Dealing with paradoxes
One of the difficult challenges for leaders is paradox — the fine balance between being:
- humble and strong.
- decisive and willing to listen to the ideas of others.
- confident and vulnerable.
- tough and compassionate.
- detached and sensitive.
A healthy paradox to start the new year is facing the future with both hope and realism. In his best-selling book, “Good to Great,” Jim Collins addressed the process that kept the Vietnam POWs going year after year, and he named it after his friend and one of our senior leaders, Vice Adm. James Bond Stockdale. Collins insightfully categorized the importance of this dynamic tension as the “Stockdale Paradox:”
“You must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
So as you look forward to 2014, are you naturally optimistic and seeing the positive potential of what can happen this year?
If so, then you may need to sit down with some friends and teammates who are more realistic to help you confront the brutal realities of your situations. If you do not have them, you need a strategy and a plan in place to address the tough days ahead.
Find the half-full glass
On the other hand, if all you can see is barbed wire and hard times ahead, then you probably need to begin the new year with a time of thanksgiving to count your blessings and recalibrate your attitude.
Determine where you can get a foothold of hope and optimism to inspire yourself and others. Optimism generates positive emotions related to faith, belief, conviction and confidence, and it’s from these emotions that we gain the inspiration to persist when things look bleak and hold on until we can ultimately prevail.
Yes, diligence and dedication are important, but never forget that inspiration is the source of power. Stockdale was right — “faith that we would prevail” is the essential principle of successful business leadership. It enabled us to resist and survive as POWs and return with honor.
This same thinking enables poor men to become rich, sick people to become well, last place teams to become first and each of us to reach our potential as human beings and business leaders. It’s more than positive feelings — it’s the choice of belief.
Most New Year’s resolutions never last as long as 90 days, but given the impact your attitude and behaviors can have on the year 2014, why not commit to lead with honor by following the Stockdale Paradox? Deal with the brutal realities of your situation, and choose a positive belief of great hope and expectations that you will prevail.
When the hard times come, it’s the leader’s attitude that lifts others to victory. The POW leaders shined the light through dark times, and that’s a lesson for all times.
As president of Leadership Freedom® LLC, a leadership and team development consulting company, Lee Ellis consults with Fortune 500 senior executives in the areas of hiring, teambuilding, leadership and human performance development, and succession planning. His latest book about his Vietnam prisoner of war experience is entitled “Leading with Honor: Leadership Lessons from the Hanoi Hilton.” For more information, visit www.leadingwithhonor.com. He lives in the Atlanta area.
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Repackaged for success / David Scheible boosts Graphic Packaging International by reducing debt and narrowing its focusWritten by Leslie Stevens-Huffman
Less than two years after David Scheible assumed the helm of Graphic Packaging, things had taken a turn for the worse. Its stock price had fallen to $1 per share and the distinguished New York Stock Exchange was threatening to delist the company as shareholders bailed and the economy soured in 2008.
“Because we had grown primarily through acquisitions, we were 6.8 times levered which means we were functionally bankrupt,” says Scheible, president and CEO. “We needed to generate cash in order to pay down debt and become a legitimate public company.”
A survey of Graphic Packaging’s employees revealed that the provider of paperboard and flexible packaging for such notable clients as McDonald’s, General Mills and Coors was slow to make decisions and that its divisionally-focused management team was disengaged from the company’s broader goals.
The candid feedback inspired Scheible to set a new course. Under his leadership, the $4.3 billion industry giant has strategically realigned itself. He’s reduced debt by $1.3 billion and strengthened Graphic Packaging’s market share by tethering its operations to the consumer products industry. His efforts have boosted the company’s share price to just more than $8 and produced 11 percent year-over-year earnings growth for the most recent quarter.
Here’s an in-depth look at Scheible’s efforts to repackage Graphic Packaging.
Turn up the volume on accountability
It seems that decision making wasn’t Graphic Packaging’s only shortcoming.
“Our employees said our managers were good at storytelling but not good at holding people accountable or creating a culture of accountability,” Scheible says. “There was no doubt in my mind that we needed a cultural revolution to get to the next level.”
Scheible turned up the volume on accountability by replacing 80 percent of his leadership team. While he acknowledges that jettisoning incumbent managers is never an easy decision, he maintains that it’s more expedient to start over than to try to change the attitudes of veterans who saw no reason to change and preferred the status quo.
“It was a gut-level decision but I thought we needed an upgrade,” he says. “We needed results-oriented leaders who possess the ability to interpret data and make speedy decisions. People who realize the difference between achieving a good result and telling a good story.”
It turns out that Graphic Packaging had other lagging issues that were impeding decision-making and accountability, as its history of acquisitions had left the company was disparate IT systems, goals and reward programs.
“Each division was tracking cash, inventory and various operational metrics,” Scheible says. “Which made it difficult to conduct comparisons and identify the underperforming units. It turned out that some divisions were doing well while others were not.”
So Scheible eliminated Graphic Packaging’s divisional fiefdoms by introducing a company-wide set of operational KPIs and replacing patchwork software programs with what he calls a plain vanilla version of SAP. Finally, he created a uniform compensation plan linking managerial pay and bonuses to the company’s overall performance.
“The good news was that our employees liked working here and said they would recommend our company to a colleague, so our survey proved that we were doing some things right,” Scheible says. “I wanted to make sure that we had the leaders and resources to build on what we were doing well while eliminating the bad.”
Narrow your focus
Downsizing or eliminating vertical markets is always risky, especially for CEOs of public companies whose moves are scrutinized by shareholders. However, Scheible was convinced that Graphic Packaging’s array of sub-sized businesses was hindering the company’s potential.
As one can imagine, making a package for a pharmaceutical product requires different materials and equipment than making a carton to hold six bottles of beer. Graphic Packaging’s limited presence in pharmaceuticals and cosmetics made it difficult to maximize the company’s investment in manufacturing equipment. Moreover, the company needed a plethora of manufacturing plants to support its diverse customer base.
“It’s not that the business was bad or unprofitable,” Scheible says. “But we couldn’t leverage our assets because we lacked critical mass in some segments.”
“Since we were better at some things than others, I thought we’d be better off by doubling down on the business we knew and focusing on industries that offered the most stable growth for the foreseeable future,” he says.
So Scheible scaled back the company’s position in pharmaceuticals and cosmetics and sold the plastics division before tethering its operations to consumer products, with a strong focus on the packaging needs of the food and beverage industries.
He based his decision on the projected growth and stability of the consumer products industry and its ability to generate a steady cash flow. Scheible also felt that consumer products offered enough diversity to mitigate the risk of putting the company’s eggs into a single basket. So far, his hunch seems to be right.
Despite, the overall slowing of net sales growth rates in 2012 food, beverage and household products companies experienced positive net sales growth of 7.0 percent, 5.5 percent and 3.2 percent respectively, according to the 2013 Financial Performance Report by the Grocery Manufacturers Association and PwC US.
In addition, his move has helped Graphic Packaging eliminate excess capacity in its plants resulting in closing 21manufacturing facilities since 2008. While his downsizing strategies weren’t always popular with employees, shareholders have benefited from Scheible’s efforts to reduce operating expenses as Graphic Packaging’s operating profits soared from $219 million in 2010 to $322 million in 2012.
“Sometimes you have to make tough decisions,” Scheible says. “While closing a plant impacted some people, our consolidation efforts ultimately benefited the people who are with us today. We’ve boosted employment at our remaining plants and now employ 15,000 people.”
After reducing debt and narrowing the company’s focus, Scheible consummated five strategic acquisitions and a merger as part of a deliberate effort to increase GPI’s market share, global footprint and capabilities in the consumer products industry.
Some purchases fostered European expansion while others, like the 2011 acquisition of Sierra Pacific, provided Graphic Packaging with a strategic location to service customers on the West Coast while upping its ante in the fast-growing craft beer and litho-printed laminated wine box markets.
“We’re far and away the leading producer of folding cartons for beer, but our recent moves have further propelled us into the rapidly growing craft beer segment,” Scheible says.
“Our improved financial performance afforded us the opportunity to stretch on the acquisition front and we’re taking advantage of it,” he says. “We’re focused on opportunities in under-served markets like China and Japan that provide us with a first mover advantage,” he says.
In some cases, Graphic Packaging’s first mover advantage comes from its commitment to sustainability and its ability to create more efficient packaging out of recycled materials, especially in emerging countries.
“The fact that we don’t have to dig up dinosaurs to make a package gives us a competitive advantage and makes us more efficient at the same time,” he says. “For instance, in the U.S. we’ve replaced the plastic clamshells at Panera Bread with a smaller, paper product. And that kind of innovation gives us a leg up on many local or regional competitors.”
Scheible has gone to great lengths to ensure the thorough and seamless assimilation of the Graphic Packaging’s recent acquisitions by refining his assimilation plan and adopting the principals described by authors Mark Feldman and Michael Spratt in “Five Frogs on a Log: A CEO's Field Guide to Accelerating the Transition in Mergers, Acquisitions and Gut Wrenching Change.”
“We’ve created an office of integration that reports to me,” Scheible says. “It’s staffed with 12 full-time employees who have backgrounds in legal, HR, finance, IT and operations. They can spring into action at a moment’s notice.”
The expense of maintaining a dedicated team is more than offset by the identification of synergistic reductions in overhead following an acquisition. For instance, analysts project that Graphic Packaging will realize more than $70 million in cost savings this year as the company integrates its recent acquisitions.
“I’ve learned a few things about assimilation from my successes and failures,” Scheible says. “First, don’t acquire a company unless it supports your core business and second, always retain the best person when you’re deciding between an incumbent and a newly acquired manager.”
How to reach: Graphic Packaging International (770) 240-7200 or www.graphicpkg.com
Create a culture of accountability.
Improve your financial performance by narrowing your focus.
Acquire market share through acquisitions.
The Scheible File
Name: David Scheible
Title: Chairman, Cresident and CEO
Company: Graphic Packaging International, Inc. is a wholly owned subsidiary of Graphic Packaging Holding Company headquartered in Sandy Springs, Ga.
Birthplace: Evansville, Ind.
Education: He has a bachelor’s degree in biochemistry and a master of science degree in industrial administration with a concentration in finance from Purdue University.
What was your first job?
Given my background in chemistry, I went to work for B.F. Goodrich right out of college where I sold chloride and rubber treatment chemicals in Latin America. My role prepared me for my future career by teaching me how to interface with customers, how to prioritize their needs, how to navigate the international marketplace and best of all, how to speak Spanish.
What’s the best advice you’ve ever received?
My boss at Avery Denison taught me that speed beats perfection every time when it comes to decision-making. You’ll never have all the data you need so make the best decision you can, adjust quickly and keep the organization moving forward.
Who do you admire most in business and why?
I admire Steve Jobs for his clear vision and unwavering desire to change people’s lives and Warren Buffet for the way he executes his strategy. He doesn’t fall in love with an industry or product; he falls in love with a management team and its ability to carry out its vision and strategy.
What’s your definition of business success?
What I would tell you is that success is a journey. It’s about setting goals, achieving them, being accountable and making corrections when you don’t. Then doing it over and over again.
What’s your biggest obstacle to future growth?
Our aging workforce and a lack of interest in manufacturing careers by Gen Y’ers is a challenge that we’ve identified and are trying to overcome. We’ve defined the career path for our employees and created a rotational training program to help us engage Millennials. Some of our local plants are conducting sophisticated training programs as part of a conscientious effort to develop a qualified workforce. We’re not sexy like Yahoo! but there are some good reasons why young people should consider a career in manufacturing.
Shane Pike: No office. No problem. / Clear goals and ongoing communication keys to building successful remote officesWritten by Shane Pike
Technology and the rising number of millennials entering the workforce are two factors making it easier and more acceptable for organizations to offer part-time or full-time telecommuting options to their employees. In fact, according to a recent Cisco survey, 70 percent of college students and young professionals believe that it is no longer necessary to head into a traditional office to work anymore.
While the times are indeed changing and most workplaces barely resemble the “Mad Men” office of yesteryear, companies, regardless of size still need to take certain steps to ensure their virtual office workers are productive and connected to their manager and co-workers in a collaborative manner.
Know thyself. Know thy employee.
Although we’re all super connected via tablets and smartphones, we’re not all equipped to work remotely. Moreover, many employees who might work well in a remote environment simply may crave the day-to-day interaction of working in a “traditional” office environment. With this as a backdrop, it is critical for employers to find out if their future remote worker will thrive from the virtual office.
I offered a job to a perfectly qualified candidate who turned it down because she was self-aware enough to know she wanted and needed the structure that an office provided. Until that point, it hadn’t occurred to me that a good, qualified candidate doesn’t always translate into a successful and happy remote employee. Culture is critical and the extent to which employees will work remotely is a big part of your company’s culture. Ensure that the fit is right by asking specific questions about their working style and desires.
Tried and true technology
Workplace communication is essential whether employees are working in their offices or from their homes. However, when technology hinders this communication in a remote environment, it heightens employee frustration and lessens productivity.
To that end, you’ll have to do your due diligence in researching the technologies that work best for you and your employees. Unified communications systems are gaining in popularity and making it easier for employees to work remotely. For us, a VoIP solution provides us with the telecommunications services we need to communicate as easily as if we were in the same office.
We also use Google Apps for Business. This has enabled us to run the virtual office as efficiently as possible. Even better, the applications are compatible with Microsoft Office — making it easier for employees who prefer to use Outlook instead.
Make connections count
There’s the flip side to relying on technology to connect with employees and that is true face-to-face communication. While it may sound counterintuitive to promote face-to-face communication as we are all moving away from it, there are situations where in-person interaction is better than instant messages, video chat and email. These technologies cannot replace in-person team-building exercises, team community service days or infrequent lunches or dinner and drinks.
While running a virtual office may make it more difficult to schedule and coordinate these in-person team meetings, it doesn’t make them less important. Look to schedule these meetings on a quarterly basis, if not more often. Schedule them well in advance to make it easier on employee travel schedules and pack in as many relevant activities (such as training sessions or team lunches) around these in-person meetings to maximize schedules and travel budgets.
Shane Pike is president and CEO of EngineerJobs.com, one of the most visited engineering job sites in the world. Before that, he built NursingJobs.org into one of the Web's leading job sites for nurses in just two and a half years before selling it to Internet Brands in 2008. He is a graduate of The University of Alabama. He can be reached at email@example.com.
Surviving a mid-stage crisis: Masergy disrupts the networking services industry when it grows up in a hurryWritten by Leslie Stevens-Huffman
Chris MacFarland was on his way to manage a startup when Royce Holland, chairman of Masergy, asked him to take a hard look at his company. Although the eight-year-old provider of networking services had reached nearly $100 million in revenue and survived both the nuclear telecom winter and dot-com crash, Masergy was stuck in that awkward adolescent stage just as the economy was slowing.
“Masergy’s board wanted me to consult for a year, offer advice and position the company for a possible sale,” MacFarland says. “After assessing the financials and current solution set, I thought it was possible to grow the business but the steps wouldn’t be easy.”
The telecom veteran and self-professed computer nerd, who taught himself structured programming languages as a child, found a company that from a macro standpoint was pretty good, but not great. Specifically, the staff was passionate about customer service but lacked the tools and systems to deliver, growth had stalled, the CEO had resigned and after bankrolling the company for the past eight years, the firm’s venture investors wanted liquidity.
“The top leaders needed to go, we needed a more collaborative environment and a change in ownership,” MacFarland says. “I was brutally honest in rendering my assessment because Masergy’s board trusted me to make the right call.”
Masergy’s board bought in. MacFarland became COO in 2008 and was promoted to CEO in 2010. Under his watch, the firm has matured from a rudderless organization to a major industry disrupter with revenues of $170 million for fiscal 2013, which ended in June.
Here’s how MacFarland pushed Masergy out of its mid-stage funk.
Build a healthy foundation
MacFarland initially planned to reposition Masergy during the recession, then satisfy investors’ need for liquidity by filing for an IPO as the economy rebounded. Given his goals and his assessment of Masergy’s issues, it’s not surprising that he started by replacing the company’s leadership team.
“There was a lot of infighting among our management team,” he says. “We needed leaders who could deal with investors and water the culture in order to get to the next level.”
MacFarland wanted to eliminate the fiefdoms that were hindering collaboration as part of a comprehensive effort to create what he calls a healthy company.
“You need trust between the leaders and departments to garner commitment for initiatives, core objectives, financial objectives or new product introductions,” he says. “And we didn’t have that. In fact, our environment had become so unhealthy it was stifling growth.”
Next, he weeded out underperformers and raised the bar for new hires by sourcing candidates who wanted to drive the bus instead of ride it. Paring the staff led to productivity gains and a 35 percent increase in profitability.
“Smaller firms need passionate ‘A’ players who will take the initiative,” MacFarland says.
“The economy propelled us from 2005 to 2008 and during that time, people became somewhat inefficient and we ended up with a lot of ‘C’ players.
“Cultural fit and synergy are critical in a mid-market tech company like Masergy because we’re not IBM. We can’t drive the business through operational measures, we need passionate, capable people to carry the torch.”
At the same time, he established a new set of core values before setting his sights on improving the company’s technical platform.
“For example, one of our values is that everybody has to be engaged and involved,” MacFarland says. “If an employee sees something they don’t agree with or understand, instead of sitting back we want them to ask about it and offer up suggestions.”
Despite MacFarland’s best efforts, Masergy encountered significant head winds from 2008 to 2010. He ended up shelving the IPO and recapitalizing through another venture firm, ABRY Partners, in the summer of 2011. But upgrading Masergy’s staff, culture and leadership team has continued to pay dividends.
“Sure, I could lay out a vision but a CEO needs cohesive leadership and engaged people to carry it out,” MacFarland says.
Improve the customer experience
Competing against the likes of AT&T and Verizon isn’t easy. Industry leaders tend to offer a full portfolio of voice and data products, coupled with above-average service and support, wide global coverage and competitive pricing according to MacFarland.
“Our platform wasn’t stable which impacted customer satisfaction and hindered sales,” MacFarland says. “To make matters worse, our network admins and customer service staff couldn’t always see our customers’ screens which made it difficult to resolve their issues.”
Moreover, customers will defect if they don’t have a strong value proposition and a reliable global network, so MacFarland reset the bar by spending millions upgrading Masergy’s platform.
His team now has the ability to monitor the network in real time, while customers can run voice, video conferencing and applications while viewing the same interface from anywhere on the planet. And because the new structure is scalable, MacFarland says it can sustain Masergy’s growth to $500 million.
“Our 360-degree view of the customer is unique in the industry,” he says. “Plus, customers get to speak with a real person instead of an interactive voice response system or IVR when they call. And our customer service reps are experts at relating to prospects who aren’t technically savvy.”
While some of the values that MacFarland is credited with helping to instill at Masergy may seem rudimentary to outsiders, his mandate to treat customers and business partners equally is regarded as innovative in the networking services industry.
“Treating everyone equally is a fundamental shift in thinking for our industry,” he says. “It helps us build healthy relationships and a robust supply chain which is critical to sustaining growth.”
MacFarland isn’t solely relying on technology to improve the experience of Masergy’s customers. He’s using good old-fashioned feedback and metrics to track customer sentiment and improve their satisfaction. And he’s putting his money where his mouth is by offering customers SLAs and credits if the firm falls short of its promises while giving employees bonuses for improving their experience.
“We weren’t engaging in deep analytics because we lacked actionable data and metrics,” he says. “Being a global company we need to keep our fingers on our customers’ pulse and monitor how we’re viewed in the marketplace.”
He’s also using spot surveys to track customer reactions and the rise of Masergy’s Net Promoter Score (NPS), which measures the loyalty that exists between a provider and a consumer by asking if they would recommend the service to a colleague.
A positive NPS is good, and a score above 50 is excellent and regarded as a harbinger of profitable, sustainable growth. Masergy’s dreams of delivering exceptional service have been realized based on the firm’s most recent NPS of 59.3 percent.
“The first year we scored around 30, which is OK for our industry but not for a broader tech firm,” MacFarland says. “We need loyal customers to become a valuable partner and achieve our goal of competing on a bigger stage.”
After building a healthy foundation and improving the customer experience, MacFarland turned his attentions to Masergy’s lagging top line. Admittedly, sales was not one of MacFarland’s strong suits so he hired a new sales leader and charged him with reinvigorating the company’s base of channel partners and resellers.
“As a technology firm, we rely on solution providers, systems integrators and telecom agents, as well as consultants and network and video equipment manufacturers to sell our solution,” he says. “Clearly, we needed new partners to jump-start growth.”
MacFarland’s sales guru reinvented the company’s sales methodology and rolled out new partner levels in 2011, offering Masergy’s top producers rewards and incentives for selling its WAN solutions. Gold and platinum partners receive higher commissions, spiffs and access to benefits such as customized joint-marketing strategies, co-marketing funds, special events and co-branded case studies.
As a result, Masergy saw its platinum partner base go from five to 12 over the past year, while its total number of partners rose to more than 100. In fact, some partners’ year-over-year sales grew roughly 30 to 40 percent, thanks to MacFarland’s well-timed entry into the cloud and cloud-based managed network services.
To explain, MacFarland took advantage of Masergy’s recapitalization by acquiring Los Angeles-based Broadcore in July 2012.The move catapulted Masergy into cloud services and gave the firm a complementary presence in hosted PBX and UC services, a segment that is expected to achieve robust growth over the next few years.
“We’ve experienced double-digit revenue growth after recapitalizing,” MacFarland says. “And to sustain that we have to roll out a new product every other year.
“We’re not looking for a value play, it has to be a cultural fit and meet certain criteria. But given that we have significant market share within the networking services segment developing or acquiring new capabilities is the best way to sustain growth over the long haul.”
For a guy who says he knew nothing about sales coming into the job, MacFarland has been very successful in driving top line growth. Masergy has acquired numerous marquee customers such as Unisys Corp., Akamai Technologies, Dolby Laboratories Inc. and the Hallmark Channel. The firm is forecasting revenues of $170 million for 2013.
“Technology is a high stakes game,” he says. “It takes significant investments and efforts to succeed but you increase your chances by building a healthy, transparent company.” •
- Build a healthy foundation
- Improve the customer experience
- Jump-start growth
The MacFarland File:
Name: Chris MacFarland
Company: Masergy Communications Inc.
Birthplace: Born in Hobbs, N.M.
Education: He studied computer science engineering at the University of Texas at Arlington.
What was your first job and what did you learn from it? I worked in a tire store changing tires and repairing flats when I was 16. The work was so hard that it encouraged me to pursue a career that would utilize my brains instead of my brawn.
What’s the best advice you’ve ever received? During my early days in the telecom industry I got to know Michael Russell, co-founder of American City Business Journals. He taught me that there’s strength in numbers. In other words, your company will go farther and grow more quickly by having a strong team rather than a handful of strong individuals.
Who do you admire in business? I tend to admire leaders in different industries for their strengths and accomplishments. For instance, I admire Bill Gates for being an extremely shrewd business person, his problem-solving skills and his remarkable philanthropic spirit. I admire Jamie Dixon for his ability to manage through the global banking crisis. And I admire Herb Kelleher for creating a dynamic brand and culture.
What’s your definition of business success? You’re successful when you achieve a profit without compromising your integrity. Although many tech companies were successful in the late 1990s, they engaged in questionable business practices and weren’t transparent. True success takes place on multiple levels.
Learn more about Masergy at:
How to reach: Masergy (866) 588-5885 or www.masergy.com
The Patient Protection and Affordable Care Act, often called the Affordable Care Act represents some of the most far-reaching government overhaul of the U.S. healthcare system since 1965 when Medicare and Medicaid came into being. It will be phased in over time, but a number of changes have been delayed and won’t be in effect until 2015.
The act focuses on increasing the rate of health insurance coverage for American and reducing health care costs. Here’s what some area businesses have on their minds about health care reform as the time nears for the full impact of the ACA:
Vice President-Finance & Human Resources
How is your company preparing for changes associated with health care reform?
We began reviewing the potential impact of the changes well ahead of the legislative process. We analyzed the effect on taxes and fees, calculated the potential of “pay or play” exposure and audited the minimum value of our plans. We prepared models for potential impact of a “Cadillac” plan tax. During the final step of this project we implemented new processes and procedures to accommodate notice and reporting requirements. We are prepared to provide additional educational information to our employee base as needed to address how these changes may affect individual employees and their covered family members on our plans.
Have you studied or instituted wellness programs to contain health care costs for your employees?
At Ebix we see wellness care as a core and vital part of our ongoing benefit plans, as well as a critical extended benefit to our employees. We began planning for the addition of a comprehensive wellness care initiative already in 2008 and 2009. In 2010 we had fully implanted it. The 2010 wellness care program is incentive-based, and includes full health risk assessments and biometric screenings. Employees are required to participate in the health risk assessments and biometric screenings, in order to fully participate.
We have tried to make the process as easy as possible for our employees. We have even provided the option of having their screening and testing done directly in the company’s offices in a confidential setting. They may instead choose to visit one of the many local labs in their area at their convenience. To help insure the highest percentage of participation, we have tried to also have some fun with this and have given gift cards to the employees as they completed their biometric screenings as well as providing healthy snacks and such as on the day of the onsite lab testing.
What other things are you doing specifically to contain health care costs for your employees?
The company continually reviews the performance of all of our group plans and monitors changes in how our employees utilize the plan benefits. We have implemented spousal surcharges for covered spouses who have access to other medical coverage but chose to remain on the company plan as their primary plan. This helps keep the employee contributions as low as possible. We look to use targeted regional providers with extra deep discounts where geographically possible. We also have a well-established disease management program in place in our plans.
Do you foresee having employees pay a larger share of company-offered health care coverage?
We believe having strong benefit plans with contribution costs at the market average or far lower, is important for retaining our top talent. The company works very hard to keep all out-of-pocket costs as low as possible for all our valued employees. We are always looking for ways to lower the employee’s costs, while still providing a high level of coverage with strong benefit plan designs. Like with most progressive companies, we are striving to be ahead of the curve as it pertains to group benefits, and we are combining creativity and innovation, with practical ideas that are easy to implement. We don’t just talk about or discuss in meetings and planning sessions. We are looking for ways to actually put these innovative ideas into production.
President and CEO
How is your company preparing for changes associated with health care reform?
National Interstate typically reviews all our benefit programs on an annual basis. The enactment of health care reform has not materially changed that process; it has simply added another layer of compliance-related items that we must be mindful of. Our primary goal of providing benefit programs to meet the needs of our employees and their families remains unchanged.
Have to studied or instituted wellness programs to contain health care costs for your employees?
Over the last several years, National Interstate has implemented a variety of wellness programs primarily in response to our employees including initiatives such as an onsite flu shot clinic, monthly newsletter, health fairs including screenings and wellness vendors, as well as lunch and learn speakers. There is no question employees have greater access to information and resources promoting healthy lifestyles than ever before. For an employer, it can often be difficult to quantify the results of individual employees reaching their health goal. It may simply mean that employee was able to attend a son or daughter’s soccer game. Those kinds of results are important in addition to focusing on healthcare cost containment.
What other things are you doing specifically to contain health care costs for your employees?
We believe educating employees about the plan they participate in is a key factor in containing health care costs. Most medical plans have discounts and incentives already built into the plan design, yet many times employees don’t fully utilize these features. We work in conjunction with our health care provider to disseminate information to employees so they can make informed health care decisions.
Do you foresee having employees pay a larger share of company-offered health care coverage?
It is impossible to predict what the future holds in terms of health care costs. What we do know is if our employees collectively work as a team, we have the best chance of minimizing health care costs for our organization. While we make health care choices as individuals, the impact of those choices from a rate perspective is felt amongst the group participating in the plan.
Principal, human resources
How is your company preparing for changes associated with health care reform?
We have been making changes to eligibility and benefit levels as required by the regulations since the passage of the Affordable Care Act. We have made required modifications to our group medical plan to ensure that it meets the guidelines for 2014. We will continue to closely monitoring the regulations so that we are prepared to meet future requirements of the law.
Have you studied or instituted wellness programs to contain health care costs for your employees?
We have had a wellness program in place for several years, and anticipate it will help contain cost increases in the future by motivating our plan members to be aware of and gradually improve their health over time.
Due to health care reform what other things are you doing specifically to contain health care costs for your employees?
By 2009, we had moved to a consumer-driven health plan model. Our plan includes some pharmacy and medical treatment programs that help direct members to lower cost, higher quality sources of care. Soon we’ll introduce online cost/quality transparency tools to help raise awareness of the disparate cost spread that can exist even within an approved provider network.
Do you foresee having employees pay a larger share of company-offered health care coverage?
While we do not plan to shift a greater proportion of the cost to associates in 2014, the overall costs for health care continue to rise. In this regard, we have added a surcharge to cover spouses who have their own employer-based coverage available. We cannot speculate on what may happen in the future because the health care landscape is undergoing so much fluctuation.
David Passman’s classic remake of Carmike Cinemas is garnering rave reviews from Tinsel Town to Main Street. After falling into a state of disrepair, the nation’s fourth largest theater chain, through Passman’s efforts, has boosted the fortunes of film distributors and once beleaguered shareholders as well as the appetite of moviegoers.
“Hollywood didn’t like us, our shareholders didn’t like us and our employees were driving customers away,” Passman says. “Every option was on the table from bankruptcy to revival or something in between when I came out of retirement to become Carmike’s president and CEO.”
Known as “America's Hometown Theater Chain,” Carmike operates some 245 theaters and 2,476 screens in small to midsized communities located throughout 35 states. Despite enjoying quasi-monopolistic conditions, Carmike’s ticket sales were declining, the stock price had fallen to $1.30 per share and the company had restated earnings three times shortly before Passman traded his board seat for a corner office in 2009.
He’s remodeled aging theaters, paid down debt and consummated strategic acquisitions since taking the helm. After logging net losses for three straight years, Carmike produced net income of $96 million on revenues of $539 million in 2012, driving the average stock price above $20 per share.
Here’s a look at Passman’s steps behind his Hollywood-style success story, which just happens to include a fairy-tale ending.
Undertake the easier tasks first
After conducting secret shopping excursions to several theaters and evaluating competitors’ financial statements and operating metrics, Passman concluded that Carmike was worth saving.
Best of all, his due diligence revealed enough “low-hanging fruit” to produce modest improvements in revenues and profits while he executed a burgeoning slate of long-term strategies.
“Competitors with the same raw attendance numbers in similar markets were turning a profit, yet we were broke,” he says. “My analysis revealed that our operating costs as a percentage of revenue were substantially higher than Regal or Cinemark.
“If you think the underlying fundamentals are OK, then it makes sense to put all your efforts into fixing the problems,” Passman says. “If the underlying fundamentals are unsound, then you stop renewing leases and prepare an exit strategy.”
His stealth visits to Carmike’s rural theaters also revealed poor sanitation, broken marquees and scruffy-looking employees who dissuaded customers with their indifferent attitudes.
“Customers were staying away because the prior CEO tried to manage earnings by deferring repairs and maintenance,” Passman says. “That attitude was further reflected in the appearance and actions of our employees who had become disenchanted with the company.
“I stole a page from Jim Skinner’s playbook,” Passman says, referring to McDonald’s CEO, who steered the floundering company to the best financial performance in its history. “We needed to have a clean, friendly environment before asking customers to return. In other words, we needed to clean up our act.”
Passman replaced under-performing theater managers, authored new hiring and performance standards, retrained the entire staff and spent millions repairing broken signs and theater seats. Admittedly, he took some heat for making substantial repairs and booking a multimillion-dollar impairment charge, but through it all, he remained committed to the idea that improving the customer experience would boost loyalty today and pay dividends down the road.
“Our investments in training and repairs increased attendance, customer loyalty and concession stand revenues,” he says. “The key to getting the most from part-time workers is to hire for attitude and give them training. That’s why Disney is so successful.”
He also asked Carmike’s vendors to sharpen their pencils as part of a comprehensive effort to bring the company’s operating costs in line with those of competitors.
“The conventional wisdom is that you can’t renegotiate contracts until they expire,” he says. “We asked everyone from our refuse removal service to Coca-Cola to give us a better deal even if their contracts were in the middle of the term.”
The revised vendor pricing not only lowered Carmike’s operating costs but boosted customer goodwill and concession revenue by allowing Passman to reduce prices for beverages and snacks.
Although Carmike has traded margin percentage for margin dollars at the concession stand, it’s come out ahead as concessions and other revenue increased to $54.9 million in the most recent period compared to $43.6 million for the same period in 2012.
Repair vital relationships
After witnessing Carmike’s dramatic slide, constituents had not only lost money but faith in the company’s leadership. Since their support was critical to Carmike’s long-term success, Passman launched a series of steps to build goodwill and repair damaged relationships.
For starters, he garnered shareholder support by reducing the company’s debt by $120 million over three years. The company’s highly leveraged position had left shareholders vulnerable and fearful, especially when the economy faltered in 2008.
“Ultimately, deleveraging the company would free up cash, reduce our debt service cost, mitigate shareholder risk and give us more choices,” Passman says. “We stopped paying dividends and put every available dollar toward retiring bank debt.”
Next, he solicited revenue-generating ideas from theater managers, who were initially stunned by his request. After some prodding, however, the managers offered-up great marketing tips including a promotion called Stimulus Tuesday.
“The problem with discounting tickets to drive attendance is that it impacts studios who get a percentage of box office receipts,” Passman says. “You don’t want to bite the hand that feeds you in an effort to increase sales.
“Instead, we offered $1 popcorn on Tuesdays,” he says. “We immediately got a 35 percent increase in attendance and best of all, it didn’t diminish ticket sales on Mondays or Wednesdays.”
Not to be outdone by rank and file employees, Passman’s marketing team introduced a rewards program, allowing moviegoers to accumulate points and earn discounts on concession items and movie tickets.
He conveyed his revenue-boosting strategies during personal visits with distributors and studio executives who had experienced a falling out with Carmike’s former CEO. His cross-country trek not only bolstered the firm’s relationships with Hollywood moguls, it quashed their fears that the chain might file for bankruptcy.
Carmike’s marketing strategy has led to big gains in ticket and concession sales. Second quarter admissions revenues grew 24.7 percent year-over-year and 13.9 percent on a per screen basis, significantly outperforming the domestic cinema industry increase of 7.8 percent. Beyond the strong gains in admissions receipts, second quarter concessions and other revenue per patron increased 6.9 percent to a new all-time record, extending Carmike’s year-over-year per patron spending growth to 14 consecutive quarters.
Best yet, giving theater managers a voice has created a sense of ownership, improved theater cleanliness, boosted attendance and reduced annual turnover from 40 to 20 percent.
“Not everything we tried worked,” Passman says. “But we kept trying. In fact, my idea of offering graduated concession packages actually decreased revenues based on the results of a 12-theater pilot.
“My philosophy is that you can’t fail as long as you keep trying and CEOs need to lead the way by acknowledging their mistakes.”
Armed with an improved balance sheet, Passman went on another shopping spree in late 2011. But this time, he didn’t travel incognito. In the cinema world, he’s widely recognized as a savvy buyer.
The top four exhibitors control about half of the country's 40,000 screens and many smaller players are looking to sell out. In fact, during the firm’s July 22 conference call, Passman characterized the market as “very buyer-ripe,” adding that Carmike “is inundated with opportunities to purchase assets.”
“After analyzing our income statement, I realized that we could support an additional 300 theaters without adding to our headquarters’ staff,” Passman says. “We were able to use mostly cash to consummate a number of purchases due to our improved performance and balance sheet. Plus, we raised $60 million by issuing additional stock.”
Passman isn’t looking for fixer-uppers or aging venues in declining markets. Rather, he’s looking for turnkey properties in stable locales that stand to benefit from his marketing expertise and Carmike’s highly efficient infrastructure.
“We had a chance to leverage our efficiency and G&A by making strategic acquisitions in maturing markets where the owners don’t have the ability to lower costs and boost their profitability,” he says.
Carmike has purchased 366 screens since the end of 2011. It’s also building new theaters, both to replace existing venues and open new locations. For instance, Passman built three new theaters in the first half of 2013, closed several under-performing locations and raised an additional $88 million in order to hone Carmike’s portfolio amid a maturing market.
“In 1991, the Atlanta Braves became the first team in the National League to go from last place one year to first place the next, and we may be the second team to achieve that feat,” he says. “Our stock has rebounded after hitting rock bottom. Which proves that Wall Street still believes in fairy tales.”
How to reach: Carmike Cinemas: (706) 576-3400 or www.carmike.com
- Start with the easiest tasks.
- Repair vital relationships.
- Use strategic acquisitions to leverage G&A.
The Passman File
President and CEO
Birthplace: Bay Shore, N.Y., raised in Ocala, Fla.
Education: He attended the University of North Florida and received a bachelor’s degree in accounting from the University of Florida. Passman is also a CPA.
What was your first job and what did you learn from it?
I learned how to run a successful concession operation when I was just 13 and sold milkshakes at the local Burger Chef. Later, I learned what it takes to be a successful entrepreneur when I joined the audit practice at Deloitte. I spent the better part of 20 years helping small businesses grow and became a partner. Having a horizontal view of everything that goes on in a company helped me understand what it takes to be successful.
What’s the best advice you ever received?
Attitude trumps aptitude. I’ve met a lot of very smart people who never achieved success because of their attitude. On the other hand, I’ve seen folks with average IQs and a positive outlook rise through the ranks. A positive attitude is how Jim Skinner became CEO of McDonald’s, and it’s one of the main reasons why he was able to save the company.
Who do you admire most in business and why?
Warren Buffet because he’s involved but not overbearing, he’s trusting but not naïve. He’s successful because he sticks with what he understands. He doesn’t invest in unfamiliar businesses; he knows his limitations.
What is your definition of business success?
You’re successful when you improve the return for shareholders, empower people and instill the right values. Ultimately, a leader is successful when he or she leaves a company better off than he or she found it.
The downturn of the economy is clearly behind us. Companies have their feet back under them and are once again focused on expanding, acquiring, adding clients and hiring employees. Now is a great time to grow.
Moe’s Southwest Grill is one of those fortunate companies that made it through and, for the past few years, has been experiencing growth. In fact, Moe’s is preparing to open restaurants at a much more substantial rate than in years past. While this is great news, growth, of course, comes with its own set of challenges and opportunities.
So how do you prepare your organization for growth?
Establish a viable strategy
First, you need to have a sound strategy for how you go about it. Moe’s expects to double in size in the next three to four years — but how many will we open next year, and can our current organization support it? Those are questions that can be answered with a solid strategy.
It was important for me to work with the team to set our opening goals together so everyone bought in — now we know next year we’ll open 100 restaurants, 150 the year after that and another 200 after that. Including the team early in the planning allows you to get support, but it also helps you hold the team accountable for the goals it sets.
Explosive growth means opening 100 to 200 restaurants a year, which is also like opening a small restaurant chain each year. The support team that’s in place to support 500 restaurants will also need to grow, so it’s important to understand the people impact of growth. How do you become a recruiting machine but hold on to your company culture? I currently meet the final candidates for nearly every position we hire, even if for just a few minutes, to ensure they can “play well in the sandbox” with the rest of the team.
I stay involved because I know growth is one thing that can fracture our culture and ultimately the company. It’s important to recruit quality people who are the right fit, because when you don’t, there’s a good chance the culture will slip away.
Define departmental roles
In the grand growth plan, every department should play a clearly defined role and be a vital part of the growth strategy.
In the franchising model, franchise sales are the pipeline. Real estate leads the way to introduce the concept across a larger geographic area. Training helps new restaurants open and is on the ground to mobilize what they do in the restaurant. Operations supports training and the franchise partners to ensure customers have a consistent, positive experience. Marketing promotes our products and what our company stands for and grows sales.
As a leader, you know that some of the most exciting times can be the most challenging. But with a sound strategy, the right people in place and departments that are involved and know their roles, you should be full steam ahead.
Paul Damico is president of Atlanta-based Moe’s Southwest Grill, a fast-casual restaurant franchise with more than 500 locations nationwide. Paul has been a leader in the foodservice industry for more than 20 years with companies such as SSP America, FoodBrand LLC and Host Marriott. He can be reached at firstname.lastname@example.org.
If you were to assemble some of the world’s outstanding business leaders in one place and ask them their secret to sleeping well at night amid the pressures of running a successful business, you might think you’d collect the best tips to handling anxiety in the business world.
The truth is that top business leaders often don’t have a secret to reveal — they rely on the strength and confidence they’ve developed over the years.
At the EY World Entrepreneur Of The Year conference, held earlier this year in Monaco, EY Entrepreneur Of The Year country winners assembled to compete for the World Entrepreneur Of The Year title.
We took the opportunity to collect the thoughts of the world’s most accomplished entrepreneurs — innovators, futurists, turnaround specialists and problem solvers — about dealing with worries. ●
“There’s nothing that keeps me up at night. I sleep very well. The challenge we have as a company is to keep delivering the culture we have created and expand it, keep evolving at the speed our customers expect us to evolve and keep creating value for them as we have for the past 10 years.”
Entrepreneur Of The Year 2012 Argentina
“The main thing is to make sure that we are always looking for new, creative ideas that keep our business updated with new technology and creativity. The other thing is making sure we are working faster than before.”
Lorenzo Barrera Segovia
founder and CEO
Entrepreneur Of The Year 2012 Mexico
“Business has its highs and lows, because let’s face it, it’s not easy. It has its challenges. They asked Steve Jobs what was the most important thing in business and he said, ‘Passion.’ If you don’t have passion you would give up when things get difficult. We have so much passion and love for what we do that it becomes a part of our life.”
founder, president and CEO
Entrepreneur Of The Year 2012 United States
2013 World Entrepreneur Of The Year
“What if the stock market crashes? What if there is some unknown thing that happens? What if there’s another 9/11 type of situation? Companies need to carry on, but maybe they don’t need to do events. Maybe they cut back on entertainment and speakers. The worry is what happens if something happens that I can’t control.”
President and founder
SME Entertainment Group
“We are in recovering times. I feel very positive about the economy in general, but I’m still very worried about Europe. And while we are recovering, it’s still choppy and choppy times are times when there are more needs out there.”
Retired global chairman and CEO
"I guess there is a point in my life where I thought it is all about me, and I am going to be the guy that guides everything and controls everything. What I have learned is that the best thing that I have done for our business is learn to let go and learn to get people who are better equipped to manage specific areas, do their thing and not get in the way."
Dr. Alan Ulsifer
CEO, president and chair
Entrepreneur Of The Year 2012 Canada
“Nothing keeps me awake at night becase my work is solid.
My father married at 60 and my mother was 23. They had four children. Then he died, and we quickly had to start thinking about what to do. There was no money — nothing. We had to leave the little town we lived in because of violence there. Thanks to that, I am where I am right now because I still could be on the streets of my village selling tobacco. There is no wrong that can do good. That's what I have to teach people.”
founder and president
Entrepreneur Of The Year 2012 Colombia
The idea of driving aimlessly seems glamorous in movies and songs. In reality, few of us get in a car without knowing how to reach our destination. We’ve created smartphone apps, GPS devices and satellite mapping to make our trips as efficient as possible and to avoid what we know to be an inconvenient, expensive outcome — getting lost.
I bring up this idea because many companies using social media have inadvertently become lost drivers. They start using social platforms with the goal of reaching some number of likes, retweets or shares, but as they embark on their social media strategies, many experience a disconnect between the content they post, blog and tweet and their progress on measurable business goals. These companies are driving without a roadmap; they just don’t know it.
Sound familiar? If social media isn’t working for you, your social media approaches may be missing a fundamental component: an effective content strategy. Here are three ways a solid content strategy will enhance your company’s social media success.
A like is just a like
All social media engagement is not created equally. To be successful, the social media activity that you generate needs to support your marketing goals — whether you want to improve employee engagement, boost customer conversions or build interest in a new product.
Creating a content strategy before you engage in social media will help your business clarify the specific marketing goals you want to achieve through content, as well as what messages you need to communicate to reach those goals. This process will ensure you get the right likes, shares and retweets from social interactions.
Social is a vehicle
Social media is a vehicle for sharing compelling content with your audience, and it doesn’t work if you don’t know what issues, topics and trends your audience finds compelling. Part of developing a content strategy involves learning how those you are trying to reach want to be talked to. Where do they go for information? How much time do they spend online? What kind of content are they looking for from your industry?
By getting to know the interests and pain points of your audience (customers, employees, shareholders, etc.), you can develop tactics to reach your online audience more effectively, saving you time and enhancing your company’s social influence.
Relevant content is meaningful
Kings of social content don’t become that way by luck. They use strategic tactics to connect with their audience through the right channels at the right times. More importantly, they make these connections meaningful and memorable by posting and sharing strategic, relevant content that their audiences desire.
When you deliver social content that your audience members find valuable or interesting, they’ll reward you by sharing your content, engaging with your business and, ideally, helping to promote your reputation as a thought leader in your business or industry. A content strategy allows you to do that by providing a roadmap for what kinds of informative, helpful, educational or creative content you need to make meaningful interactions.
As a recent Huffington Post article put it, the golden rule of the web is clear: “To know us better is to sell us better.” Ultimately, being successful in the social media space means taking the time to map out what success looks like. In this sense, a solid content strategy is not only an important component of any social media strategy, it’s the key to driving the results your business wants.
Michael Marzec is chief strategy officer of Smart Business and SBN Interactive. Reach him at email@example.com or (440) 250-7078.
When Albert “Chainsaw Al” Dunlap was the CEO at Sunbeam in the late ’90s, he had a reputation for ruthlessness. Besides massively downsizing the company, he was also known to intimidate everyone around him and resort to yelling and fist pounding.
While extreme, Dunlap’s behavior is an example of the type of “dictator” leadership that used to be fairly common in the C-suite. Rules were rules, there were no exceptions for anything and people were just a line item on a budget. Need to cut thousands of jobs? Don’t think twice about it.
On the other end of the spectrum is the Christ-like leader. This leader focuses more on building people up rather than tearing them down. This type of leader understands that there are rules, but sometimes to do the right thing, the rules need to be broken. For example, during the economic downturn, some Christ-like leaders went well beyond what was called for to make sure laid-off employees were taken care of.
They made sure they had the use of office resources to look for a new job and did everything they could to lessen the hardships. They weren’t required to do this; it was just the right thing to do. They saw employees as human, not just numbers on a spreadsheet.
Does it cost money to take the more humane route with your leadership? Yes and no. From a short-term, bottom-line perspective, it probably does cost a few more dollars to help people through a hardship. But long term, it can pay dividends. By treating people with respect and doing the right thing, it helps eliminate animosity toward you and your company from both the ex-employees and current ones. Maybe there are some good employees who you wanted to keep, but couldn’t afford. By showing compassion, when the economy turned around, they were far more likely to consider coming back than if they had just been shown the door with little regard to their well-being.
And what happens when these ex-employees end up in key positions in companies that could be customers? Do you think an ex-employee who you mistreated is going to buy anything from you or recommend your company to someone? It’s a small world, and what goes around often comes around, so it’s always best to treat people as best you can.
You can lead like a dictator and still get results. But do the ends justify the means? Will you conquer all, only to find yourself alone with no friends, the equivalent of Ebenezer Scrooge in “A Christmas Carol?” Or will you have an epiphany and realize there’s a better way to do things?
During this holiday season, think about your leadership style and the long-term effect it has on people’s lives. If this exercise makes you uncomfortable, then maybe it’s time to change how you lead. ●