Embrace change. You need to listen and be open to change. If not, you’ll stop growing, and you’ll have problems because the economy, market and technology changes every day. Be open to adjustment in your processes and your guidelines.
Years ago, I was invited to a seminar. The theme was ‘Open to Change.’ This person talked about the Swiss watchmakers. They had dominated all the watch industries in the world. At one of their conventions they have every year, they had an engineer come and talk to them about the Pulsar system.
They thought he was crazy. ‘Why are we going to change? We dominate the market. We don’t need to change.’ The Japanese got hold of this engineer, and that’s how the Pulsar watch business went to Japan, and that’s how (the Swiss) lost their leadership in the watch industry. They ignored a potential idea for change or improvement.
Take smart chances. Sometimes there are good temptations and there are good business opportunities that get away from what you do, and you fall in that trap, but it’s a learning experience. You say, ‘I shouldn’t have done that,’ but you learn that over the years.
But if you’re too rigid, then that limits your growth. Some of the biggest investors, some of the most successful entrepreneurs,they have taken chances, and they have been very successful, but it all depends on how you do it.
You have to be smart, but also, you have to be lucky.
Use criteria to make decisions. The first thing you learn is the theory the knowledge and that’s what you learn when you go to school. The second that you learn is the practice and practical knowledge. The third thing that is very hard to apply is criteria. That’s what helps you make decisions.
Some people don’t get to that point. They never develop the criteria. They have the knowledge, but they don’t have the practice, or they have the practice, but they don’t have the theory part. Criteria is a combination of both, but not everybody gets to the point where they have the proper criteria to make decisions.
Be careful that you’re not putting people in the wrong position where they can’t make the proper decisions they can’t do their best. We all have our limitations, and we need to know where to put ourselves where everybody gives their best.
Hire open people. Make sure they have a positive attitude and they’re open to learning they don’t have that attitude that they know everything. There’s no such thing as knowing everything. Even with the years I have of experience with this business, I know you learn something every day. People who act like they know everything, they are not the kind of people you want around your company.
Foster communication. Be involved with your operation. We need to be able to talk to our people so they don’t feel there are barriers to come talk to us if they have a problem, issue or an idea on how to improve. Don’t make them feel like there is a separation or distance between you and them or between the managers and the people.
Make them feel that they are important to your process and your system that they are being taken into consideration and not just being criticized or blackmailed because they come talk to you. I don’t want them to be reprimanded if they bring up issues.
Be very honest and always do what you say you’re going to do. Be open with your people. Always tell them the truth, good or bad, so they also tell you the truth, good or bad.
Empower employees. Give people responsibility, and you have to give them a good list of their responsibilities so they know what they need to do. Give them the authority to make decisions, but you have to be careful in knowing and realizing how much power to give them.
There are some people that need time to be able to get to that point. You have to sense people, and that’s why it’s important that you talk to them.
Have a good reporting system. You have to have meetings with people and know and ask how people are doing because as you grow, you can’t talk to everybody, but you can talk to your division managers. They are the ones that are going to tell you how people are doing, and you need to ask.
Remember, it’s important that they feel they are important to the system. That makes them do better when they feel they’re work is being recognized.
Understand how personal issues affect professional work. Ask [employees] about their families. Sometimes they have family problems, and that affects their production and the way they do business.
If they’re under a lot of pressure at home for whatever reason, don’t make them have to make an important decision because they’re probably going to make a mistake. That’s when you have to help them.
Coach people. Recognize when they do something good. When they make mistakes, instead of pointing fingers and trying to blame people, help solve the issues and work as a team to resolve the issues. They all have my mobile phone [number], and if there’s an issue, they can call me anytime, day or night, and I’ll help them, but we also need to sit down afterward and see why we had this issue and how we can avoid having the same problem.
That’s how they will learn to respect you and work more as a team. We all have problems, but it’s how you resolve problems that makes you different. When you use a positive attitude toward obstacles and problems, that helps resolve the issues more smoothly.
HOW TO REACH: Azteca-Omega Group, (214) 905-0612 or www.azteca-omega.com
James J. “Jim” O’Brien has led many changes at Ashland Inc. As chairman and CEO of the $7.2 billion diversified, global chemical company that serves customers in more than 100 countries, he has learned how crucial it is to get buy-in from both his management team and employees.
“You have to create awareness around what it is you’re trying to do,” O’Brien says. “It’s not just describing the strategy or talking about the size of the company you want to become or even, in some detail, some of the tactics you want to take. It’s more around, ‘What is it that the people have to do?’ That awareness piece is difficult to get people to truly understand and seek to understand and ask questions and get into.”
He says you first have to create awareness and unity among your management team.
“If they’re not aligned, that’s what the organization looks for is those gaps,” O’Brien says. “If they see me saying one thing and maybe the CFO says something contrary to what I say, they say, ‘Ah-ha! These guys aren’t on the same page, so we don’t have to be on the same page either.’ So they take that as an excuse not to engage.”
If you want to get an alignment, you first need a team of senior leaders who also know how to follow.
“A lot of people have discussion around leadership, but it’s just as important to have good followership,” O’Brien says. “If people can’t follow well as a senior team member, they’re not useful to the team. If you have a team of seven or eight senior leaders, if they’re all leading and not following, then you’ve got chaos because they may not all lead in the same direction. You need to have good strong leaders, but they have to have the ability to follow, as well. That even goes for the chairman and CEO.”
When you have people who can lead and follow, it helps create a group who will collectively discuss changes and come to a consensus. When they reach that consensus, it’s important to dig deeper into the details about that decision. O’Brien says with today’s PowerPoint age, people tend to gloss over the fine details.
“That’s where teams break apart and you get divergence,” he says. “If you understand how things can go wrong and what you would do about it when it goes wrong and already have a point of view around it and acknowledge that that risk is there, then Murphy’s Law will tell you that it will go wrong. When the team has to face that, then you don’t have a situation where people go off the reservation on you.”
Once the management team is on the same page and aligned and knows how to handle the problems that may arise, it’s important to communicate it to employees and get their buy-in. He says to just choose one to three key things to focus on and don’t try to do anything else. This keeps everyone focused and helps people understand what the priorities are.
“In the past when we’ve tried to do initiatives, especially large initiatives, it’s hard to create the desire inside the company to take on big things because the information is a program de jour, and they’re going to wait it out,” O’Brien says. “The bulk of the corporation will sit on the sidelines to see if it gains any traction or momentum, and then they’ll kick in. After five or six months, management usually loses their enthusiasm or desire, and it goes away.”
O’Brien says you have to maintain enthusiasm about it, so people know you’re serious and that it really is important. He also says you have to lead major changes yourself and can’t delegate them to someone else.
“You better believe it yourself, and I think that’s where most things fall apart,” he says. “They’ll read something in a magazine or go to a seminar and say, ‘That sounds neat. Let’s try it,’ and they delegate it to someone in that organization. That will never work. If you’re going to do big change, it has to be led by the CEO every hour, every minute of every day, and you can’t waiver because the organization is looking for that moment of opportunity to say, ‘Let’s not do this that’s hard.’ There are thousands of people trying to convince you not to do it, so if you don’t believe it in your total heart and soul, don’t even try.”
HOW TO REACH: Ashland Inc., www.ashland.com or (859) 815-3333
An employee in San Francisco needs to meet with a co-worker in Israel, but instead of hopping on a plane and spending a day flying halfway around the world, she grabs an empty conference room, signs out video-conferencing pieces and calls her colleague. He answers using the same technology, and the two converse, face to face, to discuss the issues they needed to work out for a major project.
This happens every day at Polycom Inc., a video and audio collaboration solutions company, and Bob Hagerty, chairman, president and CEO, relies on these technologies just as much as his customers do, so he constantly pushes his organization to be the best in the market.
This push for excellence has fueled the company’s growth in the last decade. Since he joined the business in 1997, Hagerty has grown Polycom through a combination of organic growth and acquisitions from about $50.4 million in revenue to $682.4 million in revenue last year. Whether growing organically or through acquisitions, Hagerty believes wholeheartedly that to grow a company, you have to have a plan, measure that plan, communicate with customers and stimulate innovation in your organization.
“Growth is hard,” Hagerty says. “It’s hard work. It requires real attention. It requires risk-taking. You have to really understand. You can’t just follow, and you have to have an organizational structure where it takes moderate risks and occasionally will fail.”
Creating a plan
You can’t book a flight for a business trip or vacation if you don’t know where you’re going. In the same sense, leaders can’t grow their company if they don’t know where to lead them.
“Each individual market has a different strategy,” he says. “You start with a strategy. What’s your value proposition to the customer, and how do you deliver that value proposition? Communicate that value proposition, and then build your plan top to bottom and measure, measure, measure, and keep an environment where you allow people to participate.”
After an off-site meeting where the strategic plan is created, Hagerty and his team start working on getting buy-in from the rest of the employees. He starts with a meeting at the beginning of the year, with all the managers, where the issues are explained and broken down into their basic elements. At this meeting, Hagerty and senior management explained the strategy for the year.
He then broke everyone up by natural work groups and had them evaluate the issues involved and the ways they can achieve the strategy. Each group presented its thoughts to the room, and others asked questions and challenged the group to create further thinking.
“The idea is then they go out and do the same thing with their groups and get everybody to buy in with the goals,” Hagerty says.
He follows up on the overall strategy with a quarterly business review, which allows everyone to bring up any concerns or problems along the way, and that’s where he makes adjustments if needed.
“The plan always stays because whatever adjustment you make, whether you’re going to spend more money in an area or less money in an area, it still needs to show the return, so we use the plan as our baseline,” Hagerty says.
Managers again facilitate their own communication with the people below them to keep a pulse on their areas, and so they know exactly what to report at the next quarterly meeting.
“The idea is that everybody has weekly staff meetings and regular one-on-ones with their people and is setting goals as this whole process continues to churn,” Hagerty says. “The issues we have with the senior executive staff are just a culmination of what they’re seeing at their level, and the staff they have reporting to them have challenges.”
As Polycom grows, Hagerty depends on measurements to ensure that these processes are still carried out and effective. He measures customer satisfaction, failure rates in the factories, marketing metrics, sales metrics and other leading indicators.
“Measurement is a cornerstone of how we drive the company forward and track where we are against our plan,” Hagerty says. “If you can’t measure it, it isn’t worth doing it. You are what you measure. People will resonate to what they’re measured on. If you don’t measure them, they don’t think you care, or nobody thinks it matters.”
While creating metrics for salespeople is often straightforward, management also needs to create metrics for other departments, so everyone has specific performances to work toward.
“Find things to proximate goodness,” Hagerty says. “If it’s marketing, you’re trying to track leads or impressions. If you’re in engineering, you’ve got milestones you’re trying to get through to get a product developed. There’s always something. It’s just setting a target, setting a plan and measuring your progress toward achieving those plans.”
Without having clear metrics and goals, a company remains stagnant.
“If you don’t have goals, I don’t know how you can go from Point A to Point B.”
A couple decades ago when Hagerty worked for another company, he met a major customer for lunch and excitedly explained to him what technology shift his company was going toward, but the customer just gave him a funny look.
“You don’t think that’s the way to go?” Hagerty asked.
“It’s technically the way to go, but it’s not going to happen,” the customer responded. “There’s not enough capital in the system to change over the equipment and make the shift to this different standard.”
This rocked Hagerty’s world, leaving him in shock as he pondered the customer’s perspective on a very long, thoughtful plane ride home.
That experience, while 22 years ago, has shaped Hagerty’s attitude toward customers. He realizes now how important it is to speak with them and know their concerns, challenges and thoughts on products, and he drives that every day at Polycom.
“Understand your customers,” Hagerty says. “Talk to your customers. Love your customers. Our first value is put customers first and profit will follow.”
Senior leaders have to get out into the field to talk to them. Hagerty spends 50 to 80 percent of his time with customers. He asks a lot of questions about what they think Polycom is doing well and what it struggles in. He also asks them what they need and what their problems are. Additionally, he runs new technologies by them to see how they like them, and he asks what kinds of additional technologies they would need.
He then takes the suggestions and ideas they give him back to his people for them to solve and implement in their technologies.
Hagerty’s commitment to putting customers first shines through when a customer calls with a problem. It may not be Polycom’s technology that’s the issue, but his people understand how the equipment is supposed to work more than the customer does, so they work with the network provider to fix the problem.
“We are one part of a big network environment,” Hagerty says. “Sometimes it’s not us, but it’s our brand on the product, and that’s what they’re trying to use, so we go fix it even if it’s beyond our scope.”
To ensure that employees stay focused on customers, he both hires and rewards people based on it. During interviews, he flat out asks them how they view customers.
“You challenge them on that,” Hagerty says. “Where does the customer fit in your process and your thinking? If they’re not saying the customer is first, then that’s a problem.”
When those people come into the business, they see the different tools used to gauge customer satisfaction. Hagerty uses customer statistic measurements, has weekly sales meetings to discuss customers, and hosts quality sessions and customer response meetings. Polycom also has review meetings where Hagerty and his people review data about what the customer is feeling. From there, they make distinct decisions and follow up on them. Hagerty then financially rewards employees based on how well the company does.
“Bonuses are based on performance, and performance is based on how well you treat and deal with customers, because you don’t get there without customers,” Hagerty says. “They’re the only one who pays our bills.”
Companies don’t grow, and they certainly don’t lead their markets, if they don’t have the newest and most innovative products out there. Because of this, Hagerty strives to be what he calls the “best in breed,” and as a result, Polycom has more than 550 patents issued and pending. But this innovation can’t be forced on people.
“You don’t drive it,” Hagerty says. “You set a goal, stimulate people, give them time to think it through, challenge them and have the right people who really want to innovate. It’s not about just get in line and follow. It’s about let’s do something different. Let’s make a difference.”
Employees understand the difference they make in customers’ lives because they use the technologies every day to meet with people all over the world. They know the amount of time saved and how much more productive people are by having eight video conferences a day versus traveling and having maybe two. They know how much more effective a phone call is when they can see the other person.
Employees use their own experiences and customers’ problems to create the best solutions.
“Sometimes people offer solutions, and they’re great solutions,” Hagerty says. “Sometimes they’ll just be able to describe the problem, and what we need to do is come back and use our expertise to formulate where we should be going.”
He relies on his people to take those problems and voices as vague as they may be at times and research them to see how they can be solved and implemented.
“You have to decide from where the technology is going, what is achievable,” Hagerty says.
He has a full-time product management team to solve those problems and answer those questions. He also invests 14 percent of the company’s revenue in research and development and another 8 percent in marketing, but the outcome is worth the investment because it allows Polycom to remain at the front of the pack, and the longer it stays at the front, the more it will continue to grow.
“In our area, it makes sense because the dynamic of the market is fairly rapid, and the technology continues to improve,” Hagerty says. “Our strategy is to be best of breed. We have to be the leadership. We want to be. We are. We measure it, and we expect to be the leader in each space we’re in.”
HOW TO REACH: Polycom Inc., www.polycom.com or (800) 765-9266.
Randy Hardin often jokes that he started a business so he could wear shorts to work. But while there’s some truth to that, he mainly wanted to make Universal Power Group Inc., a supply chain management company, a place where people feel comfortable working and where they would want to stay. When people enjoy their work, they’re more productive, an approach that has yielded UPG 37 percent revenue growth over the last two years, ending 2006 with $92.6 million in annual revenue.
Smart Business spoke with this relaxed president and CEO about how flexibility helps retain people and grow companies.
Q: How do you find good people?
One way we’ve done it is through our existing people. Some people feel it’s not a good idea to mix friends and family and business, and we feel exactly the opposite.
If you’ve got good people, and they’ve got integrity, and they’re hardworking, then why wouldn’t you want to look at someone they’re related to if they have the same qualities?
Q: What qualities do you look for?
Honesty. People just throw that word around, but we want people to be honest even if it hurts. We have to be very honest with our customers, and even if that means we lose an order, that’s just how we need to be.
The other thing is we hope to treat people the way we’d want to be treated. That’s a key thing of employees, that you’ve got people around you who treat the business as if it were their own business.
Q: How do you gauge those characteristics?
It’s not the easiest thing in a short period of time. There’s lots of things that are an indicator about people’s character.
You can pick up on the way a person feels about his or her job or their future. Ask people, ‘Where do you see yourself in not only the job you’re in now, but where do you see yourself if we were to hire you?’ Ask questions about their ability to get along with other people, how they deal with adverse situations, how you deal with a situation where someone has said some things about you that were untrue.
Q: How can you tell if someone will fit with your team?
Look at where they came from. Were they there very long? What’s the reason for them leaving? It’s one thing for a person to leave because they want to better themselves either financially or position-wise, and it’s another that they’re leaving because they couldn’t get along with the people they were working with.
Do your homework, and find out why they’re leaving the company they’re with. Find out how well they worked with the team they were with.
Q: How do you retain and empower people?
The obvious one is through money. Everyone gets motivated by money. I also wanted a place where we weren’t so black and white. We have some single moms. Do they have X amount of personal and vacation time? Yes. But should we be flexible as managers and directors and as fathers and parents? Yeah.
Be a little understanding when that mother needs to get off because the day care says, ‘Come pick your kid up,’ and they have no family to help them. Or that single dad, or his wife works, too, say, ‘OK, the kid’s got a soccer game at 4 o’clock, and he’d like to go see him play because he’s always on the road.’
It’s little things like that where we don’t just want to be the people that talk about it. We want to say, ‘You know what? You don’t need to write that down as time off just go watch your kid play soccer.’
Q: How do you get the right people in the right positions?
You find that out by trial and error. Sometimes when you’re a young company and you’re growing, you reward people who helped you grow. In rewarding them, you’re actually not doing them a favor, and you’re not doing the company a favor. You put someone in a position of authority because they paid their dues, and then you find out they don’t have the skills for that job, so it hurts them, and it hurts you.
Q: How do you know when people aren’t working out?
You find out when things aren’t getting done, or you don’t see the performance in a certain area. Analyze it and say, ‘Why is this happening?’ Ninety percent of the time, it comes back to people.
If you’re seeing one particular person who never seems to hit their time line, bring that to their attention. Ask them, ‘What can help you meet these time lines? Do you not have enough resources? What is it that we’re doing or not doing that could help you meet these time lines, or is this something you feel we need to give to someone else?’
A lot of times, someone will say, ‘You know what? This is just over my head.’
HOW TO REACH: Universal Power Group Inc., (866) 892-1122 or www.upgi.com
Back in 1998, Greg Flynn was doing business in Washington state when he had the opportunity to buy a group of eight Applebee’s locations. While he didn’t know anything about running the restaurants, he thought Applebee’s had good long-term viability, so he made the purchase on blind faith that he could trust the guys who were already running the restaurants.
Nearly a decade later, that culture of trusting employees and not trying to control every decision himself fuels growth in his Applebee’s franchise group, Apple American Group LLC.
“You can’t be an effective leader in a large and diverse organization if you’re too controlling,” says Flynn, Apple American’s chairman and CEO. “You also can’t succeed if you punish people for taking risks that you encourage them to take.”
Flynn believes in having a flat organization that breeds the kind of culture where employees can make decisions and grow as leaders. He employs a state and federal approach to his organization, with corporate acting as the federal government and each region in his portfolio acting as a state.
“They operate with great autonomy, except they are subjected to federal standards — rules that apply throughout the whole portfolio,” Flynn says. “While we don’t tell them how they need to achieve these results in every instance, we do demand that they achieve the results we’re looking for.”
While many companies try to complicate visions, values and strategies, which leave employees utterly clueless about how to succeed, the key to Apple American’s success is maintaining that flat, simple organization to preserve the cultural values and propel growth. With 130 stores across eight states, Flynn has successfully done that, and group sales reached $375 million last year, a 114 percent increase since 2001.
“First and foremost, keep the entire business as simple as possible,” Flynn says. “From the long-term vision all the way down to the day-to-day execution, the simpler it is, the better you can communicate it, the better everyone in the organization will understand it, the more measurable it will be.”
Creating vision and values
Employees aren’t sure what they need to do if leaders don’t tell them what to strive toward and how to get there.
“Have a vision, which is where you want to be in the future, and a good plan for getting there,” Flynn says. “Have that clearly communicated so everyone’s pulling toward that vision in every action, every day.
“Our vision is very simple. It’s to be the premiere franchise group in the Applebee’s system. We have a dozen things we must execute well to do that, but it’s a simple vision. We don’t need to concern ourselves overly with global strategy in the restaurant industry or major marketing campaigns or menu development. We build and operate restaurants, and we just have to kill that.”
While it’s crucial to keep the vision simple, it also has to be something that you can measure, otherwise you won’t know how close you are to achieving it. For Flynn, he knows what other franchise groups look like compared to his because he can benchmark their performances against those of Apple American Group.
He also notes how crucial it is to stay focused and not get sidetracked with other ventures that can steer you away from achieving your vision. He sticks to Applebee’s and doesn’t get lost in other restaurant concepts, even if they seem to provide an alluring short-term gain. It’s more important to stay focused on the concept that has the best long-term gain for him and his people.
“By having a very narrow focus, it’s easier for me to communicate where we wish to be, and then lay out the plan for getting there and measuring our progress along the way,” Flynn says. “Define your vision as narrowly as possible because it will make it much clearer to your people and, ultimately, easier to get there if you really maintain a laser focus.”
Any organization can have an overall vision and put it up on the wall by the main doors in gold letters for everyone to read, but the employees also have to know how to act and what kinds of behaviors will help achieve that vision. For this reason, Flynn has a set of values, called the “Gold card,” for Apple American Group employees to know what the company values and expects.
“The central principle there is that we will feel comfortable seeing our actions and our motives for them published in the newspaper,” Flynn says. “I think about that one all the time. We will never do anything that I can’t look someone in the eye, who’s intimately affected by it, and justify it as an ethical, moral and rational action.”
Flynn adopted his values from one of the group’s predecessors, and while the values weren’t Apple American’s at first, Flynn has modified them to make sure they reflect the group.
“We’ve adopted it and changed and refined it over the years,” Flynn says. “It has a longer history than me and them and anyone at this point. ... As I understand more and more about what really matters in our business, we just make changes. It’s like the constitution — it evolves over the years through amendments.”
For example, Apple American’s vision looks at where it wants to be, how it will get there and the impact it has on three different groups: customers, employees and shareholders. Flynn saw how important community plays into his restaurants, so this year, he decided to add community as a fourth group in that list.
Values ensure that everyone is pulling in the same direction, but just like the vision, they have to be understandable and actionable.
“Keep it very simple when you can,” Flynn says. “Don’t say, ‘I demand excellent restaurants.’ Have clearly articulated expectations. Our whole system is not telling them how to get from A to B, but telling them we expect them to be at B, and they can take different routes to get there, but you have to tell them very clearly what B is. The overriding advice is trust your people.”
While headquarters are in Cleveland, Flynn works out of San Francisco, so he is conscientious that his structure requires him to trust people.
“Our system relies entirely on trust,” Flynn says. “We must be able to trust the individuals in our restaurants and in our markets to do the right thing because we’re not micromanaging them, and we’re not supervising them to an excessive degree.”
Trusting people means letting go and allowing your employees to do things.
“It takes a long time to earn people’s trust, so when we say we trust in you, and we believe in your potential, and we’re going to allow you to enjoy latitude in how you do things and develop yourself and your people, we actually do that,” Flynn says. “Ultimately, that’s the main way you get people on board with the system.”
Building trust requires realizing other people are capable of success.
“People, in general, are smart, hardworking, experienced, want to do the right thing and more capable than most companies give them credit for,” Flynn says. “The best way to develop people is to give them responsibility, and they will sort of develop themselves.”
Giving people responsibility increases trust between management and employees and increases buy-in of the vision and values, but you have to give people leeway in how they accomplish those responsibilities, too.
“If you don’t give them any latitude — here’s exactly how you have to do everything — then there’s no innovation,” Flynn says. “But if you say, ‘All I care is you end up in B,’ it really encourages creative thinking, and we get tremendous creativity from our people as they seek out new and creative ways to get from A to B. People are smart, and they have great ideas all the time, but the certain structure of those companies doesn’t allow for those to percolate up.”
Flynn also emphasizes that leaders have to actually do these things and not just say them or talk about them in meetings.
“You live it,” Flynn says. “You say to people, ‘I believe in pushing authority down the line and empowering you and giving you the resources to do it yourself, and I don’t really want to hear about it unless there’s a big problem or opportunity,’ and then you actually do that.
“There’s no better way to develop a person than to just give them responsibility and figure it out for themselves. You know, they’ll stub their toe a few times, but the benefit they’ll get is someone who has really learned how to do it and didn’t just follow instruction.”
And while employees work to improve themselves and drive the company to succeed, they need reassurance that they’re on track. Flynn has a profit-sharing program for his managers, where each gets a percentage of his or her divisional earnings, with no strings attached.
“Keep it simple, without adjustments,” Flynn says. “I’m delighted to pay them that way because it’s all the results of growth.”
He says it’s also important to give the managers equity ownership in the business. He gave them a five-year plan in 2001, and when they recapitalized in 2004, they were exactly on target for meeting those numbers and got rewarded in cash.
“They’re side by side in their ownership with me,” Flynn says, “So it’s good for me; it’s good for them.”
While Flynn has formal recognition programs through conferences, awards dinners and monthly staff rankings, he says informal recognition is more important, especially at the lower levels.
“Recognition is mostly a day-to-day thing,” he says. “The culture of your organization — is it appreciative? Can we — and do we — say, ‘thank you,’ often and out loud to each other?”
To maintain his state and federal model for the organization, he has to have an inclusive decision-making style.
“A critical component of being a flat organization is having a very inclusive decision-making process, which can be inefficient at times, but when you reach a decision, you’ve typically gotten a better decision because of all the input you’ve gotten from the people in charge of carrying it out,” Flynn says. “Because you’ve gotten better buy-in, you do roll out decisions more effectively.”
People feel like they had a say in the decision and that it wasn’t just mandated down from the powers that be.
“They need to feel like their opinion was sought and listened to and considered, and even if it was ultimately overridden, they were treated with respect,” he says. “They have to trust that the leader has lots of different opinions he’s considering, and a vision of his own, and trust that your decision is going to be right at the end of the day, but if you don’t listen to someone, it’s almost impossible to get them on board with that decision that’s contrary to what they already believe.”
While not everyone may agree with a decision, people will at least respect the decision if they were included in making it.
“Typically, it happens very well because they will have been part of the process, understand the logic behind the decision, and they’ll respect it in the process,” Flynn says. “Even if they disagree with it, they will have been heard.”
While Flynn encourages and facilitates discussion and conversation when making a decision, he also notes that, when necessary, the leader has to be prepared to wrap things up and move on.
“Rarely does it happen where I need to just shut down the debate and make a decision that we haven’t arrived at collectively as a group,” Flynn says. “But it does happen. In our state and federal model, there is a president.”
When decisions are made, you can’t overlook how crucial communicating those decisions are, but it’s equally important to explain the process and reasons behind decisions.
“It shows respect for them as people,” Flynn says. “They’re not just automatons doing what they’re told to do. That’s antithetical to our culture. More importantly, if they understand why we’re doing what we’re doing, what impact it has, they’ll do it better, and they may come up with better ways to do things if they understand where they’re trying to go.
“If this is about getting from A to B, most of our ideas of coming up with a better way to get from A to B comes from the field, but they have to know what B is to suggest a better way.”
When communicating those processes, reasons and decisions, you also need to be brutally honest with your people, otherwise employees see right through it and wonder what’s being hidden or what they’re not being told.
“Say exactly what you think all the time and don’t hold back, and people respect that,” Flynn says. “I’d like to think we don’t sugarcoat anything in our business, and as a result, we are much more effective, and our people have much more actionable information, and therefore, are more successful.”
While Flynn and his management team are happy to make decisions and communicate those to the rest of the group, they are also keenly aware that some decisions are best left to people below them. With such a wide geographic spread, he knows he’s not equipped to make a decision about a restaurant in Pennsylvania by sitting in his office in California.
“They are identifying problems and opportunities themselves and acting on them in real time, with much greater sensitivity to the actual local context of the issue, as opposed to me, centrally sitting there with much less information and much less understanding of the context of a given issue, trying to decide,” Flynn says.
He even works to develop his employees’ decision and problem-solving skills by asking them tough questions to make them think differently as new situations arise.
“I’m always saying, ‘What problems do you have, and what opportunities have you had, and what are you doing about them?’” Flynn says. “I expect both sides of that question answered, so it’s not, ‘We have a problem; what are we going to do about it?’ It’s, ‘We have a problem, and here’s what I’ve already done about it.’”
Flynn’s commitment to keeping his business simple has cooked up one successful and growing organization. In 2005, Apple American Group was ranked fourth on Nation’s Restaurant News’ “Top 100 Growth Companies” list, finishing one spot ahead of Starbucks Corp. But Flynn attributes Apple American’s growth to the culture he’s created and maintained.
“It’s fuel for growth,” Flynn says. “Growth is fuel for people development. The two are complementary. We attract and retain better people because we’re growing; because of the opportunities for upward mobility within Apple American that we can afford.
“Likewise, our people are driving growth. We have better people. They stay with us longer, and they enable us to open more restaurants and open them better, and when we acquire new markets, we have wonderful procedures for integrating the new people, so it’s really a synergistic and complementary dynamic.”
HOW TO REACH: Apple American Group LLC, www.appleamerican.com
Get the right people. You can have all the capital in the world, but if you don’t have the right people, you’re not going to succeed. If you have the right people, you can get dog food and sell it as caviar. If you have the wrong people, you could have Louis Vuitton bags, and you couldn’t sell them.
In Spanish, it’s called chispa spark. They have to have it in their eye. They have to have it when they speak, but it has to be a true chispa.
You interview people, and they’re like, ‘I want to come work for you, and I’ll work eight days a week, 30 hours a day, and I’ll live, breathe your company, and I can raise your sales 50 percent.’ That is false chispa. He’s creating a spark because he’s doing an interview.
The spark is more in the want. You can see it when they speak because they’re not trying to prove themselves to you in a 10-minute interview. You can see it in the way they dress, the way they look, the way they handle themselves. You can come in a hand-me-down suit, but you tied your tie properly, you sat up straight in the chair. You at least cleaned your shoes.
If someone gets here late and got stuck in traffic, folks say, ‘Oh, he doesn’t care.’ You have kids at home, you get delayed, your car breaks down. Those things can happen.
It’s more personality. How they look at you, how they speak, their mannerisms. Are they polite? Do they say thank you? That all matters.
Don’t be fooled by resumes. Resumes do not impress me. I’ve seen people master’s here and 10 different colleges, and you interview them, and they have no social skills. They don’t look you straight in the eye when they talk to you. They don’t sit up upright.
They’re not proud of who they are. They’re not self-confident, and you can see that when you talk to people. Then I hire some kid who had to leave high school to support his family, and he impresses the hell out of me, and he gives me a wow.
That’s what I look at. Do you demand more of yourself? Do you demand more of what you are able to contribute from your abilities? A kid who didn’t finish high school has limitations to a certain amount, but those limitations to them don’t exist, and they exceed those limitations, and that’s the spirit I’m looking for that nothing holds them back.
Do things yourself. If something’s small, like faxes or return this person’s call, it is who can do it the fastest. If it’s going to take me longer to tell my assistant to call Kristy and tell her I can’t make the conference call, and she’s like ‘Who’s Kristy?’ ‘Kristy works for Smart Business. She’s an associate editor here’s her number.’ It’s faster for me to pick up the phone and call you.
Whoever’s going to do that for me, they have work to do as well. If it’s going to take me five minutes to explain, and I’m going to take that five minutes of their time, and they still have to make the call, it would have been more efficient for the company if I had just done it myself.
Delegate. If I get calls from folks who want to buy my company, I say nicely, ‘You need to speak with my CFO,’ and they say, ‘Well, we only talk to owners.’ I go, ‘No. My CFO has access to everything. If you want to talk financial stuff, you talk to my CFO,’ and that’s how I delegate.
If it’s not my responsibility, it’s delegated to a manager. Period. I keep a list of the tasks by managers in a public folder. They have access to that folder they can read it, they can copy it, but they cannot amend or delete it.
I’ll add the task, I’ll e-mail her the task so she knows that that’s an expectation of mine, and I put a start date and a due date. Then they get back to me and tell me whether that’s reasonable or not. I know everyone’s busy, but I don’t know what you’re working on. I’m flexible on that stuff.
Reorganize periodically. Let’s assume we’re starting from scratch. Forget people. Forget budgets. Create an organizational chart for me that would meet your needs today. Then forecast your needs for the next 12 months, then a soft scenario for 24 months.
In the reorg, we’ve created a list of requirements before we look at who’s going to fill that box. Then we say, ‘(She) had that job before that was her title. Look at the job now. Does she fit that job? If she does, is she willing to do it?’
One of my buyers, when I analyzed what she was doing, she was creating reports for sales. She was analyzing data, so I moved her into my team, and she’s our business analyst. It’s not different. It’s just sometimes the title, over the years, has remained the same, but your duties have changed, so you’re really doing something different than what your title calls for.
It makes us refocus on our business at a micro level rather than a macro level. It’s not a lot of changes, but one or two little boxes you move around makes a huge impact. When you’re growing 30 percent a year, you have to redefine yourself every 12 months. If not, you’re fooling yourself.
HOW TO REACH: Diaz Foods, (800) 394-4639 or www.diazfoods.com
Five years ago, Michael Gerster realized the old business model at WIKA Instrument Corp. had clearly expired. It was losing market share to Chinese manufacturers, was failing to efficiently meet customer demands and was wasting money with large amounts of obsolete inventory.
“The Chinese and other low cost manufacturers ... are eating our lunch and the bag it comes in,” says Gerster, president of the company.
He clearly needed to make some changes if his company wanted to compete. His prior company had been in the process of exploring lean manufacturing, so when he left in 1998 to come to WIKA, a pressure and temperature instrumentation manufacturer, he brought a basic curiosity about it with him. Upon starting at the company’s U.S. headquarters in Atlanta, he started sending his people to lean manufacturing seminars, but they always came back with the same response.
“I don’t know what’s in it for us, Michael.”
But in 2001, that finally changed. WIKA worked with one particular company that was able to really explain the benefits it would experience from going lean.
“The results were so earth-rocking that everybody was instantly convinced that this is going to be the future for us, and the way we wanted to do business,” Gerster says.
So he and management began working with the outside company to make changes, but even with people on board, implementation is much more difficult. The entire plant was rearranged so everybody had to do things differently and embrace a different thought process.
“Two or three years followed where we moved the furniture,” Gerster says. “We broke all of these departments a-part and created manufacturing cells.”
But after all of that, he realized the new layout wasn’t very efficient, so af-ter 18 months, they finished moving everything again to optimize efficiency.
His patience and persistence have paid off. As a result of all the changes that have taken place during last five years, productivity increased by double digits, market share doubled, and they’ve saved 20 to 30 percent of space. WIKA’s lead time has also dropped from about six weeks to just five to 10 days. That all yields real results the U.S. headquarters’ profits and revenue doubled in the last five years, bringing the entire global revenue to $480 million and the Atlanta plant’s revenue to $100 million last year.
“We are well-conditioned for the future,” Gerster says. “There are things that are under our control and there are things that are not under our control, and even the things that are not under our control, we have a level of agility that we can react to those real quick.”
Making major changes in a company requires a lot of planning, communication and work to succeed. Here’s how Gerster conquered some of the challenges of driving change through an organization.
The first stage of any change is having a reason to do so, which starts with knowing how your company competes.
“Clearly understand the value proposition to the customer,” Gerster says. “When you compete in a batch world with other customers, same lead times, same quality service, etc., the only thing you have to differentiate yourself is price. Then if you have a competitor coming through globalization that brutally undercuts you in price, you lose your value proposition to your customer.”
He spends about one-third of his time with customers and says to ask questions, “then shut up and let him talk” to learn their needs.
Gerster asks about what challenges they face, their biggest expenses, how WIKA can help their profitability beyond lowering price, and what they expect from suppliers.
While these questions help surface spoken demands, sometimes you have to dive deeper to find needs they don’t even think about.
“If you ask the right questions, you’re going to find, hopefully, unarticulated demands that the customer would have never told or asked you to do,” Gerster says. “If you offer that to the customer, all of a sudden the light bulb goes on and they say, ‘Yeah, that would be important for us.’”
After listening, WIKA made some changes. To start, it changed its methodology in pricing to be customer-friendly.
“If you tell a customer, ‘Here’s a price for five pieces, and here’s a price for 50 pieces, and here’s a price for 500 pieces,’ you are enticing the customer to do the wrong thing because he’s going to have one eye on the low price,” Gerster says. “Then he’s buying more than he actually needs and puts the rest in his inventory.”
Inventory costs a company a lot of money to maintain, often negating the lower price it paid, so whether a customer needs five pieces or 500, WIKA charges the same price. WIKA also realized it could save customers time, money and manpower by monitoring their inventories for them by linking their IT systems and automatically shipping when a product was low.
None of this would have happened if Gerster hadn’t tried to create a true partnership, which he says many companies don’t understand.
“Nobody ever really understood what partnership means,” Gerster says. “In the past, it was who had the lowest price. If there’s no dependency between the customer and the supplier, and the supplier and the customer, then you don’t have a relationship.”
Real relationships are key to a successful business. “The customer must, at some level, depend on WIKA in a good sense, not in a blackmailing sense to meet their goals while leveraging the capabilities of an agile supplier,” Gerster says. “That creates a dependency, and that dependency cannot be thrown out or competed with just because somebody walks in there with a lower price because we offer more than a lower price.”
When making changes within an org-anization, leaders must get buy-in from everyone in the company, otherwise the changes won’t yield success.
“The top management support is the oxygen that is blown into the candle all the time to keep it alive,” Gerster says. “At the same time, the whole organization has to become more self-sustained. In other words, the employees have to pick up the DNA and the way we want to do business.”
Doing that is pretty straightforward. “You must be honest, and you must give people a reason why change is imminent,” Gerster says. “In order to do that, you should have some urgency.”
But that’s not enough. Top management has to follow up with the low-level employees. He attributes Toyota’s success to this.
“Those guys know what they are talking about because they know what’s going on, on the shop floor, and they make sure things are right on the shop floor,” Gerster says. “If you make sure things are right on the shop floor, everything else will fall together. Don’t start at the top start at the bottom.”
It’s also important to keep the senior team excited and focused. That will filter down the organization and help employees buy in to changes.
“People on the shop floor have seen many different programs over the years, and they know, management says yeah, yeah, yeah, and then six months later, nobody talks about it anymore,” Gerster says. “It needs constant nurturing through top management, and top management needs to be excited about it, and they should be because it brings you the results you’re looking for, but they don’t trust it, and they let it go too quick.”
Leaders need to get and keep everyone on board through continuous training and mentoring, and if they don’t like those activities, let them go. He also keeps them in the loop by standing in front of everyone each quarter and giving a state of the company address. He both looks back at what the company has accomplished and also spells out the top five issues needing work as they move forward.
“That’s a certain set of information that I repeat over and over again,” he says. “Then you just need to engage with people. You need to tell people that while they are changing, mistakes are going to happen, and it is OK to fail.”
Most people have had a moment where they look at a policy or procedure and say, “That’s complete nonsense. Why do we do it that way?”
Around WIKA, Gerster rewards people for asking that question because it shows they’re paying attention and looking for improvement. He calls it the “Utter nonsense” award, and it comes with a $100 reward. It’s a way of getting people to continuously improve the company.
“Sometimes you set up business processes and never look at them again until they kick you in your rear end,” Gerster says. “What we’re trying to do is set up a process that looks at everything and anything continuously and try to capture opportunities for im-provement.”
Offering incentives to those who choose to get involved and offer ideas motivates and ignites enthusiasm. For example, Gerster’s lean transition completely re-energized his people and propelled WIKA forward.
“It’s an employee-driven process, and it puts people on steroids,” he says. “The morale is totally different than what it was years ago. Give the people responsibility. ... Just trust them, and they will deliver for you.”
It’s also crucial to watch what you reward. “Often, people get a bonus for increasing sales or increasing profitability, but they only measure the sales or only measure the profitability, so at the end, you either have it or you don’t, or you’re somewhere in between,” Gerster says. “You need to focus on the internal activities that drive sales and drive profit, so you know much earlier if you are on track or not.
“If you focus on these activities, you don’t worry about sales or profitability because you know it’s going to come together anyway, because you’re doing the right thing. You’re looking through the wind-shield and not through the rear mirror.”
WIKA also sets benchmarks for employees by averaging the previous two years’ performances and then raising that number slightly. If they hit the new goal, the company splits its profits 50-50 with employees, so they reap the benefits of their hard work.
“You need to define an expected outcome for a certain business process, and you need to make sure you raise the expectation every now and then in order to push the limit and start people thinking, ‘How do I do better?’” he says.
When they get a cut, they’ll look at how to be more efficient to increase their share of the prize.
“If people want to make more money here, it’s not about working harder, it’s about working smarter,” Gerster says. “You can’t get it done if you work harder. You need to do it differently.”
While change can often seem slow and people can be skeptical, Gerster says to plunge forward and let success get people on board.
“If the changes work, and they see that it works, and they get a share of it, why would they get frustrated with it?” Gerster says. “They must be part of the success, and we make them part of that success.”
HOW TO REACH: WIKA Instrument Corp., (888) WIKA-USA or www.wika.com
Len Pagon Jr. founded Brulant Inc., then called NewMedia, as a 23-year-old in the spare bedroom of his house back in 1989. Throughout the 1990s, he went through different company transformations but also propelled the company through rapid growth, being named to the Inc. 500 list three times. But sometimes good things don’t last, and by the end of 2000, the dot-com bubble had burst.
Pagon made a tough decision to restructure his company in order to survive, so he sold off three branches of the business and had to make layoffs. By the end of 2000, a merger had been planned, but by March 2002, things had fallen through and the merger was abandoned. About half of his employees, including the CEO Pagon hired, left to join the company it was supposed to have merged with.
Pagon bought back controlling interest in the company, and in doing so, he inherited a company with an upside-down balance sheet, negative equity and no cash. He took charge of the 26 employees that were left. He hired an entirely new senior management staff and started over.
The information technology services market was also changing, so he decided it was time to take the company in a different direction. He positioned it beyond a consulting firm that primarily implemented e-business solutions to a full-service strategy, information technology, and digital business consulting and integration firm to serve global clients. At this time the company was renamed to its current Brulant Inc., and it was this repositioning that fueled Brulant’s explosive growth during the last few years, culminating in more than 100 percent growth in 2006.
Pagon, president and CEO of Brulant, defines a great company as one that is doing something different, that has built a different brand, that has deep technology expertise and has a core of talented employees. These attributes have helped him reposition the company and will continue to help it succeed in the future.
HOW TO REACH: Brulant Inc., www.brulant.com or (216) 896-8900
Jerry Stallard just thought the letters GTS sounded good together when he started GTS Communications from his one-bedroom apartment in Olmsted Falls back in 1996 during his last year in the U.S. Coast Guard Reserve.
As president and founder, he didn’t exactly know much about installing telephones when he started the company, but he knew he had an interest in it. His first installation was for his brother, but he used troubleshooting techniques that he learned during his coast guard experience and received additional training to fill in his knowledge gaps. Finding clients was initially difficult to balance along with answering calls and serving as the technician, so his wife entered the picture to answer those calls while working at another job. This allowed him to focus on his craft, as he thought his overall work would be the best advertisement for GTS.
Those letters that sounded good have translated into a telecommunications business that’s still doing great 11 years later, as it’s never experienced a year with negative revenue growth. Additionally, first quarter 2007 sales have increased 26 percent.
Stallard takes an innovative approach to business by building his company as an alternative to a larger competitor and created a niche in installing Nortel phones, which are commonly installed by larger competitors.
Stallard also strives to maintain a family culture at the Strongsville-based GTS headquarters. With just 10 employees, he is dedicated to providing gift bags for them on holidays as well as hosting company outings and dinners at his residence.
As Stallard pushes his business to continue growing, he maintains a down-to-earth attitude and dedication to working hard. He leads growth without getting ahead of himself, and with that mentality, he will open a second GTS office in Orlando, Fla. in August.
GTS is on the fast track for future success with an average expansion of approximately 25 percent in both sales and employment growth.
HOW TO REACH: GTS Communications, (877) 487-8866 or www.gtscommunications.com
Steve Ciuni has taken some risks during his career. Back in 1992, he and three other colleagues purchased the assets of Drake Construction Co. from the original founders, but three years later, Ciuni made one of the biggest financial risks of his life by purchasing the shares of one of the other owners who had decided to leave the company. Nine years later, Drake Construction’s president decided to retire, so Ciuni stepped up to the plate. At this junction in the business, he decided again to take a risk and change the company’s business focus.
While the construction company had previously focused on work in the open-bid market, he decided to focus on negotiated, client-relationship-based work. This strategy would allow the business to work with quality sub-contractors and focus on providing the highest level of quality to its customers, but the strategy also proved challenging as it limited the company’s client base in the Cleveland area, which wasn’t expanding. However, Ciuni was determined to build a business based on trust, honesty and strong relationships.
He also had to explain to his partners and employees that the new approach was risky and would take nearly two years to recognize the benefits.
Ciuni first met with every employee to explain the new philosophy that every person he or she interacts with as an employee of Drake Construction must be treated the way that person wanted to be treated. He also never wanted to hear the phrase, “It’s not personal it’s just business,” as he wouldn’t accept that mentality, and it wouldn’t help the business in its new direction.
Three years later, he’s seeing real results and the risks Ciuni took throughout the years have certainly paid off for Drake Construction.
“The strategy has paid off in what we do,”
Ciuni says. “Today, we do not have any outstanding receivables, our old debts are paid off, our repeat business has increased, and we are receiving projects on a referral basis.”
HOW TO REACH: Drake Construction Co., (216) 664-6500 or www.drakeconstructionco.com