When Stacey Gillman Wimbish was named president of The Gillman Cos. in 2008, she didn’t have much time to enjoy being named to her new position. She took over right at the height of the economic recession, and in just one day in November, she had to let go of 150 of the company’s then 900 employees. The recession’s full force had fallen on the automotive industry. The Big Three, Ford, GM and Chrysler, were all in financial trouble and that meant that dealerships would suffer, too.
“That’s what faced us during the recession and our reaction was to cut expenses, and that meant employee count, and it was really, really hard rebuilding,” Gillman Wimbish says. “There was nothing we could do about it.”
Although it seemed like nothing was going right in the auto industry, Gillman Wimbish remained focused and rallied her employees to adapt to changes in order to push forward and leave the past in the past.
The $500 million 760-employee owner and operator of 14 car dealerships has had to fight through unprecedented recessionary times as well as inventory setbacks due to the earthquake and tsunami that hit Japan earlier this year.
Here’s how Gillman Wimbish pushed through the recession and an uncertain industry to keep The Gillman Cos. performing as one of the top car dealerships in Texas.
Brace for change
To say the condition of the auto industry wasn’t good in 2008 and 2009 is an understatement. The industry was severely underperforming and the companies at the forefront were in the midst of federal bailouts. In an industry that is hot one minute and cold the next, you have to be ready for change.
“During the recession here in Texas, we had two direct-hit hurricanes on our business, we had $4 gas, at least 70 to 80 percent of all customers financed their cars and lenders stopped lending,” Gillman Wimbish says. “General Motors went bankrupt, and we have two General Motors stores. Pontiac dissolved. Dealers were getting letters in the mail saying we’re not going to renew your sales and service agreements. Thankfully, Gillman didn’t get one of those letters, but it was a very high-stress time.”
When chaos is happening all around you, you have to have a plan ready to move forward and be able to communicate that plan throughout your organization.
“Today, we say, ‘Let’s work; don’t worry,’” she says. “These times demand change. You have change whether it’s natural disasters or poor economic conditions or internal management restructuring; change is hard on your employees. The best way to approach it is to have a plan. You can make mistakes along the way but have a plan [and] communicate the plan: ‘This is what we’re going to do to get through this.’ Lay out expectations and be consistent with your message. Make sure you stay the course and don’t bounce around with your plan. If you can do that, then the best part is at the end when you can thank your team for making it through.”
A plan is only good if it accomplishes the goals you have set to achieve. Make sure that what you plan to do can be measured and improved upon year after year.
“It’s always best to keep it simple,” she says. “Whatever you decide to do, whatever plan you come up with, you have to make sure you measure it so you can tell if the plan is working. When you ask folks to change their routine, it is a matter of presenting your plan and training them on how you want it done, defining expectations and then constantly measuring. My weapon of choice is hard facts. We measure ourselves against everything — against other car dealers, other name plates and, of course, fierce and fun internal rankings. If you can measure it, then you can improve it. That’s how you can monitor what changes you’re trying to instill.”
Change is an ongoing process that your entire organization has to be on board with in order for your company to be able to ride the fluctuations of an uncertain industry.
“You can never stop changing,” she says. “The times are moving too fast to relax. If it’s not hurricane readiness or economic meltdowns or $4 gas coming back or a tsunami on the other side of the world, you have to react and go faster. You have to have folks that will change. If you have employees too set in their ways, then they need to go. We don’t do anything the old way. Old wisdom serves you well, but new technology will make you better and stronger and faster. You can never stop changing and looking for ways to go faster. At the same time, you have to be able to keep calm and carry on. You have to breathe when these curveballs come up. Don’t lose control and don’t give up.”
Learn from experiences
Over the past year and a half, the auto industry has made a big comeback. However, it wasn’t long until some car dealers had to withstand inventory shortages due to the natural disasters that struck Japan in early 2011.
“In this environment, it’s been very nice to have some diversity,” Gillman Wimbish says of having both domestic and import dealerships. “The recession is over so the most recent challenge has been the tsunami and the earthquake that happened on the other side of the world. The ripple effect is production of these cars and that means that our summer inventories are going to be very low. Instead of selling 1,300 new cars, we’ll probably be down to 1,000. So we’re going to be down 30 percent. Through the first four months of 2011, we’ve been on a post-recession high. It’s been an exciting 25 percent increase over last year, but now we have another setback to last year’s sales levels, and sadly, that’s going to rob us of the best-selling months of the year.”
What The Gillman Cos. endured three years ago will play a big role in how the company gets through any future tough times. Just realizing that change is a crucial part of your business can make adaptation easier.
“We’re not planning to just turn off our marketing or suffer through the lack of sales volume,” she says. “We did that during the recession, but we’re not doing that now. In fact, we’re going to do exactly the opposite. We’re going to press on, and we are going to have to change a little bit and sell both new and used cars. We’re going to provide a clear path, stay the course, and offer a lot of reassurance that the dealership is financially strong, and together, we can handle all these curveballs.”
That mentality in a leader is critical in order to be resilient. However, that mentality has to carry throughout the company in order for employees to know they can help.
“I have a great team at the top, but I can’t do it all,” she says. “If you involve more people and you involve them in your recovery plan, that will help make you more efficient. If you tell your employees and managers the challenges that you’re facing, they can be part of the solution. They will offer to step up and help and that will bring you closer together. When you all pull together, it becomes that much easier to pull through.”
Part of pulling together and getting help from the employees around you is being honest and open with them about what is happening in the company.
“One of the things that we have done really well through these hardships is we disclose,” Gillman Wimbish says. “There are a lot of companies out there that hide a lot of their financial statements. We disclose our financial statements and encourage department managers to dig in and find ways that we can be more efficient. There’s not an account within Gillman Cos. that’s a secret. If you create a culture of, ‘They don’t need to know,’ that’s not using the tools you have at your disposal. You need as many eyeballs helping you as you can or else you’re limiting your success. You’re limiting yourself if you don’t disclose your hardships, successes and challenges.
“You should also tell the truth. Employees get worried and they don’t want to hear what’s happening from the ‘Today Show,’ they’d rather hear it from you. Tell the truth, whether it’s good or bad, don’t cover anything up. It’s important, and it’s actually reassuring to them. I’m amazed at how many team members step up and help us through something because they want to feel like they are part of the solution.”
Look through the customer’s lens
Change is not and cannot be the only way a company gets past tough times. A company has to also look at what it is best at and continue to do that and improve it. For Gillman, that meant customer service.
“You have to look at things through the customer’s lens,” Gillman Wimbish says. “I want to treat every customer as if they were my neighbor. They need to get a quality product that you stand behind, sold with honesty and integrity, follow up after the sale and have sincere appreciation for their business. There is a ton of competition out there and the only thing that sets you apart is the service you provide.”
Gillman not only wants to make new customers, but prides itself on having repeat business. If your company doesn’t emphasize customer service and process improvement, you will lose out to companies that do.
“If you treat everyone as if they were your neighbor that you’re going to see everyday … and your neighbor is happy with you, then they will send you more customers,” she says. “You can’t be hiding behind the bushes trying to avoid things. You need to see your processes and customer touch points through the customer’s eyes. You can always do a much, much better job of this. Have customer touch point meetings within your management. You may think your website is clear and full of all the data that is relevant, but is that what the customer is looking for? You need to do more think tanks about the customers’ needs and wants.”
While putting yourself in the shoes of your customers is a crucial part of improving service, you have to also make sure that employees are enjoying the work that they do.
“Another thing that CEOs have to understand is that employee satisfaction equals customer satisfaction,” she says. “We have 760 employees, and if the one employee that you encounter has a bad attitude that day, then you translate that as a poor reflection on the whole face of Gillman. So you need to sincerely have solid employee satisfaction in order to provide a good reflection and a good impression on your customers. You want your employees to be proud of where they work and you want them to have clear direction in their job and confidence in management. If your employees take pride in where they work, they will perform there jobs with confidence.”
Improving the levels of satisfaction among customers and employees takes measuring and monitoring. Competition is what will let you know whether improvement is needed.
“We love competition,” she says. “We love to win, and we’re not afraid of our results, even if we’re in last place in a certain ranking. I won’t ever hide from that, and through awareness of that and getting my teams input, we’ll climb the ladder and improve. In order to monitor, you have to measure. No matter where you are, if you can measure it and keep the awareness in front of folks, you can improve. Don’t try and do too much all at once. Break it up into pieces.”
Climbing the ranking ladder comes back to the satisfaction of your customers and employees. It has to be your top priority to stay out in front of your competitors.
“It’s a fun, happy environment that you have to try and create, because happy employees will equal happy customers,” she says. “Don’t be afraid to ask the customers. Ask them where they’re having problems or where the clogs are and then try to modify based on that feedback. You may think you have the greatest processes in place. You need to have a few meetings specifically pretending to be a customer and try to gauge how they feel about that. You have to challenge yourself to think through their lens.”
HOW TO REACH: The Gillman Cos., (713) 776-7000 or www.gillmanauto.com
The Gillman Wimbish File
Stacey Gillman Wimbish
The Gillman Cos.
Education: Attended the University of Texas
What is the first car you ever had?
A red 1981 Pontiac Firebird Trans-Am.
If you could choose one car on your lot to drive, what would you choose?
I’m driving a Nissan Armada because it holds kids and dogs.
Who is somebody that you admire in business?
My dad, Ramsay Gillman, and my former boss and former COO, Jay Gould. Both of them allowed me to make a lot of mistakes and learn from them.
Remembering Ramsay Gillman: It is with deep sadness and regret that I must announce the death of Ramsay Gillman, my father and our board chairman. Ramsay died at age 67 at his home on Friday, June 3. We miss his guidance, wisdom, affection and humor. He was an inspiration to me, my brothers and my co-workers.
Ramsay followed his father into the car business starting at Frank Gillman Pontiac GMC in downtown Houston. He grew our company from one dealership to 14 in five different cities across our great state. His vision and determination will be hard to match.
My dad’s strong discipline and customer service excellence has been instilled in our dealerships and will continue to guide us in the future. His principles of honesty and integrity will continue to lead us as we move forward.
One card I received read, ‘We will never be the same as we were before this loss, but we are ever so much better for having had something so great to lose.
Edgar Smith Jr. has more than 25 years of sales and marketing experience with Fortune 500 companies and more than 13 years experience in the commercial printing and paper business. It is through his experience that Smith, founder, chairman and CEO of World Pac Paper LLC, has developed his business.
The nearly $30 million paper company has been thriving because of Smith’s ability to form important business relationships within his industry.
“When I started the company, I wanted to be sure that it was a company that had the foundation to be competitive and the insights into the industry,” Smith says. “It was important that I built the company from the ground up with industry experts. I wanted to combine the best entrepreneurial management with top industry leaders to create a very dynamic company.”
Smart Business spoke to Smith about how he has developed relationships over time to keep his business cemented in the industry.
Look for relationships. It was critically important for me that I had other invested principal executive-level company officers with significant experience, knowledge and expertise within the company management to really assist with the daily operations of a paper business. What I was looking to achieve there was that I wanted to ensure that I had as many paper company mill relationships as I could because I knew that it was a very competitive environment.
There’s always a relationship in most things that are done in the world. Relationships are developed over time. You have to really understand human nature and the human condition to understand relationships. They oftentimes occur when you least expect it, and it’s through shared experiences that relationships will come about. We all bring the talented expertise that we bring, but you have to have confidence in yourself and your ability to do what you do and to add to the value equation. It’s about getting others to work with you, appreciate what you do and take the journey with you.
You have to first allow yourself to consider the possibility for relationships. We all know what we know, we don’t know what we don’t know. It’s sitting down and understanding others and what their goals and objectives are in this world. You have to understand yourself and understand others and look for possible connections. But also value experiences that you have not had and see how those experiences can augment some of the things you are trying to achieve. When people believe in you and are willing to go on a mission with you, that’s real power.
Build the relationship. One of the things that’s always been important to me in building relationships is trying to maintain communication. It’s very important that people have conversations. Things happen and don’t happen as a result of conversations. You’ve got to have conversations before you can start the building process in whatever you do. You have to get to know one another and spend time with one another because that is very important. You have to be reliable and dependable and be someone that is trustworthy.
You have to bring value to the relationship. Oftentimes I’m looking for what I can do for others, not what I can get out of the relationship. You have a lot of folks that run around and they wonder, ‘What can I get from someone else?’ and that shouldn’t be your approach. You should look for how you can add value to someone else’s situation. Those are some of the things that I think are necessary, but it’s really about gaining that understanding and taking time to listen to others. It’s not about you; it’s about them.
Get value from relationships. The other thing that’s helped us is that we are customer centric. We understand that the customer is at the center of everything that we do. We’ve got to have the high-quality products and high-quality service. Quality means that we work to achieve total customer satisfaction by understanding and committing ourselves to our customers needs while embracing a philosophy of continuous improvement. There is always more that you can do.
In order to be customer centric you really have to understand your customer and as best you can, you have to understand their industry in which they operate. You have to be able to identify what their needs are and what the opportunities are with a particular customer. As best you can, understand the overall situation. You have to see opportunities as your customer sees those opportunities and try to align with them on those situations. You have to work alongside them to generate possible solutions to their challenges. A big part of that is having open and honest communication, being transparent and operating with excellence and being very consistent in what you do.
HOW TO REACH: World Pac Paper LLC, www.worldpacpaper.com
When A.G. Lafley became Procter & Gamble’s president and CEO in 2000, the company had 10 billion-dollar brands. When he retired from his position as chairman, president and CEO in 2009, the company had 23 billion-dollar brands. Viewed as one of the best chairmen and CEOs in P&G history, Lafley accomplished what he did through a focus on innovation and the consumer.
Four billion times a day, P&G brands like Gillette, Old Spice, Tide, Charmin, Pampers, and Duracell touch the lives
of people around the world. Lafley and Chris Thoen, former director of innovation and knowledge management at Procter & Gamble, spoke last November at the Ernst & Young Strategic Growth Forum in Palm Springs, Fla., to share their insights into how innovation and consumer focus has been the key to P&G’s success.
“The biggest decision we made was to move to an open innovation platform,” Lafley says. “The problem at P&G in 2000 was not that we weren’t inventive. The problem with us was that we weren’t turning that invention into innovation that created customers, that benefitted customers, that created value for customers or a better experience for customers, and that’s all I wanted to do.”
The drive and focus on innovation Lafley instilled in the company during his time there is now one of the most important aspects of the organization’s business.
“Our belief is that innovation is the way for a sustainable competitive advantage and business growth,” Thoen says. “Everyone in the organization breathes it in and out every day. At Procter & Gamble, we see it as the cornerstone to develop the best possible products for consumers everywhere in the world. Innovation has been a great game changer at P&G, especially over the past 10 years.”
P&G had net sales of $78.9 billion in fiscal 2010. Here is what Lafley and Thoen had to say about how the company’s biggest advantage is its ability to innovate.
Innovate for the consumer
P&G innovations have become so successful and a part of people’s daily lives because the company innovates its brands with the customer in mind 100 percent of the time.
“I’m a big believer in pushing the idea, the innovation and the technology in front of the prospective customer very early in the process,” Lafley says. “I learned this working with a lot of very good design shops. We used to spend way too much time and way too much money designing and engineering pretty ornate prototypes. I pushed us to prototype very quickly and prototype very crudely. Consumers are smart. … You just want them to get the idea.”
Not only does P&G innovate with the customer in mind, but it strives to understand its customer base for new products.
“For us, the consumer is the boss,” Thoen says. “It’s the consumer that hands over the money to the cashier and makes a choice to buy a product of P&G or a competitor’s products. So for us, it’s really important to understand what the consumer wants and to be able to deliver that experience. That means understanding the consumer fully. To go forward with that, it’s finding the best possible innovations to put those into the products.”
Once consumers grasp a concept for a product, you have to test it to see if the product holds true to its purpose in a real situation.
“I also believe in getting into some kind of transaction test,” Lafley says. “You don’t know if you have something until somebody will part with some money. You can run all kinds of research and people will say that they are going to do something, but you can’t believe any of it until you actually have to reach into their pocket and pull out hard-earned money, hand it to somebody else who is going to take it away from them and then get that product to try it.”
Innovating products that customers can’t live without doesn’t come without trial and error. You have to be willing to fail and work until you get a product that consumers want.
“The failure rate is high; that’s part of the game,” Lafley says. “Many fail multiple times. We just introduced a new chemistry foam-based feminine hygiene product that we worked on for 13 years. We failed so many times with that technology I can’t even tell you. But we stuck with it because we knew if we delivered it, it was going to deliver protection and security that no other existing technology could come close to. You’re going to fail and you’re going to fail multiple times. I always encouraged fast failure and I preferred cheap failure. I didn’t want to drop $50 million or $60 million. That’s a high price to fail even for a company with deep pockets.”
You can’t underestimate the importance of being able to innovate. You have to identify innovations that will help your business keep growing well into the future.
“As I’ve looked at a number of other industries, virtually all the value gets created by innovation,” Lafley says. “At our company, all of our revenue growth was either organic innovation — serving new brands or new products or better products and improvements in existing brands — or it was acquiring. In our view, an acquisition was a platform for future innovation. We didn’t buy Gillette because we wanted their male shaving business. We bought Gillette because we thought Gillette would be a fabulous platform for male personal care innovation for the next 50 or 100 years. Innovation drove everything.”
Hunt for innovation
Innovation isn’t always easy to come by. You have to be willing to ask for help and let partners in business know that you are innovating.
“For us, it’s tapping into a network of partners, ecosystems, and they range from the individual, the innovator, inventor, to small and medium enterprises, to big enterprises,” Thoen says. “Where the innovation comes from is not important. It’s finding it, doing the right thing with it in our context, putting it in the right products, and then delivering that innovation to the consumer.”
Even if your business is a known leader in innovation, you have to let it be known that you are looking for assistance with new innovations.
“I think we are still trying to get the word out,” Lafley says. “We did all kinds of things. We got a lot closer to our customers and I mean our retail customers, our distributors. We reached out to universities and research laboratories and we tried to get the word out to individual entrepreneurs. One of the things we did was we ran these big innovation fairs. We would run it for two or three days and it was sort of, you had to give if you wanted to receive. So we would show off some of our technologies that we were looking for partners on. Then we would invite people in to show off theirs. It starts out with making a couple of connections, ‘Gee, maybe I have an idea you might be interested in’ and you talk to a third party.”
P&G has a huge network of past and present employees, and it puts that network to good use.
“An amazing source for us was the thousands of people who had worked for P&G that had moved on and I reconnected with them,” Lafley says. “Believe it or not, former P&Ger’s around the world get together and they have these big events. They created a community where they connect on business ideas, they connect on entrepreneurial ideas and they connect on innovation and we started getting a lot of leads from former P&Ger’s, colleagues of former P&Ger’s, and friends of former P&Ger’s.”
The company also utilizes its websites to gain ideas. You have to use all your resources if you want to find the best innovations and ideas.
“We pose those same needs on our PGConnectDevelop.com website,” Thoen says. “A lot of people can go and visit that web site and say, ‘I think I have a solution for you.’ They then submit their idea onto the website. Within P&G, we have a back store process to go in and evaluate those ideas and see if they fit with our strategy and what we want to do. Once those ideas come in, we also have a commitment to those partners that have submitted those ideas to come back to them within a very reasonable time frame, four to six weeks, on whether or not this is an idea that has traction within the company and we want to move forward with it.”
To find or develop products or services that will become true game-changers, you have to be able to get different view points on that innovation.
“All innovation comes from people and you have to open them up and you have to open up to the world around you,” Lafley says. “All innovation comes from either a person or a small group of people making unlikely associations or connections that others don’t make. Everybody’s going to be looking at it, but you have to see it in a way that’s slightly different.”
Find what consumers want
To build upon your innovation, you have to know what consumers are looking for and what you can do to give them what they want. You have to know what products are and aren’t the right fit for your business.
“It’s clearly important to define what are the areas where we want to play and the areas where we don’t want to play,” Thoen says. “For many years, this was all about physical products, consumables. Those will continue to be important, and we have significant business units where we have developed a strong portfolio of products and will continue to strengthen the performance of those products and make sure they have the right value. But what we’ve found is that the consumer is not only looking for products, they’re looking for services. So as we set ourselves up for success in the future, we need to make sure that we follow that trend into the market and make sure that we don’t only have consumables but also have the right services.”
As you try to develop future endeavors you have to devote the time to those projects to make sure they fit.
“One thing you have to keep in mind is how do you balance the return from the present with the investment of the future?” Lafley says. “The other is what business are you in and what businesses do you want to be in and what businesses should you not be in and they are kind of related. I spent a lot of time with what businesses do we want to be in. And I spent a lot of time on making sure that we were putting enough resources, not just financial resources but human resources, in partner investment and acquisition investment for creating the future. I probably spent a third of my time on people development and talent allocation. I easily spent a third to a half of my time on innovation for the future and creating a strategy and a platform for the future.”
A big part of what an innovator does is create something that builds a relationship, creates a better experience, delivers some value and creates trust over time.
“We have a very simple business model in most of our businesses,” Lafley says. “We try to create a brand that makes a promise that you’re interested in and a promise that will make your life a little bit better. We try to deliver a product that delivers better value and a better experience in performance value. Then we try to generate some trial. We try to get some people who we think are most interested or most in need of the brand or product to try it. Then we hope that you like it enough and you come back and try again and will use it on a regular basis. That frankly, is our game and that’s the secret of success to our brands. They have higher trial rates and they have higher usage and loyalty rates and that’s what makes it go.
“At least with consumers, a successful brand is a promise that’s kept. A successful product is a promise that’s kept. If you can take it one more step and add some delight, I not only kept the promise, but I delighted you in some unexpected way then you’re off to the races. That’s what you’re trying to create.”
HOW TO REACH: Procter & Gamble, (513) 983-1100 or www.pg.com
The Lafley File
Former chairman, president and CEO, Procter & Gamble
Born: New Hampshire
Education: Bachelors degree from Hamilton College; MBA from Harvard University
Experience: He joined Procter & Gamble in 1977. He was named a group vice president in 1992, an executive vice president in 1995 and president of global beauty care and North America in 1999. He served as president and CEO from 2000 to 2009 and was elected chairman of the board in 2002.
Accolades: During his leadership, sales doubled, profits quadrupled, and P&G’s market value increased by more than $100 billion dollars.
He was named “CEO of the Year 2006” by Chief Executive Magazine. He received the 2010 Edison Achievement Award, an annual award recognizing leaders that have made significant and lasting contributions to innovation, marketing and human-centered design throughout their careers.
The Thoen File
Former director of innovation and knowledge management, Procter & Gamble
Education: Masters degree in science and chemistry and a Ph.D. in biochemistry from Universiteit Antwerpen
Experience: He joined P&G in 1988 as an R&D scientist for Fabric and Home Care. In 1993, he became section head of R&D for Fabric and Home Care. In 1997, he was named associate director of R&D for Fabric and Home Care. In 2003, he was promoted to R&D director of technology for Fabric and Home Care. In 2007, he was named Personal Health R&D director. In 2009, he became the director of innovation and knowledge management.
Studies have shown that only 3 percent of people around the world write their goals down on paper. However, that 3 percent is more successful than the other 97 percent combined. Think about any winning recipe, whether you’re trying to grow a company to new heights or baking a cake. Without a strategic plan and goals to meet along the way, you’re much less likely to reach them if you don’t write them down and keep track of them. Strategic plans take time, effort, research and people to monitor and drive them forward. You can’t simply devise a plan and then not reference it. You must constantly be checking your progress and making sure you are on track to accomplish what you set out to do. Below is a sampling of what three CEOs previously featured on the cover of Smart Business Pittsburgh had to say about developing strategic plans.
“You have to look at where you want to go and what you’re trying to strive for your business to achieve. It comes down to being able to pick and choose where you want to spend your money and where you want to spend your resources and you really have to do your homework to make sure that you’re making the right decisions.”
Michael Fetsko, formerly of Bombardier Transportation. Currently VP and GM of frieght pneumatics at Wabtec Corp.
“Once a strategic plan is in place, it is to your advantage to continue to follow and update that plan. It requires an individual in the company to have responsibility for that plan and have responsibility for making certain that everybody’s working toward it. Finding the time to work on the longer-term strategy takes a lot of discipline.”
Jack Ouellette, president and CEO, American Textile Co.
“Make sure you have a very strong strategic plan. It’s got to have … your diligence plan, your integration plan and your plan going forward. You need to be able to know what you can do internally from an organic standpoint or what needs to be looked at outside of your current organizational set up.”
Stan Hasselbusch, president and CEO, L.B. Foster Co.
Dean Aloise has big shoes to fill in Pittsburgh and he knows it. Aloise, principal and Pittsburgh market leader of Buck Consultants, took over the position in January 2011 after his predecessor was promoted to managing director of the East region. Aloise is a young guy in his early 30s but is up to the challenge of leading the 70-staff employee benefits consulting firm.
“I’ve actually been fortunate in transitioning to this leadership role,” Aloise says. “My predecessor, Harry Rienhart, has moved up in the Buck organization. My transition has been eased by the fact that part of what I’m expected to do is continue that momentum that Harry created. That’s one of my main goals, and obviously, what I’m trying to do is build further on what he created.”
Smart Business spoke to Aloise about his appreciation for his new position and looking to make his own mark.
Examine the organization
You have to understand the current history and culture of the organization that you’re in and the successes that your firm has been built on. Really embracing that, recognizing it and respecting it is a huge part of understanding where you fit into all of that. Going forward, you will be accepted a lot more as a leader that understands where he might fit within the organization’s history.
You have to spend time with the people that you know got the organization to where it is. For example, say there’s an account that’s been around for 50 years and there’s an account executive that’s run that account for the last 25 years. That’s someone you need to get to know, that you need to understand and that you need to respect. Those are the types of people that you absolutely need to spend time with.
Get to know employees
To become familiar with the role, you need to be very involved. You have to really get to know all the people that you are working with. It’s the personal relationships, whether it’s with your client base or with your employees that are required in order to build trust.
Trust is where you need to get to really be firing on all cylinders. To get that trust in a leadership role you have to put in the time on a personal level to understand people and put yourself in their shoes, have them get to know you and establish a rapport with all of your employees and all of your clients. Unless you do that you’re never going to connect to the level that you need to connect.
It might seem simple, but … take the time to go to lunch one on one with employees. Spend a solid hour talking about them and learn to truly be interested in them and in their well-being. Similarly with clients … get together with them to learn about them and get to know them and have them get to know you so you can establish that trust.
You need to figure out who you are as a leader. I think to be successful, you can’t just show up in the position and exist without putting some specific thought into how you want your organization to work and how you want the culture of your organization to exist. Part of that might be reading leadership books and finding what parts of those books resonate with you and trying to establish your identity, who you truly are, but really getting to know who that is and then you have to deliberately work to try to live that out in your job every day.
Focus on leadership
Always be putting your team and the people around you first. Always be looking out for the best interest of the folks around you. It might seem counterintuitive, but you as a leader should be the last person on your own mind. If you’re taking care of your team and the folks that work around you and your clients, then things probably will work out the best for you in the end.
HOW TO REACH: Buck Consultants Pittsburgh, (412) 281-2506 or www.buckconsultants.com
Sam Liang is a leader who is always looking to the people around him to help make him better. What he expects from himself is what he expects from his company, Medrad Inc. The more than 2,000-employee medical device manufacturer prides itself on its ability to continuously improve upon every aspect of business.
Liang, who became president and CEO in June 2010, was brought in to keep the company pushing forward and to improve upon the success of the business.
“It’s interesting because sometimes CEO transitions, they’re because there’s a turnaround that has to occur,” Liang says. “In Medrad, it’s absolutely the opposite. It really is an opportunity to take Medrad to the next level. My predecessor, John Friel, to whom I owe a tremendous amount of credit, was CEO for over 12 years, and for 12 years, he built this business into a very successful business.”
The more than $500 million company is a market leader in all of the segments it participates in. Since Liang took over his role, he has been driving to further diversify the business through product innovation and improvement across the company’s metrics. Here’s how he reaches for the next level at Medrad Inc.
Never stop improving
Medrad has a culture of continuous improvement and has followed the Baldrige Performance Excellence Program since the late ’90s. The Malcolm Baldrige National Quality Award is the nation’s highest presidential honor for performance excellence and Medrad has won it twice.
“It was 2003 when we were recognized by Baldrige for the first award, primarily for growth,” Liang says. “The second time was 2010 and we were recognized for adaptability and agility through challenging times. The way that we achieved it is you have to invest resources. I would encourage you to find one or two leaders internal to the organization to become very familiar with Baldrige and go visit companies that have seen it. From that perspective, you can start your journey by driving a culture of continuous improvement throughout the organization.”
Continuous improvement cannot be achieved by having a team devoted to it. It must be something the whole company and everyone in it strive to achieve.
“It has to be part of what you do every day,” he says. “It’s not a whole separate group of 30 people that are there to say, ‘Do Baldrige.’ Everybody has to be trained on the methods and the approaches and the tools you can use and then you have to deploy them. Then you have to stick with it. It’s a way of doing business and a way of thinking of being efficient. Start as soon as you can and it will pay itself off.”
Since Medrad started Baldrige, the company has achieved a 14 percent compounded annual growth rate in the last 14 years. To make the principles of continuous improvement work for your company, you must be completely devoted to it.
“It pays off and people think of it as a separate activity,” Liang says. “The No. 1 advice is that it’s not separate. You’re training your employee base to approach things in a certain fashion using tools that are accepted. It’s all about analyzing where you’re at and finding benchmarks out there of who’s doing it best-in-class. You have to put together a plan and execute against it to hit that best-in-class metric and if you don’t, you reiterate until you hit it. The key thing is, once you do hit it, you find the next benchmark to do better. You go through this continuous cycle of improvement.”
Form performance metrics
To know whether your company is improving, you have to measure areas of your business and form metrics around which your company will operate.
“One of the unique aspects about Medrad is that we run the company on what’s called the balanced scorecard, which is based upon the Medrad philosophy,” Liang says. “In 1983, one of our prior CEOs, Tom Witmer, and a group of employees, came up with the reason why Medrad exists. No. 1 is to improve the quality of health care. No. 2 is to create a rewarding and enjoyable work environment for our employees. And No. 3 is to deliver continued growth and profit for our shareholders. If we do all three of those things well, especially if we do the first two … the third aspect of delivering improved profits and sales will just happen. That has manifested itself in how we actually measure and metric the company.”
Medrad has devised five metrics to help measure the success of the company. Three financial metrics and two satisfaction metrics are what the company focuses on.
“What we do is we constantly focus on running the business, making decisions across the impact of those three stakeholders: our shareholders, our customers and our employees,” he says. “You have to keep it simple. Some companies will come up with 40 different metrics and what’s interesting to me is when you’re a small company you say you have to be focused. When you’re a large company, the biggest mistake I think large companies can make is, ‘Hey, because we’re a big company, have more money, have more resources, we can do more things.’ You actually find in large company settings you even have to focus more, because think about the inertia it takes to get a whole organization of people to go in a certain direction.
“My advice is to keep it very simple. Internally you can adjust [metrics] year to year, but from a business perspective, I would keep it simple. Our metrics are aligned with our philosophy. A starting point for other companies is to take a look at the basic operating principles of which the company is founded upon or that people commonly understand. To that extent, you can align your scorecard or your metrics with something that people already get. If people already understand it you want to build off of that foundation as opposed to introducing all new fancy terminology. Just keep it as simple as possible, because the key to Baldrige is making sure everyone from top to bottom understands what you’re trying to do.”
One of the things Liang and Medrad want to improve is the diversification of the company’s products.
“What we are essentially driving to do is to continue to diversify our businesses along three dimensions,” he says. “We have three businesses: radiology, interventional and service. The first level of diversification is within radiology. We want to diversify our revenue stream within radiology, which is the largest of our three businesses. The second piece is to diversify our businesses outside of radiology, which are Medrad interventional and service components. The third is, we have greater than 50 percent of our sales are all in North America. So we are on an effort to globalize and diversify outside of the United States.”
Liang had to take a look at the company and evaluate it to see exactly how he wanted to approach diversifying those areas.
“Using principles of Baldrige, one of our processes that we embrace and take is the strategic planning process. Part of that is looking at your external environment, looking at where you are as a company in terms of how well you’re positioned within that external environment and then coming up with the operating plans to execute against that external environment. If you have a company that’s doing well, you really have to understand the dynamics as to why it’s doing well and build upon that foundation. Don’t change that piece of the formula. The second piece is to put together and stretch plans that are aspirational and visionary but also that are realistic. You have to have very clear lines of roles and responsibilities around how you’re executing.”
In order to diversify the areas of the company that Liang wanted to focus on, he had to put an emphasis on innovation.
“A big part of diversification is innovation and we’ve shifted more dollars to innovation,” he says. “Some companies believe they can sell their way out of situations, ‘Well, let’s just sell more.’ But think about the markets today. It really is about focusing on innovation.”
Look to innovate
When innovation is a focus of your company, you have to get ideas and advice from the people who use your products every day and get their feedback on what to improve.
“We sit in our board rooms and we try to answer specific questions around directions and what should we do, how should we do this and do that,” Liang says. “I’ve always found that the answer always lies with the customer. You have to get close to the customer and you try to understand and gain valuable insights from the customer that no other company can see. The decisions and the directions you take become very clear very quickly around what you should do. You take innovation that is driven by customer needs or customer insights, that’s what I would focus on whether you’re a company that’s doing well or a company that’s in need of a change in strategic direction.”
Customers are your most vital resource for innovating products and can contribute to your company’s quest for continuous improvement.
“We spend a lot of time with our customers both informally as well as in a formal manner,” he says. “You go in and watch everything that they do. Part of the value proposition of Medrad and part of this informatics drive is to streamline the efficiency of how radiologists and technicians do their job throughout a day. Even simple changes in our algorithm of how you fill the syringe can save five or 10 minutes in a certain procedure in terms of set up time and what that translates to is the difference between a hospital being able, in one specific radiology suite, to see 30 patients a day versus 40 patients a day. The only way you get at that is by going in and watching everything that they do.”
Similar to how UPS adjusted its policy on right-turn-only routes to save gas, avoid accidents and decrease delivery time, Medrad uses customers to innovate and improve its products.
“We’ve done the same thing in all of our specific technologies,” Liang says. “In our Medrad Interventional portfolio, we are market leaders in the area of mechanical thrombectomy, which is sucking out blood clots throughout various parts of your body. In working with customers and understanding what their needs are, we’ve introduced a new console that the catheter hooks up to. We have reduced the steps [it takes to set up]. In an emergency, all the doctor has to do is put in a cartridge, push a button and then prime and he’s ready to go. I’m over simplifying it, but before, he had to put in a bunch of cartridges, connect a lot of tubing and then purge and get ready to go. If you’re having a heart attack or if your leg is green, you can’t afford to do all of that. All of the answers lie with the customer.”
While getting customer feedback for innovative ideas sounds simple, it still takes time and resources to develop an innovative culture that helps define your company.
“A lot of people talk about innovation, but the reality is as you look at the amount of money they would dedicate to research and development and innovation, the dollars aren’t necessarily there,” he says. “You have to put resources to it. We have a corporate innovations group, which is the group that looks out at your portfolio and takes the competencies and the technologies that the company has and they are looking out beyond three or five years. They are looking at where our technology can be applied or in the markets we are in right now; what are the longer-term unmet needs. We put money to that for these folks to … dream. We know that a certain percentage of them may not come to fruition, but you have to allow that forward-thinking innovation.”
HOW TO REACH: Medrad Inc., (724) 940-6800 or visit www.medrad.com
The Liang File
Born: Atlanta, Ga.
Education: Bachelor of science degree, mechanical engineering and material science, Duke University; Master’s degree in management, Kellogg Graduate School of Management, Northwestern University
What was your first job and what did you take away from that experience?
My first real job was working in a hospital outside Washington D.C. in a pathology lab. I did everything. I filed pathology reports and logged in specimens coming off the OR. That was where I got my interest in health care and when I knew I wanted to do something health-care related.
What was one of the toughest parts about coming into Medrad as a new president and CEO?
One of the toughest parts personally is that it was a very, very successful company and the former CEO, John Friel, had been here for 12 years. Those were big shoes to fill. For me, it was about trying to learn and connect with the business and connect with the people.
What is your advice to incoming CEOs?
I started in June 2010, but by the three-month mark I did a full 360 and got feedback from anybody I had extended interaction with. It’s a two-way street. I also worked in the field and that’s one thing I think you have to continue to do. You can never do enough of that. You have to keep doing work in the field with the customers because that’s where a lot of the answers are. Spend as much time as you can with customers. Formulate your own impressions.
If you could invite three people to dinner, who would you invite?
I would invite Abraham Linclon. If you look at the issues he had to face and the decisions he had to make as a leader, boy, he had to make them all. You could walk away with so many valuable learnings.
I would want to talk about the topic of innovation, so I would invite Thomas Edison. He was such a leader in that respect.
The third person I would invite is Thomas Jefferson. Anybody that had a say in the founding of this country or writing of the Declaration of Independence is an amazing person. The whole thought process around democracy and the ability for other people to make decisions for what’s right for them takes an amazing amount of forethought.
When Rick Pleczko thinks about the office space his company used to be in, he thinks about a college campus. He remembers open houses with barbeques on the front lawn, free beer, a DJ playing music and all his employees enjoying themselves.
Pleczko, co-founder, president and CEO of BBS Technologies, used to throw these parties as a way to thank current employees for hard work and to attract new employees looking to join the $30 million provider of systems management software.
“We have this interesting environment where, since we founded the company, we have been in three turn-of-the-century mansions in this bohemian neighborhood,” Pleczko says. “Everybody loves it here. It’s almost like a college campus-style environment.”
Over the past few years, the company has grown to new heights and in the process, outgrown its current headquarters. The challenge facing Pleczko and his team was to find a new place to conduct business that would keep that college-campus feel.
“Our big challenge was, ‘Gee, one of the unique things about our company and our culture that attracts folks is this campus-like environment,’” he says. “It wasn’t practical for us to add more houses in this space. It just couldn’t be done in the neighborhood. We knew we would have to move to a tower. Our problem was, how do you recreate that culture in a tower?”
Recreating the company culture was a big undertaking. It took collaboration from his 200 employees to find the right place.
“We talked to our employees,” Pleczko says. “Everybody wanted to be in the same neighborhood or close to it. So we were looking for something within a couple-mile radius of where we were. Then it was going to the staff and saying, ‘What features do you want in this new environment? We can’t replicate what we have entirely, but what do you want to do?’”
Pleczko set up a committee of a few employees to get feedback on the type of things they wanted.
“You have to figure out what the key criteria are to maintain and expand your existing culture and get those criteria from the folks that work for you,” he says. “Focus on the staff and get the information and the feedback from the staff. Then you need to engage a good, talented Realtor.”
Pleczko was fortunate. He found a space 1.5 miles away with 70,000 square feet across three floors of a tower with a spiral staircase connecting all floors.
“We have this environment with a spiral staircase and we’re building it out with almost a Google-like campus environment,” he says. “We set up recreation rooms with Xbox connects, foosball tables and table tennis. Software engineers tend to work long and odd hours, so they like that sort of environment. So we built a couple of playrooms on different floors where people can get together and socialize just like they would walking down to the local Starbucks. We were able to replicate to a high degree our culture inside of a tower.”
Not only did BBS recapture its culture in a new building, but the company took a big step forward in its growth by moving to a new headquarters.
“The environment that we had was perfect for when we were in the startup stage to about where we are now,” Pleczko says. “But we are now doing business with some very significant and very large corporate entities. When they came to visit us in those funky houses, they thought it was cute and it was like visiting an ad agency in a brownstone in Manhattan or something. We always looked like we were a fun startup.
“Now moving to this new environment, it gives the impression of we’re a $100 million company. It gives us significant credibility with the environment, the space, the décor, etc. But it still enables us to maintain that culture of innovative startup.”
HOW TO REACH: BBS Technologies, (713) 862-5250 or www.bbstech.com
Not only will BBS Technologies’ new headquarters building allow the company to continue to grow and keep its unique culture, it provides change within the organization.
“Change is good,” says Pleczko, co-founder, president and CEO. “It seems to refresh everybody’s morale and attitude and I think it acts as an inflection point for growth. I’ve been able to say, ‘We’re moving into a space that a $100 million company lives in and we’re going to be that $100 million company.’ It enables you to get some pretty good motivating messages out to your staff.”
A move like this takes time and a strategic plan. Pleczko had to understand his company’s growth pattern and plan accordingly.
“This is of great strategic importance, because if we didn’t move, our growth would be constrained,” he says. “We are planning to grow aggressively this year and that growth would not be enabled without this new building.”
Failing to realize that your company is outgrowing its current space can negatively impact the productivity of your employees.
“[Employees] become inefficient,” he says. “You have too many people in not enough square feet and they are bumping in to each other. Things like conference rooms end up being turned into offices. Folks become unproductive simply because of the noise and activity level all around them. If you don’t [expand], you will tend to see productivity go down.”
David Petratis has a long background and a strong history in building products. As the former chairman and CEO at Square D Co. and CEO of Schneider North America, he is no stranger to the demands and fluctuations of the construction industry. That experience has proven extremely valuable since Petratis took over as CEO of Quanex Building Products Corp. in 2008, right in the middle of one of the worst economies for any industry.
“I think the performance of Quanex in the worst building environment maybe ever says that we’ve got a lot going here,” says Petratis who now serves as chairman, president and CEO. “And today, even with construction flat on its back, we’re on a margin basis, more profitable than we’ve ever been, are growing and are debt free.”
The strong position Quanex now finds itself in didn’t happen overnight or by accident. Petratis and the 2,300 employees at the manufacturer of windows and doors have worked tirelessly to keep the company pushing forward during a period where if you rest, you don’t wake up. Here’s how Petratis rebounded Quanex from $585 million in 2009 revenue to $798 million in 2010.
Evaluate your business
As a new CEO to Quanex, it was vital that Petratis got a full understanding of the business and how it was operating.
“What we did from the day I hit the door through 2009, we revisited our strategic perspective and our strategic plan three times,” Petratis says. “In six months, we made some observations and then we did it again. In an 18-month period, we took three hard looks at our strategic plan, our markets, and we came to some pretty strong conclusions that has driven growth at Quanex Building Products in a market environment that remains the weakest in my lifetime.”
While the economy made it tough for companies operating in any market, the construction industry was hit particularly hard. Petratis wasn’t sitting still expecting the poor conditions to evaporate quickly.
“First of all, you had an unprecedented decline, especially in businesses related to construction, but you also had a big commodity slide,” he says. “I think, No. 1, when you’re in an economic slide, don’t assume that there’s light at the end of the tunnel. You need to take aggressive steps that ensure the continuity of the business. You cannot make assumptions that the market’s going to come back and life’s going to be good again. The companies that have made those mistakes are still struggling today. You have to create your own opportunities within the business portfolios that you have.”
Creating opportunities in a weak market and an economy as poor as it has been is not an easy task. You have to be aggressive and make sure you’re evaluating your entire business.
“We took aggressive steps to free up cash on our balance sheet,” Petratis says. “We challenged the inventory on our balance sheets and in our factories and took them to historic lows and kept them there. That has generated cash, No. 1, to survive, but No. 2, to go redeploy in things that are growing. We have right-sized ourselves to the new business reality. We had a scale and infrastructure that was built to produce 2.2 million homes; today, we struggle to get above 600,000. Some major restructuring had to occur. We eliminated nonvalue-added activities. We made investments in the skills of our people. You have to give people hope that we’re going to make it through this, but also give them new skills to be able to compete. We have invested more … in the business than we made during the up cycle.”
Evaluating your business and restructuring areas that need it is a critical element at any point of a cycle.
“We looked at our portfolio in a BCG Matrix,” he says. (Editor’s note: A Boston Consulting Group Matrix looks primarily at market share and market growth). “Where did we make money? Where did we lose money? Where are our opportunities for future growth? What are the businesses that we’ve got to get out of? What are our stars, cash cows, dogs and dilemmas? You look at your business and try to emphasize and invest in those businesses that have opportunity or are generating large amounts of cash and you get out of the ones that don’t.
“The other thing that we did was went through a review of our customer profitability and looked for opportunities for price realization. You’ve got profitable customers and unprofitable customers. You’ve got to think about that in terms of just standalone profitability and then you’ve got to think about it in terms of cost to serve. There are customers that are more expensive, take more customer touch and that’s got to go into the analysis. Have a dialogue with your business leaders and your salespeople and ask, ‘What’s our cost to serve?’ A customer that has a low margin and has a high maintenance cost are the first ones that you take action on. It’s critical with a triple underline to know where you make money within your product portfolio.”
Whether the economy is forcing hardships on your company or you’re simply having a tough year, communication within your business is the most important thing a CEO has to do.
“We stepped up our communications aggressively, especially versus my predecessor who operated in a better economic time,” he says. “We cut a quarterly video. There’s a camera crew that comes in and we cut a 20-minute message every quarter. Employees get a letter from me every three-day holiday and I do site visits. You also have to put on your customer ears and get out and visit customers. We’ve done surveys to understand our ability to deliver and our understanding of the voice of the customer.”
Petratis also stressed the importance of safety among his employees and communicated how safety could help improve the business as a whole.
“As a new guy coming in, I have pushed the hell out of safety awareness,” he says. “To me, this is Maslow’s Hierarchy of Needs. If I can get our employees to believe that I care about their safety and health, I am awarded by our employees the opportunity for them to self-actualize into things like customer satisfaction and continuous improvement of our business. In a down environment, if you fail to communicate, if you fail to invest along that hierarchy of needs, I think you’ll lose your work force. We’ve certainly done the things that we’ve needed to do in terms of our cost structure, but we’ve provided extra attention to the people that are still with us.”
If leaders don’t take the initiative to get out in front of their staff and tell them the good and the bad, the company will lose direction and purpose.
“I would say to those CEOs who are not aggressively communicating where they want to go and what are the tough issues that face the business, they probably own the business or should be looking over their shoulder for the next guy who’s going to come in and replace them,” Petratis says. “Think about any human dimension. When things are uncertain because of economic crisis, family crisis, people want to know, ‘Where am I going? Help me understand the risk and uncertainties.’ People understand that times will be tough. You can’t run from them. You have to communicate and you have to do that in a variety of manners. You’ve got to do it in person, you’ve got to do it in writing, you’ve got to do it through media communications and then you’ve got to go back and do it all over again.”
Throughout Petratis’ business career, he’s been in front of the people that he’s led every quarter since 1986.
“That level of communication has rewarded me and the people I’ve worked with with excellent performance and you’ve got to double down when it’s tough,” he says. “You communicate in the good times and it’s like putting money in your checking account. You’re building in the confidence of your work force so when times are bad, you’re believable. They know who you are, you’ve made an investment and now you can make a withdrawal when you’ve got to do something tough.”
Adapt to changes
During a down economy you have to be looking for ways your company can change and adapt to keep pushing forward.
“I think anytime you’re going through a change effort you have to establish proof of the need,” Petratis says. “This is why we need to do this. This is why it will be good for customers, shareholders and employees. Once you’ve satisfied that criteria, there will be resistance. You’ve got to check for that resistance. There are people that can’t make change. For those people that can’t buy in to where you think you want to go and you give them the chance to air their opinions, they need to move into new positions or on to new companies. I think it’s one of the tougher things for managers and leaders to make that call.
“You’ve got to make sure you’ve got the talent around you to take you where you want to go and they’ve got to believe in it. If you don’t have the talent, if you’ve got people in the wrong position, you’re not going to be able to get people where you want to go. You’ve got to have the courage to help them get to where they can contribute the best.”
Through a project Quanex coined ‘Project Nexus,’ the company reshaped its sales force and is serving a broader customer base with its total portfolio.
“We had resistance when we started Project Nexus,” he says. “First of all, we socialized where we wanted to go. I believed when we first launched Project Nexus in January 2010 that we would have resistance, but I didn’t make organizational changes. I didn’t just blow up the organization day one. I let the idea percolate. I got people around it, and we sold it. Then I changed the organization. It was six or seven months after we began to share the data, share the opportunity, help our organization understand that if we didn’t go out and create prosperity, prosperity wasn’t going to come knocking at our door. We still had resistance and we continue to fight that.”
Change is an ongoing process and in the same way that people change, companies change. It’s critical that you communicate that fact.
“You’ve got to continue to communicate that goal, why it’s important we make that change,” Petratis says. “It goes back to your communications and it goes back to your vision and you’ve got to reinforce those things. Nobody likes change. I would just assume to have things the way they were in 2005 when we were building 2.2 million home starts. I wish it never would have changed from that, but it did. You’ve got to change with it, or you die.”
Change seems daunting to most companies, but oftentimes, change brings out the best in employees, leaders and the company.
“Another element to this is that you’ve got to help educate people in the change process,” Petratis says. “Give them new tools and skills. As you change things you create problems and a work force that has a solid toolbox of problem-solving tools manages through those changes more effectively. I don’t give them 20/20 vision; I give them direction. They’ve got to apply the problem-solving tools and get us to where we need to be as a company and as an organization.”
When companies undergo change, it can be very stressful to all involved. Make sure that you celebrate any successes change brings.
“The other thing you have to do in the change process is punch up your wins,” he says. “We created a lot of change with Project Nexus. In our fiscal 2010, our engineered products business grew by 12 percent and our aluminum business grew by 25 percent in a market that was negative. We could have hunkered down and not changed anything and we would have had more pain because the market wasn’t going to give it to us. You’ve got to punch up your wins and help people see there are benefits to taking on new challenges.”
HOW TO REACH: Quanex Building Products Corp., (713) 961-4600 or www.quanex.com
The Petratis File
Born: Council Bluffs, Iowa
Education: University of Northern Iowa, production management; MBA, Pepperdine University
What was your first job and what did you learn from that experience?
I’ve had a lot of jobs. My first job was mowing grass, shoveling snow and detasseling corn. I’ve pumped gas. I’ve worked in an ice cream factory where I bagged ice. My big break that changed my life was getting a job in an electrical supply house when I was 18. I learned how to work. I learned how to be accountable and responsible. I learned how to listen to customers both internal and external.
What’s the best business advice that you’ve ever received?
Take care of your employees and your customers and everything else will take care of itself.
Who is someone that you admire most in business?
I have a mentor named Charlie Denny he was the chairman and CEO of Square D Co. He played a big influence in my life. Jerre Stead is the chairman and CEO of IHS. Those guys are different types of leaders, but I benefited from my exposure to both of them.
What traits do you think a good leader needs?
I think you have to have honesty, respect, courage, tenacity and resiliency. You also have to be a servant leader.
If you weren’t a CEO, what would be your dream job?
I would be a cattle rancher and farmer. I’ve already got the farm part. I like being around equipment and being around animals and working on the land. I’ll have it someday.
Hospitals nationwide are being pressured and, in some cases, forced to adapt to changing demands in the health care industry. Rising expectations in the quality of delivering care, the cost structure of health care and a looming shortage of personnel are just a few issues hospitals are looking for solutions to. Dr. Cary Gutbezahl, president and CEO of Compass Clinical Consulting, specializes in hospital consultation. His firm helps hospitals solve these issues by improving efficiencies.
Smart Business spoke to Dr. Gutbezahl about how hospitals are streamlining their operations to combat health care issues.
What are the most pressing issues facing hospitals today?
Hospitals are facing a couple of important challenges. One is rising expectations for the processes and results of delivering care. That means things related to improving patient safety, reducing the occurrences of undesirable events and reducing hospital readmissions.
The other pressure is the cost structure of health care. The way it has been funded has generated some pretty significant overhead costs and investment in technology that have made health care costs rise to the point where they are pretty much unsustainable both for private-sector insurance as well as for public insurance.
The third challenge which is looming on the horizon is shortage of personnel. In the future, with rising demand for health care services and the aging of the existing population, there is going to be a severe imbalance between supply and demand.
How are hospitals looking to solve some of these issues?
The challenges give hospitals a number of opportunities to make some changes both in their traditional scope of operation as well as expanding their scope of operation.
One of the areas that hospitals have had incentives to work on, but many hospitals haven’t addressed is the issue of how to manage hospital care expeditiously in order to minimize the amount of time and expenses that are provided for a patient.
A number of hospitals have patients stay a number of hours in the emergency department. They are sitting in the emergency department waiting for an inpatient bed, but in the meantime, they are not getting the physician consultation and diagnostic tests that you would normally get as an inpatient. One way that hospitals can accelerate care is to make sure patients either get to a bed quickly, or that the care process begins while the patient is in the emergency department so there aren’t hours waiting for things to happen.
They also have to recognize when a patient’s care can be safely transitioned to an outpatient setting. Some hospitals are identifying and working with the physicians and nurses to say this patient can get the rest of their care as an outpatient with home health care or with outpatient rehabilitation therapies.
What is the main focus of hospitals right now?
Right now there are two things that hospitals should be focusing on and they are related. One is called throughput. That is increasing the capacity of the existing facilities, meaning both space and people, by redesigning the way patients flow through the health care delivery system so that they move more quickly.
That means people sitting in the emergency room for less time so that the existing beds in the emergency room can accommodate more patients. It means moving patients through the inpatient side quicker so the hospital doesn’t need to build additional beds in order to house people for inpatient care. If hospitals have to build more beds, then the costs are going to rise. The only way to try and keep the cost of health care down is going to be to work on these through put issues throughout the hospitals. The ORs, the inpatient beds, critical care units, emergency department, all areas of the hospital where there are backups in terms of patient flow.
The second thing is looking at how we redesign the delivering of health care services so it becomes more efficient. One technique that’s being used on the outpatient side in a number of large multispecialty medical groups is the idea of group appointments. You have a number of patients who have similar kinds of clinical problems. Instead of meeting with each of them one by one … a number of these organizations are scheduling group meetings for patients who have [the same diseases].
HOW TO REACH: Compass Clinical Consulting, (513) 241-0142 or www.compass-clinical.com
Stuart Aitken admits that he has an eclectic background in business. He has tried his hand at making a fortune in Silicon Valley, he’s been a vice president of marketing for the grocery chain Safeway, and he was chief marketing officer for the arts and crafts store Michaels. His background is what brought him to dunnhumbyUSA, a consumer data analytics company.
In 2009, Aitken was hired by dunnhumbyUSA as COO and was promoted to CEO of the $245 million company a year later. His experience with consumer data made him the logical choice to lead the company after former CEO Simon Hay was promoted to lead the London operations.
“If you look at my background, there is a lot of IT and a lot of loyalty marketing in my background largely with the work I did at Safeway for 10 years and the work I did at Michaels,” Aitken says. “For me, this was the perfect fit of bringing my technology background with my marketing background to a company that fundamentally believes in the data and the customer, and for me, I had admired dunnhumby for many years. In fact, I recall trying to emulate some of what they were doing. This was a fantastic opportunity to join a company I feel is on the forefront of customer understanding and customer behavior.”
Aitken has helped to further dunnhumbyUSA’s focus on customer loyalty and retention all while growing operations to better serve its clients. Here’s how he helps dunnhumbyUSA and clients like Coca-Cola, Procter & Gamble, Kroger Co. and Macy’s succeed through a focus on the loyal consumer.
Focus on customer retention
Everyone in business knows that gaining loyal customers and having a high customer retention rate is extremely valuable. However, not many companies aim to please loyal customers.
“We have a fundamental belief that companies, regardless of who you are from a company perspective, and it can be any organization, has a monomaniacal focus on the customer and understanding the customer and not just any customer, but loyal customers,” Aitken says. “We fundamentally believe that you have to focus on loyal shoppers to be successful. It sounds like a principle that most companies would adopt and adhere to. But what we’ve found is that very, very few do. You talk to companies and the vast majority of companies talk about bringing in new customers, new clients, etc. versus saying, ‘Who are my loyal customers, what’s my headroom with those customers and how do I reward those customers for being loyal to me, my retail organization and my brand?’ Whether you’re a (consumer packaged goods company) or a retailer, very few companies think about customers in that way. It’s a different philosophy and that’s what makes it successful.”
Not only does dunnhumbyUSA advise its clients to focus on loyal customers, but it also adheres to those same principles.
“Our business model is very different, too,” he says. “We are exclusive with the retailers we work with. Because we work with Kroger, we will not work with other grocers in the U.S. Because we work with Macy’s, we will not work with other department stores in the U.S. We are exclusive and therefore it means we’re trusted. We’re not like any of the other big consulting firms who can help with strategy with competing retailers. For us, we just do not go there.”
Aitken realizes that by focusing more on existing and loyal customers, companies are limiting the number of clients, but there’s a reason this method works.
“What’s interesting to me is that there are many, many white papers out there and educational institutions produce it all the time, that it costs X times more to bring in a new customer than it does to retain an existing customer,” he says. “It’s likely something like six or 10 times more. But very few companies do that and focus on that and I liken it to a bucket of customers. Most companies are focusing on trying to find another faucet to fill that bucket of customers and very, very few are focused on plugging the hole that is in the bucket.
“You would need to win 12 new customers on average, we’ve found, to replace one loyal shopper. What we’ve also found is that with loyal shoppers the headroom with them, even with your most loyal shopper, you’ll likely have a 50 percent share of wallet, which gives you enormous headroom with those customers.”
Weigh your options
Without full understanding of your customers, companies miss out on vital ways to reach core customers that can provide more revenue than new customers.
“The other thing with us is we believe in behavioral data,” Aitken says. “Attitudinal data is very helpful and insightful, but what people say and what people do are two very different things. Understanding behavior through data is what we do so well. Where the rubber really hits the road is taking that data, taking those insights and giving them to the decision-makers and disseminating all of that knowledge and insight to the decision-makers across the business such that we put the customer at the heart of all business decisions. So when people are making even the smallest decision, they’re doing it with the customer in mind and with the loyal customer at the heart of those decisions.”
Even with data to back up the logic of focusing on loyal customers, some companies continue to reach for new consumers. The leaders of those companies need to examine the pros and cons of their customer base.
“I would ask those individuals to create a list of all those activities you’re doing to bring in new customers and create a list of all those activities you’re doing to retain existing customers and your loyal customers,” Aitken says. “Compare those lists and those costs and the return that you’re getting on those two lists. At the bottom of those two lists write down the percent of revenue and profit you are getting from those two customers or segments. Then ask yourself is that where I should be investing my time, my energy, based off of what that ratio looks like. Nine times out of 10, you’ll find the ratio is swayed enormously toward bringing in new customers.”
When companies put an emphasis on going after new customers, they are rewarding behavior that a company wouldn’t want from its own customers; they are advocating that customers leave and join a better company.
“Just think about any cable company or satellite company and the ads on TV saying, ‘Join now for the next 12 months and here’s an incredible deal for you,’” he says. “Then you’ve got somebody sitting watching that same ad who’s likely been loyal to that brand for six years or eight years, never moved and they’re basically being slapped in the face and would be better off moving to a different provider than staying with the existing provider. That’s a great example of not rewarding the behavior you seek but rewarding a behavior that is detrimental to your loyal customers.”
Aitken has continued dunnhumbyUSA’s practice-what-we-preach approach. The strategy has worked for the business and for clients of the firm.
“We’re telling our clients to reward the behavior you seek and make sure you go after your loyal customers,” he says. “In the same way, we need to do the same. We’re putting great talent on existing clients versus putting them on recruiting additional clients. Let’s put our great talent where it matters. Let’s make an impact on those businesses and the growth will come from that. That has been a big key.”
Change your thinking
When things are going well in business, companies tend to keep doing more of the same. However, it’s the companies that challenge the status quo that find ways to continue growing and overcome adversity.
“I feel we challenge the status quo and some of the myths in business,” Aitken says. “Whenever we hear, ‘That’s how we’ve always done it.’ That is a key red flag to say, ‘Well, is that the right way to do it? Is that good for customers?’ It’s always easier to do it the same way. If you want to fundamentally change the trajectory of your organization, if you want to truly start focusing on the customer and you know in your heart that you haven’t in the past, then you have to challenge all norms and beliefs. I think it was Darwin who said it’s only those who change and evolve who will survive. If you stick with your norms, are you changing and will you survive?”
Numbers don’t lie, and if you find that a change in your business operations will help your company survive, you have to commit to that change.
“In a downturn economy, that’s when companies realize they need to do something different,” he says. “They need a different strategy and a different perspective on things. When things are going incredibly well very few companies go, ‘Well maybe I need to change strategy or think about the future.’ So in a downturn that’s when you see companies going, ‘OK now I need to change and what does that change look like.’ Don’t get me wrong. We’ve had a couple of clients who were flying high and said, ‘Listen, we want to continue to fly high and in order to do so we need to look beyond the next two years and where our growth is going to come from in the future.’ Those are tremendously forward-looking individuals and organizations.”
Whether your company needs to consider a change or not, it is important that the change you implement doesn’t stray too far from what made the company successful.
“You can never forget what made you successful in the first place,” he says. “Make sure as you grow that your principles and your values never change. It’s always good to go back and double check that when you look at your strategies and your growth plans for the future that they very much have your core principles that made you successful in the first place still in place and the values that you look for from employees still in place.”
Oftentimes the hardest thing for leaders to grasp is that doing right by customers will ultimately prove successful for the business. You have to understand that what’s right for the business isn’t always good for customers.
“Results help drive customer satisfaction enormously,” Aitken says. “What’s interesting is when you challenge, when you push back, typically your satisfaction scores go down because you’re not doing exactly what the client wants but you’re doing what you believe is right for customers. Those two things don’t always align and you have to be courageous when you see those results. Are you doing the right thing for the client or are you doing the right thing for the customers? If you’re doing the right thing for the customers then the results will come and the satisfaction scores will turn.”
HOW TO REACH: dunnhumbyUSA, (513) 632-1020 or www.dunnhumby.com/us/
The Aitken File
Born: South Africa. He considers himself Scottish because he grew up in Scotland after moving there when he was 10.
Education: BA in information management, Queen Margaret College, Edinburgh; Masters, University of Strathclyde in Glasgow
What was your first job, and what did you take away from that experience?
I bent metal for gutters on industrial buildings. Because it was such a manual-labor-type job, I look back at how hard those guys work and what they put their bodies through for little pay and that drove me to make sure I got a further education to get the best job I could.
I was also paid to play rugby. I was a young man playing rugby and from a leadership standpoint that taught me about teamwork and that no person can do a job by themselves.
My position was flanker/wing forward. I played from when I was 6 until I was 34. In the process, I had a disc removed from my back, I broke my neck, I’ve broken multiple fingers and it is something that will be with me forever. I truly love the game. I was the youngest rugby captain of my team in Scotland. At age 19, they voted me as captain, so I was telling 20-, 30- and 40-year-old men what to do. I love the sport and love the camaraderie. It’s a very unique sport that relies on teamwork and team spirit and trust and all those things I love as part of business.
What’s something you miss from Scotland that you wish you had in Cincinnati?
Aside from friends and family, my answer would be haggis and fish and chips. However, Cincinnati has tremendous curry houses.