Sheri Tackett knows the secret to increasing sales and profits: Keep employees happy.
It’s that simple. “I firmly believe that if employees are happy, that comes through in the work that they perform with and for our customers, which translates into higher profits and growth,” says Tackett, president of Delta Energy LLC. “The perfect example of this is visible in our financial statements.”
In 2005, just two years after Tackett formed Delta Energy following a management buyout from Ashland Chemical, revenue was $584 million. The following year, revenue jumped a full 45 percent to $847 million. In 2008, sales are expected to close in on $1 billion.
“Many companies say that their employees are their most valuable asset,” Tackett says. “At Delta Energy, our employees are our only asset. For this reason, employee satisfaction is at the top of the list of priorities.”
Delta is a Columbus-based energy management business that services more than 50 Fortune 500 companies, including General Electric, Harley-Davidson, Honda of America, Merck, Ashland Inc. and Worthington Industries.
“I have found that it is often the little things that have the biggest impact on individuals,” Tackett says. “A small example is our outdoor workspace. Employees truly enjoy conducting meetings on the patio or working outside in the fresh air when they can. Another example is having the fitness room available on-site whenever our employees can take a break and work out during the workday.
“We work hard, work smart and have fun,” Tackett says, quoting one of the company’s mottos.
Yet, adhering to that motto requires a lot of work. “Keeping employees happy is an effort that must have continuous attention,” she says.
Here’s how Tackett has made an art out of maintaining employee satisfaction and kept her company in a favorable financial position as a direct result.
Like most things, it’s easier to maintain a happy work force than to build one from the ground up. That’s why Tackett places a high priority on starting off with the right people.
“The folks that work for Delta have been hand-picked because of their experience and knowledge but also because they have a winning attitude, great work ethic and are team players,” she says. “We have a rigorous interview process to ensure that we hire the right people because we realize how much time, energy and effort it takes to correct performance problems.”
Prospective employees can expect no fewer than four interviews with Delta before an offer is extended. The first part is a 30- to 45-minute telephone conference, which isn’t that unusual, but the next step is a panel interview with at least three key employees. If each panel member independently rates the candidate high enough, the interviewee is called back a third time to meet with a group of senior managers.
“If all is well and it looks as though an offer will be extended, a meeting is scheduled with the candidate and me, as the final check and balance,” Tackett says. “We are very deliberate about the types of individuals that we employ and while experience and knowledge is mission critical to serve our customers, equally important is attitude, work ethic and being a solid team player.
“I think one of the primary reasons that people enjoy working for Delta is because of the culture that we have created.”
That doesn’t mean there’s never been any trouble in paradise. But Tackett makes sure any employee performance or attitude problems that crop up are addressed as soon as they are recognized by a manager.
“I have experienced many situations in my career where employee productivity and growth of a work group suffered because performance issues were not addressed quickly by management,” she says. “In at least a couple of cases, employees left the department because the situation was not handled timely and effectively.”
Sometimes, that can mean showing technically capable but lax employees the door to prevent widespread discontent.
“While every effort is made to correct the issue, we do not dillydally around,” Tackett says. “If positive changes are not recognized according to a prescribed timeline, the employee will be released — for their own good and the good of the organization. It is unhealthy, and costly, for the organization and the individual to allow the process to drag on. I firmly believe that this practice has kept our highest-performing employees more satisfied with their work.”
Pay and play fair
Satisfaction among employees can also be closely tied to how fairly employees feel treated — both by management and amongst each other. That’s why Tackett has made what she called “internal equity” a priority at Delta.
“We go to great strides to ensure that everyone in the organization is treated fairly in terms of compensation,” she says. “The pay scale corresponds directly with the scope of work and the level of responsibility and accountability that the job requires, rather than tenure.
“I have been in situations where individuals with more service were paid more and underperformed when compared to their counterparts with less service,” Tackett says.
“Although, ideally, salaries should remain confidential, it seems that is impossible in the real world. As a result, if high-performing employees realize that they make less than others with more service, their
motivation to go above and beyond could be diminished.”
In addition, Tackett has made sure the physical space in which employees work is also seen as equal across the board.
“We all sit in open cubes the same size, making it easy to communicate — and throw footballs,” she says. “My view is that when you come into our offices, it doesn’t matter what your title is or how much money you make; what matters is taking care of our suppliers and customers.
“And, if one individual feels unappreciated, that negativity can spread like wildfire and quickly destroy the culture of a company.”
That’s why Delta management actively looks for opportunities to keep that internal equity scale in balance — even anticipating problems and creative solutions.
“We have several golfers in our company that entertain suppliers and customers on the course during the summer months,” Tackett says. “Since most of our female associates don’t play golf, they don’t seem to get out of the office very frequently. Realizing this, we organized a lunch and a trip to DSW to buy shoes. What female does-n’t always want or need a new pair of shoes?
“My opinion is that if employees don’t feel appreciated, they are not inspired to work hard and work smart for our customers,” she says. “As humans, when we are unhappy, it is very difficult to hide it and, therefore, it will come through when dealing with a customer or a co-worker.”
Keeping things fair around the office can go a long way in avoiding those problems.
Employees have come to expect generous benefit packages from large companies. Small ones like Delta, which has a payroll of just 34 employees, can get away with less, but that’s not Tackett’s style. She likes to exceed expectations with plentiful, unique and — perhaps most importantly — affordable employee benefit packages.
“We start with offering benefits that mirror those of Fortune 500 companies,” she says.
The benefit package includes medical, dental, vision, life and disability insurance, a 401(k) plan, plus vacation time and sick leave.
“In addition, we have a performance incentive plan that is based on team and individual performance,” she says. “The largest component of the payout is based on our financial success as a team, reinforcing one of our sayings: ‘If one wins, we all win; if one loses, we all lose.’”
Flexible work hours are also a big hit at Delta.
“We always encourage our parents to attend school functions with their children whenever possible,” Tackett says. “We are extremely flexible with employees when they have personal issues with parents or children that take them away from the office unexpectedly.”
Other benefits include offering free snacks, sodas and fruit, catered lunches for special occasions, an on-site fitness room, an on-site basketball court, and monthly on-site massages.
Then there are the Friday lunchtime cook-outs in the summer and the happy hours on the patio to celebrate business accomplishments.
While the scope of the benefits package at Delta tends to wow employees, the real kicker is the cost.
“It has been our mission to maintain or increase the coverage associated with the traditional benefits, without increasing premiums,” Tackett says. “In fact, while health care costs have risen dramatically since we formed Delta in 2003, we have absorbed 100 percent of the increases.”
How does she justify taking on those increases?
“I believe that the return for Delta is a work force that has peace of mind that they will have the benefits they need, when and if they ever need them,” she says. “This peace of mind eliminates worry, thereby allowing our folks to focus on their responsibilities for Delta.”
Look and listen for new ideas
Most of Delta’s unique benefits have come from employees — either directly or indirectly.
“I listened to what employees were saying, and not saying, about what benefits they would like to have,” she says. “You can pick up on things just by paying attention.”
For example, Tackett often noticed how much employees enjoyed their lunch hours when the weather was nice. That led to the creation of Delta’s outdoor workspace.
Another time, Tackett overheard a conversation between employees that prompted her to install Delta’s outdoor basketball court.
“And it’s not just me that picks up on these things,” she says. “The individual responsible for our energy management business, Justin McMaster, organized a laser tag game for the members of his team so they could cut loose and enjoy each other’s company because he sensed that the team would benefit from an activity outside of the office.”
In addition, Tackett takes requests. “We have tried to adopt most, if not all, of the benefits that have been suggested,” she says.
On-site lunches are a perfect example. “There are certain times during the month when it is difficult for our associates to get out of the office for lunch,” Tackett says. “One of our commuters from Pennsylvania suggested that we have company-sponsored Chipotle or other semi-fast food during these times, which would allow folks to stay in the office during lunch.”
The practice has become a benefits staple. “Listen to what they are saying, both through words and actions,” Tackett says. “More than 90 percent of the time, they are right — and those are pretty good odds.”
To ensure that Delta employees remain happy on the job, Tackett recently formed an in-house Employee Satisfaction Committee.
“This committee is responsible for confidentially securing ideas and input from employees on how to improve their satisfaction with Delta,” she says. “These ideas are then evaluated by the team and, if accepted, are presented to management for consideration.”
The committee comprises a handful of employees plus one member of the management team: the controller.
“If employees are satisfied with their work, they are happier, more productive and work harder to satisfy the customer,” she says. “And, satisfied customers ensure profitability and growth.”
In fact, more than half of Delta’s growth since 2003 has come via referrals from existing customers.
“And when customers refer Delta to their peers, it just doesn’t get any better than that.”
HOW TO REACH: Delta Energy LLC, (614) 339-2600 or www.deltaenergyllc.com
It was a good product with a catchy name, but the rollout was all wrong. Greg Tunney knew the Terrasoles brand had great potential for R.G. Barry Corp. But he also knew if the company’s newest brand was ever going to reach its potential, they’d have to start over. From scratch. Immediately.
“We literally pulled it off the shelves for a year and killed it,” says Tunney, president and CEO of the Pickerington-based company. “We took it out of the marketplace. Then we dusted off that little brand called Terrasoles, repositioned it, and went after a whole different marketplace with it and a completely different price point.”
The response was immediate. Last fall, 235 outdoor-themed retailers across the country, including L.L. Bean, signed on to carry Terrasoles, and sell-throughs nearly doubled expectations.
“The people we’re going after never heard the name Terrasoles in their life,” Tunney says. “It was completely new to them.”
That was a good thing. After all, the reason the previous rollout had been so disastrous was because R.G. Barry, a company long-known for its Dearfoams brand of slippers, had tried to make Terrasoles, a vastly different, outdoor-themed line of footwear, part of the family.
“They had Dearfoamized it and killed it,” says Tunney, who joined R.G. Barry in February 2006, after turnaround artist Tom Von Lehman spent two years saving the company from near-bankruptcy.
To ensure nothing else would be “Dearfoamized” at R.G. Barry again, Tunney has taken some drastic steps since joining the company. He relegated the Dearfoams staff to its previous job of designing slippers and built a completely separate division for Terrasoles. He recruited outsiders for all the key positions at Terrasoles the brand president, designer and marketing team and even contracted with independent sales reps to hawk the brand to retailers in the outdoor industry.
“We didn’t use anybody from inside here,” Tunney says, noting that a clear separation between the brands is vital for Terrasoles ongoing success.
“We wouldn’t even want them having lunch with the Dearfoams people,” Tunney says. “We say that tongue-in-cheek, but we really mean it. In today’s marketplace, the consumer can sense and smell authenticity a mile away. Unless your brand is true to its core, true to its DNA, the consumer will sniff it out in a minute.”
That’s why Terrasoles had to be rebuilt from the ground up. It’s a reincarnation strategy that Tunney is applying with success throughout R.G. Barry these days. And it’s a key reason the $105 million company, which was chin-deep in red ink just a few years ago, has rebounded to record net earnings of $25.1 million in fiscal 2007.
“This is probably a Harvard business case as far as successful turnarounds go,” Tunney says. “Within the apparel footwear companies, it’s probably one of the top turnarounds I’ve seen in the last 20 years.”
The Turnaround Management Association appears to agree. The international organization of business turnaround specialists named R.G. Barry its 2006 midsize turnaround of the year.
Here’s why Tunney is sure R.G. Barry is back on its feet and what he’s doing to make sure the accessory footwear developer won’t stumble significantly again.
Five years ago, some thought the long-time maker of Dearfoams slippers was dead.
R.G. Barry had recorded three consecutive year-end losses the worst totaling $21.7 million in fiscal 2003 and net sales had dropped $18.4 million in a single year. A $10 million bank loan had been called in, and the company’s stock was delisted from the New York Stock Exchange.
“The company was going through some horrible times and didn’t look like it was going to make it,” Tunney says. “A lot of the team members here had to answer questions from their friends, their family, their spouses about, ‘Hey, what’s going on over there? Are you guys going to make it?’”
Now that the company has come out on the other side returning to profitability in fiscal 2005 and setting last year’s earnings record the victory is that much sweeter.
“The company’s doing great,” he says, noting that he expects revenue to grow at least another 4 percent this fiscal year and profits to increase 6 to 10 percent, despite the weak retail environment. “I’m hoping that our team members here get to enjoy the good side because they went through the bad side.”
Tunney didn’t mastermind R.G. Barry’s turnaround. In fact, he wanted nothing to do with it. He’d orchestrated turnarounds for companies like Brown Shoe Co. and Phoenix Footwear Group Inc. before coming to Ohio and knew all about that sleepless, pit-in-the-stomach stress that accompanied bringing nearly dead companies back to life. So before he agreed to take the top spot at R.G. Barry, Tunney made sure the turnaround was complete.
“When I got here, they had already changed the model and said, ‘We’re going to get out of manufacturing.’ So I didn’t have to get my hands dirty and bloody and all that stuff,” he says.
During the turnaround, R.G. Barry closed all three of its manufacturing plants in Mexico, shut down an operation center in Texas and cut more than 90 percent of its work force. At its peak, the company employed more than 2,500 people. Today, R.G. Barry has just 130 employees.
“I didn’t have to live through that,” Tunney says. “One of the things that attracted me to this company was I wasn’t going to have to go through the turnaround and do the clean up. It was a company that was ready for growth.”
The first step
Tunney’s primary job when he arrived on the scene two years ago was to take the pared-down company and develop a growth strategy to move it forward.
“A lot of people when I came here, their big thing was, ‘What’s the strategy?’ like there’s some magic pill or something,” he says. “What we’ve focused on here is really the development of good leadership and good managers.”
After all, no matter what strategy you come up with, Tunney says, things change. Having a leadership team that can roll with the changes and overcome obstacles is a growth strategy in and of itself.
Tunney illustrates his point by singling out what could have been a terminal flaw in the business plan he developed with his new leadership team.
“We never put in place that a barrel of oil would go from $60 to
$100,” Tunney says. “But you’ve got to realize a big portion of our products are petroleum-based; they come from oil. We weren’t smart enough to have that in our strategy to say that oil was going to virtually double.”
So R.G. Barry’s leadership team which received extensive training from The Covey Institute shortly after Tunney’s arrival got to work and started cutting expenses elsewhere and finding more efficient ways to operate in order to offset the increase in oil costs.
“When you look at the expense we’ve taken out of this company in the last 18 months alone, it isn’t because I’m the smart guy and I’m doing things behind the curtain pulling the levers,” Tunney says. “It’s because we have people who have been given the leadership tools to really figure out what we have to do to re-engineer and restructure our business to take advantage of that.”
For example, R.G. Barry reduced its selling, general and administrative expenses by roughly $3 million between fiscal 2006 and 2007, putting that line item at its lowest point in at least five years.
“If you develop your team and help your team grow, they will grow your business,” Tunney says. “That’s what’s happening here.
“I wish I could come up with the perfect strategy each year, but I’m not that smart. And as we go forward, the economy is going to get more and more turbulent; it’s going to get more and more tricky, so that’s why I’m more interested in how well we can develop these people. The better we develop them, the better they’ll be able to respond to the economic challenges that are out there.”
Creating a bigger footprint
Diversifying R.G. Barry’s product line beyond the widely known, but seasonal, Dearfoams slipper brand has been another high priority for Tunney.
“We really were concerned that the company was a one-trick pony,” he says. “We love the slipper business, but it can be very seasonal. We thought the company had much more capacity to get into other channels of distribution, other types of product extensions.”
Terrasoles was only the beginning.
Tunney’s next step toward diversifying its products and expanding its profit margin is Superga, an upscale Italian-based line of canvas footwear that debuted at Nordstrom’s and other high-end retailers this spring a season that’s typically been slow for the Dearfoams company. Then there’s the agreement R.G. Barry signed in January with Nautica Apparel Inc. to develop and market slippers under the Nautica and J-Class brands. And the acquisition of NCAA College Clogs from Wolverine World Wide Inc. last May. All of these deals including an agreement for R.G. Barry to be the exclusive licensee of Superga in Canada beginning this July could significantly even out the company’s revenue stream.
It’s not the first time R.G. Barry has tried to lesson the seasonality of its business. Under long-time CEO Gordon Zacks, the company developed Microcore, a thermal technology in the mid-’90s that could be used to heat or cool a variety of products from slippers and seat cushions to Pyrex dishes and pizza delivery bags. The division took on a life of its own and was ultimately sold.
Tunney says this attempt to produce more year-round revenue will be vastly different.
“First, we are focused on products for the foot,” he says. “When we tried to get into those other things, they weren’t our expertise. We didn’t really bring a whole lot of authenticity to the marketplace. We do have a good name in the marketplace with slippers. We have an iconic brand in Dearfoams. When you say Dearfoams, people say slippers. So with those relationships, we felt there was an opportunity to really leverage those within different channels of distribution.”
Being able to roll out these new brands, supported by the tried and true yet invisible to the consumer finance, credit and supply chain logistics that R.G. Barry mastered under the Dearfoams label, creates even greater leverage.
“The things that don’t directly touch the consumer the backroom part of our business we can get some really great synergy out of that because we have some really great teams operating those,” Tunney says
Other potential diversification targets include designing more products that appeal to men and possibly entering the children’s market.
“I mean, why aren’t we doing children’s slippers?” Tunney asks. “We have customers right now who are saying they’d love to do children’s slippers from us. It’s just a matter of prioritizing things.”
Getting an international toehold
Even with so many new products poised to reach the market this year, Tunney remains interested in expanding R.G. Barry overseas.
Never mind that the company just sold its French manufacturing plant. He regards that decision much like the first Terrasoles rollout: It was time to start fresh and in a completely new direction.
“They went after it as manufacturing,” he says. “That’s not going to be our strategy. We like the idea of a distributor and a licensing deal where we can just let them be the experts in the marketplace and collect our royalties off of them.”
R.G. Barry’s upcoming expansion into Canada with the Superga line is structured that way, and it could lay the groundwork for becoming a more global company.
“Right now, [the] United States is not the biggest user or wearer of slippers,” Tunney says. “European countries tend to be bigger users. There are even places like Argentina or Chile that are also big slipper users that aren’t exposed to a national brand or international brand such as ours. So we think it’s just a matter of getting the right partners and getting some focus and some investment against it.”
Tunney expects R.G. Barry brands to be established in Europe, South America and the Far East in the next five years.
“I think our biggest challenge going forward is going to be the investment community,” he says. “We’re making a lot of money investments now that will pay off in four or five years. One thing we tell our investors all the time is, ‘This is not the widget business. This is not the toothpaste business. We’re in the fashion business. So on a five-year scale, you’re not going to see a linear line moving steadily up. But even though you’ll see erratic shifts, long-term, you’ll see a linear line through all that. If it was only linear, I would tell you that, as a fashion company, we’re not taking enough risks. And we’re probably missing opportunities then.’”
In fact, it’s the hard times that make a company stronger. “We’ve been fortunate,” Tunney says. “We haven’t had a disaster or a bad year since I got here. It will happen. Trust me. I keep warning these guys that we’ll get really good when we have a tough year. It’s the tough years when you find out who is really on board and you really grow and stretch yourself. I actually look forward to even that. But our investors don’t.”
HOW TO REACH: R.G. Barry Corp., (800) 848-7560 or www.rgbarry.com
Living in the shadows of Victoria’s Secret and Bath & Body Works, the dynamic duo of new millennium brands, nearly killed The Limited Stores Inc.
After all, as quickly as fashions come and go, so does capital especially when a business is underperforming relative to others in the corporate portfolio.
“As Limited Brands started to focus more on Bath & Body Works and Victoria’s Secret, the apparel businesses did suffer from neglect,” says Linda Heasley, chairman and CEO of The Limited Stores, which was the cornerstone of Les Wexner’s fashion empire until its sale to Sun Capital Partners in August 2007.
It’s a move that benefited both enterprises.
Limited Brands shed itself of the last of its seven apparel businesses, which had become a drag on the corporation’s financials. The Limited Stores, which had become stagnant and unprofitable under Limited Brands, was now armed with new capital and ownership bent upon restoring the stores to their former glory.
“If we’d stayed with Limited Brands, we would always have gotten the second-level of attention and focus and capital,” Heasley says. “It would have been an ongoing struggle to get proper investments made in the business.”
Heasley isn’t bitter about the lack of attention and resources focused on The Limited Stores during the rise of Victoria’s Secret and Bath & Body Works. Quite the contrary. She credits Wexner with helping to make the brand a trendsetter of women’s fashion in the 1970s and ’80s, and she’s confident his vision will live on to see better days ahead.
“The good news is, despite ourselves, we hadn’t lost a lot of equity in our brand base,” she says. “The Limited is still a name people recognize as a good business.”
With Sun Capital’s $50 million equity investment in The Limited Stores and the additional $75 million line of credit Sun Capital arranged already Heasley is starting to see a turnaround.
“Since Sun has purchased us, we have started a program to refresh the [stores] and remodel,” she says. “Even things like replacing the carpet and painting fitting rooms we hadn’t done that in years. So that’s all very positive for the business. The focus has been very refreshing.”
In addition, the split from Limited Brands has allowed Heasley and her staff to explore new product lines, such as sleepwear, loungewear and accessories, that are breathing fresh life into a brand that was quickly becoming stale under its former corporate umbrella. Another plus: Ideas that would have taken months or years to get approval through the former corporate hierarchy are now able to be acted on almost immediately.
“Bottom line, we’re just a lot more nimble now,” Heasley says. Here’s how Heasley is working to take The Limited Stores from underperforming to over-the-top success.
Under its own flag now
“When we first announced that Limited Stores was going to look for a buyer, it was very emotional for many of our associates who had been here for a long time,” Heasley says. “Initially, I think people were very shaken.”
That didn’t last long. With Heasley and then-co-president Avra Myers touting the potential upsides to being independent of Limited Brands, associates’ reservations about the sale gradually diminished.
“We’ve been turning it into a good thing,” Heasley says. “It has actually caused us to become closer as a company.”
The key to getting associates to rally around the opportunity that a sale offered, she says, was consistent, open communication.
“The whole time we were interviewing prospective purchasers or owners, we sent out communication to the field to let them know how the meetings were going,” she says.
Heasley also set up round-table discussions with associates over breakfast and installed boxes around the Columbus headquarters as well as the New York offices for associates to submit anonymous questions about the impending sale. She sent out e-mails. She did monthly meetings in Columbus that were video conferenced in New York and vice versa.
“We demonstrated our willingness to share with them as we had information,” Heasley says. “We weren’t keeping anything back. As soon as I knew something that someone was wondering about, we would get that information out to them. I found that multiple touchpoints were good. They seemed to like the e-mails so I tried to do one every two to three weeks saying, ‘This is what we know.’”
When the buyout by Sun Capital was finalized on Aug. 3, 2007, associates were ready to celebrate.
“We threw an Independence Day party,” Heasley says. “And we created our own ‘Declaration of Independence.’” A large copy of the missive hangs framed on the wall outside Heasley’s office.
“We wrote it ourselves, and then we signed it,” she says. “I think people were really energized by the whole thing.”
Of course, some acts of independence such as securing a completely separate location outside the Morse Road campus of Limited Brands and undergoing a name change to further differentiate the stores from their former corporate owner were not included in the deal. Still, Heasley says a name change is not off the table.
“We have talked about it,” she says. “But we don’t have an answer yet. That is on the list of things that we are thinking about. It’s a tough call. The Limited has got a great history.”
So stay tuned. Another declaration of independence could come later this year.
Reconnecting with customers
Revitalizing The Limited Stores involves more than gaining new-found independence underwritten by Sun Capital and an enthusiastic sales force. It’s going to require a long, hard look at why customers like or dislike the store. It’s going to mean tracking all customer traffic not just sales. It’s going to mean getting reacquainted with customers on a more personal level. Heasley is all over that.
“The most critical area we have is our stores and our store experience,” she says.
That’s why getting to know customers again has become priority No. 1.
“We’re developing a lot of metrics right now around the customer,” Heasley says. “Metrics that we probably should’ve used historically but haven’t.”
For example, in the past when customers purchased an item from The Limited Stores, a toll-free phone number would randomly print on receipts inviting them to answer a handful of questions about their store experience. Now, exit interviews will be added to capture information about why customers decide to buy or not buy merchandise. Ditto for traffic counters, which track how many people enter the store.
“Right now, we’re only getting information from people who actually complete a transaction,” Heasley says. “For me, it’s as much about who doesn’t complete a transaction. I’ve watched too many people go in our store, turn and go out without a bag. That bothers me. I lose sleep over that.”
Further complicating the task of better connecting with customers is the fact that The Limi ted attracts an extremely varied demographic among women.
“She’s anywhere from 25 to 50 years old,” Heasley says. “That’s a very broad range. And you can’t be everything to everybody.”
So Heasley and her team fashioned a more specific customer profile, gave her a name and plastered her likeness upon the walls throughout the company’s headquarters to help associates envision who they’re catering to at The Limited Stores.
“We call her Tyler Monroe,” Heasley says. “We believe she’s 28 to 35 years old. She’s a professional woman. She likes fashion, but she’s not a slave to fashion. She’s probably in her second job, but she’s career-minded. She’s involved in a relationship. ... We created a whole brand story around Tyler.”
Limited executives even created a detailed day planner for Tyler listing everything from an upcoming Key West getaway to sticky-note reminders to call her mom.
“It’s a tool to bring life and a face to our customer,” Heasley says. “The associates rally behind it. The design and merchant team really love it. ... It’s been a very helpful way for us to get very clear in our minds where the assortment needs to go. What would Tyler wear? What wouldn’t she wear?
“It also gets to the customer experience in the stores. How would Tyler want to be addressed when she goes into the stores? What would be the store experience she would want? So we’re now carrying this all the way through our service offering.”
Heasley’s only concern with the Tyler prototype is that she may narrow the customer target a bit too much.
“Our customer is broader,” she says. “When you walk in our stores, we have a lot of women who are stroller moms now, but they’re career women. So we’re all Tyler. That’s the theme we’re talking about now. How do we keep it inclusive relative to who the customer really is? How do we capture all of that? That’s what we’re trying to refine right now.”
The new black
Increasing store traffic and converting more browsers into buyers are two main goals of The Limited Stores these days. Yet the importance of returning The Limited Stores to profitability certainly can’t be downplayed.
“We haven’t been profitable in some number of years,” Heasley says. “So the goal here is to get us back to a level of profitability.”
Focusing on the Monroes more than the Benjamins is how Heasley plans to get the company there.
“The measurement of success for most of us in retail is proving your relevance to the customer and establishing a loyal customer base while continuing to attract new customers,” Heasley says. “If we do that well, then profitability falls out. It should happen.”
In fact, she predicts The Limited Stores whose revenue rebounded to $500 million in 2007, up $7 million from 2006 figures will turn a profit in 2008.
“We’ve got a very strong balance sheet,” Heasley says. “We didn’t have that before. Sun is very supportive of growing the business.”
Illuminating the runway to better financial performance is a list of 21 initiatives developed jointly by Heasley and Sun. Among them: growing the accessories business, establishing an e-commerce site, assessing the most efficient way to bring in merchandise and even opening new stores.
“The target is three to five new stores in 2008,” she says. “It’s been years since we’ve had a new store.”
And these stores will be new throughout. “We are looking at a new concept for the brand, which is very exciting,” Heasley says. “I think one of the hallmarks of The Limited is our approachability. It’s not stuffy. It’s supposed to be a fashion statement, but it doesn’t make you feel intimidated to come in. So having a store design that’s a bit more contemporary is key. We’re very excited about that work.”
A lot is riding on this new concept. “For many years, the brand has been playing defense,” Heasley says. “Now we’re trying to play offense.”
That involves taking risks, yet staying true to the brand. “Les Wexner left us an incredible legacy,” Heasley says. “How do we build on that legacy, yet be relevant today? How do we leverage that past and move forward? That’s been one of the biggest challenges. Do we mention the Forenza sweater again or not? That was a defining product. Or do we come up with our current defining product?”
The possibilities are unlimited. “We’re going to be swinging for the bleachers,” Heasley says. “I call it regaining greatness.”
HOW TO REACH: The Limited Stores Inc., (614) 415-7000, www.thelimited.com
2006, the company was in poor shape.
Same store sales — one of the most relied-upon measures of
financial health in the restaurant industry — had been falling
steadily for two years. Restaurants were closing. Shareholders
His predecessor, Stewart Owens, had stepped down after profits fell eight out of nine quarters prior to his resignation — and
net income in fiscal 2005 had dropped 48 percent from the previous year.
The only bright spot was sales, which were growing, but at a
lackluster, single-digit pace.
“When I met all the people and looked at the historical performance, I realized these are good people. They just needed a
rudder,” says Davis, chairman and CEO of the nearly $1.7 billion,
Columbus-based company. “They needed somebody to come in
and say, ‘Let’s see what we can do.’”
Find a better course
Davis wasted no time bemoaning the situation at hand when
he accepted the top post of the underperforming restaurant
and food product chain. He knew decisive action was needed
and that he couldn’t turn around the company alone. So he set
out to meet the crew.
“In my first six months on the job, I hit about 100 restaurants,” he
says. “In the first nine months, I visited all of our plants.
“I had to be visible. I talked with managers and asked them
three questions: What do you like about working at Bob
Evans? Where can we improve? And what would you do if you
He got some interesting answers.
“I heard everything from new product ideas to how we
should control our development, to wanting to better understand how to track our business, to what kind of Christmas
party we should have,” Davis says. “Everybody has different
points of emphasis. But it created an environment of really listening to the people closest to the action.”
It also helped him lay the groundwork for some sweeping
First came a change in management compensation.
“You have to be tough-minded about performance and link
your pay to clear metrics that are a stretch for the organization
but are still achievable,” Davis says. “It’s a simple principle:
Things get better; people make more money.”
Davis started by linking officer compensation to specific company
goals and used a cascade process to bring the system to other levels,
including restaurant and plant managers. Individuals eligible for performance-based pay are measured against each metric twice annually — once at a six-month check-in to see how they’re progressing toward each goal, and once to determine if they’ve met each
goal and, thus, qualify for the incentive pay.
“It’s almost like taking the SAT: Here’s the metric; here’s your
score,” Davis says. “That makes it relatively easy to say, ‘Here’s
where I did well, here’s where I didn’t do well and here’s where
I have to do better.’”
Performance metrics are linked directly to the other big change
that Davis instituted in his first few months on the job.
“Within the first 30 days, I said, ‘We don’t have a strategic
architecture,’ so I took that very seriously, and we crafted our
BEST Brand Builders,” Davis says.
The acronym BEST stands for Bob Evans Special Touch, but
essentially, the brand builders are a five-pronged strategy for
rebuilding Bob Evans.
“I’ve worked in large businesses and small businesses and
having clarity of purpose and vision is essential,” Davis says.
“It’s the leader’s job to articulate the vision, but we also have to
say how we’re going to get there. That’s where the Brand
Builders come into play.”
- Win together as a team.
- Consistently drive sales growth.
- Improve margins with an eye on
- Be the BEST at operations
- Increase returns on invested
“It’s hard to argue that these aren’t things you need to do to
build a business,” Davis says. “They’re very clear measures.
And each of the five Brand Builders are tied to incentive pay. I
think everybody bought in to it. It gave us a road map to follow.”
Communicate your plan
Once the direction was clearly set, Davis’ next task was to
“broadly and boldly” communicate the five BEST Brand Builders
to the more than 50,000 employees throughout the Bob Evans
“We’ve got people working in plants, we’ve got people working in restaurants, we’ve got satellite facilities, we’ve got people in California, people in Ohio,” Davis says. “We had to find a
way to connect with all the different constituent groups across
Posters, mouse pads and other assorted paraphernalia were
emblazoned with the five expectations set forth in the Brand
Builders. Davis began hosting departmental lunches and companywide meetings to reinforce the importance of the Brand
“It’s a way to motivate and get people energized around the
Brand Builders,” he says. “They’re the key to our future success.”
In addition, Davis now has his own corporate blog within
“I have a blog where people can go online and ask me anything,” he says. “People want to know what’s going on in their
Despite all the improvements in internal communications,
what probably speaks the loudest to employees is seeing actual results.
“The first half [of fiscal 2007] was pretty rough,” he says. “But
the second half was really strong. That’s when the business
started to turn and cash flow started getting better, and we
started being smarter in where we were spending and investing our money.”
For example, when Davis promoted Mike Townsley to executive vice president of food products, he immediately combined the corporately owned but separately branded Bob
Evans Farms and Owens Foods product lines into a single unit,
helping reduce overhead, streamline operations and maximize
buying power. In addition, Davis’ Brand-Builder-inspired
stance that business segments now had to “earn” capital
investment by meeting sales and profitability expectations
helped send a message of fiscal responsibility throughout the
company and stave off losses.
“We went from restaurant openings as a birthright to
whomever has the best return on investment will get new capital in the future,” Davis says. “If we want to improve shareholder value and drive stock price, we have to be great at
return on value.
“I think the majority of people understood what we were trying to do [with the Brand Builders]. But we started really hitting our stride when we started getting results. When that happens, people start to realize these Brand Builders really do
Get buy-in at the top
Communicating with shareholders and board members was
also a vital part of Davis’ turnaround plan for Bob Evans. After
all, measurable change was going to take time and shareholders had already run out of patience with Davis’ predecessor.
“One of the first things I did was visit some of the top shareholders,” Davis says. “I said, ‘Here are my thoughts on the business. Give us time to craft a strategic plan.’ When we came back
with the Brand Builders, I think they saw we were serious
about performing. Then, when the results came, that spoke
“The best way to earn the support of shareholders is to show
progress in operating results, and our Brand Builders generated improvements shortly after we implemented them.”
As for the Bob Evans board of directors, Davis was careful to
get alignment with them on the direction he was sailing before
he got too far.
“You have to make sure you have a direct line with the
board,” Davis says. “Change starts at the top.”
Board members were very receptive of the Brand Builders
concept, and together with Davis, they crafted a five-year
strategic plan to further solidify Bob Evans’ course.
“Everybody rallied around it,” Davis says. “We are headed in
the right direction today.”
So where would Bob Evans be today if Davis had not taken
control and set a clear, performance-centered direction for the
“It’s hard to speculate,” Davis says. “The business didn’t get
to where it was overnight. I kept reminding myself of that. I’m
just proud of our team and our company for galvanizing as
quickly as we did and moving in a better direction.”
The clearly humble Davis says what he has done with Bob
Evans isn’t so extraordinary. It’s basic change management.
“You start with a plan, you communicate it, you get alignment
from your key stakeholders and your board, and then you don’t
waiver,” he says. “You have to keep driving it.”
There is, after all, still a long way to go.
Although sales and net income are still plodding along, same-store sales have rebounded into the positive column and cash
flow has improved dramatically. So much so, in fact, that the
board of directors has authorized the repurchase of up to 3 million shares during fiscal 2008 on top of the 2 million shares
repurchased in fiscal 2007.
Shareholders are regaining confidence in the brand, and
employees seem to be encouraged, too.
“I’m seeing people smiling a lot more,” Davis says. “It’s a reaffirmation that we’re at least trying to move in the right direction.”
But it’s just the beginning.
“I’m one of those happy-but-never-satisfied guys,” Davis
says. “You can never rest on your laurels and think your turnaround is complete. There’s a fine line between positive and
negative sales, so you can’t become the least bit complacent.
There are a lot of external factors out there. You have to
always be on your game.”
Still, the progress he’s seen is encouraging.
“When you see it work, it’s so rewarding,” Davis says. “When
you sit in a meeting, we’re not challenging which direction
we’re going anymore, we’re challenging the best way to get
HOW TO REACH: Bob Evans Farms Inc., (800) 272-7675 or www.bobevans.com
His empire, worth more than $100 million, spans eight soon to be nine states. What’s even more impressive is that he’s done all that in a highly competitive some might even say cutthroat industry notorious for chewing up and spitting out wannabes by the dozens every year.
Clearly, Cameron Mitchell knows how to build a brand.
“It’s amazing the power of the concept,” says Mitchell, president of Cameron Mitchell Restaurants. “We have multiple concepts, and some are better than others. Some outperform others. If you can get that concept to be just right, you can build a hell of a brand. But it takes a lot of work.”
Here’s how Mitchell has successfully built his collection of diverse brands, from retro diners to Pan-Asian bistros, from supper clubs to sophisticated steakhouses. It’s a formula that’s proven to drive growth and is based on some universal concepts.
Mitchell says the foundation for any brand must be built upon a company’s core values and philosophies.
“I think any business venture has to ask themselves, ‘What do they want to be?’” he says. “We want to be an extraordinary restaurant company.
“Any organization also needs to define itself and say, ‘Who are we?’ You need to be able to answer that basic question. We answer that by saying we’re great people delivering genuine hospitality.
“Our third plank of our philosophy is, even though we have 2,500 associates and we all have different job descriptions, we all have the same role in the company. And that is to make raving fans of the five groups of people we do business with: our fellow associates, our guests, our purveyors, our partners and our community. If we make raving fans out of those five groups of people, we will succeed in making raving fans of anyone we come into contact with.”
Those three core philosophies go a long way in driving the brands that Mitchell creates.
And although he acknowledges that each restaurant concept he’s created has become a brand of sorts, the underlying, unifying brand behind all of them remains Cameron Mitchell Restaurants itself. Every restaurant concept has to adhere to that brand.
“What is our brand? Our brand is quality food, quality ambiance and, hopefully, great service to go with it,” he says. “We want our guests to be able to count on that.”
So no matter if that guest is dining at the Columbus Fish Market or the swanky M, customer expectations should be exceeded on all fronts.
“We try to be consistent with that throughout,” Mitchell says.
He makes it sound so easy, but the introspection required to start building a brand can’t be taken lightly. It’s the identity of your business. It’s your calling card. Your signature.
“What do you want your brand to be known for?” Mitchell says. “You have to develop that brand promise. The brand promise is what you want to deliver to people.”
Once your core philosophies and values are clearly defined, the next step in building a successful brand is holding fast to them in every little detail.
“Be true to yourself. Stay focused,” Mitchell says. “It’s easy to get going on all these different tangents.”
Mitchell knows of what he speaks.
“Look at our Fish Market, for example,” he says. “We opened those in 2000, 1999, 1998, and we were very, very profitable. We’d done a good job. But we started to not be true to ourselves. The concept was built on fresh fish, a daily menu, doing creative presentations of fish. We started to change, slowly but surely.”
The company, for instance, found it could save money by doing away with daily printed menus. Then someone noticed how many complex items were on the menu and it was simplified.
“Then we went and got too pricey,” Mitchell says. “Before we knew it, our profit was in the toilet. We went on this way for two or three years. And then we finally looked at the Fish Markets and said, ‘What are we doing here?’ We pulled out the old menus and we kind of got our way back. Now we have our profitability back, and the business is growing.”
Mitchell’s Fish Market, which already has a presence in 12 cities outside Central Ohio, is slated to open four more locations this year and a fifth in 2008.
Mitchell was lucky he caught things when he did, though. That rolling snowball of simple, well-intentioned missteps could’ve spelled disaster.
“Quality is like a path through a dense forest,” Mitchell says. “If you step off that path very far, before you know it, you have no idea where you started. You’re lost.
“In the case of the Fish Market, we were breaking the brand promise left and right. We broke it for not having a daily printed menu. Fresh fish, fresh market, fresh daily that was the whole concept. I just want to kick myself for that blunder.”
Sweat the details
A brand and the promise ingrained in that brand should be clear to the public at any point of contact.
That means using the right font style on all signage and letterhead, conveying a consistent image through carefully selected advertising avenues and smartly crafted messages, giving all physical facilities an appropriate look and feel, making sure employee’s dress codes and demeanor reflect the brand ... the whole ball of wax.
“Everything has to be congruent,” Mitchell says. “You can’t not have white tablecloths and charge $60 per person for food. That would be a disconnect. You can’t have real loud, energetic music in a fine-dining restaurant. It doesn’t make sense. It goes all the way through to the details of the china and the music. It needs to match the environment, which needs to match the concept, which needs to match the service level and guest expectations, which the price needs to match. All the way down through the line, we want everything to be congruent. If it’s not, we have disconnects.
“The brand has to appeal subconsciously to people, too. They may not realize consciously that the music is too loud or the lights are too bright, but subconsciously, they pick that up, and it kind of agitates people. So they may not have a good feeling or may not be completely endeared to that restaurant.”
The same could happen to any company that overlooks seemingly minor details in building a brand such as the hold music callers hear or the paint color and style of furniture greeting customers in the lobby. Everything must carefully and consistently add to the brand. “This is a business of 1,001 details,” Mitchell says. “It’s true. All your T’s have to be crossed and all your I’s have to be dotted. It’s very challenging to have it all work together and have that magic happen.”
Never rest easy
Even when a brand finds success and infiltrates every nook and cranny of a business, ongoing work is needed to keep it fresh.
Take, for example, Mitchell’s original Ocean Club restaurant in Easton Town Center.
“We closed the Ocean Club, which was doing about $4 million a year in business, and totally reconcepted it,” Mitchell says.
Management decided the restaurant’s whimsical underwater theme came off as kind of cold, he says, and the menu needed more beef items so it would appeal equally to fish lovers and steak lovers.
“We opened Mitchell’s Ocean Club two months later, and it has been a phenomenal success,” Mitchell says. “It resonates with people. It’s tracking to do $7 million in ’07. And not only did we take a restaurant that was moderately successful and make it very successful, but we feel we’ve birthed a new concept. Maybe that becomes a $100 million brand.”
In similar fashion, Mitchell recently raised $3 million through a capital campaign to remodel additional restaurants in his ever-expanding chain, some of which date back more than a decade.
“It was imperative that we put that money back into our system to maintain the quality of our dining rooms and our physical spaces,” he says.
“Because part and parcel of that brand promise is we want to have great-looking interiors and we want to exude quality within those interiors when you walk into the space.”
Watch your time
Anything worth doing comes at a price, and branding is no exception. Yet, it’s not the corporate wallet that takes the biggest hit when building a new brand. “The biggest cost is time,” Mitchell says. “One of the things I’ve learned is there are two forms of capital: mental capital and physical capital. Mental capital has a price to it. If we’re spending all our mental capital over here, we’re not spending it over there. So what does that cost you?”
Mitchell points to his latest branding concept, Marcella’s, a Tuscany-themed wine bar set to open in the Short North this month, to illustrate his point.
“It’s going to cost us in the ballpark of $1.2 million to open Marcella’s, which is very inexpensive for a restaurant,” he says. “Typically, we spend about $2.5 million. But I think the physical expense kind of pales in comparison to the amount of mental capital we’ve put into it. Our corporate chef is in the test kitchen for six weeks working on the menu, another two weeks for the opening, another four to eight weeks following up on that, so our corporate chef is spending four months of their time on this project. That means four months they’re not spending on other projects within the company.
“There’s a lot of energy devoted to it. I think that’s the far greater cost, because you basically have to put the rest of the company on hold for a little bit while you’re doing this.”
That’s why it’s so important to be sure the brand you are pursuing truly fits with your company and is worth the labor-intensive effort.
“I opened a little bread company that ended up taking up way too much of our time,” Mitchell says of his 2002 purchase of Tapatio Bread Co. in the North Market area. “It took 20 percent of our time for 1 percent of our sales. I pulled the plug on that in about four months.
“If I had it to do over again, I would be more focused. For a while we were just all over the place. But that happens in organizations. You get teams of people together, teams get off on a tangent, and one thing leads to another and before you know it, the whole team is over there for one reason instead of being over here. That’s where leadership steps in. I try to keep myself above the fray so I can have some clarity of vision, but even with me, I get sucked into it sometimes.”
That’s why keeping your company’s philosophy in the forefront at all times is imperative.
“Anybody that’s involved in working in your company has to know your brand promise and be able to execute that,” he says. “You have to know your vision and be able to articulate your vision to anybody.”
It’s a formula that’s allowed Mitchell to grow from a single American bistro in 1993 to a 28-location, multibranded empire that’s on pace to do $125 million in 2007.
“You have to have the patience and the discipline to stick to your guns,” he says. “Not that you can’t change, but remember where you came from. What is the brand promise?
“I’ve learned a lot over the years. Probably one of the biggest is the power of the concept.”
HOW TO REACH: Cameron Mitchell Restaurants, (614) 621-3663 or www.cameronmitchell.com
See Jane. See Jane run a company. The carefully laminated sign on Jane Abell’s desk stunned her father, Donatos Pizzeria Corp. founder Jim Grote, when he first spotted it nearly seven years ago.
“He said, ‘Really? You would want to do that?’” Abell says.
Abell’s older brother, Tom, was already ascending the ranks to one day assume leadership of the then-$150 million family business. Grote, chairman and CEO, had never really considered Abell for the position.
“I didn’t even know she wanted to do this,” says Grote, who founded Donatos in 1963 and brought all four of his children up through the business in various capacities.
“He never would have thought of me in this role never, ever, ever,” says Abell, who now serves as chief operating officer for the $171 million pizza chain. “My older brother was the golden boy. He was the 4.2 [grade point average] student. He graduated from Wharton. He’s just incredibly smart. He always was the COO but always kind of wanted to do something else. And I was always in HR.”
In fact, Grote might never have realized Abell’s potential as a business leader had it not been for a fateful decision reached in mid-1999 to sell Donatos to McDonald’s Corp.
“The president, Bill Rose, saw Jane not just as my daughter but as a person,” Grote says. “He put her in charge of development and franchising, plus HR, and really stretched her. He told me, ‘I know this is your daughter, but I don’t think you realize how talented she is.’ I thought about it and said, ‘I might be blinded by that.’ “So I watched during that time and I was somewhat surprised to see how quick she picked up the new responsibilities. She was really just absorbing them like a sponge.”
Abell says it made her father see her in a new way.
“I think that’s when Jim first saw me as a partner,” Abell says. “It was a great, pivotal point for him to see me in another light.”
The rest is history or, at least, history in the making. Here’s how Abell landed at the top of Donatos, alongside her father, who is no longer surprised that she may one day want to take the reins alone.
All in the family
It’s said that what doesn’t kill you makes you stronger, and the McDonald’s experience might be classified that way for the Grote family. It certainly made the leadership of the company and its family roots stronger than ever.
“My son was in charge of operations when we sold to McDonald’s,” Grote says. “Tom was my righthand guy. He was the oldest son and, well, he probably would, one day, take over the business.”
But things changed. Tom Grote left Donatos to open an upscale restaurant in downtown Columbus called Out On Main. [It folded in 2002.] He is still on the advisory boards for both The Grote Co. and Donatos, and serves as a sounding board for Abell.
“I still bounce things off of him,” Abell says. “He’s my biggest fan. He always was. And I think that’s because he always kind of knew it wasn’t in his heart to do this, and it was in mine.”
Abell’s sister, Kate, who helped build Donatos’ catering business before the McDonald’s buyout, wound up opening a coffee shop on Tamarack Circle called Sips and became an artist. Abell’s other brother, Kyle, who worked in the marketing department at Donatos, launched his own video production business called Enlightenment Studios.
“For me, though, it’s always been this,” Abell says.
That’s why she couldn’t sit idly by when she saw the path McDonald’s was taking Donatos down. Aggressive expansion plans nationally and abroad were stretching the company too thin, and the once-profitable regional chain was quickly mired in red ink. Abell had to do something and fast.
It didn’t take long for Abell to realize that, under the McDonald’s umbrella, things weren’t as they should be. In addition to the company’s financial problems, Donatos’ culture was changing and not for the better.
“Our first year went by, and I knew what kind of company we didn’t want to have,” Abell says. “There was a lot of fear, a lot of bureaucracy, a lot of politics, a lot of people positioning themselves in our company in ways that I just never got to experience. We were always a family business. I wouldn’t say we had a perfect culture, but if you felt like you needed to say something to Jim Grote, you could walk into his office and say it. For the first time in my life, I felt fear, which was an interesting experience.”
When McDonald’s shareholders began making noise about the company’s falling stock price and executives talked about cutting off unprofitable arms of the business to set things right, Abell and Grote feared the worst for Donatos.
“The edict was they had to get rid of all these ‘distractions,’” Grote says. “Their stock had gone from $42 to $13. The CEO had left. The new one came in and said, ‘We will have no more losses recorded on our statement.’ So that was his charge. “They were going to break it up pretty much and just get as much money back as they could from profitable markets.”
There was even talk of converting some Donatos locations into sub shops under the McDonald’s brand and shuttering the rest. If that happened, Donatos would cease to exist.
“We’d already been paid, so as far as us being all right [financially] it was OK except it was like one of your kids being chopped up,” Grote says. “It’s something you’re attached to. So you can see how the idea of splitting it up or selling it off was not sitting very well.”
That’s when Abell stepped up once again surprising her father and offered to risk it all to keep the Donatos name alive.
“I was ready to do whatever it took,” Abell says. “I told my Dad, ‘I will sell the house I just built. I’ll sell everything I have. I’ll do whatever it takes.’ But I knew I couldn’t do it alone. “I needed his money. I joke about it a lot, but I really needed his leadership. He’s an incredible, inspirational leader, but he’s also an intuitively smart entrepreneur. He just knows. I needed to work with him side-by-side to absorb some of that from him.”
Leader in the making
It took Abell and Grote about eight months and a reported $50 million to buy back Donatos from McDonald’s. The deal was finalized in December 2003.
By that time, Donatos had grown to 182 stores in seven states, but it was operating at a $7 million loss, Grote says.
“Jane’s first challenge was, Can we stabilize and get the morale back to where it was as a family business?” Grote says. “The culture took a hit because of the large company that owned it, even though Jane and I were still very much involved. There seemed to be a lack of connection with what we were all about. So when we took it back, she took over operations. That was really important. She spent most of her time going to the stores and talking to the managers and supervisors and market managers. She was the face of Donatos, and she was a family member.
“The scary part was what had happened during those four years. Internally, it seemed chaotic. We were growing like crazy, then we stopped. But in the field, our old-time pizza makers were still out there plugging away making the best pizza they could make, just like before. Fortunately, we didn’t lose the core group of people who knew how to run Donatos.”
Within a year, Donatos was profitable again.
“We had a $10.5 million turnaround that first year,” Abell says.
“I thought that was a pretty good achievement considering the chaos we were in and what could have happened,” Grote says. “Jane was the catalyst that actually made this second phase of this business happen.”
Still, Abell won’t take credit for the rapid return to profitability.
“It wasn’t me,” she says. “It wasn’t even Jim. It was our people who rallied around the spirit of who we are and were excited about getting it back. “I just knew we had a destiny,” she says.
And she wanted to see Donatos reach it.
Becoming a team
Grote’s growing confidence in Abell’s leadership is clear by the number and complexity of tasks he’s delegated to her in the past three years. She now oversees most of the day-to-day tactical duties, and Grote says she understands all the financial aspects of the business.
The one area Grote has not yet relinquished to Abell, however, is product development.
“Product is his passion,” Abell says. “We always joke that when we can’t find Jim, it’s ‘Oh no! He’s down in the test kitchen.’ “Of course we irritate each other sometimes. Any true great partnership does. But you’ve got to have the courage to talk about it.”
Abell and Grote often talk about their differing personalities and how to embrace each other’s vastly different one might even say polar opposite approaches to decision-making.
“There are moments when it’s hard for us to be in the same room because I would come at a decision very differently than he would, even though we would come to the same decision,” Abell says. “He has an incredible sense of urgency. He’s always about tomorrow. But sometimes implementing quickly isn’t always the best way to do it. I like to have a plan. I like order. I like structure.”
Still, Abell says she is learning to appreciate the need to move more quickly on some decisions. And Grote is starting to lean on Abell to help him think through scenarios even if sometimes it’s in hindsight.
“He’ll come to me and say, ‘OK. What should I have done differently in that situation?’” Abell says. “He’s 63 years old and still aspiring to be a better leader.”
Abell no longer worries about being seen as the boss’s daughter, either.
“I’ve fought very hard against that my whole life, probably to the point that I would argue with Jim on purpose just because of it,” she says. “I don’t think anybody in the company today feels as though I’m in this position because I’m Jim’s daughter.”
That includes Grote himself.
“I have respect for her not just as a daughter but as a full-blown partner, as a peer.” Grote says. “I’m always going to be the dad and she’s always going to be the daughter, but in business, she’s a peer.”
Abell’s sights are still set on growing Donatos, but doing so slowly and methodically.
“The reason I bought it back is because I do believe our destiny is much bigger than being a regional player,” she says. “We’ve stabilized for the past three years. Now we need to take it up a notch.”
She says that means expanding nationally first, and then, perhaps, globally.
Would Donatos ever consider selling to another company again to make that happen?
“I never say never,” Abell says. “I never would have thought we’d sell in the first place, to be honest. It wasn’t on our plan. It wasn’t on our radar. But I would say that we really see growth through franchising right now. That’s where we’re headed. When you have a franchise, you have people who are invested in the business financially, emotionally, and they’re doing it for the right reasons. It’s a different attitude and a different feeling.”
And what about Grote? Is he thinking of retirement?
“I never used to see myself not being daily involved,” Grote says. “But with the team and with Jane’s energy, I could see that happening. ... But I would still probably hang around the kitchen.”
HOW TO REACH: Donatos Pizzeria, (614) 416-7700 or www.donatos.com
“That scares most people to death, but then I need to redefine the word,” says Wallace. “I would say lethal is: We’re quick, we’re sharp, we’re fast, we do what we say we’ll do, we do it when we said we’d do it, and the result of what we do will be to accomplish what we said it would accomplish.”
That may sound like a pretty tall order for a 21-year-old, family-owned business, but Wallace doesn’t care.
“That should have nothing to do with anything,” he says. “I don’t want to be [known as] a closely held, family corporation. I want to be a good, sharp, aggressive, tough, ethical corporation that, oh, by the way, is family-owned.”
He seems to be well on his way.
“In the first 14 years of the company, if you look at any three-year span, we doubled the company every three years,” he says. “We did that for a long time, then Y2K came along and a lot of things changed in our industry. One of those changes was that growth.”
The first sign that something radically wrong was happening in the industry was a sharp drop-off in pricing.
“Way back when we started this business, a gigabyte of storage sold for between $20,000 and $40,000,” Wallace says. “Today, a gigabyte of raw storage costs less than $1. That requires change.”
Here’s how Wallace reinvented and repositioned Cranel to survive that enormous bump in the road.
Absorbing the shock
“Coming through the ’90s, there was so much money in this industry,” Wallace says. “Part of it was driven by the Y2K hype. Every company had tons of people hired to go fix real and imaginary ghosts. The money was just knee-deep.”
Cranel was one of the benefactors of that push for updated, Y2K-proof technology. The company’s sole line of business at that time was reselling computer storage and document imaging products to other businesses.
“Three to four years in to the company, we could see [the price] begin to move,” Wallace says. “I don’t think anyone in the industry thought it would go from a $40,000 to $1 change. We kept hearing it and reading about it, but I don’t think we really realized it was going to go that fast.”
Nevertheless, Wallace wasn’t about to wait and hope that disaster didn’t strike. Instead, he started carving out a new niche for Cranel before things got bad.
“You have to learn to not follow the market,” he says. “You have to try to figure out where it’s going ... and try to get in front of it as far as you can. Of course, the farther out you are, the greater the risk because it may not go where you’re going.
“But try to be as proactive as possible instead of reactive. Because when you’re reactive, you’re playing catch up and, boy, that’s hard to do.”
Wallace says he’d already begun to change Cranel’s business model pretty substantially by 1990 well ahead of the great IT crash that left many once-thriving tech companies floating down a river of red ink into oblivion.
“We were a reselling product-based business,” Wallace says. “If we would’ve stayed in that model, I question whether we would even exist today. We had to change from a product-based business to basically a solutions-based business.”
That meant changing nearly everything Cranel and its sales force had ever known.
Rather than just selling products, Cranel’s new plan was to sell the product as well as the installation, integration and everything else that went along with it. Cranel needed to become a turnkey solution provider.
To do that most effectively, Wallace broke the company into separate divisions under the Cranel Inc. umbrella.
“We needed to diversify,” Wallace says.
In 1994, Versitec, a support and maintenance arm of Cranel, was born.
“To some extent, it is more immune to the economic swings, thank goodness,” Wallace says. “During Y2K, there was a huge amount of product moved in to businesses. They didn’t need anything for a long time after that. That made the sales in that arena dip rather strongly. But they still had this equipment that they had to maintain and support so that business continued up and to the right that whole time for us.
“We picked a business which, in this case, was in the realm of what we do. Our customers were the same customers. It was just a slightly different effort.”
Another diversification move that helped Cranel ride out the plunge in hardware prices was the evolution of Cranel Imaging.
“It’s the last of our product-based divisions,” Wallace says. “Even though it is our lowest-margin division, the contribution per head is the highest in the company.”
After all, the equipment that Cranel Imaging sells presents a huge opportunity for Versitec in terms of maintenance.
“We can make more money maintaining that equipment than we can selling it,” Wallace says.
So having Cranel Imaging get a foot in the door with customers is paramount to Versitec’s ongoing growth.
The same can be said of Cranel Inc.’s third division, Adexis, which sells data storage equipment and implements hardware and software solutions in mid-sized to large corporations.
In the mid- to late-’90s, IT departments were moving from centralized, mainframe-oriented computing systems to open systems. Those systems were more costly and more complex to manage, presenting an opportunity for Cranel to provide services to customers to help them manage the complexity.
“The demand for content going up almost outstripped the prices coming down,” Wallace says. “That was part of the reason we could maintain our growth. We were sitting here with curves going two different ways, and they kind of canceled each other out to some extent.”
While the new, three-pronged business plan for Cranel Inc. seemed to be keeping revenue high, the dramatic, sweeping changes took a toll on employees.
“We humans are creatures of habit,” Wallace says. “We like our ruts. Change is very hard for employees. And we were finding that, for some people, change was not to be. They just could not accept what we set out to do and, unfortunately, we lost some of those people.”
About half of Wallace’s sales force had to be replaced following Cranel’s switch from a product-based business to a solutions-based company.
“Not all of your people will join in adopting change and, as much as I appreciate them being here, they were so uncomfortable they had to move on,” Wallace says. “Those were sad times. It’s for me very personally painful to, in effect, go to someone and say, ‘Thank you for giving me your best, but we’ve now grown and it’s no longer good enough.’ That is extremely painful for me as an individual. But nevertheless, you have to do it for the people who are still there.”
Wallace is grateful to the nearly 200 employees who comprise Cranel Inc. today and especially to those who were both willing and able to tough out the changes along the way.
“One of my greatest thrills is every February, we recognize longevity,” Wallace says. “We have a fairly good proportion of 10-year people here.”
Still, there are many more whom he would have liked to have kept.
“In a growing company, sometimes it’s hard,” he says. “People who like what they do in a $10 million company may not like what they need to do and must do in a $100 million company. In our case, the company went through some radical changes.
“We stalled around $30 million and went through some pretty radical people changes around that time. That change jumped us into $80 million, and we went through them again. That group has gotten us where we are today.”
With a new corporate focus and new employees ready to embrace Cranel’s solutions-oriented business plan, all that was left was to find the best way to market those changes to customers and the rest of the outside world.
“Our marketing people had to take a totally new approach to what they were doing,” Wallace says.
In fact, all three divisions had to develop separate marketing materials and brand images.
Making the shift from one business to three, and from product-focused to solutions-driven, took Wallace out of his comfort zone, too.
“We did go outside and get a whole lot of advice to go do that,” he says. “You have to be comfortable that you can work with and co-exist with people who are smarter, quicker, faster, better than you are.”
Wallace also relied heavily on advice from business authors.
“To me, marketing is an absolute science,” Wallace says. “I read as much as I can put my hands on. There are some marketing authors out there who have had some good impact on this company.”
He specifically points to Al Ries and Jack Trout, who together wrote a number of marketing books, including “The 22 Immutable Laws of Marketing,” “Marketing Warfare,” “Positioning: the battle for your mind,” and “Focus: The future of your company depends on it.”
Former General Electric chairman and CEO Jack Welch also carried much influence at Cranel.
“We are big fans of Jack Welch’s No. 1, No. 2 philosophy,” Wallace says. “On the vendor side of our business, we want our vendors to be No. 1 or No. 2. That vendor has a huge sales force that’s out pulling the product.”
Applying all that knowledge, as well as the lessons of his own experiences as the owner of three separate businesses prior to Cranel, Wallace has developed an ongoing focus for Cranel that he calls M.A.P.
“The M part is margin,” he says. “We absolutely put the focus on margin. The A part is annuity. We had to put product sets in there that had an annuity effect so we didn’t start at zero every month or every year. The P is for productivity. That doesn’t mean getting out a bigger whip and getting salesmen to sell more.
“Productivity was putting things in the price books that were three-year spans instead of one-year spans. It was putting things in the price books that were all-inclusive, life-care products that span a large number of events instead of picking up each event one at a time. That’s part of why we’ve been successful in driving our margins up.”
And driving up margins is especially important in the face of dropping sales volume.
“One of the changes as you drive from the product to the solution side of the business is you will struggle to keep your volume up,” Wallace says. “Our volume went down about $5 million last year, but we feel we are doing the right thing because our gross profit was higher on less volume.
“Now we are going back to driving the growth side of our business again. But we are doing it with different product sets and different efforts.”
Through all the twists and turns of change, Wallace says, one thing at Cranel remained absolutely stable: the company’s ethos.
“It’s the stuff of which you’re made of,” he says. “It’s the inner makeup of the company. If you work hard to get that right, your chances of effecting change will be much better.
“If your goal is to make everybody happy, you probably won’t even make it as a company. But if you have the ethos piece right, the ethics piece right, the internal makeup right, the confidence right, the quality of your people right, the freedom to go do their jobs right ... if you get that right, your chances of success are much, much better.”
HOW TO REACH: Cranel Inc., (614) 431-8000 or www.cranel.com
Education: The Ohio State University, bachelor of science degree, business, major in accounting
Greatest business challenge: When I worked for another company, when I walked in the door, this other company owed the IRS $250,000 in trust fund taxes. Now that’s significant. I had no idea at the time the significance of that because I had never been in that situation before.
However, I was able to work out a payment plan with the IRS, which allowed us to pay down that existing debt and remain current for future payment of trust fund, payroll taxes.
About halfway into this payment plan, I came to work one Friday and found a notice to levy on our bank account. A levy is where the IRS literally goes in and sweeps your bank account and takes whatever money you have in there.
In our particular case, they got $50,000 of money that was already spent but still sitting in our bank account. That caused a great problem for us. So I picked up the phone and I called one of the managers at the local IRS office and said, ‘I need to come down and see you.’
When I left a half-hour later, they’d given me back $35,000 of that money that we had to have to meet payroll on Monday. I basically told them they were wrong and we were right. We were living up to our agreement and our obligation to them, so they had no ethical or moral right to this money at this point in time and that they were going to put 50 people out of work by their actions.
The gentleman that I spoke with kind of compromised. He said, ‘I’m not going to give it all back to you ... ’ but I knew then that we were going to be OK. It is amazing what you can do when your back is against the wall.
Most important business lesson: The best customer is the one that takes the longest to get. Short-term gain almost always leads to long-term pain.
And the opposite is also true: Short-term pain tends to lead to long-term gain. Anything that comes easy and fast typically is not good and will not last.
Education: Ohio Northern University, bachelor of arts degree in business. “I was the first one in my family to go to college ... I got a basketball scholarship.”
First job: Working on the line at a General Motors plant in the summertime. It was interesting. I had to join the union. At that time, I was making $3.50 an hour, and it cost me $50 to join the union and I was so mad. That was a week’s salary.
I worked 3:30 to 11 p.m., and after about the second week of work, a couple of the older guys pulled me aside and said, ‘You’re going to have to slow down. You’re going to get in trouble. You’re making us look bad. We don’t work that hard here, and you need to slow down or you’re not going to be coming back here.’ So I finished the summer and I thought, ‘I don’t want to do this for the rest of my life.’
What is the greatest business challenge you’ve faced?
Starting the Greif Transformation Initiative was by far the biggest. Knowing that that was going to be such an all-encompassing review and we were effectively going to break a lot of what we did to try to make it better.
The risk was not whether we could do it but how the people would accept it. I believed in the process and I believed it was the right thing to do, but I didn’t know how people would accept it. Would we have a total mutiny? We were going to affect people’s lives, so that was a challenge.
What is the most important business lesson you’ve learned?
To surround yourself with good people. I think that’s the key to success or at least my success. Understand that you don’t have to know all the answers and you won’t know all the answers and you don’t have to be the smartest person and you’re not the smartest person.
But if you surround yourself with good people, you are giving yourself and your company a much better chance of being successful. And surrounded by good people does not mean ‘yes’ people. If I surround myself with a lot of good people and they always say, ‘Yes, you’re right, Mike,’ we’re never going to go very far because we’re only going to go as far as I can see.
By surrounding yourself with people that can challenge you, you have a better chance of being successful. So try to find people who are very smart, who are very dedicated, who are not afraid to speak their minds. And,when we walk out of this room, everyone is on the same page. That is critical.
If we can do that, we’re going to be successful.
Education: Bishop Hartley High School; The Ohio State University, bachelor of arts degree, psychology
First job: Underwriter, Travelers Insurance
What has been the greatest business challenge you’ve faced?
In 2002, there was a gentleman from Illinois who engaged in a hostile takeover attempt (of State Auto). Certainly, that was a significant event in the company’s history. We worked with the board, who recognized that continuing the company’s operations and profitability was, in fact, in the best interests of all constituencies: the shareholders, the policyholders, the associates, the agents, the community.
Everybody was best served by maintaining and sustaining the track record that we had demonstrated over the years. Ultimately, the entire issue was litigated, and the takeover was not successful.
What is the most important business lesson you’ve learned?
Communication. That has been a change for me. Even in high school, I was petrified at the prospect of making even the smallest report or presentation. I remember a lot of times waking up in the morning and telling my mom I was deathly ill so I wouldn’t have to go to school and face that.
Over the years, I have overcome that concern. I’m not saying I’m any good at it, but I think I’ve learned to be a reasonably effective communicator.