He added more structure to the company and implemented a plan to continue its growth, and today, Gold Star has annual systemwide sales of about $60 million, an increase of about 200 percent since Sullivan took over 16 years ago.
“It’s a combination of the family, the franchisees and associates of the company that has been the key to our success,” says Sullivan, CEO.
Smart Business spoke with Sullivan about how he maintains quality and builds a brand for Gold Star.
How do you maintain quality as you grow?
We have a balance scorecard, and we measure certain things to make sure we stay on track. Obviously, you track the normal things, which are the sales and the profits, but the thing we spend a great deal of energy on is being able to track our customers.
Not only the consumers that come in our restaurant, but twice a year we survey our franchisees and get their input on how the company is doing.
Also, twice a year we survey every associate that works for the company and make sure that the company is doing the right things. If things come up on that survey ... then we take action to solve the problem.
Sometimes it may be a matter of communication. Maybe they don’t understand the complete story. But other times, maybe someone in the organization isn’t communicating properly with the associates.
Every once in awhile, a restaurant will get a bad report card from our survey. When that happens, we have our people go into that store and interview everybody and find out what the problems are and put plans in place to correct them. We learn a lot of things, and we have to make adjustments as we move forward from those.
We also do a benchmark study that tells us how we’re doing in the overall marketplace as far as consumer reactions to our promotions, to our products, to our values.
How do you stay competitive?
(In) the restaurant industry, every week it seems like there is a new concept opening up. When you have existing units and you’re in kind of a mature market, it’s very difficult to continue to hold your share.
We’ve concentrated on really taking (care of) our existing stores, and in some cases, we’ve relocated them in the same market and built a new facility. We’ve remodeled restaurants.
We’ve implemented new products. We implemented a gift card program. We’re introducing a customer feedback program.
On every one of our receipts ... it says we’ll give you a reward if you call in and take the survey. By gaining that information, we are in a better position to find out how we stand. We feel that as we can continue to serve our customers and our customers are happy with us, we’ll be successful.
How did you create a brand for Gold Star?
We’ve tried to make it very consistent. We try to standardize most of the operations between our restaurants, so that one customer that goes into one restaurant will get the same experience if they went into any one of our restaurants.
When things aren’t going well, a lot of chains are forced into doing discounting. When you’re doing that, all you’re doing is buying that customer for a visit or two. As soon as you don’t give them 50 cents off, they go to the other competitor where they do get the 50 cents off.
A customer called me yesterday ... to give us a compliment. We have a program that is called Serving Our Troops where if anyone has a relative or friend coming back from overseas who was serving in the military, we’ll put on a party for them in a Gold Star restaurant.
We invite all the family to come in and put up banners and buy a cake and decorate. This man had just called to say that he attended one of those (parties) and he was extremely impressed.
We really realize that what we want to do is build relationships. If you do things for the community, and they understand that you are part of the community, then you can build your business easier than discounting, where you are just buying your business for a short-term period.
HOW TO REACH: Gold Star Chili, www.goldstarchili.com
In 1977, Tom Hofer was Spring-Green Lawn Care Corp.’s third franchisee. Ten years later, as the company grew, he was named its CEO, and today serves as both CEO and executive vice president.
Today, Spring-Green is growing faster than ever, opening 13 franchises in 2005 for a total of 63 and hitting systemwide revenue of more than $23 million. And Hofer believes that the best is still to come.
“Our long-term vision is to someday become a $100 million organization,” Hofer says. “In the short run, we are looking at 10 to 20 percent annual growth for the next several years.”
Smart Business spoke with Hofer about putting the right people in the right places and getting employees to buy into his vision.
What challenges come with fast growth?
It’s critical to have the right kind of people in the right positions. When the organization is small, people often wear multiple hats. They do more than one thing. Then, as the organization grows, they tend to specialize more.
Making those moves at the right time, putting the right people in the right positions with the right talent is always critical, but more so when you are in a growth mode than when you’re in a maintenance mode.
How do you make sure the right people are in the right place?
I don’t think you can make sure. You use your best judgment with people. You look at what the position requires, and you interview and talk with people and try to figure out whether that person’s talents are a fit with what is necessary to be successful in that position.
Hopefully, you are right, but nobody is ever 100 percent right. You do the best you can. If the person is not right for the job, then you have to get someone in the position that is.
How have you managed to retain more than 80 percent of your customers?
You do a good job for your customers and you end up with these kinds of renewal rates. Our franchises are locally owned and operated. They’re not big organizations with several different layers of management.
Often the owner knows the customers. If there is a problem, usually the owner of the business is dealing with it himself.
What are the key skills any leader needs to survive?
He has to be able to look into the future and set a goal for what he wants his organization to become. Everything starts with a vision to be working toward.
Once that vision is in place, he needs to be able to communicate that and inspire his people with that vision so that they buy into it and they believe that it can be done. And then you start establishing that track record that builds confidence within the organization.
There are different personality styles. People approach things differently. I think different approaches can be successful. There’s not a one-size-fits-all leadership style.
How do you inspire employees and get them to buy into your vision?
We don’t have an organization where everything comes down from the top. We include people in the process of setting those goals.
Hopefully, we make our team feel that they are included in the process. They’re not just dictated to as to what they have to do.
When people are included, they tend to assume more ownership of that goal, feel more responsible for that goal and are probably more committed to achieving that goal.
What advice would you give brand-new CEOs if they want to have the same kind of success you have had?
It won’t be a straight line to the top. There will be ups and downs in the road along that path of where you want to go.
Some of those downs can be pretty bad. There will be some challenges and obstacles to overcome. Stick with it, don’t give up, find a way, stay resourceful and eventually it will happen.
One of the problems with a lot of people today is they might be too impatient. People think, ‘Well, I’m going to start a business, and pretty soon I’m going to have this unbelievable lifestyle.’ They might eventually end up with that unbelievable lifestyle, but it certainly doesn’t happen right away.
You have to work toward that and make it happen in the long-run. People who do that, I think, can ultimately achieve way beyond what their initial goals might have been.
HOW TO REACH: Spring-Green Lawn Care Corp., www.spring-green.com
“We were not Global Payments when we spun,” says Garcia, who is now also chairman. “That name was a little presumptuous. U.S. Payments would have been closer to the truth.”
But Garcia had a plan to grow Global Payments worldwide and take it above and beyond what it was when it was part of National Data Corp., where the company had reached a standstill.
“We were struggling a little bit, quite frankly, in terms of growing the company,” says Garcia. “We were mid-$300 million in terms of revenues. But, the company had some core products and some core people that I believed we could build upon.”
The company needed a clear mission to establish an identity of its own and give employees direction.
“The first thing we did was to establish a vision for the company, which was to be the leader in the delivery of payments and associated information,” says Garcia. “I’m pleased to say we did that from the very beginning, and over the course of the next five years, we haven’t changed that vision, and everything we’ve done has been payments-related.”
Garcia wanted his vision to be clear and concise so that employees could remember it and relate to it. He also wanted to leave room for the company to grow, while also being clear about where it was not going.
“If, all of the sudden, we decided to get into another business line that doesn’t have anything to do with payments or associated information with payments, I think it would be fair for my board or my investors or executives or employees to say, ‘Whoa, that is a divergence from our vision,’” says Garcia.
The vision creates a framework so that people understand what they’re striving to accomplish.
“Everyone wants to have an idea of what they are to do every day and how their piece fits in,” says Garcia. “It’s not getting people to buy into the vision that’s the hard part; it’s to make people feel that what they’re doing is intricate to the success of the total. And the bigger the company, the harder it is.”
Garcia makes employees feel that their role in the company is intricate to its success by giving them something meaningful to do and explaining why it is meaningful.
“And that, I think, is the key to success, is making everyone buy in to not just the vision but their piece of the vision, whether they’re answering the phone for a customer or sweeping the floors or are a senior level executive in the company,” says Garcia. “I want everyone here to feel as though what they are doing is important, and it is. We have 4,200 employees now living in 20 countries around the world, but we’re not that big that you could come here and not be productive because we need everyone to come to work every day and accomplish what they need to accomplish for us to be successful.”
No one ever wants to feel that their role in a company is meaningless, regardless of what they do. Garcia stresses to his employees the importance of their positions and how it affects the company.
“Take the time to say, ‘Look, I know you are answering phones over there, or you’re the switchboard operator over there, but that is very important, and here’s why,’” says Garcia. “They understand that. I think that goes a long way toward making them successful and making you successful and making them feel good about what they do.”
With a strong, concise vision in place, Garcia created five values the company would operate around: Treat all with respect and dignity; delight customers; reward accomplishments while encouraging creativity; embrace meaningful change; and have fun.
“The values are all really straightforward,” says Garcia. “The only one that might be tough for people is embracing meaningful change.”
To get people to embrace change, Garcia constantly explains that without change, the company can’t grow.
“Change is very unsettling for everyone,” says Garcia. “Every change that we go through is a bit of a trauma, because it’s different and we are all creatures of habit. Our world is all about change. Business culture is all about change. The most important thing to understand about change is that with change comes opportunity. If everything was exactly the same, then there wouldn’t be opportunities created.”
Besides telling employees about the vision and values, Garcia communicates to them in writing and devises a new theme each year to re-emphasize the vision and values. Letters are sent to employees’ homes discussing the new theme and reminding employees of the importance of the company’s vision and values. Posters are put up around the office and employees receive wallet cards with the vision and values.
As Global Payments has expanded internationally, spreading the message about the company’s values has become more difficult due to cultural differences.
“In the former Soviet Union countries, slogans are not well received,” says Garcia. “We have to be cautious about our colleagues in Moscow and our colleagues in Prague, in particular. You don’t just roll out slogans. You have to get more to the core of what you’re trying to communicate. They’re not real big about putting posters all over. It’s too much of a throwback. So you have to be sensitive to that.
“Secondly, you have to make sure the translation is appropriate. ‘Have fun’ is a tough thing to translate. It could be translated into something frivolous. Or it could be totally watered down where it reduces the impact. So we spend some time understanding that.”
Garcia also spends a lot of time understanding his employees’ and customers’ various cultures. Global Payments partners with a company that is native to the area it is expanding into, which Garcia says is key to expanding internationally. Companies sometimes fail when trying to expand internationally because they go into a new country with American-centric eyes and don’t consider that what is appropriate in the United States may not be appropriate elsewhere.
“There is a different relationship between an employee and an employer,” says Garcia. “And there are, many times, very different rules on how you conduct yourself. There are governmental regulations that are peculiar to each country. You have to go in with your eyes wide open. You have to do a lot of listening.
“You have to find a good partner who has been there, who knows the geography and is willing to have a true partnership with you where you do what you do well, and they help you with all of those other pieces. The worst thing you can do is go in thinking you know everything and you’re going to teach them how to do it. That usually ends in disaster.”
Garcia allows and even encourages different offices to operate in different ways according to their local customs. For example, employees in the Czech Republic have draft beer in their cafeteria.
“That’s their culture,” says Garcia. “It would be inappropriate for us to say, ‘That’s not what we do here.’ It’s what they do there, and they don’t abuse it. Very few people even take advantage of it, but it’s there. What we wouldn’t tolerate is if we didn’t think they were treating their people with respect and dignity or they weren’t delighting their customers or embracing change. That’s different.”
In some cases, cultural differences mean walking away from potential business.
“In some countries, people offer (bribes),” says Garcia. “Well, that is expressly against the law in our country. You’re not to do it, and we don’t do it. And if we have to walk away from business, then so be it. We walk away from business.”
Garcia encourages all employees to keep the company’s five values in mind when doing business internationally, because even though it’s important to embrace cultural differences, employees should never go against the company’s core values.
“There’s a difference between cultural differences and things that are just wrong,” says Garcia.
The value of honesty
Despite all of Garcia’s efforts to openly communicate to his employees and accept their differences, he knows there are going to be times when he makes mistakes. The important thing is that he never strays from his values.
“Nobody is perfect,” says Garcia. “I think that if people just fundamentally think that you’re fair and honest, they’re going to give you a break. That’s why our jury systems work. If you take 12 people with varying degrees of sophistication and education, they can, at the end of the day, usually get to the truth of the matter.
“People know intuitively if what you are telling them is honest and if you’re fair yourself. They’ll internalize that and it will really make them feel good about working for a group that really respects me, is doing their best to reward me. They might make a mistake from time to time, but that’s all it is.”
Garcia’s strategy of staying focused on his vision and values has allowed the company to grow into its name. He’s taken what was once a $300 million company and grown it into a $900 million company with a large presence in Canada, Mexico, Europe and Asia, and Garcia expects that presence to continue to grow.
“We’re just scratching the surface,” says Garcia. “This company has a huge amount of growth in front of it. And I, quite frankly, believe our best years are absolutely to come.”
HOW TO REACH: Global Payments Inc., (800) 560-2960 or www.globalpaymentsinc.com
They were right. When Burget took the lead in 1997, Safety Management Group’s revenue was $509,000. Since then, revenue has increased rapidly; from 2003 to 2005, it increased from about $4.5 million to nearly $8 million.
But Burget is quick to deflect credit to his employees, saying that he simply listened to what they had to say and then made it happen.
“One thing I’ve done is listened and learned from our people that work here,” Burget says. “This is different, where you don’t have just one person running the ship. We try to emphasize that nobody works for anybody here.”
Smart Business spoke with Burget about the importance of relationships to growth and why you need to have a vision that employees can buy into.
To what do you attribute to your company’s fast growth?
We had the one anchor client that really started things. We were then able to pick up another anchor client. (If) you have a fairly large check coming in on a regular basis, it definitely helps with the cash flow when you are getting started.
The other things are having relationships. It’s important when people call that you’re responsive. We try to emphasize that with our folks.
With my voicemail, I change it every day, so people know what my schedule is and how to get ahold of me. It’s returning people’s calls when you say you will. I always return even the phone solicitors’ calls to tell them we’re not interested.
The management team that I’ve got, those folks are basically the leaders of our company. We were blessed to get some of the right people in the right places.
A lot of people tell us what to do. They say, ‘You ought to try this,’ or ‘You ought to try that.’ We’ve always stayed focused. Our core business is helping entities that have large contractor populations on their property or on a construction project. We’ve never really strayed from that.
How do you make sure the right people are in the right places?
You have to recognize their skills and talents. I don’t know if there is a way you can objectively do it. It is probably a subjective decision or observation, but once you identify those folks, you put those people in positions of leadership and responsibility and you take care of them.
One of the things we have done is a succession plan where the two other owners in ’97 those guys were silent partners and getting toward retirement had the vision, along with myself, to transfer ownership to the next generation of leaders, to have that vision to set them up so that those are the folks that are running the company and they can reap some of the success.
How did you expand your presence nationwide?
In ’02, we sat down and we knew enough that we needed to have some kind of annual strategic planning meeting and we were having that meeting and everything was going well, then one of the (employees) questioned me on where we were going, what’s in it for us and what’s your vision?
My vision, unfortunately at that time, was to stay in business and make money. They all stood up and said, ‘That’s not good enough. We need more direction.’ That led to our mission and vision statements and also our five-year goals.
It actually took us a couple more years to get our five-year goals done doubling in size, being the No. 1 place to work in Indiana, maintaining at all times our anchor clients, developing five products, being involved at a chairperson or a board level in 40 associations.
Those things have leapfrogged us into more of a nationwide presence.
How were you able to form the new mission and vision?
We probably took half the company and considered them our core people and tried to get 20-some people to put into words where we think we’re going. To get to the mission and vision we have now, it probably took us a couple of years.
It was something where we started out with one but we haven’t hesitated to tweak it as the years go by to make sure those statements hold true and they’re accurate and where we want to go. I don’t know if it ever ends.
HOW TO REACH: Safety Management Group, (800) 435-8850 or www.smgindy.com
“There was nobody there to hand it over and give me even two weeks of training,” says Smolyansky. “I truly learned everything on the job, and it was under intense, traumatic, painful times. I had lost my father and our president.”
Although Smolyansky had to learn how to run Lifeway, a developer of specialty functional dairy foods, as she went along, the company has prospered under her leadership. Sales increased from about $16 million in 2004 to about $20 million in 2005.
Smart Business spoke with Smolyansky about how she has expanded Lifeway’s market base and introduces new products.
How did you grow the company?
When my dad was running it, he had a certain image and a certain clientele. He was really focused on the Russian ethnic population, which were already big users of the product and already familiar with it.
I wasn’t going to concentrate on that market as much. They’re still my bread and butter ... but because the immigration stopped from the former Soviet Union, and Eastern Europe in general, I decided ... to focus on a different market. That was the natural and health food market.
I decided that we were going to change our packaging. That was critical because I thought the old packaging was kind of medicinal. The change in packaging opened up a huge market for us of mainstream people.
How do you approach the marketplace when introducing a new product?
There has to be a need for it. It is very hard to introduce new products, especially for a smaller company, because the larger companies just have so much money to do it.
For us, I think ProBug [a new product for children] is going to be a huge hit, because it is so unique and different and none of the large companies have been able to think about that, come to market with it. I think it might be too niche for larger companies. You have to be supermotivated and driven to get it into the marketplace.
What marketing strategies have worked for you?
I read “The Tipping Point” a few years ago and I absolutely loved the concept of it. It talks mainly about how trends are started and how epidemics are started.
It even uses things like diseases to discuss how an epidemic starts, and it translates into marketing terms ... how things become popular and successful. And that’s mainly through the use of certain groups of people.
I basically thought the same concept would work, and by using a grassroots type of concept that I would get the product into the hands of people who kind of make the trends or people who in their own circle or subcommunity can drive decisions and sales.
We are probably, once a week, at some kind of race, so I think runners have really picked up on the product. People who run marathons are considered semi-experts on food and nutrition, so if we’re able to convince them that kefir [A creamy drink made of fermented cow's milk] is a healthy option for a food choice, then they tell all their friends.
Or maybe it’s the soccer mom or the yoga mom. Certain groups of people, women especially, tend to have relationships and a strong network. Moms, if their kid likes something, they’ll tell all the moms they know.
That’s what we’ve done with all different groups of people. We just sponsored Bonnaroo, which is a large four-day music festival. The people who attend Bonnaroo are very loyal to the different companies that are there supporting the festival.
These are the type of people who influence and drive trends in the world. Putting an advertisement in a magazine isn’t necessarily what’s going to help our company. Getting in touch with people and getting a chance to talk to people is worth spending a little bit of money on grassroots to actually have a relationship with the customer.
How can other CEOs increase their company’s market penetration in the way you have?
Do a little bit at a time. We’ve been doing it consistently and strategically, so that we always have long leads and short leads and things that are down the pipeline.
You have to do it over time. The long term is a bigger picture than the short term. You might have a bad week or a bad month, but if you are focused on the big picture you will survive and succeed.
HOW TO REACH: Lifeway Foods Inc., www.lifeway.net
“It seems like most of them don’t survive from the first generation to the second generation,” Hoover says. “TVS is in the process of making the transition from second generation to third generation. Being able to do that with that type of longevity requires a culture that does keep your most valuable asset around - and that is the talent and the people you surround yourself with.”
Smart Business spoke with Hoover about how he attracts employees and creates a culture that makes them want to stay.
How do you attract top talent?
It’s a great incubator for young talent. TVS has a reputation ... that it is a great place for young people to come to learn a lot of things about all aspects of this very complicated profession, so you could get the necessary experience and savvy to take and pass that exam faster than anywhere else. We’re able to recruit some of the best and the brightest from around the country because of that.
Secondly is the work that we’ve got, the quality of the design, the acknowledgement that we’ve got out in the marketplace as being committed to high-quality design and the products that various students and other people out there in the profession see
Lastly, our Generation X people are very excited and attracted to firms that practice on a global basis. Even though their work may be on a domestic basis, they’re attracted to firms that are on a global basis.
Our younger folks are much better read, are much better traveled, they are more sensitive to the cross-culture realities that are on the globe now, they are more fulfilled about a diverse set of work-life issues, concerns about the environment, and it’s a rather sophisticated group, which makes me incredibly encouraged and optimistic about not only the future of our industry but about all industries.
That group is interested in organizations that have a diverse background of employees, of cultural backgrounds, and then clients and project opportunities that are equally diverse.
How do you create a good work environment?
TVS is 100 percent owned by our employees through an ESOP program. It started in 1980 ... and it has been about eight or nine years that we are 100 percent owned.
The ESOP culture drives a lot of who we are. Each and every person here is eligible to be an ESOP beneficiary. It doesn’t matter what role you are in. What it instills is an employee owner culture where we know that as individuals, we will do well if the overall organization does well. And as individuals, we equally share with our colleagues based upon our level of contribution and our performance.
But first and foremost, it is the health and success of the organization that comes first. If the organization is first because we all own it, if it is successful, then we and our families will be equally successful. That drives a lot of our culture.
We are not working for anybody. We work for TVS. We work for the organization. I like to think that we don’t have bosses, but we all are equal colleagues. We just have different missions and different roles within the greater entity called TVS.
How does having a positive work environment contribute to your growth?
Part of the ESOP culture is we have a couple of annual meetings. One annual meeting is dedicated strictly to ESOP and ESOP-related issues.
We also have ... an annual business meeting. All members of TVS attend that. If they can’t all be here in Atlanta, then the leadership of the firm goes to them, and we share not only what we’re doing for projects and looking ahead about what we are getting ready to do, but we share financial information, just like you would in a public company, even though we’re not public.
There are enough employees that we have a public-type mindset. So we open the books and show it to them. It’s amazing what a benefit that has.
Our employees not only know how their actions and how their performance can drive the performance of the company, but from an attitude standpoint, it lets them know that they are fully vested, trusted members of the organization.
HOW TO REACH: Thompson, Ventulett, Stainback & Associates Inc., www.tvsa.com
Bachelor of science degree, aerospace engineering, Georgia Tech; master’s degree in mechanical engineering and MBA, Stanford
Cleaning concrete forms at a construction site in South Florida. My father was in the construction business, and he wanted to encourage me to go back to school. He felt that the best way to do that was to have me clean concrete forms in the hot Florida sun.
I thought he was going to put me in the office doing something else, but he wanted to make a point. He made it loud and clear.
What is the biggest business challenge you’ve faced, and how did you overcome it?
It might have been my first real general management job, which was running a waste company in Detroit. It was a highly unionized, antagonistic work force.
I was a young manager, and they all understood that I was probably the last man standing and why I was given the job, because I don’t think anybody else wanted to run this company.
I didn’t have a real good playbook. I was smart enough to know what I wanted to do, but I really didn’t understand how to get people motivated to do it, especially (at a company) that had had a very negative environment.
I’ve been lucky, and there’s nothing wrong with being lucky. I was fortunate to be lucky. In the absence of any other grand idea, I tried just straight talk with the group and explained to them why the changes we needed to make were good for me and why I was promoting them, but more importantly, why they were good for them.
To this day, even though it was a relatively small company, I’m proud of what we were able to do over the course of almost three years.
Whom do you admire most in business and why?
I have had some great bosses. It was really my first CEO that was responsible for the company I just referred to in the waste business. He’s the one who strongly encouraged me to spend some time in sales. His name is Steve Beck, and I thank him for that.
Subsequent to that, someone that I think has always operated with the highest of integrity was my boss later on, and his name is Bob Anderson.
I’ve been very fortunate to have a great run of bosses early in my career that have always emphasized ‘Do the right thing.’ I think they’ve had more influence on me than any celebrity CEO that might be on the cover of a book.
The idea for the company came when Nelson was working for an auto dealership in 1997. In order to increase sales, Nelson developed a direct mail campaign that targeted customers who leased cars. He would send letters to customers who were approaching the end of their leases, branding himself and the dealer as lease specialists. The letters were sent every 15 days for the last several months of customers’ leases.
“It was so successful, that I decided to start my own company doing it,” Nelson says.
With $300 and a computer, Nelson started the direct mail company in his basement and began pitching to dealerships. Although it was months before Nelson gained his first client, he never gave up. He knew that if he could get auto dealerships to sign a one-year contract, then he could show them the effect that his direct mail campaign would have on their sales.
He was right. About a year later, Nelson’s direct mail concept was so popular with dealerships that he and his wife opened a 2,500-square-foot facility and bought $150,000 worth of equipment so they could stop outsourcing.
“I was outsourcing all of the folding, ink-jetting, lasering and all of those types of things,” Nelson says. “Well, we only mailed twice a month, so the rest of the time I had a full-time employee to run the equipment, they sat around and read books and didn’t do a whole lot. I decided why don’t I fill their time by selling excess capacity on this equipment to people who are customers of the company I used to be a customer of.”
Today, the company deals with 3 million pieces of mail a month for a variety of industries and reached $4.5 million in sales for 2005 a more than 1,300 percent increase since its founding.
HOW TO REACH: Captiva Direct, (440) 255-6000 or www.captivadirect.com
Kirtland Capital, formerly Chagrin Valley Co., successfully partners with management teams of niche manufacturing, distribution and business-to-business service companies in order to increase the long-term value of those companies.
Any successful partnership needs mutual trust and understanding, so Turben has focused on building strong relationships with the management teams of the companies he buys. Turben’s ability to respect management teams’ leadership abilities and provide them with the resources needed to grow their businesses has lead to profitable growth for Kirtland Capital and its partners.
Management is given ownership in the companies they manage through option programs, loans and incentive compensation programs.
“They always have strong ownership, so they have identical interests with us in building value in their companies and the same kind of payoff at the end when we sell the businesses,” Turben says. “For years we’ve had get-togethers between our investor group and our partners and spouses where we develop a true sense of partnership with our management groups.”
As Kirtland Capital grew and evolved, Turben decided he needed a process in place to prepare his companies for the future.
“We decided that the companies we owned probably lacked strategic planning ... ,” Turben says. “We developed, relatively recently, a strategic planning mandate to our businesses that once we own them we would, at the appropriate time, embark on strategic plans for those businesses. And we’ve continually done it for ourselves to keep checking what the changes in the private equity business have been and what we need to do in the future differently than we have done in the past.”
After nearly 30 years of success, Turben is confident that if he keeps investing in people and relationships, his business will continue to prosper.
“The mistakes that we’ve made have almost never been financial, they’ve been people mistakes, and there have been very few of them,” Turben says. “It’s all a people-related success story.”
HOW TO REACH: Kirtland Capital, (216) 593-0100 or www.kirtlandcapital.com
Shah had a lot riding on Noble his father had handed over the family’s savings to help him start the national hospitality organization in 1994. So Shah developed a mission statement that would allow the company to stand apart from the competition and lead it to prosperity despite the condition of the economy.
“Our mission is to be the most respected hospitality organization in the United States as measured by the loyalty of our team members, our customers, our financial stakeholders and the communities in which we live and operate,” says Shah. “What all that means, outside of a whole bunch of nice words and some nice thoughts, is we measure everything in terms of outcomes that we want to get to.”
Shah has made metrics an essential part of his business. His management theory is similar to the balance scorecard theory a strategic management concept that gives managers a comprehensive view of an organization by using metrics to measure success.
With more than 3,000 employees and millions of people staying in his hotels, measuring has been an essential way for Shah to keep track of people and their needs. He has a separate spreadsheet at each hotel, which he calls a dashboard, that measures four factors: team member loyalty, guest satisfaction, financial performance and community involvement.
“If you look at a car dashboard and say, ‘Gosh, my RPMs are a lot higher than my speed is going,’ you stop and you go get it checked,” says Shah. “That’s what we do.”
If a hotel meets the goal for a certain metric, the spreadsheet is marked green. If the hotel is in a 5 percent variance, the spreadsheet is marked yellow; beyond that, it’s marked red. Shah strives for an all-green dashboard at all of his hotels, and as soon as a metric starts moving into the yellow, he applies resources to move it back to the green. He never wants to see red on a dashboard.
Although every company measures financial performance, by also measuring team member loyalty, guest satisfaction and community involvement, Shah is able to see the big picture, and that, he says, is a large part of his success.
To measure employee loyalty and satisfaction, Shah uses metrics to evaluate employee training, Noble’s culture and employee turnover. He also provides employees with professional development plans to make them aware of the opportunities that await them at Noble.
“We work very hard to take the time to understand our team’s professional ambition,” says Shah. “We’ve got a dedicated training force in our home office that, surprisingly enough, we added immediately post 9/11, because we wanted to ensure the fact that we were building leaders that would allow us to be the most successful through the dog days of our business. But as we got through that, really what we thought [is that it would create] a great window of opportunity, which we’re kind of in right now.”
Shah’s first metric measures employees’ training. All managers are required to go through 35 hours of training each year because Shah believes that by providing them with ongoing training, he is educating the future leaders of his company. And managers are motivated to complete the training because they know that Shah likes to promote from within.
For the past three years, Noble’s training program has been based on Stephen R. Covey’s book, “The 7 Habits of Highly Effective People.” Shah says that those seven habits - be proactive, begin with the end in mind, put first things first, think win-win, seek first to understand and then to be understood, synergize principles of communication and sharpen the saw are a stepping stone for team members to learn to be more effective and productive in their everyday lives.
“We basically go through each one of those disciplines and we use a lot of role playing,” says Shah. “We have certified training staff on board and we go basically hotel by hotel. What ends up happening is, whether it’s guest service agents or engineers or food and beverage professionals, we take different approaches for each utilizing each of the seven habits in terms of how to be more efficient and ... do their jobs better and actually function as people in a fashion which is more productive.”
All managers must complete all of their training for the year in order for the dashboard at their hotel to be marked green.
Noble team members, especially managers, are motivated to turn their hotel’s dashboard all green because that is the main way they are evaluated. A hotel’s dashboard reflects management’s performance and whether or not that manager will receive a promotion.
“Every one of our managers knows that when the time comes when we acquire another hotel or we’ve got a position relative to somebody getting promoted, we are going to go by the dashboard in terms of who has performed the best,” says Shah. “That’s our grading scale. It’s the highest weight relative to a person’s ambition in terms of their career goals within our organization.”
The next employee loyalty metric includes anonymous surveys which are given to team members twice a year. Team members then have the opportunity to comment on their work environment and tell Shah what they think Noble is lacking without fear of punishment.
Shah says it’s important to do these surveys twice a year because if a problem has gone on for an entire year, a lot of damage has already been done. Surveys are graded on a point system, and in order for a particular hotel’s dashboard to be marked green, the total points of all surveys must meet a minimum threshold and be higher than those of the previous year for that hotel.
Finally, Shah measures turnover. He stresses that it’s more important to measure turnover of managers because hourly employees, such as waiters, housekeepers and valet parkers, tend to move around a lot.
“Our industry has historically been a higher turnover industry,” says Shah. “Seventy-five percent turnover is in the top 5 percentile in our business, but in most other businesses, that seems like a lot of turnover. We target 50 [percent], but we target less than 10 [percent] from a manager standpoint.
To keep turnover low, Shah performs extensive personality profiling to make sure that he is hiring the right people for the right jobs.
“If a team member is either terminated or leaves on their own, there is a process that has failed us,” says Shah. “It’s either in the selection process or ongoing motivation or training.”
The fact that Shah works with team members to create professional development plans and provides them with many opportunities for advancement also keeps turnover down.
“We like to say that if your career is in lodging or hospitality, we hope that you can accomplish all of your professional goals inside the Noble organization,” says Shah. “At the same time, we believe that the loyalty metrics are very fundamental to being able to deliver great experiences in our hotels.”
Focusing on the future
But having loyal, satisfied employees is not enough to ensure satisfied guests, so Shah also extensively surveys guests to find out what they think about every aspect of their stay.
“They’re not like the surveys you get in restaurants where you’ve either had a really great meal or a really horrible meal, which is the only time that you’re really filling those things out,” says Shah. “These things are done a lot differently to really give us a great sample as to where we are. It judges everything from how our exercise room was to how the heating and cooling was to room cleanliness, all of those different things.”
Guest surveys are graded on the same point system used for team member surveys. Everything is evaluated in terms of processes, because Shah says that processes fail, not people.
“If there’s a failure where a guest doesn’t have a good experience, it’s not the person who made the mistake, it’s a process that broke down,” says Shah. “Did the executive housekeeper and the front desk supervisor not connect on an issue? Was there a training snafu that the organization missed? What are the series of things that happened that caused it?”
These surveys also provide Shah with ways to improve his hotels. Recent surveys have told him that guests would like higher thread count sheets, more pillows, more user-friendly desks and bathrooms that are more spa-like, so Noble developed a plan to gradually change its hotels to better reflect guest preferences. However, when Shah noticed that one hotel’s dashboard had gone into the red in the guest survey area, he decided to speed that process along.
“There was a certain hotel that we planned to invest capital in in terms of new bedding programs, etc., in the fall,” says Shah. “It was spring, and we started noticing trends where our customers were saying that they were not as happy with the bed product as they had been. That ended up making us move our capital investment up a full quarter to nip that in the bud.”
By continuously surveying guests and listening to and measuring what they say, Shah can continue to increase revenue in his existing hotels and build his brand.
Another way he builds his brand is by contributing to the communities where his hotels are located. The main organization that Noble partners with is America’s Promise - The Alliance for Youth, which was formed to strengthen the character and competence of America’s youth. Also, all hotels in specific areas often come together to support a charity of their choice, for example the March of Dimes.
“We basically have a national platform with America’s Promise that we ask our hotels to be very visible in the local communities in terms of providing mentorship and internship opportunities in local high schools,” says Shah. “We measure that in terms of ongoing activity.”
As long as hotels provide ongoing support to the community, the dashboard is marked green.
By measuring the factors that drive Noble’s growth, Shah has been able to grow his company at a higher rate than the industry average, and Noble is on track to reach $380 million in revenue in 2006, up from $210 million in 2005.
“Our ability to translate our mission into day-to-day business practices has allowed us to be successful in great economic times and allowed us to really maintain our course during difficult economic times,” says Shah. “That strategy of having that mission connected to all parts of our organization, so when we were a very small company to now where we have 3,000 employees, it’s still been the thing that drives us is the thing we measure.”
HOW TO REACH: Noble Investment Group, (404) 262-9660 or www.nobleinvestment.com