Randy Velarde was uncomfortable a few years ago with what he was seeing in his financial reports. The president of The Plaza Group, a petrochemical marketing firm he founded in 1994, was used to seeing double-digit growth.
The company had hit a plateau in terms of moving forward in sales and volume, and he realized something had to be done.
While it was happening during the recent economic downturn, that alone did not account for the disappointing growth. Besides, Houston wasn’t hurt much when the housing bubble burst. The Greater Houston Partnership reported that the downturn in the city was short and shallow, and the region began recouping its job losses sooner than most.
So what was going on?
Velarde knew that the company had a very strong foundation. After all, 15 years of impressive growth didn’t happen by chance. It was time for an in-depth look. Velarde, some of his key managers and the board of directors decided to spend a couple of days off-site studying the James Collins and Jerry Porras book entitled, “Built to Last: Successful Habits of Visionary Companies” as their guide.
What they came up with were five statements that had been the company’s core values, and would still be, but with new emphasis.
“We spent a great deal of time going through ideas and arriving at what are the five core values of our organization,” Velarde says. “The idea is that as you move forward, because the core values have clearly been a part of your past success, do your best to continue to live by those core values that have brought you such great success.”
Since that time, sales growth has resumed the trajectory that The Plaza Group was used to in its early years, with more than 35 percent growth over the last four years. Sales for 2011 were $273 million, 38 percent over 2010 revenue.
“I couldn't be more proud of our entire organization embracing, living and breathing our core values,” Velarde says.
Here’s how he and his team went about defining the company’s core values, taught employees to embrace them and created a feedback system that ensures the core values are a top priority.
Getting to the core
The term foundation is a key one when a company considers its core values. Those values not include operation procedures, business strategies or even cultural norms. They do include those basic tenets that are so fundamental that they survive the most strenuous challenges from any source. So analyzing your foundation will give you insight into areas such as how you treat people, how you make decisions and how you value honesty and integrity.
For The Plaza Group, with its 15 years of operation behind it, this was the solution it needed.
“I think there is a maturation process for any business,” Velarde says. “I think after 15 years, this was the correct tonic for where we were. If you are just starting out, I don't know if it would be. Everybody conducts themselves with their own set of core values individually. But that may not be the most important element, depending on where you are at in business. It may be a case where you need capital instead.”
He ruled out a need for capital and focused on what had been driving success. The process of defining your core values is simple, yet it takes considerable time to get it right. Where it can become time-consuming is when you weed out what values you have had that brought you success — from those values you hope you could possess.
“It really is a very long process because Collins and Porras walk you through arriving at your core values and want you to make sure that they’re not those values you wish you had,” Velarde says. “It’s about spending the time necessary to make sure you determine those values that are a part of your DNA and have been a part of your DNA — and again not what you wish you were but what are those core values.”
If the analysis is on the right track, you will be able to focus your microscope on what’s inside your DNA.
“It’s one of those moments when you realize what are those things you want best to live by, of course, knowing that at some point in time you may make a mistake — we’re all human — but you want to ensure that your entire organization understands what is your DNA,” Velarde says. “It's not just a plaque you put up on the wall.”
Velarde and his group settled on five as a good number for the values.
“I think we wanted to arrive at a number that was not too big that the whole organization would say, ‘Wow, that's an awful lot.’ You didn't want one but you didn’t want 10. By picking five I think we were very comfortable.”
When the team was finished with its assignment, it had found five realistic and embraceable core values for the company: to be honest and forthright, to treat people with respect, courtesy and professionalism, to provide exceptional service to customers and suppliers, to be opportunistic, and to be financially responsible.
Each value should be reviewed as to its history and importance to the organization. This effort calls for insight and introspection.
Velarde notes that it was clear to the team that the company has never been in a corporate lawsuit with suppliers or customers, that fact sunk home the idea of being honest and forthright.
“That's what I would call a good accomplishment given our litigious society,” he says. “I think it speaks to honesty and forthright. What does that mean? Well, there have been conflicts, there have been matters in which one party feels one way and the other the other, but there is a way to manage that and be successful. I've never been in a room with people with black robes on.”
If exceptional customer service isn’t the top of your list, it should be. Treat every customer as a platinum-level customer.
“They are your very best customer,” Velarde says. “There is no distinction, there's no screen that comes up when the phone call comes in showing they're a platinum color or a silver color or a gold color. Treat every one of your customers with the highest level of service that the company can offer.
“For every one of these core values, we spent a lot of time wordsmithing it,” he says. “The quality of being nimble was something that was at least proposed. I think we all agreed that opportunistic was a little more specific. But it does include an element of nimbleness: being able to move swiftly, more quickly than competitors because of your size and your lack of overwhelming bureaucracy.”
Leading by example is a process
Getting employees to follow core values that have been a part of your company doesn’t seem like a difficult task. However, it’s not just something like hanging framed copies of your core values on the walls.
“I think leading by example is the best way, and it’s a process,” Velarde says. “It not only includes me but our managers and our board of directors. Employees will observe the commitment and embrace these values at each level, which I think is very positive in terms of establishing their own level of conduct.”
Each core value can be demonstrated by an example. One incident that happens with some frequency in business transactions is a dispute over an invoice. A short case history of the event, when told to employees, will demonstrate how a core value led to a satisfactory and successful outcome.
“I have many examples of where a supplier has undercharged us,” Velarde says. “If you kind of said, ‘Well, they will never know; we’ll pay the lower price and make more profit,’ that’s not following the core value of being honest and forthright.”
By following the core value and informing the supplier of the error, it is leading by example, and goes far in developing a deeper relationship with the supplier.
“Your team should say, ‘You know what? We are advising you of an error, that we owe $100,000 more than invoiced,’ and I can tell you that there is nothing more impressive to a supplier. They’ll say, ‘Wow!’ In big companies, a lot of things go unnoticed, maybe for a very long time or even forever. But now you’ll be noticed.
“Every time you call back to your core values is essential to your company’s personality and your company’s culture.”
With management focused on calling back to the company core values by setting examples, the focus will cascade down through the organization and each core value becomes strengthened as part of the company culture.
Check adherence to values
In a competitive market, feedback is often seen as some of the most critical data you can obtain to help you succeed. Monitoring how well your employees are performing is an important part of your operation, and a logical place to start is with a team from the heart of the company.
Once Velarde had the five core values in his toolbox and management was all squared away on its role to lead by example, a core values team was formed to observe the pulse of the organization.
“My key managers begin every meeting with a question: Are we abiding by our core values?” he says. “And I have my own core values team I meet with about every 60 to 75 days to make sure that we’re doing well with our core values.”
A team made of four members of folks in the trenches, as Velarde calls them, is composed of representatives of the customer service, supply chain and accounting department and the commercial team.
“You want to make sure you have a finger on that pulse,” he says. “In some companies, managers may just tell you what you may want to hear. I want to make sure that this is a part of every level of the organization.”
The core values team concerns itself with both positive and negative feedback, lauding the cases where a core value was followed with a successful outcome and expressing concern over potential violations of core values.
“Are you living by them?” Velarde asks. “Where have there been mistakes? Yes, there is a mistake here and there, but is there a trend? Maybe there is a violation — you know, where the organization or an individual may not have been in concert with your core values, and that’s OK; mistakes are made.
“But what you want to do is nip in the bud anything that may resemble a trend. There's no harm in a mistake; we are all human. We’re not perfect, but make sure there is no bad seed growing within the organization, violating your honesty, your financial responsibilities.”
Some issues can be resolved by just going to your manager to expose an issue. For larger issues, you can establish a formal corrective action process. There are multitudes of ways that can be used, depending on the situation.
Matters such as the earlier mentioned invoice error are brought up by the team to show an example of a core value guiding employees to successfully handle a sensitive error.
“If you do every one of those core values correctly, success is at the end of the road,” Velarde says. “The kind of growth we have experienced has been in conjunction with our entire organization embracing our core values.”
How to reach: The Plaza Group, (713) 266-0707 or www.theplazagrp.com
The Velarde file
Born: Albuquerque, N.M.
Education: University of New Mexico, with a bachelor of science degree in chemical engineering; master of business administration degree from Baldwin-Wallace College. I was with Shell Chemical at the time, and I had been transferred to Cleveland.
What was your first job?
I was sanding and stripping furniture for my godfather, who was in the refinishing business. I recall that vividly; talk about hard work. I think I was a teen. It was a great experience, though. Hard, hard work. At that time, my godfather had a great team that enjoyed the camaraderie, and it impressed me.
Whom do you admire in business?
I must say that Andrew Liveris has done a terrific job with Dow Chemical Co. as chairman, president and CEO. He’s been a great example of a leader who has been through some challenges and has absolutely navigated his way very well through those challenges. He’s done a remarkable job of steering the ship so it is well-positioned.
What is the best business advice you ever received?
My first boss at Dow Chemical Co. was a very strategic thinker. He impressed upon me the value of the detail that one could go through to manage a sales territory. There was a great deal of strategic thought that went into it. His strategic thinking example has stayed with me. I learned something very important from him.
What is your definition of business success?
I have found that the greatest satisfaction in leading a business is getting the buy-in from the team, your team, and that strategy is not only your business strategy but also your core values. With that buy-in, knowing that if everybody does their job, excellent results are almost inevitable. The success happens to be the end result of such a strategy executed and the embracement of core values by your organization. The results don’t lie, and following a very strong strategy with an incredible team that embraces your core values leads to those results.
A significant amount of John Treace’s career has been focused on returning failing businesses to profitability by retooling their sales and marketing areas. So time and again, he’s come into a company where the sales organization was the needlepoint for other problems.
“Of course, the sales operation of a company really is the heart and soul of the company,” says Treace, who is the founder and CEO of JR Treace & Associates LLC. “The performance of everyone else in the business is weighed and justified on the performance of the sales team. … It all shows up in sales.”
Smart Business spoke with Treace about his book, “Nuts & Bolts of Sales Management: How to Build a High-Velocity Sales Organization,” in which he explains how business leaders can create a high-powered sales organization, starting with the company culture.
Why is culture the first section of the book?
Every company that I’ve ever been in that was failing or stumbling was failing because of top management up at the CEO level and at the VP levels. They fail because they don’t have a culture of success. To create the culture you have to identify your core values.
Core values should be written. They are like the 10 commandments. They are simple. They are action statements. As an example, one of the core values that we used in our business is ‘Don’t run out of cash no matter what.’ It sounds simple, but every company that I’ve ever gone into in my business career had run out of cash.
How can you effectively communicate core values to your team?
When you are presenting them, you have to make an emotional connection with each core value. As an example, the core value ‘Don’t run out of cash no matter what’ — when you tell that to a group of people, it really doesn’t sink in because they can’t imagine their company ever going bankrupt. However, if you ask a question to the audience and you say, ‘Have you ever known somebody who didn’t get a paycheck?’ — You’ll see hands pop up all through the audience. You talk to those people and say, ‘See, those people were working for a company that didn’t have this as a core value.’ Then they can make the emotional connection.
So you create your core values. You publish them. You create the emotional connection with your employees. And from that, you can write your mission statements.
Can you explain the relationship between morale and execution in managing your sales team?
In every failed company I’ve been to, the morale was just terrible, with sniping from the corporate officers at the sales team. One company I went into, and I interviewed the CEO and the CFO to begin with, I asked them what they thought the problem was, and they answered, ‘Well, we have a terrible sales force.’
I’ve never seen a terrible sales force in my entire life. I’ve seen sales forces of low morale and sales forces that were not effectively deployed, but I’ve never seen a terrible sales force. In that situation, with the CEO passing down word throughout the company that the sales force wasn’t very good, it totally demoralized the sales force.
The sales force wants predictability. They want to be able to answer these three questions of corporate management: Do you care about me? Can I trust you? Are you committed to excellence? I actually learned these in a talk with Lou Holtz, the football coach.
So when the corporate officers do things that don’t allow the sales team to answer yes to one of those questions, then it’s going to hurt the morale.
How to reach: JR Treace & Associates LLC, (904) 314-1442 or www.treaceconsulting.com
If you asked your employees, would they be able to tell you your firm’s core objectives?
Do you know?
Simply put, a core objective is a critical force that drives the company. Yet every day businesses operate without a solid sense of their core objectives. Many companies don’t know the role core objectives play or how they form its underlying foundation.
It is a well-known fact that Southwest Airlines considers flight turnaround time to be one of its core objectives. Many Southwest decisions support this turnaround objective, including the hiring of in-house mechanics and cross training of all personnel. The flight and ground crews understand the importance of the objective and work together to ensure turnaround times are met, and because the objectives are measurable, flight-by-flight performance is published for all to see so teams clearly know if they have met their objectives, and they can make adjustments if they have not.
The reality is there are generally four or five objectives that drive each firm. Because every business is different, it’s important to identify which objectives are critical for your business and your customers. The further removed your core objectives are from your customers’, the more opportunity you provide a competitor to step in and close the gap. A good example is when the domestic automotive market let the Japanese step in between it and its customers. While quality was not a core objective in practice of the domestic automakers, it was for customers. So when Japanese automakers took advantage of this disconnect, they turned an entire industry on its head.
Once your firm has identified its four or five key objectives, there are several strategic mapping methods you can use to your match core and customer objectives. My firm uses a COAR map designed by CASE Weatherhead School of Management’s Sayan Chatterjee. It is designed to map the relationship between four areas: customer outcomes, company objectives, activities and resources.
Here’s an example of how this works:
Let’s say your entrepreneurial 10-year-old wants to earn some extra money this summer by operating a lemonade stand. If we asked a 10-year-old (and we did) what his or her core objectives would be, the answer might be: Repeat customers, great lemonade and make a profit.
If we asked the 10-year-old’s customers for their core objectives, they might say: Lemonade that is readily available, great taste and reasonable prices.
In this case, the 10-year-old’s core objectives match the customer’s objectives. With the objectives in hand, effective activities follow easily: recipe, location and cost-effective supplies. Every decision this 10-year-old makes should then align with the established core objectives. If your company’s core objectives are to make a profit and enjoy repeat customer business by selling superior lawn services, the activities and resources that you assign to ensure you have superior lawn services will determine how successful you’ll be in achieving repeat business.
We like the COAR map because it illustrates the interconnections between the customer and the company’s objectives, the core metrics that we should track and the financial allocations for activities and resources that support the objectives. Understanding the connections between customer and corporate objectives, activities and resources is imperative for long-term business success. Once you’ve aligned these connections, you’ll have a good handle on the driving forces at work within your firm.
Victoria Tifft is founder and CEO of Clinical Research Management, a full-service contract research organization that offers early- to late-stage clinical research services to the biotechnology and pharmaceutical industries. She can be reached at email@example.com.
It is generally agreed that to succeed in business or any other collective pursuit, there must be the ability to attract and retain the “best and brightest” people. But really, this is just the beginning. In my experience, I’ve found that there are three core value traits that can help organizations to optimize the performance of their “best and brightest.”
These same three value traits surface over and over, year after year. They are: character, competence and commitment.
It requires character to act with fidelity on one’s beliefs. It requires competence to achieve goals. It requires commitment to persevere to a successful conclusion. These core values drive productivity and produce profitability and sustainability for one’s company, its staff, its customers and its investors.
How best to describe these core value traits at the corporate level?
One must be able to demonstrate ethical integrity, an emphasis on seeking solutions not casting blame, an open environment where honest communications are encouraged and honest differences of opinion are allowed, and a commitment to managing on the basis of sound principles. Doing the “right thing” in a professional manner is a demand all must make of themselves.
It is also important that you find people who have an entrepreneurial spirit and relentlessly seek to innovate within bureaucratic structures. You must also find people who have creativity, decisiveness, initiative for self-growth, leadership ability that encourages small work groups and a continuous seeking of the optimal balance between flexibility and control. A truly disciplined organization continues to learn and consistently applies the best methods to achieve goals and the fulfillment of the idea that competency is a key competency.
It is also crucial that the people of your company have commitment to one’s group, one’s company and to one’s fellow colleagues. They must have a missionary zeal in representing the company and its products, responsibility and personal empowerment. They must encourage people to grow and empower them to do so. You also want people who promise to do what has been asked, pledge to provide whatever assistance is required to meet a shared commitment and perseverance in one’s beliefs.
To be successful, people and organizations must act with character, competence and commitment in a harmoniously orchestrated environment that energizes all and synergizes everything. As an employee or employer, these core value traits are essential minimums. But, they are only minimums.
Studies consistently show that among the three most highly regarded leadership traits are those of honesty, integrity and trustworthiness. Leaders who cannot be trusted cannot lead. So, besides the ideals of character, competence and commitment of an organization’s staff and leadership, the firm’s leaders must also be people who are honest, trustworthy and have a sense of integrity.
It is this sense of integrity that integrates all other desirable characteristics into an authentic and harmonious entity, which is a mark of all consistently successful organizations.
Thomas M. Nies is the founder and CEO of Cincom Systems Inc. Since its founding in 1968, Cincom has matured into one of the largest international, independent software companies in the world. Cincom’s client base spans communications, financial services, education, government, manufacturing, retail, health care and insurance. Read more about Nies at http://tomnies.cincom.com/about/.