When he was president of Oberlin College, Robert W. Fuller had a superstar and aproblem.
The superstar was a baseballplayer who was hitting .550 on the college’s team. The problemwas that the kid wouldn’t cuthis hair, and the veteran coachwanted everyone’s locks incheck. The 1950s were wayover, and Fuller knew the rulehad to change, so he went tothe coach to figure out how tochange it without making anyone look bad.
“The coach said, ‘My authority will be undercut if I reversemyself, but if you’re willing toorder me to change the rule,then we’ll change it, and I’ll takerefuge in the fact that the president made me do it’ — but hehad suggested it himself,”Fuller says.
Today, Fuller — who coauthored “Dignity for All: How to Create a World WithoutRankism” with Pamela A.Gerloff — focuses on lessonssuch as that one and how aleader can fix problems by usingrank without abusing power.
Smart Business spoke withFuller about how to talk toleaders who abuse power andwhy hierarchies are OK butrankism isn’t.
Create a hierarchy without rankism. Rank differences are not theproblem; we are not equal inour abilities, in our experienceand in our judgment. We’rewildly unequal, and we should-n’t even think we’re going tocreate a level for everybodyand have everybody at thesame rank.
Egalitarianism was tried on amassive scale in communistsocieties, and it was a flop.Abusive rank is the problem.To eliminate rankism, we don’teliminate rank; we try to makereally sure that there is mutualrespect both upward anddownward — especially downward, where it’s a choice.
Upward, there’s no choice; ifyou’re not respectful to yourboss, you’re very apt to loseyour job. But what we’re discovering now in business, andevery walk of life, is thatrespect downward createsesprit de corps, energy, healthand happiness, and it creates amuch more robust, productiveand creative work force.
Great leaders are ones whodo two things: They have agreat vision for their company,and they’re humble — theytreat everyone with respect.And more than that, the CEOcan be a nice fellow, but if hecountenances rankism at all,he’s not doing his job. Greatcompanies have CEOs whodemand all their subordinatestreat their subordinates withdignity. So there’s a surveil-lance job that’s needed.
I remember discovering thisat Oberlin, that it wasn’tenough that I be decent to myvice presidents and provostsand so on. It was importantthat they did the same thing totheir subordinates, and thatmakes for a place that canreally go places because the sabotage that disgruntledemployees can wreak upon acompany is just beyond comprehension.
It ranges from stealing paperclips and pens, all the way upto whispering to customersthat the company is actuallydysfunctional and that theproduct is no good.
Go into cahoots with those causingproblems. Let’s say you discover that there is a bully somewhere in the organization thattakes pleasure in humiliatingsubordinates. You go to thatperson, and you do not bullythem — you do not try to correct his behavior by doing tohim what he is doing to others.
You ask him what the troubleis — in other words, you haveto play a little bit of psychia-
trist. You try to correct hisbehavior while telling him it’sunacceptable; you try to tellhim in a way that preserves hisdignity, that’s the key.
You cannot eliminate rankismwith rankism. You don’t eliminate the amount of rankism inthe universe by doing it thatway — you’d leave peoplesmarting, and they look for achance to get even with you,and they become your enemy,whereas up to that point, theykind of liked the president, nowyou’re their enemy.
You have to do it in a way thatdoesn’t involve more rankism,and that always involves askingthem and exploring the reasons.And do you know what the reasons always are, that someonewas rankist to them in the past.
It’s identical to why childabusers very often wereabused when they were children; so, too, rankists had afather or a mother who was abully. So you talk to themabout that behavior.
You go into cahoots with theoffender. You do it as a problem-solving thing rather than as, ‘I’mright, I am morally superior toyou, and you’re going to do itmy way.’ Come up with a workable solution here, and you cantry finding a solution in different contexts. It can be one onone, you can broaden it to otherpeople, but you’re in problem-solving mode, you’re not in dictating mode.
Bring people in to wear down theagitator. My feeling is, 99 percent of the time, you can solve these problems really quickly.
Every once in awhile, it’sreally hard, and you can’t finda solution, and then what youdo is you say, ‘We have notfound a solution yet, we’re stilllooking, we’ve broadened thecircle to keep looking, buteverybody can get involved’ —and the minute you’veinvolved everybody, you’veactually come up with amethodological solution.
You don’t have the answeryet, but you have a methodology that will find one because,gradually, you’ll wear downthe guys who are resistingsome change or resisting giving up a perk that they do notdeserve that in itself constitutes an indignity for everyone else.
HOW TO REACH: Robert W. Fuller, www.breakingranks.net
Yallen president and chief operating officer of Inter/Media Group of Cos., the company started by his father saw a bright future ahead for the advertising agency and media organization that blends direct response advertising and general market techniques. That is until a slew of significant clients went into bankruptcy. Losing business would have been bad enough, but Inter/Media was on the billing end of the media needs for those companies.
“So it was like the double whammy,” Yallen says. “The clients went into bankruptcy, we got held holding the bag on their debt, and we lost their revenue, so it was pretty awful.”
Want the gory details on the word awful? At the time, Inter/Media was doing less than $75 million in billings. The debt it got left with was roughly $2 million.
Oh, and losing those accounts basically cut business in half. “I had our bank talking to me and my father like we were 2-year-olds,” Yallen says. “It was rough. That type of debt would still hurt today, trust me, but we could weather that. Then, that was devastating.”
That’s not to mention that for some of those accounts Inter/Media had set up specific local offices, which were suddenly running with high overhead and no revenue stream.
If ever there was a time to circle the wagons, this was it. Yallen pulled in his top advisers, and they began creating a plan to diversify Inter/Media’s business by adding more clients and making themselves less of a commodity while focusing on accountable production. But before they could act on anything, they had to calm down nervous employees, make sure they had the right people in place to add new elements to the business and then give people the autonomy to create the services that would get Inter/Media back on track.
Take control of the huddle
When things were at their ugliest at Inter/Media, Yallen turned to the people he trusted most in his company and in the outside world for comfort. You don’t want to get your people too worked up, so save the worst for closed doors.
“It’s difficult at best, and what you need to do is surround yourself with your top people and any of your outside advisers and have them work with you and work with them on maintaining calmness,” he says.
Those outside advisers weren’t just business associates, by the way.
“My wife, I consider her my partner, and she was instrumental at the time and just sharing everything with her and relying on her and getting her input,” Yallen says.
The idea isn’t to hide bad times from your people, but Yallen wanted to keep any elements of panic away from the public eye. In order to maintain business, you have to be sure people believe in you and the company. That means that even when you share the bad news with internal and external people, you don’t have a shaky voice.
“We wanted to eliminate panic among our team members, and we also wanted to avoid building bad will with our vendors,” Yallen says.
It was an extreme case, so Yallen and his father both did that by doing something extreme: They cut both of their salaries and injected money from their own pockets into the company. That money was used not just to provide a little bit of daily capital but also to give out the annual bonuses that employees had grown used to. So while employees knew things were rough, they also saw the company was trying to fix its problems without hurting employee checkbooks.
“We made sure that our employees knew most of what was going on, and remember we were a much, much smaller company then, but even that year we gave out bonuses,” he says. “We still had to reward our people.”
Yallen is not saying to give away money from your pocket, but that moment was about instilling confidence. After saving the roughest times for those he trusted most, the outer employees were told of the hardship but also saw that leadership believed they could turn things around.
“It helped tremendously because we showed that we believed in the company in two respects,” Yallen says. “One, cutting our salaries, and two, putting money into the company, and I think probably putting money into the company showed the most. I don’t know how much it transcended down to the ranks, but we obviously felt comfortable, and that probably showed with our staff that, by doing this, we were somewhat calm.”
Hire gold medalists
Yallen pulled from his sprinting background in order to take the next step in turning Inter/Media around. While many employees were encouraged by the calm instilled, other positions were left open when offices had to be closed when accounts were lost.
So as Yallen began bringing in a few new people, he started thinking of new hires in more athletic terms. That’s not to say he began only hiring his collegiate athlete buddies. Instead, he focused on hiring competitors and winners.
“We look to and love athletic backgrounds,” he says. “I love people who have competed at a high, elite level, as well as the military, because there are certain things that are instilled within an elite athlete and someone in the military that you just can’t find anywhere else.”
The point is basic: Checking resumes for people who have been in and handled high-pressure situations will behoove you.
“In our business, we’re just like the travel, hotel and airline industry, what we sell today we can’t sell tomorrow,” Yallen says. “Imagine being Wal-Mart and everyone one of your items that’s on your shelves disappears the next day. So it’s a very difficult business in that we need to maximize every day, and that means being able to move at the speed of light. There are people that can’t work in our organization because they can’t move and think that fast.”
That doesn’t just limit him to former athletes or military personnel, by the way. He says the idea is finding someone who is passionate about life in general because you can spark that person.
“I look at extracurricular activities beyond sports (on a resume),” he says. “Looking at a rounded person, the more a person does, the better they’re going to be able to communicate with others, so I really like somebody who has a heavy emphasis on something other than just having a 4.5 GPA."
Yallen doesn’t keep stats on how much better his company has done by looking for passionate people something he says you can find by simply asking about what sparks someone outside of work but he knows it makes a difference.
“Do I have quantifiable data? No,” he says. “Could I do it? Yeah. I can tell you that the people in our organization, or any organization for that matter, that are well-rounded and well-rounded to me is more than book smart, it’s experience, it’s having multiple disciplines and multiple interests are more passionate. Look at people, what hobbies do they have? It can be wine tasting, but they have passions for things. The one thing that I won’t accept in anybody that works for me is somebody who doesn’t have a passion.”
Give them a chance to run
As Inter/Media started to dig itself out of a hole, Yallen learned the value of giving up his own athletic spikes and taking up more of a front-office job.
“I don’t want to say that my role is more of a coach, because I can quickly translate into the GM mode, but I really try not to micro-manage, which by the way comes with a lot of maturity,” he says.
While the turmoil Inter/Media faced was rough, it gave Yallen the opportunity to restructure. The lost accounts meant the closing of some offices, and the end alignment has each unit president located at headquarters today. That may not last forever, but Yallen is able to let go more because he knows his people are close by, and he can have weekly meetings with his leadership team.
“So if I’m getting constant updates and status reports, and I know where the ball is headed, so to speak, I am able to back off,” he says. “If I’m getting information and we’re not headed in the direction we need to be headed, I’m obviously going to step in a lot quicker.”
Not every company can keep its leaders in one building, but Yallen’s comfort comes from the fact that he’s made an effort to create lines of communication with each direct report to see the overall scope and timeline of their work. If you can get your people giving you regular overviews of their work, whether they’re in the same office as you or not, you can let them take over and feel free to be more creative to help the company become more distinctive.
While Yallen feels good having his people close so he can give them feedback, part of pulling Inter/Media from the depths was hearing what every employee with an idea had to say.
“Look, if you’re an athlete and you’re not listening to your coach and you’re not able to synthesize what they’re telling you, how are you going to reach your best performance?” he says. “Same thing in business, so you have to know how to listen and be listened to.
“I try to be respectful of everybody, whether it’s a maintenance person emptying trash cans or a high-level executive president of a company where I’m trying to get their business. I grew up in the civil rights era, so I believe everybody is equal. Period. Some people are just a little luckier, and some people work a little harder, but everybody is equal. Now, from a practical standpoint, am I spending as much time with an admin as I am an executive? No, but they have the right to give any input that they have.”
To show that respect, you have to be willing to put down your BlackBerry and let go of your mouse when people come to see you. You also need to encourage or better educate them.
“One of my people came to me today with the idea of going after a certain piece of business, and I don’t think there’s a snowball’s chance in hell that I’m going to get that business,” Yallen says. “But I don’t want to discourage her. So I explained why it was not the right company to target. So I sat down and said, ‘This is what you should be looking at.’ I tried to encourage her because it’s to all of our benefits that we’re all thinking like that.”
By helping his employees find that autonomy, Inter/Media was able to pull itself out of debt and start to really differentiate itself in the marketplace. Today, it provides service to clients like the U.S. Army and DISH Network Corp. and has grown to more than$450 million in billings. While Yallen thinks his company would have dug itself out of the hole, the things he learned about keeping calm and finding and empowering the right people really helped Inter/Media to the next level.
“I think we would have been OK because, at the end of the day, it’s how you perform for your clients, and we’ve always done an excellent job at what we do,” he says. “It would have been a question of how much we would have grown, and I know we wouldn’t have grown to this extent. We would have gotten through and made a good living and employed a lot of people but not had near the amount of success that we’ve had.”
HOW TO REACH: Inter/Media Group of Cos., (818) 995-1455 or www.intermedia-advertising.com
It’s a cliché that runs deep in the sport:
Football is a team game.
But, really, it is. The truth of the matter is,
there’s a lot more teamwork that goes into
running the Chicago Bears Football Club
Inc. than the cohesion shown by the players on Sundays.
And that’s where Ted Phillips comes into
play. Phillips, the president and CEO, is in
charge of running the team’s business operations. From the time he was put into that
role in 1999, he’s been focused on getting
his roughly 130 employees to work as a
In his years with the Bears, Phillips has
helped the organization push through to
become a financial success in the National
Football League by working with the city to
fund a large-scale, several-hundred-million-dollar renovation of Soldier Field, where
the team plays home games. He’s also positioned the team to have success on the
field, as the Bears made it to Super Bowl
XLI at the end of the 2006 season — their
first trip to the big game since the end of
the 1985 season.
In the mega-hype world of professional
football, where rookies are often given
endorsements and multimillion-dollar
contracts before they even set foot on the
field or take one snap, one might think
that Phillips’ success would be something
that would come up easily in conversation. That assumption, however, would be
“The biggest thing in terms of being able
to accomplish all of that was I had some
great people around me; I had a great team
of people,” he says.
And that team is what Phillips focuses
his leadership around. In order to do
great things, he believes you have to put
together a team of people who can work
So while the Bears are privately owned,
and guard their financial numbers with a
few of their offensive linemen, Phillips’
team has earned some respect. Forbes put the team’s valuation at $1.1 billion, ranking
it ninth in the 2008 list of NFL teams — not
bad considering the Bears were purchased
for $100 in 1920.
Here are a few tips from Phillips on how
to get everyone to run the same play.
Hire team players
The cover of a football team’s press
guide may be a picture of a quarterback or
a middle linebacker, but the daily blocking
and tackling of everybody on the field is
what makes it successful. Phillips looks at
his team on the inside the same way. And
that starts with scouting the right team
“You have to hire well,” he says.
In order to hire smart people who can fit
in with your team, Phillips says there are
some characteristics you can look for.
“You want to find people who are flexible
in their thinking, not rigid,” he says.
“Everyone always talks about the right fit,
and you want people who can check their
ego at the door and be truly team players.
... That makes your team more cohesive
and better in the long run.”
The key to finding talented people who
can check their ego at the door is in letting
them tell their story. After you vet the
resumes and find people you think are
going to be sharp, bring them in and ask
them to talk about their accomplishments.
As they talk, hear what they are saying to
see if they’re interested in moving forward
the daily tasks of the team or if they are a
needy, me-first wide receiver.
“Some of it is how they answer questions
during interviews,” Phillips says. “As they
are talking, are they using the I language
about everything that they did or are they
talking about how they added to the efficiency or the overall good of the company
or the department that they were working
You can’t do all the hiring yourself, of
course, so make sure that this hearing test
is being administered by your direct reports as they hire.
“I try to instill that in my direct reports
when they’re hiring people,” Phillips says.
“You tell them to be alert for red flags that
go up in someone’s personality. Are they
being arrogant; are they talking too much
The other part of getting that philosophy
down to your direct reports is ask them to
have other people test personalities. When
it comes to hiring, involve different people
and let them know they are looking for
someone who can put the team first and
warn them to look for a personality that
can’t do that.
“You talk to them about it as they’re interviewing to make sure there’s a fit personal-itywise with your other staff,” Phillips says.
“(That’s) not just the person interviewing,
but make sure they get some input from
other people in that department as to
whether the candidate is a good fit or not.
Hand the ball off
In order to have an efficient team, you
have to create systems that give people leeway so there isn’t a bottleneck when it
comes to making decisions.
“You have to empower people, you have
to give them responsibility, you try to create an environment of collective responsibility,” Phillips says.
To get that, you can’t be right on top of
your people all the time. Instead, try setting
up regular meetings with your direct
reports where they can give you detailed
timelines, status updates and bring up
points of note. In between those, don’t
poke your head in every day looking to
take on their responsibilities or have everything done the way you would do it.
“I don’t micromanage,” Phillips says. “A
lot of times, I don’t ask for all the details; I
try to teach people, ‘Have confidence in
yourself. It’s OK to take risks; it’s OK to
make mistakes. It’s just if you make them,
try not to repeat the same one.”
While you should hang back and trust employees, you also
have to make yourself a resource. Phillips has regular meetings
with his direct reports, but he doesn’t tell them to hold off if they
are in need of help.
“I always tell people, ‘If there is something critical, you don’t
have to wait for the next scheduled meeting,’” he says.
But all of that comes with a caveat.
“People want responsibility, but they have to have accountability, too,” Phillips says.
Accountability in a culture where you want to empower people can be tricky. But Phillips likes to use his check-in points
with his direct reports as a teaching example. You can make mistakes like lying or stealing fireable offenses, but make other mistakes a learning opportunity the first time they’re made. That
will let employees know that they can take a risk and, instead of
finding themselves on a guillotine, they’ll get positive reinforcement.
“When they do make those mistakes, they start to realize
that you’re not just bringing the hammer down on them; that
you’re using it as a teaching opportunity,” he says. “And after
awhile it gets ingrained in employees that, ‘OK, I understand
that.’ And it all goes with wanting more responsibility and
being accountable. But being accountable doesn’t mean that
you get fired every time that you make a mistake.”
By giving people the rope to make a mistake, you give them
empowerment. But by reiterating with them that a big mistake
is a one-time thing, you keep accountability. If you can keep
doing that consistently, you will have a culture of empowerment.
“You end up building mutual respect and trust in different dealings, and employees begin to trust you when what you say is
consistent with the actions you take,” Phillips says. “It’s easy to
say, ‘Don’t worry about it; you can make these mistakes,’ but
then when you turn around and act a different way, people start
wondering about where you’re coming from. If you’re just consistent in your approach, then, over time, employees start to
realize that there is some method to your madness.”
There’s one last thing that Phillips says can be done to empower people: Give them a little credit here and there. Whenever he
talks to the company about successes, he lets people know who
handled the project and who they worked with. The end result
is people like to take on a little more responsibility because they
know they’ll get recognition.
“I give them credit when something is done well,” he says. “My
direct reports know that the credit gets shared. They like that.
Understand that everyone needs a pat on the back once in
awhile — a simple thank you sometimes goes a long way.”
Hear all the voices in the huddle
If you want people to feel like they are part of a team, they
have to feel like they have a voice. To Phillips, giving them that
voice comes from two-way communication. That begins with
“Learn how to listen,” he says. “You can learn a lot more when
you listen to people than when you’re talking yourself.”
That process is about pairing the mental and physical aspects
of listening together. The basics are to shut your mouth and
make sure you look attentive and are paying attention.
“You make eye contact, you let them finish their thoughts before you speak, some basic ideas really,” he says. “You let them finish
their thoughts, their ideas — even if you disagree, you don’t immediately criticize. You accept, you try to add other points and give
them a different direction to think about.”
It’s also about giving employees a more comfortable work
atmosphere where they can be heard. It’s always hard for CEOs
to break down walls with employees, but make sure you take
the time to say hello to people in the hallways or during lunch.
“Yes, we have an organizational structure, yes people know
that I’m the CEO, but I like to treat my direct reports the same
as I treat my lower-level employees and try to engage people,
even if its just a couple of minutes during the day in the hallway,
just so they feel that they, too, are an important piece of the
organization,” Phillips says. “Everybody needs to feel they have
some input; everybody needs to feel that their job means something.”
For Phillips, that process sometimes means giving his funniest
two minutes of stand up. When it comes to breaking the ice with
people, it helps to have a few good jokes — or at least jokes that
you think are pretty good.
“People need to enjoy their job every day because people
spend so many hours in the workplace, and so I do believe in not
taking yourself too seriously,” he says. “You have to laugh at
times. You have to use humor — especially in a situation where
you’re negotiating something with somebody. Oftentimes,
humor can be used to diffuse tension in a certain situation.”
The second part of two-way communications is checking for
clarity. You have to ask people questions to make sure that you
heard what they said and they understood your response.
Phillips likes to clarify points when there’s some disagreement
by asking people to repeat their points more concisely and then
follow up by giving summations of his own points.
“I also try to encourage people to understand that just because
you say something, the key is, did the person you’re talking to
hear it the way you intended it to be heard,” he says. “And if you
don’t ask questions of people, you don’t find out those kinds of
things sometimes until it’s too late.”
HOW TO REACH: Chicago Bears Football Club Inc., www.chicagobears.com
Carl J. Grassi came into his tenure as president of McDonald Hopkins LLC dealing with a potential communications catastrophe.
The business law, litigation, restructuring and estate-planning firm was fine from a business standpoint, growing from one office to five in the last five years, but it was dealing with the unexpected death of Grassi’s friend and predecessor, Joseph J. LoPresti Jr.
Grassi did his best to comfort his people through open communication, mixing understanding and the time to mourn with an appropriate focus on the future. Then, after six weeks, Grassi and the firm’s partners had an off-site retreat to close the sad chapter.
“We focused not on the past, but we focused on communicating where we were at and where we wanted to be,” he says. “It was great closure to a very unfortunate, unexpected result.”
With that, Grassi was able to refocus his more than 250 employees on getting back on task and seeing brighter days ahead.
Smart Business spoke with Grassi about how important it is to open up communications.
Talk business in person. To get the message across and have people pulling in the same direction, the importance of regular and frequent communication is critical. And one thing that you can’t replace is the impact of face-to-face communication.
Our management team meets every month, and every quarter, our management team goes to one of our markets and spends two days. It takes a lot of time, but you have to do that because each market is unique in and of itself, and people want to feel like they are a part of something.
And the only way you can do that is you’ve got to be able to embrace the feedback; you can’t be critical of the feedback. You’ve got to listen. You’ve got to make people feel part of something — and the only way to do that is you have to be there. Face-to-face communication is still the most effective way to have people relate. You cannot replace the benefits of that.
So you can easily say, ‘Well, you have videoconferencing capabilities, you have e-mail, and you can hit four digits and be talking to somebody ...’ But, you know what, it doesn’t replace regular and frequent communication, and it doesn’t replace those face-to-face meetings.
Listen to everybody. To get feedback, you have to be a good listener; you have to be able to listen to the message rather than try to impress upon them your agenda or your considerations.
Secondly, you have to be proactive at it. One of the things we did this year — and will do on a regular basis — is a client survey and an employee survey. What we’re trying to do is be proactive so those individuals that may not speak up or say how they feel can voice concerns. The other thing is the walk-around management style; it’s going out there and seeking that feedback — asking and encouraging people to speak up.
If you look at our firm, 85 percent of us have come from other law firms. We draw on those experiences that those individuals had with those other firms, those things that we need to consider and those things we should avoid.
And to be able to do that, you have to be able to listen, and you have to be proactive in terms of asking and encouraging people to communicate.
Give everybody the same memo. When you put out the message, being consistent — not changing the message — is so important because it can be misunderstood, misconstrued. So when I talk about the results of a particular month that we’ve had, that message goes to everybody. We don’t change the message for the audience because we have to recognize that we’re all here together to promote and grow this firm. And if you’re going to do that, then you need to make sure the message you’re providing to your colleagues is consistent.
That’s really important as you evolve and change — and we’re a bigger firm today than we were just a few years ago or just last year. You’ve got to make sure that the message doesn’t change for the audience. Sometimes the core thing there is when you get the message out, you really want to make sure you do the message in a framework where it’s, I don’t want to say instantaneous, but it’s out to everybody at the same time because you don’t want any of it to be lost in the translation.
Celebrate success, but refuse complacency. The time you become complacent is the time you really need to find something else to do. You really need to be looking outward, looking forward. You can rejoice in your past successes but not to the extent that it forestalls you from moving forward.
One of the things I have on my wall is a Vince Lombardi speech. ... His one line is, ‘(There is a second place bowl game, but it is a game for losers played by losers)’ That’s a little strong, because you don’t want to be viewed as ‘winning is everything,’ but what he really was saying is, don’t be complacent, try to strive to reach your fullest potential, don’t just sit there and say we’ve made it.
If you think about our firm, we could sit back and say, ‘Boy, we’ve done a pretty good job.’ That’s the day I need to worry because we need to continue to look at opportunities. That’s a daily occurrence that you share with everybody. You don’t put it away and think about it later.
HOW TO REACH: McDonald Hopkins LLC, (800) 847-6424 or www.mcdonaldhopkins.com
He wants to help you turn your company around, but the fact is most people won’t do what he’s recommending.
Sure, sure, the guy has a great story to tell. And nobody sums up the plight of The Middleby Corp. in 1999 better than Bassoul.
“We had very limited resources and capital, we were running out of cash, we were very highly reliant on three customers that generated more than 60 percent of the sales,” he says. “We lacked innovation, and the products we were generating or creating were very me-too products. The competitors were stealing our best employees, and the turnover at Middleby was more than 33 percent. Roughly 30 percent of the orders were not shipped on time, so we had a case study of a lousy company.
“Externally in 2000-2001, we had a recession. Patents on our highest margin product line, which is the Middleby conveyor oven, had just expired and competitors were all jumping in. Good scenario to start the story, eh?”
OK, it’s a good place to start the story. But the turnaround that Bassoul, Middleby’s chairman and CEO, made is a lot to handle. He slashed nearly 30 percent of Middleby’s sales and dropped the company from more than 10,000 SKUs to 1,000 in a matter of 90 days. He came up with a plan to completely rearrange the provider of restaurant and food service equipment because it was stuck around $100 million, and he had the audacity to focus that strategy on taking giant risks on innovation and building a global brand. This is the kind of stuff that you don’t try at home. But, if you’re still interested, Bassoul wants to show you how to completely rethink a company.
Be No. 1
Middleby’s industry is turnkey and simple: You make a range of products and you go to visit a restaurant and sell them all. But Bassoul realized something that a lot of companies struggle with: Middleby wasn’t that great at anything.
“The problem is if you’re not No. 1 or No. 2, then you’ll never get pricing,” he says. “So, being No. 1 always generates a higher price premium because you can service your customer better, you can innovate better, and you can retain your employees better because you can pay them better bonuses.”
So Bassoul made a decision that he recommends to you if you need to get your company out of a rut.
“We audited all of our engineering resources, and we decided we wanted to be No. 1 in one segment -- and we were not No. 1 in anything,” he says.
That audit told him that his company could not be No. 1 in things like refrigeration or dishwashers. So Bassoul and his team dropped everything but the hot side -- conveyor ovens, fryers and the like. Knowing that area was the strongest, they put all of their resources into it and began doing new things. With more engineers working on that core competency and more salespeople dedicated to it, Middleby was able to start leveraging a new customer base. With more than 60 percent of the sales going to just three customers, the company was in a risky area, but by taking a new risk on just one core competency, they actually made things safer. Having bet everything on the hot side, Middleby began getting its foot inside the door with new customers by offering the most liberal guarantee in the industry.
And that’s Bassoul’s first lesson for you: If you want to start digging your company out, find something that you do well and do it better. You have to be responsible for dropping your dead weight and charging your people with being truly great in one area.
It was risky, but here’s a sneak peek on how it worked for Middleby: “Our market share increased from a 6 percent to around 20 percent,” Bassoul says. “And today, we are No. 1 or No. 2 in every segment we serve worldwide.”
Swing for the fences
If you really want to turn the corner, you need to go beyond refocusing your company to find a few areas you can make a difference and then use your limited resources to take a big swing.
“You need to identify trends, and you need to go out in the trenches and identify your customers as well as customers that don’t choose your product,” Bassoul says.
So when Middleby’s focus on ovens turned up, Bassoul began making visits to customers that bought his product and ones that didn’t.
“I tend to spend a lot more time with customers that don’t buy my product, and I’m not trying to convince them to buy my product,” he says. “I’m trying to learn why they didn’t buy us and what they don’t like about the products they use so when I go back to my customer they buy me because I become better.”
But this is where Bassoul says you have to really pay attention to see what innovations can truly spark the industry.
“How many people tell you they are customer-driven?” he says. “We are not customer-driven, we are customer-driving. Customers don’t know an iPod; they can’t help you create an iPod.”
So to create an iPod, you have to pick up on things beyond what people are complaining about by sitting with them long enough to listen to current state of their business. At Middleby, for example, Bassoul noticed two things in restaurants that might not seem directly related to his business. One, restaurants were cutting back on costs wherever they could. Two, the trend of dining out casual was growing every day.
So Bassoul took everything he had and put it into addressing these issues. Middleby decided that it would build its brand up around more casual dining -- going so far as to make that brand global -- and put all of its engineering focus on the innovation required to make more energy-efficient ovens.
“We bet the company on these things, and that’s what people need
to do,” he says. “We didn’t take on 20 projects. The customer told us change that knob to red or green; we didn’t want to waste our time. We wanted to do bold moves, so in 2000, we bet on energy saving. We put huge resources in designing ovens and fryers with energy management systems that could save customers hundreds of dollars -- and today, thousands -- on the monthly utility bill. It was the same year Hummer introduced H2 at 9 miles a gallon.”
The company also attacked the global market by going into markets where there was no local player and building test kitchens and funding complete operations. Both moves were completely different than anything that Middleby’s competitors were doing -- and that’s exactly the point.
“When you look at our competitors, they are still trying to change knobs,” Bassoul says. “We’re not working there, we’re working on huge disruptive technology, we’re working on plasma TV versus tube TV, we’re working on iPod versus Walkman.”
As a result, Middleby today has been growing its international business by double digits annually and 30 percent of its employees work overseas. Oh, and in case you didn’t guess, customers have been pretty interested in the more efficient equipment, too.
Get your people on track
Bassoul doesn’t sugarcoat some of the facts that come with turning your company around: If you want to do things like Middleby, you’re going to have to fire some people and you’re going to have to pay for orthodontics.
Those things might not sound like they go together, but if you’re looking to make big moves, you need the right employees and the right culture. Middleby was focusing on cash flow to help fund innovation, so there was an obvious need to cut some sites and some people. So Bassoul went through a quick process of cutting the dead weight and then put the people he had left in a more simple structure that was only three layers deep with better bonuses for everyone.
Do you want to know who he got rid of? He cut four types of personalities without a second thought: the whiner, the sniper, the passive-aggressive and the contaminator. Fittingly, the names for all four tell you what you’re looking for.
“The whiner is the person who every day whines about everything,” Bassoul says. “‘The weather isn’t good; the coffee isn’t good.’ The sniper is the person who snipes at everybody else. ‘I can’t do my job because accounting didn’t give me that’ -- they have to go. The passive-aggressive can tell you everything you want to hear, and then a month later, they’ve done nothing. And then the contaminator: Those people have a history in the company. They are smart, but they use that to build arguments to prove you’re wrong instead of working to make it successful.”
Those traits stick out at any company and, with all due respect to Jack Welch, Bassoul says you can’t cut just the bottom 10 percent of your company.
“Most people talk about, ‘Oh this person is not performing; we take out 10 percent of the nonperformers,’” he says. “Of course, if they’re not performing, you should take them out, but it’s tougher to take out people who are performing, but they are whiners. Those four (personalities) create morale issues.”
Bassoul knows it’s not easy to let people go, but he’s worked out a way to be civil while being quick: He gives people one month of severance pay for each year they worked at the company.
“It took me a long time to convince my board that (good severance pay) needs to occur because then you free people to take people out,” Bassoul says. “A lot of people expect managers to fire people and give them one week per year. You know what, nobody is going to do much unless they are forced to because they feel guilty.”
If you’re cutting nonperformers and the four bad personalities, Bassoul says what you’ll be left with is a group of employees that he calls game-changers and plug-and-play people. Both are autonomous and self-driven, and you need to hold on to them. That’s where the orthodontics comes in. Middleby gives all of its employees lavish health care that includes orthodontics and vision.
Like paying the severance to get rid of people poisoning your culture, the health care costs are worth it once you have efficient employees. And once you get to that point, Bassoul says those employees will bring in more of the same. Today, Middleby’s primary mode of hiring is from employee reference because he believes his people understand the culture the company has created and the type of people that will fit in.
Look, no one is telling you to risk your entire company on one project or to fire all the whiners in your company. Bassoul wants you to feel free to take any part of this and apply it to your turnaround. Of course, if you are willing to risk it all, he’s seen some benefit to it.
“We have 2 percent turnover from, remember, 33 percent,” he says. “Our employees have referred 85 percent of our new hires since 1999. We have the most productive work force in the industry, as our sales per employee has risen from, in 1999, around $130,000 in sales per employee to around $500,000 per employee.”
Oh, and Middleby has one more chip to bargain with in case you still think the plan was half-baked: In 2003, it had net sales of $242.2 million with net earnings of $18.7 million, but in 2007, it had net sales of $500.5 million and net earnings of $52.6 million.
HOW TO REACH: The Middleby Corp., (847) 741-3300 or www.middleby.com
Founder and Chairman, TriNet Group Inc.
Martin Babinec has been in your shoes.
As the founder of privately owned human resources outsourcing provider TriNet Group Inc., he loved being in charge of his business his way.
But when times got tough, he realized that he needed the help of outside investors. And with that help came the natural concern for any entrepreneur when outside people come in.
“As you’ve probably seen, oftentimes, when there is a change in shareholder, the CEO is the first to go,” he says.
But Babinec remained president and CEO of the company through the time when initial investors took a small portion of his company and, eventually, when two separate investors took controlling interest. Along the way, TriNet earned a spot in the Inc. 500 Hall of Fame for its fast growth, and Babinec, who recently stepped down as president and CEO but remains chairman, learned how important it is to share realistic expectations with both his investors and his 435 employees to earn their trust.
Smart Business spoke with Babinec about how to keep running your company while accepting outside investments.Look at alignment, not valuation. Typically, when you’re a management team and you’re trying to raise funds, you’re trying to raise those funds at the highest possible valuation. But therein lays a major trap that you can fall into because if you don’t have the alignment, you’re not going to achieve anything you want. Having the right alignment means a lot more than the value that investor is giving your business at the time of the investment.
All financial investors have one objective return on investment. But the question where they do vary from one to another is what is the time frame for liquidity, and that’s what you have to understand. They all want maximum ROI, but their time horizon is really a key picture.Carefully evaluate potential investors.
Part of what you ask about as you meet with those potential investors is, do they share your values?
As an example, how important is integrity? They’ll all say integrity is important, but you have to go about ways of validating where does that really lie on their priorities.
We specifically looked at which of the investments didn’t work out, what were the circumstances and what did the leaders of those companies have to say in retrospect. In any relationship, you are going to be tested much more when things don’t go according to plan, and so what happens when things don’t go according to plan is the true test of the people you are dealing with.
Another subpoint underneath this is how consistent they are. Were they consistent throughout the relationship? If it was a relationship that was several years, was there zigzagging on priorities and what they stated as goals or were they consistent in the agenda?Understand upward transparency. From a CEO perspective, everyone knows that to build trust, you earn it by setting the right goals and you deliver on that. So the variation on that is the importance of looking at that through the lens of the board, and it’s how the CEO and the management team set the right goals for the board that are realistic.
Oftentimes, to get the highest possible valuation, you set goals that have hockey-stick growth, and it’s not reality. And the new investor comes in, and you fail to meet these goals, and you’ve just lost your credibility.
Another element of transparency is really making sure that you can be predictable. It’s all about being able to be predictable in what your growth targets are going to be and then hitting those growth targets consistently. And for many private companies, that’s a very difficult thing to do.
Consistency in hitting the right target is all about creating metrics in whatever the area is that you’re trying to get more accuracy in your forecast. So if it’s a revenue issue, then having a well-defined structure for how many leads do you have to have in the pipeline to convert to how many proposals to convert to how many meetings with a CEO, that converts to how many closed pieces of business.
Anybody that is thinking about taking on private equity has to be able to think through how they are going to be able to realistically deliver liquidity to the investor. So you don’t go talking to investors until you’ve got a very clear picture of how you’re going to make liquidity happen for them.
It goes back to what I mentioned earlier: Entrepreneurs set themselves up for failure when they draft these business plans and have hockey-stick growth.Learn to wear two hats. If you think about a founder entrepreneur, as I have been, you have your CEO hat and your shareholder hat. The board looks at everything through the shareholder hat; they don’t look at it through a management lens.
So there are many situations that come up where it’s necessary for someone who is both to strike a balance between those two roles. It’s important for the board to see that you’re striking the right balance, that you’re ready to sacrifice what might even be in your near-term interest because, oftentimes, as a manager, that’s what you have a tendency to gravitate toward, when the shareholder hat is really more of a longer-term interest.
When the board can see that you are embracing their goal, then that increases confidence and trust in your leadership. And you need that confidence at the board level so you can stay in control instead of being jettisoned to the sidelines because you’re inconsistent with the direction that the board desires.
HOW TO REACH: TriNet Group Inc., (510) 352-5000 or www.trinet.com
Suri Suriyakumar has a pretty straightforward view of leadership.
“I totally believe in the fact that a great leader will be able to inspire teams to accomplish goals that they did not think were possible,” he says. “You have to inspire them and make them believe that they can accomplish these goals, because otherwise, they would have done it themselves the reason they haven’t done it themselves is they look to you to motivate and inspire them.”
Suriyakumar, president and CEO of American Reprographics Co., keeps that in mind with each step his company takes. Already the largest provider of document management services to the architectural, engineering and construction industry in the U.S., American Reprographics has acquired well over 100 companies ranging from a few million dollars in revenue to $75 million in the last two decades. With so many of those deals made directly with owners, Suriyakumar and his leadership team have done extra work to keep the entrepreneurial spirit alive in each company they’ve bought.
Rather than just pulling the resources of a new company into the giant arms of American Reprographics, Suriyakumar keeps each one independent to spark its growth. While many companies will wave goodbye to large percentages of a staff when they acquire a new business, American Reprographics focuses instead on respecting the assets that already exist. Introducing a few of the best practices that American Reprographics knows in a way that comforts the acquired team, Suriyakumar slowly eases them into the company by allowing them the autonomy to act independently to leverage their local expertise while their systems are being fine-tuned. The result is 300 individual reprographics companies growing with entrepreneurial spirit under one giant umbrella. Using that philosophy, American Reprographics’ net sales have increased from $416 million in 2003 to $688.3 million in 2007.
Break in your new team
Suriyakumar knows that American Reprographics is the biggest in its industry, but that’s no reason to be a bully.
“We have to bring about best practices and things which are required by a larger company, but it can be done in a way that we are not disrespecting the local owners, in a way that lets them keep their pride and their dignity,” he says.
Suriyakumar wants to keep the entrepreneurial spirit alive by taking a hands-off approach. While you want to begin to implement your company’s procedures to better the acquisition, the first goal should be easing minds to keep the acquired company’s energy alive.
“We never change a president’s job title,” he says. “The key element of that is for us to understand that we’re not just buying a company because we have the money but to win the hearts and minds of the people over in the company we acquired. Failing to do so would actually put our investment in jeopardy.”
When you’re acquiring a smaller company, you have to quickly let people know that being part of a larger organization won’t kill the entrepreneurial spirit.
“The important element is right at the beginning of the acquisition for us to be able to protect ourselves as a company to let them know you are actually going to improve the company,” he says. “When people get acquired, their biggest worry is that their title will change, their jobs will be cut off and somebody is going to bring improvement by cutting cost. Our strategy has been, whenever we acquire a company, we want to look to grow the company. Our first objective is to say, ‘OK, how do you take this company from this level to the next level in terms of profitability?’”
The more clearly you can lay out your plans for the company at the beginning showing the ways you want to improve the company without sharp cuts the easier it will be to win people over. With a very successful track record, for example, American Reprographics is able to show new people times that it has improved things like accounting and purchasing without personnel changes to sharpen a company. If you can show potential success because of your involvement, you can actually drive away concern.
“We are able to tell them, ‘Our company is an open book. Look at the numbers we have; look at so many of your colleagues that have gone from 8 to 10 percent (profit margins) to 15, 16, 18 percent,’” he says.
“You say that to somebody who has been long enough in the industry and you really get them fired up, they say, ‘Heck, if Tom can do it and Peter can do it and Martha can do it, I can do it, too.’”
Keep the flag flying
Though that original outline will help set the table, you have to follow up by being clear about your intention to run your new acquisition as an autonomous segment.
“While we know best practices, we have better buying power and we know HR issues, we absolutely must be respectful and give him or her the right position to run the company,” Suriyakumar says. “So our first objective is to make sure that we are joining that company in that marketplace instead of that company joining us.”
The trick is the way you bring a new company into the fold. American Reprographics doesn’t take over the new company in name.
“We don’t buy the company and tell them, ‘Oh, by the way, this owner has a new boss and, by the way, we’re going to change the name and the color and we’re going to give new titles to all of you,’” Suriyakumar says. “Because when you do that, you take away a lot of the motivation, the enthusiasm, their pride and their dignity. We work behind the scenes to develop and improve their accounting structure, their cost structure and put more to the bottom line and the employee and the owner actually benefit by it while taking away all of the headaches.”
The first benefit to letting the company run under its old flag is that it keeps the spirit of the owner focused on the business.
“If you think about any entrepreneur that’s built a company over 20, 30, 40 years, they sell the company, they get a chunk of money, and typically, they would like to get on with their life, so to speak,” Suriyakumar says. “But if you create an environment in which they have their dignity and in which they can do all of the things they did before, then they would stay. When you acquire a company, they are often shackled with problems. ... They have HR issues; they have insurance problems. These are all headaches of a small company owner. So there are a lot of things, which keep them awake during the night, and when we acquire them we remove all those shackles. We say, ‘You go and do what you did best for the last 30 or 40 years, which is selling reprographics to your customers,’ and the owners love it.”
In addition to keeping that internal knowledge with the company, you can also hold onto the relationships those owners had with local companies.
“We don’t change their names and put a big American Reprographics stamp and make them one company,” Suriyakumar says. “We ... let them act as their own company because local relationships are very important.”
It can occasionally take an ego adjustment for the company doing the acquiring to work behind the scenes while the existing company is still the face of the organization, but Suriyakumar says that one of the biggest mistakes you can make in growing through acquisitions is assume that just because you’re bigger you know the market better.
“It’s a typical thing for a large company, when they acquire a small company, the first thing they do is to say, ‘We’re a big company, we acquired a small company, so you guys now have to sit and listen to us, and we’re going to tell you how to run this company,’” he says. “If we go and buy even a $3 million company, whether it’s in Idaho or North Carolina or Minnesota ... we are proud to be part of that company, and that company we bought only because they know their business, so we become part of them instead of them becoming part of us.”
Knock off the moss
While so much of the beginning of an acquisition is about being hands-off and easing the new company into your family, Suriyakumar knows changes must be made.
“These are small companies, they all come with a certain amount of baggage, and it’s our job to go and clean those companies up,” he says. “Even when you’re a well-managed company, you’re still always going to have situations when you grow fast, where it’s only natural you start gathering some moss, some inefficiencies.”
Like everything else American Reprographics does, it has an approach that encourages an entrepreneurial spirit from every unit. Overall, the company has 300 locations broken up into 45 divisions. Suriyakumar has a vice president and a team at headquarters assigned to watching over the daily numbers for each and every division to see where soft spots develop. In addition to that, those numbers are posted for everyone to see to encourage competition and recognition.
Suriyakumar checks in on any area that’s weak without taking over the business. He instead focuses on the assets that American Reprographics has to help and offers support from anywhere in the company.
“It’s very important for them to know that I know their successes and failures and I’m there to celebrate or help,” he says. “So on the one hand, if they had a phenomenal quarter or month or got a great billion-dollar project, I will be the first one to call and congratulate them on their tremendous success and thank them for the effort. At the same time, if certain divisions are not operating up to par, then it is my job to call and point out specific issues and say, ‘Look at this and come back to me what should we do, what could we do, where do you need help from the corporate office?’ So once you do that, and communicate that on a regular basis, then their confidence goes up significantly because everybody feels like the boss knows where we are.”
Instead of micromanaging divisions, Suriyakumar learns where the company is strongest and explains how those areas can help any groups that hit bumps.
“The important thing is for a leader to identify and be able to justify his position as to why we should do better than others,” he says. “Obviously, you can look at somebody and say, ‘You should do better, go do better,’ but that would be demotivating sometimes. It’s really important for a leader to be able to identify the strengths of the company and be able to communicate those strengths and make your team believe you are absolutely right. I’m able to explain to them and say, ‘OK, we understand your market is soft but look at the opportunities we have in front of us.’
In allowing each segment of the business to operate individually while keeping it under one umbrella, Suriyakumar hasn’t just seen American Reprographics grow, he’s seen the inside knowledge of the company increase because it retains about 95 percent of the business owners that it acquires.
“One would expect that (the owners) would take the money whether it’s $3 million or $5 million or whatever it is and then they’ll go about doing their things, go fishing or whatever, but that really doesn’t happen in our case,” he says. “We inspire and motivate them to stay with us. That’s what helps grow the company.”
HOW TO REACH: American Reprographics Co., (954) 949-5100 or www.earc.com
Edward P. Roski Jr. wasn’t born in Southern California, but
he’d be quick to tell you that he and his family made it their
home when he was just 3 years old.
And with the exception of a stint in the Marines that earned
him two purple hearts, he’s lived there ever since. In that
time, he’s become a billionaire and seen Majestic Realty Co.,
the private real estate company his father started in 1948,
continue to grow, as it now owns, manages and leases more
than 70 million square feet of property.
Working on notable projects, like the renowned STAPLES
Center, the company’s continued success has expanded to
other markets but has always started at home.
So, as Majestic continues to grow by nearly 4 million
square feet of property managed per year, it was logical that
Roski, who also is a minority owner of the NBA’s Los
Angeles Lakers and the NHL’s Los Angeles Kings, would
center his philanthropic endeavors on L.A. Of course,
Roski’s challenges go well beyond just thinking about how
to help the community.
“When you talk about the challenges in business, I think
having a company that has continued to grow over the
years and having employees that want to work with the
company and that really feel they’re being satisfied is the
big one,” says Roski, Majestic’s chairman and CEO. “I want
it so that it’s not just a job, they are looking forward to coming to work, even with the traffic in L.A., and want to put
forth a real effort.”
So as Roski redefined what his company could do to help,
he analyzed how a charitable contribution could do more
than just push good ideas back into his hometown. He realized that by building up the community he was in, he would
strengthen his company’s core. In that process, he created
avenues to ask the 650-plus employees within Majestic’s
businesses how they wanted to help out and created charity programs that gave employees a chance to help in different and engaging ways, giving them a new reason to battle
that rush-hour traffic every day. As a result, his company’s
growth has continued while the average tenure for top
managers in the company has pushed beyond 20 years.
The case for charity
Plenty of companies give to charity, but when Majestic
started the Majestic Realty Foundation in 2002, Roski wanted the company to do more than just write a check every
year. Instead of giving blindly, he wanted to use the company’s resources to help build strategies for nonprofit organizations and help with management initiatives. The idea was
basic enough: Don’t just give to charity, make an impact in
the community where you work. To that, Roski says you have to think of how your work will affect the community
and be sure to consider strengthening it wherever possible.
“I’ve always felt it’s critical to think in the long term in the
deals that you’re doing on a day-to-day basis, to think about
what you’re doing and what you’re building.” he says. “Our
growth pretty well depends on not just growing our business but growing in the cities and communities that we’re
involved with. We’ve always been committed to building
long-term relationships with our business partners, and I
think fostering solid partnerships with stronger communities kind of creates a foundation and you can really continue to grow.”
That brings Roski back to the evolution he made to start
the Majestic Foundation instead of just pouring more money
into local charities. Roski says the fact of the matter is
you’re probably going to be giving to a charity anyway, so
you might as well help that investment along as you would
any other. By taking a more active role in the process, you
might find that Roski’s theory about building a stronger
community will help grow your company.
“We’ve always been involved in the community, and we
wanted to take basically a more active role than just passively making donations and stuff like this, so I founded the
Majestic Foundation and that really gave us the opportunity
to actively work with the different nonprofits and to make
a real impact,” Roski says.
“Most business do try to contribute and give back to the
communities that they are in. And, as we became more and
more active in that side of things, we thought that we could
take that next step and provide some guidance and maybe
some business principles to help nonprofits accomplish
their goals, so it’s just the next step in an evolution.”
Ask employees what they want
Roski’s desire to build a charitable foundation doesn’t just
serve his love for Los Angeles, it also acts as glue for his
company. In order to keep growing, he knows that he needs
to do more things to keep his employees involved, and
charitable projects give employees a chance to do something more than the daily grind.
Roski has always had an interest in philanthropy, but he
found out that employees want in on the action, too. So as
he decided that the company should make the evolutionary
step to starting the foundation, he wanted as much employee input as possible. To do so, he did something many executives rarely have time to do, he walked up to his employees and asked for that input. In fact, Roski makes regular
communication with employees a part of his weekly schedule.
“I set it up so that I can spend time with them,” he says. “I
enjoy talking with them and finding out what they’re all about
and what their desires are and what they really want. In my
experience, everybody wants to be working in a place where
they enjoy working there. It’s not the money they make, it’s the
satisfaction they get out of where they are and if they’re really
doing something to make a difference. And you find that out by
just spending time with them to find out what they want.”
Of course, the chairman and CEO of a company can find it
quite hard to just talk to people and find out what they want.
There is no question that a barrier exists between employees
and senior executives, and Roski says the way you can shed
that is by making employees comfortable by being yourself.
“Everybody puts their pants on the same way,” Roski says.
“Everybody is contributing, so you just try to be comfortable
with who you are, and then they can be comfortable with who
they are, and you can try to communicate.
“It’s getting out there and talking with everyone. It’s really
spending time, not just with the individuals that are running
the office but spending time with everybody in the company.
They have to feel like they can talk to you.”
To Roski, the basic summation of his ability to open up with
employees comes from one word: empathy. He says he does-n’t always know what employees are thinking, but he’s willing to take the time to try.
“In other words, they are not operating out of fear or anything, they are operating in a situation where they feel their
contributions are being recognized and, in one word, there’s
empathy,” Roski says. “When you’re dealing with people, you
really can’t imagine how they think or feel, what you basically need to understand is what they want. You can’t just tell
people to do something, they really have to want to do it.
That’s the one thing that I’ve learned.”
Not only does the time Roski spends talking to employees
help fill him with ideas, but he says it also gives employees a
reason to feel empowered.
“I think it honors them, it gives them a reason to think that
what they’re doing is worth something,” Roski says. “Instead
of just coming in and punching the clock, they are coming in
and they have something to say and somebody is going to listen to it, too.
“You make them part of the process. The most important
thing is the role that the employees play in every aspect of
the company and that they are actually involved in all the
planning and execution. We’ve been very fortunate most of
these people have been with the company for many years,
and for a company, especially a smaller company, employees
are your whole resource.”
Build some company pride
Majestic’s employees were quick to take to the charitable
ideas thrown out by Roski, and even he was surprised by the
extent to which they wanted to help. Though he knew that he
wanted the company to do more than just sign checks, employees came back willing to work with nonprofits on many levels,
offering up time and energy as well as expertise.
As a result, Majestic began to build teamwork within the
company around this charitable work. The big business goal of
Majestic still existed for employees, but there was also a more
personalized charitable goal that made people feel good about
“We’re actively involved and hire consultants for them and
make sure they are really focused and accomplishing their
dreams because there’s quite a few nonprofits out there that
are founded on great ideas and dreams, and sometimes they
also need help to accomplish those things,” he says.
As a result of helping with different options in areas beyond
financial giving, Roski noted that involvement with the
Majestic Foundation is blossoming.
“Our company is extremely involved in all the foundation
work,” he says. “I would say we probably have 85 to 90 percent
participation from the company, whether it’s the fund-raisers
we do or actually working in different nonprofits, not just supporting their kid in little league but actually getting very, very
involved, and it’s kind of contagious — as people get involved,
others get involved.”
At the end of the day, Roski doesn’t get 100 percent of his
employees throwing themselves into the charity program, but he
knows that the foundation works when it comes to building
something for both community and company pride. If you can
make that step, he sees it as a big boon to your ability to fulfill
“I think people have to really be proud of where they work,” he
says. “If they are, and they think where they work is really making a difference in the community where they live in, with all
other things being equal, that’s where they are going to stay. And
I think in our company, it’s probably one of the reasons that people stick around so long is they really think they are making a difference.”
HOW TO REACH: Majestic Realty Co., (562) 692-9581 or www.majesticrealty.com
Tony Anderson has seen the world of business change during the last 30 years, and he likes it.
With building diversity becoming a more common theme on the lips of executives, Anderson, vice chair and managing partner for
the Midwest region of Ernst & Young, feels ahead of the curve with the large impact he’s made in his territory with the 3,500 employees under his charge.
That’s because Ernst & Young, the juggernaut professional financial services firm with more than 120,000 employees in the U.S., is looking to integrate its culturally evolving staff. Anderson estimates that Ernst & Young will hire more than 20,000 people across its U.S. regions in the next year, with only 30 percent being white males.
“If you think about those numbers for a second, think about what work force you just created,” Anderson says. “Your ability to integrate that work force into the different aspects of the business is what’s going to make the difference between having an inclusive, engaged group of professionals or if you are just going to have representation.”
Building diversity has long equaled the realization of many company’s value systems, but Anderson says that few are adapting to the cultural change in business by really valuing new talent. He wants to make the integration process a business benefit for Ernst & Young so that the new work force can be a boon instead of an attempt to meet representation goals without substance.
“It’s about how you engage them and how you involve them in all the different activities we have in the firm, and that’s where we need to take the lead,” he says.
So he’s changed the strategy to one that constantly thinks about that changing work force for the Midwest region of Ernst & Young, a portion of the business that does more than $1 billion in annual revenue. Anderson went to his team with the business value of building a diverse team and then built systems to not just create jobs for new employees but ensure that they have an active role in the company. Beyond that, he has a hiring policy that values life experiences to ensure that the best candidates get jobs, regardless of their background.
Understand the business imperative
As much as Anderson would love to believe everyone out there would attack business with more morality, he knows the key to changing people’s minds on diversity is to address the business imperative.
“I think for a long time there were people talking the talk but nobody willing to walk the walk,” Anderson says. “And, in a lot of ways, you could argue that there was no reason to, there was no business imperative, there was nothing compelling other than doing the right thing. Today, things are different, and they’re different because you have a work force that is changing, so that’s a big thing.”
Not only has the work force changed but so have the expectations of the industry. In order to survive in the modern world, Anderson says you have to know that clients and customers will require a modernized staff from your company.
“On the other side of the coin, you have clients that are increasingly demanding a level of diversity in the way we serve their account,” Anderson says. “Now you have that business imperative, and that’s been the evolution in the last 30 years that has had a big impact on this.”
That understanding is how you start building the cause at your company. Anderson regularly plays off that evolving dynamic in conversations about diversity at Ernst & Young.
“The way I talk about it and deal with it is I go to the heart of the business issue and make sure everybody understands it,” he says. “We’re all accustomed to business issues and problems, so I bring it back to, ‘OK, here’s the dynamic in the market, here’s the dynamic in sources of talent; it doesn’t take a rocket scientist to figure out we better get this inclusion thing right.’ I always go back to that. We can talk about doing the right thing, and that’s an important element, but nothing hits home more than the business reality.”
When you start that dialogue with senior leaders, Anderson says you will find that you’re not the only one who has thought about how important changing your thinking will be to the future of the company.
“The interesting thing about this is, broadly across the firm, people are being touched by one of those two things: Either their client has asked for it, or they’re seeing the different people that are going to be on their account look different than they do,” he says. “So there are a lot of places where people are starting to be personally touched around the issue and the importance of the issue, and that’s the revolution that we’ve had.”
Anderson is polite-natured, but he will tell you very sharply that if you really want to change the framework of your company, you’ll have to lose the word diversity.
“You use the term diversity, I want to use the term inclusiveness, and I think they are very different,” Anderson says. “I always get concerned when we talk about diversity that we’re talking about representation, we’re talking about hiring, and I don’t think that makes the difference in an organization’s culture. It’s how people are valued, how people are engaged when they are here because you can have a lot of representation and they can all feel pretty angry about being there.”
That means the first step in inclusion is thinking about the fact that a different work force requires different means. Today, it’s the job of the employer to think about what employees will need to be successful instead of holding up blanket standards for everyone. For many companies that means considering flexible hours for employees with children or ensuring that minority employees are hired with the message that they will be encouraged to move up the ranks.
“The way I think about it is, have you created for those different kind of groups a culture where they can succeed?” Anderson says. “If you think about women, they have a lot of different challenges, so are we going to be engaging on those issues, or are we going to
ignore them? If you think about minorities, they often come with a completely different background, so are you going to embrace that background and let it be something additive to what we do, or are you going to ignore it?
“We need open dialogue with the issues, so this will be talked about in our leadership meetings, and it will be talked about with all of our people directly.”
Beyond that discussion, Anderson knows you might have to give some people a little push in the right direction. At Ernst & Young, giving those opportunities is tied to managers’ performance reviews. Though Anderson is happy to let each manager figure out the best way to involve everyone, he ultimately sets goals for inclusion so the issue must be addressed. By surveying employees and finding out where they fit in with the team, he is able to ensure that everyone is getting a chance.
“You have to get granular here because this goes all the way down to how we do performance reviews of people and what they do every day,” he says. “I’m a real big believer in accountability — that if we decide we’re going to do something, then we ought to hold all of us accountable for making sure it happens. I set out very specific goals, not hiring goals, but how we are going to engage this topic and build it into the way we’re going to evaluate the performance of our people.”
By creating those opportunities, you not only exceed the evolving expectations of customers, you also get a happier employee. Anderson has seen the direct effect of these opportunities.
“You have to provide outstanding opportunities for people,” he says. “People are hungry to learn to grow, and if you have an environment that breeds those two things, I think it creates incredible loyalty. The other thing is creating opportunities for people to advance. If you have great opportunities for people, you create a significant amount of loyalty. We have the highest retention we’ve ever had in the firm today, and why do we have that retention? It goes back to engagement.”
Anderson says that a different employee base comes up with the innovation needed for the future.
“Like anything else, if you have different people talking about an issue that are thinking about it differently, chances are you are going to come up with a better solution,” he says.
Hire by talent
For all Anderson’s talk about including different groups in Ernst & Young’s future, he doesn’t hire with any numbers in mind. Instead, he says that you have to hire like you always hired — so long as you are giving everyone an equal chance to earn a seat at the table. That means opening the doors to all candidates, and not having a fit in mind for a position but instead focusing on what type of values and experiences you want from a candidate.
“On the hiring side, I have always had a philosophy of hiring the best athlete,” Anderson says. “I’ve always believed you can do a lot if you have incredibly talented people. Now, the only modification to that I would make is if you have an incredible athlete that doesn’t believe in that value statement, I don’t think you can hire them.”
When Anderson sees that someone has the talents fitting of the position he’s interviewing for, he spends more time checking in on the candidate’s value system to make sure he or she aligns with the future Ernst & Young is building.
“I talk to people, and as I engage with them, I’m always thinking about looking for whether or not that person’s value system is aligned with ours,” he says. “So, it’s the best athlete that has value systems consistent with ours.”
In that conversation about values, he can get to the heart of another matter that helps him sort out the best candidate: experiences. Whether he is hiring someone straight from college or another senior leader, Anderson says experiences don’t come by gender or background but by how you handled the lot you were given.
“I typically go at it by talking about the experiences that they had, so I ask what they did, why did they do it, and how they did it,” Anderson says. “It tells me a lot about their value system. So I don’t ask them directly about their value system, I pick at it from understanding the things they’ve done in their career or their college experience, and when you talk about the what, when and how, that’s how I build my own thinking around the value system.
Not only does the explanation of experiences and the value system help you get a better feel for the employee’s fit for your company’s culture, but Anderson has noticed that it helps weed out candidates who can talk a big talk without having the credentials to back it up.
“That’s where the art of interviewing comes in because people can mislead, and I think that’s where you come in and really have to be inquisitive about the things they’ve done,” he says. “And if you find inconsistencies that should raise flags, then you match that up with whatever feedback you get externally and look for inconsistencies to find out if they really are what they say.”
HOW TO REACH: Ernst & Young, (312) 879-2000 or www.ey.com
Smith, president, business management division, watched as those acquisitions helped build the company from $100 million in revenue to $1.01 billion in 2007. But with that growth came problems.
The acquisitions had not been fully digested. Too many employees had been part of other companies and didn’t have a full understanding of what Sage was about or what its capabilities were. They couldn’t sell additional Sage products or services because they didn’t have the knowledge required to do so.
Many of the company’s customers were in a similar situation. The growth had come so fast that they didn’t have a full understanding of everything Sage could do for them. Customers of the acquired companies might be used to getting one particular product or service from what was now part of Sage, but for the acquisitions to fully pay off, Smith needed to sell multiple products to each customer.
If that didn’t happen, Sage would never get a full return on the money it invested in the acquisitions.Smith and the leadership team realized the solution was to focus communications on the employees and the customers. If the employees got the message, they could then help sell customers on Sage’s expanded capabilities.
So Smith rolled out a vision to get Sage attention as the leader in the marketplace internally and externally. Step one was getting employees to buy in to build energy and spread the word. Step two was pushing that to existing customers.
“My vision is to become the recognized leader of business management solutions in North America,” Smith says.
Since Sage, an arm of The Sage Group plc, was already at or near the top of the market for most of its products, Smith said the goal was to roll out a vision that her 2,000 employees and the company’s more than 2 million customers could understand. To do that, she wanted to go out and touch those people with the mission, get them on board and then follow up with them.
Reach employees first
The employees were the starting point because they were the ones who could then carry the message to customers.
“First, you have to engage the people to make them a part of it,” Smith says. “You have to energize them, you have to do it with a shared vision.”
That sounds simple enough, but with 2,000 people in her division, there are 2,000 different opinions of where Sage is going. So even though she’s not writing a book or promoting a show, Smith went on a publicity tour to get out the new growth message.
“My philosophy is there are very few secrets in business the more people know, the more we can all work together to achieve a common goal,” she says. “Do a lot of round tables with employees, tell them, ‘I’m here, we’re all in this together, you understand your jobs better than I do, and so together, we have to really understand where we’re going. I’ll share with you my vision, you share how things are running operationally, and together, we can determine where things will go.’”
In order to get feedback on what her employees are thinking, Smith has to get people to stop thinking about her title and start talking to her honestly.
“I do a lot of walking around. I like to touch the employees, I like for them to feel comfortable,” she says. “I ask them, ‘How are you feeling about it; can I answer any questions?’ Just because you’re in this senior role, you should not be removed from what’s going on, and the more you are in touch with the rank and file, the better leader you will be, and you can truly move your company forward.”
Smith knows that just walking around the office won’t have employees falling over one another to get on board, but it’s a start. From there, she visits different Sage campuses with her message.
“It’s so important to do direct communication because cascading doesn’t always work, or the e-mail an employee is sent isn’t read,” Smith says. “So the upfront, personal communication is really critical. You have to at least kick off your year by touching all the employees and then do the round tables. And by the way, I’m not the only one doing these round tables, I require that my direct staff does the same thing.”
There is one caveat to Smith’s leadership style: It can take time away from other things. When she decided that getting employees to understand Sage’s capability and new growth was job No.1, she realized that had to be the main focus of her visits. As a result, she schedules time for round tables on all of her visits. She also leaves time in her schedule for answering questions from employees.
“I simply make it a priority,” she says. “The round tables are scheduled on my calendar; it’s a priority with my assistant. I answer my e-mails personally, and I pick up the phone and call people. I have an e-mail that employees can send to me. I don’t always answer them on an e-mail, sometimes I’ll just pick up the phone and talk to them.
“It’s really making a difference and employees are feeling comfortable now. I can tell by the number of employees that will just walk into my office. It’s a very different style, but it’s about engaging and energizing the people to think about the overall solution and not letting them get stopped by barriers from this title to that title.”
When it comes to growing with a new vision on the external level, many organizations will start off by cruising the market for new customers. In order to shore up Sage, Smith’s first focus was on existing customers. Like building buy-in with her employees, she knows that Sage’s customers can be free promoters for the new plan.
“We have to start with our customers,” she says. “Inside this division, we have over 2 million customers, and we want to be connected to them so that they feel good about us, and they feel good about our products so that they’ll recommend those products to their friends and business colleagues.”
During all the acquisitions and moves Sage made, there was a drop-off in how much attention was paid to customers. While many stayed with the products they already had, not enough were making additional purchases. To solve this problem, the company started holding customer conferences where it promoted all the products available.
“We start by making people aware of who Sage is,” Smith says. “We did marketing campaigns directly to them, and we had a response from probably a quarter-million customers saying, ‘I didn’t know you had this product; I didn’t know you offered that.’ It was really critical for us, and I think that it’s twofold, if you build a relationship with the customer you have, what better recommenders do you have, what better promoters do you have?”
So Sage started the process by reassessing the assets of the company. At the end of the day, all the growth hadn’t just meant new buildings and products, but a whole list of customers who, if treated correctly, could be the message carriers for the company.
“When I came to Sage, it was a little over a $100 million and now we’re at a billion, and you could just look at all of these customers and say, ‘What a crown jewel,’” she says. “For me it was just taking a step back and saying, ‘Wow, these are the things that you have to do, you have to build awareness in the market if your product will ever be considered, you have to tell your customers and you have to keep your customers.”
Follow up on the plan
Creating and implementing a plan is only the first steps to success.
“You have to stay out there,” she says. “You have to make sure everyone is always on the team and working toward the same goal.”
As hard as it is to get employees to buy in initially, it can be very easy to lose them if you don’t keep them on the path. Smith refuses to let her people forget about the vision.
“I won’t allow that to happen,” she says. “If someone sends me an e-mail, we don’t send a ‘We’re going to get right back to you’ message. If it’s an area where, let’s say, it’s a marketing question, I’ll send it to the head of marketing and say, ‘Would you draft a response on my behalf,’ and then I’ll follow up with the employee.”
Smith doesn’t make any reservations about how much time the effort takes, but it’s her job as a leader to get her employees moving, and that personal connection works wonders.
“Yes, it takes time,” she says. “But it’s so important to leading an organization and having everyone feeling empowered and like they are part of the team.”
Similarly, Sage couldn’t just promote itself to existing customers and then fade away. In order to keep them happy, customer account managers were created to create profiles for each customer. That profile is then traced and when the company is ready to move up, Sage has a migration center that can help fit it with a new product. The key idea is to be on top of the customers’ needs as they evolve.
“In business, often what happens is a lot of the sales force is they go out and get the customer, and then they leave them because they’re off to get the next customer,” Smith says. “What we’ve done is we have an organization that’s focused solely on getting customers, and then it’s moved over to the customer organization; that allows us to focus on the customer needs.”
The idea is strikingly similar to Smith’s desires to constantly follow up with employees.
“You over communicate, you don’t allow the organization to become complacent,” she says. “You do the same thing with customers. Their business is growing, they’re doing new things, so we don’t spend time at a conference talking about how great we are, we bring people in to talk about what it takes to run their business and what changes they’re going through. We all live in a world of change, so you have to stay engaged and you can’t rest on your laurels.”
Smith and her senior leaders have set up metrics that measure a customer’s challenges. They send out surveys on a quarterly basis to see if customers would recommend Sage products and to find out if they have any issues. Those reports go directly back to Smith and her team.
“We really look at what’s happening with the customer, that’s how we keep the pulse,” she says. “You have to stay on top of customers by just going out there and visiting them and just talking to them and staying connected to your business relationships.”
Maybe you can’t get every customer to buy in, just like you probably can’t get every employee to buy in, but Smith says you can’t give up trying.
“You don’t want to lose anyone,” she says. “I always say to the organization, ‘Shame on us if we lose one because we already have them.’”