David Sutherland was elected president and CEO of IPSCO Inc. in January 2002 during one of the worst downturns ever experienced in the North American steel industry. Very few Canadian companies have been successful penetrating the enormous American market.
IPSCO has not only been successful in that venture, but in the process has transformed itself from a relatively small Canadian pipe company that made steel to a NAFTA-wide steel company focused on infrastructure and energy tubu-lars. Today, IPSCO is the leading producer of steel plate and energy tubulars in all of North America.
The company has targeted North America, where its focus, differentiation and value-chain-oriented strategy will have maximum effect. The core effort of this strategy is to clearly differentiate IPSCO from other steel manufacturers through superior execution of a customer-focused commercial strategy, reliable delivery to market, consistently high-quality product, a growing emphasis on value-added products, technical leadership and strong financial performance.
IPSCO builds brand presence in its primary markets in order to support and extend its ability to differentiate “who we are” and “what we do” from others in the marketplace.
The company’s strength derives not only from the intrinsic competitive abilities of each of the activities along its value chain, but also from the synergistic combination of its facilities, resulting in better service to its customers, good penetration in competitive markets and a set of alternatives that provide a strong defense in difficult markets.
HOW TO REACH: IPSCO Inc., www.ipsco.com or (630) 810-4766
Southern Bells Inc. was created in 1982 as a franchisee of Taco Bell. Craig Fenneman and his partner, Charlie Brown, were in the process of building their first restaurant when PepsiCo offered to sell two existing stores in Bloomington and Columbus, Ind. Since that time, the company has grown through acquisitions and new development to 62 restaurants.
Fenneman became interested in the restaurant business after he was a landlord for a variety of full-service restaurants. The financial viability of the restaurant business, coupled with his enjoyment of serving people, made this an attractive business proposition.
Early on, financing for land, buildings and equipment was difficult. Most bankers had not heard of Taco Bell and were reluctant lenders. Pledging other assets and personal guarantees were the norm. Franchisees were expected to complete all aspects of development, including site selection, construction, equipment and training.
Fenneman saw the restaurant business as an opportunity to meet several goals. The first was to find a business that allowed for growth. Another important focus was the ability for Craig to own the sites on which he built restaurants. This was a perfect fit for Fenneman a cash-flow business that allowed him to build equity in real estate.
In addition to building his own business, Fenneman has focused his energies on helping shape the industry. He served on the board of directors of the National Taco Bell Franchisees for six years where he helped effect changes in concept development, building design and national insurance programs for franchisees.
HOW TO REACH: Southern Bells Inc., www.southernbells.com or (317) 788-0374
For high-net-worth individuals and institutions, hedge funds offer appealing investment options and more flexibility with much less regulation than mutual funds. Savvy fund managers, who don’t need to register as investment advisers, can do pretty much whatever it takes — from leveraging to short selling — to earn return on investment.
Net worth and income requirements have historically limited these investors to a small, exclusive group. But changes in the economy over the past decade or so, have opened up hedge funds to a larger swath of individuals.
“Under current Securities and Exchange Commission (SEC) rules, investors can use their primary residence to meet their qualification requirements for net worth,” says Aaron Kase, partner with Levenfeld Pearlstein, LLC, a Chicago-based law firm. “With the increase in real estate prices over the last couple of years, a greater percentage of the U.S. population passes the accredited investor test.”
Smart Business discussed with Kase the proposed changes, the potential implications of these changes and the best courses of action for hedge fund managers and investors.
Which individuals are currently legally eligible to purchase hedge funds?
Under current securities rules, which have remained mostly unchanged for the past 25 years, individuals have to meet income or net-worth requirements to purchase an interest in a hedge fund. To qualify as an ‘accredited investor,’ individuals need to have had $200,000 of income in each of the past three years, or $300,000 including a spouse and have the expectation of making at least as much in the current year. Otherwise individuals need to have at least $1 million in net worth, which can include a primary residence.
How could proposed legislation change who qualifies?
Recently, the SEC proposed changes to the requirements that would make it harder for investors to participate in the hedge fund market. These potential amendments would require individuals to also have $2.5 million in investments, including assets like securities or investment property. This would raise the wealth requirements and mean that individuals could no longer count the value of their home toward the total investment assets. Married individuals could only count half of their marital assets, meaning a couple might need as much as $5 million in investments to participate in hedge funds.
What are the implications of these proposed changes?
The SEC has received a large number of negative comments on its proposal from the public. The feedback typically states that it’s inappropriate to limit people’s investment decisions based on the amount of investment assets they possess. If the SEC adopts these proposed modifications, many individuals would be pushed out of the hedge fund market.
My sense is that large hedge funds, those with $1 billion or more in assets, don’t need to be concerned about this issue. Most of these funds already limit their investors to those who meet the higher, more stringent qualified purchaser status requirements of $5 million in investment assets for individuals and $25 million for most entity investors.
Smaller hedge funds would experience a much greater impact from these more restrictive requirements. These smaller investment entities would have a more limited pool of potential investors. Also, depending on how any final rule is worded, hedge fund managers could end up with investors in their fund who would not have the ability to further invest in the fund or to invest in subsequent funds.
What advice would you give to new hedge fund managers?
It’s essential to stay informed, think about whether potential investors will meet the higher standards, and include as many investors who meet the more stringent requirements as possible.
Ask if potential investors still qualify under the higher proposed standard. The proposed rule has some grandfathering provisions. It’s in the hedge fund managers’ best interest to limit the investor qualification risk based on possible SEC changes.
Why is it important to select a knowledgeable hedge fund adviser, and why is a proven track record important?
The key risk in a hedge fund is the hedge fund manager. Mutual funds are registered investment companies that have a lot more restrictions in terms of governance, type of investments and investment practices. These constraints limit the ability of managers to take advantage of market inefficiencies, but they also protect investors from unscrupulous or incapable managers.
It’s important to thoroughly research the fund manager, including his or her track record, and to read the fund documents carefully. If individuals don’t feel comfortable doing this research, they can invest in a fund of hedge funds. The fund of funds diversifies manager risk by investing in several different hedge fund managers.
AARON KASE is a partner with Levenfeld Pearlstein, LLC. Reach him at (312) 476-7524.
Congratulations to all of the nominees, finalists and winners in the Ernst & Young Entrepreneur Of The Year Lake Michigan Area award program. Ernst & Young created the Entrepreneur Of The Year® (EOY) award the Award for Business Leadership to honor the accomplishments of the great men and women who make our economy vibrant.
Growing companies are vitally important to us. They create jobs, support their communities, and provide products and services that help drive the economy. It is hard to imagine where we would be today without the entrepreneurs who create growth companies. They are the visionaries and the risk-takers who believe in their dreams and refuse to be denied. Rather than follow in the footsteps of others, entrepreneurs choose instead to lead, to take the road less traveled.
For the past 21 years, we have proudly recognized outstanding business leaders across the Lake Michigan Area program. This year’s Illinois, Indiana, West Michigan and Wisconsin participants have succeeded through turbulent economic times and personal sacrifice, and they have emerged stronger than ever. They’re driven by accomplishment. They have defined sustainability. They’re not afraid to take risks and can see beyond them.
Ernst & Young’s Strategic Growth Markets practice is the leader in serving the Russell 3000, high-growth private companies, companies with significant investments from venture capital or private equity firms, and companies planning to go public. We are committed to serving the entrepreneurial companies throughout their lifecycle. That’s why we started the Ernst & Young Entrepreneur Of The Year awards.
Join us in congratulating the leaders of today innovators that have achieved their American dream. We, along with our sponsors and patrons, continue to be inspired and encouraged by the entrepreneurial business achievements of our nominees. The following pages highlight those individuals who pursued this coveted distinction. Ernst & Young is proud to recognize and honor the accomplishments of the people who make this country great.
Congratulations on your continued success.
RANDALL L. TAVIERNE is Ernst & Young Entrepreneur Of The Year director, Midwest Area Strategic Growth Markets leader and partner at Ernst & Young LLP.
George L. San Jose has seen a lot of companies that were great at the 100-yard dash. However, he’s not impressed by the flash-in-the-pans of the world and prefers to liken his company, The San Jose Group Co., to a well-conditioned marathoner. Fostering what he describes as a customer-centric culture, San Jose has stressed persistence and consistency since founding the Hispanic-focused marketing agency in 1981. Employing 54 people in Chicago and more than 700 worldwide, The San Jose Group now records more than $130 million in domestic annual billings. Smart Business spoke with San Jose, the company’s president and COO, about leading by example and seeking out fresh ideas.
Personify your vision and build buy-in. If you’re expecting people to follow you and to follow your example, then you have to live your example. You have to be a living testament as to what they can achieve.
In a way, you almost have to be their mirror, so that they can see themselves in you and thus begin to think on their own that, ‘Gee, if he did it, then I can do it.’ It’s like anything else. You have to see the end from the beginning. You have to know where you’re going before you can figure out how to get there, and if you know what it looks like, you at least know when you’ve arrived.
My style is very much leading by example, casting out a vision. There are three major steps to it. First is casting out a vision, specifying the objectives, achieving the buy-in from everyone in the vision and making sure they understand it. It has to be made into a common vision for everyone to feel and touch.
Then you have to support that with incentives. There has to be a reward mechanism in place for those folks who are going to help you.
The last part is pulling the people to help you accomplish it. You lay all that out, and then you just have to pull them along.
Hire for potential. I’ve learned that the vision that I had can be accomplished and that the vision we set out has really made a difference in the type of agency that we have become, the size of our organization and the quality of our work. I’ve also learned that not every person wants to be pulled into a higher professional level than the one that they presently might have achieved.
Studies show that 20 percent of the people in an organization are going to resist change. Not everybody that you hire is going to be one that wants to achieve that higher level of excellence.
A lot of times in the hiring process, we try to evaluate candidates on not what they bring to the table right now, but as best as we can, is this a candidate that can be promoted two or three times higher than the level they’re at right now? At the end of the day, I’m a coach.
It’s kind of like a sports team. You have great players in different positions, and as a mentor to them, I look at people not based on what they can deliver but based on the full potential that they have.
It’s impossible sometimes to know in a 30-minute interview or even if you screen them at two or three levels what the person’s disposition is going to be. There are telltale signs that you can look at and read, but a lot of times it’s just like the stock market. You look at where they’ve come from, and that’s how you can judge where they’re going. It’s not necessarily true 100 percent of the time, but it does provide you a pretty good guide.
Constantly strive for excellence. Most employees would tend to do enough work just to get by. They’ll do good work, but good is just not good enough.
To achieve excellence, it’s something that you have to constantly work on. Excellence is in the details. To get people to see your vision and to capture the fact that if we do work at a higher level of excellence, we don’t have to do as much.
We’ll do less work, run more profitably and with less stress. That’s a hard point to get across sometimes.
I can’t repeat enough how important it is to be constant. It’s constant training, constant evaluation, a constant pursuit of excellence and teaching by example. That’s not only as to how you behave yourself but as to how you would tackle projects or assignments or basically points of view on how to manage a business better.
Seek out new ideas. Leaders tend to sometimes live in a vacuum. They run their own companies and they make statements to themselves that we’re the best at this or we’re the best at that, and a lot of times, those statements and that way of thinking are not founded or grounded in anything that is actual truth. They believe that, but they haven’t exposed themselves to what their competitors are doing or what their colleagues might be thinking.
It’s important for a leader to break away from the office at least two or three times a year and go to conferences where they can see other businesses and how they’re addressing issues and other things that they’re doing. I’ve found that has recharged my battery on a continual basis.
If you always think that the people you’re competing against are smarter than you are, you’re always going to try to be smarter than they are. That, in itself, will make you more competitive, but you have to constantly be on the lookout for what’s hot and what’s a new, innovative way of doing something. There’s something that I constantly teach my folks here, and that is if it was great that way last week, what are we going to do differently to make it better this week?
HOW TO REACH: The San Jose Group Co., (312) 565-7000 or www.thesanjosegroup.com
According to a recent survey, hiring managers know fairly quickly in the interview process whether they will hire a candidate. Executives polled said it takes them on average just 10 minutes to form an opinion of a candidate, even though interviews for staff-level applicants last an average of 55 minutes and those of management-level candidates are an average of 86 minutes.
The survey was developed by Robert Half Finance & Accounting, the world’s first and largest specialized financial recruitment service. It was conducted by an independent research firm and includes responses from 150 senior executives with the nation’s 1,000 largest companies.
“The interviewer tends to make a judgment of a candidate within the first 10 minutes,” says Steve Kass, president of the Great Plains District of Robert Half International. “That doesn’t mean the interview takes only 10 minutes, just the time to form an opinion.”
Smart Business talked to Kass about what candidates should and shouldn’t do to improve their chances of getting the job.
What do the results from your survey mean to job-seekers?
It’s critical during an interview to get off to a good start because you’re making an impression right from the beginning. From the moment you walk into the office, everything you do makes an impact. It’s really important to make that first impression a positive one. This means interviewees must project enthusiasm and a professional demeanor from the outset of the discussion.
What are hiring managers looking for during that first 10 minutes?
Hiring managers want to see that interviewees are confident and enthusiastic about the opportunity and the company. They want candidates to quickly describe why they’re right for the role and show an understanding of the organization and its objectives. Also, they are looking for somebody who really wants to be there and communicates that desire to the hiring manager.
If judgment is made so quickly, why does the interview go on for so much longer?
Employers may be able to form an initial impression of a candidate in a matter of minutes, but it’s much harder to gain a full understanding of a person’s skills and expertise in that amount of time. Once the manager has a good first impression, it’s important to delve into that person’s background to make sure he or she has the right knowledge and experience to do the job properly. More time with the interviewee will allow the hiring manager’s judgment to evolve even further. Hiring decisions are expensive decisions. They can make a lot of money if you make the correct one and they can cost a lot of money if you make the wrong one.
If it’s clear that a person is the wrong candidate, is it all right to end the interview early?
Yes. The most important thing to do is treat interviewees with dignity and respect and let them know specifically why they’d not be a good fit. A candidate gets fired up for a job interview, so you don’t want to put him or her through the unnecessary stress of the interview process if you know for certain that the person is not the right match.
How can hiring managers enhance the process?
First, managers should evaluate candidate resumes thoroughly and conduct phone interviews before inviting people for in-person discussions. During the interview process, hiring managers should conduct a structured interview and know exactly what they're looking for in a candidate. Be prepared with specific questions you want to ask and allow room for follow-up questions based on how the candidate responds. Know that you will control the action most of the time, but allow the applicant to do so for a period of time as well.
What advice can you give potential applicants?
Arrive on time, look sharp, be enthusiastic and have a good energy level. Research the employer and understand what value you can add to the company. Rehearse the answers to common questions. When appropriate, ask questions of the interviewer. Lastly, always follow up the meeting with a thank you note to each person who interviewed you. This is an opportunity to restate how you can contribute to the company’s success and express your enthusiasm for the position.
Things you want to avoid include not knowing enough about the employer, having a bad attitude or appearing arrogant. And whatever you do, don’t make a claim that you can’t back up. Don’t say you’re good at something specific without being able to give an example to make your point. Also, don’t lack confidence or ask about compensation prematurely. In other words, be prepared. It’s the most important part of any interview.
STEVE KASS is president of the Great Plains District of Robert Half International. Reach him at (312) 616-8200 or firstname.lastname@example.org.
Education: Western Illinois University, bachelor’s degree; Northern Illinois University, MBA
First job: Motorola
Favorite business periodical: The Wall Street Journal
Whom do you admire most in business and why? David Jones, chairman of Hospira. He started Human Health back in the 1960s.
What is your most important business lesson? You’ve got to change, because if you don’t, both you as an individual and the company you’re running will get left behind.
What are the three most important leadership characteristics that a CEO should possess? Integrity, passion and the ability to listen. I think too many CEOs talk first and don’t listen.
How would you describe your leadership style? I think I’m direct, decisive, open and approachable.
Begley on breaking down barriers: On a recent, rainy morning, Begley arrived at work later than usual and had to park in a space in the last row of the Hospira headquarters lot and got soaked running to the building.
“We don’t have reserved spaces,” Begley says.
But he’s not complaining. One way to ensure that employees buy in to the leadership’s program is to break down the barriers between the two groups. That means no lavish perks for executives.
“I eat in the cafeteria,” says Begley. “When I do, I typically go down by myself, get my tray and sit with a different group each time. If I don’t know who they are, we introduce ourselves to each other. I don’t want a different standard.”
Begley on integrity: Financial performance is not the only bottom line for success. Conducting business with integrity when it comes to customers, shareholders and employees is a value Begley has emphasized at Hospira since the outset. Soon after the company was spun out, Begley had a book titled “The Integrity Advantage” distributed to every employee.
“It has a summary in the back so that if you don’t want to take the time to read the book, you can read the summary and still walk away with the understanding that you need,” Begley says. “So we’ve tried to do things like that, whether it’s our values or our business concepts, to make them easier to understand and then implement them.”
The role that integrity plays is important enough to Begley that Hospira includes a survey about it in its Sarbanes-Oxley compliance audit, even though it’s not a requirement by law.
Technical skill and competence are important, but to work at Levy Restaurants, you’d better be a nice person with lots of passion for what you do.
Lansing, president and CEO of Levy Restaurants, says that being nice and having passion for their work are the two most important qualities that the company’s employees need to have before they analyze a spreadsheet, set a table or fry an omelet at one of its 19 restaurants or 75 locations in sports and entertainment facilities.
“To me, only after you get past the nice and the passion is when I’m interested in what your experience has been or how good you may be able to do the job,” says Lansing. “The things you usually start out with in most interviews ‘Tell me what you’ve done, why do you think you can do this job?’ all those typical questions, we’re an hour into the interview before we touch that.” Lansing says that making sure that employees can pass through the nice and passionate filters has allowed the company to manage remarkable growth an almost doubling annual revenue since 2002, with 2006 revenue of $735 million and retain a culture that produces a high employee retention rate and, in turn, delivers top-quality service to customers.
In an industry notorious for high turnover, Levy’s employee turnover for 2006 was just under 23 percent, while the industry average, as reported by the National Restaurant Association, ranges between 53 percent and 94 percent, depending upon the type of restaurant.
Levy Restaurants achieves its enviable retention rate by hiring people who are nice and passionate, and then emphasizing those two core values in its training and treatment of employees. Employees are rewarded for performance that embraces those values and are also given an opportunity to participate in decisions that affect their work environments.
Lansing says that failing to retain its culture and its employees wouldn’t necessarily have meant failure for the company, but it would have led to a different kind of company.
“The downside if you’re not able to do that is that you wake up one day and you’re a different company than you were and than you want to be,” says Lansing. “We are pretty passionate about who we are as a company and staying with that formula, no matter how big we become.”
Lansing cites some examples of how nice and passionate employees make a difference in practice. A guest at a restaurant asked for Dr Pepper, a beverage that it doesn’t serve. The server found someone to cover his tables for five minutes and went across the street to a vending machine to buy the guest’s preferred soft drink. A visitor from London asked a Levy employee at a convention center operation if it served scones. The server replied that it didn’t, but went home that night, did an Internet search to find a recipe for scones, bought the ingredients, baked them for the guest and served them to him the next day.
You could argue that the two examples are exceptions, and Lansing says that they are among the most remarkable, but every month, the company recognizes an employee for his or her outstanding customer service performance. Lansing says Levy brings them to its Chicago headquarters for recognition at the company’s monthly update meetings. That kind of recognition is key to reinforcing nice and passionate behaviors.
Levy gets some of the best employees through what amounts to self-selection. Lansing says Levy disqualifies a lot of candidates with the nice and passionate requirements but that it helps to attract the best candidates by earning a reputation in the industry as a desirable place to work.
“The fact that a lot of people fall off is a blessing to us, as opposed to something to be feared,” says Lansing. “So we’re really selective. We have amazing people applying to our company every day because of those values, and because they’ve worked elsewhere, and when they come here they have the broadest smile on their faces,” Lansing says. “They say, ‘You really mean this about being nice and passionate, that’s really important to you. I can’t believe it. It’s so different from where I came from.’” Screening for the proper people starts with the interviewing process, where the first hurdles aren’t work skill or technical expertise but attitude.
“The first question I ask people in an interview for a senior position with the company is, ‘Are you nice?’ and they look at me and laugh like it’s a trick question,” says Lansing. “I let them ponder it a minute, and they give me an answer like, ‘Yes, I was voted nicest in my kindergarten class.’
“I say to them that they don’t really have to answer the question, but I want you to know how important that is to me because if you’re not nice, I’m going to get you, and it may be one week or it may be one month, or it may be a year, but you don’t go on with the pursuit of this opportunity if being a nice, decent human being is not important to you because that’s our No. 1 value.”
New employees start their jobs with a nice gesture from senior management in the form of a fruit basket, with a note signed by Lansing and several other key employees, welcoming them to the Levy family. When they arrive on their first day of work, each gets a handwritten note from Lansing.
“That backs up what you talked about in the interview process,” Lansing says. “It makes people feel like family, it makes people feel like I’m accessible, and it just stuns them. I can’t tell you the number of thank yous I get from sending the gift baskets. So we try to set the tone on Day One.”
Training for culture
Lansing carries the culture message through the training program with new management employees.
“I’m very, very upfront with them in management academy, where I say, ‘Please understand that although we’re going to spend the next hour or two talking about culture, this is not for everybody, and do not think that there’s something wrong with you if our culture doesn’t suit you well, because there’s a company out there that’s a perfect match for you,’” Lansing says.
Levy’s new managers go through a week-long training program in Chicago, where they receive both technical and culture training. During that week, Lansing himself guides the discussion on culture and passion.
“They have a great experience because there’s bonding, they laugh a lot and they learn a lot. So now they’ve been here for a short period of time and they realize that we really mean what we talk about, and now they go to out and live it.”
Lansing ensures that the message is disseminated out into the organization by emphasizing to managers the value of employees not simply as workers but as willing participants at Levy who have a wide choice as to where they can work.
“What we try to train our managers to understand is that these employees of ours are really, in a sense, volunteers,” Lansing says. “And when I say that, sometimes they scratch their heads and say, ‘What do you mean?’ Then I explain it, and then they get it. So if you start with that, and your mentality then becomes how can I keep these people, because I know they have so many other choices, it really does influence the way you think about how to motivate people and how to retain them.”
While it’s a large commitment of his time, Lansing says time spent near the employees is a good investment because it creates a good example and sends a powerful message about being passionate and nice.
“If you look at how a CEO can spend his time there’s new business, there’s strategy, there’s current operations to me, there’s no higher or better use of my time than being out there with our people and talking and living culture by example,” says Lansing. “If I say this is important to me, and they see the passion and the niceness and the other things, it’s really hard for them not to live that because they’re seeing it personally.”
Lansing says making sure that the company lives out its values not only serves to attract employees but helps to retain them,s well.
“In terms of retention that’s the name of the game we can get people in but we’ve got to keep them,” says Lansing. “I think, by and large, we do a good job of that by living the values that we preach during the recruiting process, because if we did a bait and switch on somebody and they come in and said, ‘That’s really nice, they talk nice, they talk passion, but that’s not what this place is about,’ then they’d be flocking out the door.”
Local team empowerment
Lansing says that giving employees autonomy in improving the workplace to enhance their own experience, which translates into more satisfied guests, is a key to Levy’s ability to retain employees. To encourage that, every Levy location, including its headquarters, has a team called Project Great Service, a group of hourly employees that gets together to discuss its mission of making the work environment as pleasant, positive and efficient as possible.
“They will put together initiatives that will range from, ‘We need additional tools to help us do our job better’ to, ‘Let’s do a bowling party function because that would be fun for us and make us feel more a part of the team,’” Lansing says.
Group leaders share the plans and, while some are location-specific, other Levy units can adopt ideas that might fit their own circumstances.
“If you look at the Project Great Service plans from all of our locations, no two are the same,” says Lansing. “One may say, ‘We’re not crazy about our uniforms, can we look at some other options?’ Another may say, ‘We need more pepper mills to do our jobs the way we need to do it.’ So we really ask them, instead of assuming we know the answer, instead of one-size-fits-all. The examples are enormous and varied, but every location has a self-empowered team to focus on the work life for them because that’s where it should start, not from our home office.”
But if the most effective initiatives come from the bottom up, the commitment and the tone has to come from the very top of the company for any cultural imperative to be effective, Lansing says.
“I’ve seen too many companies where the CEO will walk into the HR office and say, ‘Guys, we’re going to start being nice and passionate, that’s going to be our formula from now on,’” Lansing says. “And the CEO walks back into his or her office, and HR’s scratching their head and saying, ‘OK, what’s that?’ as opposed to the CEO setting the example.”
HOW TO REACH: Levy Restaurants, www.levyrestaurants.com