Daniel G. Jacobs

Monday, 10 October 2005 12:04

Chicken feng shui

How do you say chicken in Arabic?

The odds are pretty good that Tom Johnson, chief operating officer for Church’s Chicken, can tell you. Johnson, who oversees international operations for Church’s, has visited 83 countries and is tasked with bringing the brand to the rest of the world.

Founded in San Antonio in 1952, Church’s has more than 1,500 locations in 15 countries, with combined annual sales in excess of $950 million.

Arcapita Bank BSC, Church’s parent company, is committed to international markets and expects 70 percent of the company’s growth to come from foreign locations.

Part of that commitment includes a huge travel budget. Johnson spends 280 to 300 days a year out of the country, flying nearly 600,000 miles a year. That travel is an absolute necessity, he says, for making sure franchisees feel comfortable with the company.

“The international business is a relationship business, with as much importance on the relationship between the principals on both sides as the commercial terms,” Johnson says. “Americans do not usually have the best reputation out in the world, so being in front of franchisees in person shows we care enough about them to come to their home country versus just using phones and e-mails.”

That effort to make a personal connection has helped Church’s develop a number of markets around the world. The expansion plan calls for focusing on regions in which the company already has a strong base — in Latin America and the Caribbean — then increasing its presence on other continents. The company can easily build on its existing markets because the distribution systems are already set up, leaving leadership to focus on increasing sales.

North America may be the company’s foundation, but Johnson is making sure it doesn’t neglect the rest of the world. In recent years, Church’s has pushed into the Middle East, initially into Kuwait, then into Oman, Qatar, Bahrain, United Arab Emirates and Saudi Arabia, all countries that welcome Western businesses.

“The region is a very large one for all of the [fast food] chains that are in it, and the desire for alternative brands to the ones that have been there for 20-plus years is strong,” Johnson says. “We were approached by several qualified groups within the region, did consumer product testing to gauge acceptance of our menu offerings, and based on the results, started development with some of the qualified groups.

“We have very strong sales there, and we offer an alternative people like, and it’s very easy to set up our supply lines.”

And it doesn’t hurt that everything imported from the United States comes into those countries duty-free, which makes the supply line easier to manage than in other parts of the world.

That’s a plus, because the most challenging aspect of operating overseas is managing the supply chain, Johnson says. It has gotten easier over the last 25 years because as more American companies have overseas operations, there are opportunities to work with other chains. But sometimes you have to find local suppliers.

“For the [Persian] Gulf region, everything is imported from the U.S. duty-free, thus, it is easy,” Johnson says. “In other regions of the world, you cannot economically import, so finding local producers and distributors is a challenge. It’s something that we pay a lot of attention to on a daily basis.”

Another way to help manage supply chain issues is to partner with other fast food chains.

“Around the world in different locations, we have co-branded, share franchisees and facilities with Burger King, Papa John’s Pizza, Little Caesar’s and with Subway,” Johnson says. “There are some places in the world where we share franchise partners or share facilities or share supply lines.”

Two ears, one mouth
A mentor once advised Johnson that the best way to learn about franchising is “‘to walk in, close your mouth and open your ears, and do a lot of listening before you talk,’” Johnson says.

Part of that education is learning about local customs, and Church’s is focused on making its restaurants palatable to non-Americans.

“We are almost 100 percent halal in our food,” Johnson says. “It’s a way to get a Muslim certification that your food doesn’t contain alcohol, doesn’t contain pork products and that it is prepared and butchered in the right way. It ensures that Muslim people aren’t offended by what they eat. We are probably 90 percent that way and moving to 100 percent that way internationally.”

Sensitivity to cultures and customs around the world is very important to Church’s and a key ingredient to its success. But it’s more than just understanding local tastes and rituals.

“Every region of the world or every country of the world, if it’s big enough where we operate, we hire local people on our payroll to work for us as our operations support people,” Johnson says. “I tell them they have one foot on the Church’s side of the fence and one foot on the franchisee side of the fence. It’s their job to help us understand a lot of the cultural and language issues, and at the same time, be able to translate what’s important to us from a corporate standpoint to our franchisees.

“We’re 100 percent franchised outside the U.S., so we’re all locally owned. Any country we go to — be it Indonesia, South Africa, Kuwait — the franchise is owned by a local person. We also strive, and are usually successful, in supplying 100 percent of the needs of the restaurant, constructionwise and productwise, locally. We’ll help set up factories and train people to make all of our products, so there’s no importing. Basically, we’re a locally owned business using local products. So when people come to work for us, they’re working for a local person who happens to have an American franchise.”

Church’s reputation and longevity have given the company an advantage in terms of finding those restaurant operators.

“We are contacted about the brand availability by some that have seen it in other territories and were impressed, some that were looking for a chicken brand to compete with local brands or other franchise systems and others that are looking at a variety of [fast food] brands and look at all that are available,” Johnson says. “We get some interested parties from referrals of existing franchise partners. We also utilize the services of the U.S. Commercial Service to recommend qualified groups to us within a territory we are interested in. On occasion, we have used the services of business consultants who introduce us to interested parties.”

With local operators in place, Church’s is less likely to offend its customers as a result of American ignorance of local mores. Issues can be as simple as making sure the colors used in the restaurants or the names of menu items aren’t offensive.

“For our project in China, we’ve had our trademarks and our names — we took them through the normal consumer testing — but then we gave them to a feng shui master to make sure they wouldn’t be offensive,” Johnson says. “(In Indonesia), we operate as Texas Chicken there because in Islamic countries, the word Church’s can be offensive to Islamic people.”

Johnson made the Asian market a focus for the company for the same reason restaurants pick locations in the United States — foot traffic.

“We have been able to figure out a great investment model and operating model that makes sense in Indonesia,” he says. “The Chinese, Indians and Japanese do a lot of business in Indonesia; there is a lot of manufacturing that takes place. So you have a lot of people come there, travel back and forth, and get ideas.

“It’s a good model for us to use from a consumer standpoint, the check average and average spend-per-person standpoint and an operating model. A lot of the things that we do in Indonesia — being mall-based with smaller footprints — are the kinds of things that you need in the other countries.”

Johnson has also led the charge into South Africa and Nigeria. There is one part of the world, however, that Johnson is not bullish about.

“Noticeably absent from my discussion is anything in Europe,” he says. “We feel, based on the labor situation, the cost of doing business there and regulatory interference, that it’s much easier and much more profitable to go into other parts of the world. We don’t have anything open in Europe. We have some ongoing limited discussions on some places in Europe, but it’s not a primary focus for us.

“It’s not that we wouldn’t take advantage of a great opportunity, there just aren’t that many great opportunities there compared to the rest of the world.”

Because the company is not married to a specific venue, Johnson is able to pursue alternatives to the freestanding store model to take advantage of any opportunity.

“We have a great team of architects at Church’s,” Johnson says. “We build in airports, bus stations, we have mobile units that drive around and get parked at places like beaches, we have big, 300-seat free-standing (sites). Our venue people can really work on that. I’ve got operations people all over the world providing support.”

And when Johnson is ready to pursue an opportunity, he knows he must act quickly.

“Because the quick-service restaurants are so much more profitable and take such a smaller investment, it happens a lot faster,” he says. “I’m always living one or two years down the road. The team that I have working for me ... they’re dealing with the day-to-day stuff that is going on in the business. I’m dealing with what do we have to have done to be ready for the next year, the year after, because whether it’s hiring people or getting resources that we need, I really need to think ahead so I have them in place when the need comes for them.”

An increasing pool of successful entrepreneurs from across the globe has made Church’s expansion goals easier to achieve.

“I think the job is easier now because we’re dealing with smarter businesspeople,” he says. “Twenty years ago, it was an emotional decision. Somebody was educated in the U.S., they went back to their country — ‘I want to bring this brand here.’ They’d call up an American company. They’d say, ‘I’ll write you a check. You send me the brand.’ We’d go, ‘Yes.’ They’d take the brand, and they might or might not make it.

“Nowadays, it’s businesspeople we deal with, very successful businesspeople, and they don’t make emotional decisions. They want to know how much will it cost and how much can I make. You’ve got to be able to answer those questions.”

HOW TO REACH: Church’s Chicken, http://www.churchs.com

Monday, 26 September 2005 12:52

Made in the U.S.A.

Real estate is often about location, location, location. And while that’s true for Sol Margolias in the properties he buys and sells, it was even more important in deciding where to establish his business. Margolias, CEO of Margolias Realty Group, left his native South Africa after 16 years as a real estate investor in Johannesburg to make his fortune in the United States and settled in Atlanta.

“We did well in South Africa, but when we decided to emigrate, we were limited in the amount of money that we were allowed to bring out — $40,000,” Margolias says. “Once I bought cars for my kids and put some money down for furniture, I had nothing left. So I started, literally, all over again. That was at the age of 42.”

In the past two decades, Margolias has build at portfolio that exceeds $350 million in a variety of markets.

“My passion is real estate,” says Margolias who completed his first real estate deal at age 20 while still in college. “I’m passionate about what I do. No two days are ever the same. There are a lot of problems and challenges to overcome, and we’re dealing with big amounts of money, but it’s very exciting.”

Smart Business spoke with Margolias about why he left his successful South African venture and what he did to make his American venture thrive.

Why did you leave a successful enterprise in South Africa to start over?

If you look at the nature of the business that I’m in, you need to have a long-term prognosis. Real estate by its very nature is long term. It was very difficult in the politically uncertain times to make a long-term prognosis of what you thought would happen to the real estate market.

A cycle would last for one year. I decided the best thing would be to get out of that environment.

Coming to America was the right decision because I can buy a property and say my investment term on this is seven years or 10 years and (provide) reasons why I buy it for that time period. I know I can do that here, and I couldn’t have done it there. Even now, I could not do it there.

What were the challenges of doing business in a new country?

In South Africa, I was a big fish in a small pond. Coming to America, I was a little sardine, and it was difficult for me to explain to some of my investors that I knew what I was doing. I didn’t have a track record.

The biggest problem was to build a track record to show investors I did know what I was doing, and if they gave me the chance, I would show them I could do it. Eventually, little by little, I was able to build a track record. Every time you do (a deal), you build credibility.

How did you grow the business?

I knew I had the ability to put deals together because real estate is essentially the same whether you are in South Africa or America or the North Pole. I had to find the capital to get it going. The way I built it up was that I had the ideas and the ability to put the deals together and I took in partners as venture capital and was able to build up my portfolio that way.

How has your financial background helped you build your company?

My training is as an accountant. I really analyze from the numbers back to the bricks and mortar. I will look at a deal and make sure it works financially and then go look at the bricks and mortar. Very often, you go and look at the bricks and mortar and location; I check the economic viability before I go out and have a look at the property itself. That applies whether it is a warehouse, a public building or a condo conversion.

How do you decide whether to do a deal?

We’re offered three condo conversions a day. They come from all over —  Arizona, California, Florida, Georgia. We look at a lot of product before we decide. We look at where in the economic cycle that property is.

We also look at the very important tool of financing and how we can financially gear the property — how much we can borrow against it, what kind of risk do we have to take. Is the risk without recourse, with recourse? We factor in the economics of the deal, the timing of the deal, and how we can finance it and what the risks on the finances are. You have to have an innate ability to discern which are the good deals and which are the bad deals. It’s very much instinct.

I often look at employment figures. Are they up? Are they down? This gives me a pretty good acid test for me to assess the depth of the market.

There is another element that goes into that, which I call perceived risk. Very often, when I’m buying properties, people will say, ‘Haven’t you overpaid?’ I assess my risk as carefully as I can. And as long as I’m covering it as much as I can, I will go into it.

We take some speculative views on property. We’ve bought condominiums where we paid the highest price ever paid for condominiums in that area. And we were able, because of its location, sell it within six months. There’s a risk.

Location, location, location was something that was drummed into me from an early age. But what I discovered was you could have the best location at the wrong time and you would turn it into a loss. Timing was far more critical than location. I’m not discounting location. It’s difficult. We have made mistakes.

You start off with instinct. Instinctively, you can feel there is an angle to the deal which you see that somebody else hasn’t seen or they have seen but don’t think is important. It started with instinct, but we are very, very careful. We look at three condo conversions a day, and we may choose one every two months.

We’re very careful; we do a lot of research. We don’t just do it willy-nilly.

Why don’t you specialize in one just area of real estate?

That’s a throwback to my South African background. South Africa being a much smaller economy, we looked at every kind of deal. We looked at offices, we looked at warehouse, we looked at retail, we looked at residential.

When I came to the States, I had that same discipline, and our portfolio is varied. We have taken that discipline of looking at all different property types and continued with it even in a country where people tend to specialize.

What is your most important role in the company?

I’ve got good people working with me, but all the acquisitions I’ve done, and when we decide to sell, it’s my decision. I guess it’s just a knack; I’m able to sniff out a good deal. Once I’ve zeroed in on it, I have very good people who can check out the financials, the legal side of it, check out the lease and everything else — all very critical. The trigger is my ability to go out and find it.

I know that sounds arrogant, but I have the ability to discern good deals. Every day there is a challenge, and no two days are the same. The whole time we’re putting out fires, things that crop up. What’s so exciting about real estate is you can never envisage all the problems that could come down the pike.

No matter how careful you are, there’s something that you never forecast that could happen. It’s just working through it. Sometimes it’s a headache, but if it were easier, everybody would be in it.

What is the greatest business lesson you’ve ever learned?

The most important thing to me is my reputation. I’ve had somebody walk into my office and offer me a part in an office deal and give me a price. I’ve said, ‘OK, we’ll do it. Go to the attorneys. Get the papers drafted.’ And the next day, somebody else walks in (offering) a higher profit.

Because I’m committed to that (first) person, even though I wasn’t legally committed because it wasn’t written, I’ve honored my word with that person. I can’t tell you how many times that has paid back because you build up a trust, a relationship. Real estate — any business — is all relationships. To me, the most important lesson is building up trust and credibility. HOW TO REACH: Margolias Realty (770) 458-0555 or http://www.atlantaleasing.com/home.htm

Wednesday, 17 August 2005 11:17

The Thorn File

Born: 1956, Glen Cove, Long Island, N.Y.

Education: Finance and information systems and MBA, Wharton School of Business, University of Pennsylvania

First job: Delivering furniture in high school

Career moves: Began his career in 1979 with S.C. Johnson & Son Inc. In 16 years with the company, Thorn's experience spanned finance, marketing, strategic planning, acquisitions and international business. Thorn also served with Campbell Soup Co. and carpet manufacturer Beaulieu of America.

Boards: Just Care, a private company that provides medical services to prisoners. Advisory board to the commissioner of corrections to help run the prison system and place individuals in jobs once they've served their time

What is the greatest business lesson you’ve ever learned?

A strength taken too far becomes a weakness. If you want to find the reason for a weakness, you look to that person’s or that business’ strength. A person who is very analytical, that’s a strength, but when they become too analytical, they can miss the emotional side of decision-making. That can cause them to make poor decisions.

For someone who is very people-oriented, that’s a strength, but when you take that too far, those people can become indecisive because when it comes to making decisions, they want to make everybody happy, and they can’t.

What is the greatest business challenge you’ve faced, and how did you overcome it?

When I was in the carpet industry, I was with a business that was caught in the middle of a consolidating market. It was mid-sized. It either had to sell or participate in the consolidation of the industry in order to get big enough to really end up a profitable player in the final consolidated industry.

We chose to continue to operate the business, but in order to do that, we had to make a number of acquisitions, which required that we take on a bunch of debt. And we already had a fair amount of debt when we started because this was only a 20-year-old company. It was started from scratch and was over $1 billion in revenue. That was a huge challenge for me.

I started out as chief financial officer and ended up as president and chief operating officer. It was really a frenetic, high-pressure time in my life.

Whom do you admire most in business and why?

I’ve learned a lot from the people I’ve worked for throughout my career. I’ve been fortunate enough to have worked for a lot of different people, and I can’t think of one person that I didn’t end up learning something valuable from. But one in particular stands out. His name is Bill Perez. I worked for him in the final job at S.C. Johnson. (He’s now CEO of Nike.) Bill Perez was a high-energy kind of guy. On the one hand, he was very challenging and he kept you on edge, and on the other hand, he had high energy, he had a lot of fun, and really promoted consensus decision-making.

Wednesday, 27 July 2005 13:13

Base of support

Don Johnson talks as if his career were preordained.

“If you live and grow up in Central Illinois, the premier employer in Central Illinois, obviously, is Caterpillar,” he says. “I started at Caterpillar and had a 25-year career.”

But experience elsewhere can only take you so far when moving into a new position as head of a major company.

“The first thing I did when I came in (to Aftermarket Technology Corp. last January), I spent the first three months on the road talking to hundreds of employees and talking to the management team about their frustrations with the company, how they thought it could improve and what they wanted to see out of the company,” says Johnson, who serves as chairman, president and CEO.

It was an extremely valuable approach, one that helped Johnson form his plan to remake the company. While the formal titles may impress business types, it’s Johnson’s role fine-tuning the company that may be his most important. Like the mechanic who is forever fiddling under the hood of his auto, Johnson continues to retool the company.

His plans include adding a third leg to the company to balance out the logistics and drive train operations, finding a way to get out from under the constraints of the previous owner and getting more from his employees.

The final leg
Johnson likes to think of Aftermarket Technology as three-legged stool. The first leg comprises remanufactured drive train products, predominantly remanufactured transmissions, engines and other drive train-related components. Leg two is the logistics organization.

And while the company had revenue of about $395 million last year, Johnson knows that two-legged stools aren’t the most stable and he began investigating adding a third leg to the company.

The company announced in June that the third leg would come in the form of an agreement with Fallbrook Technologies Inc., a technology development and intellectual property licensing company. ATC will design and build transmission applications based on Fallbrook’s NuVinci continuously variable planetary (CVP) technology.

“The agreement is a strategic move in ATC’s growth and diversification strategy, leveraging its ongoing transmission remanufacturing and engineering expertise into the transmission manufacturing arena,” according to the press release announcing the deal. “ATC’s selection of Fallbrook’s NuVinci technology as the basis for this part of its overall growth and diversification strategy represents a major validation of the NuVinci CVP’s market potential.”

According to Johnson, “As we begin to market this new transmission technology, ATC will remain focused on growing our drive train remanufacturing business with our current and targeted customer base. We believe in this technology as another building block in our company’s growth and diversification strategy.”

In addition to a third leg, ATC is enhancing its existing operations. It created an advanced engineering group to look at new products and new capabilities and to work with the business development team, whose job is showing customers “how we can drive their business successes in the marketplace and enhancing our revenue flow in the process,” Johnson says. “That particular wing of the business is boding real well as we look forward to that third leg.

“It’s all about new products. So what we wanted to do was grow the business organically with new customers and also organic growth with existing customers.”

The introduction of the engineering group helped the company sign $35 million in new business in logistics last year. Building the existing operations and adding a third leg is a natural approach for Johnson, something he picked up in his time at Caterpillar and Ford, where he transformed the automaker’s parts supply and logistics organization.

“If you look at the strategies I launched at Ford, it was about improving the processes, improving the physical distribution capabilities and also improving IT,” Johnson says. “If you took one of those legs away, the strategy fell. We supported all three legs, and the strategy blossomed into being best in class. At ATC, we have logistics and we have drive train, which is two out of the three legs. What we’re looking for now is a growth strategy to drive organic growth in logistics and drive train, which are two of the legs of the stool.

“And the third leg of the three-legged stool is to add another leg to the company, which allows us to further diversify the revenue and customer base.”

The people
When Johnson arrived at ATC in 2004, he recognized there was a problem with the company’s focus.

“The thing that surprised me the most was the lack of business development or new growth resources set aside to do nothing but that,” Johnson says. “The people were asked to do that on a part-time basis — run the operation and oh, by the way, try to drive growth while you’re at it. That never works.

“So, what we decided to do to help change that mindset is rearrange the work behind people and set aside a business development organization that dedicated 100 percent of their time to go out and work with customers.”

That required changes to the management team, and Johnson brought in people from outside the organizations to add expertise.

“Ironically,” Johnson says, “the thing that surprised me the most, once I freed up those resources, (was) how people really gravitated toward growth. Fundamentally, people want to see an organization grow, but you have to put them in an environment and a process to do that. That’s what we did.”

He did it by recognizing what was good in one part of the company and applying it to the other.

“We found out that in the drive train organization, which again is the predominance of the revenue, there was no real business development function,” Johnson says. “It was focused on driving new growth and driving value to your customer set. We were basically order-takers working on a remanufactured unit when that OE wanted to throw an order over the wall for us to bid on.”

Johnson sought to make the drive train side of the business more like the logistics side.

“In logistics, we had a very aggressive business development organization — going out there knocking on doors and driving the business growth,” he says. “That happened about two-and-a-half years ago.

And I give my predecessor credit for that. What we didn’t have, which is on the drive train side of the business, is the same type of effort.

“So, in mid-’04, we put that in place. People focused on our customers to understand their needs and introduce new products and look for ways to help them control their costs and improve their sales in the marketplace.”

ATC has seen an almost immediate impact to its operations.

“We’re seeing a very significant sales pipeline, both on the logistics and drive train side of the business that we face now in terms of opportunities going forward,” Johnson says. “We won’t win all of them, but we’re going to win our fair share.

“If you look at what happened right after we implemented (in the drive train operation), during the first six months of existence, which was the last six months of ‘04, we saw $35 million of new business signed, which was great. We were off and running.”

Out with the old
When Johnson arrived at ATC, the company was a victim of its structure.

ATC was formed when Aurora Capital Group performed a roll-up of much of the light vehicle utility remanufacturing capability in North America. The company wanted to leverage the power that one company could provide to serve the original equipment spare organizations of the automotive original equipment manufacturers.

“When I was hired, it was about, ‘Don, how can you launch a growth strategy to allow Aurora to exit in their 10th or 11th year in this fund?’ which is amazingly patient for a private equity firm,” he says. “That whole growth strategy was built on the fact that we need to provide value to our customers in both logistics and drive train — what do they need and how do we deliver it at a competitive price? How do we help them manage their cost but also improve performance in the marketplace from a sales perspective and a customer satisfaction perspective?

“We launched those initiatives in both logistics and drive train to help drive business growth organically in our two main legs of the stool.”

The problem was that ATC was managed in a leveraged buyout (LBO) environment by the board and the subsequent management team. In addition, Aurora controlled 40 percent of the company’s stock.

“What happened over time, because it was managed as a leveraged buyout, there really wasn’t a growth strategy,” Johnson says. “When I was asked to interview for this position, (Aurora was) having a hard time getting out of our investment. I was brought on because of my background to drive that growth strategy.

“My background is, I was one of the customers. I know what customers want in terms of logistics because I used to be a logistics buyer. Second, I know the service parts business, and I know how I can add value to my customers, and that’s the most important ingredient for growth.

“If you understand you can affect transportation, you can affect inventory, you can affect material costs in the things that we do, then how can we put together the most comprehensive proposal that attacks all three of those elements to give the customer the best equation to win the business, and, at the same time, help our business grow? And that’s really what I bring.”

He has that and a mechanic’s ability to turn a company from an adequately running machine into a fine-tuned, high-performance engine.

HOW TO REACH: Aftermarket Technology Inc. (630) 271-8100 or http://www.goatc.com

Tuesday, 26 July 2005 13:29

Business coup

While it’s not exactly a military operation, former Navy captain Bill Donges knew from experience what was needed to transform the eight loosely connected operations that comprised Lane Co. into one lean, efficient business unit.

Lane, through its subsidiaries, acquires, develops, constructs and manages multifamily properties. Donges, Lane’s president and CEO, joined the company in 2002 as chief operating office and took command of the business earlier this year.

A turnaround specialist, Donges’ first contact with Lane was as a consultant for founder George Lane.

“I had just finished [working with the owner of a] start-up and turned it over to new management,” says Donges about his meeting with Lane. “Essentially, I was going to take some time off. I met George, and a week or so later, was working on his companies, figuring out what to do with them.”

That work turned into a full-time job and, eventually, Donges became Lane’s successor. Smart Business spoke with him about how he applies his military background to the business world and what it took to remake the company and turn it into a cohesive, industry leader.

What role has your military training played in your business acumen?

(It helps with) the depth of my leadership skills, my ability to read people and to understand how to manage. You learn so many things when you’re in the military. I taught leadership training at the Naval Academy after I came back from Vietnam. The lessons you learn (deal with) accountability, integrity, teamwork.

[When] I graduated from the academy, within three weeks, I was on the fantail of a destroyer with 143 guys reporting to me. It puts immediate pressure on you from a leadership point of view, so you have to learn very quickly. You learn how to get things done. You learn how to work with people that are more senior to you. You learn how to work in a team, and how to organize.

How would you describe your leadership style?

I’m the opposite of what you might be thinking, coming from the military. I’m very open, very inclusive, very transparent. It’s hard to fool me because I’ve been in a lot of different industries. I’ve seen different people and different approaches.

I like to bring people into the process. If you’re not going to make them feel part of it and like they’re going to make a difference, then you wind up managing [the entire process]. People have to feel empowered, but they have to have guidelines.

How did you find your way to Lane Co.?

George was in his late 50s. He wanted — and correctly assessed with the board — that if the company was to be a long-term, sustainable company, he needed a succession plan. I came to review the companies for him.

At the time, he had eight companies. We’re down to seven now. When I completed that, he asked me to stay on to begin the succession of him from CEO and chairman to me as CEO.

How common is it for entrepreneurs to do that type of advance planning?

It was in his head that this was something he needed to do. Which, I will say, is something very unusual for most entrepreneurs. They just flat out don’t get it. When they do, it’s usually too late.

What was your first goal as COO?

The key for me (was to) get the right people in place and start managing through data. This company was like a lot of other entrepreneurial companies. It had a lot of data, but what was being done was being done by gut and anecdotal management rather than understanding exactly what the reality was of the different business units and making strategic objectives based on something data driven.

I’m very process-driven. I take the time to make sure people have a process in front of them, and what I put in are key performance indicators so you can communicate to the company what’s happening.

How hard was it to succeed the company’s founder?

I have done this before in other companies. They almost never want to let go of the baby. Even though they say they do at the beginning, they don’t.

It was interesting here with George. He immediately said, ‘Look, I know this is not my skill set.’ We had ourselves tested and [found that] we are the opposite of each other, which we thought was a real strength.

How did you make it work?

He let his ego down and said, ‘Let me train you.’ We spent a lot of time together going through industry issues, company issues. He started letting go slowly.

We came up with a succession plan where I started taking over each of these companies in a progressive state. I started with the management company and worked my way to the development company. George has been supportive. Clearly, he sees the baby changing. I’m sure he’s bitten his tongue many times and felt like he wanted to jump in, but he didn’t.

How did you win over the management team?

First, George and I agreed on the process. Once we agreed, it became difficult to ‘triangulate’ me. We actually identified when I was being triangulated — I’d tell the company I wanted everybody to wear blue shirts, and George gets a phone call from his favorite manager who says, ‘Bill is ruining the company. We’re wearing blue shirts.’

George could react a number of ways. If he reacts by saying he agrees with that person and tells him that he is going to call me, then I don’t need to be here. George and I agreed that we would not violate that process.

As far as my outward face to the company, I communicated a lot about the transition. Once we set the new plan in place, I built a lot of trust by talking to the key managers, telling them what to expect and where we were going.

What were your first changes for Lane?

I wanted to change some of the key management, and I set goals for the executive team. In order to make the company data-driven, I needed the company to be technology-driven. In order to connect better with our clients, we needed to be technology-driven.

I then started investing in the people and processes to put the software into the company. We did that with a vengeance. It takes years to get the culture to come around to understanding how to use it and make it more efficient. By setting that goal, we changed the whole company. We became, instead of this paper-driven scenario, [a company] that was focused on being progressive.

How is being a privately held company beneficial?

If you’re a public company, you have to drive for quarterly earnings, whether it makes good real estate sense or not. As a private company, we do what’s best for the partners. We play the market the way it should be [played], without pressure to convince the public market it’s the right thing for that quarter. I hear a lot of the public company CEOs complaining that they struggle to do things with real estate that maybe they wouldn’t do if they were privately held.

The other issue right now is Sarbanes-Oxley. As a private company, we’re making sure our control procedures are correct, but we are not spending millions of dollars to comply with Sarbanes-Oxley.

Other than the bottom line, how do you measure success?

Each quarter, I go through with the board what talent we have attracted to the company. The ability to attract intellect, talent and creativity is made more important each year because knowledge and creativity is what’s going to make the company successful in the long run.

Once you set your plan in place, it’s your strategy and (meeting) key components of the execution of that strategy. You review that each quarter with your board and see how you’re doing. They are keenly interested in our ability to execute against that plan. That’s not just financial. It’s human resources, technology, capital; it’s hitting those key items.

What is your most important role in the company?

I’m a professional change person. I understand transition and change. It’s not easy to do that. I would say executing the vision that is currently there, because it’s a vision I helped define.

Change is something is that needs to be thought out. Positive change is a challenge to execute. I’ve done it a lot. Many people have run companies but haven’t necessarily had to make some of the transitions here we’re going through at Lane.

How important is it to really know your industry as opposed to just having general leadership skills?

The fundamentals of each business I’ve run have been the same — the leadership and people issues. There are clearly differences in some of the financial structures of real estate companies and how they work. What you don’t have are the relationships within the industry.

I spent a lot of time meeting the presidents of key organizations in the industry and meeting presidents and executive teams of other companies. Internally, within the company, the fundamentals are 80 percent. You can learn the lingo in the industry.

HOW TO REACH: Lane Co. (404) 459-6100 or http://www.lanecompany.com

Tuesday, 26 July 2005 12:16

The Ward file

Born: 1943 Long Meadow, Mass.

Education: Bachelor of science and MBA degrees from Cornell University

First job: Delivering newspapers, mowing lawns and shoveling snow. I worked from a very young age; it gave me spending money. I think it’s just kind of who I was. I always expected to work hard at whatever job I was in.

Career moves: Began his career in 1966 with Procter & Gamble; joined H. J. Heinz in 1968, where he was product manager for several brands. In 1972, joined Hanes Corp. as product manager for the expansion of L’eggs hosiery, named vice president of marketing for L’eggs in 1975. From 1979-1993, was president and CEO of several divisions of Sara Lee Corp. (the acquirer of Hanes); appointed senior vice president of Sara Lee Corp. in 1992 and CEO of Hanes Group of companies in 1993.

Boards: Executive committee, Metro Atlanta Chamber of Commerce; past chairman of the board of directors, American Apparel and Footwear Association and a current member of its executive committee; member, advisory board, Robert C. Goizueta Business School at Emory University; board of governors, The Southern Institute for Business and Professional Ethics; member, Atlanta Action Forum, the Forward Atlanta Cabinet and the Workforce Development Task Force for the Commission for a New Georgia; chairman, Ivan Allen Society Campaign of the United Way 2003 Campaign; 2002 honorary chairman of the Georgia Trust Preservation Ball; previously served on the board of directors of Burlington Industries and Lanier Worldwide

Residence: Sandy Springs

What is the greatest business lesson you’ve learned?

The greatest business lesson is to thoroughly evaluate and assess, and don’t jump to quick conclusions, whether it’s about a problem or about how you assess an individual. Often times you’ll find your first reaction may not be the correct reaction.

What is the greatest business challenge you’ve faced, and how did you overcome it?

The greatest business challenge was dramatically changing in a competitive market, where you have to create revolutions sometimes in order for companies to survive and to grow. In Russell, we had to dramatically change the whole company — where we operated, which meant we had to eliminate a number of plants.

You have to go forward knowing it’s the absolute right thing to do and that you are saving a lot of jobs because if you don’t, you won’t be in business. At the same time, you have to figure out how to do the right thing for the people.

We put in a very extensive transition plan for the people — severance, education funds; we brought in people to retrain. We even had incentives for others to come into our facilities and hire our people.

Whom do you admire most in business and why?

It’s not just one person. I’ll tell you the characteristics — someone that is successful but it’s not just profit, is very successful in the community, has very strong values and Is really involved in doing the right things for the right reasons. Profit has to be one of those reasons because you have to be successful as a business, but it’s much more than driving for pure profit. It’s respect for people of all backgrounds, races, and it’s high integrity and involvement in trying to get the community to be a better place to work and to live.

Friday, 24 June 2005 09:12

Plowing ahead

Martin Richenhagen speaks English well, although with a heavy German accent, and he insists his French is second only to his native tongue. Those language skills come in handy for the man who leads one of the world's largest agricultural equipment manufacturing companies.

"We have factories all over the world," Richenhagen says. "Our main factories are in Finland. We have a factory in Germany. We have a little factory in Denmark and in The Netherlands. We have a big factory in France. The language skills and international management experience help me in the job I'm doing."

Richenhagen, who has worked both in the United States and Europe throughout his career, is president and CEO of AGCO Corp., a $5.3 billion manufacturer based in Duluth. AGCO was formed in 1990 with the management buyout of Deutz Allis Corp. from German-based Kloeckner-Humboldt-Deutz AG. Twenty-three acquisitions later, Richenhagen leads a company focused solely on agricultural equipment.

While AGCO is relatively new in the agriculture world, through acquisition the company traces back to the mid-1800s.

"We have certain companies that we took over that are much older than we are," Richenhagen says. "If you look at Massey Ferguson (acquired in 1994), they are about 100 years of age. They have a huge tradition and a lot of very experienced people. That needs a certain diplomacy with regard to those businesses. We didn't just overrule them. When you talk about synergies, you have to make sure everybody in those companies buys in. In addition to that, we have the different cultures -- not with regard to company culture, but with regard to nationalities.

"It's very helpful that I worked in France, I worked in Switzerland and I worked in Germany. I think I pretty much know how to handle that."

What he has to handle are different the work ethics, cultures, attitudes and laws in every country in which the company has operations.

"The laws are different in every country; the traditions are different," he says. "Unfortunately, in my home country, Germany, people are used to working only 35 hours per week. In Finland, it's pretty normal they work 40 to 42 hours. We have different work councils and different situations with unions. We have a different approach how to do business. Finns are typically less outspoken. Germans can be pretty tough and straightforward. The French love to discuss everything in big meetings. Every country has a slightly different tradition and culture."

His international experience may give Richenhagen an edge in dealing with different cultures, but the former high school teacher's main challenge is managing a company that has grown from $200 million to more than $5.3 billion in less than 15 years.

"What I try to do is go to people with regard to the international approach to business, and I try to focus very much on how to become more profitable," Richenhagen says. "We are big now; we are certainly No. 3 in the world (among competitors that make not only agricultural equipment, but other types as well) and we are very close to the No. 2 and not too far away from the No. 1.

"You have to take out from Holland and John Deere the revenues generated by their construction businesses. We are the biggest single agricultural manufacturer in the world, but we have to become more profitable. That would also be reflected immediately in a higher stock price. I think AGCO is a little undervalued."

Stock price is one way to measure the company's value, but Richenhagen uses a number of other metrics to gauge the health of the organization as well.

"We are regularly measuring customer satisfaction, quality, warranty costs, inventories, and this year, we will, for the first time, also interview all of our employees and do an employee satisfaction survey," Richenhagen says. "All of our almost 16,000 people have a chance to give their input. We want to establish a baseline. We want to know where we are today. We want to be in a position to agree on a target and to improve. You can only do that by measuring."

Sowing the seeds

Some of brands under the AGCO umbrella follow their lineage to the mid 1800s. Each of the 23 acquisitions had its own network of dealers and manufacturers. Today, the company operates more than a dozen brands on six continents with about 3,900 independent dealers.

With dealers and manufacturing plants scattered around the globe, fluctuating currencies and an ever-changing global economy, AGCO is constantly restructuring to improve effectiveness and maximize profits.

"We started to do that in '90 and' 91, but we do that basically every day," Richenhagen says. "This is normal operational business. We have major initiatives we work on, and the main reason is we suffer a little bit - we bring product over from Europe, and we bring product over from Brazil and Mexico, and we suffer from the weak dollar. In order to be sure we still generate margin here, we need to reduce our cost of manufacturing.

"For example, the spare parts business - it does not make sense (to have) two different distribution centers in one market, so we would typically put those two together. When we talk about overhead functions like human resources, legal, finance, things like that, we would sit together and think what we should do and who are the best people (for those positions) and then come up with the optimal solution.

Richenhagen says AGCO is working on several important projects right now.

"This is one of our strengths," he says. "This year, the market in South America goes down in tractors by more than 20 percent, and in combines by more than 50 percent, and we are still in a position to be a little bit better than previous years, we believe. The reason is, very early, we took the right measures and were in a position to reduce our cost of manufacturing, not only in Brazil but also in other countries."

Although he has vast international experience, Richenhagen knows it would be foolish to ignore the local experts, and AGCO eagerly taps the native expertise.

"We try to work with local managers," Richenhagen says. "We don't believe in management from America to those countries. That doesn't mean we don't have an exchange. We have job rotation. We have people coming from all over the world to Georgia and working here in the headquarters. We also have people in America going to those countries. The management team should be local."

Cultivating the business

AGCO has made huge inroads into foreign markets, which are booming, while the home market leaves something to be desired.

"Very important for us is North America because we only have about 10 percent market share," Richenhagen says. "We certainly want to grow here in North America, and we do that by better products and better distribution, better dealers. Very important to us is we came to an agreement with Caterpillar, and we use already the Caterpillar network for the distribution of our agricultural equipment. They will generate about $350 million of additional revenues this year already.

"Second, very important to us, are eastern and central Europe. (On April 11), we signed in the presence of President (Vladimir) Putin from Russia and Chancellor (Gerhardt) Schroeder from Germany an agreement with the leading Russian manufacturer of agricultural equipment, and the idea is, through several joint ventures, to make sure that we get into Russia. The win-win situation is that we deliver the technology and the Russians would deliver local networks and distribution."

China is also vital to the future of AGCO, and the company is in intensive negotiations about a corporation there, as well.

While new business growth is important, AGCO also aggressively seeks the secondary market. No matter how good the products are -- and quality improves every year -- the equipment the company manufactures will eventually break down. And that creates a spare parts market.

"You first create a population of agricultural equipment in a marketplace," Richenhagen says. "And then -- after a short period of time -- that generates additional spare parts business. We see that this year; spare parts are up (about) 10 percent. (The first quarter) parts were $155 million compared to $145 million in 2004. This is pretty typical, so you are somewhat rewarded by the new equipment you sold.

"Our customers are very demanding on quality, so you work on improving quality." Typically a tractor or combine harvester uses fewer parts than the year before, every year. With the growing population, that creates higher volume. Big professional farmers, of course, use their tractors and equipment much more intensively than small farmers did in the past."

As farms get larger, there is a need for new products, and Richenhagen is making sure AGCO stays on the leading edge of technology to meet the demand for those products..

"In 2005, we're going to invest $130 million in research and development, which is about 25 percent more than in previous years," he says. "We will do that for maybe two or three years in a row. We have, worldwide, a little more than 800 people working in research and development.

"Second, from those acquisitions, we get product innovation on top of that. When we bought the tractor business from Caterpillar about three years ago, we got access to the leading technology for tractors. On the basis of this technology, we are in a position to develop a high-horsepower articulated tractor -- in the area of 500 to 550 horsepower -- which is a new product for our dealers. When we bought Fendt, we (acquired) the most advanced technology with transmissions, continuous variable transmission. This CVT transmission is, by far, outperforming all competitors."

The benefit was almost immediate.

"Fendt had it in their German and western European markets," he says. "The Fendt tractor, as such, was too difficult to handle for the typical North American farmer. What we did is we took the transmission and brought it into a typical North American tractor, and that generates a total new market approach. We also work on a big Class 8 combine harvester for North America, which is important because farms are concentrating and getting bigger and bigger. It's not only farms that are getting bigger but also combines."

If he can continue AGCO's successful growth, no doubt Richenhagen will reap a bountiful harvest of his own.

HOW TO REACH: AGCO Corp. (770) 813-9200 or www.agcocorp.com

Monday, 23 May 2005 11:45

Head of the class

There are those who can't wait to graduate from high school, and then there's Arne Duncan.

Duncan serves as the CEO of the Chicago Public Schools, a position he was appointed to by Mayor Richard M. Daley in 2001, a position one commentator called it the toughest job in the United States. Prior to that, Duncan served as deputy chief of staff for the system's first CEO, Paul Vallas.

"I can't tell you how fortunate I feel to have this opportunity," Duncan says. "Both my parents were life-long educators. My wife's an educator. My sister and brother are both educators. My wife's brother is an educator. In our family there is nothing more important.

"To have a chance to try and dramatically improve the quality of education for kids across the city is -- I can't tell you how meaningful that is."

Daley appointed the first CEO in 1995, signaling a fundamental change in responsibility for the schools. Duncan, who played professional basketball in Australia (after he was cut by the Boston Celtics), joined the district in 1998.

"At the time most people told him he was committing political suicide," Duncan says. "There was no upside. The political courage he had to do the right thing and take that risk was extraordinary. They mayor will tell you every single day that his greatest legacy is to create great education opportunities for children.

"He was out there 10 years ahead of his time. Everyone now thinks it is the greatest idea since sliced bread, but at the time people really questioned his sanity on it. "

There may be some that question Duncan's desire to become the CEO of an enterprise with 613 schools, more than 47,000 employees, nearly 427,000 students and a $4 billion budget, but his aim is clear.

"The only reason I do this job is I want Chicago to become the best big city school district in America," he says. "I'm absolutely convinced we have a real chance to do that in the years ahead by continuing to challenge people's expectations -- students, teachers, parents -- everybody not accept mediocrity and push for the best. It's something we work on every single day."

Smart Business spoke with Duncan to learn why a school system needs a CEO and how he plans to improve one of the largest school districts in the country.

Why does a school district need a CEO?

There was a tremendous change here in Chicago particularly when the mayor took over in 1995. Historically you had a school superintendent and a school board that was basically accountable to no one. What we're trying to do is set the stage that we're running the school system with the same level of efficiency and accountability and emphasis on results that you would any business.

You have to have a leader in charge who can really make decisions, get things done and be held accountable for them. You need clean lines of authority; you need clear accountability. It's a major, major step in a real and symbolic way to say we're very, very serious about what we're doing.

How is running the school system like running a business?

I think there are many more similarities than differences. We absolutely have to be fiscally responsible. We've had 10 years of balanced budgets since the mayor took over. Unfortunately, Illinois ranks 49th out of 50 states in the amount of money going to K-12 education and has a dismal funding record.

Despite that, we've managed to be very fiscally responsible. Last year we actually took $100 million out of the budget.

We're measured by results. We had a great, great year last year, academically, probably our best year in a decade. Seventy percent of schools showed improvement. We have eighth graders beating national norms in both reading and math for the first time ever.

How do you measure the success of the Chicago Public Schools?

The heart of is performance, achievement. We're very, very pleased to see these dramatic (academic) gains. There are many, many indicators of student performance. Basically, all of those are positive indicators - test scores, attendance, the number of students beating national norms is at an all-time high.

A lot of the negative indicators -- truancy, dropout rate -- are at all time lows. That's our bottom line. All of the trends are at their best point ever, which is very, very encouraging. Having said that, I don't think we're anywhere where we can be, will be or should be as we go forward the next couple of years.

We're nowhere near where I think our potential is. That's the most important bottom line.

What is the biggest challenge you face leading the Chicago Public School System?

Funding would be right up there at the top. The other big one, I am constantly trying to raise expectations and raise standards. We've come a long way (since) 1987 (when) former secretary of education Bill Bennett came out and called Chicago the worst school district in America. There's been extraordinary progress, particularly since the mayor took over in 1995.

What did you learn from your predecessor?

Paul did an extraordinary job leading this school system. I had the privilege of working for him for about three years before he left.

The passion he brought to the job, the work ethic and his ability to create along with the mayor and the board to really create a sense of hope for the Chicago Public Schools when it didn't have much before was extraordinary. It gave me a real opportunity to build upon all their hard work.

How do you communicate your vision to the employees, students and parents of the district?

You do it on multiple levels. I do a decent number of speeches. I'm on TV, radio, in the newspapers fairly frequently. I try to spend a lot of time out in the community, going to churches on Sundays, meeting with parents, meeting with students.

I'm in schools almost every single morning. I set up a system where I meet with every principal twice each year. You can communicate a decent amount through the mass media. As important as communicating the vision is, time spent listening, really paying attention to what people are asking for (is also important).

So much of my vision has really been shaped by what I've learned from listening not just to my staff, but students, parents, teachers, principals, community members, religious leaders.

What surprised you most about becoming CEO of the system?

The thing that's been unbelievable to me is the level of support I feel, the entire city's commitment to making the Chicago Public Schools the best big city school district in the country. I get to see an extraordinary cross section of the city every single day.

The level of support and commitment across the board, it's humbling. I had no idea how much support was out there for the system as a whole and for me personally. I can't tell you how gratifying that is; it's one of the reasons I'm so hopeful about what we can do.

How close have you gotten to your goals?

We're continuing to push very, very hard every year. We really think the key level of change is the principal. I think about principals as CEOs. They have to be instructional leaders; they're managing multi-million budgets; they have to recruit and maintain a great staff; they have to work in the community; they have to work with the local media.

The more we can empower our principals, the more we can remove those impediments, the better those schools are going to do. We've come a tremendously long way in terms of instead of the central office being seen as the bureaucratic impediment to change to really having the central office become the center of innovation and a source of support.

HOW TO REACH: Chicago Public Schools (773) 553-1000 or http://www.cps.k12.il.us

Friday, 22 April 2005 10:24

Giving away the family fortune

For five years, Sandra Guthman led a double life, serving as Midwest region director of marketing for IBM during the day and as president of the Polk Bros. Foundation when her schedule allowed.

"I put the (foundation) offices in a building near the IBM building so I could go in at 7:30 in the morning and stop at the foundation on my way home from work," says Guthman. "After five years, it became too frustrating to do both. I was always thinking about more I could be doing at the foundation and that IBM wasn't getting my full attention."

So Guthman took early retirement from IBM, and the foundation became her full-time job.

Until 1988, the year Guthman was named president of the board, the foundation was part of Polk Bros. Corp., a chain of retail furniture and appliance stores founded by Sol, Samuel, Harry, Morris and David Polk, and their sister, Goldie Bachmann. That year, to eliminate conflicts of interest, the foundation was separated from the stores and a new board was appointed. The final store closed in 1992, and all assets were transferred to the foundation, and in 1993, Guthman, daughter of Samuel Polk, was named CEO.

As the various estates of the founders were settled, money flowed into the foundation. Today, the Polk Bros. Foundation has about $365 million in assets and doles out approximately $15 million each year to Chicago organizations in the areas of education, social services and health care.

"We have maintained the values of both the corporation and the early days of the foundation and style and values without necessarily supporting the same type of organizations," Guthman says. "Polk Brothers was a company very much out in the neighborhoods. It's one of the few successful retail businesses in Chicago that never had a store downtown. It was very much of, by and for the neighborhoods, peaking at about 18 stores all over the metropolitan Chicago area."

That's why the foundation only grants money to organizations in Chicago.

"We figure that's where the business was built and the money was earned that went into the foundation, and therefore it should go back into the community," Guthman says.

Smart Business spoke with Guthman about how she leads the foundation and what it takes to make a not-for-profit organization successful.

How did your time at IBM help prepare you for your position as head of the foundation?

Good management is good management. You learn a lot about human resources management at IBM. In my day, IBM had one of the smallest ratios of human resources people per employee of any major American corporation. That's because their culture and strategy was to have line management perform the human resources function.

I learned a lot about management of human capital, management of people, operations management [and] built financial skills. All those are transferable to a not-for-profit corporation.

I also learned when you're in an executive position how important it is to create a vision and then sell that vision to the people that follow you and make sure they understand it. Just because you understand a vision doesn't mean you're articulating it or explaining it well enough to get buy-in.

You have to think of different ways to help people understand why it's important, why it makes sense and why it's good for both the people and the organization.

What are your foundation's core values?

It's a combination of value and mission. The Polk family immigrated to the United States right around the turn of the century. They got an education and set to work at very early ages and were successful. Immigrant families today have many more barriers to capitalizing on those opportunities -- the quality of the education system, the availability of health care, the availability of services, the prevalence of gangs, guns and drugs.

We're about, in the purest sense, brushing away the barriers to opportunity so that families in Chicago today can, if they work hard and stay dedicated to it, capitalize on opportunities.

How would you describe your leadership style?

I tell stories. I think stories resonate with people, but I also try and listen to people. I've discovered it's hard to learn something when your mouth is moving. That's a challenge because I like to talk.

I also tend to be something of a lateral thinker. It's important to listen and try and learn all the time, but also to try and paint a picture for the people you work with of where you're trying to go.

What is your most important role within the organization?

Like every CEO, I think there is an external and an internal role. The external is to be the public face of the foundation, to be very participatory. Chicago is a community where people do things, they don't just talk, and showing up is important. I participate in a lot of different organizations and have a number of leadership roles around the civic community.

Internally, (my role is) to make the vision come alive, to keep people moving in the same direction around what we're trying to accomplish. It is a very flat organization; we have people who are much more skilled in different focus areas than I am, and it's to get them to do their best.

People who tend to get into foundation work are very mission-driven anyway, so that's not a very hard job.

How does running a nonprofit compare to running a for-profit business?

With a foundation, one of the things people tend to forget is that there are two very different sides -- probably more so than a for-profit. That is the revenue side and the expense side. Asset management is a very important function for a foundation that doesn't get talked about quite as much as the grant-making side. The best thing about the CEO job is being able to work on both.

I work on asset management; obviously the board is very involved, the investment committee is very involved, but I, and the chief financial officer, pay attention to that on a day-to-day basis. That is what enables the grant-making. For planning purposes, when those two things come together, you look at your assets to try to figure out some way of forecasting so that you know how much you have to spend.

What goes into your strategic planning?

When we do strategic planning, what we try and do is figure out where there are service gaps, where there are problems that we think not that nobody's working on but where we think we can make an impact. We identify those areas just from our fieldwork.

But when we focus in on how we can best play a role, we involve our grantees because they're the ones who do the work.

How do you measure success?

Rather than saying whether something is a successful grant or not, we tend to renew grants. We don't have a three-year-and-out rule. We're willing to go for a significant period of time. So what we're looking for are markers of progress.

We understand [that] if you can get positive outcomes in a one-year grant, you've probably bit off too small a problem. But you can demonstrate you're moving toward positive outcomes. You work with your grantees to articulate the markers of progress that will help them know if they're moving in the right direction.

What is the most important business lesson you've learned?

The best piece of advice I ever got that I still think about 18 years later is to seek forgiveness, not permission. You have to push the envelope. It's too easy to get complacent.

It's uncomfortable, and you have to learn to live with a little bit of chaos, but I think if you're not moving forward, you're moving backward.

HOW TO REACH: The Polk Bros. Foundation, (312) 527-4684 or www.polkbrosfdn.org

Tuesday, 22 March 2005 09:42

The Tally file

Born: 1942, Cairo, Ill.

Education: Bachelor's degree in history and business, master's degree in education and a Ph.D. in higher education administration from Southern Illinois University, Carbondale. I was named, to my honor, Executive of the Year there in 2004.

First job: When I was 10 years old -- it was two jobs at the same time. I was a caddie at a country club and I picked up litter on a hamburger (restaurant) lot. I picked up litter on that lot every week.

Career moves: Joined Scottish Rite Children's Medical Center in Atlanta, 1984, served as president and CEO, 1989-1997; vice chancellor for administration and fiscal affairs at the University of Arkansas for Medical Sciences in Little Rock; assistant dean and director of the University of Arkansas' Medical College Physicians Group of the College of Medicine. Held positions at Southern Illinois University School of Medicine in Carbondale; United States Air Force,1967-1970, captain

Boards: Chairman of the board of trustees for the Marist School in Atlanta; board of the Atlanta Chamber of Commerce; member of the Rotary Club of Atlanta; member of the advisory board of the College of Business at Southern Illinois University

Residence: Dunwoody

What is the greatest business lesson you've learned?

People don't care how much you know until they know how much you care. I think there is great power in that lesson.

What is the greatest business challenge you've faced, and how did you overcome it?

The merger is the biggest challenge I've ever faced. And (I) overcame it by having wonderful partners, a board of trustees that believed in what they were doing. They were doing the right things for the right reason. I have been blessed with a wonderful group of teammates -- all of the people I work with.

These are extraordinary people with extraordinary standards. We've faced what we've faced because it's a lot of people following the board philosophy of doing the right things for the right reasons.

Whom do you admire most in business and why?

I admire a lot of people. My father would certainly rank up there. I admire him tremendously. He's 86 years old. His standards for honesty, integrity, ethics -- having grown up in that house and watched some of the business challenges he faced and the way that he always stood by his principles and integrity first, irrespective of personal consequences.

I always felt he should be one of the chapters in John Kennedy's "Profiles in Courage." I would think my father for all of those reasons, and all of the board members who have been involved in negotiating this merger and doing the right thing for the children of this community.

This thing of creating a new enterprise is not a small undertaking. Other boards have refused to do what this board has done. This board said these assets belong to the children, and we will do what is right for the children.