Waiting to go home

Pharmed Group co-founders Carlos and Jorge de Cespedes came to South Florida as part of the Pedro Pan program run by the Catholic Church when, in the 1960s, 14,000 children left Cuba to come to the United States.

“Jorge and I came to the United States in 1961,” says Carlos de Cespedes, chairman and CEO. “I was 11, Jorge was 8. We didn’t see our parents for five years.

“It was traumatic for us. It was 10 times more traumatic for our parents. As a child, you’re hanging out with another 1,000 kids, you’re going to school, you’re playing basketball, you’re doing this, you’re raising hell. I have four kids. My brother has three. And I can assure you, if I didn’t see my kids for five years, I don’t know what I would do.

“The real heroes of that era were not the 14,000 kids but the parents that had the foresight and the guts to send the kids out of the country, to get them out of that hellhole.”

That experience left an impression on the brothers, who participate in a number of philanthropic causes.

“We have a very intense humanitarian streak to try to help people who are in desperate need,” he says. “In our industry, you get confronted with that on a daily basis.”

The people he would really like to help are in his native Cuba.

“Obviously, we look forward to the day that we can operate inside Cuba,” he says. “There are 11 million people there that haven’t seen a Bayer aspirin in 45 or 46 years. We think that is going to be a big market for us eventually.

“It could open up tomorrow afternoon. (It will take) the death of Castro. The whole place will collapse on itself the day that happens. It’s a one-man show over there. For us, it will be phenomenal, not only from the health care side, but every major manufacturer that is based in Puerto Rico used to be in Cuba.

So, from a manufacturing point of view, it would be a bonanza for the United States and for us.”

Prescription for success

Politics make for strange bedfellows, but the old maxim applies in business, as well.

Pharmed Group manufactures and distributes medical supplies in an industry dominated by multibillion-dollar players. But it also manufactures and distributes its competitors’ products.

Chairman and CEO Carlos de Cespedes wants to build a company that is willing to change and adapt to a business climate in flux, even when that means doing business with the competition. And that flexible approach has kept the company competitive in a consolidating market.

That can-do attitude and the ability to move quickly are reflections of the company’s size and independence. De Cespedes says the private company posted revenue of between $500 million and $600 million last year; by comparison, Cardinal Health, the largest player in the market, posted revenue of about $75 billion. To survive against such massive competitors, you have to be able to analyze a market need and move quickly.

“We believe we’re more capable than these other large players,” de Cespedes says. “We believe we’re a lot more flexible. We don’t need to meet 20 times over an 18-month period to make a decision. We can come in and make a decision rather quickly and move on it extremely quickly.”

De Cespedes infuses flexibility into everything the company does, from distribution and customer service to manufacturing and the willingness to partner with a competitor.

“We are not setting for ourselves a goal to become a national distributor,” says de Cespedes, who formed the company in 1980 with his brother, Jorge de Cespedes, who serves as president and chief operating officer. “We want to be the best that we can in the areas that we’re at.”

An example of that is a distribution center the company opened in Cleveland to accommodate area hospitals. The three largest medical distributors own a combined 85 percent of the market, and they changed the rules in the market, delivering to hospitals less often and tightening credit and payment options. Pharmed’s flexibility allows it to offer hospitals an alternative.

“After wasting a year talking with (the major distributors, the hospitals) came to us and we got a deal within a matter of weeks,” de Cespedes says.

The de Cespedes brothers also use personal communication to help differentiate themselves, whether it’s to overcome resistance to new ideas such as the flex center or to simply say thanks to a valued customer.

“It’s all has to do with the relationship you develop with these people,” he says. “What we do, we do extremely well. At the end of the day, it doesn’t matter what everybody says. People like to do business with people they like. We take care of our customers. We’re there for them.”

Communication makes the difference.

“I made it a point, myself, to call two or three days before Christmas 15 or 20 CEOs that do a lot of business with us — besides sending a card — to wish them, personally, a Merry Christmas and a Happy New Year,” de Cespedes says. “I would venture to say that was not the case with the top three or four distributors. Can you document how much business is created by that? It’s probably next to impossible, but trust me when I tell you that creates a tremendous warm and fuzzy feeling and friendship.”

Service
Pharmed’s smaller size also allows it to offer service levels the bigger competitors find hard to match. It offers a guaranteed minimum 98 percent fill rate — items in stock when an order comes in — while most others offer a fill rate in the low 90s.

When a company offers as many as 25,000 items from 200 manufacturers, a 98-percent fill rate is a both a challenge and an asset. Pharmed is able to do that because of its software tracking system and a willingness to keep more of each product in its warehouses, giving it more flexible than the industry standard.

It’s part of what de Cespedes calls a high-touch approach. For instance, the company will deliver a surgical kit not just to a loading dock but to the nurses’ station.

“It all has to do with sitting down with the customer and saying, ‘How do you want to do this? How can we work together? Where are the areas where you are weak? How can we improve them?’” says de Cespedes. “That talent — I don’t want to say it’s been lost, but it certainly has disappeared. Everybody just wants to carry the box from one location to the next, and they want to do it twice a week.

“God forbid you deliver more than three times a week. (Others provide) very little communication, very little humanity.”

The high-touch approach sometimes means that Pharmed charges more than some of its competitors, but when customers understand the big picture, de Cespedes says, they learn that the approach will likely save money in the long run.

“You have to present it in such a way, which is the truth, which (shows) how much money it is going to save them,” he says. “Some of these major institutions have whole departments, 30 to 40 people working in receiving, working in distribution, inside the hospital. We’re going to charge them a little bit more, but they’re going to do away with an awful lot of headaches and an awful lot of infrastructure.”

The change benefits a hospital in a number of ways. The hospital no longer has to be in the distribution business, and it frees up space once used for storage to be used as treatment or operating room space. Space that used to cost money is now generating revenue.

And Pharmed helps hospitals deal with other challenges, as well.

“Let’s say the hospital has a problem with medical records storage,” de Cespedes says. “We’re flexible enough that we’ll say, ‘We can do that for you.’ There are a lot of people who do nothing but direct sales, and the hospital doesn’t want to have to deal with direct vendors. We can (provide) third-party logistics with some of these direct vendors and have it all concentrated in one location that is easily accessible.”

Partnerships
Flexibility means keeping options open, and Pharmed has found success in what seems an unusual way to do business — by helping the competition. Many of Pharmed’s customers have asked the company to deliver products from its larger competitors.

“We distribute for Medline,” the largest privately held U.S.-manufacturer and distributor of health care supplies and services, de Cespedes says. “We carry a warehouse full of Medline products. They used to distribute it themselves. The same thing applies to Cardinal. Cardinal is the biggest company in our industry. They’re huge in distribution, yet we probably distribute more Cardinal product in South Florida than their own distribution center in South Florida.

“We do it a little bit better, or at least the customers tell everybody we do it a little bit better. The proof is in the pudding.”

Someone is going to deliver the product, de Cespedes says, so why not Pharmed? It makes customers happier, and his company makes money doing it.

While Pharmed is primarily a distribution company, de Cespedes has opened another business track — manufacturing. A portion of its manufacturing is done for Pharmed’s larger competitors. These operations allow the company to diversify its offerings and maintain quality control of the products it is delivering. The company has a joint venture producing cotton-based products, including private label items for Cardinal and Medline, but its manufacturing also extends into pills.

“We own a huge operation in South Florida manufacturing vitamins, over-the-counter medications and, eventually, generics,” de Cespedes says. “Obviously that has nothing to do with medical and surgical supplies, but for us, it’s a sizable franchise. And it is 100 percent manufacturing. We do a fair amount of work for CVS, for Walgreens and a bunch of other people.”

Pharmed may never reach the scale of Cardinal, and de Cespedes is perfectly fine with that. After all, by staying small and flexible, there is plenty of room to grow right where it all started.

“Take the state of Florida,” he says. “If we’re lucky, we might have 3 percent market penetration. So we could easily grow by a couple of hundred million dollars, if not more, by going from 3 (percent) to 5 (percent). You’re not going to drive anybody out of business by going from 3 to 5. We’re much more interested in concentrating in those areas.

“Our goal in life — I don’t mean to sound corny — is to enjoy our lives, enjoy our families, have fun, do good things for the general public. We’re very big in philanthropy here in South Florida, as well as other parts of the country. If it happens, it happens.

‘Our goal is to become a hellaciously good company in the state of Florida.”

HOW TO REACH: Pharmed Group, www.pharmed.com or (800) 683-7342

A new way of thinking

Bruce Goldberg, chairman and CEO of All American Semiconductor, began his professional life as a lawyer. By nature, lawyers look for the liabilities, not the rewards of action — not an attractive trait for a leader looking to grow a business.

“The biggest challenge for me has been trying to address the mentality of being a lawyer, which has always been a totally risk-adverse approach to things,” Goldberg says.

At one time, his job was focused on all of the wrong things, as he puts it, whereas today, he is trying to view things as opportunities, taking chances and deciding what risks are worthwhile to take.

“As a lawyer, [you have] tunnel vision into looking for a black-and-white answer to things,” he says. “As a businessperson, you can’t live in that environment. You can’t always have a definitive answer to everything you want to do.”

For Goldberg, it’s been a slow progression.

“It really was taking a lot of time, losing a lot of sleep and developing an ability to have faith in a decision and watch it develop,” he says.

But, he says, he has made the transition.

“In the early years of All American, I was focused only on the financial and administrative end side of things,” he says. “I never had to venture out in that way. It was in the early ’90s when we decided we wanted to expand and started opening offices. I had to rely more on other people to run their portions of the business. That was the biggest step for me because as a lawyer, there’s such tremendous liability for everything you did. I tended to check and recheck everything myself.

“In business, while you still have to do your homework, I also have to rely on other people to do things. The biggest venture out there was when we started expanding and developing a sales organization with layers of management.”

Conducting business

It hasn’t been easy for Bruce Goldberg to lead All American Semiconductor through an industry consolidation that grew the company into one of the four largest distributor of semiconductors.

“It’s been a very traumatic consolidation, far more than many other industries have ever seen,” Goldberg says. “When I joined All American in 1988, we were the 48th largest distributor, and there must have been 1,500 to 2,000 distributors in North America. We have achieved some of the most rapid growth in the industry.”

He’s also grown the Miami-based distributor of semiconductors and electronic components from $20 million in annual revenue to $425 million in 17 years.

Now Goldberg, president and CEO, is poised to further grow All American with a three-step plan to move the company forward by increasing its customer base, increasing sales to existing customers and expanding its markets outside North America.

Here’s how it’s going to work.

Increasing customers

The first plank in Goldberg’s growth strategy is reaching new customers. That ties, in part, directly back to the industry consolidation and taking advantage of the changes that caused.

The two biggest distributors in the industry, Avnet Inc. and Arrow Electronics, have acquired scores of smaller semiconductor distributors over the past decade. A manufacturer that wants three to five suppliers may find that it now has only one or two to choose from, presenting All American with an opportunity to sell to customers it couldn’t access before.

“Because some competitors that were successfully selling to that customer were acquired, we can gain entrance into the account,” Goldberg says. “The customer says, ‘I don’t want too much concentration in Arrow or Avnet, so I need another distributor.”

Suppliers have also been left in the lurch due to consolidation, and Goldberg is taking advantage of that.

“As Arrow and Avnet have acquired so many companies in our industry, suppliers who used to rely on these other distributors to provide them the level of focus that they want, those suppliers find themselves needing another distributor,” Goldberg says.

And All American has made sure it is there to fill that gap. These new customers were added in part through the company’s establishment of a large geographic footprint.

“We have 36 marketplaces — offices with outside salespeople who call on customers. A good part of gaining new customers was adding offices and adding salespeople, putting feet on the street to knock on doors and call on customers,” Goldberg says.

“That’s really the strength and the heart and soul of our positioning today. It revolves around having significant presence in the North American market. There are only four distributors in North America that have the geographical coverage comparable to All American — obviously the two mega-distributors, a third guy out of Montreal and All American. There are no other distributors that have the geographic coverage that we have.”

According to Goldberg, All American’s coverage helps make suppliers’ decisions easier.

“If you’re a supplier and you’re thinking about adding another distributor, you’d rather have a distributor that has 36 locations that you can deal with instead of having to deal with three distributors that have 10 locations each,” he says.

A key to gaining these new accounts is having salespeople who are thoroughly trained in the technical aspects of the products.

“A salesperson is not a salesperson in this industry,” Goldberg says. “This industry is different than most. I don’t know if I can think of any organization where the sales organization of a distributor is such an important part of being able to sell something.

“In our industry, the only example of that might be Intel. Intel brands itself through billion-dollar marketing campaigns. Nobody buys it because they saw a TV commercial about semiconductor products. It has to be sold by a very technically competent sales organization. Our industry is very dependent on the quality and technical capability of the distribution salespeople to sell the components.”

Increasing sales

In addition to finding more customers, Goldberg introduced a strategy to increase sales to existing customers.

“In the earlier stages of our company’s history, we were more focused on selling products by virtue of price and availability,” he says. “If a customer needed something and we had it on our shelves at the right price, we could close a sale. What we’ve been doing over the years is improving our ability to develop new products with our customers.

“We do this by having what we call an FAE program — Field Application Engineers. We have a very talented group of applications engineers that, instead of waiting for the customer to design their own product and then we see if there is anything they want to buy from us, we work with them on the design and we try to show them why they should incorporate in their design more of the products that All American sells.”

The goal is to help customers reduce design time through extensive applications support, including component selection and general assistance throughout the process.

“By doing that, instead of waiting for a customer’s engineering department to create a bill of materials that may or may not have our suppliers listed on there, we’re able to work with the customer to make sure that they utilize more of the suppliers that we are authorized to sell,” Goldberg says.

There is a fourfold benefit from this approach: All American increases its sales; suppliers are happier because more of their products are being sold; the customer is happy because the design and manufacturing process is easier; and the process gives All American a relationship to increase the number of products it sells to that manufacturer.

“If you work closely with the customer on their core technology, then after you’re done helping them design and select the core technology components, it’s much easier to get them to also approve some of the supporting technology products that go around the core technology,” Goldberg says. “You take yourself from selling one or two components to the customer, to selling 20 or 30 components to the customer.

“This is the major driving force behind how we sell more to our existing customers — we get involved in their design process early.”

Moving overseas

The final tenet in Goldberg’s plan involves expanding its overseas opportunities.

“Our efforts initially revolved around supporting our North American customers in their global expansion,” he says. “We put in more of what I would call customer service capability to support the customer as opposed to sales and marketing capabilities where we’re trying to sell them other things.”

Those initial global efforts included helping customers with logistics solutions such as bar coding, auto replenishment, real-time inventory status and warehousing. These types of services give All American a competitive advantage by solving customers’ problems.

For example, a typical manufacturer’s output does not match a customer’s daily requirement. Suppliers like to have an output of 1 million units of their product per month coming out of one location in whatever part of the world that manufacturing plant is in. A customer may consume 10,000 pieces a day in five locations around the world.

“We bridge the gap between the 1 million units that come out per month from the manufacturing plant of the supplier and make sure that 10,000 units per day are available at five different manufacturing locations that our customer might have,” Goldberg says. “Our customers don’t want to sit on 1 million units for a month, have to pay for 1 million units at the beginning of the month and then ship in advance to their various plants for it to be sitting there. They like their parts to arrive just in time for their needs. They want the parts to arrive at the plant two hours before they actually have to solder that part onto a board.”

Goldberg wants All American to expand its overall efforts with manufacturers, regardless of where they are located.

“It definitely means looking at ways to sell additional products to existing North American-based customers and also finding those customers without a base in North America and learning what All American can do for them,” he says. “We see the biggest growth opportunities in Asia, particularly in China and Eastern Europe. In both of those areas, there is more and more manufacturing popping up as a result of low labor costs and things like that.”

Today, 98 percent of All American’s revenue comes from customers headquartered in North America. In terms of where the product is procured and consumed, 8 percent to 10 percent of revenue is the result of product shipped or consumed offshore.

“My biggest hope would be that North America grows extremely rapidly and always stays a big percentage [of revenue], but that’s not likely to be the case,” Goldberg says. “So, we’re hopeful to achieve growth rates in North American in the 5 [percent] to 15 percent range and growth rates in Eastern Europe at (two times) that, with hope that one day our growth around the globe will be so successful that North America would be about 40 percent of our revenue [with 60 percent shipped and consumed offshore]. That’s looking at a 10-year plan.”

The balance of sales between domestic and overseas markets may shift, but Goldberg’s commitment to his growth plan won’t.

“I feel we’re really standing at the [key] point now, with the way the industry has developed, not just in North America with consolidation, but (with) the rapid expansion available in markets like Asia,” Goldberg says. “The market there is so fragmented, and most of the distribution there is so far behind in developing the distribution technology that has become so commonplace with the distributors remaining in North America.

“The opportunity for All American in both North America and globally today is more exciting than ever before.” HOW TO REACH: All American Semiconductor, (305) 621-8282 or www.allamerican.com

Balancing act

When Roy Krause took over as Spherion’s president in July 2003, he knew he had to reverse the company’s downward trend.

Spherion, a $2 billion staffing company, had posted essentially no revenue growth in 2002 and 2003, and posted net losses of $903 million and $13.9 million respectively in a tough economy for the industry.

Krause knew he needed to make some changes to make the company profitable again, and his first step was to sell Spherion’s profitable international operations in order to focus on the North American market.

“We made a decision to divest of those international businesses and some local businesses that really weren’t related to staffing and recruiting,” says Krause.

That allowed the company to pay down debt and refocus attention on its 700-plus North American offices.

With the contraction completed, Krause established four financial targets designed to reignite the company’s overall growth: Grow revenue at or above industry levels, expand gross profit, reduce selling expenses and decrease the time it takes for customers to pay.

The effects were almost immediate as the business went from struggling to profitable, outgrowing the market in 2004 when it posted net earnings of $35.8 million to reverse two consecutive years of losses.

“We got our confidence back into our ability to close a deal,” Krause says. “We tracked performance. We rewarded victory. We analyzed where we made mistakes and didn’t win, and then made changes.

“People started seeing it work and believing in the process, and if we do these kinds of things, we have a better shot of winning [more customers].”

Growing revenue
To help grow revenue, Krause brought in someone to oversee the company’s sales processes. Krause knew he had good individual salespeople, but it wasn’t properly managing the sales process and there was no consistency across the company.

Was the company predictable and could its processes be replicated? If someone left the organization, could that salesperson be easily replaced or was institutional knowledge lost?

Krause hired Byrne Mulrooney, a veteran of IBM and EDS, as president of staffing services and tasked him with answering those questions and giving the sales process a jumpstart. Part of his solution was deciding that growth simply for growth’s sake was a poor long-term strategy.

“We found out that we also needed to target where we grow within the industry,” Krause says. “We ratcheted back on the growth in ’05 so that we could point it and target it to the kinds of clients that we really wanted to develop, that we could make more money on and that we could contribute more value to in the future. While I want to grow at the market [rate], I will give up growth to get and maintain quality customers. In the long run, that is the right answer.”

And Krause fired some of his customers as part of the company’s turnaround.

“We had some serious conversations with customers and said, ‘At this price point, we don’t think we can deliver the value that we need to deliver. We think we ought to adjust pricing or we ought to adjust services,’” he says.

As a result, Spherion had fewer customers in 2005 but still increased overall revenue, posting an increase of 17.2 percent in 2004 over 2003. Through the third quarter of 2005, revenue from continuing operations was $10.1 million compared to $2.4 million the same period in 2004.

And the company posted a modest gain in revenue of 1 percent despite losing a $75 million contract early last year.

Expanding gross profit
To succeed, a company must take advantage of every opportunity, and that includes getting as much business as possible with every customer to maximize profits.

“Our focus for ’06 is expanding the relationship with our existing customers — selling them other skills that we can provide,” says Krause.

The overall profitability goal is to increase gross profit margins by 50 basis points each year.

“It’s very important for me to try to increase gross profit not just in absolute dollars but also as a percent of revenues so that I can bring more to the bottom line,” he says.

The first step is disciplined pricing, making sure the company’s services are priced competitively without sacrificing profits. The second and more effective step for Spherion is a better mix of placing permanent workers versus flexible workers.

Permanent placement provides a higher gross profit for Spherion, but less than 4 percent of its business is permanent hiring. Krause’s goal is to increase that at least half a percentage point each year, a target he has hit since the process began in early 2004 when permanent placement accounted for 2.7 percent of placements. At the end of 2005, that number had increased to about 3.8 percent.

“It’s a very good, profitable business for us,” Krause says. “It also supplies a service to our clients when they increase their core staff. When they’re employing people they want to keep long-term, we’re providing those people.”

To increase the number of permanent placements, Spherion went on a major hiring effort last year to increase the company’s number of permanent-employee recruiters.

“The goal in 2005 was to increase our headcount in our professional services area about 20 [percent] to 25 percent,” Krause says. “A good chunk of those people were permanent recruiters. We increased our recruiter headcount by about 120 people.”

And there is still plenty of room for growth in the permanent placement section.

“We could at least double it and it wouldn’t bother me,” he says. “Permanent hiring tends to be more cyclical than temporary hiring. I don’t want to become a permanent placement firm [with] 90 percent of our business in permanent placement. How long we keep doing it is really a factor of the market.”

Reducing selling expenses
Growing at industry levels or better and expanding gross profit margin are two important goals, but both deal with external factors. Krause’s third financial target focuses on internal processes.

He wants to reduce selling expenses, and general and administrative expenses to 80 percent of gross profit. That number currently sits at more than 90 percent.

“That’s an internal target we use to benchmark where we want to go,” Krause says. “We know we have to be efficient, and as much as I’d like to say we can increase gross margins at will, it’s really very difficult to do that. Our customers are smart. They want to pay as little as they can for the best service they can get. So it behooves us to be the most efficient producers that we can possibly be.”

The first step toward that goal was installing an enterprisewide computer system.

“Putting in a fully integrated system was key to attaining this goal,” Krause says. “The reason we spent the money and put the system in was to leverage our unit capital base. The past problems were [a function of] 20 or 30 different subsystems. As we grew, I had to add additional headcount in areas because I had four payroll systems and three billing systems and all the other stuff. Now I have one, and I do that across all skill sets.

“It doesn’t really matter if you’re looking at one of my offices where we do mostly accountants or we do industrial workers. They still use the same system and do the same processes to get a paycheck out.”

A more efficient computer system will take you partway, but efficient employees are vital to reducing overall expenses. Krause added a chief marketing and corporate development officer to focus the organization on tasks that add the most value.

“One of his tasks is to review our operational processes with a goal of doing only the things that are really, really important that add value not only to the client and add value to us — get payroll done, get sales reports out and get receivables collected,” says Krause. “Over time, you tend to add tasks, which adds people.

“Part of our goal is to streamline our processes so that we can take our current employee base and be able to grow significantly with it. It’s not about cutting heads, necessarily. It’s about moving forward and getting more leverage and productivity out of our systems with the existing employee base that we have.”

While there has been progress, the goal of reducing expenses to 80 percent of gross profit has yet to be reached.

“I didn’t expect to reach that number [in 2005],” Krause says. “We have made progress. We will continue to make progress. That number is a little dependent on how fast the market grows. Right now, the market has slowed down a little bit, although it is still a reasonably robust temp market.”

Getting faster payment
The computer system that’s added to the organization’s efficiency is also helping Krause reach his final financial goal of reducing the time it takes customers to pay. The goal is to better manage working capital by reducing days sales outstanding (DSO) by one day per quarter.

“Our biggest asset is receivables,” Krause says. “That’s where we use working capital. The good news is that as the economy increases, sales go up, but also receivables go up. Because we pay people on a weekly basis and collect from clients on a little longer [period] than that, our terms may be net 10, but our average days outstanding at the end of last year was something like 60 days. So I’ve made eight paychecks to an individual before I get paid from my customer. It’s critical for us to bring that down.”

This is important because each day approximates the use of about $6 million in working capital, money the company could be using for other purposes.

With the completion and implementation of the computer system, the DSO is decreasing.

“We’ve reduced four days in the first six months of (2005), which generated a lot of good cash flow for us, and we use that in a program to actually buy back stock,” Krause says. “It’s been a real healthy exercise for us.”

A new computer system was only half the solution.

“The second part was to engage the branches and the back office operations together with the customers — get out there and collect these receivables and talk about the value we really add to customers,” Krause says.

“We can talk to customers about, ‘With this markup, I need to be paid in this many days in order to provide real value services. Now, if you’re going to pay me in 80 days instead of 40 days, then either I have to get more of a markup or maybe I should remove some of these other services because I have a bigger interest to carry.’”

That extra effort to reach customers has made a difference.

“When we have those discussions with a client, generally, we get straight on our terms,” Krause says.

By focusing on the four key financial goals, Krause has successfully reversed Spherion’s direction from negative to positive. Its balance sheet continues to strengthen, giving the company the financial flexibility to take advantage of changing market conditions.

“We’re well-positioned in the country,” he says. “We want to create value for our customers. It has been a challenge during the recessionary time, but we’ve come out pretty strong.

“We don’t owe any money; we have an extremely strong balance sheet. We’re really poised to grow now, and we’re growing in the right sectors.”

HOW TO REACH: Spherion, (954) 308-7600 or www.spherion.com

Jewel of a business

Mark and Robin Levinson watched as one by one, members of a South Florida jewelry exchange dropped out business. But they remained standing. Four expansions and 23 years later, the co-founders of Levinson Jewelers have taken over the entire exchange building and turned their small booth into one of the Top 5 grossing independent jewelry stores in the country.

“It’s an exciting ride,” says co-owner Mark Levinson. “The marketing and referrals that we got from customers over the last 23 years have culminated in getting us to a point that we’re just doing better and better each year.”

In 2002 the company recorded 8 percent growth. That rate doubled to 16 percent in 2003 and nearly tripled to 23 percent in 2004. And it was on pace for another record-setting year in 2005.

Smart Business spoke with Levinson about how rapid growth has changed how he manages the company and what he has learned along the way.

How has the growth of your company changed how you manage it?
The biggest change is realizing it’s 100 percent a team effort. When it was just Robin and I, it was just Robin and I — and it’s very, very, very entrepreneurial. As the business grows and as the level gets to one employee to two to three up to 30, the systems need grow with it, and the philosophy of interdependence — the employees and the team as a focus — is a tremendous growth that I’ve realized along the way.

If you’re not growing, you’re not going to survive. If you stay the same, you’ll end up going backwards. It’s never one or the other; they go together.

How do you decide when to expand?
Through the department heads communicating with Robin and me, when they’re at the point when they need to grow in a certain area to achieve a certain goal in their department. If your sales manager said there’re just so many customers coming in the store that they’re not being satisfied because we don’t have enough people on the floor to assist them, then that would be a message that we need another sales person.

How difficult has it been to give up control as you grow?
(It) is very hard. It’s probably the biggest learning curve that I’ve had. I’m still in the process of doing it. It’s a constant evolving process that you try to get better at. The first step is awareness that you need to macromanage, not micromanage.

Micromanaging really doesn’t work. You have to macromanage because you have to be able to delegate or you don’t have any time to move forward. We don’t micromanage. We delegate and focus on the department heads being responsible for their departments, (let them) micromanage their departments, so we can macromanage the company.

When did you recognize it was time to hire help?
When we realized that call waiting wasn’t working anymore, and we had to get phone that had another line. Then, all of a sudden, we saw in a very simplistic way that we needed a receptionist. We couldn’t be with a customer or a vendor and be answering the phones every two seconds.

From that, it grew from time and being aware there is no time to accomplish your goals. The more functions your business requires, whether you like it or not, whether you’re going to get anything accomplished, you need to delegate it to the team.

What did you look for in the people you hired?
Someone passionate and someone caring — passionate about their department, whether it be the selling of jewelry or being able to organize the accounting end or the marketing end or the designing end. When they’re able to have that passion, can they communicate it well to their staff and their employees?

If they’re able to communicate that passion well, the result will be our spirit and our culture, which is passion and goal-oriented.

How will you expand your reach?
We’re focused on the catalog sales and on developing our Web page and trying to become accessible to more of a global clientele. We’ve allowed ourselves and enjoyed the growth of the customers locally and nationally that we’ve reached through person-to-person contact.

Now we’re trying to reach a global area, where they don’t have to meet us person-to-person.

What is your strategic planning process?
Overall for the company, we plan yearly. We’ll see the variances from our projections to our actuals, and see where we’re on or off and then take a year look at it after every quarter.

The process of the macropicture of where Levinson Jewelers as a whole is headed is determined at the beginning of each year. We haven’t gotten to a point where we’re planning for two, three, four, five years ahead. We’re more focused on growing each year and evolving from our basic foundation, which is selling the customer, making the customer happy and being passionate about what we’re doing.

HOW TO REACH: Levinson Jewelers (954) 473-9700 or www.levinsonjewelers.com

Strong foundations

In less than four years, Antonio B. Mon has built Technical Olympic USA into one of the largest homebuilders in Florida by using a carefully crafted strategy of mergers and acquisitions.

Mon, president and CEO, looks at each potential deal for two key things: Do the leader and the management team at the company have a high level of integrity? And does the company bring a complementary product or intangible asset to the table?

By following those two simple principles, Mon has put together a company that will do between $1.7 billion and $2 billion in revenue this year.

Identifying top leaders who can quickly blend in to the TOUSA culture while providing complementary products or markets has built the company into what it is. TOUSA was created from a merger of Engle Homes and Newmark Homes in 2002, and Mon later added Fedrick Harris Estate Home, Trophy Homes and, most recently, Transeastern Properties Inc.

“The biggest thrill for me is the ability to build a management team, creating a team of people, designing a strategy and implementing,” Mon says. “That’s a rush, and that is a lot of fun.”

The integrity factor
Finding the right people to add to his management team through acquisitions is a challenge, but it’s crucial to the overall success of the company.

“Welding a management team together is not easy, but it’s very rewarding because you see people grow,” he says. “We’ve seen the company triple in size. That’s a lot of fun. It’s a lot of hard work. But nothing goes perfectly smooth all the time. That’s life. You’re part of the team. You take the good and the bad together.”

And what makes up the “right” kind of leader for TOUSA?

“The first thing I look for is integrity,” Mon says. “There’s no substitute for that. I want good people that have a good value system, that have a high sense of integrity and know right from wrong. I will not compromise on that. The other thing I look for is, I look for team players. I look for people that respect other people. And I look for people that are adaptable because the world changes.

“I don’t want rigid, one-dimensional people. I look for people that have the ability to change as the world changes and not panic when things go wrong. And I look for people who are committed to try and do something.”

What Mon doesn’t want is people who are just looking for a job. He wants people with a passion for the business who can take their business unit to the next level while displaying a high level of integrity.

“I try to look for people that are believers of what we’re trying to do and trying to make something exciting happen — a little spark,” Mon says. “Team players, respect for people and the ability to learn from one another, the ability to laugh and take things in stride, are important to me.

“Obviously, we have particular positions that provide particular skills, but that’s the easy part. The hard part is underwriting the quality of the people you bring in. That is tough, and frankly, I spend a lot of time with that and it’s paid off pretty big-time. We have turned down people that are brilliant that weren’t team players, that we believed did not have high enough integrity. We will not compromise on integrity. All we ask our people is to do the right thing.”

Mergers and acquisitions can be time-consuming and costly, so Mon focuses on companies with a management team that is willing to stay on with TOUSA. That way, the newly acquired company can start contributing immediately.

“We’re able to grow without having to change the way we manage the business,” says Mon. “(When) there’s a whole management team there that’s coming with the deal, we don’t have to go back and put management in place. That is one of the things we look for in an acquisition. It’s a lot easier to grow through acquisition doing that than if you have to grow and restaff an operation.”

Integrity is a key trait to TOUSA’s leadership because Mon has to trust each of the division’s management teams to follow the company philosophy and make decisions based on local market conditions. The divisions operate in four geographic regions and 16 metropolitan markets, and the leaders of each of those units is entrusted with the power to do what’s right for the business in its particular market.

“It starts with our view that our business is fundamentally local,” Mon says. “The house that sells in Palm Beach doesn’t sell in Phoenix. And the house that sells in Phoenix doesn’t work in Houston. Our buyers are different. Our housing styles are different. And every housing market has different price points and local preferences that an outsider will not generally pick up. So we rely on our people to decide what kind of houses to build at what price.”

Failure is considered part of the learning process, as long as the person acted with integrity.

“We will never bury them if they make a mistake, as long as it’s an honest mistake,” says Mon. “If you work for us and you do what you believe is the right thing, life is OK. We understand that people make mistakes.”

Complementary businesses
Although people are a major consideration when Mon picks an acquisition partner, the company still has to add something of value to TOUSA as an organization. A great management team with no product is like a great jockey with no horse.

For TOUSA, the types of things that make an acquisition attractive are land, a different type of product or price point, or even something like a different business strategy that would complement what TOUSA already does.

Mon’s most recent acquisition, Transeastern Properties, brought not only the right management team but also a larger scale in the Florida market.

“They are in every place (in Florida) we are except Tampa,” Mon says of Transeastern. “They are a significant player in that marketplace. This transaction will make us one of the top largest builders in the state of Florida — probably top 3. And that is very important for us locally because there are very significant advantages of scale in our business.”

The acquisition nets TOUSA an additional 22,000 home sites in a state with a high demand for housing but a low supply of available land.

Like members of a music group, each contributing to the blended sound, each entity within TOUSA contributes something different to the company harmony. The acquisition of Transeastern gives TOUSA more than just a bunch of new home sites. It also provides a different philosophy.

“Their business model is slightly different than ours,” Mon says. “Transeastern prefers larger communities —1,000 homes. We prefer 300 to 500. Consequently, they tend to be in a community longer — three to seven years. We like to be in our communities two to three. There are some advantages to both; both approaches work very well. It’s great to have both in a given market because it doubles our chances of making a sale.”

A variety of builders under one roof allows the organization to provide consumers with more selection. TOUSA and Transeastern generally offer homes at different price points.

“That opens a broader spectrum of potential homebuyers,” Mon says.

Initially, the two entities will be run as separate companies and may even compete with one another. And to Mon, that’s a good thing.

“There’ll be instances where both Engle and Transeastern compete, and that’s OK, as long as it’s not widespread and it’s not bad competition,” Mon says. “It also creates a situation where, in larger communities, we can put in an Engle product at a higher price point and a Transeastern product at a lower price point and in essence double our market share in local markets. To us, that’s pretty good. If I have to lose a sale, I’d rather lose it to a wholly owned entity.”

While the companies complement one another, they are different enough that they will need time to settle in together.

“We’ll take a period of time — maybe six months, maybe a year, maybe 18 months — something on that order of magnitude to get to know each other better,” he says. “Then we’ll begin to figure out things that they do better than we do, and we can implement the things we do better than they do. At the end of the day, both businesses will get stronger and better.

“I have a very clear vision of who we want to be and how we’re going to get there and what it takes to get there. That is what I do well.”

HOW TO REACH: Technical Olympic USA, (954) 364-4000 or www.tousa.com

Critical care

The 11,000 employees of Baptist Health South Florida take care of more than 100,000 patients a year. And for more than three decades, it’s been President and CEO Brian Keeley’s job to take care of those employees.

“Thirty years ago, it was our sense that, to become a truly great organization in the health care industry, [we decided] it starts with people and it ends with people,” says Keeley. “If we were in the IT business or if we were in manufacturing, that would not be our priority. In the service mode, service begins with people and ends with people.

“It starts with attracting world-class physicians, getting the nurses, the skilled technicians and everybody that works around the patients. From the highest skilled neurosurgeons to the lowest skilled food service people, it all starts with people.”

Keeley is committed to making the $1.5 billion health care system a great place to work every day. By using a strategy of communicating with his employees, developing programs with their input and making sure that the organization’s salaries and benefits packages are as good as or better than those of competitors, he is able to attract and retain the talent he needs to create one of the best health care systems in the region.

And it’s not just Keeley who says so. The company has been recognized as one of the best companies to work for by Fortune magazine five times since 1998, including the last three years in a row, and as one of the 100 best companies for mothers by Working Mother magazine 13 times since 1989. The AARP also honored it as one of the best places to work for those over the age of 50.

But Keeley doesn’t strive to make Baptist Health a great place to work just so he can put another plaque on the lobby wall.

“As a destination employer, when I talk to people during orientation, I tell them I want them to spend the rest of their career here,” Keeley says. “This is not, ‘We want you to stay three to five years.’ We want you to spend your career here. When you look at the proof in the pudding, our retention rate is probably the highest in the state right now, [we have] very, very low turnover. Our average executive has been here 10 to 15 years. We have virtually no turnover there.”

At any hospital, nurses are among the most critical employees. In Florida, the nurse turnover rate is about 15 percent; Keeley says Baptist’s Health’s rate is about half that. That loyalty is important, and Baptist Health has worked very hard to develop it.

“We’re the only health care system in South Florida that’s never had a layoff,” he says. “And we’ve had probably four or five downturns in my 30-some years here. The easiest thing in the world is you can save $1 [million] or $2 million by having an instant layoff. You get rid of a bunch of people, and then you’ve destroyed your relationship with the employees for the next 20 years. That speaks plenty about what Baptist Health is all about.

“We’ve always had that conversation with our board when we’ve had a downturn — we can do the simple thing or we can do the right thing. The simple thing is you go ahead and have the layoff. You save the money, you readjust your revenues and expenses, and you try to dig yourself out after that, as opposed to we’re just not going to have a layoff. We’re going to preserve the integrity of our relationship with our employees. People never forget. Treat your employees badly and they don’t forget it after the first six months or year. They remember it forever.”

A great deal of hospital care is about the nurturing of patients, and Keeley extends that nurturing to his employees. The company celebrates birthdays and holidays., and it celebrates employees’ personal accomplishments and when the company is honored as a whole. Each of the system’s seven hospitals has an employee advisory committee that works with the executive team to make that site a more enjoyable place to work.

“When we want to celebrate winning Fortune 100, we say, ‘What do you think? What do you guys want to do? Be creative.’ We have ice cream socials and barbecues. We turn them loose.”

The committees also address employee issues and suggest improvements.

“How can we spark some more enthusiasm and excitement in the organization? There’s a tremendous amount of feedback,” he says.

The notion of a suggestion box is anathema at Baptist Health because it simply doesn’t provide the necessary feedback. Keeley has a more direct approach, one that puts him in intimate contact with his employees.

“I do town hall meetings quarterly at all of our facilities,” he says. “About once a month or so, I’m meeting a bunch of people randomly. The last one, I had a huge group. There were about 500 people there at Baptist Outpatient Services. I spent as much time as they wanted, anything they wanted to talk about.

“They wanted to talk about the hurricane relief. The two hot buttons were higher reimbursement because of gas price increases and donations to the Red Cross [from employee paid-time-off banks].”

Keeley checked with the Internal Revenue Service and learned that employees could convert their paid time off into cash, which could be donated. He also raised the mileage reimbursement rate to match the federally allowed maximum.

“It’s a great way to get feedback,” he says of the town meetings. “Trust is so absolutely important. That’s the bottom line. If people don’t trust you, you don’t have a great organization. We have a very high degree of trust with employees.”

Knowing some employees might be hesitant to voice an opinion in such an open forum, Keeley employs other methods to gauge employee contentment as well.

“We use Gallup to survey all the employees on an anonymous basis,” he says. “Our participation rate is in excess of 80 percent. When Gallup first did this, we were one of the highest-ranked organizations they’ve ever surveyed in terms of engagement. They don’t use the term ‘employee satisfaction,’ they use the term ‘employee engagement.’ Engagement is a term that implies not only people liking their work but they’re challenged at work. They’re psychologically, mentally and intellectually engaged.”

For the past five years, that survey has provided vital feedback.

“We use that to evaluate ourselves,” Keeley says. “Are we doing a good job managing this human enterprise? Unlike many other enterprises, we’re very labor-intensive. Fifty (percent) to 60 percent of our total expenditures are for people. We employ a huge number of people because we’re in the service industry.

“One of our values is if we have happy, productive, committed, passionate employees, we know we’re going to do a great job providing absolutely superb clinical care with a very high service component.”

That atmosphere translates into employees willing to go the extra mile — literally — to work in the Baptist Health South Florida system.

“We have tremendous longevity over here,” he says. “We have people that drive down from Broward County, from Boca Raton and up from the middle Keys to work at Baptist Health. Isn’t that amazing?

“How on Earth would somebody drive an hour-and-a-half to come work at our place? But they do, even though there are plenty of opportunities (elsewhere). I don’t know if I’d even do it.” Keeley says, laughing.

The medical field is constantly changing, and keeping employees happy and effective in a hospital setting means keeping them well-educated. One way the company does that is through its education and tuition reimbursement programs.

“We call ourselves a learning organization, and we encourage people to go back for advanced degrees,” Keeley says. “We have a huge component in terms of learning and development and staying within our system over here. We have a huge number of opportunities.”

The organization also provides opportunities through one of its seven hospitals or their affiliated health care service sites. From the more laidback location of the Florida Keys, where employees work at Mariners Hospital, to the small-town atmosphere at Homestead Hospital to the urban flagship Baptist Hospital of Miami, employees can find their comfort zone.

“They can go from a high-tech environment to a high-touch environment,” Keeley says. “They can go from clinical bedside nursing to working in a home health agency where they’re actually visiting patients in homes. We provide them with a huge opportunities in terms of upward mobility and self-development. That’s extremely important for our nursing staff and for all of our employees.”

It’s also important that the executive team never rest on its laurels. Ensuring employee happiness is an ongoing process.

“We’re doing it routinely all the time,” Keeley says. “We look at our competitive position — salaries and benefits — every single day. We always want to stay one step ahead of our competition. We’re very proactive when it comes to salaries; we never allow ourselves to get below the 50th percentile. Since those changes are occurring routinely, we’re doing that routinely.

“Benefits we normally only change once a year, but we carefully monitor what’s going on with the benefits and we have a benefits team that goes through that, but the sounding board we use are our employee advisory committees. Every one of our hospitals has an advisory committee and we also have a systemwide advisory committee. Those are the people that meet [several] times a year, on a continual basis [and] we ask them, ‘What do you think about this? What do you think about that?’”

What employees think is evident in the turnover rate.

“We try to create an environment that’s second-to-none professionally,” Keeley says. “We call ourselves a destination employer. We want people to come and try us for a couple of years. We want people to come stay here. We nurture them. We develop them.”

HOW TO REACH: Baptist Health South Florida, (786) 662-7111 or www.baptisthealth.net

Answer man

The numbers are impressive.

Among its 2,000 or so clients in the past 13 years, Answerthink benchmarks 93 percent of the Dow Jones Industrials, 76 percent of the Fortune 100 and 90 percent of the Dow Jones Global Titans.

“We brought together a vision quickly and then the market demand was strong,” says Ted Fernandez, chairman and CEO of the company. “(It was) a combination of what we were doing and then the fact that the market demand for the services we brought together was very robust as we were heading into the Y2K cycle.”

Fernandez got his feet wet in KPMG’s consulting company, but a dispute about how to grow that operation led him to resign and start his own company.

“I went to (KPMG management) and said, ‘To really take advantage of the emerging marketing opportunity, you really should create a global consulting organization the way, at that time, Andersen Consulting had built.’ Andersen Consulting, now Accenture, had developed a big lead. At some point, you may want to reconsider the structure. To really compete with the best, given the head start that they had, you need to redefine the playing field.”

Fernandez thought the company should use an equity model, not its existing partnership model. The company disagreed, and Fernandez left to start Answerthink, a provider of technology-enabled business transformation solutions.

“This strategy was being discussed openly throughout the firm,” Fernandez says. “There was a group of people who said, ‘We want to go with Ted.’ That created a legal dispute, which we settled about 60 days later. Approximately 40 people did come and were the core founding group.”

Thirteen years later, the company is approaching the $150 million revenue mark, much of that due to Answerthink’s complementary business, The Hackett Group, a business process advisory firm providing best practice research, benchmarking and advisory services for executives.

“It’s a lot more fun to grow,” Fernandez says. “The biggest issue when you’re growing rapidly is to make sure you don’t lose sight of your focus as things appear to be coming easier than you might think. On the retrenchment side, any time you have to exit a business or let go of an associate, I think it’s an incredibly painful thing to do. If you’ve run a business long enough, you know you’re going to go through different cycles. The key is to understand why you’re doing it. That’s been a guiding principle for us.

Smart Business spoke with Fernandez about how he built a business from scratch and became friends again with his former firm.

How did you get involved in the consulting field?

I grew up in the Miami office (of KPMG) on the audit and accounting side of the business. The last job that I had prior to jumping into the consulting business, I was running the southern half of the state of Florida.

The firm in the early ’90s spoke about the fact that it needed to build a meaningful consulting business. That was a key to their strategy. I decided to give up the job that I had to jump into the consulting business and see if I can actually contribute to that strategy.

Through a little bit of luck, the right mentors and the impact that I had, I found myself running the national consulting organization seven months later.

What’s your relationship with KPMG now?

If you want to go full circle, we are actually doing a joint study with KPMG, my former firm, right now in the Sarbanes-Oxley area around the total cost of compliance. Their recently-named chairman is someone I know very well and have an excellent relationship with.

When did you know your new company was going to be a success?

In the latter part of 1997 … we were profitable after five months. In that fifth and sixth month, where I saw that we had brought some of the critical pieces together and we were actually profitable, I could see the vision was really coming together.

We went public in a record time for somebody in our sector. We incorporated in April of ’97. We started to call on clients in May, and we were public 12 months later.

What issues have forced you to make decisions along the way?

As we went through the Internet bubble, Internet implosion cycle, which significantly redesigned the opportunity for the technology implementation side of the business, we saw that the intellectual capital side of our business, which had always been there, if properly nurtured and nourished, could really lead to a very significant value creation opportunity for our shareholders.

What’s been the most important factor growing the business?

The most important factor, if we look all the way back, goes back to that focus we had around accumulating intellectual capital that allowed you to smartly serve a client. Building a knowledge management system that allowed us to share that intellectual capital very efficiently were important tenets.

Then you get to the focus and execution and things that you’ve got to do right, but when I think of what allowed us to not only to succeed early, but more importantly allowed us to survive the Internet implosion cycle, where tech demand decreased dramatically.

I’m very proud of the fact that we’ve been through that cycle and we’ve got a company today that has as good or better market opportunity than it ever has because of the focus we have around intellectual capital, but also that we have this pristine balance sheet with a tremendous amount of money in the bank and we don’t have any long-term debt so we don’t owe anybody any money.

How did the Hackett Group become part of the company?

As we were starting to build our knowledge management system that would allow us to share that data, we said, ‘We need intellectual capital to populate the knowledge management system.’ The Hackett Group was being shopped at the time; they decided that they were going to sell the business, and we were very fortunate to acquire it.

How do you keep the Hackett Group and Answerthink separate, and why is that so important?

Answerthink is the parent company of the Hackett Group. The reason that we promote the brands separately is because the Hackett Group’s focus and strategic value to clients is the independence and objectivity that it drives from the empirical data that it captures from our benchmarking business that we share with clients, either through research or executive education kinds of forums.

Since Answerthink implements technology in addition to also being parent to the Hackett Group, we wanted to make sure that no one could ever infer (that Answerthink) would impact the independence of the Hackett Group. We manage the brands separately; we allow Hackett to have the halo effect and the brand marquee that it’s always had about being the pre-eminent and definitive source for performance improvement or enterprise improvement data.

How do you use one to help grow the other?

The term intellectual capital is an overused term, but the fact is how we capture data, how we normalize our data, how we report back our data, that whole process of data capture, normalizing and scrubbing, and reporting back out, needs to go through a process and a standard that you must uphold, and that’s something that we’ve tried to uphold through our entire Hackett history.

We have, in essence, tried to accelerate or grow (Hackett Group) instead of using it as our think tank and way of being really smart in front of clients; we then said, ‘Why don’t we develop offerings through and around the intellectual capital and the brand?’ The fact that we were so committed to protecting and enhancing the intellectual capital in Hackett has really served us well here over the last several years.

How is that leveraged to benefit clients?

From that individual client data, as we analyze it in the aggregate versus performance of others, we’re able then to define activities or processes that we call best practices. It is our insight and our research and the way we share that experience back with our client base that allows us to be so powerful in their eyes.

The relationship is really defined up front. We’ve never had a client in our eight-year history who’s said that their data was not handled properly or has ever questioned our ability to use that data to help them without compromising any of their strategies.

How do you apply your offerings to your own operations?

We always make a decision and everybody says is that a best practice or not. The discipline itself forces us through a process that I think is incredibly helpful.

We take all the learnings we publish, and we reflect on them as we look at the things we do in our business.

HOW TO REACH: Answerthink, 877-423-4321 or www.answerthink.com

The leadership generation

Many companies talk about a culture of leadership. At PBS&J, John B. Zumwalt III has made it his mission.

"If you go back to the Tom Brokaw generation – the World War II guys — to me, that was a leadership generation," says Zumwalt, chairman and CEO of the 45-year-old PBS&J Corp. "They came together in World War II. Post World War II, they were into doing missions for the United States and growing programs, whether it’s Kennedy putting men on the moon or Eisenhower building the interstate highway system, these people had missions and visions for the country.

"The baby boomers (of which Zumwalt is a member), which came along right after that, are the most egocentric generation to come down the pike in years. Their whole concept was management. We’ve managed ourselves in knots in health care and tort reform and other things in society and perhaps led ourselves nowhere. A lot of that has transformed into business. If you look around the United States, we’ve got some great companies, but a few leaders step forward."

It is Zumwalt’s desire to turn every one of his 3,700 employees into a new leadership generation.

"I’m a strong believer that there is a difference between leadership and management," Zumwalt says. "What we’re trying to promote here is a culture of leadership. I firmly believe that if you can get people that are passionate about what they do, they’re on some kind of a mission, the metrics naturally follow.

"In a management lineup, everyone is given budgets and productivity goals and all this other kind of stuff, and their Holy Grail is the metrics they have in front of them. That can be stifling to growth," says Zumwalt, whose firm offers planning, architectural, engineering and construction management services from 70 offices in 23 states.

Zumwalt drives the leadership concept in two ways. He created the PBS&J University, a series of online and classroom instruction that helps employees with everything from how to better perform their jobs to licensure renewal offerings. The second incentive, employee ownership, has actually been around in one form or another since the company was founded, but it was Zumwalt who opened the program to every one of PBS&J’s 3,700 full-time employees. At last check, between 2,500 and 2,600 owned some piece of the company.

Employees, depending on their level at the company, can purchase differing amounts of stock, ranging from 10,000 shares down to 500. In addition, the company offers a standard incentive plan.

"There are not many places they can go, besides a publicly traded firm, where that many employees are offered equity in a company," he says. "We didn’t need the money. It was a terrible way to try to capitalize the firm. We can borrow money at 3 (percent) or 4 percent and the stock certificate is returning 20-plus (percent). We weren’t after it for the money, but we were after it for the culture it created.

"We’re one of the few privately held firms that has gone the full employee (ownership) route. We’re trying to get that employee-partner attitude. You probably can’t put your finger on it, but you kind of know (owning shares of the company) is probably a consideration, particularly when their ownership levels get up to the point when it makes a significant difference in their lives as they’re headed toward retirement. Then we know we’ve got their all in this place."

Even if Zumwalt cannot fully quantify the leadership element, there are other ways to measure the benefit. When Zumwalt became president in 2000, the company’s turnover rate hovered around 18.5 percent.

"I said, ‘You know gang, this is ridiculous.’ The answer was, ‘Gee, John. The industry is 22 percent.’ I said, ‘Well, the industry’s screwed up then.’ We started immediately investing in people."

That investment included taking the benefits the company offered from middle of the pack in the industry to front of the pack. Zumwalt also expanded the stock purchase program to all employees.

"Our employees have responded tremendously," Zumwalt says. "We’ve gone from 18.5 percent (turnover) in the year 2000 down to this year, it will be somewhere between 9 (percent) and 10 percent. Our industry is still at 22 percent."

Zumwalt has been with the company 31 years, but it wasn’t until he assumed a leadership role that he was able to make the push to a leadership culture. So there is still some residual resistance.

"Our big kick here is leadership over management," Zumwalt says. "It’s not 100 percent because I’ve got four generations of people growing up in the firm and a lot of them have grown up in that compartmentalized, management type of the past. A lot of that is still prevalent, but I think I’m winning the battle. The results of the firm are stellar compared to our industry."

 

Leadership education
Many companies provide or at least pay for continuing education programs for employees. Zumwalt has taken the concept a step further by creating Leadership PBS&J, a program modeled after Leadership Florida and other similar programs around the state. It is separate from PBS&J University.

The program accepts 30 employees a year. Those individuals must be nominated and are officially appointed to the program by the board of directors.

"When we first started, we kind of looked at position level in the firm, and I can tell you that’s completely gone by the wayside now," Zumwalt says. "When you have an organizational box, there’re a couple of reasons they want that next box. The first reason is to be important; the second reason is to make a difference. We’re more the second reason. Anybody can be important, wear a suit and tie and smile a lot, but what difference are you going to make?"

Those who are nominated for the program are demonstrating some leadership ability already, even if it’s rudimentary, Zumwalt says. They’re taking initiative, they’re being proactive; they’re taking the high road.

"Those are the names that come forward, and it’s from all walks of life. It’s really trying to get people to combine what’s in their mind with what’s in their heart from a passion standpoint and get excited about what we do and go do it," Zumwalt says.

The leadership program is a series of six 2-1/2 day sessions on topics ranging from personality mapping to mergers and acquisitions — including analyzing the effect on employees — to financing. The first session is always about getting to know the psychology of the individuals.

"The personality mapping is the first session — how to line up teams and how they fit into society," Zumwalt says.

The test includes seven to nine questions that predict an individual’s personality profile with 95 percent accuracy, he says. Every employee is tested and has the results explained, but those in the leadership group receive detailed analysis of how to use the information.

"We do personality mapping of all the employees," Zumwalt says. "It’s done the first day they show up for work. We take a look, not at the individual, but group dynamics. We’ve come to the conclusion, if we can get somebody slotted in the right job that really plays to their strong, core personality preferences, their energy gets multiplied and goes vertical and is very noticeable in their work habits and demeanor and the way they handle themselves. The opposite to that is if we have people in the wrong jobs, and they’re spending all their energy on pretending to be something they’re not, we don’t get any vertical energy to rise up with."

As part of the leadership program, each of the 30 participants is assigned an external coach.

"For the full year that they go through (the program), they’re talking with a psychologist, a professional coach on work, on life, on family or anything they want to talk about," Zumwalt says. "It dawned on me that when they graduate and they’ve been coached, they might do a good job in mentoring. We’re working on having these people become mentors for other people in the firm."

Zumwalt is not concerned about losing the newly trained leaders to the competition. After five classes (150 employees), it is the group of employees that has shown the lowest turnover rate.

"In the five years that we’ve done the program, we’ve had two people leave, and one of those want to come back," he says.

Leadership PBS&J’s influence on the bottom line, like that of the employee ownership program, has been enormous. Although he doesn’t have an exact figure, Zumwalt says the benefit is very easy to see.

"Our clients recognize it more and our people recognize it more," Zumwalt says. "And the financial results of the firm show it."

Following the creation of the PBS&J University, the expansion of the employee ownership plan and the creation of Leadership PBS&J, Zumwalt has seen the company move from single-digit growth and profits in the late 1990s to double-digit growth and profit every year since 2000.

"When you do that the first year, you wonder if it’s just a spike," Zumwalt says. "Then when it stayed on the second year, the third year, the fourth year and the fifth year, and the firm continues to grow in double digits, anywhere from 14 (percent) to 16 percent, when our industry is high single digits and we report double-digit profits, you’ve got to believe (even if) you can’t put your hands on the return on some of the stuff we’re doing, obviously it’s there."

 

HOW TO REACH: PBS&J Corp., (305) 592-7275 or www.pbsj.com