Scott Patsko

Tuesday, 28 February 2006 19:00

Making connections

When Lee Perlman was a young man working for his father’s chain of electronics stores, he learned quickly that what you sell is important but not as important as how you go about selling it.

After expanding his father’s company into a successful wholesale business, Perlman found himself dealing with a diverse group of retailers.

“The customer was typically in a big city like Miami, New York, Chicago,” Perlman says. “They’d have a photo store or a gift store or something like that. There were different ethnicities of businesspeople. Every group was represented. I got a life lesson very quickly in how to deal with people, how to be courteous and learn from their culture. You have to enjoy their company. That has stuck with me to this day.”

Today, Perlman is CEO and chairman of New Age Electronics Inc., a sales outsourcing powerhouse that provides logistics, distribution and remanufacturing services to consumer technology manufacturers and retailers. The company earned $530 million in 2003, a 50 percent increase from 2002; 2004 sales were in excess of $700 million.

As New Age nears the billion-dollar mark, it’s evident that relationships have had as much to do with its success as hard work and foresight.

“The No. 1 thing as a businessman and as businesspeople we have to do in every industry is earn a person’s respect,” says Perlman, who co-founded New Age in 1988. “You have to be very diplomatic and kind and make them understand how hard you are working. Be there to protect them. If they feel you’re honest and can make a good buck out of it, they will be loyal to you.”

That way of thinking led to New Age working with major manufacturers such as Hewlett-Packard, Canon, Sharp and Panasonic, and retailers such as Wal-Mart, Office Depot and Costco.

Perlman says New Age’s strength is identifying underserved needs and finding innovative ways to serve those needs. However, convincing a billion-dollar company that you can help it achieve greater efficiency and success can be a tricky proposition.

“A lot of people make the mistake of drinking their own Kool-Aid day in and day out,” says Perlman. “They think they are high and mighty, and they’ve got their own answers. Their first instinct is that you’re not believable. They don’t trust you.

“But I try to be very forthright, simple and clear as I’m describing what we can do for a vendor and what we can do for their customer and end user. No more, no less. You get your foot in the door, and you’ve got a start.”

Sometimes it takes a while to get that foot in the door. New Age was mostly handling distribution for Sharp home office products and Packard Bell computers in the early 1990s when, after about five years of trying, it finally got the attention of somebody at Hewlett-Packard.

“I wrote a white paper on how we could sell their fax machines to retail,” says Perlman. “We worked with them and were successful. Getting HP was a feather in our cap. It put us on the radar screen. And each year, HP gave us another opportunity.”

Perlman says that there are two keys to success he’s learned in his 18 years with New Age and his 28 years in the industry: Consistency, and your word is your bond.

Consistency comes from identifying ways to help another company become more successful and efficient.

“It’s not an innate quality,” he says. “It becomes intuitive over time. If you’re in a marketplace and you’re visiting on a consistent basis with your customer, you’ve got your feet on the street and your ear listening to the ground. You’ve got your eyes wide open. You’re getting input from the vendor and the customer. They’re telling you what customers are looking for.

“At the same time, the manufacturer is telling you what they want in the marketplace. You know what could possibly work, and you show them that it would be the logical way. We don’t win at everything we do, but we like to hit a lot of singles. Home runs come, but we like to be consistent.”

Relationships form the basis of a solid business deal, but you still have to deliver on your promises with a business model that works.

From the mid-1970s to the mid-1980s, Perlman helped his father’s company, Zemex, become a national presence with the concept of low overhead, low head count and warehouses in key locations for quick and easy shipment. It’s the same formula he used to build New Age. And though it works together with some of the largest retailers and wholesalers in the world, New Age has just 131 employees and four warehouses.

“We started out thinking we’d have a nice, small business,” says Perlman. “Maybe do $20 million and have a nice living. Don’t kill ourselves.”

But the explosion of products for the small office/home office changed everything as fax machines, copiers and other products began making their way into homes. Soon, Perlman found his business booming as he continued building relationships and identifying ways he could help his customer base. This changed the way he managed New Age.

“In the old days, the one thing I would pride myself on was being a real myopic manager,” says Perlman. “I would look at everything. I was a stickler for the process and dotting the I’s and crossing the T’s.

“But that didn’t allow me to grow, and I got stifled. I realized quickly that it’s people that make the difference. I can’t be all things to all people. I have to recognize my strengths and weaknesses. There are people more capable and qualified to do the things I don’t do best.”

Perlman and Adam Carroll, the company’s president and COO, can’t be the only ones contributing to the cause. New Age needs to have the right management team and employees, people who have Perlman’s and Carroll’s values and drive.

“It’s a very collaborative effort here,” says Perlman. “Everybody has a feeling here that it’s safe to comment and make a contribution. We encourage people to spread their wings and change the process or add a line.

“We set objectives and expectations that can be accomplished. We don’t want to set goals and expectations that can’t be accomplished because that would send a bad message. You have to be realistic, know who you are and that you can’t do it overnight.”

Much of Perlman’s business savvy was forged while working for his father. Being around him, going to meetings and seeing how he interacted with others had a big impact.

“The most important thing I learned from him was that to be successful, you need to be able to ask somebody to do something for you without asking,” says Perlman. “I know it sounds strange, but there has to be a way to have a relationship with somebody and plant a seed so that person has expectations to get something done without you having to remind them over and over again. If you find a way to communicate with somebody on that level, you’ll really accomplish your goals.”

Another important lesson Perlman learned from his father was how to listen. People are always asking you for something, he says, but sometimes they don’t know how to ask it, so you have to listen to what they’re trying to say.

Listening leads to trust. Trust leads to a relationship. And a good relationship leads to success.

“If you’re in business, you need to convince people you’re real and that you will, time and time again, make them money,” says Perlman. “You also need to convince them that you will do whatever you can in your power to help them be successful. If they understand all that, plus the fact that you are going to be successful, too, then nothing can stop you from being successful.”

How to reach: www.newageinc.com

Monday, 30 January 2006 19:00

The inner leader

Just because you are successful in business doesn’t mean you know all the answers. In fact, sometimes the key to success is admitting that you don’t know all the answers.

Andrew Cherng knows this as well as anyone.

Cherng is the founder and chairman of the board of Panda Restaurant Group, which includes Panda Express, the fastest-growing chain of quick-service, Asian cuisine restaurants in the country. Cherng has led Panda Express to the top of its industry thanks in large part to the strategic placement of restaurants in malls and other high-traffic areas.

As Panda Restaurant Group, which includes Panda Express, Panda Inn and Hibachi-San, has grown to include 12,000 employees in 37 states with revenue in excess of $750 million last year, Cherng has not only had to change the way he manages his business, he’s had to change himself.

And that, more than his booming business, seems to be Cherng’s true measure of success.

“Perhaps one of the biggest things we are focused on is personal growth,” says Cherng. “How do we help people to become a better human being? If you become a better human being, you are able to do your job better. This approach is new to us, but it is very clear today that we need to do this.”

Cherng accomplishes this by using Stephen R. Covey’s bestseller, “The 7 Habits of Highly Effective People.” The book has become a road map, steering him in what he believes is the right direction for his life.

The book presents an inside-out approach to effectiveness and is centered on principles and character. According to the book, change starts from within, and Cherng took that belief and ran with it.

“Most people get on the physical treadmills, but how do you improve mentally, emotionally, spiritually?” asks Cherng. “The total package. Where do you go to become a better father, husband, human being?

“Like anything else, you need to practice. I think, obviously, one of the reason’s I’m intrigued with ‘7 Habits’ is because some of my habits are not very good yet. There are people doing bigger, better things than I’m doing. Look at Jack Welch. He’s doing a lot, and he is living a full life. What’s my excuse?”

When Cherng and his father opened the first Panda Inn [the sit-down predecessor to Panda Express] in Pasadena in 1973, their lives revolved around the restaurant.

“In those days, it was really like a 24/7 kind of a thing,” says Cherng. “Your whole life revolved around the restaurants. I remember basically you would get up, go to work, come home and go to sleep.

“There were no other things that were near as important. The mindset was that you just have to do this.”

Today, Cherng tries to get away from that mindset and “get a life,” as he says. It’s something he also wants for his employees.

Because of that, employees of Panda Express and Cherng’s other restaurants are asked to attend classes to study “7 Habits of Highly Effective People.” Then, they are asked to put them into practice and teach others. The program has been in place since the middle of last year.

“I think it’s like planting a tree, then giving it time to grow,” Cherng says. “You have to have faith in the system. I feel we’re doing the right thing. It will all show through in the long run.”

Making his employees better has long been a focus for Cherng, who says that when he hires a waiter, he tells himself he’s really hiring a future manager. Nurturing his employees to help them advance in business and in life is a priority.

“One thing I’m in the process of learning is how to be critical without being critical,” says Cherng. “In other words, how can I be critical of something without being critical of the people doing the work? We all have to be good at what we do, but it’s important that we don’t demoralize people. (Being critical) can be a motivating factor or a demotivating factor.”

One of the biggest challenges Cherng faces is finding a way to help people realize they have potential, especially those people who have more potential than they realize.

“Most people can do more if they just think that they are more capable than they give themselves credit for,” he says. “We have a lot of wonderful, hard-working people in this organization, and sometimes they don’t believe in themselves and don’t invest in themselves.

“We are all ordinary people until we find that gift inside that we all have. Unfortunately, most people don’t even open it. I think many people have busy lives and occasional stumbles, and they become somebody that they weren’t intended to be. But some people find that gift one day. I think I’m close to it. At least I’m closer than I used to be.”

Cherng didn’t realize the potential for Panda Express until somebody else steered him in the right direction. In 1983, 10 years after he and his father opened Panda Inn, Cherng was invited by family then-UCLA football coach and family friend Terry Donahue to put a version of Panda Inn in a mall being built in Glendale.

When that first Panda Express did well, Cherng realized that mall traffic [and later, airport, stadium and casino traffic] spelled success for quick-service restaurants.

“It was very accidental,” says Cherng of the origins of Panda Express. “I had never really been to the malls before, at least not in a way where I realized the potential. I never knew about food courts until I was invited to open (the first Panda Express).”

As Panda Express grew, Cherng’s role in the business remained relatively the same. And while he is still very focused on operations, people and real estate, he tries to squeeze more out of his business.

“I’ve always been sort of the visionary and kind of a value keeper,” he says. “I’m the kind of person that will try to get everybody going a little faster.”

While talking about his business, Cherng always comes back to the issue of life and how to make it better. And with that in mind, he started Panda Cares in 1999. The program helps disadvantaged children by providing and aiding local organizations with food and volunteer services.

“That comes from my parents,” says Cherng. “My mother was always helping other people. I think we’re so blessed to have so much. We only do a fraction of what we could give back. But, like anything else, you have to practice. The more we do, the better we get at giving back.”

At 57, Cherng proves that becoming set in your ways doesn’t have to be a byproduct of age. Working on self-improvement and becoming more effective for the future are things he strives for every day.

“‘7 Habits’ is one book I read, but you name it, I read it,” says Cherng. “The more often I go back to it, the better I become. In some ways, I become even more thirsty.

“The most important thing is that we don’t know as much as we think we know. So never stop learning, and be open-minded. Be thirsty. Be curious about any kind of learning. Don’t stop.”

How to reach: www.pandarg.com

Wednesday, 28 December 2005 10:41

Richard Sperber File

Born: San Fernando Valley

Education: California Polytechnic State University, ornamental horticulture and business administration

What is the biggest business challenge you’ve faced?
My dad was the founder and visionary, and we have different leadership styles. We’ve had to get people to buy into our different leadership styles. He certainly was able to run the business in a more detailed fashion than me.

He knew how to put a lot of his fingers in a lot more places. The company has gotten to the size that I don’t have the ability to do that. I delegate more.

What is the most important business lesson you’ve learned?
Treat your people with respect. Treat them right and fair. We’re a people business. The other thing is keeping a long-term perspective. We’re always looking at the health of our business for the long-term, not the short-term.

Sperber on hiring: It’s easy to find people who are smart, but it’s hard to find smart people who fit into your culture and have the flexibility to bring something and learn. You have to surround yourself with passionate people and then encourage fun and entrepreneurism.

Sperber on customer surveys: We live by those surveys. I look at a lot of the good ones, but I look at every bad one. What went wrong? How can we fix it? How can we make it right for the customer?

Sperber on working with family: My dad still comes in every single day. He’s a great mentor I can go right next door and talk to. My uncle runs the tree nurseries.

I’ve talked to my dad every day for the last 25 years, and we are really on the same page with where we want to go and how we want to get there. We’re lucky. Sometimes you hear bad things about a lot of family business, but me and my dad have never been in a fight.

Tuesday, 23 August 2005 20:00

Game on

When Brian Farrell became CEO of video game maker THQ in 1995, he knew the company needed a base product to build around.

But Farrell, who joined the company in 1991 as CFO, didn’t want to reinvent the wheel. Instead, he saw a better opportunity to reuse the same wheel, putting shiny new hubcaps on it each year.

Under Farrell’s innovative leadership, THQ has been on a 10-year tear, rapidly expanding from a $13 million business with a limited product offering into a dominant force with licensing agreements for some of the world’s best-known brands.

“This is not a business without risks,” says Farrell. “But you take risks on things you think can be successful through disciplined research and reviews. You make sure you are hitting the market target.”

And hitting the target is what Farrell does best.

In the early 1990s, he looked around his industry and saw that industry leader Electronic Arts had a good thing going with titles built around professional sports that it could reissue annually. “What they had that was enviable was the sports business,” Farrell says. “They didn’t have to reinvent a product every year. Some companies said, ‘Let’s go into the sports business.’”

But Farrell had other ideas.

What if he sought out major players in the entertainment industry, acquired licensing agreements with them and built a library of reccurring titles in this market where there were no real competitors fighting over limited market share?

Ten years later, that strategy — combined with a dynamic line of THQ-branded and developed games — has led Farrell’s company to new heights.

Last fiscal year, powered by a library of games based on license agreements with household names including Nickelodeon, Disney/Pixar, World Wrestling Entertainment and Scooby-Doo, THQ raked in a record $757 million in revenue, including net income of nearly $63 million. And six of its games have sold more than 1 million copies since their release dates; four have sold more than 2 million.

Farrell isn’t shy about explaining his company’s strong position. In THQ’s most recent annual report, he put it this way: “With some of the best mass-market brands, more than 900 people in our internal studio organization, a growing international sales team and more than $330 million in cash and short-term investments, THQ is poised to expand our leadership position in the video game industry.”

Finding the right formula for success
Farrell’s strategy hinges on identifying the right partners with whom to forge deals. He started out with a bang in 1997 with Nickelodeon.

Through a licensing agreement, THQ produced a line of successful titles involving SpongeBob SquarePants and the Rugrats. Three years into the relationship, the two signed a master licensing agreement that gave THQ exclusive worldwide rights to produce games bearing the Nickelodeon name.

Farrell says the deal was profitable for both parties, and in October 2004, the two companies extended their deal through 2010.

The next piece of Farrell’s puzzle was put into place in 1998, when he recognized that pro wrestling had a large following, including many of the same people who play video games. That led to a deal with World Wrestling Entertainment (at the time World Wrestling Federation) to add its brand to THQ’s stable.

Then in 2002, Farrell hit the jackpot when he inked a deal with Disney/Pixar to release a video game based on the movie “Finding Nemo.” Its success quickly led to an expanded relationship with Disney/Pixar and resulted in what became last year’s most-shipped product for THQ — “The Incredibles,” also based on a movie — which sold a whopping 4.5 million units.

“We have the foundation of three huge brands with long-term licenses that provide a base of cash flow,” says Farrell. “It’s great to have that base, and now we’re building our own brands on top of that.”

These brands include “Destroy All Humans,” a THQ original title that is arguably the most popular game in the world right now. Says Farrell, “That’s given us another brand to sequel or extend.”

To accomplish all of this, a few years ago, Farrell made the decision to put a premium on human capital and research and development.

When he started with the company in 1991, THQ had between 30 and 35 employees; today, it employs more than 1,300. And to bolster the R&D ability of the company — allowing THQ to develop organic titles to complement the licensed brands — over the last year, Farrell has more than doubled THQ’s product development team, going from 400 people to 900. His philosophy is simple — hire those who can perform in their functional area but who also bring something else to the table. At THQ, that something else often means deep industry experience.

“We know the industry very well, and we make sure the core engine keeps going,” he says.

Despite the influx of new faces and the company’s quest to continuously expand its product offering, the key, says Farrell, is to remain focused on quality, not quantity. On average, THQ adds one to four new brands per year.

“This is a very challenging business,” he says. “It’s a long business cycle. It takes two or three years to develop a product. So what we try to do at THQ as well as anyone is marry the creative side of the business with the consumers as young as 3 or 4 (years old) and as old as 50. You have to entertain your consumers with a wide variety of products.”

This broad-ranging but focused thinking has also led Farrell to expand the company’s distribution methods and strengthen its global marketing and sales force to be able to directly serve customers in more than 50 countries worldwide.

Meeting changing industry needs
While THQ’s strong base has been the linchpin for its stratospheric growth, innovation still steers any video game company’s ship. Game consoles such as PlayStation and Xbox account for 75 percent of the overall game market, but Farrell knows that THQ must continue to branch out and address other ways people play video games.

“We have a very rapidly growing wireless group — THQ Wireless,” he says. “We think we’re going to do $50 million in revenue (over the next year). It’s still a small portion of revenue, but it’s still growing rapidly. It’s a way to serve your customer.”

Over the last fiscal year, THQ Wireless more than tripled its revenue from $7 million to $25 million, fueled by games centered around major sports, including an agreement with the National Football League; Nickelodeon; and a motocross game called MotoGP.

Farrell is also making sure THQ is prepared for whatever the market brings, including the ability for gamers to download, for a fee, clothing or weapons for game characters.

These are big strides for a company that initially built itself with games for Nintendo’s GameBoy. “We are still the leader in that category,” says Farrell of the company’s roots. “We always wanted to serve all gamers. It just took some time to get where we are now. I came in as chief financial officer when we went public. We had a couple good years and a couple challenging years. After the second of those (challenging) years, I was elevated to CEO to try and turn it around.”

So far, Farrell has hit pay dirt. But as the company grew, he says he had to adapt not only the company but his management style as well. He was forced to change from being a hands-on manager to a team leader. And along the way, he hired a management coach to help him evolve with the company and better himself.

“At the end of the day, I have to make the final call,” he says. “But when a decision has to be made, I expect the managers here to be able to make a decision based on the strategy set forth. I try to empower people. That being said, we don’t always agree. But a good executive wants people to think. It’s good to have different points of view.”

Farrell says all of these moves are worthless if he doesn’t listen to customers, the marketplace, his team and his board of directors.

“The more info you can get, the better,” he says.

And in the fast-paced gaming industry, Farrell measures THQ’s overall success over a longer time horizon but with short-term milestones — such as his goal to hit $1 billion in total revenue for the 2007 fiscal year — in place. “We’ve more than doubled revenue in each of the last two cycles,” he says. “You do what you say you’ll do in the short term and set building blocks in place for solid growth.”

For Farrell and THQ, those building blocks have been put in place, and solid growth has followed. And Farrell oversees all of this with the humble realization that his personal connection to the gaming industry is more through his son than himself.

“I’m a ripe old 51-year-old,” he says. “I’m a boring CPA. I used to play Tank and Seawolf, but I don’t categorize myself as a gamer. I get creamed by my 14-year-old son. I do not walk into a studio and say, ‘Change this,’ or ‘Change that.’

“My job is to say, ‘Here is where the company is going, and here is how we are going to get there.’”

How to reach: THQ Inc., http://www.thq.com

Wednesday, 28 December 2005 10:39

A history of growth

In its early days, ValleyCrest growth was fueled by the booming San Fernando Valley, but innovation played a role, as well. In the 1950s, the company realized it could grow trees in boxes and did so with great success. In the 1960s, it developed a computer system to make its operation more efficient.

Then, in the 1990s, ValleyCrest saw an opportunity to enter the golf world.

“The golf business was just another niche business we saw an opportunity to get into,” says Richard Sperber, president and chief operating officer. “Golf courses have really smart operators who are worried about how to get more people to play. They weren’t as competent in how to make it look good. It was just a niche we found.”

Today, the company builds and maintains landscapes for everything from private residences to hotels and resorts to theme parks. The $700 million in revenue it did in the 2004 fiscal year was a 12.9 percent increase over the previous year.

“I really got involved when we were doing $100 million of work,” says Sperber. “Then we hit $200 million and we thought we were going along pretty good. When we hit $400 million, we said, ‘Wow, we’ve really become larger than we’ve expected.’”

ValleyCrest tried to go public in the 1970s, when it was worth just $10 million. But it didn’t work out and the owners bought back the shares.

“Our type of company is more long-term,” says Sperber. “Everything we do is for the future. When you go public, everything you do is for the next quarter.”

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