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A little over a year ago, Randy Highland came back home.

He had been away from the California division of McCarthy Building Cos. Inc. for nearly eight years, heading the company’s Nevada/Utah division in Las Vegas. In 2011, he accepted an offer to return to the company’s Newport Beach office as the president of the California region. It’s a place where he had served the construction contractor in a variety of roles for 16 years before leaving for Las Vegas in 2004.

But when you leave as a subordinate and return as the man in charge, the perspective changes.

“There is obviously a big challenge getting yourself familiarized with all our people here,” Highland says. “There are a lot of new folks here who weren’t here seven and eight years ago. So, initially, I was taking a lot of time to get acquainted with them, understanding everybody’s strengths and making sure all of the new folks who didn’t know me from my first stint here got an opportunity to meet me and ask whatever questions they might have.”

But it wasn’t as simple as handshakes and introductions. As the regional president, Highland needed to form a vision for the future of McCarthy in California, help form a plan for executing the vision, create buy-in on the plan and see it all through to completion.

“When you step into a role like this, you need a plan, and then the biggest challenge is making sure you are adequately communicating the vision,” Highland says. “I needed to make sure it was communicated accurately and frequently, and that I was getting multiple touches with all of our folks in all the areas where we operate.

“They say you can never overcommunicate, and I think it’s true. You need to take the opportunity to communicate that vision and your strategic direction for the company at all times.”

Form the vision

As the president of a division within a larger organization, Highland is in the position of ensuring that the goals of his region fall in line with the goals of the company at large.

When he took over as the president of McCarthy’s California operations — which generated $950 million in revenue last year — Highland began a period of internal assessment. He wanted to know where the region stood, so he could form the best possible plan for where it needed to go.

“There is obviously a direction for the division and goals and objectives for the division that already exist,” he says. “And there is a strategic vision for the division. So you come in, you assess where everything stands, and you form an adequate time frame for the transition to the new leadership. That is one thing I think we did extremely well.”

Instead of an abrupt switch — picking a day and switching the nameplate on the president’s office door — Highland worked with retiring regional president Carter Chappell over eight months to help smooth the transition process. Highland officially assumed total capacity of the president’s role this past February.

“The last thing you want in a transition like this is for it to have a negative impact on the division’s goals and financial results for the year,” Highland says. “So you want to make sure you don’t take a step backward because you’re spending all your time on the transition while failing to keep your eye on the ball.”

During the first half of the transition, Highland served as something of an apprentice to Chappell, shadowing the outgoing president to begin meeting employees and learning the processes that are employed throughout the region.

Over time, Highland took increasing control of responsibilities and decision-making. During the second half of the transition, Highland effectively served as the president, with Chappell as his adviser.

As Highland assumed more control, he began to fashion a new direction for the region. His vision didn’t differ from Chappell’s vision on a fundamental level, but there were some new areas Highland wanted to explore.

“Certainly, my predecessor had a vision, and for the most part, there is agreement in the overall vision,” he says. “But there are going to be some tweaks on what I see as our vision and where I want us to head as an organization.”

Specifically, Highland wanted to focus his efforts on driving McCarthy’s California region to $1 billion in annual revenue. He also wanted to commit resources to the company’s San Diego-area operations with the goal of becoming the top commercial construction contractor in San Diego.

“It’s a vision that has both short-term and long-term aspects,” he says. “It is important to set the stage of where you see the organization in five years and beyond. You definitely want to spend time thinking about the big-picture objectives surrounding the long-term vision.

“Then, you spend time formulating the short-term strategies that will help you ultimately achieve those longer-term goals. That stuff is a little more tactical, as opposed to strategic.”

Once you have formed a detailed vision for where you want to take your company, the next crucial step is to get everyone in the organization on board with it. You do that through a multifaceted communication strategy that encourages dialogue and feedback.

Create buy-in

Throughout his first year as regional president, Highland has repeatedly stressed the importance of utilizing a communication strategy that offers multiple interaction points between him and his management team and the hundreds of employees who work both at the regional home office and at job sites throughout the state.

The interface opportunities come in a variety of methods and settings, including formal seminars, informal social functions, person-to-person meetings and electronic avenues.

“As far as the big-picture opportunities go, we perform a divisional seminar twice a year,” Highland says. “It’s an update on both the division and the entire company. The seminars are a mechanism for me to set the vision for where we are headed and do so in front of everyone in the region.

“Last October, when I was still in my transitional period, we had one of those seminars, and that is one of the first places where I laid down my vision for the region and set up the goals and objectives for the whole group.

“However, you still need multiple touches, because you can’t expect all of this to happen in one get-together. You need numerous opportunities throughout the year.

“Another thing we’ll do is have quarterly updates within the division. Those are different from the twice-yearly seminars in that they’re constructed as informal social hours. We try to have a little fun with those. It’s kind of like a happy hour where I’ll get everyone in the office here and bring them together, and we’ll just talk about the current division highlights, then take any questions that the group may have.

“Those gatherings are smaller than the seminars, where we can have 400 to 500 people. The smaller groups offer more of an opportunity to take questions and give updates.”

The formal, twice-yearly gatherings allow Highland and his leadership team a chance to roll out large-scale presentations. The smaller, informal gatherings are a chance to inform the staff of smaller-scale tweaks and alterations to the plan, along with any other changes that have come up in the interim. It allows the leadership to drill down on areas that might need a more detailed explanation.

It’s those areas of detail that allow for dialogue between management and employees, which is a critical aspect to his communication strategy because McCarthy is constructed as an employee stock ownership plan, or ESOP, — a company structure that allows employees to have an ownership interest.

With an ESOP structure, employee input becomes necessary regarding the company’s future, since employees are stakeholders.

“There were a couple of questions at the first meeting about what work, exactly, we are going to do within our commercial business unit,” Highland says. “We talked a bit about one market that we are definitely going to chase in that unit, which is the wastewater market. We talked about a few other areas in those markets, including detention and correctional facilities, hospitality and entertainment, and airport work.

“So creating those opportunities for dialoguing is just another way to connect the dots throughout the whole organization, getting everybody to understand what the tactical approaches are going to be for executing on the strategic vision — meaning, what markets we are going to attack.”

In addition to his own personal contact with employees, Highland utilizes communication avenues that don’t require him to be in the room. It’s an important aspect of communication for any CEO or president, particularly if your company covers a large geography. You can’t be everywhere at once, but your message still needs to resonate with all employees at all locations.

Highland uses email blasts to inform the staff of events, new hires and promotions, and various other accomplishments within the division.

But Highland believes a computer screen can’t be the only other face of the company besides his, so he relies heavily on his management team to keep the messages clear and the dialogue moving. He enables his management team and middle managers to communicate the vision, but he also wants feedback to ensure that the message is reaching everyone’s eyes and ears in the form he intended.

That’s why he checks in regularly with many of his managers, asking them what feedback they’re getting from their teams.

“It is important that you take the time to have touches with those people, so that you’re getting a sense at all levels of the company about what the pulse is out there, how people are responding to the direction you are headed, and it gives you another opportunity to see if the communication is getting through.

“You kind of do an ‘end-around.’ You might think you’re communicating well, but it’s always good to go back and see if the message really resonates, if people understand it. Are your midmanagers communicating the message effectively to all members of the organization? It’s kind of a trust-but-verify approach.”

Highland will often ask his managers what types of questions they’re receiving from their teams. It’s often a good barometer for determining whether the message is getting through clearly as it passes through the various levels of the company.

“Just by the questions that folks have, you can get a read on whether the message was communicated accurately,” he says. “You can find out if some folks legitimately have a point or an issue with what we’re doing, if it’s something we need to address.

“My direct reports and the layer under them understand that part of their job is to make sure they take the time and make the effort to take the pulse of the company, find out what folks are saying about the information they’re hearing. That is a key part of communication and making sure everyone is on board with your vision.” <<

How to reach: McCarthy Building Cos. Inc., (949) 851-8383 or www.mccarthy.com

The Highland file

Randy Highland

President, California region

McCarthy Building Cos. Inc.

Born: Lansing, Ill.

Education: Civil engineering degree from Bradley University, Peoria, Ill.

First job: I was a paperboy for a paper called the Village Press. I’ll never forget it, because it wasn’t a subscription paper — it went to everybody. So I had to deliver like 600 papers twice a week on my bike. Obviously, that teaches you that hard work pays off.

It also demonstrates something that I try to teach our younger people: Try to ace everything. Sometimes you’ll be asked to do things you don’t want to do, but even if you’re not passionate about it, it’s a short-term thing, and what is important is that you ace it. If you do that, you’ll be recognized earlier in your career as someone who has the ability to do a lot of different things successfully.

What is the best business lesson you’ve learned?

I have two. One is the importance of communicating the strategic vision to your folks, getting the right people on the bus, give them the support to be successful and then stay out of their way. Another is to take a genuine interest in the development of your people. You are only as good as the folks around you.

What traits or skills are essential for a business leader?

If you don’t have honesty and integrity, people are going to see right through you. You also have to be a good communicator, a solid evaluator of talent and you need to be willing to put the interests of other ahead of your own.

What is your definition of success?

Achieving the goals that you set is my most basic definition of success. But it’s also watching your people grow and develop, and becoming successful themselves – and having a little bit of fun while you’re at it.

Published in Orange County

The topic of succession planning had been on the table for quite some time for Andy Morrison and his fellow co-founders at Market Strategies International. But it wasn’t until 2006 that the clock really started ticking.

“We started to understand, really around 2000, that as we matured in the business, it was time for us to start thinking about who would be our successors, really under the condition that we wanted the firm to remain independent,” Morrison says. “That is when we started to think about a succession plan and a succession strategy for our positions.

“But in 2006, we acquired a private equity partner, Veronis Suhler Stevenson, and that was really the second stage of succession planning because now we had an outside partner and a board of directors.”

As a component of the partnership, Veronis Suhler Stevenson mandated that Market Strategies look for add-on acquisitions, particularly companies that had younger leadership.

“That was a main part of the criteria for any acquisition, that we find young-but-seasoned management who would be in the business for a considerable period of time and could potentially become companywide leaders once they joined our organization,” Morrison says.

In 2007, Market Strategies acquired Doxus, a marketing and product strategy consulting firm, bringing Rob Stone into the fold. Morrison and the leadership team quickly identified Stone as someone with high growth potential in a leadership role and began grooming him in an executive vice president’s role.

In February, Morrison — the company’s CEO since 1994 — decided to step down, effective March 31, transitioning into the chairman’s role. Satisfied with Stone’s development, the leadership team offered Stone the CEO’s position, which he readily accepted.

That’s the short version. In reality, it wasn’t as simple as Morrison stepping down and Stone stepping up. Over the course of many months, Morrison and Stone worked together, along with the rest of Market Strategies’ executive team, to develop and execute a detailed succession plan that fell in line with the overall goals of the market research and consulting firm and to communicate it to everyone in the company.

Lay the groundwork

A good succession plan is a road map. It shows you where you need to go and what possible routes you can take to get there, so that you and your team can plan the safest and most prudent route for your business.

The preparedness of the leadership team is something that made an immediate impression on Stone when he joined Market Strategies in 2007.

“That is one of the factors that worked well in our favor,” Stone says. “Andy and the entire cohort of founding managers have always been very transparent in the company regarding what their plans are, what the timelines are — because it is critical for people to understand what the road map looks like so that these sorts of changes don’t come as a surprise.”

The transparency is the result of an ongoing dialogue among the top managers in the company. The communication among the members of the management team gave Stone and George Wilkerson — who was named president at the same time Stone was named CEO — an opportunity to have a voice in the decision-making process as the future of the company took shape.

“There is a level of unnecessary surprise that can mar succession planning,” Stone says. “The communication process, which allowed myself and George to be completely invested and present in the key strategic decisions that the company has been making, helped remove that. It also has helped us to be more available and present to the staff at large.

“It has always been clear to our people as to who has an ongoing voice in the management of the company, who were the people on the executive committee and who were the people authoring the strategic three-year plans.”

Even though Stone and Wilkerson were involved as members of the leadership team, their consideration for the top spots in the organization wasn’t automatic. Market Strategies conducted a lengthy search that narrowed the field down, first to an internally focused search, and then specifically to Stone and Wilkerson.

Morrison and his team initially looked at candidates both inside and outside the organization. They wanted their ideal candidates to possess a number of qualities, including areas of expertise that Morrison’s team didn’t possess, such as experience with international markets.

Developing a list of essential qualities that every leadership candidate must have is a critical component to the hiring process. Along with international experience, Morrison and his team constructed a list of other qualities needed to successfully lead Market Strategies, which generated $75 million in revenue during 2011, Morrison’s final full year as CEO.

“On the established leadership team, we knew we had to think about who the replacements might be, and that was very much spurred by the integration process,” Morrison says. “We knew we wanted to add younger businesspeople who had played a big part in running their own companies. They knew how to meet a payroll, they knew what it takes to manage a business.”

However, along with the valuable experience and skills comes baggage. Incoming leaders learn how to manage according to the rules of their previous company, and assimilating them can take a certain amount of deprogramming and reprogramming.

“The baggage manifests itself in a number of different ways,” Morrison says. “Their own track record can work against us. They might have had to sign significant noncompete agreements that create major barriers to them holding a management role at another firm.

“Age was another factor. Some other people we talked to had a similar age to myself and those of us who were already leading the firm, which meant there was no real advantage in terms of bringing them aboard in a successor capacity, since they were probably looking at retirement as well.”

Morrison never hired a third-party search firm, but he and his team did work with a consultant on an informal basis. The consultant helped Morrison refine the criteria for evaluating a leadership candidate, which ultimately led to a focus on internal candidates.

“He is a trusted industry adviser and ran one of the largest firms in the industry at one point,” Morrison says. “He helped give us the final insight regarding what he saw as the advantages and disadvantages of internal succession planning candidates versus external.

“When you add all of that up, it really did lead to the fact that we did have candidates internally who were going to be as well-qualified and well-positioned as we could have hoped for. That is what convinced me that we would be fine selecting from the people who were already managers in the organization, as opposed to people who were on the outside.”

Step into the role

The transition occurred at the end of March, but soon after Morrison and his team zeroed in on Stone as their CEO candidate of choice, they began to train him for his role. One of the chief responsibilities Stone needed to master is that of communication.

It’s perhaps the biggest difference between a leader and an assistant. The leader needs to oversee the entire organization, not just a piece of the pie. An assistant coach in football or basketball might only take charge of the offense or defense. He might manage a section of the playbook. But the head coach has to bring every player on the roster together and unite all of the players around a common set of goals.

That means the head coach, much like a CEO, has to know how to communicate effectively to a large audience.

In the six months prior to their formal appointments, Stone and Wilkerson ramped up their interaction with the entire Market Strategies workforce. It was a job with an added degree of difficulty due to the acquisitions the company had made in recent years, which meant a portion of the company’s employees weren’t originally members of the legacy company — including Stone and Wilkerson.

“That was one of the concerns for the people here who had been a part of the legacy Market Strategies for quite a while,” Stone says. “They wanted to know what this means, if anything, for our culture because the people now leading the company at an executive level are not the people who founded it and led it for the first couple decades of its existence.”

Stone’s primary location was another area of concern for employees. Stone is based in the Atlanta area and decided at the outset of the transition that he had no desire to relocate to the Detroit area. He would, instead, visit the company’s Livonia headquarters on a regular basis while primarily operating out of Atlanta.

“We had to ask ourselves if that really matters anymore,” Morrison says. “Does it really matter if all the C-level officers live in one place? We’re a smaller firm, but I had to ask myself how a Ford Motor Co. operates when their leadership is literally worldwide, with senior officers on every continent. In this day and age, if you haven’t learned to communicate worldwide, you’re in trouble from the get-go. You need to be able to effectively communicate worldwide.”

With modern communication technology, you can effectively run a business with executives, managers and employees in different locations. But it also creates an added set of challenges for someone in Stone’s position.

Most critically, if you aren’t there in person each day to promote the vision and strategy of the organization, someone else needs to be communicating in your place. Otherwise, you run the risk of complacency setting in.

It’s something that Stone has worked at tirelessly in the months since he’s taken over the CEO’s role and something that he’ll continue to work at as he fine-tunes his approach.

“That’s the danger in an internal transition, particularly if you’re running an organization with several lines of business,” Stone says. “To answer that, George and I are continually ramping up our communication, particularly to the next group of leadership candidates that we hire. We want to impart the best practices that we would hope leadership candidates would abide by. Their first priority upon accepting their new role is to get out there, talk to people, be present and available.

“It’s easy to get complacent. If you’re transitioning into a new role from another place within the organization, you can kind of become complacent yourself. You can take it for granted that people throughout the company know you, that the people on your team know you.

“That’s why, when you are assuming a new role like this, you need to put as much attention and care as is possible into reaching out to your people, getting your message into all of your various offices and locations.” <<

How to reach: Market Strategies International,

(734) 542-7600 or www.marketstrategies.com

The file

Andy Morrison, chairman, Market Strategies International

Rob Stone, CEO, Market Strategies International

Education

Morrison: Doctorate in mass communications research and bachelor's degree in English and journalism with a teaching certificate, University of Michigan.

Stone: Doctorate in cultural studies, Columbia University.

What is the best business lesson you’ve learned?

Morrison: Constant communication, which includes both talking and listening. Everybody emphasizes listening nowadays, but you also have to be an effective talker.

Stone: You have to be absolutely dedicated to the success of your clients and colleagues. It seems like one of the simplest lessons to learn, but it is one that is seldom learned.

What traits or skills are essential for a leader?

Morrison: You need integrity in every sense of the word. You need to be open and transparent in your communication, and deliver on the promises that you make to clients and employees. I also admire decisiveness. Make a decision and set in motion the steps you need to get to the result you want. That is something that is critical to me.

Stone: I would add that you need to convey passion for what you do. That is a big part of our job as leaders, to constantly convey the passion and excitement we feel to all of our teams.

Published in Detroit
Friday, 26 October 2012 11:54

The topic of succession planning had been on the table for quite some time for Andy Morrison and his fellow co-founders at Market Strategies International. But it wasn’t until 2006 that the clock really started ticking.

“We started to understand, really around 2000, that as we matured in the business, it was time for us to start thinking about who would be our successors, really under the condition that we wanted the firm to remain independent,” Morrison says. “That is when we started to think about a succession plan and a succession strategy for our positions.

“But in 2006, we acquired a private equity partner, Veronis Suhler Stevenson, and that was really the second stage of succession planning because now we had an outside partner and a board of directors.”

As a component of the partnership, Veronis Suhler Stevenson mandated that Market Strategies look for add-on acquisitions, particularly companies that had younger leadership.

“That was a main part of the criteria for any acquisition, that we find young-but-seasoned management who would be in the business for a considerable period of time and could potentially become companywide leaders once they joined our organization,” Morrison says.

In 2007, Market Strategies acquired Doxus, a marketing and product strategy consulting firm, bringing Rob Stone into the fold. Morrison and the leadership team quickly identified Stone as someone with high growth potential in a leadership role and began grooming him in an executive vice president’s role.

In February, Morrison — the company’s CEO since 1994 — decided to step down, effective March 31, transitioning into the chairman’s role. Satisfied with Stone’s development, the leadership team offered Stone the CEO’s position, which he readily accepted.

That’s the short version. In reality, it wasn’t as simple as Morrison stepping down and Stone stepping up. Over the course of many months, Morrison and Stone worked together, along with the rest of Market Strategies’ executive team, to develop and execute a detailed succession plan that fell in line with the overall goals of the market research and consulting firm and to communicate it to everyone in the company.

Lay the groundwork

A good succession plan is a road map. It shows you where you need to go and what possible routes you can take to get there, so that you and your team can plan the safest and most prudent route for your business.

The preparedness of the leadership team is something that made an immediate impression on Stone when he joined Market Strategies in 2007.

“That is one of the factors that worked well in our favor,” Stone says. “Andy and the entire cohort of founding managers have always been very transparent in the company regarding what their plans are, what the timelines are — because it is critical for people to understand what the road map looks like so that these sorts of changes don’t come as a surprise.”

The transparency is the result of an ongoing dialogue among the top managers in the company. The communication among the members of the management team gave Stone and George Wilkerson — who was named president at the same time Stone was named CEO — an opportunity to have a voice in the decision-making process as the future of the company took shape.

“There is a level of unnecessary surprise that can mar succession planning,” Stone says. “The communication process, which allowed myself and George to be completely invested and present in the key strategic decisions that the company has been making, helped remove that. It also has helped us to be more available and present to the staff at large.

“It has always been clear to our people as to who has an ongoing voice in the management of the company, who were the people on the executive committee and who were the people authoring the strategic three-year plans.”

Even though Stone and Wilkerson were involved as members of the leadership team, their consideration for the top spots in the organization wasn’t automatic. Market Strategies conducted a lengthy search that narrowed the field down, first to an internally focused search, and then specifically to Stone and Wilkerson.

Morrison and his team initially looked at candidates both inside and outside the organization. They wanted their ideal candidates to possess a number of qualities, including areas of expertise that Morrison’s team didn’t possess, such as experience with international markets.

Developing a list of essential qualities that every leadership candidate must have is a critical component to the hiring process. Along with international experience, Morrison and his team constructed a list of other qualities needed to successfully lead Market Strategies, which generated $75 million in revenue during 2011, Morrison’s final full year as CEO.

“On the established leadership team, we knew we had to think about who the replacements might be, and that was very much spurred by the integration process,” Morrison says. “We knew we wanted to add younger businesspeople who had played a big part in running their own companies. They knew how to meet a payroll, they knew what it takes to manage a business.”

However, along with the valuable experience and skills comes baggage. Incoming leaders learn how to manage according to the rules of their previous company, and assimilating them can take a certain amount of deprogramming and reprogramming.

“The baggage manifests itself in a number of different ways,” Morrison says. “Their own track record can work against us. They might have had to sign significant noncompete agreements that create major barriers to them holding a management role at another firm.

“Age was another factor. Some other people we talked to had a similar age to myself and those of us who were already leading the firm, which meant there was no real advantage in terms of bringing them aboard in a successor capacity, since they were probably looking at retirement as well.”

Morrison never hired a third-party search firm, but he and his team did work with a consultant on an informal basis. The consultant helped Morrison refine the criteria for evaluating a leadership candidate, which ultimately led to a focus on internal candidates.

“He is a trusted industry adviser and ran one of the largest firms in the industry at one point,” Morrison says. “He helped give us the final insight regarding what he saw as the advantages and disadvantages of internal succession planning candidates versus external.

“When you add all of that up, it really did lead to the fact that we did have candidates internally who were going to be as well-qualified and well-positioned as we could have hoped for. That is what convinced me that we would be fine selecting from the people who were already managers in the organization, as opposed to people who were on the outside.”

Step into the role

The transition occurred at the end of March, but soon after Morrison and his team zeroed in on Stone as their CEO candidate of choice, they began to train him for his role. One of the chief responsibilities Stone needed to master is that of communication.

It’s perhaps the biggest difference between a leader and an assistant. The leader needs to oversee the entire organization, not just a piece of the pie. An assistant coach in football or basketball might only take charge of the offense or defense. He might manage a section of the playbook. But the head coach has to bring every player on the roster together and unite all of the players around a common set of goals.

That means the head coach, much like a CEO, has to know how to communicate effectively to a large audience.

In the six months prior to their formal appointments, Stone and Wilkerson ramped up their interaction with the entire Market Strategies workforce. It was a job with an added degree of difficulty due to the acquisitions the company had made in recent years, which meant a portion of the company’s employees weren’t originally members of the legacy company — including Stone and Wilkerson.

“That was one of the concerns for the people here who had been a part of the legacy Market Strategies for quite a while,” Stone says. “They wanted to know what this means, if anything, for our culture because the people now leading the company at an executive level are not the people who founded it and led it for the first couple decades of its existence.”

Stone’s primary location was another area of concern for employees. Stone is based in the Atlanta area and decided at the outset of the transition that he had no desire to relocate to the Detroit area. He would, instead, visit the company’s Livonia headquarters on a regular basis while primarily operating out of Atlanta.

“We had to ask ourselves if that really matters anymore,” Morrison says. “Does it really matter if all the C-level officers live in one place? We’re a smaller firm, but I had to ask myself how a Ford Motor Co. operates when their leadership is literally worldwide, with senior officers on every continent. In this day and age, if you haven’t learned to communicate worldwide, you’re in trouble from the get-go. You need to be able to effectively communicate worldwide.”

With modern communication technology, you can effectively run a business with executives, managers and employees in different locations. But it also creates an added set of challenges for someone in Stone’s position.

Most critically, if you aren’t there in person each day to promote the vision and strategy of the organization, someone else needs to be communicating in your place. Otherwise, you run the risk of complacency setting in.

It’s something that Stone has worked at tirelessly in the months since he’s taken over the CEO’s role and something that he’ll continue to work at as he fine-tunes his approach.

“That’s the danger in an internal transition, particularly if you’re running an organization with several lines of business,” Stone says. “To answer that, George and I are continually ramping up our communication, particularly to the next group of leadership candidates that we hire. We want to impart the best practices that we would hope leadership candidates would abide by. Their first priority upon accepting their new role is to get out there, talk to people, be present and available.

“It’s easy to get complacent. If you’re transitioning into a new role from another place within the organization, you can kind of become complacent yourself. You can take it for granted that people throughout the company know you, that the people on your team know you.

“That’s why, when you are assuming a new role like this, you need to put as much attention and care as is possible into reaching out to your people, getting your message into all of your various offices and locations.” <<

How to reach: Market Strategies International,

(734) 542-7600 or www.marketstrategies.com

The Morrison/Stone file

Andy Morrison, chairman, Market Strategies International

Rob Stone, CEO, Market Strategies International

Education

Morrison: Doctorate in mass communications research and bachelor's degree in English and journalism with a teaching certificate, University of Michigan.

Stone: Doctorate in cultural studies, Columbia University.

What is the best business lesson you’ve learned?

Morrison: Constant communication, which includes both talking and listening. Everybody emphasizes listening nowadays, but you also have to be an effective talker.

Stone: You have to be absolutely dedicated to the success of your clients and colleagues. It seems like one of the simplest lessons to learn, but it is one that is seldom learned.

What traits or skills are essential for a leader?

Morrison: You need integrity in every sense of the word. You need to be open and transparent in your communication, and deliver on the promises that you make to clients and employees. I also admire decisiveness. Make a decision and set in motion the steps you need to get to the result you want. That is something that is critical to me.

Stone: I would add that you need to convey passion for what you do. That is a big part of our job as leaders, to constantly convey the passion and excitement we feel to all of our teams.

Published in Detroit
Sunday, 30 September 2012 20:00

Becoming a change monster

Randy Dobbs advocates that CEOs become “change monsters,” a mythical, business beast capable of transforming even the direst business. To rejuvenate and transform a company, you can’t be intimidated by change or what may be necessary to right the ship.

As the former president and CEO of U.S. Investigations Services Inc., Philips Medical Systems North America and GE Capital, IT Solutions, Dobbs, who is now a business leadership consultant, knows what it takes to transform a company.

“My view is that transformational leadership is the key ingredient for organizational success,” Dobbs says. “Most of the businesses that I’ve run have had two very common ingredients — the first one is they are missing their financial portfolio significantly; the second one is they’ve had organizational chaos.”

As the author of “Transformational Leadership: A Blue Print for Real Organization Change,” Dobbs recently spoke at the ASLON Leadership Forum in Cleveland where he discussed advice from his book and his career for best ways CEOs can be transformational leaders.

Find your success factors

To understand how to change your business, you have to know where your success factors lie. The inverted triangle is a great tool for understanding the value of the customer and how your company serves them.

“When I go in to talk to CEOs of $100 million, $500 million or $25 million companies, the first thing I ask them is, ‘What are your success factors in your business? What are your business objectives?’” Dobbs says. “They say, ‘Well, I want to grow revenue 10 percent this year. I want EBIDTA to grow faster than my revenue. I want to get my growth’s margin up three points.’

“I look at them and say, ‘That’s not a business objective. That’s an outcome.’ Your success factors in your business are those things you want to do to drive that outcome. It could be that I want to get premium price for my product in the market. I want to grow my market share, and I want to take a share within my geography. I want to go into adjacent markets. I want to leverage my existing assets. Those are success factors.”

When you define what that success factor is, you then have to look at your strategy for accomplishing that goal.

“Even if businesses have a success factor, what I find is they don’t have strategy,” he says. “At GE, we used to have five-year plans for strategy. Jack [Welch] came in and blew that up. He said, ‘Don’t have a strategy more than 18 months.’ The world changes too much in 18 months. As every business designs and defines its success factors, it needs to have an 18- to 24-month strategy.”

If you identify your success factors and develop the right strategy, you should find gaps within your business.

“There should be a gap between where you were and the strategy it takes to get there,” he says. “If you don’t have a gap when you get through that process, then you don’t have a good plan. You’re doing something that you really haven’t defined well enough in your business solution.”

Drive change

To close this gap you have to use the sides of the inverted triangle — people and processes. Dobbs uses Southwest Airlines as an example to prove his point.

“They were trying to be the low-cost provider in air transportation and they were trying to be the fastest and the simplest,” he says. “They built a strategy that said, ‘We’ll have a spoke and a hub, we’ll use the same airlines, we’ll be very quick with maintenance, we’ll have a quick turnaround time, and we won’t assign seats.’

“With the right processes and the right people and through all this financial turmoil, they’re the only airline to remain profitable. They had good business success factors, they had a great strategy and they continue to work on processes and executing.”

Think about this relative to your business. This is where you have to be a change monster in order to truly make transformation happen.

“To close the gap you have to be a change monster, and that’s really what transformation is all about,” he says. “A good transformational leader is somebody that has overcome one failure and learned, one failure and learned and kept moving through life.”

You have to get people to a comfort level where if you’re going to transform, they believe in the leader to do the right thing.

“What really drives transformational leadership is that ability to never give up and to see where you’re going,” Dobbs says.

“And be that leader and take the organization there when everybody is standing against you and saying that it can’t be done and you have the belief that it can and you keep driving to that point and keep having that vision and keep overcoming those failures.”

Create a transformational environment

Dobbs notes that five key things are important to create a transformational leadership environment.

“No. 1 is building a culture of change,” Dobbs says. “Businesses fail for two reasons: They fail early on because they run out of cash or they fail long-term because of their inability to change. No. 2, you’ve got to improve and grow the spirit of the team or the esprit de corps.

“No. 3, you have to have very strong communications. No one wants to hear about what happened yesterday. They want to hear about where we were and where we’re going.

“No. 4 is you have to change the financial results. You can be a great speaker, you can build a great team, you can have a wonderful environment of change, but at the end of the day, the scoreboard is going to tell the real story about you and that’s how you’re going to get evaluated.

“The last thing is you’ve got to build a cadre of transformational leaders who can run that business when you’re gone.”

Building a culture of change starts with recognizing your current culture and communicating how you plan to change its structure and character.

“One of the critical things is to create a shared need,” he says. “That’s why communication is so important. Most of the people in your organization, until you explain to them why you need to change, don’t get it. When they start to get it, they’re afraid of it.

“You have to continually develop that movie in your head where this business is going. Know where you’re going to be in 18 months and start selling it every day. You have to keep selling it and selling it and selling it until, all of a sudden, people just get it.”

Driving transformation starts with people and processes on top of a vision, mission and supporting strategies. Being a change monster will help you close the gap of where you want to go.

“As a transformational leader you wear a lot of hats,” Dobbs says. “At the end of the day, your primary job as a transformational leader is to be a change agent. You are that change monster and that’s how people see you if you really want to transform.

“For me, there is no better feeling in the world for a true leader than to really try to change and see a business transform and see the people in it be successful and then see the financial results be successful.”

How to reach: Randy Dobbs, www.dobbsleadership.com or rdobbs3@me.com

Published in Cleveland
Friday, 31 August 2012 20:01

Natasha Ashton: Blink and it's grown

Every entrepreneur dreams of going big, fast. However, few recognize that the dream of rapid growth can, if managed incorrectly, turn monumental momentum into inexorable inertia. The fact is, whether a business ultimately succeeds or fails comes down to how well the CEO plans for growth — especially rapid growth.

As CEOs of a company that has experienced 2,200 percent growth in revenue during a three-year period, with a workforce that feels as if it is multiplying faster than cells divide, my husband Chris and I have learned that having the best product in the marketplace helps but can’t guarantee long-term success. You sometimes need to take a leap of faith. But, at all times, you need passion, vision and a plan. Here are some tips on managing growth.

Communicate your vision

Before your team members can help fulfill your vision, they need to know what it is. Communicate your long-term goals, and set the bar high. Establish strategic milestones along the way, and celebrate each one.

Clearly define your core values, and ensure each decision you make as a leader can be supported by those values. Lead by example, and choose key staff and managers who do the same.

Power to the people

One of the best things you can do as CEO is hire experienced talent that understand your business model and can develop the key areas of operation. Resist the urge to keep a hand in everything — you simply won’t add as much value to details as you could to the big picture.

In the early days of Petplan, Chris and I were accustomed to doing everything from answering the phones to marketing, from accounting to recruiting. Eventually, we were so immersed in day-to-day tasks that we became further and further removed from the strategic vision that fueled our initial growth.

We adjusted our focus back into driving the business forward and created the structure to allow our managers to lead their teams. It was difficult at first, but everything that’s worth doing is.

Maximize your mentors

Creating strong external partnerships is important to any business, but an internal partner who can focus on driving growth is invaluable.

When Vernon W. Hill II, founder and retired chairman and CEO of Commerce Bancorp, agreed to join Petplan as chairman in 2008, his get-it-done philosophy increased the pace of our decision-making significantly.

The right mentor can push you outside your comfort zone and help you grow in ways you never imagined.

Take advantage of technology

The importance of understanding when and how to make investments in technology can’t be overstated.

In the early days, many of our administrative systems were manual. The office was coping fine, but our teams were overstretched. By investing in technology and automating administrative tasks, we reduced the opportunity for human error and focused our human resources on other key areas, such as exceeding customer expectations.

While the initial investment was not insignificant, we ultimately saw a cost savings of more than 90 percent, which allowed us to make key investments in other areas.

Don’t just get customers, make fans

Take good care of your customers and they’ll tell their friends. Transform your customers into fans and they won’t just tell their friends, they’ll speak so passionately about your product, service, culture and core values that their friends will wonder if they’re getting a commission.

Putting our policyholders’ needs front and center has codified our position as the top-ranked pet insurance company in North America since 2008. Keeping their needs in focus during periods of rapid growth has ensured we not just maintain that position but fortify it.

To an entrepreneur, a rapidly growing business is both the challenge and the reward. And with an unwavering vision and the right people to help execute it, you can harness the momentum to achieve even greater heights.

Natasha Ashton is the co-CEO and co-founder of Petplan pet insurance and its quarterly glossy pet health magazine, “Fetch!” — both headquartered in Philadelphia. Originally from the U.K., she holds an MBA from the University of Pennsylvania Wharton School of Business. She can be reached at press@gopetplan.com.

Published in Philadelphia

When people are looking at business ownership, they are in one of two positions. Like my story, I’d say about 15 percent are just coming out of college and are full of a “taking on the world” attitude.

But that segment is certainly the minority. The substantially larger group, from my experience, does so because they were forced to. Most people say they would like to own a business, but the truth is that most people never start one. It’s only because of a layoff or downsizing that they ultimately say they don’t want another J-O-B.

Like me, most entrepreneurs have found starting out in business to be much harder than originally thought. However, reaching this stage of business ownership, it’s much more rewarding — both financially and emotionally.

Whether it is adding a new brand to your holdings, adapting an existing operating model, or making leadership changes in your organization, I want to share four strategies that have helped me over the past three decades:

  • Have a plan. You don’t know if you’re achieving success unless you have a written plan. This allows you to organize your vision and outline strategies to achieve your desired results. Secondly, the act of planning helps to make you accountable to tracking your progress against your goals. Remember, it is not uncommon for plans to require updates as conditions change. I was asked recently if my career looks the way I predicted it would when I began at 24 years old. It’s entirely different, but that’s OK!
  • ·
  • Be determined. An unbelievable amount of determination is required to be successful in business. There are unimaginable road blocks that creep up, whether you’re starting a new business or you’ve been established for many years. The ability to have a goal and adjust to conditions such as competition, the economy and technical advancements showcases your positive mindset on achieving your set goals – even if the pathway to get there has to change.

  • Recruit a board of advisors. Having a group of professionals whose judgments and recommendations I trust and treasure has been crucial to my business success. Look at the areas where you struggle and look for skill sets you need help with in finance, insurance or marketing. Go after high-level experience in the areas you need help with. It’s amazing to me that when I started in business, by just asking someone a question, they were willing to help. I have asked people at the top of their industries to give me an hour a month and they happily agreed. I’d tell them what was going on in my business and then listen to their advice. Share your written plan from step one with those who are willing to hold you accountable.

  • Amass enough working capital. Having enough money, from launch to break-even, is important for a new venture or strategic investment in your business. I’ve learned that whatever number you have in mind, you should double it. I like to compare working capital in business to the space shuttle. In business, it’s money and with the space shuttle, it’s fuel. If you only put three quarters of fuel in shuttle’s tank, it will only go three quarters of the way to orbit, which would have a horrific ending. The same is true in business. You must have enough working capital to get the business into orbit. In business, orbit equates to cash flow, breakeven and producing a profit so the business becomes self-sustaining, and in space, it means free travel in zero gravity. Enjoy the ride!

David McKinnon is the co-founder and chairman of Ann Arbor, Mich.-based Service Brands International, an umbrella organization that oversees home services brands, including Molly Maid, Mr. Handyman, 1-800-DryClean and ProTect Painters. To contact him, email davidm@servicebrands.com

Published in Detroit
Sunday, 30 September 2012 20:28

Succession shopping

Lisë Stewart founded Galliard Group to support family-owned businesses in the many decisions that can make or break the future of a company. One significant area of decision-making for family-owned businesses is succession planning.

When considering how to handle the future of the company, many family-owned businesses don’t realize the number of options that are available. From transitioning to the next generation in the family, to bringing in a leader from the outside or deciding to sell the business, the decisions are very personal and require careful thought and planning.

That is where Stewart, founder of Galliard Group, lends a helping hand. Galliard Group provides consulting, training and support materials for family-owned businesses. Conversations in the succession planning process can be difficult, as most experienced family-owned business members will report. The process is challenging on several different levels.

“Owners who are currently running the business often really enjoy what it is they are doing and don’t necessarily want to leave, but they feel like they need to make room for the next generation of ownership,” Stewart says. “Others really want to get out of the business because they’re tired and they’ve been doing this a long time, but they realize they’ve never groomed a successor and they don’t know what to do with the business.

“Sometimes they think that their children may want to take it over, but they’re concerned that their children don’t really have the skills, background, or maybe the passion to do a great job. How do you tell your children that? So it’s a very difficult situation.”

These businesses need to understand their options. The sooner the business members start the planning process, the better.

“We try to convince our business owners to develop their exit strategy right when they start the business,” Stewart says. “Think about what the future needs to be and what your plans are. A lot of people don’t realize that it could take five years or more to really develop and implement a successful succession plan.

“The other thing I think is important to note is that succession is not just about finding one person to take over and run your business. A succession plan is a plan to continue the long-term viability and success of the business. That often means that you need far more than one person to take over — you need a strong leadership team.”

More often than not, family-owned businesses will have to look outside the family to get the right kind of talent to help grow the company.

“We really encourage family-owned businesses to place people into jobs based on their talent and skill, not on their blood line,” Stewart says. “You have to look at the job and what needs to be done to this company to meet a strategic goal. Get people into jobs that have the talent or the ability to learn skills that are key to that job being effective. Base your organizational development on key competencies as opposed to relationships.”

Family businesses often struggle to weigh the needs of the business with the needs of the family. It is important to be honest in discussions about the future, especially for families that do not plan to pass leadership to the next generation.

“We have a saying at Galliard Group, which is, ‘Deal with the emotional issues before emotions become the issue,’” she says. “If you believe your son or daughter or the next generation of potential owners don’t really have the skills … have a really honest conversation around what sort of skills you need in order to bring this strategic plan to life and if you don’t have it, what are the options.”

Depending on the needs and desires of the business owner(s), there are several paths to take.

“One might be that you form an advisory board of people who have knowledge necessary to help grow the company and they can serve as mentors and coaches for the next generation,” Stewart says. “The second thing you can do is bring in an interim leader. They come in in a leadership role, but they are hired with the knowledge that they’ve got to be able to coach the next generation of ownership. There really are quite a lot of options that family owners can generate if they are not sure that the right leader is in the family.”

How to reach: Galliard Group, (320) 762-1371 or www.galliardgroup.com

Published in Akron/Canton

Clayton Frech loves customer service. He loves it despite the fact that his first job was managing a dormitory salad bar at the University of California, Santa Barbara.

“It was the worst job in the cafeteria other than maybe washing dishes,” Frech says with a chuckle. “But you learned quickly and within a year, I was one of the assistant managers and I started managing my own team.”

That passion for stepping into a tough situation and not only making the best out of it, but finding a way to thrive in it, would serve Frech well years later when he was asked to get things turned around as division manager for the Southern California division of Safelite AutoGlass.

Sales had been flat for the three years prior to Frech’s arrival in 2009, and that had fostered a work environment that didn’t have a whole lot of energy.

“In that kind of slow to no-growth environment, there aren’t a lot of new stretch assignments,” Frech says. “There’s not a lot of need to develop new talent.”

Frech wanted to start developing talent and get people excited about serving the customer and energized about the opportunity to become a leader in the Safelite organization. Doing so was the only way he knew to get Safelite on the map in Southern California with potential customers and boost the division’s mediocre sales volume.

“I love the service side of things and I love thinking about the underlying people and operations processes needed to ensure that the service delivery is excellent every time the customer walks through the door,” Frech says. “While I’ve changed industries over the years, this is what I’m most passionate about.”

When Frech brought up the idea of providing leadership and customer service training to employees, he didn’t get the response he expected from his general managers.

“I was thinking about whom my managers are going to be in two or three years and what skills do those guys need because I want to start grooming them,” Frech says. “And my managers said, ‘Well, the guys who are running the business right now need some of this too.’”

So Frech changed course and opened the training up to existing leaders as well the leaders of the future. And he set out to create a program that would give them the skills they needed to make Safelite a company of choice for its potential customers.

Lay the groundwork

Frech was fortunate that Safelite’s headquarters in Columbus, Ohio, had put together a leadership development program that had already proven to be effective at grooming leaders and improving customer service.

It would provide a template to work with in developing a curriculum for the Southern California division. Frech knew he wanted the training program to balance learning about leadership principles with the functional side of being a manager.

“We weren’t teaching them how to do their day jobs,” Frech says. “We were teaching them the intricacies of people management as well as the softer side of leadership. To put it another way, in terms of conducting a performance review, there’s the nitty-gritty functional things you just need to know about how to do it and do it correctly.

“Then there is also the side of what do we expect out of our people. Is it just that they are able to put a windshield in correctly? Or do we expect them to have a good attitude? Do we expect them to bend over backwards for our customers? It’s a balance.”

As the curriculum was hashed out, it was decided that the first training course would take place over the period of a year. But in both cases, Frech says one of the keys to success is often a willingness to remain flexible.

“You have to be rigid and flexible at the same time,” Frech says. “If you don’t put dates on the calendar, it will never happen. So getting the dates on the calendar and planning it and forcing everybody to make it happen is critical. But then it’s trying to listen to your people and be flexible when you really need to make a change.”

An agenda was provided at the beginning of the training to give participants an idea of what to expect, but caution was taken to not reveal too much.

“They never really knew exactly what we were going to do,” Frech says. “So there was an element of knowing and an element of surprise. But it was a healthy balance.”

As for the participants in the Safelite training course, everyone who was already a manager would be required to take part. High-potential employees who had a strong desire to one day become a manager would then submit applications.

“The main thing we looked for in the applications was a vision of where they wanted to go with their careers and if they could articulate that vision, even in a limited way, and really show that they were hungry, engaged and willing to learn,” Frech says. “For us, it didn’t need to be that polished perfect application. It was more, is there desire in there?”

There were 50 slots filled for the first course, with about 75 percent of high-potential applicants accepted. Those who weren’t chosen were put on a list and a point was made to give them more opportunities to stretch themselves in their work. They would also be given strong consideration when future training courses were offered.

As for those who were selected, the excitement was high.

“They had never been through anything like this before,” Frech says. “So the general mood going into the classes was excited and positive.”

Make it worthwhile

Since it was something new, Frech did indeed feel a lot of energy about the leadership development course that was about to begin. It was now up to him and his team to make sure the students weren’t disappointed.

“In every class, there needs to be an aha moment,” Frech says. “The content of the class needs to be compelling enough so they are searching for that aha moment. They are really paying attention. That’s probably the most important thing.”

Frech wanted employees to focus on gaining knowledge and getting better at their jobs. There would be no grades and there wouldn’t be a final exam at the end of the course either.

“The main emphasis was on them reporting back in some way and using the knowledge they gained as part of the discussion,” Frech says. “That’s how we reinforced the homework. At the end of the day, the classroom is only so good. You’ve got to be in the field and learning on the job. That’s where the vast majority of learning is going to take place.”

Frech and his team sought to make the classes interesting by bringing in people who could offer compelling lessons to the trainees.

“We brought in high-level speakers from other parts of the organization, some in person and some on conference calls,” Frech says. “We toured facilities together. We just did a lot of different things and tried to keep it fun.”

While there was thought to bringing in outside help to lead the course, Frech was confident he had the resources in house to train people the right way.

“For us, the basic goal of this effort was to take an hourly technician and turn them into a team leader/store manager of five to 10 associates and to be able to lead those associates to their optimal performance and capabilities,” Frech says. “We weren’t trying to take on the world here. We were just trying to develop a new generation of managers with some idea of what it means to be a manager and what it means to be a leader and have expectations.”

As the first year drew to a close, it became apparent that employees had gained a lot of knowledge about managing people.

“But it didn’t provide any insights into the business and how we want to run the business and where the opportunities are to improve the customer’s experience and the customer’s journey,” Frech says.

So a second class was scheduled to begin a year after the first one ended. It would focus on the customer journey and all that went into providing great service.  

“We got experience at the distribution center and an understanding of the supply chain and at our warehouses where the glass is stored and shipped out to our technicians,” Frech says. “We spent time with the technicians and talking about their perspective and then we spent time doing the glass and talking to customers, real customers, on both ends of the process. We talked to them at the beginning when they’re making the decision and at the end when they’re deciding if they are happy or not.”

Frech says the two-year plan of first learning to be an effective manager, then learning about customer service, was not exactly how he had it planned. It just happened to work out that way.

“It’s a pretty good one-two punch the way it ended up, but I’m not going to take credit for some grand vision,” Frech says. “If we take care of our people the right way and they in turn take care of our customers; that’s the heart and soul of what we do and of our strategy.”

Provide a path

Frech made no promises to employees who took part in the training program in regard to raises, promotions, bonuses or any other incentives.

“The implicit deal that we struck with the associates was if you can adopt the learning in your life, you will be much more viable for a promotion,” Frech says. “It’s got to be a two-way street. You can train people, but how much training goes in one ear and out the other?”

You’ve got to stoke the flames of self-improvement in your people and create an environment where they see the potential opportunities ahead and get excited about going after them.

“That’s what I talk about with my people. Are you on a journey of self-improvement? What are you working on? If they do all those things and start stepping up and taking more responsibility, that’s when I’m more comfortable to give raises and promotions,” Frech says.

“If they can start on the journey and show that they are really genuinely improving, the opportunities are going to be there for them. It doesn’t mean you win every opportunity or you get everything. But that’s the commitment that has to be made.

Frech’s division has since been expanded to include all of California and now encompasses 566 employees. Since the training began, 20 promotions have been issued and 16 of the people who were promoted took part in the training course.

“So that’s 80 percent,” Frech says. “That probably keeps them motivated. I don’t tell them who has been promoted out of their peers, but they know. It’s really worked to give them visibility with myself and the general managers as well as with their peers and has really moved their learning along.”

How to reach: Safelite AutoGlass, (877) 800-2727 or www.safelite.com

Takeaways:

Think about what your people need.

Make sure that you’re not wasting anybody’s time.

Give employees a reason to get excited about what you’re asking them to do.

The Frech File

Born: Bethesda, Md.

Education: Bachelor of arts in economics, University of California, Santa Barbara; MBA, University of California, Los Angeles

Who has been the biggest influence in your life?

Steve Miggo, senior vice president of operations and human resources at Safelite. There are a lot of bosses in the world, leaders in the world, who don’t always appear to have a caring or kind manner.

Steve is the kindest, most genuine and caring guy and he’s 100 percent focused on building the organization in that same vein. He was one of the folks I interviewed with when I was thinking about joining Safelite.

His leadership philosophy was just so perfectly aligned with how I have always wanted to lead. It’s almost like a homecoming from a values and leadership philosophy standpoint.

Who would you most like to meet?

I would probably say Jack Welch. The reason I say Jack is he spoke at our annual leadership conference back in 2011. And he talks a lot about people and talent development. He talked about how he evaluates his managers along two criteria: performance and values. This has really had an impact on the way to look at managers.

It’s easy to discard values if you get performance, and he made the point that you absolutely can’t do that because in the long run, it’s not sustainable if managers do not share your values or have your values. I think about that all the time and it’s one of those things that has stuck with me. It’s so simple.

Published in Los Angeles

Manufacturing companies in Northeast Ohio directed their attention overseas in June and collectively acquired a number of international firms. 

Eaton Corp., Goodyear Tire & Rubber Co. and RPM International Inc., all acquired companies that are based outside of the United States. Acquisitions made by Nordson Corp. and The Sherwin-Williams Co. in June also had an international flavor even though the companies are based in the U.S.  

The perfunctory trend of placing cash in conservative cash funds or bonds has not been a quality option for most CFOs as yields are historically low. Many companies are seeking opportunities to invest the surplus cash on their corporate balance sheets in acquisitions geared to bring long-term results.

Manufacturers see the continued growth in emerging markets and the need for an expansive global supply chain as reasons to use cash for international acquisitions. 

Eaton’s purchase of Gycom’s electrical low-voltage power distribution, control and automation business in the countries of Sweden, Denmark and Finland will give Eaton a larger presence in the Nordic region.

Eaton will also expand globally through the purchase of Polimer Kaucuk Sanayi Ve Pazarlama A.S., a Turkish hose manufacturer that employs 2,100 people and posted sales of approximately $335 million in 2011.

Goodyear purchased the remaining shares from a joint venture of Nippon Giant Tire, a subsidiary of Goodyear in Tatsuno, Japan. NGT manufactures Off-The-Road tires sold globally in the Asia-Pacific region, especially in Australia, and Goodyear plans to invest $250 million to upgrade the company’s facilities and expand further in the region.

RPM International, through its Euclid Chemical Group, acquired Brazilian building and construction products manufacturer Viapol Ltda. RPM hopes to leverage Viapol’s existing customer base for additional growth opportunities in the Brazilian market.  Viapol has annual sales of $85 million and employs more than 300 people.

ALBERT D. MELCHIORRE is the president of MelCap Partners LLC, a middle-market investment banking firm. He is also a director on the ACG Cleveland board. For more information on MelCap Partners, please visit www.melcap.co. For more information about the Association for Corporate Growth, please visit www.acg.org/cleveland.

Deal of the Month

The deal of the month is awarded to Nordson Corp. for its two closed transactions in June. Nordson engineers, manufactures and markets differentiated products and systems used for dispensing adhesives, coatings, sealants, biomaterials and other materials. The company also does fluid management, test and inspection, as well as UV curing and plasma surface treatments.

Nordson completed the acquisition of Wisconsin-based EDI Holdings Inc. EDI provides slot coating and flat-polymer extrusion dies for plastic processors and web converters. 

The second deal involved the acquisition of Pennsylvanian-based Xaloy Superior Holdings Inc. Xaloy manufactures melt-delivery components for injection and extrusion machinery in plastics processing. Both transactions are expected to expand Nordson’s global reach, which currently extends to over 30 countries.

Published in Cleveland

K’NEX Brands LP has been taking a bigger and bigger bite out of its market ever since Michael Araten took over as president and CEO in 2006. In the past six years, the manufacturer of building toys has formed partnerships linking the K’NEX brand with brands such as Nintendo, Sesame Street and NASCAR.

This year, the company will introduce a line of toys licensed by Rovio Entertainment, makers of the “Angry Birds” video game franchise.

The tie-ins that Araten and his leadership team have orchestrated are having a major impact on the company’s bottom line. In 2008, K’NEX produced about $100 million in North American sales. In 2011, the company’s North American sales had jumped to $150 million.

Given all the success that K’NEX has had, what is Araten’s first tip on managing growth?

“I would tell other leaders to be lazy,” he says.

No, Araten hasn’t discovered the secret to building a highly successful enterprise from your living room couch. But he has developed a good grasp of what a CEO should and shouldn’t be doing when piloting a company through a growth phase.

“What I mean is, the first question when I’m looking at a task is, ‘Who needs to be doing this, and is there a way I can put this in someone else’s hands?’” he says. “The key for the CEO suite is to recognize who has what talents, and make sure they do what they are great at. If you don’t have the ability to do something yourself, what you want is someone on your team who can help you accomplish the key things you need to do, so that you can execute your growth strategy.”

Araten has been able to successfully manage the growth of K’NEX through strategic planning and effective delegation — knowing where he wants his company to go, and who can take it there.

To Araten, the plan is the known quantity, and the people are the variables. The success of K’NEX — or any company — is dependent on how well the team executes the strategy.

“If you have the right people executing on the plan, it will go really, really well,” he says. “If you don’t, it doesn’t matter how good the plan is, it just won’t happen. That’s why the linchpin in all of this is assessing the talent of your people and making sure they’re doing what they are really good at.”

Draw a map

 

The first step in any journey with a destination is to plan a route. When plotting a journey for your company, your route is outlined in your strategic plan.

Araten gathers all his top thinkers together for periodic strategy sessions, during which the team assesses growth opportunities that have either been presented to K’NEX or that the company is considering pursuing. The strategy team members weigh avenues for growth against a number of internal and external factors.

“It’s a risk-reward calculation, really,” Araten says. “How much reward do we think we can get for a given opportunity, and how much risk is related to that reward? We look at how much risk we want to take, how much inventory we want to build, what does our distribution channel look like, and build a plan around that. Once we agree on how much upside there is related to how much downside, we go and execute on that plan.”

To develop an accurate strategic plan, you have to know what market factors stand the biggest possible chance of affecting your business. K’NEX exists in a market that is seasonal in nature, and produces a product with a very specific appeal to consumers. With that in mind, he set boundary lines for what his team could consider regarding growth opportunities.

“We’re a seasonal business, so there is a little extra risk involved with that,” Araten says. “With every opportunity that comes along, we also have to ask ourselves if it makes sense as a building toy. Not to single out ‘American Idol,’ but even though the show is very popular, it probably wouldn’t make sense as a building toy.”

When Araten and his team did research prior to signing a licensing agreement with Nintendo last year, they started by figuring out the type of reach Nintendo had with its brand and video game characters, and by extension, the type of reach K’NEX could expect with cross-branded building toy products.

“We started by asking how many users of Nintendo products there are in the U.S. and around the world,” Araten says. “For example, we know that 40 million Wii units have been sold and another 70 million Nintendo DS units. We looked at Q Scores of various characters, and those scores have always been in the top five over the past decade.

“We also did a survey of our key customers, so we knew that retailers were open to carrying a new product. So we took all of that information, looked at our budgets in several categories, where we’d find placement in North America, Europe, Australia and other places, and decided that we were comfortable making, let’s say, a $10 million investment in inventory.”

Good growth opportunities in the manufacturing sector usually center on two areas: new customers and new products. You either increase what you offer to customers, or you increase the pool of customers to which you offer your existing products. In most cases, your growth will result from a mixture of the two, and you need to account for that in any strategic growth plan.

In the toy industry, executives such as Araten are fighting a constant battle to stay current. Kids quickly grow bored of their current toys and parents are always on the hunt for the next smash-hit birthday or holiday gift, so the leaders at K’NEX have to harness their creative and collaborative power to stay a step ahead of demand.

In that battle, the wins you already achieved can act as a critical springboard for future wins.

“When you look at our history, our first big licensing deal was with ‘Sesame Street’ back in 2007 or ’08,” Araten says. “Once we had ‘Sesame Street,’ and people saw how good we were performing and how well we could capitalize on the opportunity, licensors started coming to us with ideas.

“We were the ones who approached Nintendo for that deal, but we’ve had a lot of other brands come to us. That is where you want to build a checklist into any strategic plan that it makes sense for you. That you can reach consumers with marketing and distribution, and that the idea is a good match for your company. As I said, we want to make sure it’s an idea that makes sense as a building toy.

“We’re also starting to leverage technology so that we can ship directly to consumers in pretty much every country on earth. We want to be able to ship to anywhere from our warehouses in the U.S., so we are modifying our websites to be able to launch in a variety of countries that make sense. We’re working on both of those, and that is why we’re so interested in product relationships with global appeal.”

Invest in human capital

A strong culture that embraces solid core values is a central component of any high-growth organization. But to have that type of culture, you need to first build a team that can embody and promote your values.

Many leaders reference the principle of getting employees in the right seats on the bus, as popularized in Jim Collins’ book, “Good to Great.” No matter what metaphor you use to illustrate it, the concept is true: In order to have a strong culture that can enable growth, you need the best possible people positioned throughout your organization in a way that allows them to grow as employees, and allows you to leverage their talents and skills for the best possible effect.

Araten says much of what he has learned about people stems from years of experience, which has helped him develop a reliable gut instinct regarding whether a prospective employee fits in the company, or whether a given team member fits in a specific role. But that isn’t enough. You also need to be able to ask the right questions.

“Some of what I do I’ll refer to as a ‘friendly deposition,’” Araten says. “You ask people a lot of questions about why they are doing what they’re doing, you apply common sense to what the answers are, and you see if they’ve thought about all the potential angles to a given problem or scenario.

“If they have experience dealing with that scenario in the past, that is something to consider as well, Araten says. “In some cases, you’re going to have some new employees with limited experience, so some of what you are able to do is going to depend on where you are in your life cycle as an organization.”

In assessing a person for a job, promotion or assignment, you need to get to the core of their thought process. If you can peel back the onion layers on how they process information and solve problems, you’ll get a much clearer view regarding how they might fit your team.

“You have to look at the thought process of how they came to their decisions,” Araten says. “If it makes sense, it looks like the probabilities are in your favor, and you can move forward.

“There is never a scenario where you have perfect information or a guarantee of success, so you just try to get as close as you can, make the move with the information that you have at the time, and the results are the results. More often than not, when we take that approach, things seem to pan out in our favor.”

If you hire or promote an employee into a new position, and the person falters out of the gate, making decisions that don’t bear fruit, you need to get to the heart of what is going wrong. It might be the person, or it might be the process. In either case, you need to get your hands on as much information as possible so that you can address the issue.

When K’NEX launched its line of Nintendo products, the team overseeing the launch made a miscalculation in the budget. Admittedly, Araten was not happy, but he didn’t go on the warpath, point fingers of blame at everyone involved. Instead, he used it as a learning opportunity.

“On a couple of the items, we underestimated somewhere on the order of $100,000,” he says. “We thought it was going to cost $100,000, but it ended up costing $200,000. As part of our review on all the product lines, this comes up, and you could tell the person who was telling this to me was a little nervous. But we went through why it happened, whether we missed anything, and found that our logic was sound.

‘In the end, we learned some things about what we could have done differently. We ended up improving some of our internal mechanisms.”

If you encounter a similar situation, Araten says you should do three things.

“One, figure out if the person in charge asked the right questions, and if the questions were based in logic,” he says. “Second, if you would have done anything differently, what is it and did the person you put in charge know it – or should they have known it? Three, teach them how to ask better questions. Oftentimes, as the CEO, you will have a much broader view of the organization, and will think to ask questions that the team or department leader didn’t. That’s part of the learning process. If everybody knew all the questions to ask, we’d have hundreds of CEOs in the organization.

“If you value teaching in your organization, teach people what questions to ask so they improved their logic. Then, the next time a situation arises, it goes smoother and reaches an even better outcome.”

How to reach: K’NEX Brands LP, (215) 997-7722 or www.knex.com

The Araten file

Born: Montreal

Education: Political science degree from Stanford University; juris doctor from the University of Pennsylvania Law School

First job: I worked as a part-time sales guy at a leather and fur store in suburban Philadelphia.

Araten on building a high-growth organization:

I think you have to develop a culture, along with some mechanical things. You need to be able and willing to reinvest in the mechanical infrastructure, but to me the more important thing is that you need to create a culture where it is OK to take a chance going fast, where you forgive people their mistakes as long as their logic is good. So I think it is setting that tone from the top and letting your leadership team say it to the rest of the crew.

We are going to go a hundred miles an hour to try and take advantage of these opportunities, and we are going to miss some stuff. But as long as the logic is sound, what we miss shouldn't be critical. Whatever mistakes we make, we will learn from and move on. It is easy to say, but the more critical part is the first couple of times you make those mistakes and learn from them and move on. That is what people really remember.

Araten on reinforcing a culture through communication:

I have one-to-one meetings with my leadership team every week. We are sitting together for at least an hour each week making sure that we understand what the priorities are and the logic behind the major decisions that we are making. When things go awry, it starts with me asking how we are going to learn from it so that it doesn't happen again, and then moving on. Then, encouraging them to do the same thing with their teams.

On the flip side, you want to make sure that you are giving positive feedback whenever possible, whenever they are doing things that you really like. We have a few mechanisms in place for that, such as awards that any employee can give to any other employee when someone goes above and beyond the call of duty.

Published in Philadelphia