Morgan Lewis Jr.
Thomas A. Waltermire smiles whenever somebody asks him exactly what it is that PolyOne does. The company, he explains, doesn't make "things," it makes "stuff."
Most of that "stuff" involves compounds of plastic, vinyl and rubber. The plastic that goes into a car dashboard or bumper, the plastic-rubber compound that makes up the IV bag in hospitals, the vinyl compound that covers your car's airbag, even the orange pigment on the seats of the new Cleveland Browns Stadium are among the thousands of products that PolyOne manufactures. The company takes raw materials, improves them and sends the new materials on to other manufacturers for transformation into something recognizable.
What PolyOne does might be difficult to get your hands around, but the company's influence in the plastics industry is unquestionable. With annual sales of $3.5 billion, PolyOne employs more than 10,000 people at 80 manufacturing sites on four continents.
PolyOne was born Sept. 1, 2000, out of the merger of Cleveland-based M.A. Hanna Co. and Avon Lake-based Geon Co. It seemed like an obvious -- and overdue -- marriage to many who follow the plastics industry: Hanna had a diverse product line and global reach, while the smaller, but faster-growing Geon dominated the North American polyvinyl chloride (PVC) market and was a more closely managed firm.
The companies' product lines didn't overlap, but they were parallel players in the same industry.
Leaders of the two companies quietly started the ball rolling in 1998, but it wasn't until late last year that the deal was finally complete. And behind the scenes, representatives from McDonald Investments toiled endlessly to ensure a deal that benefited both firms.
"We knew from a strategic perspective that it made a lot of sense to put these two businesses together," explains Christopher M. Gorman, a senior managing director at McDonald, which handled Geon's side of the merger. "Although the deal took some twists and turns, that was the overriding thing throughout that kept everybody focused on finding a way to get it done -- it just made imminent sense."
Geon's history seems lifted from the storybooks of American industry. It was spun off from plastics giant BFGoodrich in 1993 as the country's first manufacturer focused solely on producing and marketing vinyl products.
All went well for several years. Then, in the winter of 1997, then-CEO William Patient led his management team through a review of the company's growth strategy. During those meetings, Patient decided the company's long-term future was tied to a focus on vinyl, plastic and rubber compounds and services. That required a move away from its commodity-based resin business.
As part of that strategy, Geon acquired six companies, including its largest target, the $150 million Massachusetts-based O'Sullivan Corp. By 1999, one year before the merger with M.A. Hanna, Geon more than doubled its earnings, due in large part to its acquisitions.
But even before Geon began its fast track acquisition campaign, Patient, and then Waltermire, who was named CEO in May 1999, started talking with their counterparts at M.A. Hanna about a potential merger.
"They were very general and high level talks, just kind of feeling each other out," recalls Waltermire, who at the time was president and COO. "Our goal was to see if the concept made sense to either of us because we thought we understood the Hanna business, but we didn't really understand it in that much depth."
During early discussions, it became obvious to those involved that the companies should find a way to merge. So in October 1998, Geon and M.A. Hanna's legal teams drafted a confidentiality agreement and began to exchange information about how each company was run to see how the two could make an integration work.
"From an operational standpoint, Hanna was not running as smoothly and efficiently (as Geon)," says Saul Ludwig, a managing director at McDonald who follows the polymer industry. "Geon was running smoothly, but had a much narrower product line. It was kind of like Geon was selling vanilla and Hanna was selling chocolate, strawberry and butter pecan, and they didn't sell any vanilla."
Ice cream analogies aside, both entities had something to gain from a merger. But, like any large-scale move of this type, there were enormous stumbling blocks on the way to unity that threatened to derail any deal.
Shortly after talks began, M.A. Hanna CEO Doug McGregor retired. Former CEO Martin D. "Skip" Walker came out of retirement and picked up where McGregor left off.
The uncertainty at the top of the M.A. Hanna ship continued until Phillip D. Ashkettle was hired in June 1999 as president and CEO of the 116-year-old firm.
When the merger talks began, Geon, like M.A. Hanna, was a transformed company.
Founded in 1885 by Marcus Alonzo Hanna, a wealthy industrialist who served as a U.S. senator and left his namesake legacy throughout the Greater Cleveland region, M.A. Hanna evolved during the late 1980s and early 1990s from an old-line iron ore company that served the mining and shipping industries into a formulated polymers manufacturer and distributor.
Between 1986 and 1999, M.A. Hanna completed 26 acquisitions and five partnerships, resulting in $2.3 billion in annual revenue. It was a far cry from the mid-1980s, when the company's sales bottomed out at $130 million as the steel and auto markets plummeted and demand for M.A. Hanna's core products slipped.
"Skip transformed it from a mining business to a holding company," says Waltermire. "Geon came out of a tradition of being a very closely integrated company with a strong central identity and common systems. Here we were, talking about joining a company that was more of a holding company and put together over (the past) 15 years."
There was also apprehension on the M.A. Hanna side. After the talks had started, Geon was working on a spin-off of its plastic resin business unit called OxyVinyls LP, a joint venture with Occidental Chemical Corp. Although the spin-off meant big profits for Geon, many at M.A. Hanna were concerned by the move.
"They justifiably said, 'We like a lot of aspects of Geon's compounding related interests, they've still got this big (resin business), but we're not sure we understand that,'" Waltermire recalls.
Perhaps due in part to that uncertainty, talks broke off in May 1999 after a dispute over each company's valuation in the proposed merger. Despite the disagreement, those involved in the talks say both sides were still committed to establishing a future deal.
"As everybody knows, putting together two organizations of more or less equal size is always harder to do than adding a smaller business and folding it into the company," Waltermire says. "We set out to transform Geon and Hanna, to create something different than either of the companies was."
So it should have come as no surprise when, in August 1999, Hanna's newly hired CEO Phillip D. Ashkettle called Waltermire and asked to resume talks. Both companies' boards approved restarting discussions and the two leaders returned to the bargaining table.
But the talks were short-lived. Negotiations were terminated in November after a dispute over pricing terms. Representatives from both companies made numerous attempts to resume talks in the following months, but there was little progress.
Finally, in April, M.A. Hanna's board of directors broke the stalemate and extended an olive branch to Geon. It was during these negotiations that Waltermire and the Geon management team agreed on a compromise that many say was the linchpin of the consolidation agreement: Waltermire accepted the title of president and COO, while Ashkettle was to become chairman and CEO of the as-of-yet-unnamed proposed company. After two years, Ashkettle would step down and Waltermire would assume the top spot.
On the surface, the move gave M.A. Hanna the upper hand in the management arena, but that later turned out to be a mute point.
"People have been asking why there hasn't been more merger activity in the specialty chemical business," Gorman says. "Frankly, it comes down to social issues. It's been well documented that Tom Waltermire, in order to facilitate getting this deal done and put these businesses together, was willing to step back. As fate would have it, it helped serve as a catalyst in getting the deal done."
Disagreements over who will head a new company are common among large-scale mergers and have been the death knell of dozens, if not hundreds, of negotiations. Many would argue that that issue alone has prevented serious discussions over any speculated deal between Cleveland-based financial institutions KeyCorp and National City Corp.
But in the case of PolyOne, it was a hurdle that was swiftly overcome. Although he had been with Geon longer than Ashkettle had been with Hanna, "it was an accommodation that I thought was worth making," Waltermire says. "I believed in the combination so much."
On May 7, 2000, the boards of each company voted to enter into a merger, creating the world's largest polymer services firm in an even stock swap deal. And then, says Waltermire, the real work began.
"The merger was between two corporate entities," he says. "The integration that's going on right now is between a dozen or more cultures and traditions that both corporations brought to the organization. Hanna was just in the early stages of integrating its businesses. Geon had doubled its size in the years before the merger, so there were new parts of Geon that needed to be integrated.
"The big challenge we have is bringing all that together."
It requires a unique type of leader to take two so differently structured companies and weave them into one seamless operation. Fifty-one-year-old Waltermire has those qualities, claims William Patient, former Geon chairman and CEO.
"Tom is a great leader," Patient says. "He has the ability to get different groups of people together and motivate them toward his vision. He has a tremendous enthusiasm for what he sees a company can be. That enthusiasm spreads to all of his people."
Waltermire's affability is undeniably genuine. His cool demeanor and easy smile never seem forced or phony. Even when discussing challenges, like the current economic slump, Waltermire is unflappable and exceedingly driven by his ambitious goals for PolyOne. He recently set the mark of $2 earnings per share by 2003, pending an improved economy, of course.
"He knows exactly what PolyOne can become and he's been communicating that clearly, both internally and externally -- a $5 billion, multipolymer, distributor, supplier global company," McDonald's Gorman says. "He has also put together an exceptional team of executives. He listens to them and values their input. While Tom is very good at making decisions and moving on, he's also very good at making decisions after listening to his team."
Waltermire graduated from The Ohio State University with a degree in biological sciences and earned his MBA at Harvard. His first position, in 1974, was as a financial analyst for BFGoodrich. He quickly moved up the corporate ladder, from division assistant to vice president, then to president of the Elastomers and Latex Division, a specialty chemical business.
His top post at Goodrich was as vice president of investor relations and assistant to the chairman and CEO. When Geon spun off from Goodrich, Waltermire followed as Geon's CFO, but he also was responsible for many tasks in human resources, information technology and corporate communications.
"Even at BFGoodrich, Tom showed he had what it takes to be a leader," Patient says. "Then at Geon, we talked about where we could see the company going. He had such a strong strategic vision."
In 1997, Patient promoted Waltermire to COO. He added the title of president in 1998. In 1999, Patient announced he was passing the CEO and chairman baton to Waltermire.
Waltermire's most auspicious promotion came less than two weeks before PolyOne went public. Ashkettle had a falling out with the M.A. Hanna board and promptly resigned. He later filed a lawsuit against his former company. In his absence, Waltermire immediately was named PolyOne's CEO, president and chairman, almost two years ahead of schedule.
Waltermire calls Ashkettle's resignation "regrettable," but admits it did not slow down the integration of the two companies.
"There are always those kinds of things you have to work through," he says.
From Day One, PolyOne has been beaten around by the economy as well by as Wall Street, which greeted the new $3.5 billion company with little encouragement.
The stock (NYSE: POL) opened on the New York Stock Exchange at $9 a share, but dropped to as low as $4.56 shortly before the start of 2001. Though it has since rebounded to near its IPO price, the company suffered a $13 million loss after its first full quarter, which Waltermire and his team attribute to a weakening economy, particularly in the auto and construction markets, as well as to high raw material costs.
To overcome those distractions, Waltermire picked up his pace. Programs that were supposed to be phased in over 12 to 18 months were jump-started. An ambitious $25 million improvement of PolyOne's information systems was sped up.
Four plants were shut down and the work transferred to other facilities. Initiatives to save on raw materials and other purchases were implemented faster than planned to help weather the economic downturn.
"These conditions warrant that we have to do it," PolyOne CFO Dave Wilson said during the last quarterly conference call to analysts. "(The programs) will be brought in sooner. This is a totally unacceptable level of earnings performance. We've got to take the bull by the horns and wrestle it down."
Through raw material savings, overhead reductions and business growth, Waltermire says he is still committed to more than doubling the $50 million in earnings improvements that he benchmarked when the merger was announced last year. It's too soon to tell if investors will respond, but PolyOne's internal progression is clear to those who follow the industry.
"PolyOne continues to make progress on the integration front and sometimes it's almost in spite of all the challenges that face them," Gorman says. "Sometimes it's easier to impact change in a down market than in a good market. The reason for that is that when markets are weaker, people are more open-minded to thinking about change and how they might better serve their customer base."
Waltermire refuses to mince words when it comes to the current economy. He says if you're a manufacturer, you're already mired in a recession. But, he says, the services industries seem less affected by the downturn. He expects the slowdown to be short-lived, but claims PolyOne is better positioned to handle future economic shakeups than many of its competitors.
"There's nothing like a kick in the pants to get us moving faster," he says. "I'd rather we weren't in the environment we are in, but the fact is that it is serving as a motivator to get our change done faster and bring our company together. Everybody has a common external enemy."
It hasn't been an easy process, but no one ever said that running a $3.5 billion global company would be.
"I don't know how I could be any more pleased with how the organization has come together," Waltermire says. "It is remarkable how people are joining in, buying into what needs to be done, buying into the mission that we've got and getting excited about the potential and the possibilities in this place."
Not too shabby, he says, for a deal that almost never got done.
How to reach: PolyOne, (216) 589-4000
When Lawrence Stuenkel founded his outplacement firm in 1977, those first few sales calls were painful. Not only did his service require some explaining, stunned business owners occasionally laughed at him as they turned him down.
"I remember one fellow from a major corporation telling me, 'Now let me get this straight, we fire somebody, pay them too much severance, and you want us to pay you more money to help find them a job?'" Stuenkel says. "I said, 'You understand the concept perfectly."
Revenge is sweet. Today, many companies large and small hire outplacement firms like Lawrence & Allen in Chicago to assist with downsizing and restructuring.
"No two downsizing situations are exactly alike," Stuenkel says. "That's why it pays to bring in an objective third party who really knows the ropes. Besides helping your company keep everything legal, he or she can be on site to help shell-shocked, released employees begin their transition plans."
After years of helping terminated employees find a new career, Stuenkel wrote a guide which covers all aspects of unemployment, job hunting and salary negotiation. The guide, "From Here To There: A Self-Paced Program for Transition in Employment," was originally just for his clients. It's now in its fourth edition.
"There were books on resume writing and there were books on interviewing, but there really wasn't a complete guide from filing for unemployment to whether you should do temp work -- the whole nine yards," explains Stuenkel.
The book is a meticulous guide for job hunters, but Stuenkel could also write a volume about how to properly shrink your work force. His 20-employee firm has been quite busy lately with new projects, prompting him to add an office outside Chicago.
"I think we saw this in the early 1990s," Stuenkel says. "But the lessons of this downturn will not long be forgotten, just as I think we learned from the last one."
Stuenkel suggests the following for employers considering cutting back their work force.
Don't try to keep secrets
Employees know how many shipments are going out, if sales are dropping and if things are changing. As soon as possible, communicate with all employees that the company is facing difficulties and evaluating methods to handle the problem. Then, decisions to downsize will come as no great surprise. It is one means of maintaining credibility.
Get important information on paper
Have human resources prepare a full written explanation of benefits, including profit-sharing, vested pension rights, stock options, bonus arrangements, medical insurance continuation and unused sick days. People are not in the right frame of mind to understand benefits during a time of separation. Be clear that this is a lot of information and they are not expected to grasp it all, but you are available to talk any time to review it.
"Anything you say after that communication is probably going to be lost," Stuenkel says. "I'm just not hearing you, I'm thinking about the mortgage, the car payment, the tuition, and you don't want to hear somebody go on and on about salary continuation and medical benefits."
Plan separation meetings carefully
Separation meetings should take place as early in the week as possible. People are fresher and psychologically stronger in the morning and better able to absorb the impact of a termination than if they are confronted at the end of a hectic day or week. The meeting should be one-on-one and in a closed-door environment.
Be certain to give the same reasons to each employee because they will compare notes. Talks with affected employees should be kept brief. It's not the time for discussion or debate. Most managers or supervisors do not effectively plan what they're going to say, and the meeting runs much too long. To end the meeting, simply stand up. This physical action will end all communication.
Details are important
Company property such as keys, credit cards, etc., should be collected during the separation meeting. Computer passwords, especially for IS employees, should be changed immediately.
"It might seem a little contradictory, but keep in mind, if you were going to give somebody your computer PIN number for your bank account and fired them, would you wait a week to two weeks before you cancelled it? Probably not," Stuenkel says. "The chances of something happening are just too great."
Be aware vendors can spread misinformation
Don't forget to arrange for a transition call with vendors, who can be a source of negative rumors if not informed appropriately.
Think about the small things
Make sure affected employees have transportation home. To avoid potential embarrassment, suggest they clean out their desks, with prior arrangements, in the early evening or on Saturday.
"If they have a laptop computer, maybe they would want to buy it from the company to help with their job campaign," Stuenkel says. "Think of the things that you wouldn't think about when you have just been terminated."
Don't make promises to existing employees
Phrases such as "There will be no more cuts," or "All organizational changes are in place," are seldom true. When further changes are required, employees will recall these statements, and management will lose credibility.
Don't get caught with your face in the mud
Check to see if any affected individuals are due to receive sales awards, service awards or other forms of recognition. You don't want to be laying someone off the day a recognition memo is sent companywide.
The truth is always best
Even if your organization is small, be prepared for media inquires. Local press will want to cover the reduction, and you should have a statement prepared explaining the reasons for downsizing.
Appoint a high-level press officer to speak in one clear voice to handle inquiries from the media. Distribute this person's name to receptionists and supervisors.
"Make sure the door is left open," Stuenkel says. "Think through these things because a lot of these people that you're releasing today, six months from now, you may want to rehire. Business conditions change, but don't guarantee you'll be back in touch with them."
How to reach: "From Here To There: A Self-Paced Program for Transition in Employment," by Lawrence Stuenkel. Lawrence & Allen Press, (864) 240-3000. $29.95
But he waited, and it was worth it.
"I got the sandwich and I got soup, and it was just absolutely phenomenal," Couvaras recalls.
Couvaras, who immigrated to Atlanta in 1994, went back to the sandwich shop and talked the owners into allowing him to open a third restaurant. But he wanted to improve the business systems so the restaurant would run more efficiently and sell more food in less time.
His efforts paid off, and today the Atlanta Bread Co. is one of the fastest growing quick-casual chains in the country, with 170 restaurants in 24 states and $214.5 million in sales.
Courvaras wants to take the chain to 500 restaurants in the next four years. The trick, he says, will be finding the right kind of franchisee.
"We aren't looking for someone who's getting in to get out," Couvaras says. "We're looking for someone who wants to stay the distance with us."
Couvaras spoke with Smart Business about building his franchise and how he plans to become the major player in the quick-casual restaurant industry.
What was the idea behind Atlanta Bread Co.?
I'm an investment banker by profession. What I did in my previous life back in South Africa, part of my investment banking investments were in food.
I was involved in a fried chicken franchise in South Africa; I was involved in a couple steak houses; I started the first Mexican restaurant in South Africa. That was a good part of our investment portfolio.
When I came here, I was taken to a small sandwich shop called the Atlanta Bread Company, and they had two cash registers, they had five sandwiches, one soup and one salad, and people were waiting in line -- I just couldn't believe it. People were waiting in line; there was very slow service.
As they would ring up the receipt, they would take money and send the receipt down the sandwich line. In the end, they would call No. 25, and the guy would come to pick up his sandwich. It would just take forever.
I didn't even want to wait in this line. I was with a business broker, looking for a business when I immigrated here 10 years ago. When eventually I got the sandwich and I got soup, it was just absolutely phenomenal. I said, 'Wow, I'm glad I waited. These guys have really got it down.'
I went back a few times and spoke to the owner, and we started a joint venture together where we opened our third store. They had two stores and I opened up the third. Our store did almost triple what their store was doing.
We put monitors in, we put systems in -- it was just phenomenal. We had different kinds of soups, salads and different things, and no one had to wait anymore. We got rid of the lines. and we thought the stores weren't busy, but the stores were doing three times more.
Then we started concentrating on the staff, the training. We took the commissary that was in the back of the shop and we put it into real industrial facility. We had state-of-the-art bread-making machinery. And we just put a lot into it -- a lot of expertise, a lot of money, and took it to the next level.
What was your expansion strategy in the early days?
The investment banker in me, I thought this should be on every street corner. I thought what I needed to do is to get it right first because obviously we had a limited source of income, we had limited funds, we were immigrants.
The best way to do it, I thought, was to get involved and understand the business. For the first nine months to a year, I was stuck in the business, understanding and really putting a UFOC (Uniform Franchise Offering Circular) together, and getting a good understanding of what this whole thing took. Once I did that, then we started opening stores just in Atlanta, and two years after that, we went down to South Carolina, we started in Greenville, we went to North Carolina, so we just started growing in concentric circles around Atlanta.
We have 170 stories in 24 states, and we're going to five more states this year. We'll open about 50 stores this year. Ultimately, we think this country will hold 1,500 stores, and we'd like to have 500 in the next four years.
How have you controlled growth?
We have good franchisees, we have a good support center, and we have great people within the company who are able to execute that.
You control it by virtue of the caliber of the franchisee you allow into your system. You control it by the real estate you get.
It's everything. The model itself has got to work. The actual system should work. Our system does work. It obviously works better in some places than others, and with certain people than it does with other people. The trick we have is to find the right people who fit our model and our culture, and the second thing is to find the right real estate, and everything else should just work.
What do you look for in a franchisee?
We look for someone who shares the same sort of core values that we have. We look for someone who shares the same vision for business as what we do -- the same philosophy. We aren't looking for someone who's getting in to get out.
We're looking at people who are looking at this as a long-term business, which we believe. Wealth comes with longevity in the same business role, rather than wheeling and dealing in different businesses. We're looking for someone who wants to stay the distance with us, and someone who enjoys doing what our franchisees are doing, which is going out and negotiating real estate, building the store and ultimately selling soup, salads, and sandwiches.
We want someone who enjoys people, and who cares, and that's a big word in our culture. Not only for us and for the business, but also for the guests. And being in the hospitality business, that's one of the single most important things that we look for are caring people.
At the end of the day, you need to love what you're doing. How to reach: Atlanta Bread Co. (800) 398-3728 or www.atlantabread.com
But as the years passed, the family-owned business did not evolve with the times.
Attempts to update its systems failed until the early 1990s, when then-CEO Robert Don composed his "View from 2001," a mission statement of how he wanted the company to evolve technologically.
"[He] put out the goal of us being a technology leader," recalls Steve Don, 38, who in 2002 became the third generation to lead North America's largest family-owned distributor of food service supplies and equipment. "He didn't put out the specifics of how to get there; he just said we would be the leader in technology in the food service industry. And, from there, we executed against it."
To achieve Don's vision required four years of planning, design and implementation. At the end, Edward Don & Co. had a $15 million integrated, synchronized enterprisewide computer system to track sales, inventory and distribution of 15,000 products to its 70,000 customers worldwide. Crucial to the project was the development of the company's first Web site, Don.com, which launched in 2000 and now accounts for 10 percent of its $400 million in annual sales.
But more than finding the right technology, the real key to the success, Don says, was the buy-in and participation of its 1,200 employees, who needed to focus on the day-to-day operations of the company but at the same time, commit to an ambitious project that would take the company even further.
"It's all about people," Don says. "You can have the greatest plan in the world, but it's the people that get it accomplished."
Steve Don had a freshly minted MBA from Northwestern's Kellogg School of Management in 1992 when he joined the family business. Don, who had worked at JMB Realty Corp. and Salomon Brothers, was planning on returning to Salomon when Edward Don & Co. made him an offer. But despite his last name, Don didn't start at the top.
"I took a threefold pay decrease," laughs Don. "Long term, it was the right decision. I'm a major shareholder; it wasn't about the short-term payoff."
Starting as a sales rep, Don worked his way up to positions of more responsibility until 1996, when he was named vice president of business development. At the center of his new duties was to design and implement -- along with COO Jim Jones and Jim Lyman, at the time a consultant for Ernst & Young -- a new enterprisewide computer system for the distributor.
"We had five different locations that were operating like five independent companies," says Lyman, now director of e-commerce and customer connections for Edward Don & Co. "We had computers all over the place, and it was a hodgepodge of systems that weren't talking to each other and everything else. Now we have a single database. (A sales rep) can be down in Florida, and when the computers here in Chicago scan a box, it will go back down there as a confirmation within less than a third of a second."
The first step in the project was deciding what they needed the software to do. To do that, Don assembled what he terms the "core team," or the top leaders from each department, including inventory, operations, finance, marketing and sales.
"For these projects, you usually get the people who have the most free time," Don says. "But we said that wasn't acceptable. We needed the best person from each department."
Being a member of the core team, however, didn't just require a couple extra meetings a weeks. It was more like taking on another job.
"They probably spent 50 percent of the time for a two-year period devoted to the project," Don says. "The director of inventory, he still had to manage all his people and all the replenishment processes, but still, 50 percent of the time he was working on this."
Don and the core team came up with 1,200 requirements for the enterprisewide system - everything from how the order is entered into the system to how the customer is billed -- and sought out software vendors that could meet those demands. The group narrowed the list of 40 possible vendors down to Rhode Island-based daly.commerce, formerly Daly & Wolcott.
"We wanted something that was going to be scalable," Don says. "And one that was an integrated system, which, in 1997, there weren't a whole lot of integrated systems out there. We wanted it to be robust, but not so complicated that our people couldn't figure out how to use it."
"From a management team perspective, we were looking at saying, this is our foundation from which we can build," Lyman adds. "For everyone else that was involved in it, they were saying, 'I'm having input, and it's my chance to fix these things that are wrong.' Inherently, people want to do the right thing."
Once Don and his team had customized the system, they needed to implement it companywide. That included bar-coding the company's $30 million in inventory at its headquarters and five nationwide distribution centers, then training the rest of the work force. Once again, attaining employee buy-in with the core team at the beginning proved to be crucial to the implementation success.
"We wrote all of our own training manuals," Don says. "So by the end of it, our team was very good at going in to one of our buildings and very quickly implementing the system."
Don installed the system at its Dallas distribution center first. After it was up and running, Don flew in and trained the rest of his regional managers at the Dallas location so they could see a working model of the system.
"The weekends before we went live, we performed a couple mock dry runs." Don says. "When you train people, it's one thing, but when you actually go live, it's a lot more challenging. You can train people, but they don't use it for a couple weeks, then you go live and the retention is not as high. So by doing these live training sessions, they really got some good practice."
In the past, sales reps without Telxon units would phone into customer service at the end of the night, and get their sales reports at the end of the week by fax or mail. Usually, their sales order history was a month old, and their accounts receivable was a week to 10 days old.
Now, the company's 350 sales reps are equipped with laptops and wireless Internet cards, and they can place orders in the customer's office, view the inventory and track their sales in real time. The new process saves each member of the sales force from 45 minutes to an hour a day, according to company estimates.
"This core team really helped in terms of the sense of teamwork to keep people motivated to keep going," Don says. "Our people were working nights, weekends, but they were extremely motivated because they felt like they were really part of something."
Edward Don & Co. began in 1921 with 10 family members who walked door-to-door to Chicago restaurants, with the guarantee that an order would be filled the next day. One family member, who had worked for clothing retailer Spiegel & Co., decided to copy Spiegel's idea of using catalogs to sell its merchandise. Until that time, restaurant owners needed to go to a showroom to view food service products and equipment.
By 2000, the food service industry was starting to use more online ordering. But Edward Don & Co. couldn't reach those customers, not just because it didn't have any e-commerce capabilities but because it had no Web site at all.
So after the implementation of its enterprisewide system, Don and the core team brainstormed and designed its Web site, Don.com, over a two- to three-day period.
"All the decision-makers were in a room where we did all of the prep work, and answered all the questions and set up all the requirements, and then the people started programming after that," Don says. "What usually takes eight to 12 weeks, we did in about two to three days."
But this time it wasn't just employee input that was critical for the internal system; customer feedback also helped create the Web site.
"Between our own people, consultants and customers, over 100 people were involved in giving their input to the Don Web site," Lyman says. "We clearly heard from our customers, 'I want it easy, I want to get online, place my order and get off.' That's the way we designed it."
With technology moving at the pace that it does, Steve Don may soon have to write his own vision of where the company will be 10 years from now. For now, though, Don says he's looking into improvements including global positioning systems for his fleet of more than 100 delivery trucks.
"We'll continue to stay ahead of technology," says Don. "But I don't want to get too far. We want to be leading edge, but not bleeding edge. You could spend and spend and not get any return on it." How to reach: Edward Don & Co., (800) 777-4366 or www.don.com
Born: 1945, suburban Philadelphia
Education: B.S. in marketing/management, Florida State University
First job: Assistant buyer at Rich's, Atlanta
Career moves: Rose through merchant ranks to become CEO of Broadway Southwest Department Stores in 1986; became president of The Bon Marche, a Federated Department Stores division, in 1987; brief stints as CEO of the parent company of Woodies and Wanamakers and as vice chairman of Duty Free Shoppers; from 1997 to 2000, was CEO of Monet Group Inc., a designer and marketer of branded fashion jewelry sold through department stores
Boards: SurLa Table; Sporting Goods Manufacturing Association (SGMA); National Retail Federation (NRF); Indiana Chamber of Commerce
What was your greatest challenge in business and how did you overcome it?
Reinventing the Bon Marche. With the right people and a well-conceived and articulated strategy, anything is possible.
Whom do you admire most in business and why?
Bernie Marcus and Arthur Blank (founders of Home Depot). They partnered extraordinarily well and pursued their passion until they won.
What is the greatest lesson you've learned in business?
Listen to your customers. And surround yourself with bright people.
Sound like the new slogan for the Peace Corps? Not quite. They are the values by which Russ Umphenour built his chain of 1,065 Arby's, Lee's Famous Recipe Chicken and Mrs. Winner's Chicken and Biscuits restaurants. That's right, fast food.
It's not what you would expect from an industry in which turnover rates annually reach 100 percent and most of its employees are in their teens or work part-time. Umphenour runs his chain of restaurants under the name RTM Restaurant Group Inc., which stands for "Results Through Motivation."
His operating philosophy has helped grow the Atlanta-based company from 11 Arby's restaurants in Georgia and Alabama to 1,065 stores in 22 states with $800 million in sales last year. The company has more than 25,000 full- and part-time employees, with turnover rates well below industry averages. RTM doesn't reveal exact figures.
"More than anything, it's simply how we treat people every day," Umphenour says. "It sounds a little trite to say the Golden Rule, but when you treat people the way they want to be treated, they probably will respond to our attempts to create the right atmosphere."
Umphenour spoke with Smart Business about motivating employees and running his company with a strong value system.
How did you know the restaurant industry was right for you?
I didn't. Luck, I guess. I was fortunate enough to fall into something that I really liked.
When I first started working, even part time, I enjoyed working with kids, I liked working with food, it was a small business -- I just loved it. I tell everybody, if you find something you love to do, eventually you'll be successful at it.
And so many people get trapped in something they're not in love with. That's not good. I really feel fortunate.
How has the industry changed since you started?
Where do I start? When I started, there were no drive-throughs. There were no salad bars; the proliferation of the menus.
People. We're working with a different work ethic today. People are different. The work force is different. When I started, our whole society was still in the fairly authoritarian leadership model, and today people need more participative, more family-friendly kinds of things. That's good. I like that because that's my personal style.
It's funny, when you think about the drive-throughs, Wendy's was the first one of any consequence -- there were a couple small drive-through places -- but Wendy's was the first one who did it, and what they did is made all the rest of us in the industry go to drive-throughs.
Of course, the consumers liked it because a big percentage of our business goes through drive-throughs today, but that's definitely been a significant change in our business.
How did you respond?
We have carefully evaluated things that have come along, and said, "Do we need to do this?" In many cases we did, but in other cases, things are kind of a fad.
Every industry will go through fads, and you have to be careful you don't jump at every one of those. For example, probably 15 years ago, there were these touch-screens going around where customers could order themselves. Now, it's starting to become a reality. Customers are used to putting their credit card into a machine, but back then it was way premature, and there were several people in our business that lost a ton of money because they thought it was the time to jump on the technology.
RTM stands for "Results Through Motivation." What have you found is the most effective way of motivating employees?
I don't know if there is any one answer to that. Except, if you look at the name of our company, Results Through Motivation, we define leadership as creating an atmosphere where people will motivate themselves to achieve mutually beneficial goals.
We, as leaders, all we can do is provide the atmosphere. You hear a football coach talk about motivating a team, or you hear a military leader talk about motivating troops, but in reality, it's not something we do to someone. At the end to the day, we all individually do only what we want to do.
So our job as leaders is to provide the atmosphere where people will want to do things. When we say 'do,' it's toward mutually beneficial goals. In other words, we have to help the company reach its goals and likewise the individual reach their goals. That's a very important part of what we strive to do.
How do you create that atmosphere?
It's a whole range of things. It starts with just treating people right, treating them as adults, all the way to incentives. More than anything, it's simply how we treat people every day.
The company is rooted in a strong value system. Where did this come from?
It's certainly evolved a little bit over the years, but my father was a minister, we grew up with strong values, the Ten Commandments, and all that stuff.
But I'd really never thought about a company having a set of beliefs or values until I read a book written by Thomas Watson of IBM called "A Business and its Beliefs." In there, he stressed every business needed a set of beliefs or values. I happened to read that at the same time we started the company in late 1973.
We sat down our small group of people and said, 'What do we believe in?' We listed 21 or 22 things on the board of things we believed in, and those became our guiding principles to begin with. That list has expanded to 25 now, and it's what we call our 'people philosophy,' and it's in the first page of our management handbook.
Those 21 out of those 25 have not changed one bit. We've added three or four extras. Over time, as we began to flesh those out as people talked about them, we wanted them in little tighter sound bites, and that's where the 'Dream Big, Work Hard, Get It Done, Play Fair, Have Fun, Make a Difference' came from. Those concepts have been there since the beginning.
I feel fortunate in that because without having read Thomas Watson's book, I don't think I would've thought to do that on my own.
Why are these values so important to the company?
It gives people a sense that we are here not just to make money. When you look at the 'Make a Difference' value, we're here to make a difference in people's lives, and those are the people who work for us, as well as the entities we give to, the charities or whatever involvement we might have.
It helps people here have a sense of why we're here, and secondly, they tell how we run the business. The first three, 'Dream Big, Work Hard, Get It Done,' those are the what. The 'Play Fair, Have Fun, Make a Difference' are the how.
That really works. Even the 16-year-old kid who works in the store gets it. How to reach: RTM Restaurant Group, (404) 256-4900 or (www.rtminc.com).
Education: B.S., business administration, Northwestern University, 1960
First job: Bicycle delivery boy for local butcher
Career moves: Founded Crate and Barrel with wife, Carole, just out of college in 1962. Carole retired in 1969 to raise their children. Gordon was president of the company until 1996, when he took the title of CEO and promoted long-time employee Barbara Turf to president.
Boards: Northwestern University board of trustees, chairman of the National Retail Federation
Lives: Northern suburbs
What is the greatest business lesson you have learned?
Go slowly and do it right. Don't ever be in a hurry.
Don't let anyone motivate you to expand too quickly. We've always expanded carefully and slowly. Philosophically, for us, it's the right thing to do.
Your strategy should be, what am I going to do differently for the consumer? It shouldn't be, what is my business plan so I can make a lot of money quickly. The plan should be, what are we going to do that's going to be unique, different, that we can execute better than anyone else.
If we do that well, then we'll make the money. It's a slight nuance, but a very important nuance.
What is the greatest business challenge you've faced, and how did you overcome it?
We still face every one of them every day. You've got to be passionate about what you're doing. You have to have the belief and an enormous consistency and energy.
The most important thing -- and everyone says this -- is you have to put together a great team. You've got to be able to praise people for their performance, have tolerance for their mistakes and give them passion and reason to go forward.
We always stay in a little state of dissatisfaction. We're never quite satisfied in what we do, and always try to improve on it.
Whom do you admire most in business and why?
I admired a retailer, Stanley Marcus, because he had such a long-term perspective on what he was building, and he brought such excitement to a retail environment -- certainly a very upper-end retail environment.
He brought a point of view and quality to a store and how to promote it and market it better than anyone I've known in my generation.
Born: June 2, 1945, in Chicago
Education: B.S., home economics, University of Illinois, 1967
First job: Sales assistant, Marshall Field's, downtown Chicago
Career moves: High school home economics teacher and adult education instructor at University of Illinois Cooperative Extension Service. Full-time homemaker after the birth of her first child in 1972.
Boards: America's Second Harvest and Better Business Bureau of Northern Illinois executive committee
Lives: Western suburbs
What has been the greatest business lesson you have learned?
One of the things that I have found over the years is that your intuition and your instincts about a business are seldom wrong. If I have to work too hard to sell myself on an idea, it's probably not a good idea.
If people are trying to force fit something into the culture of the business, it's probably not going to work. If the business is healthy, strong and vibrant, it's very important to stay close to the culture of the business.
What has been the greatest challenge you have faced in business, and how did you overcome that?
Growth actually. I'm a teacher by training and a home economist, so growth was a challenge many times during our history.
Having people aligned with the mission and vision; knowing if there were difficulties that they understood why, and that it was short-term. Knowing that we were moving forward and we were going to get to a better place.
Whom do you admire most in business and why?
There are a couple of people in my industry who have been remarkable role models. One of them is Mary Kay Ashe and the other is Mary Crowley. Both of them are deceased. Both founded direct-selling companies that focused on the well-being of the people in the company.
The legacy that they left behind is creating not just a business that sells products, as good as the product is, but the point is it's more than just selling the product; it's also about developing people to use their skills and talents in a way they never thought they could.
Since he was named CEO of North America's top faucet maker in January last year, Posey has tried to continue the culture of product innovation and improvement, for which Moen is known. The key, he says, is open communication so employees feel free to share ideas.
"We're pretty open around here," he says. "The doors to this office are always open. Moen was that way before I got here. I'm trying to build on the success of the past."
Q: How do you stay innovative?
Posey: What we do is try to create an environment where people are willing, even eager, anxious, to come forward with their ideas. We absolutely try not to shoot the messenger. We have 500 people in this building, and we've got thousands more in the company in total; all of those people have ideas.
The goal is to tap into all of our people in our organization and let them bring their ideas forward. If we can create an environment where people are confident that their idea is going to be listened to and they're not going to be ridiculed for it, then people will come forward with those ideas.
How do you do that?
A lot of it is just creating that environment and communicating over and over that not only is it OK to have ideas, but we want you to bring forward the ideas.
There's kind of a presumption of "yes." What I mean by that is there's kind of a bias to agree with an associate's idea. Now, that doesn't mean it's a rubber stamp and we do every idea that comes along because not all of them fit with the strategy of the company. You have to filter the ideas to some extent.
Overall, there's a bias to want to take the idea and do something with it. That's part of the culture. You work with it all the time, and you work with the managers of the company, and people start to understand that and believe it and it builds on itself.
Is there pressure to come up with the next best thing?
When we talk about innovation, we talk about the fact that innovation is not just about major breakthroughs, not just about putting the proverbial man on the moon. Those are wonderful, but those are kind of the grand slam homeruns.
We think innovation is all about improving everything we do on a regular basis. There are a lot of -- to complete that baseball analogy -- a lot of singles and doubles out there, and if we can keep improving everything we do, in all areas of the company, and at all levels of the company, then we're creating the kind of innovative environment that will bring forward new ideas, new products, new services, new structures and ways of doing things.
Importantly, it's all areas of the company, all levels of the company, and not just the kind of huge ideas. How are we going to improve the process in just this area? How do we make that better?
Small improvements here, small improvements there, they build on each other. How to reach: Moen Inc., (800) 289-6636 or www.moen.com
As a CEO, there are lots of management consulting firms clamoring to tell you how to better run your company. But consultants are not all the same, and a bad one can sour your opinion and make you reluctant to hire one that could provide valuable advice to grow your business.
Dreamriver Group, a management consulting firm with offices in Medina and Columbus, published a booklet to help your senior executives and middle managers understand some of the dynamics involved in forming and maintaining lasting relationships with management consulting firms.
The publication, "What Keeps Your CEO Up At Night?: How To Manage Management Consulting Firms," contains these five best practices for selecting and managing relationships with management consulting firms.
* Throw your gut into it. Interview and meet with the contenders more than once. If you sense even a hint of arrogance, trust your instincts and dismiss that firm.
* Get your ducks in a row. Ask your consulting firm to help identify and prioritize your needs. Work together to determine financial and organizational objectives. Establish project success criteria.
* Reach across enterprise boundaries and overcommunicate. Your greatest opportunity for success occurs after you've demonstrated to your CEO and other leaders how your project contributes to the bottom line. Report progress in regular updates.
* Leverage your organization's knowledge. Work with your consulting firm to be sure internal resources are utilized wherever and whenever appropriate. Use the project to rate your organization's overall effectiveness.
* Actively manage your relationship. Remember that your consulting firm reports to you. Communicate openly and often about its performance. Source: Dreamriver Group, (330) 777-0090 or www.dreamrivergroup.com
Until 1994, The Mail Room was more of a traditional printer, direct marketer and distributor offering black-and-white and color printing and binding. In the early 1990s, its more technologically-savvy clients asked if materials could be distributed electronically.
Zychowski was one of the first printers to recognize that the Internet would become one of the most popular -- if not the most popular -- way of ordering and distributing business-to-business printed materials such as marketing kits, technical and user manuals, and fliers.
"In many ways, we've had two CEOs," Zychowski says. "There's me, and then there are our clients who needed the newer dissemination of information. We were always willing to take the chance to invest in technology."
Formerly owned by a large trade show marketer, The Mail Room split off from the main corporation in 1991, with Zychowski as president. Under her leadership, the firm grew to 110 employees, with more than 100 clients ranging from small businesses to large corporations including Rockwell Automation, Philips and Sealy.
Listening to her customers and adding those digital services they requested proved to be a turning point for The Mail Room. To date, all of its sales have been generated solely through word-of-mouth.
"We have never had a sales force," Zychowski says. "We've never really needed one."
But that may change now that many of The Mail Room's competitors are adding more digital printing services like CD-ROMs, DVDs and Internet distribution of materials.
"We're just a very creative, nimble little company in Medina that services some major corporations," Zychowski says. "We're always ready to change." How to reach: The Mail Room, (800) 325-5095 or www.themailroom.com