Continued business legacy
Most middle-market businesses are prominent cogs in the local community and employees, suppliers and charitable organizations alike benefit from the company’s success. Accordingly, the owner may prefer not to sell the business to a strategic buyer that might shut down the company and merge it into existing operations.
Where the ongoing legacy of the business is a concern, a recap with a growth-oriented private equity firm that seeks to double or triple the business in size can be a perfect solution.
Customized role for the seller
As a business grows, the owner often takes on responsibilities that, although necessary for the business, may be personally less enjoyable or rewarding. Dealing with banks, human resource issues, government agencies and the like can detract from a business owner’s enjoyment.
However, a top private equity firm will work with the business owner to craft a customized professional role that that specifically addresses the owner’s desired responsibilities and level of involvement.
Access to capital
As a business grows to represent a higher percentage of a business owner’s personal net worth, the concentration can result in a conservative investment philosophy which can stall growth. Top private equity firms can eliminate this artificial noose by providing assistance in identifying growth opportunities and ample access to capital to fund sound growth opportunities.
A method to reward loyal employees
In most middle-market businesses, equity ownership is concentrated in the hands of a single or few people. However, a top private equity firm will generally seek to expand the equity ownership much deeper in the organization.
Subsequently, when the private equity firm ultimately sells the business, those employees responsible for helping the company flourish can enjoy a payday of their own.
Access to additional management resources
One of the noneconomic benefits of collaborating with a private equity firm is the access these firms offer to managerial resources that may help a business evolve to the next level. Private equity firms are staffed by veteran business professionals with experience in helping companies to expand and succeed. These individuals can help businesses in many ways.
- Capitalize on global sourcing and distribution opportunities. Many middle-market companies don’t have the scale necessary to capitalize on global sourcing and distribution opportunities, and those that do often lack the expertise. By teaming up with a private equity firm with existing capabilities, the company can immediately access markets or suppliers previously unavailable.
- Develop and execute a long-term growth strategy. Top private equity firms will seek to double or triple the size of the business during their ownership. A private equity firm’s experience in capitalizing on internal growth opportunities and executing strategic acquisitions can help a business achieve a level of size and durability greater than is often achievable by a single owner.
- Enact growth-oriented strategic acquisitions. The professionals at private equity firms make a living by identifying and completing acquisitions that increase the company’s competitiveness, size and profitability.
This creates value in a couple ways. First, because smaller, strategic add-on acquisitions can often be purchased at relatively lower valuations, they can be instantly accretive to the value of the existing business. Second, the revenue and cost synergies between the two companies result in a combined company worth more than the two stand-alone companies.
A recapitalization offers business owners the ability to achieve both near- and long-term economic goals, and provides access to the fiscal, managerial and strategic resources that will help entrepreneurs grow and improve their businesses.
Dr. Richard A. Chaifetz decided to do something about that, and in 1984 founded ComPsych Corp., a supplier of employee assistance programs.
“We want to help organizations attract and retain the best and the brightest and create superstar cultures,” says Chaifetz.
Today, the company has grown to more than $156 million in revenue and serves more than 23 million individuals in 6,000 organizations.
“Our growth is fueled primarily by our reputation of being the leading provider of employee assistance, behavioral health, work-life and related services,” Chaifetz says. “Our clients see our innovation, they see our passion, they see our overdelivery on their expectations, and they know they can count us. We strive to make ourselves better every day. And with that comes a reputation in the industry that allows us to not only retain our customers but grow at the rate we have been growing, despite our size.”
Smart Business spoke with Chaifetz about how to provide superior customer service and get the most out of your employees.
How do you ensure that you are providing quality customer service?
We have very strong guiding principles which essentially revolve around an expectation that our employees have a passion and dedication displayed in their work for our clients that is second to none.
We approach each customer with a built-to-suit mentality, so we don’t have to take a cookie-cutter approach. Customers are treated as special customers regardless of whether they have five employees or 500,000 employees.
We have a very innovative program model, and we expect our people to come up with new ideas and challenge the status quo. We expect them to over-deliver on customers’ expectations, coupled with an expectation that they provide our services and deliver our responsibilities with the utmost integrity. And that integrity needs to be demonstrated both professionally in the office and in their conduct and behavior outside of the office.
We make sure we provide long-term value and quality [to] our customers so that we build long-term relationships. There is nothing more important than retaining customers for life.
I believe the best way to do that is to overdeliver on their expectations, give them high-quality services and make sure you charge them fairly.
How do you encourage employees to be more productive at work?
If we can help employees remove the distraction of everyday stressors, they are more apt to focus on their job, perform at a much higher level and also be more aligned with the company that they work for because they see that organization as finding their best interests to be as important as the company’s interests.
We offer a comprehensive employee assistance program, work-life services, flexibility with scheduling. I’m a big believer that employees need to have very clear objectives, and they need to be given the support to achieve those objectives with a sensitivity to the personal issues that may impact their ability to do well on the job.
It doesn’t mean we let people do whatever they want to do. It means we give them the flexibility to accomplish their goals and set very clear expectations of what those goals are.
How do you give employees the support they need?
We set guidelines and expectations for employees. We don’t baby sit everything they do. On the other hand, I am a big believer that we don’t advocate the responsibility of being a manager or supervisor by ignoring things until it is too late.
A strong manager or supervisor is an excellent coach, and they trust their employees with a fair degree or a logical degree of verification that, in fact, things are being accomplished in the time frame and at the level that was agreed upon. It’s not a free reign, dot-com type environment but an environment where independent thinking, flexibility and out-of-the-box ideas are welcome.
How do you find quality employees?
This is a very entrepreneurial environment. This is an organization where people have a lot of flexibility to come up with new ideas, innovate and get rewarded for outside performance.
Individuals who are extremely bright, who want to be challenged, who want to test the limits within the boundaries of good business sense, who want to get rewarded for performance as opposed to just showing up and understand the importance of having compensation tied to results thrive in our environment.
We use a very stringent selection process consisting of extensive interviewing, extensive background checks, psychological and intellectual tests, reference checks, role playing, etc., to make sure that people fit our organization both from a cultural and performance expectation perspective.
We have a very well-defined staffing model that predicts significantly ahead of time what our staffing ratios need to be, so we hire proactively and are always somewhat overstaffed to ensure that the customers have the best services available to them at all times. What you want to do is reduce the surprises in your growth story and anticipate needs and care for them before they become issues.
What should companies take into consideration as they grow?
We add a variety of services every year as we see the demands, issues, stressors and concerns of employers and employees changing as our world changes. People didn’t think about terrorist attacks 10 years ago. We didn’t worry as much about work-life balance 10 years ago as we do today.
(Take into consideration) things that are appropriate to the aging population the baby boomers leaving the work force and becoming displaced, the challenges of retaining younger employees as the baby boomers retire, the challenges of dealing with the baby boomers who are still in the work force. Things change, and you have to react to those changes and anticipate what those changes are going to mean for the issues of productivity, performance, retention and attraction.
HOW TO REACH: ComPsych Corp., (800) 851-1714 or www.compsych.com
Everybody wants it in their company, but it’s easier for some to achieve than others. With differentiation, you have a competitive advantage. It’s something about your organization that sets you apart from the guy across the street.
But how do you get it especially when what you sell is basically a commodity?
That’s the question that was facing Richard Gochnauer, president and CEO of Des Plaines-based United Stationers Inc., a $4 billion distributor of business and office products. He has 40,000 products from 500 manufacturers, but some of the same products or similar ones were available from competitors.
His solution was to build a high-performance organization, one with a culture that strives to improve performance every day. Competitors could copy his product offerings, marketing programs and systems, but they can’t easily duplicate a culture.
By creating a high-performance organization that increases efficiency, drives down costs and makes United Stationers easier to do business with, Gochnauer created the competitive advantage he needed to set his company apart.
“The first thing you have to have is a strong culture,” Gochnauer says. “It has to be really built around clearly articulated values, not just slogans. One of the key litmus tests is whether those values are used as screens in the decision-making process.
“If you bring in most of your decisions and say, ‘What do our values say about this?’ and you get to the point where decisions are not being made for what’s optimal in the short run but optimal from a value point of view, then you know you are starting to be on the right track.”
Everyone in the company needed to know what the organization’s goals were, how they as employees fit in and what they needed to do individually to make change happen.
“We were seeking functional excellence and at the same time, achieve cross-functional decision-making and accountability,” says Gochnauer. “We were trying to push the decision-making down as far as possible within the organization. We wanted decisions to be made as close to the customer as possible.”
You can’t just wake up one day and tell people expectations have changed and their behavior has to change with it. You have to teach them what’s expected, give them the tools to do it and put incentives in place to change the culture of an organization.
A large part of the changes that needed to be made at United Stationers involved moving toward a team-based culture. Gochnauer accomplished this by training everyone in the company about what a team is and how to utilize them effectively to achieve results.
“The transformation was built on teams, and teams are really at the center of everything we do now, which meant we had to do a lot of training,” says Gochnauer.
Before he took over as CEO in late 2002, United Stationers didn’t have a deep commitment to teams.
“Teams can be either effective or ineffective,” says Gochnauer. “Most people have experience with meetings that are not productive. If you are in teams, you have to make sure you are achieving objectives rather than consuming time and energy.”
Employees were put through two types of training courses. One taught them things such as how to work together to get results, what an effective team looks like and how you can measure progress. The other course focused on specific processes for using fact-based decision-making and identifying the root causes of problems.
“These were added on top of our fundamental vision and values training, where we make sure they know where we are going and how our values and culture support that,” says Gochnauer. “This was a top-down process that started with my team. We were the first ones to go through training and then started cascading it down the organization team by team.”
With the employees trained on what it takes to be a contributing team member and how teams should work within United Stationers, the focus moved toward specific goals.
“You have to quickly move toward focusing on results,” says Gochnauer. “You have to have clear goals for the teams set up. You have to track and measure performance and then take corrective action if they are going astray or having trouble meeting objectives.”
Teams are set up at different levels, ranging from regional business teams that set broad objectives for each of the company’s four regions to category management teams that set strategies for each product category and are charged with tapping expertise throughout the company to achieve its goals. In many cases, multiple teams at different levels have to work together to reach common goals.
“The key to getting this alignment to work is to get an incentive system in place to reinforce the structure,” says Gochnauer. “Part of everyone’s incentive is tied to the functional, individual and cross-functional goals, and most of the bonuses are tied into team results.”
The team-based culture that Gochnauer created also ties directly into funding growth.
“We needed funds to invest in tomorrow,” he says. “I came into this company amid declining sales and profits, and no one wants something that isn’t self-funded. The teams were designed around a W.O.W. initiative: War On Waste.
“This was different than just cost-cutting. We focused on activities that were not adding value and where we could improve efficiency.”
Gochnauer set a goal of achieving $100 million in savings over a five-year period. The goal was broken down and a portion of it was assigned to each team and each project so that everyone owned a piece of it. He also implemented training to specifically address the issue of saving money throughout the organization.
“People had been going after waste that had been there for years and thought they had done as good a job as they could,” says Gochnauer. “When we approached the problem with new training and a new approach, we unlocked the value and made huge progress.”
When the company achieved its goal of saving $20 million in the first year, Gochnauer’s new team-based culture gained credibility among employees.
“We got results,” he says. “When you see results, they start to believe, and when they believe, then you start to take control. Until you get that belief structure, you are not going to be moving the needle.”
Confidence in the teams increased, and the people making up the teams began to take responsibility and solve problems.
“They started focusing more on the fact that they could accomplish stuff and started moving away from focusing on excuses,” says Gochnauer. “Before, their hands were tied.”
Each year, the goals are harder to reach because the easier problems have already been solved, but Gochnauer says the company is still progressing toward the $100 million goal and more important, believing in his system.
“We are well on our way to reaching critical mass in creating a high-performance organization,” he says. “We have a large group of people believing in our way of managing and operating. It’s a change in management style and decision making. We used that right off the bat to provide funding for our growth.”
With the team-oriented growth platform built and funds freed up to invest in growth initiatives, Gochnauer set his various teams on goals relating to growing the company. This was going to be the payoff from creating a high-performance organization.
United Stationers had declining growth up until 2003 and flat growth until the middle of 2004, when some of the team initiatives started to take effect.
Gochnauer had set his teams on the task of determining whether the company’s marketing strategy was effective and whether United Stationers was selling the right products to the right people.
The teams identified the school supply business, medical offices and legal offices as three potential areas for growth. They also looked at what channels could be used to sell these supplies.
The company started partnering with drug stores, grocery stores and other places where basic school and office supplies were sold to give those retailers access to products they never had before. It started working with medical distributors and forms distributors to offer specialized products to niche markets. It moved into e-commerce with a solution it could sell to retailers that they, in turn, could use to sell from United Stationers’ large catalog of office supplies.
Much of the strategy focuses on creating convenience for customers and making the company easier to do business with.
“Someone buying office supplies for an office is not going to go to Walgreens, but more people are buying for their home office,” says Gochnauer. “They will get those supplies when they think about it, and that may occur while they are walking down an aisle at Walgreens or Jewel or even the mass merchants like Costco, Sam’s (Club) or even the Target’s of the world.”
The teams identified and are working to solve the problems of these retailers which will result in more business for United Stationers.
“What (the retailers) and everyone else discovers, if you offer office supplies as a category, you can’t really offer just the products you sell at retail if you are going to have a viable e-retail business,” says Gochnauer. “You have to have far in excess of 10,000 or 20,000 products on site. The only way to do this is to partner with someone like ourselves.
“As the technology evolves, this will be a source of growth for us as long as we have the front-end technology and back-end technology to support that activity.”
The idea is to provide seamless solutions to customers, but this means eliminating problem areas among manufacturers, United Stationers, retailers and the consumer. It’s at these seams where problems tend to occur.
“We put a great deal of focus on how we improve the effectiveness at the seams and identify where the waste is so we can improve speed of delivery, cost and service,” says Gochnauer.
And the way he does that is through his teams.
“We have teams of the customer’s people and our people working at the seam between us and them,” he says. “We are identifying opportunities to improve and reduce nonvalue added activity and lower costs at that seam.”
If problems can be eliminated at the seam, the efficiency of the entire organization improves because products are delivered to the consumer faster and cheaper than before, giving United Stationers a competitive advantage.
The team-based growth platform has shown results. Net income in 2004 was almost $90 million, up from $73 million the year before. Through the first three quarters of 2005, the company posted $74 million in net income compared to $71 million from the same time period in 2004.
Without the team-based structure, the turnaround would be a lot harder to accomplish, but Gochnauer says cultural change take time.
“With building teams, it’s less of a matter of getting management to let go of all the decision-making than it is of getting lower managers to take a hold of it and get beyond saying, ‘It’s not my job,’” he says. “They have to learn it’s not OK to use excuses. They have to learn that if they run into barriers they hadn’t anticipated, they have to find ways around them and still deliver results. It’s kind of a new way of managing for them.
“If, for example, inventory management is doing something they shouldn’t that is hurting sales, then they have to take ownership and work on getting it fixed. The responsibility doesn’t reside someplace else. If they are affecting your ability to deliver, then they are hurting your incentives, and that means they will be emboldened to challenge them and take the initiative. We had a somewhat compliant organization where people were somewhat content to let others handle those kinds of things. Incentives are a critical ingredient to changing that.”
Ultimately, the teams are there to drive earning growth, and the more efficiency they squeeze out of the process, the more differentiated United Stationers makes itself.
“By lowering costs and improving service, you actually offer a better value to your customers and they’ll buy more,” says Gochnauer. “It creates a cycle of being able to increasingly add value to the customer, and in the process, you grow with it and it becomes an effective model to compete with. Wal-Mart proved that model quite effectively.”
HOW TO REACH: United Stationers Inc., (847) 699-5000, or www.unitedstationers.com
China’s economic growth has been praised by some, feared by others. But while the strength of the Chinese economy represents a paradigm shift in the global business environment, U.S. businesses should not fear the implications of the Chinese boom.
Instead, American managers should work to embrace the benefits that Chinese economic growth can offer their businesses, and begin to make peace with this burgeoning giant.
If China is the country that everyone is talking about, outsourcing is usually the theme of the conversation. More and more businesses are sourcing products from China, where labor is abundant and relatively inexpensive, and manufacturing processes have been refined by increased market demand.
Rising pricing pressures have increased global competition, creating a race to the bottom line and forcing companies to procure products from the lowest cost sources globally.
China has become a recognized powerhouse in global production and supply chain operations. Sourcing product from China allows companies to obtain savings of 30 percent to 50 percent, ultimately driving down prices and making businesses more competitive.
This downward pressure on prices delivers tangible savings to a company’s bottom line, all the while improving cost structures and making goods more affordable. The end result? Increased profits for businesses and abundant choices for consumers.
The benefits of implementing a sourcing initiative are clear, but oftentimes managers are unsure of where to begin. Luckily, there are three steps businesses can follow to help simplify the process and maximize their return.
- Step one: Start small. All too often, businesses that have decided to source products from China begin with their most popular or expensive product.
But business owners should recognize that there is a learning curve associated with sourcing products from global markets, and should begin their sourcing experiment with a simple product to test the initiative and make adjustments if needed.
- Step two: Find the right partner. For businesses that choose not to establish a Greenfield manufacturing operation or acquire an existing manufacturer, choosing a suitable agent or sourcing office is the business equivalent of finding a spouse; it is one of the most important decisions a business can make.
When choosing a supplier, managers should discuss quality standards, lead times, procurement practices and payment terms at length with any potential business partners. Factors such as duties and tariffs, as well as transportation and freight forwarding costs, should also be considered.
Outsourcing part of a business’s production process or supply chain can carry costs unfamiliar to U.S. businesses, and managers should take care to calculate and analyze these costs before deciding on specific business partners.
- Step three: Measure performance. After managers have outlined the sourcing strategy, they should establish a system to monitor, record and report the results of their sourcing experiment. They should monitor product quality, as well as the movement of products through the supply chain, in order to identify areas in need of improvement.
Each business partner should understand its role and responsibilities, and the performance of the global sourcing initiative should be tracked and discussed. Where have cost reductions been attained? What impact has the sourcing initiative had on product lead times and inventory levels? How has the operation affected the company’s bottom line? Managers should consistently reevaluate their sourcing initiative in order to refine and improve their strategy.
Paradigm shifts within the global business environment have always been met with a mixture of praise and fear. China’s rise as a global economic power raises serious questions regarding the future of outdated business processes, inefficient cost structures and protectionist economic policies.
But it also offers American business owners an opportunity to leverage the strengths of the Chinese business environment and improve their own businesses. In the upcoming years the Chinese economy will continue to grow, and American businesses will be forced to further adapt their behavior in order to accommodate China’s presence.
The best strategy to manage change is to embrace it, and adopting global sourcing solutions is the first step toward making peace with a rising star.
Denny Bolzan is a principal with Pfingsten Partners L.L.C., an operationally oriented private equity firm located in Deerfield, Illinois. For more information, visit www.pfingstenpartners.com.
Businesses may be confident they have strong management teams in place today, but will they be ready for the changing realities of tomorrow? An effective enterprise’s response to this question will reflect its core organizational priorities, its strategic perspective and its capacity for effective corporate governance.
A significant fraction of today’s crop of business leaders is drawn from the baby boomer generation, born between 1946 and 1964, and many will reach retirement age over the next three to seven years.
Companies that anticipate and address in advance the challenge this exodus presents will facilitate their new leaders’ ability to sustain organizational progress. In the process, they will achieve clear strategic advantages over their less far-sighted competitors.
Many organizations that are vulnerable to the disruption inherent in corporate-level turnover have not implemented succession initiatives. More disturbing, they do not even have such critically important plans on their drawing boards.
In general, organizations are aware of the negative implications of baby boomers aging and the resulting executive turnover. But many are unwilling to commit corporate resources to resolving the issue.
Developing well-trained corporate leaders is a continuing challenge for every organization. It requires a best-practices approach that goes beyond one-dimensional replacement plans that simply exchange one executive for another in the shortest possible time.
Instead, organizations should design and implement systematic, long-range leadership-development solutions that:
- Identify high-potential people
- Diagnose developmental opportunities
- Create individual development plans
- Monitor individual progress toward the desired end result
In addition, organizations must look at themselves and how they can improve their approaches to leadership and succession. Three organizational characteristics are key to an effective leadership-development strategy.
- Strategic alignment. The organization’s approach to leadership and succession must be consistent with its long-term business plan and aligned with its strategic objectives, mission and vision. The enterprise must make an ongoing, across-the-organization commitment to leadership development, and allocate the time, talent and dollars necessary to sustain it.
- Executive ownership. Leadership development and succession management must be key priorities at the organization’s executive level. Present-generation leaders should be actively engaged in the company’s leadership initiative, providing effective mentoring, review and assignment management to high-potential individuals.
- Cultural commitment. The organizational culture should promote continuous feedback, assessment, selection and development of high-potential candidates. People across the company should seek opportunities to promote and develop leadership at every level. As a function of its culture, the company must be committed to identifying and preparing next-generation leaders from within.
A best-practices approach to leadership development results in a process that promotes these organizational characteristics and integrates them into an organization’s development and succession process. The model above illustrates the sequence and flow of the process’s implementation.
Effective leadership development demands sustained effort and a continuing organizational commitment. The return on this investment is well worth the outlay, because organizations that proactively manage the development and succession of their leaders take effective control of their own futures. Conversely, companies that choose a hope-for-the-best approach run the risk of having their futures controlled for them.
Clearly then, the only real decision is the decision to act.
Patrick J. Cole, SPHR, can be reached at (616) 752.4248 or email@example.com.
Krishnamurthy was previously vice president and chief information officer of UAL Corp.
Timothy J. Theriault, president, worldwide operations and technology at Northern Trust says, “Nirup’s appointment as CTO is an important step in our continuous efforts to strengthen and advance our competitive position, and he is an outstanding addition to our global IT management team.”
Prior to his 2003 appointment as chief information officer for United, Krishnamurthy worked as vice president of United’s information services division, and led its joint global IT efforts with the Star Alliance. He served as managing director of applications development, with responsibility for all software development, as well as manager of applications development, where he was responsible for developing and executing automation strategies for United’s flight operations, onboard service and cargo divisions.
Krishnamurthy began his career in the finance division at United in 1990, developing key optimization models for airline scheduling, operations planning and aircraft maintenance.
“I am excited to join Northern Trust at this time. It is a great opportunity to be a part of this growing and dynamic organization,” says Krishnamurthy. “In addition to helping create more value for clients through strategic use of technology, I look forward to contributing to Northern’s longstanding heritage of technology innovation and leadership.”
Krishnamurthy holds a Ph.D. and a master of science degree in industrial engineering from the State University of New York in Buffalo.
IMMTECH INTERNATIONAL INC.
Immtech International Inc. hired Dina Grinshpun in the newly created position of vice president, general and IP counsel.
Grinshpun previously worked at Fish & Richardson PC. Prior to that, Grinshpun was a judicial clerk for The Hon. Randall R. Rader at the United States Court of Appeals for the Federal Circuit.
She has a strong technical background, having worked as a pharmaceutical chemist at Procter & Gamble Pharmaceuticals Inc. prior to becoming an attorney.
Grinshpun received her bachelor of science degree in chemistry from the University of Western Ontario and her J.D. from the University of Michigan Law School. She is a member of the Bar of the State of California.
Kurt Rittenburg will lead HTP Inc.’s new Chicago office.
Before joining HTP, Rittenburg spent seven years as vice president of client development with Argen Healthcare and HealthRev. Inc., both formerly known as HHL Financial Services. Before that, he worked as director of client development and account management for HHL for six years.
Rittenburg earned a bachelor’s degree in political science from George Washington University.
Caterpillar Inc. chairman and CEO James W. Owens was selected by Stark’s Truck & Off-Highway Ledger as its 18th annual “Manager of the Year.”
The business publication cited continuing efforts to diversify its product portfolio through aggressive investment in new innovative technologies, especially at its key construction machinery-making division and diesel engine unit, as a primary reason for the selection of the Caterpillar chairman as its “2005 Manager of the Year.’”
Owens has been a director of the company since 2004. Prior to his current position, he served as vice chairman and group president of Caterpillar Inc.
Rx EDGE appointed Robert J. Blazek director of new business development.
Blazek brings a diverse and extensive health care industry background to Rx EDGE. Most recently, he was with CVS/pharmacy, where he served as manager of patient intervention programs. Prior positions at CVS included regional health care manager and staff pharmacist/pharmacy manager.
Blazek earned a bachelor of science degree in pharmacy from Purdue University.
Tribune Co. appointed John Reardon president and CEO of its broadcast group, overseeing the company’s 26 television stations.
Reardon had been responsible for the company’s television stations in the Western and Southern regions.
He holds a bachelor’s degree from Loyola University Chicago. He is a board member of the Television Bureau of Advertising and serves on the board of the Lincoln Park Zoo in Chicago.
Also at Tribune, John Vitanovec was promoted to executive vice president.
Vitanovec has had responsibility for overseeing the division’s television stations in the Central and Eastern regions and Superstation WGN.
He holds a bachelor’s degree from DePaul University and an MBA from the University of Chicago. He serves on the DePaul University board of trustees and as an advisory council member for the College of Commerce, and he is an advisory board member for the Northwestern University Media Management Center.
He is a member of the board of directors of the Peggy Notebaert Nature Museum and is a member of the Executives’ Club of Chicago.
SOUTHERN WINE & SPIRITS OF ILLINOIS
Michael J. Thompson was hired as vice president, general sales manager for Signature Wine and Spirits Co., a division of Southern Wine & Spirits of Illinois.
Thompson most recently held a managing director position at Millennium Import LLC in Minneapolis.
He earned a bachelor of arts degree in restaurant and institutional management from Michigan State University and an MBA from the J.L. Kellogg Graduate School of Management at Northwestern University.
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When the CEO of a company with global revenue of more than $570 million kicks off an interview like that, it’s a good indication that he is an unpretentious person who doesn’t stand on ceremony. As president and CEO of Information Resources Inc., a provider of market data, consumer intelligence and management solutions for the consumer packaged goods, retail and health care industries, Scott Klein is a man of some influence and responsibility.
His company has 2,800 employees, 700 at corporate headquarters in Chicago and the rest in offices around the world. Those employees manage a vast web of integrated information for companies including PepsiCo, Kellogg’s, Anheuser-Busch, Target and Johnson & Johnson that reflects point-of-sale data from more than 32,000 retail outlets in the United States and the buying decisions of 110 million households.
But with those three words “Call me Scott” Klein instantly does away with any sort of formal hierarchy. The invitation to use his first name comes across as the verbal equivalent of a welcoming handshake and a friendly slap on the back rolled into one. Within minutes, we’re talking like we’ve known each other for years.
Forging that personal connection is about more than being sociable. It also reflects the high value this leader places on relationships. And he’s been working hard to forge and foster good ones with both customers and employees since he came on board at IRI in January 2004.
Those efforts are paying off. Last year, IRI earnings hit a 12-year high, and sales are growing at double digit rates.
“2005 will be the most profitable year in the company’s history,” says the 48-year-old Klein. “Every contract except one that came up for renewal has been renewed. In the same period, we’ve landed three dozen major new clients in the United States and Europe. And in the 20 months I’ve been here, turnover, which was a huge problem, has decreased by half.”
But he doesn’t suggest that he deserves credit for these achievements. That credit, Klein insists, should go to IRI’s customers and staff.
“I start from the point of view that clients determine our success,” says Klein. “Without them, the rest of us have nothing to do. So the goal in business is to get people to choose us over the competition. To do that, we have to listen, find out what they need, constantly look for ways to serve them better and show that we can deliver more value than anyone else.”
Achieving this, he says, requires a highly motivated, creative and well-trained staff. And to recruit and retain the best, Klein has committed to making IRI what he calls “a destination place of employment.”
“I’ve always believed that companies take on the personality of their leader,” says Klein. “If the guy at the top focuses on results but also wants his people to have a good time in the process, things go better.”
Being a leader
Klein became CEO and president of IRI at a time of great change the company had recently been acquired by Silicon Valley entrepreneur and billionaire Romesh Wadhwani’s Symphony Technology Group. A major restructuring was initiated and the company invested $300 million in a new grid computing platform called MarketKnowledge that facilitates advanced store-level and consumer insights and analytics.
All this was prompted by the need to turn the company around. The pioneering shopping data provider had, in Klein’s words, lost its edge.
“Innovation is in the company’s DNA,” says Klein. “But at some point, leadership may have gotten too comfortable. We’ve recommitted to being the catalyst that helps the industries we serve reinvent themselves.”
Technology is enabling that transformation. The objective is to provide 100 percent accurate data to all clients all the time, allowing them to act quickly and make better-informed decisions to optimize sales and profits. Utilizing the next generation of measurement tools is essential but Klein knows that in the long run, people make the difference and power the company’s performance.
“Leadership is the ability to teach individuals and organizations to surpass themselves,” says Klein. “My job is to get employees to see where we’re going and how we’re going to get there.”
The best leaders, he says, are able to paint that picture in vivid colors and inspire everyone to pull together.
“Everybody who works here, from the administrative assistants to division managers, knows the mission,” he says. “They realize that if they’re spending time and effort on anything that doesn’t contribute to what we’re trying to do, it’s a distraction. And they understand how their job relates to everyone else’s.”
Communication is critical to that understanding. That’s why Klein has members of the senior management staff talking together for an hour via conference call every month, and once a quarter, there’s a dial-in global town hall meeting. Because Klein values input from everyone in the organization, he pursues it aggressively.
At a global leadership meeting last year, he asked the 100 people in attendance to go home, think about what the company needed to do to be more successful and give him three suggestions. “About 42 responded,” Klein says. “So I personally called the other 58. They’d say, ‘Oh, I didn’t know you really meant me.’ This year, I made the same request to the same group, and I heard back from 98 people.”
He’s also meticulous about follow-up.
“If someone promises me something by a specific date or time and doesn’t deliver, that person will get a call or an e-mail from me,” he says. “If I say, ‘You’ll hear from me in two weeks,’ on Day 15, you do.”
And he’s convinced that modeling this keep-your-word behavior prompts others throughout the organization to do the same.
Building employee relationships
To proceed on its growth trajectory and provide top-tier service, Klein knows IRI must work smarter, faster, bolder and more responsively. To do that, he’s promoting an entrepreneurial culture in which all employees are encouraged to maximize their potential and are empowered to be innovators.
To make sure he had the right people in place to achieve those goals, his tenure began with the difficult task of letting people go.
“I got rid of the demotivators,” Klein says. “There weren’t many, but eliminating them made those who stayed much happier. We had to bring in a few people, but one of the things I’m most proud of is that the company’s turnaround has largely been effected by those already here.”
The next step was disseminating the message that when companies and individuals make mistakes, as they inevitably do, the best way to handle the problem is to own up to it, take care of it quickly, learn from it, and then, move on.
“When you try new things, it doesn’t always work out,” says Klein. “What’s important is to get better every day.”
How managers react to mistakes is also crucial. Klein has zero tolerance for those who show a lack of respect toward coworkers.
“When I joined the company, I announced that there would be no screaming or yelling,” he says. “It’s OK to express disagreement or disappointment, but no one is allowed to treat employees like misbehaving 4-year-olds.”
In addition to respect, there’s a big emphasis on training and assessment at IRI. Classroom and online seminars support professional development, and monitored programs track performance so staff members can see where they are relative to specific goals at all times. Everyone gets formalized written and verbal feedback twice a year, because once people master their own domain, says Klein, they’re better able to mesh their knowledge and skills with other areas and departments.
Good news is shared news and victories get a companywide shout-out. And in keeping with his have-fun philosophy, Klein likes to do it with humor.
“When we won the Campbell’s account, everyone got a note from me attached to a can of chicken noodle soup,” he says. “For Welch’s, it was a jar of jelly on the desks. We just landed 3M, so I distributed pads of Post-its imprinted with the phrase, ‘Make a note of it.’”
He’s also a big believer in giving credit and honoring contributions. A number of recognition programs are in place, and Klein personally signs every award and milestone certificate himself.
Most new hires participate in an intensive three-week orientation and training class, and Klein speaks to every group. One of his presentations concentrates on the art and science of getting and keeping customers. He calls it, “Seven keys to success, or how do I get clients to like me better than anyone else?”
He talks about expertise, integrity and reliability. He emphasizes going the distance and beyond. He mentions the need for enthusiasm and pride. It all adds up to forming long-term partnerships, in large part by being a great listener.
For Scott Klein, it’s a fundamental part of doing business. But that’s just what you’d expect from a man who’s built a career by building relationships.
How to reach: IRI Inc., www.infores.com
However, not much has been said about the possibilities the new Part D plan holds for America’s small and mid-size employers. If these employers offer their retirees prescription drug coverage that is at least as generous as the government’s standard Medicare Part D coverage, these employers may be eligible for an employer subsidy, payable for each Medicare-eligible person enrolled in their plans. Sounds simple, right?
Unlike very large companies, which have many thousands of retirees and larger staffs to manage benefits programs, small and mid-size companies face challenges as they strive to incorporate the advantages of the Part D coverage into the benefits package they offer while minimizing the administrative hurdles.
As the Medicare prescription drug program becomes effective this January, employers should not wait for too long to investigate Part D coverage. For most, it comes down to two options: apply directly for the Medicare subsidy or work with a Medicare-approved health insurer that can offer a Prescription Drug Plan (PDP) for retirees.
Those thinking about applying directly for the subsidy should consider such factors as the utilization patterns of retirees, the demographics and geographic dispersion of the retiree base, and whether the number of retirees makes it worth the administrative demands that may accompany the direct-subsidy route.
The initial application process is lengthy, and takes more than 40 hours by Medicare’s own estimates. After that, you must provide monthly paperwork in order to confirm that your company is indeed providing such benefits. In addition, you may need to maintain six to 10 years of retiree benefits data in case of a government audit.
So, it’s crucial to have a human resources infrastructure particularly experienced benefits managers to help manage the considerable paperwork involved. You may also need to hire an actuarial company to help ensure that your plan delivers the right benefit level to meet the eligibility requirements for the Medicare Part D program.
With such significant requirements, it’s not surprising that many small and mid-size companies are turning to PDPs for a one-stop-shopping solution to this dilemma.
Here’s how it works. The employer receives the value of the government subsidy through a reduced premium from the PDP. Because the PDP has economies of scale, it can provide employers and retirees with myriad services that go beyond what an individual employer could reasonably provide. Among the highlights:
- The PDP handles all of the government requirements, including applications and updates. If there is a government audit, the PDP handles this as well.
- Because they provide health and other benefits to retirees, the PDPs have the educational tools to help retirees better understand the new drug program. The PDP handles plan enrollment and often provides excellent communications programs, as well as high-tech Web tools to help retirees investigate, price and compare drugs.
- The PDP may also offer a ready-made suite of flexible plan designs for employers, so you can find a plan that matches your benefits strategy.
- Many PDPs also offer Medicare Advantage, allowing you to integrate the new drug coverage into your health benefits program for your retirees who are Medicare eligible,[BS1] which streamlines your procurement and benefits administration process. What’s more, retirees can access the entire range of medical-related benefits using one ID card.
If you are on the fence wondering whether to establish a relationship with a PDP or go it alone your broker or consultant may help you assess your options. With careful consideration and execution, you should be able to enjoy the government subsidy while ensuring that your retirees receive the greatest possible value from the benefits package you provide.
Heather Dowell is manager of sales and service, covering Illinois and Wisconsin. She is responsible for managing sales and client management for Aetna’s select accounts segment, which includes businesses with 51 to 300 employees. Reach her at (312) 928-3585 or DowellH@aetna.com.
Sherard worked from 2002 to 2005 as CFO of SiteStuff Inc., a Web-based procurement company focused on the real estate industry. She joined SiteStuff from Morgan Stanley’s investment banking division, where she served clients on a variety of M&A transactions in the power and utilities, real estate and retail industries. Prior to Morgan Stanley, she spent four years at LaSalle Partners, where she was responsible for financial projections and analyses, investor relations and M&A execution.
“Shelby’s extensive background in corporate and real estate finance, accounting and M&A activities make her an extremely valuable addition to our management group,” says CEO Mark E. Rose. “We are excited by the range of experience and talent she brings to the leadership of our financial team as we pursue our near- and long-term growth objectives.”
Sherard’s primary responsibilities include oversight of financial and administrative operations, including corporate finance, accounting, human resources, risk management, facilities administration and information technology.
Sherard earned an MBA with an accounting and finance concentration from The Wharton School and a bachelor’s degree from Northwestern University.
Morris-Anderson & Associates
Daniel F. Dooley of Morris-Anderson & Associates came in No. 9 on The Deal magazine’s list of “Top Non-investment Bank Professionals.”
Dooley has more than 20 years of experience in general management, operations, finance and project management.
He is 2005 president of the Chicago/Midwest chapter of the Turnaround Management Association, the largest TMA chapter worldwide.
He earned a bachelor’s degree in business administration and an MBA in finance from the Carlson School of Management at the University of Minnesota in Minneapolis.
InnerWorkings named Jack M. Greenberg to its board of directors.
Greenberg is the retired chairman and CEO of McDonald’s Corp. He joined McDonald’s in 1982 as executive vice president and CFO and spent 20 years with the company before retiring in 2002.
He serves on the boards of directors of Abbott Laboratories, The Allstate Corp., Manpower Inc., Hasbro Inc. and First Data Corp. He is also a member of the board of trustees of DePaul University, the Institute of International Education, the Field Museum and the executive committee of the Chicago Community Trust.
Greenberg graduated from DePaul University’s School of Commerce and earned his J.D. from DePaul University School of Law. He is a CPA and a member of the American Institute of CPAs, the Illinois CPA Society and the Chicago Bar Association.
UAL Corp., parent company of United Airlines, named Douglas Leo vice president, revenue management. Most recently, Leo was vice president of sales, distribution and international for US Airways. Previously, he spent 16 years with Northwest Airlines in a variety of management roles.
Leo is a CPA and holds a bachelor of science degree in accounting from Minnesota State University at Mankato.
Kenneth I. Feldman was named vice president, loyalty and e-commerce. Most recently, he served as president of Ameritrade’s private client division. Prior to Ameritrade, Feldman spent eight years at America West Airlines in leadership positions. His experience also includes nine years of progressive finance, planning and business development roles at Frito-Lay and General Mills Restaurants.
He earned an MBA from the University of Chicago and a bachelor of arts degree in economics from Rollins College in Winter Park, Fla.
Grubb & Ellis Co.
Grubb & Ellis Co. promoted Jean Kennedy to senior vice president, chief accounting officer.
Prior to joining Grubb & Ellis in 1999, Kennedy was vice president, corporate controller at Chernin’s Shoes Inc. Earlier, she spent eight years at Arthur Andersen LLP as manager of audit and financial consulting.
Kennedy earned a bachelor of science degree in accounting from the University of Illinois and is a CPA.
Donald Olinger was promoted to senior vice president, finance and treasury.
Olinger joined Grubb & Ellis in 1997 as vice president, finance. Prior to that, he spent two years at McGladrey & Pullen as director of contract accounting services. Earlier, Olinger spent 12 years at Balcor, rising to vice president, financial reporting.
Her earned a bachelor’s degree in accounting from the University of Illinois and is a CPA.
Waterstone Management Group LLC
Waterstone Management Group LLC appointed Roger Nelson chairman.
In recent years, Nelson worked as a special adviser to private equity firms and Tata Consulting Services. He was a member of corporate and nonprofit boards, and an adjunct professor at Northwestern University’s J. L. Kellogg Graduate School of Management. Nelson also worked as deputy chairman of Ernst & Young throughout the 1990s.
Eric Pelander joined Waterstone as partner.
Pelander joins Waterstone from IBM, where he was global leader for strategy and change services with IBM Business Consulting Services (BCS). At IBM, he directed one of the world’s largest strategy practices and was a member of the IBM BCS global business leadership team. Previously, Pelander was senior vice president, consulting services, at Mainspring Corp. and managing director of strategic advisory services for Ernst & Young Consulting.
Michael Wujciak also joined Waterstone as partner.
Previously, Wujciak was a vice president with Cap Gemini, leading the management and IT consulting practice for the global automotive sector. Wujciak joined Cap Gemini through the acquisition of Ernst & Young Consulting, where he was a partner and leader of the Americas automotive industry team. Wujciak began his career at General Motors.
Communication (days 1 through 15)
At the point of closing, communication to employees, customers and vendors is essential to minimize anxiety and potential disruptions to the business. The content of the communication should be tailored for each stakeholder, and include topics such as ownership transition, customer focus, growth and a team-based management style. Shortly after closing, establish long-term communication programs for shareholders, employees, customers and vendors, using input from managers and the employees themselves.
Planning (days 60 through 90)
Clear strategic and tactical plans are essential for building a better business. One way to set the strategy is to hold a two-day, offsite meeting with senior management and middle managers. Share due diligence findings, historical financial data, operational performance data and industry benchmarks with the managers. Armed with this data, new ownership and managers can work together to identify strategic goals and a tactical plan to address growth opportunities, customer satisfaction, human resources, infrastructure, operational improvements and financial management. After this initial planning meeting, the team can produce a financial plan that supports the strategic goals and tactical plan. Then execution begins.
Organizational alignment (days 90 through 120)
Cultural and economic alignment between ownership and management is essential for building a better business. Open communication (e.g. employee surveys, newsletters, employee meetings, events, planning sessions and management meetings) and a team-based management style (which empowers employees and promotes cross-functional cooperation) accelerate the cultural alignment, particularly at companies that previously had centralized decision making and an autocratic management style. Economic alignment is achieved during this period through the creation of incentive-based compensation programs and offerings to purchase or earn equity in the new company.
Tools for execution (days 120 through 180)
After plans are completed and execution begins, establish visual metrics to measure progress versus goals or other benchmarks. Display these performance metrics in common areas of each facility to serve as both a measurement and a communication tool for employees, customers and vendors.
The first six months following an acquisition is a critical period. A properly executed transition plan that provides open communication, strategic and tactical planning, organizational alignment and tools to enhance execution will accelerate the process of building a better business and shareholder value.
Denny R. Bolzan is a principal at Pfingsten Partners LLC. Reach Pfingsten Partners at (847) 374-9140 or www.pfingstenpartners.com.