Phillips Edison & Co creates a growth environment Featured

8:00pm EDT July 26, 2008

Two years after joining Phillips Edison & Co., Chief Operating

Officer Mark Addy helped oversee the purchase and integration of

25 shopping centers that doubled the size of the company.

Addy, the top executive at the Cincinnati-based headquarters

(CEO Jeff Edison and President Mike Phillips work out of the

Baltimore and Salt Lake City offices, respectively), knew the 2003

acquisition meant significant growth challenges for the organization.

As a result, the management team began working on ways to

make sure the $176 million company was prepared to face current

and future growth as it continues to redevelop grocery-store-anchored shopping centers across the nation.

“What you find as you expand and grow ... you need to continue

to grow your people because you need a lot more quality people to

run an organization that’s twice the size it was two years ago,”

Addy says.

The company had about 35 employees in 2003. It now has 175, with

135 of those in the Cincinnati office. With that kind of growth rate, you

need to prepare to grow your infrastructure so you can handle it and

make sure you have the right people and systems to take your company to the next level.

“Whenever you’re building a platform of key people, what you find,

if you create a culture and environment where people learn and live,

then what they’re going to do is foster an environment where that carries on to all the other associates,” Addy says.

Prepare your infrastructure

Any growth opportunity takes preparation. You need to prepare to

grow your infrastructure so you can make sure you have the right people and systems to take your company to the next level.

The first step is making sure you are hiring people who can handle

a fast-growth environment.

Addy does situational interviews, asking questions based on an

employee’s resume and background, to find the right people for the

company. For example, he asks potential employees about the most

stressful situation in their lives and how they dealt with it.

“The best indicator of future results is how they’ve done in the past,”

he says. “If you see where personally and professionally they’ve lived

in an environment where they like that challenge and change, that

may be a fit.”

Addy says people either thrive or don’t in a fast-moving organization,

and those who cannot change is apparent early on. In most situations,

employees will come to you and say that the company is not a good

fit, mostly because it’s too fast-paced for them.

He gives new associates the opportunity to work at a position, and if

they’re willing to continue to learn, they will receive training. The ones

who cannot change show signs of that when confronting challenges.

He says body language and attitude are sure signs to tell if the relationship is not going to work out.

A fast-growth company also requires a strong management team to

keep the momentum going.

Addy first identified the key areas of the business that needed more

expertise and depth, then looked internally to find employees who

were ready to step into the leadership role and externally to add a few

key members to the team.

As the list of candidates narrowed, current members of the management team were involved in the selection process. Addy looked

for people who had the skills and expertise as well as those who could

fit into the culture and be examples for other employees.

Along with people, systems and technology also need to be prepared for growth.

During the purchase of a portfolio of 66 properties last year,

Addy realized that PECO’s software reporting system was inadequate to handle the growth. The company spent six months

researching options before selecting a new product to use that

would cut costs and build efficiencies.

PECO also had to change some of its financial reporting functions

in order to promote transparency with its investors and lenders. The

company has fully audited financials, conducts semiannual conference calls, and provides quarterly reporting to lenders and investors.

Addy says to be successful, you need to invest in your base and

take a long-term approach at building it so it’s prepared to handle

growth.

“That base starts with the culture,” he says. “That culture needs to

be stated and restated as you grow your management team. You need

to live and be an example of that culture. As you train the trainers, the

message will be consistent and carried throughout the organization.

Invest in technology, which needs to grow as your company grows. It

can provide information and efficiencies that you will need in a fast-growing company.”

Keep your culture intact

Growth can create significant challenges, but keeping your culture

constant gives you something to believe in, even as things are changing.

“We say that our three P’s are our most important assets — our people, product and partners,” Addy says. “Those three P’s will change

and change again, but if you have developed a culture, it will endure

as the guiding light.”

Addy says you need to communicate often, in a consistent manner

and with the door open for questions to reinforce the culture. PECO

associates know what is going on through quarterly newsletters and

teleconferences where they have a chance to ask the management

team questions.

“It’s empowering for associates to realize that they have the knowledge and know that’s being communicated clearly to them by man-

agement and know the direction the company’s going,” he says.

Addy has created an environment where it’s OK for employees to

have conflict over issues and wants them to question why PECO is

doing things a certain way. He encourages this open discussion within the management team and employees

“We feel that by introducing conflict to the topics or issues we’re

discussing, we’re better able to understand those and see all the

angles, and then we’re going to make a better decision,” Addy says.

“Everyone brings different experiences and benefits to that discussion.”

Creating an environment like that requires a significant amount of

trust within your management team and associates. It doesn’t happen

overnight but is earned over a period of time by doing what you say

you are going to do.

PECO used this open-conflict method on a transaction last year. All

aspects were openly debated within the management team to reach

the best decision for the company.

During these discussions, Addy is actively soliciting information to

make sure all employees are involved. While everyone won’t speak

up, the open-conflict method provides an opportunity for employees

to do so if they want.

“The ultimate decision of whether they communicate, that’s up to

them, but again, we try to provide a fertile ground where they can

voice their opinions and they’re going to be heard,” he says.

Keeping your culture constant also requires that you live it. Addy

leads by example and reinforces the message from the top down. He

walks around, spending time with associates to get to know them

and find out any issues he may not be in tune with.

“You’ve got to put a little shoe leather into it, and then you’ve got to

be willing to, when that opportunity comes, you’ve got to jump in and

lead,” Addy says. “Sometimes you have to lead by example and sometimes by servant leadership, where you’re actually assisting in what

they’re trying to do. You’re going to build a bond there with your associates that’s strong.”

For example, last year, the single-tenant development plan was not

growing at the level expected, and it needed someone to turn it

around. Addy jumped in to help, and this provided him an opportunity to learn more about that process and the people involved in it.

He says you need to prioritize to know what tasks to jump in and

help with and which ones to leave alone and only offer advice. He

helps clarify the issue or problem, then tries to offer guidance to the

employee without solving the problem. He then moves out and lets

the team work toward a resolution. Addy says the team’s resolution

will be better than his because they are closer to the problem.

“I get in and then get out so that I do not become part of the problem or issue,” he says.

Living your culture lets employees know that it’s not just words

and you believe in it, too.

“It gives a tremendous amount of credibility if you believe it and

you’re living it and people can look at you and hear the words and see

it in action,” Addy says. “It comes to life for them.”

Continue to grow your people

Addy says people are the key to growth, and he has built the company’s culture around developing ways to grow their skills and capabilities. Several new initiatives have been integrated at PECO over

the last few years to help associates grow.

“You don’t have to search long to find out that the way you’re going

to get there is through people and building around your people so

that you’re providing a culture that allows people to be challenged

and where they can grow and learn,” Addy says.

For example, an associate is assigned a buddy after he or she is

hired to help the new hire get acclimated to the company. The buddy

can introduce the new employee to others, teach him or her the little things, like how to use the copy machine, and be there to answer

questions. The program lasts the first few weeks.

Since implementing this almost two years ago, PECO has seen efficiencies from new associates because they have someone to go to

with questions. It also provides a learning experience for the person

serving as the buddy.

Another initiative is a two-day orientation program at one of the

three offices led by Addy, Phillips and Edison. Phillips and Edison

will discuss the company culture and vision, while Addy will discuss

the business model and the execution of it.

This gives employees an opportunity to sit with the company leaders and ask them questions.

On-the-job training is another initiative at PECO. The company has

been working the past two years on more than 20 applications used

within the PECO University training program for employees to learn

topics, such as “how to read a financial statement” or “how to understand a lease.”

Addy says these applications develop associates and allow for better internal training than using an outside company.

Employees are also invited to PECO’s annual meeting, which

includes a mix of business and fun. Adventure races have been set

up for employees to compete in, including one that took place in

New York City to help them learn more about the city, while another was an outdoors race in Moab, Utah. These races take employees

out of their comfort zone and challenge them and also help them

build communication and planning skills.

Being able to develop similar initiatives requires time, effort and

resources.

“It’s going to take time to evaluate, and it’s not something you can

pick up a chart and necessarily see how well you’re doing it,” Addy

says. “You have to be patient and keep that intensity for a sustained

period of time, and then you’ll see the results come through.”

PECO’s growth is not stopping. The company typically sees a 20

percent growth rate each year, and Addy expects it to continue as

work is done and initiatives are developed to continue building the

platform.

“Try to have some fun,” Addy says. “You need to provide energy for

the organization, and as you’re growing and taking these steps, you

have to provide an environment where people want to work, enjoy

working and have fun working. So work hard and have fun.”

HOW TO REACH: Phillips Edison & Co., (513) 554-1110 or www.phillipsedison.com