When Frank Venegas Jr. is talking with potential customers, he finds it hard to describe why The Ideal Group Inc. is right for the job. Venegas, chairman and CEO of The Ideal Group, compares the situation to asking your grandma how she makes her homemade pie. If you didn’t watch her make it and see how she knows the right amount of ingredients without measuring and how she puts her own touch on the pie, then you can’t fully understand why the pie is so special. That’s why Venegas lets potential customers into his plant, and he says he gets more business this way than by just talking about why his company is the right choice. This method of selling potential clients on his company which provides construction services, manufacturing and indirect material management has led The Ideal Group to 2006 revenue of about $160 million. Smart Business spoke with Venegas about how he got his company out of trouble by keeping his commitments and how he handles mistakes.
Keep your head up when you hit a rough patch. Six years ago, I lost 85 percent of my net worth. But when we made commitments, we kept the commitments.
Some guy that I owed $200,000 to and I just couldn’t pay him, I said, ‘Listen, I can’t pay you. I can file Chapter 11, but that’s not what I’m going to do. I’ll give you $15,000 a month until the bill is paid.’ Guess what? He got his $15,000 a month until the bill was paid.
When you live by the Golden Rule ‘Do unto others as you expect them to do unto you’ it makes things easier. Everyone gets himself or herself in some trouble, but it is the way you get out of it and handle it.
The customers are key. We explained our issues to the customers. We had meetings with our employees, which is real, real important. They hear that you are on credit hold or changing vendors or the general nervousness of the management. For a while there, we were spending 90 percent of our time on problems and 10 percent on new things. Now, we spend 1 percent on problems and 99 percent on new things.
In addition, being able to have your door open if they wanted to ask you a question. Leave it open, and let your creditor and anyone who wants to know anything be able to call you.
Be consistent. You can make changes because you think you are bigger or because you think you should, but something got you there. Say you have a certain grocery store that you really like to go to; they have everything you like. They have that steak you like, and you might pay $2 more a pound, but it is always nice. The place is clean, and it just keeps you coming back.
Now, they change the kind of meat, they change what they do, maybe they change the manager and maybe they aren’t as nice to you, and all of a sudden that store doesn’t give you that, ‘Wow.’
I always like Nordstrom. You go in Nordstrom, and it is consistent all over the country. They set the core values, put them in place and said, ‘We aren’t going to change them.’
That is the biggest thing I lost when bringing on a new lead manager seven years ago. He did not share the same values on the corporation and my values. I’ve been through some real tough times here, and most of the people stayed right with me because we were very upfront with things.
It’s more of the values that brought you there that are the most important. Are there changes in your accounting or things you do? Sure. But it is keeping your consistency on what got you there.
Be willing to start over. I can go back into times when I have this great idea, and I take it to my customer and say, ‘What do you think of this?’ They say, ‘We don’t think much of it because we are going to be doing this.’ Now I found out before I fail, maybe it’s time to ask some questions on what I am going to try doing.
Prepare yourself on what the customer wants. One of the key things we do here is we manage customers really well, but customers don’t like that saying. But technically, when they ask us to provide a service to do something, they are telling us to take care of this.
Part of the check-off box is managing what you are going to sell them. If you are in the service side of things, it’s really important to know, understand and manage your customer. You want to take care of his needs, and that’s our job.
Find people who will give it to you straight. Many people don’t want to hear they are doing badly. You need someone hammering on it. You can be an owner or manager and know all about the financial but find out you know very little.
You have to have people that will tell you the straight story. I had a great accountant that worked for me for years, and that management guy I brought in got rid of him. As soon as I got rid of (the management guy), I got the accountant back, and he comes in every month and goes through things. Not so much to find fraud but to take a look, see what is going on and make sure that everything is going the direction that you want, as well as being able to ask, ‘Why not?’
A lot of guys don’t want to hear that they are doing bad or burning cash [they think] entrepreneurs are super-stars and can do almost anything, but that’s not true.
HOW TO REACH: The Ideal Group Inc., www.weareideal.com or (313) 849-0000
Watch your hours. I get in real early in the morning and I leave at 4 p.m. After that, I am not doing any more work.
It’s not that I don’t take phone calls at home to talk to people, but I have a definite cutoff for when I’m leaving the office, except if I have meetings that night.
It benefits the company because some people are nocturnal, but I’m the reverse. I’m great in the morning, but at 4 p.m. or 5 p.m., I am not really that good to make decisions anymore, so I need to be gone. When you start at 5 a.m., by 4 p.m., you are at a point where you can’t make the same decisions anymore.
Just because a person puts in a lot of hours, that doesn’t mean a lot to me. It’s what is going into his or her hours. I have found people that can work an 8 a.m. to 4 p.m. or 9 a.m. to 5 p.m. job and get way more done than someone who works 8 a.m. to 8 p.m.
Smart people know how to work smart, and you don’t need to worry about their hours. If you start to see them there a long time, you have to start to worry either they have too much responsibility or they just don’t know how to handle it.
Don’t hire your friends or family. It is a great risk, and I’ve seen more bad examples than I have good ones. There is too much emotion involved. It also affects your other employees.
It’s very hard to win when you do that, and it’s very hard for the person coming in. Everybody thinks, ‘He’s related, and he gets special treatment.’ That person never gets treated like the rest of the team.
If they are really good, then you have a problem with people complaining they are taking over their stuff. If they are bad, then you get employees moaning that, ‘I have to do more work because of them.’ There have been a percentage of successes, but it’s a very high-risk thing to do.
Evaluate the upside and downside of risks.
How much upside can this transaction do, and what’s my downside? There should be a ratio. A 1-to-1 risk makes no sense. If you are going into a transaction and you could lose $50,000 or make $50,000, that’s not a good deal.
The risk should be at least 3-to-1. If I could lose it all, how much am I going to make? That’s the kind of thing that you want at least a 3-to-1.
Make time for big decisions. When we have a decision that is a final decision on an action with risk, we make sure we allot time for that. We don’t just have it as part of a business meeting.
Then, the people in the meeting only focus on that, and they aren’t thinking about the next agenda item or the last agenda item and writing down a whole bunch of stuff or where they are going to report. You have to take everything out of your mind and say, ‘Let’s talk about the pros, the cons and the risks, and let’s look at all the data that’s been assembled.’ You put that stuff together and put people in the room that have the skills of the different areas you are looking at. As a leader, I call it a democratic dictatorship.
You listen to everybody, and then you make the final decision. It can’t be a full compromise. Someone has to take all the information, assemble it in his or her mind, and decide, ‘OK, this is the position I think we should take.’
Be a good listener. Make sure that you allow time for your employees to be with you to be able to listen to them, and listen carefully and don’t interrupt them.
A lot of executives are in a hurry, so the employee comes in, has a problem and you cut him or her off half-way through and say, ‘I know that already, and here’s what you do.’ That’s not a good idea, even if you do know the answer. They spent time, and they may have worked themselves up thinking about this, and you went and cut them off.
Don’t fault employees with good intentions. One thing you never do is punish them for something they’ve done where they meant well, and they thought they were doing the right thing. In those cases, never cause them discomfort over what they did but encourage them.
Those kinds of things are important to get them to feel comfortable that they are willing to tell you things that went wrong. They know you are going to encourage them not to do it again, and you aren’t going to yell at them.
If somebody comes to you with bad news and, all of a sudden, you are screaming at them, then that goes back to don’t kill the messenger.
HOW TO REACH: Crosswinds Communities Inc., (248) 615-1313 or www.crosswindsus.com
When Erik Vonk joined Gevity HR Inc. in early 2002, the company had just announced a $20 million loss for 2001.
While it wasn’t the ideal situation to jump into, Vonk was readyfor the challenge.
Despite the business’ struggles, he didn’t come in , clean houseand build a management team from scratch. While there werechanges that needed to be made, making immediate personnelmoves wasn’t necessary.
“I felt that would be even more overpowering while, on the otherhand, this was a strong company and had been a strong companyin the past and had strong people,” says Vonk, who serves as chairman and CEO. “So I focused energy on trying to convince peoplewho were here to hop on the train.”
Vonk set his sights on stopping the bleeding and producingeven a small profit, but to do that, he had to convince theemployees to buy in to his turnaround plan.
The company had been a successful professional employerorganization since the mid ’80s but was also involved in sellinghealth care and workers’ compensation insurance, whichbegan to hurt the bottom line.
“In the past, the company relied on insurance margins as itsprimary income source,” says Vonk. “What we did in early 2002was declare that had been a good idea in the past, but given thecompany’s existing distribution reach within the small-business community on one hand, and the existing technology platform on the other, it made much more sense to start focusingon delivering HR-related services to small businesses.”
Vonk says it can become a sensitive issue to convince peopleassociated with successes based on a previous business modelthat a change is for the best in the long run.
“What you are really asking people to do is change the knownfor the unknown,” he says. “Gathering momentum behind theunknown is hard and takes a lot of personal convincing ... [on]how a set of new ideas can lead to even better successes in thefuture without dismissing what the achievements were in thepast.”
To drive change through the company and get buy-in from its1,000 employees, he had to communicate clear goals, deal withthose who resisted and revitalize the culture.
When change is necessary, you have to tell people why if youwant to get them to buy in to your plan.
“If I was part of a company, and someone would come in andsay, ‘Marching southeast over the last 20 years was great, butwe’re going northwest from now on,’ I’d want to know why andbe able to ask questions and share my thoughts and opinions,” hesays. “That is why I felt it was important to give people the opportunity to do that and create, as much as possible, a common platform in thinking and approach around the business.”
You have to have a simple, understandable, transparent logical message and the ability to provide context. From there, it’sa matter of keeping everyone updated on what’s going on.
“Everyone in the company gets together and spends severalhours on updating what has happened in the quarter justbehind us and what was on the docket for the quarter ahead ofus, creating ownership around the new ideas, challenges andgoals, and developing enthusiasm around them,” says Vonk.“On the other hand, it provides a forum to listen and give people who had been associated with the business a long time anopportunity to share their views and experiences and theirinput and questions, as well as criticisms and thoughts aboutwhy things would be wrong.”
Vonk tries to communicate goals in person as much as possible, and through e-mail as little as possible.
“E-mail is a blessing and a curse of this day and age,” he says.“It’s a curse in that we are all part of meetings where there arefour people around the table and two people are under thetables working their BlackBerrys. On the one hand, it’s terrible.On the other hand, it makes us much more effective in our ability to communicate.
“The emphasis should always be in person or face-to-face. Ifthat doesn’t work, then telephonic. If that doesn’t work, videotape something or make a CD. Last are written communications, but a letter with a signature in ink is better than e-mail.”
With any change, there will be some resistance to the newdirection.
Vonk says gradually getting everyone aligned behind the newdirection can be challenging, but it is important to achievingsuccess.
Resisters need to be dealt with patiently but also with a certain firmness.
“I felt it was very important to show the respect that everybody deserved who had been here building a business that hadbeen very successful,” he says. “Take a lot of time to demonstrate that respect and use that respect as the basis to conveythoughts and ideas on a new direction.”
Vonk says you eventually have to make it clear that the trainis leaving the station, and everyone has a choice of either hopping on the train or staying on the platform.
“At a certain point, you also jeopardize progress and you arewithholding success from other people if you decide to delaythe train,” he says. “It is important to explain, and take a lot oftime to explain, when the train is leaving, what the destinationis and what the journey is, and give the people an opportunityto board the train or make a conscious decision not to boardthe train. At some point, you either come along or not.”
Vonk found out who was on board by asking questions and gradually seeing whether the answers were increasingly congruent with the overall direction of the business. Over thecourse of 2002, it became clear to Vonk who was on board withthe new direction, who wasn’t and who was undecided.
“It was much more under the surface,” Vonk says. “Youwould get together with two or three or 20 people and discussthe next steps, plans, budgets and goals. When everyone gathered in one room, everyone said, ‘Yeah, yeah, yeah, great.’ AndI said, ‘Thumbs up, great,’ only to see that I was the strangerand the group was a group that had been familiar with eachother for a long time. As soon as they left the room, they wouldadvertently or inadvertently say, ‘Yeah, right.’
“Or, [I would] think they were in agreement and they’d goback to their desks and 48 hours later were back in the oldgrind and nothing changed until the next meeting. I would say,‘Hey, last week we discussed A, B and C. How far are we onthat?’ In varying degrees, people would say, ‘Oops, never got toit.’”
The people who followed through without being told againwere, in most cases, the ones who rose to the top.
“They made a choice and saw something in it and said, ‘Yeah.We are on to something here,’” he says.
Repairing the culture
After years of success, the descent of the company’s bottomline also put the company’s culture in bad shape. Vonk knew heneeded to improve the mindset of the company as a whole toget things back on track.
“When something like that develops over a two- to three-yearperiod, you have to be very careful for the mood not to be negative and the culture to start to unravel, and that is what hadhappened,” he says. “It was a fairly gloomy environment,where a lot of people had lost faith in the business. The company was housed in a dilapidated building, and it was dull grayinside and had worn-out carpet, and the whole picture was notvery bright.”
Though now in a new building, Vonk says employees fixed upthe old building while they were still working out of it.Volunteers spent weekends painting everything yellow thatwas gray.
“On Monday, hundreds of people came into the building andsaid, ‘Wow, what is this?’” he says.
Plastic plants were replaced with living plants, worn-out carpet was replaced, broken desks were fixed, and the overallenvironment changed.
“In many cases, people spend more hours in an office thanthey do at home,” says Vonk. “We believe it is very important tocreate an environment where people feel at home. We have arejuvenation zone. We have a room with massage chairs andcorners where you can relax, and we have an Internet café andareas where people can walk away from what they are doing,from intensive work and say, ‘I am still in my Gevity home butcan catch a breath.’”
Vonk says allowing employees to take a mental break resultsin a more productive staff.
“It’s year of the Lord 2007,” he says. “The IndustrialRevolution was 150 years ago. You need to be part of an environment that is inspiring and rejuvenating instead of one thatwears people out.”
Gevity also gives employees March 4 off as a break and as areminder to keep goals in mind.
“Basically, it is to provide an opportunity for all of our colleagues to march forth the rest of the year to March 4,” he says.
“We’re telling everyone on March 4, we take the day off to dosomething meaningful or to take the day off to take the day off.See if there isn’t something in your private life you wanted todo and have a special day for. That in itself is a mechanism thatcan help people to bond. That is us marching forth to the nextMarch 4. Now, we are gradually beginning to be in a stagewhere we’d like to take March 4 as a community-building effortof our clients to recognize March 4 as their day.”
Vonk’s efforts to change Gevity have paid off. Profitability isup 800 percent since he took over, with revenue hitting $648million in 2006.
While the numbers are impressive, Vonk says revenue is theresult of hitting goals but shouldn’t be seen as the ultimatemeasure of success.
“Do not set revenue or profit goals as end goals, but recognize revenue and profits as the outcome of the sum of certain,specific actions,” he says.
HOW TO REACH: Gevity HR Inc., (800) 243-8489 or www.gevity.com
When Thilo Best was recruited to manage a portfolio of properties owned by White Hall Real Estate Funds, he knew he would befacing a difficult situation.
Operations needed to be improved and the most recent acquisition wasn’t working out as planned.
Best accepted the challenge and formed Horizon Bay SeniorCommunities to manage the portfolio, and took the dual roles ofpresident and CEO.
“My first month on the job was going out to see all the communities, to start assessing the quality of the people and start figuringout what was the good part of the company, what was the not sogreat part of the company and taking actions to fix, what was atthat time, a cash flow drain.”
He spent the next 90 days assessing which properties could besold to fix the cash flow problem as well as finding people toreplace the ones that didn’t fit into his plans.
“We were really taking some of the team from that [previousmanagement] company and going to the market and buildingmy own team,” he says. “The reality is we really had to buildour own culture.”
Best says you need to build a solid team regardless of whatsituation your company is in, but when facing a turnaround,that task needs to be done promptly, which will most likelylead to some mistakes. Some people look better on paper thanthey really are.
“You put them in a situation where they really have to execute and perform and they just don’t,” says Best. “You won’tknow until you hire them.”
Because the initial team had to be put together quickly, it wasmade up of employees who had a few key traits.
“Basically, I was looking for a willingness to listen, a willingness to approach the business a different way and a knowledgeabout the industry and business.”
Some vacant positions were filled through recruitment fromother senior living companies. Best says if you are in a turnaround situation, you may have to overpay to get the talent youneed, and you may need outside help to find the right people.
“One thing I did was once we identified core team members,I brought in somebody to advise us on interviewing,” says Best.“We laid out the skills we were looking for and they helped usformulate our questions. The best way we have found to dointerviews is to give them a hypothetical situation and askthem how they would handle it.”
Once everyone was in place, Best kept them focused on theshort term.
“The early years were very interesting,” he says. “The bigquestion to me from the team was, in essence, ‘Who are we,what are we going to do and how are we going to grow? Whatis our niche?’ For 12 months I said, ‘We are not going to answerthat question. We are going to focus on profitability and delivering quality care to our residents and that is all we are goingto focus on.
“We’re not going to have a grand mission statement or somebig branding company come in and think about what our strategy is for the next five years. If you are in turnaround mode,frankly it’s about survival. There may not be a next five years.”
Trim the fat
Some of the communities in Horizon’s portfolio weren’tdelivering results.
Some were not yet at full occupancy, some were poorlydesigned and some needed more capital expenditures to fixthem and some couldn’t be fixed at all.
Best looked at which properties were profitable and whichweren’t, and within 18 months of taking over, sold 22 of the46 properties and reinvested $40 million into others.
After selling the properties, Horizon’s revenues onlydeclined 10 percent, and by the end of 2006, the companywas managing a total of 48 properties.
“You can tell we definitely sold the right communities,” hesays. “There was a dramatic swing in our earnings in a positive way. When you sell your underperformers it also helpsyou on the whole 80/20 rule, where 80 percent of your timewill be spent on 20 percent of your company that’s reallycausing the problems. When you sell the 22 properties thatare causing the problems, it frees everyone up to do a betterjob on the properties you retain.”
Through the process, Best also realized what type of communities they had the most success at overseeing.
“What we did recognize, as an organization, was what wewere good at managing were large independent living communities that have some level of assisted living,” he says.“Our core competency was not managing small assisted living communities. We really had a hodgepodge of properties.If you are managing five different types of hotels versus aMarriott Courtyard, it’s going to be easier to manage a bunchof Marriott Courtyards.”
Creating the right culture
Once things stabilized, it allowed Best to start answeringthose questions about the company’s direction and culture.
“We had an identity statement,” he says. “We interviewedpeople at the communities and at the regions and asked,‘Who do you want to be and what kind of organization do youwant to work for?’”
Out of that feedback, the core values of respect, teamwork,responsibility, professionalism and integrity were created.
As part of living those values and reinforcing the culture hewants the company built on, he relies on the talents of thosearound him.
“If we have a lot of talented people in a room, let’s getaround a table and identify the challenges we have and identify which best practices come up from the group,” he says.
Best describes his leadership style as participatory onsome things and having full delegation on others, whichhelps create a culture of open communication.
He says much of his participation focuses around askingquestions, especially ones the person coming to him mightnot be able to answer.
For example, he asked some numbers-related questions tosomeone who had come to him with a question of his own.This forced him to go back and find the answers, creating an“ah-ha” moment for the employee.
“But the idea was not to take an approach of, ‘I’m smarter
than you and you need to be as smart as me,’ but more tohighlight the skill set they need to run a particular businessunit,” he says. “Any performance-oriented person is going tobe more embarrassed than anything when they don’t havethe answer and take it as a challenge.
“You have to be open and honest and create an environment where people will be comfortable challenging you oncertain things in business. I am not high-handed, even thoughthe decisions ultimately do rest with me, at the end of theday, to attract performers. And we very much have a performance-oriented culture, you have to have accountabilityand hold people to certain standards and success measurements you have at the company. You have to listen to themand create an environment where they are comfortable ifthey disagree with you.”
While it is important to learn from mistakes, Best says partof creating a positive environment is not dwelling on them orspending time blaming other people.
“As a group, we take ownership of mistakes and get thatout of the way and focus on improvement,” he says. “Thatwas important to create a culture. You have to take risks inbusiness.”
As the company grew from $125 million in portfolio revenue in 2004 to $192 million in 2005, the biggest challengewas changing the company’s orientation from a turnaroundcompany to a growth-oriented one.
“In a turnaround company, you tend to watch every penny,”he says. & #x201C;On the expense side, you probably spend a dollaronly when forced to. Where if you are a growth-orientedcompany, you have to get out ahead of the growth and hirepeople sometime before the growth is in place.
“That is a real mind-set change. But if you explain it to people that this is what we are going through and the why, it definitely helps the buy in. Any major change isn’t going to beeasy.”
Best says he needed to have open and honest dialogue withhis senior management team and explain why the changewas made.
“I have found and learned over the years that it is definitely worth taking the time to explain the ‘why,’” he says. “Eventhough, from an expediency, urgency and execution standpoint, it might not seem like it makes sense to be overly communicative about why. To get the buy-in, as you managethrough change, it is imperative to answer that question.”
He says if you are implementing changes, the main peopleyou want to make sure understand the “why” are the leadersand performers of the company.
“Then they can go explain the why to their respectiveteams,” he says. “I’m a firm believer that you can’t overcommunicate. Oftentimes, if the change is dramatic within theorganization, the first people to push back are your high-performance people.”
Today, Horizon Bay continues to be in growth mode,announcing deals in April that will take total portfolio revenue to around $485 million.
As the company started to focus on growth, Best, who nowserves as chairman and CEO, saw it was time to step backand let his managers take the reins. That was easier said thandone.
“As you get to a certain size, it’s imperative,” he says.“Delegation is not something I think, for a good manager,comes easy. A performance-oriented person, the way I think,tends to mean they personally are pretty good at execution,not at philosophies and policies, but at execution. So, you setobjectives and that person can go execute.
“To me, delegation doesn’t come easy. But, when you do itand do it at the right time, it’s also very rewarding.”
As far as knowing the right time to delegate, Best says itcomes from experience.
“One of two things will happen,” he says. “Either you’ll delegate too early, in which case that will show up in results orin the individual you delegated to feeling overwhelmed. Or ifyou delegate too late, if it’s a performance-oriented person,they are probably going to come to you and start saying toyou, ‘When are you going to give me the reins?’
“But again, you have to create that culture where they arecomfortable having that dialogue that says, ‘I’d like it if yougave me more rein,’ or however they phrase it. You have tocreate that culture where they can come to you and honestly tell you they’d like more rope.”
If you’ve never created that culture, Best says that cancause truly solid performers to start looking for other opportunities if he or she feels unable to grow in the company.
“One way or another, if you’ve gone past the delegationphase, it will probably begin to manifest itself,” he says.“There is probably not an optimal time. You just have to useyour best judgment and delegate and see what happens.”
HOW TO REACH: Horizon Bay Senior Communities, (813) 287-3900 or www.horizonbay.com
“Bad news needs to be delivered by the top,” says the president and CEO of the $370 million window and door manufacturer. “If you send lieutenants out to deliver bad news, every time theysee a lieutenant coming, they figure it’s going to be bad news, and they think all you are trying to do is deliver the good news.
“It’s like a coach. You win or lose with your team, and you go to the press conference and say exactly what happened. I believe that good news can be shared by almost everyone, especiallyeveryone in management.”
Hershberger sees being upfront with employees on what is happening with the business as a key role for a CEO.
“There are things that happen in the business that aren’t necessarily bad,” says Hershberger, who co-founded the company. “But if you don’t tell your folks what’s going on, it’s going to be perceived as bad, or the press is going to write about it and spin it because the newspaper likes bad news better than good news.
“It’s important before it gets spread out that we get out there and tell them what is happening and what we are doing about it. We stand in front of them in small groups and tell them what exactly is happening.”
It’s all part of a culture in which Hershberger is determined to be honest with his employees and create an environment where people know they are an important piece of the puzzle.
“We want our employees to know that when they come into work, they are going to be listened to,” he says. “If there is something that concerns them, good or bad, someone is going to listento them, something is going to be done about it, and they can take it all the way to the top.”
By finding the right type of employees, sharing the company’s goals with them and then keeping the lines of communication open, Hershberger says you create an environment that benefits allaspects of the business.
“It provides benefit to all our constituents employees, customers, suppliers, shareholders and the community in which we live and operate,” he says. “PGT’s culture attracts qualified employees while also encouraging dialogue that leads to early identification of problems and/or issues that could hinder our success. An open environment provides a safe place for the development ofnew ideas, no matter how small, that help to improve our business performance.”
Finding employees who fit
Hershberger wants employees with integrity and a willingness to solve problems in his culture, but identifying employees with those qualities can be a challenge.
“That’s probably the hardest one to answer because people know the right answers to give in an interview,” he says. “We’ve got a pretty sophisticated interview process. I often consider it almostrunning the gauntlet. By the time you finish the interview process for higher level and even a mid-level position, you will go through a full day’s interview process and be interviewed by six to eightpeople. It might take more than a day to get it done. You’re going to get different questions and situations from everyone asking them.”
The team doing the interviewing is comprised of representatives from departments the potential hire will work with on a regular basis. During the interview process, interviewees are asked toexplain situations they have been in and how they handled those situations.
“We are asking about specific things that happened,” he says. “It depends on what category we are looking at. From a leadership point of view, we’ll ask who they developed under them to taketheir job. If they are interviewing for a job, we are assuming that they developed someone who can take their role. So, we ask them specifically what they did. Not what the company had in placeor what training was in place.
“Specifically, what did you do? How did you mentor that person and bring them along? What was the situation? Give us something they did well and you built on it, or something they did not dowell and you needed to repair that. As you go through that process with five to six people looking at it, I think we’re able to determine it pretty well.”
Hershberger said the reason for the questions is to get a feel on how the person reacted to a certain situation.
“What I don’t want to hear is, ‘Our company has a training program, and I enrolled them in that program,’” he says. “I want to hear, ‘We got together once a week after work, and we talked aboutthe job performance.’”
Sharing goals with employees
Hershberger says PGT puts a plan together that covers the next three to five years and has a number of measurable goals in it, from sales to profit margins to growth of particular products asobjectives.
The goals are listed on what the company calls a ‘One Sheet,’ a single sheet of paper that also includes ways to achieve those goals.
“Every significant department has a One Sheet that says, ‘These are my five or six goals,’ and underneath that, they’ll develop ways to hit those goals,” he says. “We take those measures and goalsand just hand them to people and say, ‘You run manufacturing. Here is a set of goals.’ They are part of setting those goals, and it’s their responsibility to get there.
“I’m not a big believer in having documents that are so thick that they put them on a shelf and never read them. One sheet of paper, you can see in a quick glance if we are meeting our objectives or not. There are always ways to dig down deeper if we aren’t meeting them. Or, if we are doing good, there are ways to dig down deeper and find out why.”
Once those goals are set, Hershberger steps back and lets employees take over.
“Employees love to be engaged in the company and to have a say-so in where the company goes and how it achieves its goals,” he says. “This gives people the ability and authority to look atthose goals and achieve them. We all don’t achieve them the same way.
“There are particular things I would do to get there. But, if you get five people in a room, we’re going to have five different ways to get there, and none of them are necessarily right or wrong.But the combination of five people is more powerful than one person thinking they can do it.”
Hershberger says it’s difficult for him to step back and let someone work on a task differently than he might. It’s even harder to stay away when things aren’t exactly going right. However, hesays being patient is the best method for success in the long run.
“You learn over time, the more times you step in, the less effective the folks that work here will be,” he says. “You have to back off and let them make decisions. Part of the learning curve isunderstanding when it’s OK to make a mistake and when it’s not. There are certain times you look at it and go, ‘This could be a problem and this could be a mistake.’
“We are going to have a wonderful learning experience from it next week. We’re going to have a chance to sit down and talk about it.”
Other times, you will look at a situation and realize the potential consequences are too severe to let it go, so you have to step in and redirect people away from a potentially serious error.
“We learn almost more fro m our mistakes than the things we do right,” Hershberger says. “It’s not OK to make the same mistake twice, but it is OK to make a mistake.”
If done correctly, delegating power can positively affect your customer base.
“If we do the authority correctly, a customer should be able to call in and get an answer from anybody they are talking to and feel comfortable that, that is exactly what will happen.
“When I call someplace, even when it’s good or bad, you talk to the customer service person, and they tell you its going to happen, but you know it’s not going to happen. So, you have to ask fortheir supervisor or their supervisor’s supervisor to make sure it does happen. That’s the kind of thing we don’t ever want to happen here.”
Developing a culture with a high level of employee involvement also helps with retention.
“You hear a lot about employees going to other places because they pay a dollar more,” he says. “Employees need to know why and how their job is important and what their role is and howimportant that role is. We make sure we give that information to our employees. We have a lot of meetings and spend a lot of time talking to them.”
The personal touch
While giving employees the autonomy to achieve goals is a positive, it doesn’t mean you can disappear and not be seen around the company. Hershberger says talking to the employees face-to-face can foster a more open culture that keeps communication moving in both directions.
“You can talk one on one to an employee on every line, and that employee is going to tell the rest, ‘If you have a problem, go talk to him. They’ll listen to you,’” he says. “If we need tobuild windows, then let’s build windows. It doesn’t matter if you are an hourly employee or a vice president or CEO. You go do the same thing.
“We work together, we laugh and we play together. That’s the relationships we have.”
Hershberger says rewards and incentives are also more effective delivered in person.
Sometimes that may take management going the extra mile by showing up early or staying late.
“We go through a lot of cakes,” he says. “We have a celebration on the line with a lot of our management team there. It’s not unusual to see our entire management team here at 4 a.m.doing a party on a line that has achieved something special and spending as much time as the employees want to talk to them one-on-one.”
That reputation was built around consistently preaching core values and remembering one simple lesson that can easily be forgotten in a day and age filled with e-mail and text messages.
“There’s nothing that beats a one-on-one conversation or being able to look somebody in the eye and shake their hand,” Hershberger says. “Walking up to a corner office and saying,I need to talk to whoever it is, is difficult for an hourly employee to do. Sometimes you need to make sure you aren’t in that corner office. You are wherever you need to be so they canstop you and talk to you.”
HOW TO REACH: PGT Industries, (800) 282-6019 or www.pgtindustries.com
Hire people who are going to endorse your vision. You flesh out a resume. It’s a snapshot. When you conduct an interview, it’s, ‘Tell me more about X and tell me more about Y. Tell me about your motivation.’
I don’t think there is a right answer, but the quality of the answer and the commitment behind the answer [are important]. Somebody says, ‘Yep, I went to college. Yep, I studied accounting.’
Why did you study accounting? What was it about it that excited you, or what bored the hell out of you? You can probe a little bit deeper in the course of questions. What are people about? What do they do? Do they like their family? Why did you come to Michigan? Were you born here? It’s about establishing some type of common basis to have a conversation.
Don’t show up to an interview unless you have questions of your own. An interview should be a dialogue not simply a presentation of answers you’ve already prepared.
There isn’t a prescribed answer. Truly smart and motivated people are going to take you in a lot of different directions, and maybe they’ll even surprise you with something.
Body language helps convey confidence. It can make you less assured of a person’s qualifications if they have difficulty and struggle with basic and simple questions. As an organization, we don’t automatically exclude somebody on the basis of appearance, unless it’s obvious from the way they come in here they aren’t serious.
This isn’t the type of environment where you show up in sneakers and cut-offs with a skateboard under your arm. But you don’t have to show up in a three-piece, button-down with wingtips, either.
Communicate your vision. We talk to our employees and conduct surveys. The feedback is anonymous, but you can tell if they are getting it by the way they respond. We have core values we live by: integrity, passion, discipline, openness and respect; financial and social responsibility; inspired and empowered people; customer focus; and commitment to excellence.
When people challenge you on the core values or challenge themselves, you know that they are bringing the passion and the understanding to the situation that you want to have in the organization.
Find interests other than your business. We all have outside interests. There has to be something you are passionate about. I’m a sports nut and love to play golf. So that’s one thing.
You have an outlet. I enjoy friends and music and daydreaming about some wild idea or reading something off the wall from time to time that makes you think in a different direction.
Some folks, what they do is what they love to do. No matter how far they try to stretch, the outside and inside are going to blur.
There’s people that love to ski and look forward to skiing. What is it that makes people interesting? It’s not what they do. It’s what they like. It’s a tremendous ice-breaker to begin with. If you are a Pistons fan and you encounter another Pistons fan, right away that’s something in common.
Allow employees to be open and honest. When it’s tried out, and it will be, you have to do what you say you are going to do. If I say we can have open and honest communication, and the first time someone walks into my office with bad news, you shoot the messenger, that’s B.S.
It’s, ‘I appreciate you bringing that to my attention, now let’s find a solution.’ You can’t say it and then not do it. You have to communicate it and execute on that basis. We have to hold ourselves accountable.
Learn from mistakes. You can’t learn from things by burying things. Once again, open and honest. Hopefully, we made a mistake for the right reasons, or made a mistake trying to do something better for the company, not a mistake because we are trying to cover something up.
We take that as a learning opportunity and move along. You’re much better off getting to that sooner than later. The company has a lot of people, and a lot of people know what is going on, so you can’t hide things from your employees. You learn from it, digest it and move on.
Never think that you have all the right answers. I think the greatest pitfall would be not casting as wide as you can to explore opportunities to solving problems. If you singularly think you have all the answers, then you are heading for failure.
Ask questions and listen. Even if you haven’t asked the question, listen. Go to folks, talk to them about it. Talk to people inside the industry and outside. The whole idea of gathering intelligence is a 365-day-a-year type of situation. You can learn from anybody, anywhere, anytime. If you remain cognizant of that, I think you have a better chance of success. Even the most successful people in the world aren’t right all the time.
I may think I know the right answer, but if we are having a discussion, it’s about validating. Let’s push, probe and see if it makes sense. If nobody is challenging you, then you have to say, ‘We’re about to make a big decision here. What are the risk and opportunities around it?’
That fits in the realm of proper due diligence around any type of significant decision-making. If you get there and you don’t feel right about it, then you shouldn’t put an artificial timetable on it.
HOW TO REACH: DaimlerChrysler Insurance Co., (800) 782-9164 and press 3, or www.insurance.daimlerchrysler.com
The president and CEO of Suncoast Roofers Supply Inc. was going tomeet with a company consolidator who had convinced him it would bebest to sell his then-$80 million company. But as the flight was about toland, the pilot said they were being diverted to Philadelphia.
It was Sept. 11, 2001, and while the United States would never again bethe same, Tamayo’s professional life also received a wake-up call.
“I had already mentally checked out,” Tamayo says. “I was going tocash out and get out.”
But he was forced to check back in. After a couple of days inPhiladelphia, the prospective buyers got nervous not knowing whatthe future held and backed off the deal.
“I had to really jump back in to the business,” he says.
Tamayo began to reflect on why he was so willing to part with thebusiness a $4 million company when he and his partner bought itin 1995 that they had grown to an $80 million company by 2001.
“The scope of the business, especially on the details side and operational side, was pulling me in a direction I didn’t enjoy,” he says. “Myjob was becoming one I didn’t like. I refocused my efforts andbrought in a management staff to help me on the operational sideand I focused on the strategic side. The four or five years followingthat have been the best of my entire career.”
Tamayo says there comes a point and time in your career when you have to take a look at your strengths and weaknesses. Whenhe did so, he determined that his strengths were on the entrepreneurial and strategic side. “As the company grew, I needed better operations guys to make us more efficient and more disciplined,” he says. “That reallywasn’t my strength. It’s hard to come to terms because, as you are building a business, you can believe your own bullshit of, ‘Itook this company from $4 million to $200 million and can take it to a billion.’ None of that ever happens without a lot of peoplein your infrastructure supporting you. “I wanted to have the people to come in here that could do that part of business better than I could, and I wanted to give themthe freedom to operate without my interference. It was hard to come to that realization because it’s an ego-busting realization.But our company is stronger as a result of that.”
Tamayo took his reinvigorated passion for the business and, with the help of his new team, built it into what it is today, a company that employs 400 and had revenue of more than $200 million in 2005, with $235 million projected for 2006. Two of the biggestkeys to his success have been finding the right people to carry out his vision and successfully integrating acquisitions.
Finding the right people
Surrounding yourself with good employees is not only key to growth, it is vital to the overall success of a company. In Suncoast’searly days, Tamayo looked to other companies to find employees to lure to Suncoast. As the company grew, his focus changedto developing talent internally. “We found it is better to build our own people from within the ranks and give them opportunities to move up in the organization,” he says.
Tamayo says Suncoast built a solid reputation for its workplace culture by talking to employees and finding out what they wanted to achieve. There is a lot of power behind having a conversation with an employee and trying to align your resources towardtheir goals. “That’s really what we sold these people on,” he says. “Not everybody wanted equity. They just wanted an opportunity to dosomething with us that they maybe did not get with the company that they were in. That can be a guy who is a branch managerwho wants to be an outside salesperson. Other companies have a tendency to fit people into a specific area and not give them anopportunity. If another company comes along and offers them an opportunity to achieve their personal goals, then that’s why people move around in our industry. We’ve been able to align ourselves to help people achieve their goals, whether it’s financial, personal or developmental.”
Tamayo says that type of environment can be achieved by simply listening and being sincere.
“I would never hire someone and promise them something that I had no intention of giving them,” he says. “That’s where youestablish credibility and your track record. If you do that with a group of people, then that group of people becomes your bestsalespeople. They are the ones that go out into the trade and solicit other people to come work for you.”
Building trust also comes through what he calls “focus coaching.” Tamayo says he doesn’t believe in company reviews in whichyou sit down with someone and discuss what he or she did well or not so well, and then bestowing a 3 percent raise. Suncoast’sreview process lasts 30 to 60 days and includes a conversation about company, job and personal goals. “Then we try to align the company goals to their personal goals,” he says. “It’s a very in-depth conversation. It’s a very interactive process, and I do it with the people that report directly to me. All the people in our company that have direct reports do it tothe people reporting to them. You get an understanding of what drives people. It’s the best way I’ve seen of managing them.”Tamayo says the conversations usually involve company things but shift to family and personal subjects, as well as what theemployee wants to achieve in the future. “It becomes a trusting and interactive relationship,” Tamayo says. “I have people that say, ‘I want to be a vice president,’ or ‘Idon’t understand business or financial planning.’ We have a university and will devise a curriculum for them in order for them towork on developing the strengths and skills they need to build towards that career they want.”
Learn from your mistakes
When Tamayo and his partner took over the company in 1995, acquisitions played a significant role in Suncoast’s early growth.To grow into other geographic markets, they acquired three other companies between 1997 and 1998.
Tamayo says he wishes he could say the company had a big strategy meeting to decide they were ready for acquisitions, but itdidn’t happen that way. The three deals involved people who wanted to get out of the business, and the companies were able tobenefit Suncoast through inventory and geographic diversification.
The initial acquisition involved a company with about 20 employees, which posed the challenge of integrating them into theSuncoast way of doing things. Tamayo looks back on that time as a learning experience. “It wasn’t a smooth transaction,” Tamayo says. “Within 60 days of the purchase, the guy running it quit. They didn’t even havea computer system. When we started to put in a software package, this guy didn’t want to do it. He had like a nervous breakdownthat scared us to death. Eventually, he just left. “Looking back, it was a blessing in disguise. We were stuck without anybody to manage it, so we immediately had to put ourmanagement team in there.”
Suncoast simply underestimated the time it takes to make sure everyone is on the same page. It’s important to understand whyyour new employees joined the company being acquired and to try to understand them as people, Tamayo says. “Again, you have a tendency to believe your own bullshit and that you are such a great company and everyone should want towork for you,” he says. “But not everyone wants to wor k for you, particularly if they don’t know who you are. For example, whenwe took over Polk Roofing Supply, we just assumed everybody understood computers were good, and this was going to helpthem. “We didn’t do a good enough job of explaining it or helping them through the process. We blew this guy up in 30 days becausehe was deathly afraid of it.”
Tamayo says he would do it differently now.
“I would have sat down and showed him how ours worked and listened to him communicate his concerns about it and maybehelped him in the transition more,” he says. “We could have put somebody on staff to do it for him, giving him a longer learningcurve. Instead, we put a lot of pressure on him to do it our way.”
Tamayo says Suncoast did a lot of financial due diligence before the acquisition but didn’t do the same investigative work onthe cultural side. That is no longer the case today.
Initially, the company goes to management and inquires about strategies, philosophies and what makes the company unique andspecial. “You have to have a meeting of the minds on philosophical issues,” he says. “If they are so different, you never get to the financial side. You only get to the financial side when it looks like we share some common visions. “The financial side is a score card. How has your philosophy worked out? How does your coaching strategy work out in wins andlosses? If a coach could tell you his philosophy and you look at his record and it’s 3-12, it’s not looking good.”
Suncoast also has a management team that goes in to a new company and studies every aspect of the business, including theinsurance coverage, benefits and safety program and compares them to Suncoast’s. “We are devising a strategy before we take them over on things we need to help them with,” he says about a company Suncoastis acquiring. “I had my credit department evaluate their credit procedures and our operations people evaluating their operations.”Before going through with an acquisition, which the company has done seven of to date, Suncoast devises a strategy to determine how to assimilate employees.
Tamayo says his staff researches whether the new company is compatible with Suncoast, and if the answer is no, determineshow to make it compatible. “We are committed to not discriminating in benefits to employees,” he says. “We want to make sure those people have everything we have.”
Typically, on the closing date, Tamayo meets with all the employees and lays out what Suncoast is and what its philosophiesare. “By then, I usually have the principal of the company or the person who is going to lead the company with me, and we talk aboutwhat our vision is for this merger or acquisition and what is in it for them, what the opportunities are for them and how this is goingto benefit them.”
After the initial meeting with the new employees, Tamayo has to get them to buy in to the company’s vision for the long haul.
“They are skeptical at first, but we point to our track record and we establish a focus-coaching basis where they can expresstheir concerns individually to whomever their supervisors are,” he says. “They can get personal assurances back on a variety ofissues they need.
“It could be a guy saying, ‘I have a bonus coming. What is this going to do to my bonus?’ We do the deal that is best for them,meaning, if it is best for them to live up to the commitment their company had given them, then we’ll do that for them.
“But if they benefit more under our program, then we’ll do that one.”
HOW TO REACH: Suncoast Roofers Supply Inc., (813) 383-0050 or www.srsicorp.com
The first step in giving employees recognition is discovering what they actually want as a reward. That’s why, with some help, Judith B. Van Ginkel structured a program and strategy to recognize her 125 workers at all levels at Every Child Succeeds.
“As we begin to talk about it, we need to have everyone involved,” she says. “We might think that someone wants a plaque, but someone may rather have a gift certificate to go out to dinner. We wanted a more structured process, and what we are doing was responsive to the needs and the interests of the people being recognized.”
Van Ginkel is president of ECS, a voluntary program that offers first-time mothers and their families support to help ensure an optimal start for their children.
“In the public arena, there are hundreds of programs and hundreds of activities to be involved with. It’s our responsibility to our stakeholders to explain why this produces results,” she says of the program, which has an annual budget of $8 million.
Smart Business spoke with Van Ginkel about how to handle success and create confidence in others.
Q: How do you handle failure?
You learn from it. Somebody explained to me, if you have something that doesn’t work, it’s the best opportunity you have to learn what to do next.
You don’t want to make huge mistakes about things that are going to be destructive to the organization, because we have many good minds and we try to not allow that to happen. If something happens that might not have been the right thing, then we go back, learn from it and learn from mistakes.
It’s sort of a periodic reassessment and renewal.
Q: How do you create confidence in others?
By delivering on your promises and understanding realistically what is possible. Part of this creating confidence is the way I and others present ECS.
We document that because we are an evidenced-based program. We collect a lot of research and collect a lot of information that demonstrates the investment in Every Child Succeeds produces results.
Q: How do you handle success?
We have begun to get national attention, both in terms of program operations and program outcomes. We have begun to get other requests from other communities to have an Every Child Succeeds program.
We have just begun deploying in our service area, something called the Every Child Succeeds model of home visitation. We are using two national models. With what we have learned, we are beginning to improve those models.
We are not ready yet to send ECS outside of Greater Cincinnati, but we do anticipate a time when that will happen. What we will probably do is begin working with one or two communities who are willing to work with us as pilot sites and we’ll develop this together. We need to understand ECS grew up in Greater Cincinnati and we responded to the needs of our community, (but) every community is different.
What this interest has done is it has caused us to ask ourselves questions about taking what we do and packaging it in a way where another community could use it. You begin to structure and unify the various components of your program in a way that works better here.
We have 15 agencies so anything we do we have to have in a form that 15 agencies can use. We have started to work on that now and it will be some time before we get it finished. Through the ECS model and the way we are viewing that, in a sense, it becomes a bridge to the next level.
The way I see this is most communities have home visiting programs. I wouldn’t anticipate or recommend they get rid of their home visiting program and add ours.
What I would see is that they take the things we have learned to them and that would be overlaid on the home visiting program they have, (and) improve what they are doing based on the learning we have been able to develop here.
Q: How are decisions made at ECS?
We do things in a collaborative way. The board is very involved in decision-making, but that’s not to say they get involved in the minutia of day-to-day activities.
But they provide good, sound direction that we follow. If we are in a place where something is changing, we will develop the materials and go back to the board.
HOW TO REACH: Every Child Succeeds, (513) 636-2830 or www.everychildsucceeds.org
Abooming economy is normally great for business, but that wasn’t the case for Shield’s Franchise Restaurants LLC in the late 1990s.
Co-founder Paul A. Andoni says the strong economy left the company with a shortage of good applicants for service positions.
“People were doing other things as opposed to the service industry, like factory jobs,” Andoni says. “We had to roll up our sleeves and get more involved as owners and do more of the work ourselves. Also, we encouraged our best people to go above and beyond and, during that time, we compensated the best employees greatly.”
The economy eventually turned downward, and qualified applicants began applying for service positions again. Andoni and his brother, co-founder Peter C. Andoni, employ about 220 workers, and the company had 2005 revenue of $6 million, a $1 million increase from 2003.
Smart Business spoke with Paul Andoni about how to be a good interviewer, grow a company and promote open communication.
Q: What are the keys to growing a company?
You must surround yourself with the most knowledgeable people you can. Even people that know more about the business than you do, or segments of the business.
You shouldn’t feel threatened.
Some people feel threatened by hiring people that may know more, but I think that is what the truly successful people do.
I also believe you have to hire the best people you can and become a good interviewer. Know the difference between someone who is putting on a show for the interview and someone that truly has what it takes to do a good job.
Q: How do you become a good interviewer?
You have to know how to read an individual. Look for certain cues, the way they interact and speak about previous experi
A lot of times people say they have open-door polices, but they aren’t in the building. We constantly communicate with our staff, and they realize we are readily available.
A lot of our employees have embraced that. They view it as a breath of fresh air from that corporate mentality or the corporate atmosphere they might have been exposed to in the past.
Q: What pitfalls should a leader avoid?
Taking your employees for granted. Stop doing what you’ve done to make your employees loyal. Stop talking to them. Stop having that open-door policy or stop showing up to the business as often. Once you lose that loyalty or that feeling that this is a special place to work, then you lose some of the luster and things start to fall apart.
Don’t rest on your success. Always look for ways to forge ahead of the pack. Just because you had a good year doesn’t mean you have to be any less innovative to market your business.
Q: How do you keep yourself ahead of the competition?
Just read what people are doing on the different coasts or the Midwest. Some things will work, some won’t, but at least people see you are trying to offer different things and keep the menu fresh.
We recently came up with a $5 lunch menu because it became obvious the lunch crowd was much harder to attract than it used to be. More and more people are staying in their offices or catering in their lunch. As the business climate has worsened here, more companies are concerned with people leaving and losing productivity for an hour-and-a-half a day.
In addition to that change is the number of restaurants that have opened up around us in the last decade. There are so many more options to people that you really have to go out of your way from a quality of food standpoint and a service standpoint to get your share.
HOW TO REACH: Shield’s Franchise Restaurants LLC, (248) 637-3131 or www.shieldspizza.com
But soon after a radio ad aired for Portable On Demand Storage, he got the sense that the idea may have far more potential than originally anticipated.
“As soon as (it) finished, the phone started ringing, and we had two or three people say, ‘Tell me more about this PODS thing, I might want to rent one,’” says Warhurst, president and CEO of PODS. “Then we had three, four, five more people call and say, ‘I want to buy stock in your company, or I want to buy a franchise,’ “
Not a single container had even been rented yet, but it was obvious there was a lot of growth potential for the concept of a container that can be stored at a customer’s house or picked up and stored in a PODS warehouse.
Warhurst has parlayed that initial interest into 100,000 units for rent across 150 markets in 45 states.
PODS had 2005 systemwide revenue of about $200 million, including franchisee revenue, and has grown by 100 percent a year during the past seven years. This year, it is targeting $300 million in systemwide revenue.
“I wish I could tell you we were that smart, and we knew all along were going to be this multistate and location industry,” Warhurst says. “Really, creating a new industry is what we are doing.”
Despite being surprised by the success of his concept, the former fire chief and paramedic has carefully managed his company’s growth to keep it on the path to success. Here’s how Warhurst has conquered the challenges he’s met along the way.
Growth at a steady pace
Early on in the PODS venture, Warhurst was determined that the company’s success would not be its demise. He had already once experienced the drawbacks of growing too fast after creating 911-emergency routing and records management software with partners.
The software was such a hit that they eventually had no choice but to sell to Bell Atlantic.
“We were so successful and contracted for so many jobs and installations, we couldn’t get it done and didn’t have resources to get it done,” he says. “Unless you have the infrastructure around you, I would tell anybody to do what you can do comfortably.
“Don’t stagnate your growth, but build an infrastructure that allows you to grow at whatever pace you want it to be. Getting the systems and procedures in place makes it so much easier down the road. It does slow you down in the beginning, but ultimately, it will make you a much healthier company.”
Learning from the software experience, Warhurst was sensitive about not allowing PODS to grow by leaps and bounds in a short period.
“I wouldn’t let my franchise team sell a franchise west of the Mississippi,” he says. “I felt we weren’t ready to go that far. It exceeded our span of control. We made some good decisions to control our growth early on.”
With that mindset from the beginning, Warhurst was able to grow the company at a good pace, which benefited him in the long run and has made PODS an international company.
“Now, we have such a great infrastructure under us, we can open countries,” he says. “All of Canada is under contract or is going under contract. We just did our first cross-international delivery. We made the business decision to do Australia at the first of the year, and we’ll deliver PODS in October.
“By taking the time to build the infrastructure under us, our ability to grow and expand is a piece of cake.”
While growing may also involve change, Warhurst said he prefers the word “enhance” because PODS was the first of its kind. Trying to change and compete in other industries is not something he finds appealing.
“A couple of my franchisees and some people ask me, ‘Why don’t you go to an office POD and compete with GE?’ GE could crush us,” he says. “They’ve been doing modular offices for decades and that is not our core competency. This is our industry to own and continue to own and dominate.
“While I don’t want to deviate and change, I certainly want to continue to enhance and improve how we provide the service. All we have to do is stay focused on what we do best, continue to try and improve our services and continue to grow and don’t get stale.”
Warhurst was already in the storage business when the PODS idea was born. While looking around for more property to build another storage unit in densely populated Pinellas County, the light bulb came on about the possibility of having a portable storage unit at a home.
However, that meant developing a lift system known as Podzilla and a container to hold the storage, which turned out to be quite pricey. Banks weren’t necessarily seeing Warhurst’s vision, a problem with such a capital-intensive business.
“We were building a box that the bank said, ‘Hey, if you go under, who am I going to sell this thing to?’ he says. “There was no secondary market for this collateral we were trying to finance.”
Through different fundraising techniques, bank debt and partner contributions, the company took its first step to the fast track. However, with rapid success came the need for faster decision-making, rendering every decision more of a risk.
“We don’t have the luxury, in a lot of cases, to go out and do case studies and hire consultants to come back and tell us what we already know,” he says. “We do make decisions after some diligence, but my instructions are always, ‘Let’s monitor what we’ve decided. Let’s monitor how it’s progressing. If it’s wrong, then let’s not be ashamed to say it is wrong. If we can tweak it and fix it, then great, let’s tweak it, fix it and hopefully fine-tune the solution and resolve the problem. If it’s completely wrong, let’s not be too proud to say we made a mistake. We made 10 decisions in the last month and one went sideways on us, so let’s fix it.’
“The key is to monitor it. Since we aren’t spending a lot of time on the front end analyzing and doing case studies, the key is to monitor our decisions and to make sure they are going the direction we want them to.”
Warhurst says that for the last five years, his COO ran the day-to-day operations, but Warhurst still kept his eye on what everybody was doing.
“I made sure we were all aimed at the same bulls-eye,” he says. “We met and chatted and everybody knew what the other was doing. It’s important not to micromanage. I’ve driven a truck, I have built a pod and answered the phone and booked an order. I’ve done it all, but I’m not good at any of it.”
To add to the risk, Warhurst and his partners had no prior example to research the direction a company like PODS took for success. The idea was so original that there wasn’t even a mention of such a business on the Internet.
“Our competitors that are coming up now can look at what we did and how we did it and can pick and choose what they like of what we did,” Warhurst says. “We didn’t have anyone to follow. Building the first pod was a risk. Investing the hundreds of thousands of dollars to get off the ground and get the first pod rented was obviously a huge risk in an industry that we didn’t know if t here was an industry there to have or a market there to penetrate.”
Being forced to make quick decisions might actually be a benefit for Warhurst because he says overanalyzing a situation carries its own risks.
“Don’t get analysis paralysis,” he says. “Don’t get too bogged down in trying to overanalyze it. You’ve come up with an idea, and your gut and instincts tell you it’s a good idea, be willing to take the risk. But monitor the decisions you make and be willing to admit when you made a bad one and change it and fix it.
“You can’t be afraid of risk and you can’t be a control freak. You have to trust your instincts and believe in your own vision. If you don’t believe your own story, who else will believe it?”
Build a good team
Part of the decision-making process for Warhurst is realizing he may not always have the correct solution for a problem. Using a leadership style he describes as fairly liberal, he says he tries to point everyone in the same direction but spreads out the power.
“Early on, I was the management team,” Warhurst says. “Obviously, as we continued to grow, my span of control narrowed and wasn’t broad enough to be able to do all the divisions proper service. By bringing on quality talent and getting them to learn how I think and empowering them, I think it’s enabled us to grow much faster than if I micromanaged and did it all myself.
“Clearly, the only way we could grow at the pace we are growing is empowerment.”
Warhurst surrounds himself with talented people he trusts, and when he hires senior staff members, he interviews them with his COO over a two- to three-hour period to try to find the best fit.
“I look at education and historic background and what they’ve done,” he says. “Are they a good fit for the rest of the management team? I get great pride walking down our hall seeing two or three of my managers in a room at a whiteboard solving a problem or kicking a situation around and coming up with solutions.
“There is nobody that has all the answers, and there is nobody that has an ego that isn’t receptive to a peer’s idea or suggestions. It’s an extremely cooperative and friendly environment.”
And if he has a bias toward a solution, he tries to hold it to himself and let everybody else pitch their ideas first.
“Then I’ll throw my opinion in and see if it alters anything,” he says. “Nine out of 10 times, we can come to a resolution that we all get buy-in on, and we all agree this is the most logical of the solutions. On the rare occasion that doesn’t happen, then that is what they pay me the big bucks for. I make the final decision.”
Although it’s important to realize you don’t have all the answers, Warhurst says a leader needs to have confidence that the final goal can be reached.
“Believe in yourself, believe in your idea, and be sure you can afford your goal and objective and that you’re funded,” he says. “Most businesses struggle to raise capital to meet their full objectives, and they have great ideas, but they can’t fund it. It’s important that you have plenty of funding, and you know you can fund what you are getting into.”
How to reach: PODS, www.pods.com or 1-888-776-PODS