Miami maverick

One of the most important lessons R. Donahue Peebles ever learned came at the expense of a competitor, when another developer was looking to buy a piece of property and was haggling over
$50,000.

“They didn’t close with it,” says Peebles, chairman and CEO of The Peebles Corp. “I went in and bought it and gave the person their price. I went on to make millions and millions of
dollars on that project. They felt they had the deal all to themselves. That’s the mindset of closing the deal when it’s ready to be closed. You never know who’s out there. You never know what surprise could come up.”

Peebles has spent his career learning how to make deals, run his company and find the right people to help make him a success. He has carefully examined the art and
science of business and built the 10th largest African-American owned business in the country, with $449 million in annual revenue and more than $4 billion in projects started. And with every
new opportunity, Peebles applies the lessons he has learned from his many years in business.

Every setback is an opportunity

When Peebles began work on the Royal Palm Hotel project in Miami Beach, he discovered contaminated soil and structural defects. His options were to walk away from the deal or invest another $20 million.

“We finished the building,” Peebles says. “The city of Miami Beach had indemnified us for those types of problems. We went to them and renegotiated the land use of our property that prohibited us from building hotel/condos. Getting that restriction removed significantly enhanced the value of our property.

“When people approach business and they have a setback or an obstacle, they see it as a problem. My approach is to look at those as opportunities to do something else, something different,
and to profit from it.”

That kind of attitude takes inner fortitude.

It takes “a huge desire to win,” Peebles says. “I step back and I look at it from the practical business reality. When you look at it from the business reality, then you become more practical and
look for practical solutions. It’s all about being resourceful and practical.


“The key is to look at things and have the end result in mind. The objective is to be successful and make sure the transaction that you’re involved in is successful. In order to do that, you have
to be creative. The reality is, if you’re going to be in business, you’re going to have challenges. As an entrepreneur building a business, you’re going to be even more challenged than the typical
corporate-type structure.”

Moral obligation and gut instinct

Peebles could have walked away from the Royal Palm deal, but his instinct and his moral compass drove him to stick with it.

“Business is not just spreadsheets,” he says. “Sometimes you have to go with your gut instinct. That’s not a reckless gut instinct. That doesn’t mean I walk into a technology company and say,
‘Hey this is a great company. I’m going to spend $100 million to buy it.’ That’s not my business. I don’t know it. I know my business, and I’ve been doing it long enough where my gut instinct is
really an informed decision.

“I instinctively knew that Miami Beach was going to rebound. And once I got the hotel open, I would make a lot of money and it would lead to other opportunities. I recognized the consequences
were too great for me and my reputation. To fail to build that hotel under those circumstances would be devastating to my reputation.”

Peebles’ decision paid off. He recently sold 85 percent of a project for $127.5 million that cost him $80 million to build, including all the cost overruns.
“I did OK,” he says. “I made some profit. I’m going to make some more as it goes forward. Sometimes you’ve got to go with your instincts and know where they’re going to take you and know
that you’ve got a unique product or unique idea and, over time, it’s going to endure.

“A spreadsheet may not have convinced me of that. That’s why I have an advantage, as an entrepreneurial development company, compared to an institutional one. An institutional one may do
more deals. They’ll have more dollar volume out there than me, but we’ll do more interesting deals. I will make more money, and the executives who work on my projects and work for me will
make more money than their institutional counterparts because of that entrepreneurial vision and because we’re looking to do creative things.”

It all begins with persistence.

“The willingness to stay the course and see it through is a tremendous asset,” Peebles says. “It’s very difficult. It’s generally a situation where it doesn’t look like things are going the right way. It
may appear, and it starts creating self-doubt and the concern that you may be going in the wrong direction. It requires a great deal more fortitude, a great deal more comfort with your decision-making process to see it through.

“That is the one ingredient in business that requires the most adjustment and fluctuation based on the environment that you’re in. To be able to do that in business is one of the key ingredients
of success; stay on the right course — not necessarily go in a straight line. You stay the course, but you’ve got to make adjustments along the way.”

Avoid the herd mentality

Succeeding at business means being able to see and act when and where others can’t.

“If you look at the great amount of wealth in this country that has been created over time, you’ll see that many of those businesspeople, especially the entrepreneurial wealth, went contrary to
the market,” Peebles says. “If it was as easy as following the leader, then we’d all follow the leader and we’d all make money, and everybody would be happy.

“The herd mentality is where people are all pursuing the same direction in the marketplace. Right now, people are running away from real estate. What has happened is that there is an environment where people are turned off because the media has been continuously discussing the downturn in the residential real estate market.”

Peebles is taking advantage of that.

“Fewer developers are investing in residential real estate,” he says. “Fewer lenders are investing in residential real estate, especially in high-rise condos in markets like Las Vegas, Miami, San
Francisco. The hot investments right now are hotels and office buildings.

“We just bought a prime development site for a 40-story condo project in San Francisco. We bought a 14-acre site in Las Vegas where we’re going to build a $1.6 billion project that will include
a hotel and several high-rise condos.”

It’s all about not following the herd.

“As a businessperson, you want to buy when very few people are buying,” Peebles says. “And you want to sell when very few people are selling. If you buy when few people are buying, theoretically, you should be able to get a far better price. And if you are selling when fewer people are selling, you should be able to command a higher price.”

Swimming against the current is usually a difficult thing for business leaders to do. But for those who know when to make the right choice, the payoff can be huge.

“It’s harder and not the obvious choice,” Peebles says. “Those kinds of decisions require courage. They require a level of confidence and comfort in your decision-making process. I believe in
my decision-making process. I know that I’m on the right course. I’ve done the research. I feel like I’ve got a good feel for a particular market and, based on that, I’m willing to act on it.

“It’s real simple in business. We’re going to all have great opportunities that are going to cross our pathway. Some people will take advantage of those opportunities that are going to cross our
pathways. Most will let them walk by. The difference between the winner and the loser in business is the one that capitalizes on the opportunity — that’s the winner. The loser ends up failing to
capitalize on their opportunities.”

Hire good people and let them do their job

As their companies grow, entrepreneurs often have a very difficult time relinquishing responsibility.

“Building from the ground up, one has to approach this as if your life depends on it,” Peebles says. “That’s what it takes to build a successful business. They’ve made so many sacrifices, and
they’ve also placed such great importance on it along the way that it’s such a precious entity, it’s hard for them to hand it over.”

Peebles has been an entrepreneur for more than half his life and has learned to make the transition.

“I recognize there are other things that are important in my life,” he says. “My company’s important to me, but it doesn’t define me. It’s not the most important thing in my life. The most important things to me are my wife, my children, my family — having a good life. The name of the game here is to have a successful life. A successful life doesn’t just mean making money.”

Being successful means being able to delegate.

“I just brought on a chief operating officer who assumed the role of president of our company,” he says. “I don’t want to be bogged down with the operations of the business. I want to be free
to continue to help build it.

“The key for an entrepreneur looking to find somebody is to look from within the sphere of contacts and interactions he’s had over the years. Look for somebody that can fit into what you want
within that environment, somebody you know, somebody you respect — not your buddy, somebody that you have a good relationship with, that you enjoy working with, that you have confidence
in.”

Having that kind of trust in people makes handing responsibility to them much easier.

“I tend to try to bring up people who have a similar drive as I do and a similar focus and commitment to doing something unique — not necessarily just making money — but doing something
unique and making a significant contribution.

“I tend to bring up people who had to work hard to get where they are. The harder you have to work to get where you are and the further you’ve come, the more resourceful you have to be.

That’s really the concept of every step back being an opportunity in disguise for a resourceful person.”

Those kinds of people often want to control their own destiny; to keep them on the payroll, Peebles lets them.

“I create a culture of entrepreneurship so that all the key executives that work on our projects have ownership stakes in the projects that they work on,” Peebles says. “Consequently, that makes
them owners, and they become more entrepreneurial. As a result, they become more creative.”

It’s all about motivation.

“I’m driven by more than making money,” he says. “That is not necessarily the best course of action for a businessperson, but for me it works. I’m driven by the opportunity to break new ground,
break barriers, demonstrate and prove that there is great opportunity in the country to do things that are contrary to what success could mean and to create more opportunity for the next generation of minority entrepreneurs that come behind me.

“You can do it on your own terms, conduct yourself well, do well and be successful.”

HOW TO REACH: The Peebles Corp., www.padcorp.com

Efficiency suite

Jeffrey Fisher had seen market downswings before, but the utter swiftness and severity of the one that hit the hotel industry following the attacks on Sept. 11, 2001, required a fresh approach
to the business.
“For the hotel industry, for the travel industry generally, 9/11 was a call to arms,” says Fisher, chairman, president and CEO of Innkeepers USA Trust, a real estate investment trust that owns
more than 70 hotels in 21 states. “We had several emergency executive team meetings, which we never had to have before, to look at our business from all angles, to look at it in a way that was
different than any other preceding recession.”

And for Fisher, that included looking at how he was running the company.


“We just had to look at the whole operating model from A to Z and make significant changes there,” Fisher says.

He looked at everything, including how much soap was put out in hotel rooms, housecleaning practices in the extended-stay hotels and even the free cocktail hour some properties provided.
While it may have taken on a new urgency immediately after Sept. 11, constant assessment has been the key to Fisher’s success. From the time he started the company in 1994, he has constantly refined his approach to get the most out of his people and his operation.

Whether it is adapting his role to deal with a crisis, developing the vision for the organization or finding the right people to work in the right places, Fisher continually re-examines his strategies,
which has helped him lead the organization from nearly $84 million in revenue in 2002 to $247 million in 2005.
“Leave no stone unturned,” Fisher says. “Try to break the paradigm of whatever it is that you live with in your business day to day.”

Examine the measurements

Continuous examination of his leadership, his management team and the company ensures that the team will be prepared to take advantage of growth opportunities.


“We’ve been working on that here, taking a look at our structure, talking about how we do things — from accounting functions to sales and marketing functions — to make things a little better,” Fisher says.

One tool he uses is benchmarking Innkeepers against organizations that are now where he would like Innkeepers to be.


“Every industry will have its measures of success,” he says. “In the hotel business, there are a variety of those. Every hotel company essentially uses the same measures. We call it ‘RevPAR’
growth, or revenue per available room. You’re looking at how you’re doing, your market share at the property level and how are you doing against the competitive hotels that you measure against.

“We always want to know how our service is.”

Measuring also allows Fisher to reward the company’s best performers.


“In today’s world, most companies are paying people bonuses based on performance, especially at the upper executive level — the real decision-makers,” Fisher says. “Without a measure to
quantify how well the company is doing, you can’t really evaluate how the team is doing or how team members are doing. You can’t compensate people appropriately. Most importantly, you cannot hold them accountable appropriately if you’re subjective or gray in the areas that you want to measure somebody’s performance. Everybody’s got to get measured somehow.”

Not measuring has its consequences.


“Any time I’ve seen departments fail in any organization, it’s because they don’t have some pretty clear parameters or criteria set up for how they’re going to measure what they’re going to do,”
Fisher says.

Finding the vision

Advice comes from sources including the management team and the board of directors, but there is no substitute for quiet reflection and time away from the distractions of the office, Fisher
says.
“Get away,” he says. “It’s the best way to do it. I’ve been able to do that a lot. Sometimes it’s simply a long plane ride to California. Get some time on your own. That’s what you have to do.”

If a CEO is so involved in the business that he or she can’t find the time to contemplate the big picture, then there is a problem with the company — and the person.


“I’d probably tell him he’s not structured right,” Fisher says. “You ought to be able to find the time not to be chained to the office or chained to the desk.”

Sometimes executives need to seek the advice of seasoned industry veterans. Fisher taps the members of his board to get their help to examine the vision.


“Usually, when the board is in town, four times a year, you tend to operate at a different level because, by definition, you’re operating at that [big picture] level with the board,” Fisher says.

“We’re going to pick their brains and utilize their expertise. We take a collective approach on that front. We talk about where we want to be and then we go after it.


“We’re not talking to the board about hiring and firing people at the hotel level. We’re talking about southern California, or we’re looking at something in San Diego, ‘What do you think?’”

The right people in the right place

The board may help with the big picture, but it is the employees of the company who must carry out the vision. And Fisher encourages them by doing his best to make sure they have a fun place
to come to work every day.
“One thing they appreciate is they know my door is open all the time,” Fisher says.

Because many employees are either intimidated by talking to the CEO directly or simply don’t have the time to do so, he looks for other ways to get feedback, such as using the company’s cultural events to mingle with employees.
“We think it is important to have a corporate culture that incorporates some fun into what we do and does show some employee appreciation, and we have plenty of those kinds of special days
or special events,” Fisher says. “There’s an office luncheon once a month, and they celebrate everyone’s birthday that month. We do things that are simple things that make people feel like they’re
working for a company that is not only going somewhere, but is, in fact, a fun place to work.
“I make sure that I show up to those luncheons. I’m there talking to those folks, slapping them on the back.”

The biggest benefit of a positive culture is employee retention.


“(These activities) really come from one or two folks in HR whose job is corporate culture and to cook up these wonderful ideas that do seem to work for people,” Fisher says.

That dedication to culture has created a stable work force at Innkeepers.


“We’ve got a great bunch of loyal people,” he says. “Hold them accountable. Have reasonable, but not softball, parameters and benchmarks that you’re going to use to evaluate performance. If
they can make a lot of money here rather than going down the street, then they’re going to stay.”

As Innkeepers grows, Fisher will continue to examine every aspect of the company he founded, no matter where that may lead.


“Maybe some day the company will double or triple its size, and maybe I wouldn’t be the right guy” to continue leading it, he says. “That’s very, very possible. Where we’re at right now, it seems
to work pretty well.”

HOW TO REACH: Innkeepers USA Trust, www.innkeepersusa.com

Dr. Know

 Charlie Stiefel was in Madrid meeting with senior executives during his company’s first global strategic planning session. He put a PowerPoint slide entitled “corporate values” on the screen, which listed communication, respect, integrity and excellence.

“I asked anyone if they could guess what company espoused these corporate values,” says Stiefel, chairman, president and CEO of Stiefel Laboratories Inc. “No one really knew. Then I showed them it was from the 2000 annual report of Enron.

“My point, and they got it right away: It’s pretty easy to write words down on a piece of paper and say these are our values, but it’s quite a different thing to live your mission statement, to really live the values.”

But Stiefel is well aware that a one-time presentation isn’t enough to guarantee that the nearly 160-year-old family-owned pharmaceutical company will continue to grow. And grow the company has.

For the most recent fiscal year, Stiefel Laboratories, which makes dermatology products, posted sales of $530 million, the first time it broke the half-billion dollar mark. That’s more than double what sales were five years ago when Stiefel took over as the company’s leader.

If he wants Stiefel Laboratories to continue to grow, Stiefel knows it will take more than just attention to values. His leadership doctrine includes a commitment to innovation, assembling the right team and an emphasis on communication.

Find ways to innovate
Stiefel Laboratories lists a number of “firsts” on its Web site, and each of those ties directly to its growth.

“Every one of those firsts has resulted in significant increases in revenue,” Stiefel says. “If you looked at a graph showing our historical sales growth, you wouldn’t find a straight line going steadily upward. You’d find a little bit of a plateau, with a slight upward trend, and then a huge burst upward, then another plateau and another huge burst.

“Each of those upward bursts, typically, is the result of some sort of product innovation.”

Innovation comes from carefully examining every idea, even if, at first glance, it seems unfeasible.

“By embracing even screwy ideas, there might be ideas that, at first, aren’t widely accepted, even if they’re not thought of as screwy — maybe ideas that sound too expensive or difficult to tackle — after investigation, proved doable,” he says.

That was the case with what became the company’s best-selling product.

“Our biggest product in the world is a product called DUAC Topical Gel — an acne product — that contains two active ingredients that chemically were considered incompatible,” Stiefel says. “When we were in a new products committee meeting several years ago, and this idea was first suggested, some of the scientists in the room suggested that it was scientifically impossible; it couldn’t be done. We explored it a little more and decided to try it.

“Eventually, our product development chemist did come up with a stable formulation, which we could patent. That product last fiscal year was the first product in our corporate history to enjoy sales exceeding $100 million in one country.”

While DUAC was a success, there have also been a number of failures. Innovation may lead to enormous opportunity, but it can also lead to failure. A company that strives for innovation must learn to tolerate failure and mistakes, whether they are in R&D or at the management level.

“Everyone on our senior executive team is going to make not only one mistake but probably multiple mistakes,” Stiefel says. “What I stress to them is, first of all, it’s part of business. You’re going to make mistakes. Whenever a mistake is made, the corporation will always try to identify the cause of the mistake, not to punish the person responsible but to learn from the experience and not make the same mistake twice. In the history of our company, no one has ever been fired for making a mistake.”

The problem doesn’t come when mistake is made, it comes later in the person’s response to that mistake.

“(It is) probably the concern of every CEO that a mistake is made somewhere in the organization, and the person who made it tries to conceal it for fear that his or her job might be jeopardized,” Stiefel says. “That can really compound the number of problems that emanate from that mistake.”

Find the right people
No matter how good Stiefel’s vision for the company is, or how well it gets communicated, it is still up to the employees to carry it out. And good people bring good ideas.

“It all comes down to the people you have,” Stiefel says. “I try to recruit the best people in the industry at every discipline — marketing people, salespeople, research and development people. A lot of creative product ideas come from the marketing side rather than the research side, which might sound surprising.”

First and foremost, the key to bringing in top talent and keeping them is to pay them well. Even though Stiefel is not among the largest pharmaceutical companies, he says his salaries are competitive. He likens it to a baseball team that consistently makes the playoffs.

“There are certain teams, like the Yankees, for instance, who are competitive every single year,” he says. “The reason they’re always competitive is they buy the best talent. In college sports, you’re limited by the number of scholarships that you can offer. In pro sports, you’re limited, to some extent, by the pro draft and salary caps.

“In our industry, there’s really no reason a company couldn’t hire the absolute best person at every single position. That’s really what I’m striving to do.”

The benefit is clear.

“If you have the best people in line, and you try to foster an environment of creativity and reward creativity, then hopefully we’ll continue to be fast on our feet, and we’ll continue to be innovative and creative.”

Become a better communicator
With 3,000 employees in subsidiaries spread across 30 countries, communication is essential to the future of the company.

Stiefel improved communication by hiring a COO to handle some of the day-to-day responsibilities and reduce the number of direct reports Stiefel himself oversees, freeing him to practice his laissez-faire management style.

He says that now, he can “ask questions rather than dictate answers, seek input from all stakeholders, search for best practices, build consensus and drive the decision-making process.”

Having those clear lines of communication also allows conversations both up and down the management chain.

“I do solicit feedback from our senior executive team on anything that I propose to do,” he says. “My management style is not dictatorial. It’s more consensus building. I repeatedly encourage all of our senior executive team to offer opinions about what I’m proposing to do. Oftentimes, they have valuable suggestions. It can alter what the original plan was.”

While Stiefel can influence his direct reports, the key is making sure the rest of the employees are working together.

“I push very hard to create a corporate culture of mutual respect,” Stiefel says. “Everyone in the company is treated with respect, with dignity. During strategy meetings, no matter what ideas are presented, the rules of engagement are that no one insults or speaks negatively about someone else’s idea.

“Even ideas that, at first blush, seem to be ideas that lack potential, we’re still willing to at least explore those ideas and give the advocate a chance to champion the idea. Hopefully, no one ever feels that a creative suggestion is going to be scorned. A company can do things like that that help encourage people to bring creative ideas forward.”

During his presentation in Madrid, Stiefel spent a great deal of time talking about communication. It’s a message he wants managers to send down to every layer at the company.

“There’s a lot of reassurance that has to be given,” Stiefel says. “We don’t play political games here. We want complete transparency, and we want communication that’s completely open, with no hidden agendas.”

HOW TO REACH: Stiefel Laboratories Inc., www.stiefel.com

Pioneering a new standard

 In 2004, Arthur Rhein had a difficult choice to make.

He could stick with the electrical component distribution business his company, Pioneer Standard, was founded on, which at best would have meant slow growth, or he could take a risk by transforming the organization to take advantage of new opportunities in the software field.

“With all of the pressures on business profitability and globalization, U.S. industry has gone through a phase where we’ve had to recognize new realities,” says Rhein, chairman, president and CEO of the company that, in 2004, changed its name to Agilysys Inc. “The reality is, markets change. Companies have to change and adapt. As we looked at the industry we were in, which was primarily the electronic component distribution business, and we looked at what had occurred, we recognized that we had better opportunities in the enterprise computer solutions business.”

One thing became clear: The company had to change.

“There was no epiphany,” Rhein says. “There was no bell that rang. It was an evolutionary understanding that things were, and had, fundamentally changed.”

While the growth potential was promising, it was still a difficult choice to divest the company from its foundation.

“It was a very emotional decision,” says Rhein. “I’ve often said it was far more difficult emotionally than it was intellectually. It was divorcing ourselves from the roots of the company.”

Rhein sold the distribution portion of the business and said goodbye to many people he had worked with for more than 15 years.

Once the decision was made, Rhein became the lead change agent setting goals for the company, communicating that vision to employees and relinquishing responsibility to those who could better handle it.

Set clear goals
For Rhein’s vision to succeed, he had to create a series of goals that his employees could rally around and that others invested in the future of the company could use to gauge the success of the transformation.

“I wanted to choose goals that were broad enough that our entire organization could identify with, as well as other constituencies — our shareholders, as well as Wall Street,” Rhein says. “So, I tried to achieve a balance between trying to develop a set of goals that were easily understood, yet were aggressive enough and measurable enough that we could, in essence, review a report card and keep it concise.”

To identify goals to meet those needs, Rhein turned to his most senior employees.

“I don’t think you can do it in a vacuum,” he says. “I don’t think you can sit in a room and decide for yourself what those goals are. I like to think that we deal in a very collegial fashion in this company. We’re pretty open with each other. You’ve got to involve your management team and listen to them. Sometimes they know better than you do.”

The team bandied about a number of ideas about before settling on the few that would carry the team through the change.

“At one time we had probably 20 different measures on the board,” Rhein says. “And picking out the ones we thought were among the most important — not necessarily the most important — ones people could feel good about, and at the same time, we could measure them and report back to ourselves how well we were doing.”

There was no magic formula for picking the goals that were the best ones to carry the company forward.

“Other than utilizing your management team to develop the list, when you’re done, it’ll just feel right, or it should feel right,” Rhein says. “There was no empirical way of doing it. When we got all done, we said, ‘Gee, this feels pretty good. This looks like it covers it all.’”

And there is one more reason for involving the senior leaders.

“You come to a shared vision,” Rhein says. “It’s much more effective than trying to impose a vision. It becomes much easier to lead as opposed to having you be the individual with the single vision that you have to convince people of.”

Some of the key goals were growing sales faster than the markets the company participated in, growing profits faster than sales, increasing operating profit to 3 to 3.5 percent, driving return on capital to 10 to 12 percent and reducing the debt-to-total-capital ratio to 35 percent.

“We tried to get a decent balance so that these were lofty goals,” Rhein says. “Some people might have thought of them as stretch goals. They still had to be achievable, and we had to be able to measure them, whether it was empirically, because it was a specific set of numbers, or by taking surveys of our employees.

“As the leadership, we understood this was a radical change. As such, people really needed to understand that this wasn’t business as usual. It wasn’t what was in vogue because we all read the same new book that came out six months ago. This was the leadership of the company, not just me that decided we needed to take the company in a different direction.”

Get employee buy-in
For Rhein’s transformation to work, he had to explain what the changes were and, perhaps more important, how employees affected those goals. Rhein tasked his top 180 or so senior managers with conveying the message throughout the organization.

“We not only told them what the goals were, we then told them we expected them to discuss them with their subordinates,” Rhein says. “We gave them a series of talking points, how they should go about explaining and helping our team understand that this is the new direction that we were taking, and here are the goals we’ve set for the near term, as well as some longer-term goals.”

The more employees understood, the better off the company would be. And although he may not deliver the message with the frequency he did in the early days of the change, the message has become more ingrained throughout the organization.

“We take an annual survey of our employees,” Rhein says. “We were getting fairly good feedback that our employees were getting more comfortable, that we were being open and informative, and they could better understand our strategy.

“I don’t want to say they understood it. I don’t want to say it was 100 percent effective. It wasn’t. But the combination of things we were doing was confirmed not just in the first survey. We’ve taken it each year. We’ve gotten positive feedback in terms of the percentage of people that are able to respond that they understand our strategy.”

Rhein says not every employee needed to understand the goals or even why those specific goals were selected.

“I didn’t think it was appropriate, nor did I think it was of value, to review why,” Rhein says. “‘Why’ would have meant pointing out what was wrong with the company. I wanted to emphasize what was right. We had wonderful people. They were skilled, they were talented and they were capable of changing.

“I assumed the posture that if they didn’t understand — and this may sound self-serving, and I don’t mean it to be — they just had to accept that leadership understood that we were moving in a different direction.”

A lack of understanding was something Rhein could live with. Challenging the change was not.

“You need to identify the laggards, the people who are resisting the change in your management team, the people who don’t really want to do it or they don’t buy the premise,” says Rhein. “You need to identify them quickly, and you need to move them out of the organization quickly.”

It’s not hard to identify those employees, he says.

“You just have to listen to people,” Rhein says. “You can tell. Your management team can tell who among their respective reports are not really following through. You can tell people who are rather reluctant. It’s in their words, their deeds, as well as body language.

“You have people working against the flow, and it will take longer. By allowing them to remain in the company, it fosters seeds of doubt with those who recognize these are people who are not part of the program. If you take quick action, you’re also telling the organization, once again, this is not business as usual.”

It’s not always easy to do, but you must rid the company of those people as quickly as possible.

“Although I acknowledge that it was a few, there were people in the organization that I absolutely should have moved out sooner,” Rhein says. “In deference to either their years with the company or the personal relationships with their management or even me (I allowed them to stay too long). With the benefit of hindsight, I should have moved quicker in not only identifying the people, but also ferreting them out.”

Delegate responsibilities
Rhein knew that making grand changes in the business meant significant changes to the leadership team. For example, he wanted the new company to grow through acquisitions, and while it had made a few, it was not Rhein’s area of expertise.

“During the period leading up to the beginning of the transformation, I did an assessment of the skill sets within the company and recognized my management team needed to be augmented,” Rhein says.

Bringing in an acquisition expert and putting him on the executive committee meant relinquishing control of some aspect of the company. And that’s something that’s not always easy for executives to do.

“It is the most difficult for the individual leaving the job to truly leave the job,” Rhein says. “It has to do with the evolution of your responsibility as you move up within an organization. Typically when you start with an organization and you are successful at what you’re doing, you’re usually at the level of an individual performer — a top salesperson or a sales manager. Most of the time you’re dealing with, ‘I have achieved.’ You can point to very specific things you’ve done that are easy for you to get your arms around and feel that sense of reward. Somewhere in moving from an individual performer to a manager, you move to the ‘We have done it.’ It’s no longer ‘I.’

“At the early stages of that ‘we’ is the royal we. The person who is using that is really emphasizing the first person. You really must move to ‘we,’ where it is a shared execution. You don’t own it, you participated in it. That’s a very tough transition for managers to make. You’re leaving behind your security blanket.”

Even if executives can make that transformation, Rhein says they must take it one step farther.

“There is one more level, which is ‘they,’” he says. “For me, ‘they’ is not a royal we. It’s the organization. On a day-to-day basis, I don’t do much to move the needle forward or to move the marble across the table. I am influencing people; I am motivating people. It’s soft. I may visit a customer. … I don’t close the order. I’m there as a show. I’m there for my title. My sales team closed the order. They just used me as a tool in the process.”

Rhein’s changes have led the company to rapid growth. In the three years since he began the transformation, the company has increased revenue from $1.17 billion in fiscal 2003 to $1.74 billion in fiscal 2006. In that same time period, net income went from a $42 million loss to a profit of $28 million.

“We are certainly very proud of our accomplishments,” Rhein says. “We are humble in that we recognize that a lot of things had to come together. Without the entire organization’s commitment and hard work and dedication, we would not have accomplished what we set out to accomplish three years ago.”

HOW TO REACH: Agilysys Inc., www.agilysys.com

Weathering the storm

 Jeffrey Stoops was facing a crisis.

His company, SBA Communications Corp., was in such financial trouble that advisers were pointing to bankruptcy as the only course of action for the owner and operator of cell towers.

Investors in the industry had started to focus on free cash flow, so wireless carriers slowed their expansion. SBA, which had been rapidly expanding to keep up with industry demand, was suddenly left with a lot of towers, decreasing demand and no cash flow.

“Everybody was advising us there was no way out —you had to go ahead and file Chapter 11, reorganize your debts,” says Stoops, president and CEO. “There were five public tower companies at that time. Two had already done exactly that. People were pointing to that and saying, ‘See, this is how it works. Do that, and everything will be easier going forward.’

“We just didn’t think that was the right way to go, so we didn’t. We were fortunate to find a separate solution.”

The situation required extreme measures. Stoops pared the work force of 1,500 to 400 and sold about 20 percent of the company’s towers to raise cash.

The company survived the crisis because Stoops continued to hold to a business philosophy he calls his moral compass, communicated with his employees openly and honestly, and stayed true to his business plan.

“Our deep-seated driver at that time was, you don’t go bankrupt unless you absolutely have to,” he says. “You don’t wipe out your shareholders, even if management can stay on and continue with the company. You never ,ever go through Chapter 11 if you can avoid it. That’s just a deep-seated part of my beliefs and culture here that the rest of the team fully signed on to.”

Using a compass to find your way
Stoops’ moral compass is a combination of principles and questions with which he runs the company.

“Honesty and integrity are right at the top,” Stoops says. “Those are things that we believe are essential to running a good business. We took a broad approach, a more holistic approach of the things that matter to us as operators and managers of the company.

“We have a set of guiding principles and a mission statement that we developed several years ago. We have it on posters. We hang it around the office and we continue to use those guiding principles to lead us and shape that compass.”

Stoops needed those principles to navigate through the changes in the industry that left the company troubled in 2002 and 2003. The focus on cash flow put the company in a serious financial bind.

“We were looking at a situation where we were really looking at hitting the wall because we couldn’t get any banks or other financiers to deal with us,” says Stoops.

Despite the challenges brought on by the evolving industry, Stoops stuck to his philosophy and made decisions on how to run the company based on his moral compass.

To find his way, he asked the most important question: What is best for the shareholders? When people were pressing him to declare bankruptcy, gather the remnants of the company and move on, he turned to that question to find the solution.

“These were personal decisions,” he says. “I would think every company, whether they write it in their mission statement or not, wants to avoid bankruptcy. It came as a more deep-seated understanding of, ‘We’re here to serve our shareholders, and what is the right thing for our shareholders.’

“It wasn’t, ‘What’s right for our employees?’ It wasn’t, ‘What’s right for the management team?’ It wasn’t ‘What’s right for our customers?’ I say that now as if it was black and white. It’s never that black and white. All those were valid questions. We have to take into account all those constituents in everything we do, but ultimately, when there was a conflict that arose between what was right for the employees or the management team or the shareholders, you always had to do what was right for the shareholders.”

Every executive needs to answer those key questions for his or her company. Stoops says it’s not difficult to develop a philosophy, and it makes solutions to those difficult decisions much more apparent.

“Sit back and take a clean sheet of paper and write down the five or six broad attributes of the company that they want to run, and when you do that exercise, it will become very clear,” says Stoops. “People will get very comfortable quickly with the parameters of that compass. A lot of it comes back to good old-fashioned common sense and good relationships to dealing with others. Our guiding principles are not really that specialized. It’s honesty, it’s integrity, it’s hard work, good work ethic, respect for others and have fun.

“When you get into a particular question that may seem confusing or may have various different outcomes, pull out your guiding principles to refresh your thinking on what is your most important constituency, and it actually allows you to solve those conflicts and questions much more easily.”

Communication
When Stoops laid off 1,100 employees and sold 800 towers, it created the type of environment where rumors and misinformation can cripple a company’s efforts to move forward.

Stoops says the key to avoiding this was communication.

“You have to communicate clearly,” says Stoops. “You have to portray yourself with a high degree of honesty and integrity. You may not know all the answers, but that’s not the time to be making them up.

“It is much more of an art than a science. We try to communicate as quickly, as clearly and as promptly as we can. In some cases, we can’t do that. We are very careful about saying what we can but not providing any false ray of hope or language that could be later construed as ambiguous. It’s very much a team effort that involves our human resources group, our investor relations group, and we do pride ourselves on clear and simple communications. Our style there has been one of being straightforward and blunt, even if it hurts.”

Stoops held a series of town hall meetings to address employee concerns during the crisis.

“When we didn’t know what the future would bring, we told the employees that,” Stoops says. “We found that was more reassuring than not. What people wanted was honesty and credibility. Some managers underestimate the intelligence of their employees, even down to the lowest level. People are pretty smart, and they can figure things out. You need to treat them as such.

“Be honest and open with them. Give them what you can. For a year or two, we held compensation absolutely flat, but we tried to make up for it with more flexible work hours and more fun around the office.”

It’s a delicate balance executives must manage when they talk with their employees and customers, but honesty is key.

“There are going to be questions where it is OK for the CEO to say, ‘I don’t know the answer to that,’” he says. “It creates in the mind of the employee that they have a leader of very high honesty and integrity who is going to work for them really hard.

“I think to try and create and perpetuate a vision of the CEO as all-knowing and infallible, then you’re not giving credit for the intelligence of the employees, because they’re all smart enough to know nobody knows everything. The all-knowing CEO who knows the answer to every question is vastly underestimating the intelligence of his work force.”

Stick to the plan
Even during the company’s dire financial difficulties, Stoops remained steadfast.

“Our strategy has been very consistent since Day One,” he says. “The things that we can control are what we focus on: execution, keeping our people sharp and motivated. That is a big challenge always in business, but particularly in our business, where strategies don’t change and it’s all about execution and doing what you did yesterday, but doing it a little bit better today and even better tomorrow.”

Stoops constantly benchmarks where the company is today in comparison to the previous week, month or year.

“We track, measure, evaluate, adjust and repeat,” says Stoops. “We keep repeating the cycle.”

For example, the company tracks same-tower revenue growth, cash flow and revenue growth, and compares those figures to the industry averages.

Stoops shares that information with employees, which helps them develop a team approach and a competitive attitude. Whether it is the day-to-day operations or when the company was struggling to survive, decision-making and planning start with measuring.

“We were able to script out fairly precisely the plan that we needed to adhere to during this period of time,” Stoops says. “It involved letting some people go. That was easy to track. It was reducing our expenditures and hitting our target expenditure levels. That was easy to track.”

Sticking to the plan made sense. Even during the downsizing, the company was increasing the amount of money coming in.

“It was interesting because all during this period of this time, the business was growing,” Stoops says. “It just wasn’t growing fast enough to keep up with the debt burn.”

The business plan didn’t change, but it did get put on hold.

“We just downsized and stopped investing in new assets for a period of time,” Stoops says. “That was probably much easier to control and get everybody on board with than a wholesale change in our business, which we did not have to do. We just had to downsize just a bit.”

The focus has since shifted back to increasing SBA’s presence.

“We’re constantly in the business of adding good assets to the company,” Stoops says. “It’s a core part of our strategy, so we stay constantly in the mix of opportunities. We don’t buy everything because there are price issues and quality issues. But if it fits our checklist, we are interested in acquiring it or building it.”

A checklist for new assets is another way of tracking and measuring quality against the company’s plan.

“It’s very lengthy; it’s very detailed,” Stoops says. “It gets to all aspects of the quality of towers that we’re looking at, the competitive landscape for those towers, our viewers of the geography of where they’re located — is it a high-growth area or not such a high-growth area,” Stoops says. “We have a two-page checklist.

“It was developed over the years, starting all the way back when we bought our first tower in 1997. It’s a living and breathing document that gets changed and modified as necessary, as we get smarter every day.”

Stoops’ strategies have paid off. The company went from a $53.8 million loss from continuing operations to $4.2 million in income from continuing operations between 2003 and 2005. Revenue in that same time period increased from $192.1 million to $260 million, and Stoops expects that to reach the $350 million mark this year.

“Our success here is we have developed a very good business plan, a good strategy,” Stoops says. “We’ve stuck with it. We continue to constantly challenge it, reanalyze it, change it if necessary. We haven’t found the need to change it much. Then (we) just continue to measure analyze, adjust and watch the overall market trends, up or down, which will be the ultimate governor and guide for what we do with our excess cash. We’ve kind of got it down to a very manageable and predictable system.”

HOW TO REACH: SBA Communications Corp., (800) 487-7483 or www.sbasite.com

Change or die

For nearly 80 years, MasTec Inc. survived through the booms and busts in the telecom infrastructure industry.

But the highs of the late 1990s that led to enormous growth gave way to one of the fastest and deepest busts to affect any industry, and it became Austin Shanfelter’s job to lead the company through that troubled time.

“No one could have projected how tough it was going to be,” says Shanfelter, who was named president and CEO in August 2001, shortly after the downturn began. “If you look back at history, at no point has a single industry taken such a decline in such a short period of time as the telecom industry from late 2000 to mid-to-end of 2001. It crashed hard. I knew it was going to be difficult, but I didn’t know how difficult.”

Some of the difficulty MasTec experienced was a direct result of living too much of the good life.

“It was an explosive industry,” Shanfelter says. “Money was flying, being spent on new generation telecom opportunity. MasTec was asked to get into a lot of businesses that, in hindsight, weren’t core to what we did on a daily basis.

“At the time we got into those businesses, we were rewarded well on Wall Street for taking those opportunities. We were a victim of wanting to grow, our customer needs and really an industry that was being overfunded.”

By 2001, the industry was deep into its slide. MasTec, a contractor specializing in the building, installation, maintenance and upgrade of communication and utility infrastructure systems, was forced to write off about $200 million in uncollectible receivables from failed upstart local phone companies.

Shanfelter and his team spent the first few months of his tenure deciding the company’s new tack and then began the much longer execution phase.

“It was a three-year period of time,” Shanfelter says. “It was all hands on deck. There was no one we didn’t deal with in our decision-making, from our managers down through our field managers, to our customers at the corporate level, local and regionalized levels and to our vendors. Everybody was touched in the process.”

One of the major decisions was to divest noncore businesses and downsize from 10,000 employees to 6,500.

“We were in a survival mode,” says Shanfelter. “We needed to cut out the nonsuccessful businesses.”

Shanfelter cut operations in wireless, network services and large-bore directional drilling and in operations in Brazil.

“We did it fairly rapidly,” he says. “You need to get to the bottom of where you make the turn of profitability.”

While establishing financial stability was key, the company explored more facets than just money to decide which businesses to exit.

“We got underneath the numbers,” Shanfelter says. “We got with our clients, we got with our team members and really looked at the predictability of a long-term commitment to that market.”

MasTec sat down with its customers so they could grow together. The challenge was to figure out where customers were going, where the opportunities were and where the company could make money.

“If it showed trending that was more positive, if we believed we had more predictability, capability and capacity in it, then we went ahead and put our energy toward growing and developing that business,” Shanfelter says.

Those that didn’t show signs of a profitable future were divested. The decision to dismantle parts of the business and lay people off wasn’t easy, but it was necessary.

“I’ve always been a person that wants to build things, not tear things down,” Shanfelter says. “You never build greatness out of reducing size. It’s difficult; it’s never easy, and it’s never perfect. What we told our people was, our job was to make sure 6,500 people had work rather than lose a business.

“People worked together to cut out the extra costs that were necessary. It was a team effort to address the situation, not an individual one.”

While most of Shanfelter’s reductions came from the divestiture of noncore operations, some changes came from the need to move the company in a new direction.

“There are people that can do turnarounds; there are people that can drive business forward,” Shanfelter says. “We’ve got a bunch of great people that have survived a turnaround that are driving the business forward. Some of it is you evaluate your personnel and you realize they’re just not up to the task. Some of it is you ask people who have not risen yet to rise, and they do a fantastic job.

“It’s amazing when you put a challenge in front of somebody who has been dying for one their entire business career, how they rise to the occasion. Lastly, you look outside to find expertise that has been there and done some of this before. You try to select them and bring them in as part of your team.”

Communicating the vision
During the turnaround, MasTec had to work through a number of financial crises, including late SEC filings, financial restatements and the renegotiating of bank agreements.

While those issues were being tackled, Shanfelter says the key to minimizing any damage was making sure everybody involved knew as much of the plan as possible.

“We were very active on a daily basis with everybody — whether it was Wall Street, whether it was internal, whether it was a board issue,” Shanfelter says. “We proactively tried to touch base with people on a daily, weekly basis. You can run and try to hide your head in the sand, or you can stand up and deal with the issues head on. We took the position that we needed to deal with issues head on, every day, good or bad. And I think because of that strategy, we got the company back on its feet and we won a long-term commitment from our vendors, customers and associates that is hard to replace.”

Despite his willingness and even desire to talk about MasTec’s position, there were times when federal regulations prevented him from explaining the company’s activities.

“When you’re going through the late filings, you can’t communicate with anyone,” Shanfelter says. “All you can do is communicate with the Exchange.”

Shareholders and analysts often called with questions the company was not allowed to answer. Shanfelter knew those calls still needed to be acknowledged.

“We responded to them by saying, ‘We’re here,’” he says. “The minute we can, we’ll speak more. We got back to them with what information we could every single day that they called. Nobody went more than 48 hours without a response from us. You just have to grind it out and get them what you can get them on the basis that you feel the information flows.”

Shanfelter credits that approach with getting the company through a difficult period.

“Looking back, it was an incredibly strong strategy,” he says. “We saw the proof in that pudding when we went out and did the secondary offering early this year, and we saw a lot of our old shareholders come back in to the deal in our secondary. We couldn’t have even thought about them doing that if we hadn’t done what we did during the troubled times.

“We believed, with the turmoil that we were going through, that one message fit everyone. We needed to be consistent and precise on what we were communicating. At the end of the day, whether it was our banker, our vendor or anybody, they all needed to hear the same story.”

As proof of the positive effect of communication, Shanfelter points to the fact that during the turnaround, the company didn’t lose a single significant customer.

“As a matter of fact, if you look at some of our major customer bases, we increased our market share,” he says. “It’s easy to communicate in good times; it’s very difficult to communicate openly in tough times. People truly see your character and the company’s character in those tough times. We won over people with our perseverance and out-and-out passion for the industry that we’re in.”

While the message outside the company was important, Shanfelter was aware the message he delivered inside the company — especially after laying off more than one-third of the employees — was equally significant.

He says it is difficult to explain to people that the layoffs were the right thing to do, especially in today’s business world, where the average worker views corporate America with a wary eye.

“I’m a person that does a lot of one-on-one and a lot of visits, as well,” Shanfelter says. “We traveled. We communicated, communicated, communicated. I know that’s a cheap word, but whether it was e-mailing, whether it was newsletters, whether it was phone calls, whether it was personal visits, we really worked to stay in touch with our people, our vendors and our clients through the turnaround.”

Shanfelter says a company has six to nine months following a change in the vision when employees question the message they’re hearing from the top.

“Your job is to make believers out of people, and that is a day-to-day process that really involves my entire executive team,” he says. “As you communicate with people and they see the changes are making a difference, they see they are getting something back. They see they are earning more money because we are taking care of those that are more productive. They see that you’re adding something as simple as additional paid time off.

“They see you care about them as individuals. Those things add up quickly.”

Providing leadership
Leading a turnaround is a major challenge, and Shanfelter says you have to give everyone involved — including customers and the rest of the business community — a strong leader to follow.

“It’s a determination of relentlessness that you’re committed to your cause and you’re committed to what it’s going to take to make a great company,” he says. “You involve your team members as much as you can, every time you can, to get them to do the same thing you’re doing.”

To get buy-in, an executive must be willing to do more than dictate orders.

“You’ve got to be willing to work as hard or harder than anybody you’re asking to work harder,” he says. “Our management team works as hard as every one of our workers in the field. It became contagious; you’re putting your money where your mouth is. It’s a day-in, day-out effort and grind.”

Shanfelter says that something as simple as showing up early every day can have a profound effect on employees.

“Over time, you win over people that count on you, that when they come to you with a problem [they know] you’re going to work with them to find a solution and support them whether they make good or bad decisions,” Shanfelter says.

Shanfelter says there are two keys to providing leadership through difficult times.

“You’ve got to have the passion and the perseverance to just grind it out,” Shanfelter says. “You’ve got to surround yourself with incredibly passionate, persevering type people. At the end of the day, systems will help, conditions will help, but it’s about people. It’s always about people.

“I found myself really working to build a stronger and stronger team throughout the process. People know where we’re going and why we’re going there. We’re rowing the boat all in the same direction.”

Shanfelter’s vision and leadership have turned the company back toward profitability as revenue increased from $656 million in 2002 to $848 million in 2005. MasTec posted a $123.6 million loss from continuing operations in 2002 but posted $18.6 million in income from continuing operations in 2005.

Despite the positive impact — or maybe because of it — Shanfelter has not changed his management approach.

“What really changes is your time allocation,” he says. “You take the same energy you were using to fix things and you put that on efforts to grow things and develop things. We still have to communicate with our customers. We still have to communicate with our team members. We still have to communicate with our shareholders. We still have to communicate with our bankers and the people who support our business on a daily basis.

“You do that even more so now. You don’t fall in to the trap that we’ve got everything fixed, we don’t need to talk to those folks. You try to communicate more now, and you try to work proactively on new business.”

The crisis may have passed, but that doesn’t mean Shanfelter is ready to rest.

“There is still challenge ahead of us,” he says. “There is still a tremendous amount of opportunity ahead of us. The difference is, we started to show (improvement) on a month-to-month basis, a quarter-by-quarter basis. Not only do we see it from dialogue with our clients and our understanding of the industry we serve, we see it in our actual performance.

“That’s what gets people excited — when you take on a hard-fought battle to keep your head above water. You go from that to starting to look forward to being best-in-class. That’s where people get real excited, and talent really shows its best side.”

HOW TO REACH: MasTec, (305) 599-1800 or www.mastec.com

All inclusive

Fred Lowe’s motivation back in 1997 was simple: Venture capitalists had just pumped $22 million into his company, the former CEO had just retired and it was now Lowe’s job to find a way to make those new stakeholders happy.

Lowe wanted to grow AmCOMP Inc., but before he could take the workers’ compensation insurer outside its Florida-based comfort zone, he had to make sure the employees were comfortable with one another. The company was profitable, but Lowe, now chairman, president and CEO, knew that for it to grow successfully, the departments comprising the company had to learn to communicate more effectively.

If people in the same building weren’t talking to one another successfully, how could he ever expect offices across the country to do so?

“We felt that the company had built silos between the various departments,” Lowe says. “There weren’t the interactions between the departments we felt were necessary to achieve what we hoped to achieve, particularly when we were embarking on an expansion plan that was going to take us into other states.”

Much of the problem was simply the way the office was structured. During its 15 years, the company had grown from roughly 4,000 square feet to more than 30,000 square feet.

“We don’t have the best physical setup in our home office, which is where the silos began,” Lowe says. “We’re on four different floors. The building wasn’t built with us in mind. We felt we had to do something extraordinary to break down and get people communicating more closely.”

To accomplish that, Lowe, along with executive vice president and COO Debra Cerre-Ruedisili, decided to get every employee involved in writing the business plan that would take the company to the next stage in its evolution.

“Our objective was to get the departments communicating more closely with each other,” Lowe says. “We … explained we were going to start from the bottom up and put a business plan together that incorporated everyone’s objectives and goals.”

The company had about 60 employees at the time. Most department managers had just three or four employees, and Lowe wanted to get them all involved in the process. Before they got started, management explained the reasoning behind the change in process.

“We communicated that what we were trying to achieve is getting the different departments of our company working together to produce an improved result for the company, which then produces improved income for employees, managers and executives of the company,” Lowe says. “We explained why we thought it was important to do. We wanted the company’s culture to be a representation of the employees of the company, and therefore, their input was critical to us achieving the kind of business plan we wanted to achieve. That then gives us something to measure ourselves by as we go forward.”

Managers made writing the business plan an integral part of their regular department meetings. Despite the time management took to explain why the change was made, not everyone was on board initially.

“The first time around, I heard some grumbling — ‘I don’t have time to do this,’” he says. “We haven’t heard that kind of grumbling in the last several years. Frankly, it doesn’t take as much of their time today as it did the first time around.

“Some persons attacked it enthusiastically. Some thought, ‘What are we doing this for?’ As they got into it, they developed a vision statement and mission statement. Different departments had different suggestions about what the vision statement of the company should be and what the mission statement could be. It ultimately evolved into what it is today.”

The initial plan took about four months to complete, four times longer than it does today even though the company now has about 450 employees.

“We’d follow up with subsequent management meetings as to what kind of progress they were making and keep setting targets as to time to get it completed,” Lowe says. “It took us a lot longer than we originally had envisioned. We felt, ultimately, the effort was worthwhile.

“(In) subsequent years you build on (the existing plan). Each year, we send out the previous year’s business plan. They have a chance to review what their previous objectives were last year and modify them.”

Department managers, along with their team, discuss and set new goals and targets.

For example, the Midwest region set a goal to write and retain profitable workers’ compensation insurance business totaling more than $115 million in 2006.

“In each business plan, it’s been our goal to retain as much profitable business as we can,” Lowe says. “In doing that, it also feeds into part of the budget process, because they have had to look at their book of business, see what they wanted to renew and then make estimates on what we wanted to renew, how much we are able to renew and so forth.”

In the old approach to business plan writing, a top-level manager pulled bits and pieces of information from the departments and put the document together. There was no need for any department to check with any other. By involving the employees, each department must now talk to the others to get the necessary information.

“A lot of interplay goes on in expressing those goals,” Lowe says. “They have a targeted loss ratio. Our internal actuary gets involved with (that department) in that discussion as to what kind of pricing they have to have to get to the goals that they have. They have to evaluate the competition to see if they can achieve that pricing in the market. The very nature of it achieves a lot of the communication goals.”

Each department submits its goals to the home office, where they are compiled into a comprehensive document.

“Then we send the business plan by e-mail to all the members of the management team,” Lowe says. “They sit down with their department heads. The department heads sit down with their employees and talk about their portions of the business plan.

“We like for employees to be familiar with what other regions’ goals and objectives are and what they are doing to achieve those goals and objectives. They might find some thoughts and ideas in there that they can use I their own regions.”

The process is complete once the company’s audited financials are compiled.

“Now we do the business plan every year; it starts from the bottom up every year,” Lowe says. “Everybody identifies what the critical success factors are for their region, their state and for their department. All those things are included in the business plan as goals of the company.”

Every employee gets a copy of the plan every year.

Going through this process, employees are more engaged in the company, and they now have more interest in what is happening outside their own areas.

“Everybody is aware of what each region’s and each state’s goals are, and there is a certain amount of peer pressure — ‘Are you achieving your goals?’” Lowe says. “‘We’re doing pretty good on ours.’ It has forced everyone in the company to clearly understand what they are trying to achieve. Sometimes, that in itself is difficult to communicate effectively.”

Getting everyone involved in the planning process has broken down the silos that were an obstacle to the company’s growth.

“I’m not going to tell you communication is always perfect through every department of our company, but compared to where it was 10 years ago, it’s not even close,” Lowe says. “The efforts that we’ve made to develop this culture, which is a difficult word to define, has made all of our departments in all of our states and all of our regions more sensitive to the things that are necessary to develop an underwriting profit in this company.”

Having the employees develop the business plan was all about better communication, and that is something that Lowe tries to carry into other parts of the organization, as well.

“The lesson that we learned along the way was how important it was to communicate with all the parties that are involved in our company,” Lowe says. “I would start with employee communication. Communication can be so impersonal today. You’ve got e-mails, voicemails, letters, telephone conversations.

“We found out communication by edict was not nearly as effective as turning the communication upside down. We had so many things to accomplish. Communication was critical to getting all of our employees on the same page, having the same goals. We think over-the-top, extra-effort communicating is a critical factor in developing the culture that has delivered the results that we have delivered over the past five or 10 years.”

The culture of employee involvement has created a culture that Lowe says is key to AmCOMP’s success.

“A relatively small percentage of property casualty insurance companies consistently have underwriting profits,” he says. “Most of them depend on their investment income to generate their net income at the end of the day. We have tried to develop this culture where we make an underwriting profit every year. We’ve been successful in developing a culture that has targets and goals as an underwriting profit company.

“That’s the culture that we’re trying very, very hard to maintain, and at the same time, grow the company. The most difficult time to develop underwriting profits is when you’re also pushing to grow your top line. We want to make it clear the growth of our top line is secondary to the goal of achieving an underwriting profit in our company.”

Lowe’s strategies are working. In 2005, the company posted revenue of $267 million, and Lowe expects that to grow 5 percent to 6 percent this year.

“Despite being capital constrained through 2004, we outperformed the workers’ compensation industry over the past 10 years by 19 percent a year,” Lowe says. “We’ve grown four times faster than the industry in the last five years. We’ve had a return on equity that’s twice as high as the industry over the past five years.

“Ultimately, what it’s resulted in, because of that record, we were able to raise $32 million of venture surplus in 2004 and an additional $48 million of stockholders’ equity in our IPO last February.”

Lowe knows not to mess with a good thing.

“It’s produced results for us,” Lowe says. “We certainly don’t do everything perfectly. We’ve had missteps. We’ve eaten the mistakes and hopefully learned something from them and hope we don’t replicate them in the future.”

HOW TO REACH: AmCOMP Inc., (561) 840-7171 or www.amcomp.com

Restating the goals

 When Mark Perlberg became president of Oasis Outsourcing in 2003, there wasn’t a need to change much of anything.

The company was one of the largest professional employment organizations (PEOs) in the country, and although revenue had flattened, Oasis was profitable and paying the bills. But Perlberg thought it had only scratched the surface of its opportunity.

“This was not a turnaround,” says Perlberg, who is now also CEO. “Oasis had grown; it was already one of the larger PEOs in the country. It was profitable.”

But Perlberg did not think the company, which provides administrative services for small and medium-sized companies, was anywhere near its potential.

“The challenge was a growth challenge,” Perlberg says. “The business had plateaued a bit. If you look at that approximate period of time, the business was not growing much in its recent history. So the challenge was, how do you come in and develop a sound set of growth strategies to take Oasis to the next level?”

While Perlberg had some ideas about how to do that, he knew that before he could rework the system, he needed to gather the support of the employees. The only way to do that was to show them he knew what he was talking about, so Perlberg spent three months studying the company and the industry.

“You have to do the homework first,” Perlberg says. “You’re way more open to valid criticism of, ‘You may have done this or that in other places, but you don’t really know the PEO business’ if you haven’t really taken the time to do the homework.”

Perlberg’s homework included talking with employees at every level of the organization. He went on calls with salespeople and talked to customers.

“It really was an education process for me that I wanted to go through as quickly as possible but as completely as possible,” he says. “I will sit down with them in small groups, sometimes one-on-one, usually both, and have a very open-ended discussion covering things like what they do but also getting them to talk about issues and opportunities — things that they struggle with in their day-to-day jobs, things that they see as great opportunities for the company.

“I use that opportunity to do my own due diligence so that I can develop a view of where we are and where we need to go.”

While that approach was particularly intense during his first three months at Oasis, Perlberg says it is an ongoing part of his management style.

“I want to maximize the likelihood that the course that I help set is going to be the right course,” Perlberg says. “It’s also important from an internal and external credibility standpoint. If you come in and say, ‘I’ve been in a lot of different businesses, here’s what we need to do,’ and it’s very clear to everybody that you haven’t done your homework, you’re not going to get the same level of buy-in that you will get if it’s clear that you’re trying to do your homework first before you come up with any strategy and implementation plan.”

Mission and values
Armed with company and industry knowledge, Perlberg then developed mission and value statements.

“Fundamentally, if an organization has a mission and values, you’ve got to decide whether this is going to be a poster on a wall or something that the organization lives and breathes,” Perlberg says. “Some CEOs don’t believe in them at all. For me, they’re extremely important. The mission is a strategic compass, and the values are a moral compass.

“They ground an organization in important ways. They help people understand why we’re doing what we’re doing. I can always use that as a reference point.”

No matter what the company is doing, whether it is developing a new service or offering a new product, Perlberg can explain how that relates back to the mission or values.

“One of the first things you have to do is keep bringing the organization back to it,” he says. “You have to explain the things you’re doing in the context of your mission and your values. You have to tie it back.”

That wasn’t always the case before Perlberg arrived.

“If you looked around the organization, you could find some articulations in various places of something that looked like a mission,” he says. “I didn’t see anything that looked like a value statement. You could find something in a book that would probably serve as a mission-type statement, but what we didn’t have was a real rallying point.

“It’s not so difficult to develop a mission statement or even a value statement. The hard thing is bringing it to life and keeping it alive. I didn’t see any evidence of that when I joined the company.”

Perlberg does it by using real-life examples of the mission and values in action.

“You share things like client success stories,” he says. “You tie that back to the mission because in our mission, we talk about contributing substantially to our clients’ success. You engage in the discussion of those things.”

It is important for employees to be able to connect the dots all the way back to the mission and values.

“I always want people to feel they’re working in a company that stands for something, outside of the need to drive revenue, outside of the need to drive profits,” Perlberg says. “It’s important that people have a clear understanding of that and that senior managers are accountable for that, for behaving that way, for ensuring the environment is one that respects the values.”

Too often, executives provide the right words but fail in their actions.

“You have to be not defensive on it when employees call you on it,” Perlberg says. “If somebody says, ‘We’re supposed to get the tools and opportunity to make a difference, but I don’t have this software that I need,’ or ‘I don’t have this training that I need,’ you have to be willing to say, ‘That’s not consistent with our values, so we’re going to have to step up and address that.’”

Early on, Oasis employees called out the management on its commitment to the cause and got results.

“One of the first things that happened after the articulation of our values — when we talked about giving employees the tools and opportunity to make a difference, is we ended up enacting a tuition reimbursement program,” Perlberg says. “If you’re going to say that, you’re going to have to put some teeth behind it.

“You have to show that it is something that you are willing to live. If you say integrity is very important, you have to demonstrate that you’re not going to tolerate behavior that is inconsistent with that.”

Driving sales
With the mission and value statements in place and his homework done, Perlberg was ready to soup up the sales engine.

“This will sound a bit obvious, but it’s interesting sometimes how some organizations don’t always see this,” he says. “It starts with sales. That’s what it’s about. It’s about growing. And growing, first and foremost, is about sales.”

To begin with, Perlberg put a new emphasis on sales. He has tweaked the compensation plans and restructured the management infrastructure, relieving district managers of some of their selling responsibilities to focus on mentoring and reinforcing effective selling practices.

“There is no single answer, but the most important aspect of creating a true sales culture is to make sales results one of the top priorities in the company,” Perlberg says. “Some ways that we accomplish this are reviewing sales results each month with the entire organization at our monthly town meeting; inviting not only the entire sales organization but many key partners (including operations, underwriting, benefits and human resources and client services) to the annual sales meeting and spending a large percentage of my time out visiting and working with the sales organization.”

If top executives want to show the rest of their organization how strongly they feel about an issue, Perlberg says they need to do more than send out a few e-mails and memos.

“If the CEO devotes meaningful time to these activities, it gives a clear message to the organization that it is important,” he says.

Perlberg and his senior management team spend a lot of time ascertaining what hinders sales and what could be done to better facilitate sales.

“As these conclusions are reached, we work very quickly to take appropriate action, making sure that we have the right people and the right tools and strategies to optimize sales success,” says Perlberg.

One of those strategies is to focus on activity management.

“In this kind of a business, where the bulk of the clients coming in are going to be small- and medium-sized business, these short-term activity numbers become very, very important in order to optimize the performance of the organization,” Perlberg says. “That one is very, very high on the list for me in terms of a working sales engine.”

New technology allows the company to look across the sales organization and dig down to the individual salesperson to see how many meetings were arranged, the number of proposals made and the deals signed.

“That puts us in a position where we can see, on a real-time basis, what’s happening,” Perlberg says. “That’s very important because if you see things are going well, you can look to take that to yet another level. If you see holes or you see gaps, you’re seeing it in a real-time way; you’re seeing it very, very clearly, and the managers can take appropriate action quickly.”

The actions that Perlberg has taken have had a direct impact on the company’s performance. In 2003, the company had about 1,350 client relationships. Today, that number is nearing 2,000. The company’s revenue is now $1.53 billion, up from $1.12 billion in 2003.

“We’ve grown significantly,” Perlberg says. “We’ve grown our client count. We’ve grown our revenue. And we’ve grown our earnings more quickly than we’ve grown our revenues. We’ve been able to gain operating leverage as we’ve grown our business.”

Despite the success and the opportunity for growth, Perlberg understands that change takes time.

“Do not rush into it,” he says. “Do your homework. … Once you start the organization down a path, it isn’t easy to turn on a dime. Remember that execution is usually even more important than the strategy itself. It’s often easier to decide what to do than it is to actually do it.”

HOW TO REACH: Oasis Outsourcing (888) 627-4735 or www.oasisadvantage.com

Prognosis for change

 Marvin O’Quinn asks a simple question: “How are you able to make your budget balance when half a billion dollars each year of care is not being paid back?”

As CEO of Jackson Memorial Health System, O’Quinn is tasked with finding the solution to that query and to other issues facing the 90-year-old hospital system.

“That’s been a big hurdle for us,” says O’Quinn, who joined the organization in 2003 as both CEO of the health system and as president of the Public Health Trust, an independent body that oversees the system’s primary facility: Jackson Memorial Hospital.

The real issue for O’Quinn and the health system went well beyond money; it went to the culture the organization lived every day.

“The board believed the future success depended upon the organization balancing its charity care obligations with bringing in more patients who have an ability to pay,” O’Quinn says. “That involved a different orientation for the organization than it had in the past.”

Everyone had to start thinking differently. No longer could each facility within the system work semi-independently of the others. Instead, everyone had to be working toward a common set of goals and one vision.

Change started when O’Quinn rewrote the organization’s vision and mission statements and created a balanced scorecard to measure its progress.

“It’s nothing new; it’s used throughout industry,” says O’Quinn. “That scorecard has what our vision is — to be a great academic medical center — and what our mission is — to provide a single standard of care for all who come into our institution.”

Through a series of meetings with both management and the board, O’Quinn developed six pillars that serve as the foundation for the new mission and vision — access to the institution, operational efficiency, quality of care, a good teaching relationship with the University of Miami, financial management and community service.

“If we’re going to achieve our mission and vision, we have to be successful in each of those six areas,” says O’Quinn.

Like any large organization that has been headed in one direction for a long time, change is not easy.

“How do you keep in contact and get 10,500 employees all moving in the same direction when they’ve never been asked to do that before, or they’ve been asked in the past to move in a different direction?” O’Quinn says. “That’s been a big obstacle for us that we’re still working on and will be working on for years to come. There are a lot of people in the organization who believe the old way was the better way.”

But if Jackson Memorial Health System is going to succeed, the new ways have to be embraced by all.

“Be very disciplined about the goal-setting process,” he says. “Make sure you tie rewards to performance.”

Managers cannot simply state the goal and move on. They must also provide guidance and make those goals relevant to the ones who must implement them.

“We built it into our evaluation process,” O’Quinn says. “Performance evaluations are built around (the pillars). When people set up their goals each year, they have to use the them as the framework for their goals. It cascades down through the organization — goal-setting matrices where each person in the organization looks up and says, ‘How much of my goals relate directly to what the system is trying to get accomplished, or what is it in the system’s goals that relates directly to what it is I have to do in order for the system to achieve its goals?’”

Communication
Successfully transforming a culture takes continuous work. And ensuring that people are embracing the message takes continuous communication.

“Keep them informed,” O’Quinn says of employees. “No surprises. (Provide) constant education about good governance. Benchmark your market and business parameters. Encourage questions and insightful discovery.

“Particularly in this environment, it works better if you can get people to move in a certain direction because they think it’s the right thing to do. They really want to go there and they really want to help you do it, as opposed to doing it because they’re afraid of you. I don’t like to have fear in an organization. That’s not very productive.”

There is no way to get that change in attitude without providing employees with the right information, and it is a constant challenge.

“You have to work with masses of people throughout the organization to make change happen,” O’Quinn says. “What we’ve been doing here is communicating very strongly to all of our employees, starting with what’s our vision, what’s our mission, what are our goals and objectives and how we are measuring them to help move the organization forward.

“In a big organization, communication is difficult and often messy. I have town hall meetings once a quarter. We presented (the scorecard) at our town hall meetings. We built the meetings around the scorecard. I asked each of the executives to review it with their subordinates and, in turn, review it with their subordinates so it would go down through the organization.”

O’Quinn doesn’t just hold employees accountable for maintaining the pillars. He holds himself and other executives accountable, as well.

“We evaluate our own performance,” O’Quinn says. “The board evaluates me. I evaluate the executives. The executives evaluate their direct reports based on the progress that we make in those six pillars. That’s how we keep focused on what we’re trying to accomplish.

“We do the same thing for the board. Twice a year, the board has a retreat where they evaluate their performance and they also evaluate me. They also talk about where the organization is going, are we governing correctly, and what do we need to differently. In certain parts of the organization, you can see it on bulletin boards. We sent it out to the organization and we have meetings around it. Each year, we give a report to a board on it. We’re going to step that up to quarterly reports.”

Truly changing the culture, though, takes more than a few meetings. Even executives need constant reminders.

“We have quarterly retreats with the senior management team and the next level down, which we call the leadership development group,” O’Quinn says. “Those retreats are built around educational and leadership goals as well as galvanizing speeches and discussions to get people focused in the same direction.”

Smaller targets
To be of any value, the pillars must influence behavior within the health system’s 12 primary care centers, two long-term care nursing facilities, a community hospital, a community diagnostic center, nine school-based programs, seven clinics in the county’s corrections facilities and Jackson Memorial Hospital itself. And reinventing the company’s culture is an enormous task that will take a long time to complete.

The key, O’Quinn says, is not to look at the end result but to tackle a number of more attainable goals along the way.

“I believe that what gets measured gets done,” he says. “The scorecard focuses leadership on the key strategic areas necessary for the success of the organization.”

For example, to deal with the charity care budget issues, O’Quinn didn’t focus on a single goal of compensating for $500 million in write-offs but instead focused on a monthly cash collection goal to exceed $63 million.

“We’ve set out goals in each of those areas that we measure monthly to see that we’re moving in the right direction,” O’Quinn says. “On the financial measures, they are very quantitative and they are easy to track. The way we have been tracking them is simply to compare them to the targeted goals.”

Because any given month may be an aberration, O’Quinn set up a number of parameters for many of the goals.

“We don’t get excited when we see random variations,” he says. “As long as the quantitative number is within certain limits, then it’s acceptable. Once it gets outside those limits, then we get excited about it.”

And although they may be more of a challenge, O’Quinn says even concrete targets, such as quality of care and the system’s relationship with its teaching partner, the University of Miami, must be tracked.

“For the qualitative goals that are more process oriented, we’re going to be setting up Gantt charts,” a horizontal bar chart that tracks a project’s progress in relation to time,” O’Quinn says. “In the past, it’s been either did you do it or didn’t you do it,” says O’Quinn. “Gantt charts will show, in order for me to get this qualitative goal done, eight things have to happen by a given date.

“We’ll be able to track on a monthly basis progress toward the goal so we don’t end up at the end of the year saying, ‘Did you get this goal done or didn’t you?’ and the answer is no and we’re just now finding out about it. We’re doing that for the more qualitative goals.”

For the quality of care pillar, for example, the system’s target is to have at least 75 percent of surveyed patients say they’d be willing to recommend the hospital to another. Other quality goals include striving for the 90th percentile on key measures reported to the federal government.

O’Quinn’s mission to change the culture of an organization will only work if employees trust and respect management. To make that happen, they work hard to understand what employees are thinking.

Employees are surveyed once a year and the results are compared to internal targets. When the numbers drop below acceptable levels, management responds.

“When they don’t match, we set up work teams to work on the issues,” O’Quinn says. “We manage by exception. There are so many things we could be doing, we focus on the areas that are not hitting the targets.”

One current area of emphasis is nursing satisfaction in the workplace.

“What we’ve been working on there is developing a unit-based nursing council to give the nurses more control over their immediate workspace and environment,” O’Quinn says. “They can make more decisions at the local level, which will improve their satisfaction with their job. That came out of a survey we did last year.”

O’Quinn says that while the process of cultural change throughout the health system began two years ago, there is still a long way to go for the organization that last year had a budget of more than $1 billion.

“You don’t change an organization in three years,” O’Quinn says. “It’s a journey, and to use an outmoded metaphor, it’s a marathon, it’s not a sprint. You change incrementally over time. Some people would say it’s a five- to 10-year process for real cultural change in any organization.

“First we start off with, ‘Why do we exist? What are we trying to become, and what does it take to get there?’ That’s how you begin the cultural change.”

HOW TO REACH: Jackson Health System, (305) 585-1111 or www.um-jmh.org

Spreading risks

In almost 10 years of business, R. Marcelo Claure has embodied Charles Darwin’s survival of the fittest model by carefully selecting new traits for his business. The president, CEO and chairman of Brightstar Corp. recognized early on that if he wanted his wireless product distribution company to endure, it had to evolve beyond just simple distribution.

When he started the business, Claure took advantage of enormous growth in the wireless industry and focused on Latin America.

“The wireless industry has been growing exponentially since the late ’90s,” he says. “We were lucky enough to start in a region where the wireless penetration was extremely low.”

Knowing the high-growth rate wouldn’t last forever, Claure sought new opportunities to reduce the company’s risk and maximize its chances for survival.

“One of the things that we realized, if you want to be able to build a sustainable model, you’ve got to be able to involve yourself in certain segments of the value chain,” Claure says. “When you’re just a distribution company that buys and sells products to make a profit, it will not take long for buyer to connect with seller and go direct.”

While the company continues to distribute products in Latin America and in other parts of the world, Claure has added manufacturing and supply-chain management to Brightstar’s offerings. The result has been financial success and a company that constantly evolves to take advantage of new opportunities.