And as founder and president of Urban Science Inc., he prefers to hire people like himself. He’s had plenty of opportunity to do just that, as his company’s revenue has grown from $47.5 million in 2003 to $65 million in 2005.
Today, his consulting firm which combines scientific analysis and marketing expertise to help companies evaluate, structure and manage their retail sales channels employs 400 people across the globe and 170 locally.
Anderson expects 2006 revenue to hit $72 million.
Smart Business spoke with Anderson about how he focuses on vision, mission and strategy to grow his company.
What advice would you give other business owners who are trying to grow their company?
Understand how you are competing for your business. I like to compete by having innovative products that nobody else has that the customer really needs and wants to buy. That’s not the only way to be successful but that’s what we try to do.
It’s so important to understand your competitive edge. Are you competing on price or quality of service? What is it that makes you different, and ideally, unique?
You need a vision of where you’re trying to go. You need cornerstone strategies that, when successfully implemented, will produce that vision. Then you need to take those strategies one at a time and develop a more tactical plan to achieve the goals.
I challenge many people in my life to tell me what their vision of the world is, and the answer back typically is, ‘What do you mean by that?’ If you don’t know where you’re going, how are you going to get there?
You’ve got to know where you’re going, and then you’ve got to stick to the path.
How do you ensure customers are completely satisfied?
You have to talk to them, and you have to build a relationship with them. When you don’t have the right relationship, they tell you they’re not satisfied by not being loyal, and they go somewhere else.
But when you have that right relationship, they’ll tell you, and you have to be responsive immediately.
How do you ensure that responsiveness?
We measure customer satisfaction on a systematic basis twice a year, but on an ongoing basis with our employees talking to our clients. When you have highly satisfied clients, they not only tell you that but they bring to you new opportunities.
When they see you as a resource to help them solve their business problems, that’s when the relationship becomes strong.
How do you grow as a business owner?
I have a couple of management consultant mentors, and I try very hard to hire people better than me to be on my team and listen carefully when they are critical of me. I establish objective goals, not only for my employees but for myself, and if I’m in danger of not achieving the goal, I re-evaluate my strategies.
How do management consultants benefit a business?
They challenge you. Any time you’re challenged on your philosophies, goals or strategies, if you keep coming back with the same answer, and it’s successful, that’s confirmation that it’s right.
But if your strategies are not producing the results you’re looking for, something’s wrong, and you have to figure it out.
My training was not in business; it was in engineering. I don’t claim to know all of the things you need to know on how to run a business, so I enjoy talking to people who have that expertise and learning from it.
How do you measure employees’ understanding of your growth strategy?
Productivity of our people is something that’s easily calculated. Customer satisfaction is something we measure and report objectively.
For each of our cornerstone strategies, we have these objective measures, and we have a vision for where we want the company to be regarding each of those measures. We’re always working toward either achieving that vision, or if we’re already there, maintaining our status as having achieved the vision.
The growth strategy is very much based on building long-term relationships of increasing value through completely satisfied customers. Not just highly satisfied, but completely satisfied.
HOW TO REACH: Urban Science Inc., (800) 321-6900 or www.urbanscience.com
And as the president of Abt Electronics, the largest single-store electronics and appliance dealer in the United States, besting the competition is his passion. From beating the big-box retailers on price to having an exceptional Web presence and creating an engaging in-store experience, Abt has used traditional and not-so-traditional techniques to draw customers in and keep them coming back.
Those efforts have paid off. In its 70 years of business, Abt Electronics has served more than a million customers, and last year, it posted $300 million in sales.
In retail, the easiest way to attract customers away from your competition is by offering the best price. That is achieved by purchasing in bulk, something that often challenges smaller operators.
Although Abt Electronics is only a single store, the company’s showroom covers 350,000 square feet, making it large enough to move inventory en masse and allowing it to buy in bulk and negotiate deals with vendors.
And while Abt can negotiate competitive deals as skillfully as his competition, he keeps prices below those of his peers’ by saving on operating and marketing costs.
“We have very little overhead compared to other people,” says Abt. “We spend under 1 percent advertising, and the average person in our industry is spending 7 percent advertising. So by us not having to advertise, just having good word of mouth, that’s (the) biggest savings we have. And we’re very efficient just having one store people drive to us, we don’t build stores where they are. That keeps our price down, too.”
In addition, the company has a DIY attitude toward maintenance and upkeep. Abt Electronics doesn’t outsource the care and maintenance of its delivery trucks, repair services on the products it sells or its own building maintenance. By doing it all on its own, the company saves money and passes those savings on to customers.
Besides keeping prices down, the company’s single-store format has proved beneficial in other areas namely, flexibility. By being relatively small, it is able to adapt to industry changes more quickly than its competitors can, and it’s also more willing to take risks.
“You’ve got to be aware, and spend on information and computers, go to shows and see what the new products are and be open to trying new things,” Abt says.
This openness to change and trying is what led Abt Electronics to venture onto the Internet and into the world of online sales. In 1996, it launched its first Web page featuring product information and the store’s address.
“We’re really into information and sharing, and we knew that in the old days, appliance people would go to books and look up specs,” says Abt. “We did it first just to get information to the salesmen so they could give it out to the customer. Then [outside] people came to it. We were one of the few appliance guides.”
Recognizing the site’s draw, in 1997 the company expanded from an online product information guide to a complete online appliances and electronics store.
One criticism of many consumer sites is that the shipping charges often cancel out any savings achieved by buying online. Abt has overcome that with a simple policy.
For customers purchasing appliances and electronics online, delivery to anywhere else California to Connecticut is the same flat fee.
“We just charge one rate,” Abt says. “We definitely lose money on some products, but it’s real simple $78 to buy one appliance and ship it. It just makes it easier for the customer. We’re [usually] making enough on the product that we can pay for the shipping. That’s not always the case, but it’s a simple way to shop. And we just don’t charge for things under $50.”
Today, the online store provides three distinct benefits to Abt Electronics. First, it allows it to reach consumers nationwide.
“By being one store, we want to do more online than we can than in-store,” says Abt. “That’s the only way we can grow we’re not building two stores. That’s one way to grow externally keeping one store and still doing business out-of-state.”
Second, the online store allows the company to sell more than it can display in-store. While the showroom is huge, there simply isn’t enough room to stock every available color or model of every product.
“A key part of being online is trying to integrate it into the store; whenever we can, we try to make things similar,” he says. “But there is product that we’ll only show online. In our store, there’s (thousands of) square feet of showroom, but you still can’t show everything, especially like little accessories and different colors small differentiations that you don’t want to show in the store you can put online, so you can see what a gray handle looks like if you’re only stocking the stainless steel.”
And third, the online store helps streamline shopping for customers. According to Abt, approximately 80 percent of Abt Electronics’ in-store shoppers visit the Web site before coming in to make a purchase.
But the online store’s success was never a given. While there was demand from customers to purchase online, Abt Electronics’ vendors weren’t so eager to have their products peddled over the Internet. And while many vendors have come around to the idea of Internet sales, some still have concerns.
“Everyone’s worried about bad information being out there online,” says Abt. “There (are) a lot of unauthorized dealers online you might not get a warranty if you buy from them and ... they don’t have a lot of good information on their Web site and their Web site’s slow. (Vendors) are just really hung up that people might get a negative experience of the product by it being on those Web sites.”
That concern, says Abt, can be assuaged by taking time with the vendors, explaining how the sales process works with Abt and showing them how the online store works, alleviating anxiety about quality control.
Another common worry is not so easy to relieve.
Vendors “were worried that, if something’s online, in one minute you can click and find the price at 50 different stores,” says Abt. “So they didn’t want it to just become a commodity. Especially the higher-end brands you have to sell and explain to customers why a Sub-Zero refrigerator is better. So even today, you cannot buy a Sub-Zero online, because they’re still nervous about the different markets and protecting the different dealers locally.”
In that case, says Abt, the only thing to do is to keep working with the vendors, let them see for themselves the quality of Abt Electronics’ online store and hope that they’ll change their mind.
The Abt experience
One of the most vital ways that Abt Electronics distinguishes itself from the competition is in the experience it provides customers.
Abt Electronics operates around the motto “The answer is yes to any reasonable request.” That means, says Abt, that if the customer wants something reasonable for example, if a stove is dented during delivery and the customer asks for a new one the company does it, no questions asked.
And to ensure that all reasonable requests are honored, Abt authorizes employees to make the decision themselves about whether to honor a request.
“We let all our new employees know that, ‘Hey, you don’t need to go ask a manager to see if you can help this customer make sure they get this TV out right away so they can have it for a birthday party,” says Abt. “Just go put it in a car and get it done. It’s hard to instill, because people aren’t used to making their own decisions, and you really need all your employees to have that attitude, not just the managers.
“A new employee may say, ‘Maybe we’re giving too much away. We’re going to lose money on this sale.’ We accept that on a short-term basis because we need to make people happy. We’re just one store, and they need to come back to us. So we never penalize anyone for doing too much. They get it, but it does take months to really understand it and believe it.”
In addition to the customer service experience, Abt has worked hard to ensure that customers have a positive shopping experience in the store. For example, he installed fun, interactive displays that have nothing to do with electronics or appliances, the showroom features a large courtyard with a fountain and kids can play with a large bubble machine or watch tropical fish in a 20-foot-long saltwater tank. It’s simple things like these, says Abt, that really help the company stand out.
“We’ve got a single store, so we enjoy the products, we enjoy all our exhibits ourselves,” says Abt. “It’s kind of like collecting art we just collect it in our business. It’s really priceless, because it makes us unique.”
And being unique is what it’s all about when it comes to Abt’s retail success. By taking steps to stand out from the crowd from setting the right price to creating a stellar experience the company has not only weathered the growth of big-box electronics chains but thrived alongside them.
“We want to enjoy our work, our business, and I think our customers benefit a lot from that, too,” says Abt. “We’re a serious customer, but we’re all about having a good experience for ourselves and our customers. We are one store, and people usually do have to drive from far away to get to us. But we’ve been successful for 70 years.”
HOW TO REACH: Abt Electronics, www.abtelectronics.com
Cohen and Klapper cut their teeth in 1976 as franchisees for The Athlete's Foot. The pair had vision and ambition, and thrived on action. By 1980, they had 10 Athlete's Foot stores and saw the exponential growth opportunities in athletic footwear stores. But they were limited by their franchising agreement with The Athlete's Foot, which kept them within the Indiana state borders.
So Klapper and Cohen decided to launch The Finish line, offering full partnership opportunities to Sablosky, a childhood friend, and Fagin, a manufacturer's rep who did business with Klapper and Cohen's stores.
"We had all the same problems that any start-up company has," says Cohen, The Finish Line's chairman and CEO. "Did we have enough money? Did we have the right people in place? Did we have a concept that could work?"
Cohen and his partners did have one thing that few start-ups have -- an established chain of stores generating revenue that they could tap into.
The Finish Line concept was simple -- sell brand name athletic shoes and clothing at a competitive price. There was a high demand for the products, and competition was limited.
"The fact that business was strong allowed us to make mistakes and still be successful and grow," Cohen says.
In 1986, the franchise agreement with The Athlete's Foot expired and all 10 Athlete's Foot stores were converted to The Finish Line stores. By 1991, the chain had expanded to 105 stores, primarily in the Midwest and Southeast, and annual sales were approximately $100 million. A year later, they took the company public.
Today, The Finish Line boasts more than 550 stores and annual revenue of nearly $1 billion. Cohen attributes the company's success to the fact that its leaders constantly try to differentiate it from the rest of the pack.
"We've had very strong earnings and sales," Cohen says, referring to the company's last few years. "This is due to strategies we put in place two years ago. The competition focuses on lower prices, turning the product into a commodity. We were leading with products. We focused our inventory on premium products, newer footwear, and highlighted them in the stores."
The strategy has proven successful. Year-end sales for 2003 were $985.9 million, up 30 percent from 2002's $757.2 million. In 2001, before implementing its new focus, sales were $701.4 million.
But it's not just top-line growth that Cohen has overseen. Company earnings have climbed steadily, from $18.4 million in 2001 to $25.04 million in 2002 to $47.27 million last year. The Finish Line also maintains a strong balance sheet, with $95.7 million in cash and securities and no interest-bearing debt.
Cohen's tight grip on the company's war chest has given The Finish Line high marks on Wall Street. Three years ago, its stock traded in the $10 to $12 range, and as recently as September 2002, it fell to close to $7. Today, it's trading between $30 and $35, consistently rising while the bulk of the stock market's offerings fell or remained stagnant during the recent recession.
Cohen says there's still room for earnings growth, but warns the stock probably won't continue to climb at the current rate.
"We expect a 3 to 4 percent increase in earnings this year," he says. "Our strategy is to do more of the same -- market and merchandise ourselves as a premier athletic retailer with the most unique, best products."
Part of The Finish Line's success lies in Cohen's abilities as a change agent.
"Everything has changed," he says. "Nothing is as it was when we started, from A to Z."
The Finish Line's employees, its concept, the look of the stores and technology have all evolved as the company has grown, Cohen says. The stores are bigger and the caliber of employees continues to improve. But Cohen says technological advances have had the greatest impact on how The Finish Line operates.
"There was no technology when we started," he says. "We used cash registers and manually tracked our inventory and sales. Now we are totally automated, and the information we receive is fantastic."
Automating the entire process from start to finish provides Cohen and his senior management team with more accurate and up-to-date information that they can use to make better business decisions, allowing them to act more quickly when they see a trend establishing. The Finish Line has also improved its ability to appeal to a wider age range of customers than its competitors do.
"While our core group of customers hasn't changed -- they are 13- to 21-year-olds, male and female -- we've built and designed our stores to appeal to a much broader range," by stocking products for customers of any age and designing the store with that philosophy in mind, Cohen says.
"It's not so much our marketing message that brings these additional customers into the store," he says. "It is the look and feel of the store. Almost all of our stores are located in malls. As people walk by, we want the stores to be inviting to them, and have nothing to turn them off or be intimidating."
It's a marathon, not a sprint
Cohen refuses to be complacent as he looks to the company's future.
"We will continue to try and improve on anything and everything," he says. "That's how you have to feel to get better."
And that's why he fosters an environment of continuous improvement.
"We can do better with our customers, buy better; in short, we can get better," he says. "Those are not just words. We all believe them -- it is a company philosophy."
The company has opened nearly 60 stores a year the last few years, and Cohen says managing growth is a challenge, especially when it comes to finding prime locations.
"We're already in 47 states, and now we're filling in those states where we're underdeveloped," including in the Northeast, South Florida and the West Coast, especially California. "Finding acceptable real estate on acceptable terms is getting to be a bigger challenge." he says. "It's expensive, and it's not easy getting good locations."
To overcome that challenge, The Finish Line is targeting large, regional malls rather than smaller suburban ones.
"We work with the developer to ask him or her to consider one of our stores," Cohen says. "We've proven we can perform."
Another part of the strategy for growth is to develop the company's people, The Finish Line's greatest asset, Cohen says.
"In our business, obviously, people are critical, especially at the store level. We've done a great job getting better, making the store job easier and making it easier for those at the stores to succeed," he says. "We want to continue that momentum."
Cohen says that extends from those on the floor in the stores all the way up the corporate ladder.
"Right now, we have as good a management team as we've ever had," he says. "The challenge is to keep all of these people focused and motivated through our culture and environment."
That's especially critical as the company continuously adapts to the marketplace.
"It's been tough," Cohen says. "They [the management team] understand, but still, change can be painful to go through. Keeping them in place and motivated is really a challenge."
The bottom line, however, is keeping customers happy.
"Since we are a product-driven business, we spend a lot of time making certain we have what consumers are looking for and in their size and color," Cohen says. "We have great buyers, great relationships with our dealers and good information from our systems, but we still have to work to improve."
Because the company buys products nine months in advance, it can be difficult to forecast what the hottest products will be, especially when the dealers are manufacturing just the number ordered.
"If we order 10,000 of a style, that's what we get," Cohen says. "If those run out in three weeks, it's tough."
So as Cohen sets his sights on the next wave of adaptation, one priority is to improve The Finish Line's ordering system.
"How good is anyone's crystal ball?" Cohen jokes, recognizing the difficulties of predicting what consumers will buy.
But, he says, he's confident that by keeping focused on winning the marathon as opposed to the sprint, The Finish Line will continue to grow.
"Our strategies are working very well," he says "We've done a tremendous job in gaining market share." How to reach: The Finish Line, (888) 777-3949 or www.finishline.com
It's mild and sunny, unusual for February, but Jo-Ann Stores CEO Rosskamm doesn't notice the weather -- or anything else for that matter. The farms, quaint shops and strip shopping centers along Darrow Road blur past, barely registering.
After months of denial, it is this morning that Rosskamm finally wakes up to the fact that his fabric and craft retailer is in trouble. Big trouble.
After a string of acquisitions, a multistate superstore rollout and an onerous introduction of a massive inventory control system, the company held $245 million in debt while profits were down 153 percent from the year before. Its New York Stock Exchange listed stock traded at less than half its value from the previous year.
With these facts weighing on him, now was not the best time to deliver a rousing speech to more than 100 Jo-Ann Store managers from around the country who awaited Rosskamm at Jo-Ann's headquarters.
Rosskamm enters the conference room. The cheery managers, perhaps reading his worried face, quickly silence and sit down to hear what they had expected to be an inspiring state-of-the-company speech.
"I went down there and said, 'Hey group, I don't have anything uplifting to tell you, this is our situation,'" says Rosskamm, who in hindsight can chuckle about the event. "It was the first time I got in front of a big public audience and really said, 'This is our situation.'"
What Rosskamm didn't expect was his managers' response.
"I had people sending me cheer-up cards, saying, 'It is not as bad as it looks, we're going to get through this,'" says Rosskamm, lunching on turkey and Swiss on sliced sourdough bread. "What that told me was that when you really confront your people, your team, with the hard facts, there is tremendous resilience there. They step up, and it's incredibly gratifying the way the Jo-Ann team reacted."
It was not only the buoyant reaction of Jo-Ann's 22,000 employees but also the nation's Zeitgeist which helped rebound the retailer from the time Rosskamm announced the company's turnaround plan in March 2001 to today.
As witnessed at stores like Home Depot and Lowe's, and Jo-Ann competitors like Michael's Stores and Hancock Fabrics, over the last two years, consumers seemed obsessed with improving and beautifying their homes. The nation's crafts and sewing industry grew from $23 billion in 2000 to $29 billion in 2002, according to the Hobby Industry Association, and in 2002, consumers spent $20 billion more on crafts and sewing than they spent at the movies.
The "nesting" trend couldn't have been better timed for Jo-Ann.
"Luckily, sewing and crafting seem right for America right now," Rosskamm says. "The whole nesting and cocooning phenomena, people spending time at home, looking for ways to express caring for family and friends with personalized gifting and all of that certainly helped."
The turnaround isn't quite over, but the company is now stable enough to allow Rosskamm and his team to focus on the next growth phase of the business, bolstered by the lessons learned not only over the last two years of turnaround but by the company's 60 years in business.
Too much, too fast
Alan Rosskamm has a unique look for the leader of a $1.5 billion company. While most CEOs opt for the clean-shaven look, he sports a broad mustache. His short, white swept-back hair is offset by black eyebrows and dark eyes. He's in the creativity business, so why not distinguish himself with a unique look?
Exceedingly polite, Rosskamm sounds more like a physician than a retail magnate. His words are calm, patiently delivered, even when discussing unpleasant topics like having to close 150 stores and cutting 8 percent of his work force.
"What we were guilty of clearly is undertaking too much, too fast, and not paying attention to the rule that a strategy is only as good as your ability to execute it," Rosskamm says. "We really stumbled badly on the execution because we were trying to roll out superstores the same time we were trying to put in major new systems, build a new logistics capability -- all envisioning of this long-term growth strategy -- right after we had digested a major acquisition.
"We both got leveraged financially, but more importantly, we got beyond our human capacity to execute effectively."
Jo-Ann grew from 655 stores in 1994 to 1,058 by 1999, primarily through acquisitions. The two biggest purchases were Cloth World in 1995, when Jo-Ann picked up 340 stores, then in 1998, when it acquired West Coast chain House of Fabrics and added 262 stores.
Although many redundant stores were closed after those buyouts, the acquisitions nearly doubled the size of Jo-Ann Stores. That, in part, required the retailer to take on more than $245 million in debt by 1999.
Under the weight of 400 new stores, many on the West Coast, Jo-Ann's Hudson distribution center was bursting with extra inventory and was too hopelessly low-tech to support a chain of its size. A West Coast distribution center and a better inventory control system were now critical.
"Operationally, the company had started to struggle," says David Rodgers, a retail analyst for McDonald Investments in Cleveland. "That was born out in the operational results, and we saw the stock price react."
With the influx of new inventory, the chain ran a "Band-aid" approach to logistics for at least two years after the last acquisition, says Jo-Ann Stores chief financial officer Brian Carney.
"We rented a contract facility in California to get product to the stores," he says. "The stores were getting two receipts from two warehouses. We had a lot of inventory in back rooms."
Meanwhile, Rosskamm and his logistics officers prepared the launch of a massive $33 million retail inventory control system by German conglomerate SAP AG.
"We just had a whole host of problems, and we're not blaming SAP at all," Carney says. "It was a rough installation. We have to take some of the blame, but it's a very exacting system. With SAP, you have to list every item to every store, otherwise it won't replenish. And if it doesn't think you're supposed to have it, it ignores that you're selling it."
Jo-Ann spent five months debugging the SAP system. However, while the system was getting its kinks worked out, Jo-Ann buyers and store managers ignored its commands. Buyers wrote their own purchase orders based on demand from store managers, not on what SAP was telling them.
"Everything was done by word-of-mouth," Carney says. "So, at the end of '01, we were way over inventory, we had blown our inventory budget, yet we knew we were out of stock on our key items. Alan always said we were in the worst spot a retailer can be: You've got all cash tied up in inventory, and you're not selling the stuff that you've invested in."
Fortunately for Jo-Ann, it had built a strong brand since it opened its first Cleveland Fabrics Store in 1943. Customers remained loyal to the chain despite its inventory troubles, although Rosskamm remembers one enlightening incident in Florida when a customer threw a swatch of black fabric in his face.
"'How can I make this skirt if I can't buy a seven-inch black zipper in your store?'" Rosskamm remembers the woman shouting. "And our poor frontline sales associates were hearing that every day."
Flow the product
The result of that SAP and infrastructure investment can be witnessed today through an unassuming "Store Personnel Only" door in the back of Jo-Ann Store's Hudson retail store. Once you step through the door and into the 1.2 million square foot distribution facility, you realize what an undertaking it has been for Rosskamm since the acquisition campaign began in 1994.
Joseph Erli, manager of the Hudson distribution center, walks the seemingly endless aisles of 26,000 Jo-Ann products stacked on racks 20 feet high and carefully bar-coded, everything from white shirt buttons and thimbles to ficus trees and resin furniture.
Green conveyor belts carrying cardboard boxes and blue plastic cartons rumble overhead. There are seven miles of conveyer, says Erli, a stout man with a thin gray beard and large bifocals. Yellow forklifts with flashing red lights beep as they zoom past. The entire warehouse roars with the sound of constant movement and activity.
What you don't notice is people. There seem to be very few until you arrive at the main sorting or "pick" area. There, dozens of workers travel graded metal catwalks -- as high four stories -- moving products from boxes into plastic cartons. Once the carton is full, it's placed on a conveyer belt in the middle of the catwalk, which carries it to the shipping area.
This constant stream of product moving in and out of the distribution center is a drastically different operation than it was only six years ago.
"We used to go through shipping and receiving cycles," Erli says. "In other words, we'd get all these import containers into the outside building and we'd do nothing but receive for two solid weeks, fill the building up and then we would pick it out for two weeks. Now we flow the product."
Erli, who came out of the supermarket and home improvement retail industries, helped implement the changes in distribution, including its conveyor system, the warehouse management software and the sorting area. But with the new stores, Erli quickly ran out of room with the seasonal influx of products.
In 1999, Jo-Ann broke ground on its 600,000-square-foot West Coast distribution facility in Visalia, Calif. The warehouse, which handles one-third of Jo-Ann's inventory, opened in April 2001 and helped remove the burden from the overstocked Hudson facility.
At the same time the California facility opened, the bugs were worked out of the chain's SAP system. Stores began to get restocked with high-demand products automatically, and the system pointed out redundant products and items that just weren't selling. The retailer was able to dump 20 percent of inventory in its distribution center, a $16 million reduction.
Inventory in smaller, traditional stores dropped 12 percent, and its superstores' stock sank by 17 percent.
"We're well ahead of the curve again on the logistics," Carney says. "By having the right systems in place and the right logistics network in place, it has let us now start driving the top line again."
Matter of editing
The year 2002 was kind to Jo-Ann Stores. While other retailers grumbled about a slow economy and low consumer confidence, Jo-Ann reported same-store sales increases -- the best indicator of a retailer's health -- every month in 2002.
For its most recent fiscal year, which ended Feb. 1, 2003, Jo-Ann reported $44.9 million in profits versus a $14.9 million loss from the previous fiscal year. Its stock, which traded at $10.70 a share the previous year, now traded at $26.18 per share.
In March 2001, Rosskamm laid out a three-year goal for the turnaround. Two years later, it appears as if he is nearing the finish line. Logistics are running smoothly, debt was reduced by $180 million, 148 underperforming stores were closed and more than $50 million of the least productive inventory was eliminated, all of which freed up more than $80 million cash.
"It really became a matter of editing and getting down to core," Rosskamm says. "Editing out the redundant product, and the nonproductive products, editing out the nonproductive stores ... and then also be very well edited in terms of go-forward spending and controlling your capital budget ... really focusing only on what's most important and getting full alignment of the whole organization, and then communicating like hell to make sure that everyone understands what needs to be done."
With most of the "editing" completed, Rosskamm has turned his sights on Jo-Ann Stores' next growth phase, informed not only by the lessons of the turnaround but also acknowledging that the retailer got more than a little bit lucky.
"As we look toward the future, we're not wasting time patting ourselves on the back," Rosskamm emphasizes. "We're very proud of what we did, but all the things we have apparently done right in the past two years have been helped and made a lot easier by the fact that our industry has been much in favor with the nation's consumers."
Jo-Ann's growth, Rosskamm believes, will be in the 35,000-square-foot superstore or big box, the model that has been so successful in the last decade for sporting goods, books and electronics. The move will be the third major reinvention of Jo-Ann Stores.
The retail chain began with one 1,400-square-foot store in Severance Shopping Center on the corner of Euclid and Superior, where Rosskamm spent nearly every Saturday as a child. The store, named after a combination of the names of Joan Zimmerman and Jackie Ann Rosskamm, the daughters of the founders, began as small, free-standing stores located in shopping centers. During the 1970s and 1980s, Jo-Ann moved into larger, 4,000-square-foot spaces in regional malls.
Shortly after Rosskamm became Jo-Ann Stores' CEO in 1985, the chain moved from the malls into 10,000-square-foot stores in strip malls, which was the business model at the time. Rosskamm remembers asking his father, Martin, to let him take on the challenge.
"I said, 'I'm probably not ready, but we're really drifting, give me a chance,'" Rosskamm remembers. "To his credit, he did so. Although I heard about it at home, in public he never second-guessed me, and he gave me the opportunity to turn things around at that time. Now we think we have a formula that again will give us a huge opportunity to grow and serve our customers."
The superstore rollout began in 1995 with Jo-Ann's Hudson flagship store as a test market laboratory, called "Jo-Ann etc." The store was 46,000 square feet, about 11,000 square feet larger than the reformatted model Rosskamm plans to pursue.
"We said, 'Let's put everything in the box we think she would like buy from us, and see what it looks like,'" Rosskamm says. "If it never makes a penny, we'll still be a better company because we'll learn about things we can apply to the chain, products we'll discover and whatever."
Due to the acquisitions, inventory overhaul and the challenge of surmounting long-term debt, the superstore rollout stalled in the late 1990s. But Rosskamm was still encouraged by the numbers created by these bigger boxes.
The traditional 14,000-square-foot stores do $100 of sales per square foot, while the older 45,000-square-foot superstores do about $130 per square foot. The 35,000-square-foot superstores -- the prototype Rosskamm plans to pursue -- will launch with $150 of sales per square foot and mature at between $160 and $170 a square foot, according to Jo-Ann Store's estimates.
Rosskamm points to Jo-Ann's Montrose store as a harbinger of the nationwide superstore's success. Early last year, Jo-Ann closed the 16,000-square-foot store, which had about $2 million in annual sales, slightly better than the chain's traditional stores. A Michael's store moved into the same shopping center, and within six months, Jo-Ann re-opened across West Market Street in a former Homeplace 35,000-square-foot big box.
The Jo-Ann superstore, which opened in October last year, is expected to land $5.3 million this year. Michael's, which never had a store in the area, has $3 million to $4 million in sales.
"Out of the West Akron area, the marketplace has gone from supporting $2 million to supporting $8 million of revenue," Rosskamm says. "It's a remarkable phenomenon. Making more product available in a better environment with more support is giving the consumer the inspiration and the confidence to do more."
And apparently to buy more.
Even where the Jo-Ann name is new, like in Phoenix, consumers are responding to the superstore model. Four years ago, Jo-Ann had 14 smaller traditional stores in that market, with annual sales of $13 million. Six of those closed and were replaced with four superstores. Last year, those 12 stores landed $35 million in sales.
"What's unique about them is that they are the only ones that cross over in the sewing and craft and home décor," says analyst David Rodgers.
Rodgers says Jo-Ann's superstore niche will be in selling most of what its competitors offer in the areas of craft, sewing and home decor, so the consumer will shop Jo-Ann first and get what she needs. Then, if she can't find everything, only then will she go to a Michael's Store, which is primarily craft, or a Hancock Fabric, which focuses on sewing.
The superstores are also in prime "Class A" retail locations, while the traditional stores are in less competitive, harder-to-find strip mall locations.
"While it's not a completely unique strategy, it's unique in the world of sewing and craft, and it's proven it can be successful, but it's still early in that process," Rodgers says.
Rosskamm is confident the Montrose phenomena will bear out across the country. Industry research firm Thomson & Assoc., which has performed similar market research for Home Depot and other retailers, reported to Jo-Ann that there are at least 600 locations where demographics would support a superstore.
"Our ability to take any major U.S. market and replace traditional stores with superstores gives us incredible power to grow the business and to gain market share," Rosskamm says. "It's all from the leverage of being able to provide a more complete offer to the consumer, one-stop shopping, and it's the reason we're so excited about the opportunity to roll out these superstores across the country."
The challenge for Rosskamm is to convince otherwise those consumers who still think of Jo-Ann Stores as only as a sewing store -- not to mention the fact that Michael's is still a larger chain in annual sales and number of stores. Rosskamm says there will be some Sunday newspaper advertising inserts, but the main marketing effort will be through direct mail targeting the company's extensive loyal customer base.
"Although we never want to test that loyalty again, it is certainly gratifying that over 60 years, we've built enough confidence in our brand that she gave us another chance," Rosskamm says. "And now I think she's much more satisfied with what we have for her."
Long way to go
Jo-Ann Stores 3.0 is a far cry from what it was when Rosskamm's grandparents, Hilda and Berthold Reich, opened the first Cleveland Fabric Store, which sold imported cheese among the sewing needles and quilting solids.
Rosskamm has the data to back up his superstore plan and the knowledge gained from the latest turnaround. He anticipates opening 30 to 40 superstores over the next two years, with an annual earnings growth of 10 percent to 12 percent.
"They're not necessarily in a turnaround mode, but they're still in a transition mode," says Rodgers. "Now, as they start to roll out 20 to 25 stores this year, this is the first time they've done that. So they still have a little bit to prove to Wall Street, in that can they do this profitably and on time, and what's the impact going to be for the consumer. If they can complete the transition this year and move into next year and accelerate those store openings, the stock will reflect that."
The question is, will the nesting and cocooning trend continue? Will aging baby boomers continue to spend their time and disposable dollars on leisure activities? Rosskamm hopes so, but he isn't relying on consumer whims to guide his growth strategy.
"Everybody talks about it, but it's about continually improving your ability to deliver the right product to the customer at the time she wants it," Rosskamm says. "It's having all those backroom systems and processes in place, so you when you start focusing on new markets and new stores, the core business is going to run efficiently.
"We have become a much more efficient, much better retailer, but we still think we've got a long way to go." How to reach: Jo-Ann Stores Inc., (330) 656-2600 or www.joann.com.
It was the one toy Arnold Miller always wanted when he was young.
"My husband never had a train when he was a little boy," recalls Sydell Miller, who along with her husband, founded Matrix Essentials. "I didn't know that until many years after we were married. So I went out and bought him one of those little, tiny trains that he could have in his office."
Arnold died in 1992, the same year he and Sydell became the first husband and wife team inducted into the National Cosmetology Hall of Fame and were named "Man and Woman of the Year" by the American Beauty Association. In 1994, Miller sold the company to Bristol-Myers Squibb Co. She remained chairman of the board until retiring in 1996.
Arnold's love for trains remains a happy memory for the Miller family, so much so that it sponsors the train ride at the Cleveland Metroparks Zoo.
"Somebody called the other day and said, 'Guess what? I just rode on Arnie's Engine,'" Miller said. "I said, 'Fabulous, he would love that, knowing that all these young children are enjoying his train.'"
Recalling that story brings a smile to Miller's face, as well as a joyful laugh. It's with that same gentle good humor and desire to give back that she established the Arnold and Sydell Miller Family Foundation, which recently announced a $10 million gift to create the Arnold and Sydell Miller Center for Entrepreneurship at Case Western Reserve University's Weatherhead School of Management.
"I have been looking for something to do in his honor," Miller says. "When this came about, it was just so perfect because it was everything he believed in. It matched our needs and our desires and beliefs."
A search committee has begun seeking "the pre-eminent scholar/teacher in the field of entrepreneurship" to fill the new department's chair -- the Arnold and Sydell Miller Professor of Enterprise Development. The Miller Center will be located in the Weatherhead School's new Peter B. Lewis building, which was designed by renowned architect Frank O. Gehry and will be open in 2002.
"Arnold and Sydell Miller exemplify entrepreneurial success," says David Auston, CWRU president. "They stand as important role models for aspiring entrepreneurs. The creation of the Miller Center at an independent research university such as Case Western Reserve is valuable both for the school and the community.
"Students and practicing entrepreneurs will have access to programs not only in management, but also in biomedical science, advanced technology and other fields in which the university is a national leader."
This eagerly awaited program traces its roots deep in the experiences of its generous benefactor. Sydell Miller began her career in the beauty industry long before she and Arnold started manufacturing beauty products.
And that story, Miller proudly explains, entailed a series of learning experiences that, in turn, will become a classroom case history from which others will benefit. Here are some of the lessons she learned in those years.
Seize the moment
"I've always believed that opportunity knocks once," Miller says. "Maybe one of the greatest strengths that Arnie and I both had was the ability to see opportunity and take advantage of those opportunities."
As an example, Miller points to the time when Matrix Essentials opened a distribution facility in Italy. Within one year of its establishment, the company was the third largest in the country. While on a visit to the Italian site, the head of operations explained that while it was doing well, if it were going to remain successful, it needed its own manufacturing facility, more people, advertising and capital investment.
Not seeing the immediate benefits of making such a large cash infusion into the Italian operations, Miller told the operations manager that such an endeavor wasn't possible yet.
"He looked at me and he said, 'The time is now. Maybe in three or four years when you are capable of doing things, the time will be gone,'" Miller recalls. "I said, 'I have got to figure a way, because it's time to take Matrix to a new level.' It needed the infrastructure of a large company."
It was at that moment that Miller made the decision to finish something that had been started before Arnold passed away.
"The year that my husband died, he had started to talk to Bristol-Myers Squibb," she says. "He had always felt that there would be a time in our growth when we needed to develop a partnership with a larger company, preferably pharmaceutical, where we would get the technology for our products. We were unique in the fact that from Day One, we manufactured our own products. We had our own laboratories, our quality department, as well as our manufacturing facility out in Solon. Pharmaceutical company technology was very important to us."
Aiding that was the fact that Matrix experienced major growth in 1993 and 1994.
"When the salons and distributors realized that Matrix was going to survive without my husband, the doors just opened up," Miller says. "We did more right than we did wrong. We had 80 percent growth in '93; we had a 60 percent growth in '94."
Educate everyone involved with your business
Helping others to recognize and seize their own opportunities is the impetus behind the Miller Center.
"We accomplished the building of our company through education," Miller says. "We used education as our tool for growth throughout our industry (for) everyone that came into contact with us -- our employees, our distributors, sales people, hairdressers, salon owners. We built a program for educating.
"In a small sense, a salon owner is an entrepreneur. Their training has always been in the artistic area and they become very good at what they do, so they now open up a salon."
But, Miller says, it take more than energy and expertise in a field to be an entrepreneur.
"There's a lot of things they didn't learn in beauty school on how to run that business," she says. "We started doing courses. We looked at what we could make available for entrepreneurs who are interested in developing ideas and a business. What does it take? What are the downfalls? What are they going to need to do at what levels of their business?
"How do they get the right financing. How do they promote and advertise? How do they do all these things that they may not learn in a basic four-year course in college?"
In other words, all the things the Millers learned on their own.
During the early years, education was on-the-job for the Millers.
"It was constantly, 'We don't want to hit the wall, so we need to keep educating ourselves. We need to keep reaching out for programs. We need to hire people that are more experienced than us in areas where they can surround us with very skilled people where we lack some of these skills.'"
Learn from success
Miller hopes she's able to help others benefit from her experiences.
"Matrix will become a case study because it is a very unique company with a very unique culture," she says. "In a very short length of time, (it) became the leading company in the industry by more than double any other company in the industry. It has a wonderful story to tell."
It's a story, Miller says, that any fledgling entrepreneur can relate to.
"I guess I've come to realize that it's truly a reflection of the American Dream. It is a story of two people that came from a nice background, but certainly not from any wealth," she says. "Nobody thought we could have accomplished this, so nobody paid any attention to Arnold and me. That allowed us to do our thing.
"When people woke up and discovered we were there to stay, it was too late. We were fortunate because had people tried to put pressure on distributors not to take the line, not to distribute the line, it may have been a different story."
But by the time the competition woke up, Matrix was on its way to becoming an industry leader. When Miller sold it to Bristol-Myers Squibb Co. in 1994, it boasted annual revenue in excess of $300 million.
Enjoy the spoils
Business has so many benefits -- often intangible ones -- that it's easy for entrepreneurs to forget to stop and marvel at their accomplishments. Ironically, however, the trappings of success are readily evident and often the major draw for budding entrepreneurs.
But from the successful perch on which Miller sits, she can easily see a few additional rewards.
"It helps give credit to the city," she says.
When she and Arnold started Matrix, it was difficult to find local people in the beauty supply business because there weren't a lot of beauty supply companies in Cleveland. Says Miller, "We would have to recruit people all the time. It was very difficult."
She remembers the days when airline pilots announced that they were about to touch down in the city where the river burns.
"It used to aggravate the heck out of me," she recalls. "Now (it is good) to see us being looked upon as progressive, one that has helped to rebuild its downtown, its waterfront, that has brought culture to our city. So many people didn't even realize how much wonderful culture Cleveland has always had available.
"I look at it as giving back to a city. It's also very important to my children and me."
There are long-term benefits as well, Miller says.
"It keeps perpetuating because as we develop these people, and hopefully they are successful in whatever dreams they have and helping to make them happen, it will only benefit this city."
Miller realizes her gift to CWRU is a hefty one, but says that only underscores the importance of her goal.
"It's a large gift, but I think it will be one of the most important gifts we've ever given because it will touch a lot more people," she says. "It will help give to the whole community. That's difficult to do when you're giving a gift. I think it's a wonderful tribute to my husband and his memory. Arnold was a true entrepreneur and a very charismatic man.
"He loved people and he loved this city. It's a way of honoring him with something that he loved."
Recognize the benefits
Sydell Miller will be the first to tell you how much she has enjoyed her entrepreneurial experiences. It's that love of the thrill of business that she wants to share with other kindred spirits.
"For me, the opportunity is to be able to build an educational program that would utilize some of the techniques that we used that ensured our success in business. It will help people do that and have fun in doing what they're doing at the same time," Miller says. "I'm not sure you can totally change a person to become an entrepreneur. But I do believe that you can take somebody who has some of those qualifications and you can guide them and educate and develop them to become much better at what they do.
"Many of us groped because we don't have the opportunity to know where the next road is going."
Opportunity, she says, must be recognized in order to be seized.
"Those are where I feel opportunities can be opened up -- to help them go a little faster and a little more confidently and maybe not hit all the pitfalls that we hit. Some pitfalls you have to experience. That's part of learning and growing. But you learn quickly when it's a costly mistake.
"Not all of it has to be through touch and learn. Some of it can be through basic education." How to reach: Case Western Reserve University Weatherhead School of Management, (216) 368-2046 or www.weatherhead.cwru.edu
Daniel G. Jacobs (email@example.com) is senior editor of SBN.
“That kind of gets people’s attention,” says Ed Stack, chairman and CEO, Dick’s Sporting Goods Inc.
A few years ago, Stack charged his store managers with sharing three things the sporting goods retailer does that makes no sense.
“It’s really simple,” Stack says. “Ask people for the things that you have them do that they view as doesn’t add value. We did it as a fun thing to do.”
The idea was part of an overarching theme of the importance of staying in touch with your business. It’s not enough to gauge how the business is doing by talking to employees and customers. You have to actually solicit their feedback. And one of the best ways to do that is by creating an interactive and engaging format.
At the end of 2009, Dick’s had 419 stores in 40 states as well as 91 Golf Galaxy stores in 31 states. All told, the company brought in $4.4 billion in revenue. Perhaps you, like Stack, can’t personally reach everyone to gather input. But you still need to solicit feedback in a way that portrays an accurate reflection of your business.
In order to do that, Stack asked his store managers to discuss the stupid list with their employees. Then, they submitted their three ideas via an e-mail created for the purpose.
“There was nothing off the table, they could put anything on that they wanted to,” Stack says.
Gathering the feedback is just half the battle. The second part is analyzing. When you’re gathering information from so many places, obviously you’re not going to be able to act on every decision.
“We looked at the 10 things that our associates indicated the most,” Stack says. “If somebody said, ‘This is a stupid thing,’ and we heard that 50 times and something else we saw was stupid but we got that three times, we went with the thing that we heard more.”
One of the issues Dick’s faced was it wasn’t monitoring its in-stock items for advertising as well as it needed to. Turned out, it was a computer system problem. A few adjustments were made and sales went up.
That was one problem with a fairly easy solution, but not every suggestion will be as easy to solve, nor will every suggestion be solvable. An important piece of asking employees for feedback is following up with them on your final decisions and explaining why.
Stack went back to his employees and spoke to them about what did and did not make it on the list and then an e-mail was sent to every store.
“We said, ‘This is what came up on the stupid list,’” he says. “‘This is what we’re going to do, [this is] why we’re going to make these changes, and these are some of the things that we can’t change, and why we can’t change them.’”
How to reach: Dick’s Sporting Goods Inc., (877) 846-9997 or www.dickssportinggoods.com
For more leadership advice from Ed Stack, he’ll be the keynote speaker at the 12th Annual Entrepreneur Growth Conference at Duquesne University on June 10. Also keep an eye on Smart Business Pittsburgh for a future cover interview with Stack on how to develop and maintain a vision.
Georgette Ciukurescu never practiced the martial arts. But she managed to spot a gaping need for nunchakus, throwing stars and all-things Bruce Lee.
While helping a friend outfit his martial arts club 40 years ago, Ciukurescu noticed the lack of outlets carrying inventory. The frustration enticed her to feed the market need, starting by making nunchakus by hand at her kitchen table.
Product by product, Ciukurescu has grown Asian World of Martial Arts Inc. into an international manufacturer, supplier and distributor of martial arts and sports equipment.
But understanding consumer needs only gets you so far, Ciukurescu says. You also need to develop loyalty with customers by building strong relationships and providing good service.
“I want to embrace the customer,” she says. “I want them to say this company cares. And that’s what I’m trying to do.”
Ciukurescu, owner, founder, president and CEO of AWMA, passes that philosophy on to her team, which ranges from 35 to 50 employees depending on the season.
Smart Business spoke with Ciukurescu about how to provide customer service.
Build relationships. You have to communicate constantly with the individual (customer). If you can be with them one-on-one on the telephone, that’s even better.
You have to let them know that you’re just an average person just like they are, and sort of relate to them with all their ordinary day issues.
You have to get a feel for who your customer is and what they like and just stay with that individual connection. It’s very important in a business relationship as it is with even a personal relationship. I kind of relate the two.
I see with one of my employees, he sends out e-mails to his customers. He talks to them about the sports teams and what they’re doing. He talks to them about movies that he likes and has anyone seen a good movie. He gets dozens of responses from the customers just interacting about movies.
These are people that buy from us, but they love this guy. They love what he brings to the table besides business.
It’s not just all statistics. We’re your family, and that’s what we try to express with our customers. That’s what they get from us and from our employees, which makes us a little bit different than the other person and hopefully brings the loyalty base in with our customers.
Understand your customers’ needs. We’re constantly asking them how they feel about our product. Are there any problems with anything? What would they like to see differently? Is there a product that they would like to see us carry?
You try to find out is there something new they would like to see in the market. We want to make a good product, and we don’t want any complaints about it.
Everything is valuable information. You can’t ignore it. You just cannot ignore it.
You can’t always think you have the right answers, too. You do have to listen to what your customers are saying, and you do have to listen to your sales team because they’re dealing with the people on a day-to-day basis.
If you want to grow and be successful, you have to pay attention.
Receive regular sales team feedback. We have meetings every week, and we break up into groups of eight people because we want to make sure we have enough time to talk with everybody.
We’ll do an overview as to what are your three major complaints in our process: Is it shipping, is it returns, is it defective merchandise, is it the person is not getting their order on time? What are you hearing?
Then, of course we like to hear the positive stuff. What are the positive comments that you’re getting? Then, what ideas do you have?
If we have new products, we’ll bring the product in for people to understand how it’s made and what it does and the benefit of it.
Then, you want to also get a feel of what’s going on with everybody in the room, too. This person hasn’t been that talkative, what’s going on, are they upset with something? You need that to find out what’s going on with your team. You need to stay connected with them.
(It’s) feedback and also keeping your business on the right track and successful. You want to make sure your employees understand what you’re thinking and what’s important for you and the whole program of what your company is all about.
You want to make sure employees are on the same track as you. We have employees who have been with us for over 20 years. Things are a lot different now than they were 20 years ago.
Build trust through service. You always try to be ... honest and fair. You put a good product out there. You deliver what you promise. And if there’s a problem, you take care of it.
If one person is upset with you, they’re going to tell several of their friends. If they’re happy with you, they’re going to tell their friends they’re happy with you.
I tell my employees the customer is always right. Whatever is the problem, fix it. Even if you know maybe what that customer is saying or doing is not correct or you know they’re at fault. Make them happy. Take care of that situation.
You get some customers that can be trying, for lack of a better word. And it affects your employees, it has to. You have to constantly have meetings with your employees; you have to explain to them how you just have to deal with this individual. ‘Let’s try and make this telephone conversation, an e-mail conversation, a positive one.’
You want that good vibe going out into the universe, but you have to show it, and you have to demonstrate it and it all comes down to your sales team. It’s just everything that goes on internally that brings that about.
That’s why you have to make sure that your people are on the same page as you are and that they are supportive of what you’re doing.
How to reach: Asian World of Martial Arts Inc., (800) 345-2962 or www.awma.com
George Zimmer has one word to describe his culture at The Men’s Wearhouse Inc.: trust.
“That’s not to say every single person in our organization trusts the organization,” he says. “We have 17,000 overall employees. But the critical mass of our company does believe in the organization, trusts the organization, and in fact, the organization trusts its employees, and we both trust our customers. I think that’s where it starts.”
When Zimmer talks about trust, he doesn’t want to sound new age, because the word has a business application to it. One of the significant expenses in the retail business is called shrinkage, which includes theft by employees. Yet, the difference between shrinkage at Men’s Wearhouse and one other major retailer is 200 basis points a year.
“That’s a lot of money,” says the founder, chairman and CEO of the retailer, which posted $1.97 billion in 2008 sales. “So, trust is a significant leverage in your economic model.”
Because Zimmer was a child of the ’60s, he brought ideas from that generation with him to Men’s Wearhouse, including respecting people regardless of their position in a company.
“There can only be one manager of a store, but nonetheless, the manager has to have a relationship with the other people,” he says. “I think it was that type of thought that created the original foundations.”
Those foundations helped Men’s Wearhouse and its more than 1,200 stores again be named to Fortune magazine’s 2009 “100 Best Companies to Work For” list.
Aside from accolades, the culture helps Zimmer retain employees, but he hopes it will also help the company through this tough economy.
“Customer loyalty is harder to measure,” he says. “As we are in this recession, one way to measure this is that I believe when the recession ends, Men’s Wearhouse will have a higher market share than when the recession began. That will be because of our corporate culture, which will be the glue that holds the customer and the employee and the organization, the shareholder, holds it all together.”
Encourage feedback and ideas
One of the best ideas Zimmer ever received for the company came from an employee. About 10 years ago, Zimmer attended a training class for company employees, and an employee wanted to run an idea by him. The employee made a presentation to Zimmer during a meal about tuxedo rental and how it could benefit the company. The idea made sense to Zimmer and is now a valuable part of Men’s Wearhouse. But the lesson there isn’t in the value that the idea brought. It was the fact that if Zimmer wasn’t willing to listen to an employee’s idea, he would have never heard it.
To create that type of openness between manager and employee, the company has three key principles of interpersonal communication it teaches to managers.
One principle is to listen carefully.
“What we mean by that is try not to speak until the other person has said the last syllable of what they are saying,” he says.
It’s a simple concept. Waiting one second after your employee or colleague has said his or her last syllable will create a more communicative and trusting culture.
“You can actually change the tenor, not to mention the rhythm of any conversation by forcing each person to wait one second after the other person finishes before speaking,” he says. “In that one second, the human brain is able to have an enormous number of thoughts so you get a different dialogue because there’s been a larger universe considered.”
The second principle is to elevate the other person’s respect.
“That sometimes is difficult. The idea is to not take respect away from somebody in a dialogue,” he says. “You try to find something that the employee is either good at or has made good progress at. Start with that. And, then, this is where leadership is an art at the appropriate time and the appropriate way, move from that to the area you believe needs improvement.”
The third is to always ask the person who is being supervised for his or her suggestion as to how a problem might be solved. This eliminates waiting for a lower-level employee to come to you with an idea or question and instead allows you to open the door of communication.
“We’d say it like, ‘What do you think we ought to do about this?’ because it’s oftentimes a coaching conversation a store manager is having with somebody in his store,” he says.
Yet, even with the three principles, Zimmer still says there can be improvement, especially when it comes to employees who have a question or a concern.
So, along with the three principles, the company also has 10 employee representatives inside the company who have a certain number of stores for which they are responsible.
“When there is a problem that somebody has in one of our stores, it’s suggested if it can’t be resolved in store or by the regional manager, that they call the employee representative, who, although they are paid by the company, is told to represent the employee and think like the employee,” he says. “That doesn’t mean that we agree with the employee, but you’re allowed when you are an employee representative to understand the employee’s position differently than their regional manager might.”
While having a position dedicated to dealing with employee problems can be efficient, direct communication with you can also solve many problems.
Anybody in the company can e-mail Zimmer with a question or concern.
However, one hurdle Zimmer runs into with e-mail is some employees aren’t college graduates, and they don’t think they write well. That significantly reduces the feedback he hears directly from employees.
“I tell people I like primary information, as opposed to information sifted by various levels of management, but I only get five a day on average,” he says.
To try to increase that number, Zimmer reminds employees every time he speaks to them that he wants their feedback, and he wants e-mails.
You need to constantly communicate that message to improve the chances that employees will buy in to it and communicate with you. Then, once you get an e-mail regarding feedback or a question, you need to address it as soon as possible.
“I consider anything to do with employees or the stores to be my priority,” he says. “That’s one of the other things, I guess, when it comes back to trust and authenticity. That is my priority. I don’t say that, I don’t pay lip service to that. That is how I run this business and how I live my life. So, I think the people that work in our stores, know that.
“And there’s some sense of comfort they get there, I believe. Normally it’s the people that are in the ivory tower that are sort of getting the time of the CEO. It’s kind of in reverse here.”
Even if you don’t know the answer, reply to the employee that you received it and have someone working on getting the answer.
“If I don’t know the answer, I say, ‘Thanks for the question. I’ve sent it to so-and-so who will contact you.’ If I do know the answer, I give them the answer,” he says.
The fact that you are responding will go a long way in creating a culture of trust and responsibility.
“The lower you are in the company, the more shocked you are and the more impressed you are with George,” he says.
It’s hard enough for an employee to come forward to you with an idea or with a question, so the chances of them stepping up and admitting a mistake is even less likely to occur. That’s why you have to create a culture where employees aren’t afraid to own up to a mistake.
“One of the things that I’ve never actually understood and what I’ve heard a thousand times in my career is, ‘You should hold people accountable.’ I actually don’t know what that means,” he says. “It sounds to me like holding somebody accountable means when they make a mistake of a certain size, you terminate them. That’s not how I run the company.”
One way to make it easier for employees to come forward with a mistake is to put it in your mission statement.
“In our mission statement, it says we want to be a company where you can admit to your mistakes,” he says. “You wouldn’t be able to admit to your mistakes unless the company was prepared to not adversely impact your career because you admitted to it.
“I don’t have a lot of experience as an adult in other companies, but I would imagine that in many companies a mistake is made and somebody is afraid to admit it, so they try to cover it up. When it’s finally uncovered months later, it’s not traceable back to them, even if it cost the company a few bucks.
“At our company, we say, ‘Hey, don’t worry if you made a mistake. Nobody is going to adversely impact your career when you come forward right away, because it will make it easier to correct the mistake.’”
Much like someone coming to you with an idea, you need to constantly remind employees they can come to you with a mistake.
“I think that what people might be concerned about is having a supervisor somewhere along the line that just doesn’t like them because of their having taken the initiative to say something,” he says. “Knowing this, I speak about it every time I speak to our employees, and I remind everybody that I can protect their anonymity if that is what they want. I’d rather not. Part of the culture is that you have to learn to have somebody say something that’s not the nicest thing you’ve ever heard about yourself and be able to overcome your natural tendency to not like that person.”
Zimmer will fire an employee for stealing or not being able to meet job requirements, but he is more lenient if the person made a mistake trying to improve the company.
“We wouldn’t let somebody go under any conditions if they had the right intentions and made a mistake, regardless of the size of the mistakes,” he says
If you do have to confront somebody who made a mistake, avoid using anger when speaking with him or her.
“Sometimes the mistakes are on one-off things, in which case, it’s not that important that they fully understand the mistake,” he says. “But, if it’s something that is part of their routine, then of course it has to be corrected. What I’ve found is when you lean on people and are hard to people, particularly when they’ve made mistakes, you might get a temporary short-term burst out of fear, but it shortly erodes and you are left with less than you had.”
How to reach: Men’s Wearhouse, (800) 851-6744 or www.menswearhouse.com
To be a good leader, Andrew Cagnetta says that you have to not only understand your own needs and motivations but those of your employees, as well.
Understanding the motivations of his 85 employees at Transworld Business Brokers LLC helps Cagnetta empower them by giving them the tools they need to succeed.
“You have to understand what they need to get their job done,” says the company’s president and CEO. “They need training, sometimes they need mentorship, or they need the ability to get resources.”
Understanding his people better has helped Cagnetta grow the business broker firm to 2007 revenue of $10 million.
Smart Business spoke with Cagnetta about how understanding your employees and setting an example for them can lead to a culture of honesty and trust.
Q. How do you find out what motivates people?
Try to have a dialogue with them. When people first start, we have training, and we go out to dinner the first night. I sit there and want to know about their personal lives. Not so much that I’m delving into their lives, but I ask questions like, ‘Do you have kids? Where did you grow up? Do you have brothers and sisters?’ Just getting to know the person first and what’s important to them.
You need to understand psychology. Everyone is not motivated like you are. Some want money, others want to belong, while some just want a place to work. You have to be an active listener and understand your employees’ motivations.
Some may want a lifetime career, while some might need gas money to go to night school.
Q. How do you develop that open and honest dialogue with employees?
It takes cues. Sometimes you’re telling stories, and you encourage them to tell stories. We use a lot of real-life examples in negotiating, so you’re going through these real-life phrases and say, ‘Have you ever run into something like that?’
You kind of drag stories out of them. You can ask the easy questions first ‘Where did you grow up? Where did you go to school? Did you go to college? What’s your favorite baseball and basketball team?’ You can start to learn a lot about them.
I went through a bad experience at a company where everything was a secret. I didn’t appreciate that and didn’t like the way it felt. Out of that bad experience just came, ‘I’m not going to do that to people; I’m going to be honest and share with them.’
Have an inviting body language and posture. Make some small talk. Tell them they can be honest.
Q. How do you become a better listener?
The key is to be an active listener. You have to concentrate on listening. Look at your subject and focus on what they’re saying. Note body language. Put away your BlackBerry and close your computer or turn off the screen. I always try to get out of my chair if I’m going to have a conversation with someone, I don’t want to have it across my desk. So I have a little conference table in my office and I get up and move to the table so we’re all on equal footing.
Sometimes you take notes so you won’t have to ask questions. Sometimes I sound like a psychologist ‘How do you feel about that? How did that make you feel? I understand how you feel; others have felt that way in the past, but here’s what we found to solve that kind of problem.’
Q. How do you lead by example?
You can’t be afraid to do anyone’s job. Do the simple things. Clean up the conference room after a lunch meeting. Take phone calls at the receptionist’s desk if everyone is out or late coming in.
Don’t be afraid to join your workers in a tough situation. Be the best at most tasks you ask others to do. Anything you want your employees to do, you need to do it, too.
Q. Once you understand your employees, how do you empower them to succeed?
You give people the tools to succeed and then get out of their way. I’m not a taskmaster hovering over people. I trust them.
You need to keep track of what is important and tell employees what you expect. You want to see results. You have to somehow keep in touch with everybody to understand whether they’re doing well or not.
If they’re doing all the right things and they’re not getting the right results, then something’s wrong and you have to react to the symptoms.
Q. What is the benefit of being honest and open with your employees?
You can trust them. When I go away, I don’t have to have people baby-sit them. I hope when I give them a task to do that they know I’m not looking over their shoulder, so they feel pride.
How to reach: Transworld Business Brokers LLC, (954) 772-1122 or www.tworld.com
Craig Weatherwax was the class clown in high school, and he continues to use his sense of humor to create a fun family atmosphere at Oceanside Photo and Telescope Inc.
“I do a lot of hands-on, on-the-floor experience with my employees,” says the owner, president and CEO of the $17 million, 22-employee retail camera, telescope, binocular and microscope company. “We try to keep it on a first-name, friendly basis. There’s a lot of kidding and joking that goes on. It makes it fun to go to work.”
Smart Business spoke with Weatherwax about how to create a feeling of family among your employees.
Q. How do you create a fun team environment?
Lead from the top. We try to evaluate everybody as a group, reinforce how departments are doing as a whole and make employees understand that we’re all in this together.
It’s the, ‘This is a marathon, not a sprint’ concept. You can’t get hung up on the bad days, but understand that in the long run, it’s all going to work out.
If your employees see that you take a personal interest in the growth of the business and that you like it and like being with them, that’s something you can’t instill in somebody; it has to come from the heart.
Q. How do you model that culture?
It’s not contrived; it comes naturally. You can tell if people are happy with what they’re doing, and it’s important that people are happy at work. I try to express that and let them make fun of me because you’ve got to give as well as take.
You can’t belittle employees or think less of them. They’re human beings, they have feelings, and you have to be aware of that. A happy employee is a good employee.
Q. What are the benefits of a fun work environment?
Everybody pulls for everybody else. You have your sibling rivalries a little bit like you do in a family, but it’s all done in fun. The family relationship allows people to help others with product knowledge or with how to handle a certain situation as opposed to being competitive and cutthroat.
Q. What are the keys to being a hands-on leader?
A lot of what you do as a leader is to set the tone for the workday. If you’re having a bad day, you maintain that within yourself and exude a feeling of confidence and patience. You can make a good day better or a bad day worse just by how you handle situations and problems.
Q. How do you get better at being confident and patient?
Look at the big picture. Some people get hung up on the specifics of a particular event and fail to look at the big picture. It comes with time.
If you take a step back and focus on the business as a whole as opposed to the specific incident that’s happening, it makes it much simpler to try to have that patience and exude that confidence.
Q. How do you balance being a hands-on leader and knowing when and how to delegate?
Experience. Evaluate each individual situation. Surrounding yourself with good people is important; there’s no substitute for a good staff. Sometimes, you rely on them more than you ever know.
Don’t lose sight of the big picture, and never put yourself too far above the rest of the people because you’re all working toward the same end goal. A lot of people think that you can go into business,
create a business model, and that’s as far as it goes, but being able to be there on a day-to-day basis allows you to make the kind of changes that you need. You can’t sit in a big office and expect things to work smoothly.
Communication is the most important thing you can do to be able to understand and listen to your employees and the people in the chain of command. Listening is an under-rated talent. A lot of people forget that the people down below have a better understanding of what makes your business grow and be successful.
You have to have an open mind to be able to understand and listen to what they have to say. Having preconceived ideas might hinder your ability to listen effectively. If you listen to them with an open mind, it makes a huge difference.
Q. What are the benefits of listening to employees and having open communication?
It helps you understand the building blocks of the business and allows you the ability to change. Many businesses get static in their growth potential because they don’t listen. The employees then, because they’re working with the customer on a day-to-day basis, have a better understanding of what the customer wants, and what the customer wants is going to make your company grow and change in today’s environment of constant change.
HOW TO REACH: Oceanside Photo and Telescope Inc., (800) 483-6287 or www.optcorp.com