out of the system in an effective way that leaders can use. Companies with data issues need to mine the data and then get a plan in motion to fix the problems they find.
Besides a lack of data, productivity was also an issue.
“The other thing we identified when we first got here was the idea that their plants were very good plants, but they hadn’t been stretched to [maximize] productivity,” Toler says. “We immediately began focusing on improving the productivity of the plants in terms of how they operated and the number of people per line and the efficiencies of the plants and the waste in the plants and all the things that can cost money to businesses. Really, it was about getting visibility on pricing and also driving productivity. Those were the two things we focused on when we first got here.”
Pierre had also made two acquisitions that they were struggling to integrate. That challenge, along with the condition of the industry and the economy, served to be too much for the company to handle all at once. Faced with the challenges of lack of visibility in data, lack of integration of acquisitions, and lack of pricing, Toler had to prioritize each task in order to get Pierre back on its feet.
“It was all about knowing where you made money and where you didn’t,” Toler says. “Once you have those things in place, you are able to act pretty decisively. You prioritize in the places were there is the greatest payback. Where can you get the most return for your efforts? Is it understanding the data, is it in moving the ERP’s together, is it in pricing the business or in driving productivity? You look where you get the greatest payback and you put your efforts into that.”
Communicate your plan
Once you have determined where your problems areas are and what needs to be done to fix them, you have to communicate to all your employees why those changes are being implemented.
“The most important thing is to communicate [your plan] internally so you make sure people understand what you’re doing and why,” Toler says. “We did everything from e-mail communications to town-hall meetings to plant floor meetings to conference calls and various other forms of communications. It wasn’t easy, but it was straightforward. It was something we knew we needed to do and something we had to get at right away. The one thing that happens in challenging situations is that people often don’t communicate enough, and we tried to be very upfront with folks and let them know where we stood.”
The planning process is a calculated, communicative process that requires collaboration with everyone on your team. There is no substitute for communication during planning.
“I think the thing we tried to do was talk to the people that were closest to the business,” Toler says. “You have to talk to people working the lines, the front-line salespeople, talk to the marketing team and understand what they thought were the issues in the business. One of the things I’ve always found is that when you have a problem in a business, you go to the problem. You try and find out how we can help. You put people out in the plants, you put people out in the field and you talk to the team and ask them what things they think need to get changed and what things could get better.
“Assess what you’re good at. Assess where your competitive advantages are and assess where your weaknesses are and then leverage your strengths and try and either strengthen your weaknesses or get out of them. Stop trying to do things that you can’t do and focus on the things you can do really well.”
This strategy also paid off for integrating acquired companies, including two recent ones made last fall.
“When most companies go in and do these type of deals they just take the home-teams approach and wipeout the other guys,” Toler says. “The most important thing to do is to listen and to defer judgment when you’re getting opinion from folks that are new to you. You shouldn’t automatically assume that your approach is the best approach, but you should listen and be open to each others’ ideas. That’s been what we have all tried to do. We believe you can find a better approach by listening to each others’ best practices versus just saying, ‘Because I’m doing it a certain way, that’s the best way.’ It takes a little longer and sometimes it’s harder, but generally you end up with a better outcome if you have the patience and willingness to do it.”
Toler’s solutions led to the company’s best performance in 63 years.
“Coming out of the bankruptcy, the strength of the first year results has enabled us to more than double the size of the company,” Toler says.
Pierre’s merged last September with Advance Foods Company Inc. and Advance Brands LLC, creating Advance Pierre Foods, double the size of the pre-merger organization.
Today, the company has $1.3 billion in sales and more than 4,000 employees, making it the largest privately held company in the tri-state area.
“Fixing the bottom line by productivity and pricing, staying focused on our core products and understanding how to merge two businesses together with us that strengthen us in our product lines and also strengthen us in our core channels have made us successful,” Toler says.
HOW TO REACH: Advance Pierre Foods, (800) 969-2747 or www.advancepierrefoods.com
The Toler File
William Toler, CEO, Advance Pierre Foods
Born: Raleigh, N.C.
Education: Graduated from North Carolina State University with a double major in business management and economics
Previous work experience: Procter & Gamble, Nabisco, Campbell’s, Pinnacle Foods
What was your first job, and what did you learn from that experience?
My very first job was as a swim coach and from that I learned that leadership matters. Trying to lead to inspire others is an important approach in business and in life.
What is the toughest challenge you’ve had to face in business?
The hardest thing is letting go of bad business. Getting out of bad businesses or getting rid of customers that you don’t make money on. That’s always the hardest thing, because people love revenue and sometimes they confuse revenue with good business. Getting out of business is hard and saying no to new ideas is hard. The trick is to not do the things that can distract the business.
What is your favorite thing about working at Advance Pierre?
It’s the quality of the people I get to work with. The way we feed off of each other and the things we do to challenge each other makes it fun every day.
What is your favorite Advance Pierre product?
My favorite product is our Graham Snackers, which are two graham crackers with peanut butter and jelly in between. They’re really good.