PETCO Animal Supplies Inc. was becoming a victim of its own momentum.
It was 2004, and Jim Myers had just taken over as the CEO of the nationwide pet supply store chain. The company had achieved tremendous success, experiencing significant growth on sales and earnings in the 1990s and early years of this decade.
PETCO was in the right spot at the right time.
“People were really starting to humanize their pets, and our initial success came from being innovators and creating ideas around that,” he says. “I think we were the first to allow pets into the stores, the first to have adoptions of animals in the stores. Almost all the elements of what is now the pet superstore experience are things we initially tried ourselves.”
But as PETCO vaulted into the retail stratosphere, cementing itself as a giant in the pet supplies industry, a new problem sprouted: The spirit of innovation that had built PETCO had been choked off by a companywide desire to not mess with success.
“What developed in our organization was a fear of making change,” Myers says. “It was working so well, the message down through the organization became ‘Don’t change it, it’s working.’ That stifled innovation.”
While PETCO stayed on its treadmill, competitors closed the gap, expanding their retail arsenal to offer many of the same products and services PETCO offered.
If PETCO was to maintain its standing as a pacesetter in the pet supplies business, Myers knew he needed to rekindle the innovation fire within his employees and get his company back to the cutting-edge thinking that had set it apart from the competition to begin with.
“It was really time to shake up the thought process and bring some more risk-taking back into the organization,” Myers says. “We made it a personal challenge to come up with the next innovations.”
Build a message
To reawaken an innovative mindset in his employees, Myers needed to tweak their collective thought process.
Over time, the company had rested into a comfortable groove of going through the same motions each day. Employees had been coached to concentrate on their own tasks and leave the big-picture thinking to the administrators further up the ladder.
That type of thinking can make for an efficient organization but fails to stimulate ideas. With that in mind, Myers says he needed to build interest in innovation by showing employees how their ideas and their work could impact the company as a whole.
“We started really encouraging individuals to view their jobs as not just work but that they are each an integral part of what we do as an organization,” he says “They make it easier for our customers to take care of their pets.”
With a work force of approximately 22,000 in nearly 1,000 locations, communicating that message was more complicated than bringing everyone together for a company meeting. Myers and the company’s leadership team needed to cascade their messages across both geographic distance and administrative levels. And they needed to figure out a way to prevent the message from losing steam as it cascaded away from its corporate-management source.
The first step was to engage the company’s top managers. To get all of the primary decision-makers on the same page, Myers instituted a monthly conference call for the top 250 managers and executives at PETCO.
“Every month, we review how we did as a company and the near-term objectives for the upcoming period,” he says. “We consistently use this forum to talk about the dimension of each of our leadership principles and providing solutions for the customer.”
From that central meeting, communication needed to reach all the way down to the associates who work on the sales floor at each PETCO store — and the associates on the lowest rungs of the company needed to take the message of innovation and new ideas to heart.
The large-scale communication strategy focused on two principles: Keep it simple and grab employees’ attention.
“In today’s business world, sound bites are really important,” Myers says. “That is why we promote each of our basic organizational elements in a way that they can be easily remembered as concepts by themselves.
“We hold a leadership summit where we bring all the general managers in charge of every store together in one place, and spend a couple of days together. We go through some in-depth discussion on our basic principles, some tactics and training on how you bring these things to life for your associates. From there, they bring it back to their stores and have your own store huddle and relate the short-form version of what you worked on at the summit.”
Depending on the size of your company, it can take some time for a philosophy change to take root with every person. But if you can involve management at each level, you can help the message cascade more quickly and efficiently.
“If you can do it this way, the whole company feels like they’re touched at some level with the message,” Myers says. “There is no silver bullet, and no easy way to do it. The way to do it is to be consistent, be regular in your communication and ensure that you have a plan as for how that information will filter down through the organization.”
Innovate within a structure
Myers had to walk a fine line as he rekindled his company’s innovative spirit. While he didn’t want PETCO to maintain its status quo, he also didn’t want to drift so far into new territory that the company no longer focused on the products and services that had become its calling cards.
Innovating is good for a company, but innovating without a structure and set of goals can become a destructive force to your company’s vision and mission.
Myers met the challenge by communicating PETCO’s foundational principles of pet care and customer service as he was spurring an innovative mindset. In addition, he attached employee incentives to the company’s annual goals.
Myers didn’t want to hinder new ideas, but he wanted to create a culture in which employees and managers at every level of the organization are held accountable for setting personal goals that fall in line with the company’s overall goals. Within that structure, employees could innovate with the same targets in mind.
“We set specific goals for performance each year, and we have a program that acts as a repository for that,” Myers says. “It starts with me and our senior executive team. We sit down and lay out our financial plan for the upcoming year and all the various elements that will be required for us to be successful. We embed personal goals and company goals in each of our performance objectives.
“The system allows you to cascade that throughout the organization. My goals are cascaded down to the store level, so that everyone knows about them, and store-level goals are rolled up to organizational goals. By demonstrating personally that you start at the top by setting those goals and those goals are going to integrate with achieving the company goals, it sets a strong example for the rest of the organization.”
Personal goals at PETCO are linked to the company’s rewards plan, creating another connection between innovation and company goals. Half of an employee’s year-end bonus is based on the extent to which the company achieved its goals and half is based on the extent to which employees achieve their personal goals.
“In addition, halfway through the year, you have to meet with your manager as a kind of check-in,&#x
201D; Myers says. “At that meeting, you go over what progress has been made against the goals you’ve set for the year. It might also be a case where you have to adjust your goals if some external things happened that made the goals less likely. You don’t want to set goals that can’t be reached.”
Building innovation into your company’s collective mindset is a constant process of education, reaffirming, funding and gathering feedback. That’s why building a system for implementation is so critical to success.
“You can’t just say, ‘We need innovation,’ and just sort of hope that it bubbles up somehow,” Myers says. “You have to put money in your budget for trying new ideas and develop a process for submitting new ideas. You embed the process and then fund some of the ideas that match your overall goals. Then you have to share with the organization how it worked or didn’t work. After that, you have to solicit recommendations for future areas in which you can innovate.”
It also helps if you can maintain an open-minded approach when you’re soliciting and vetting ideas. You have to accept that there might be different ways to accomplish the same objective, and the way your company has always done it might not be the best way.
“As a leader, you need to have a personality that allows for innovation,” Myers says. “By that, I mean the idea that you can try different things at various levels of the organization. You need to realize that it’s OK to do things a little differently in an effort to find a better way to accomplish the same things. You’re not setting new objectives, you’re setting new approaches and new ways to better satisfy those objectives.
“With that, it’s OK to have some failures as you try new ideas, because you have to find out if they can be proven or not. You do your best to make sure each idea is properly vetted, but sometimes ideas fall short of expectations.”
Test new ideas
PETCO’s renewed focus on innovation has helped keep the company thriving (it generated more than $2 billion in 2008 revenue) in spite of the economic downturn of the past two years.
PETCO’s success has much to do with its ability to keep producing fresh ideas for employees and customers. But there is one more wrinkle that Myers and his staff have to deal with: how to get those ideas from the drawing board to the sales floor.
Once you give the thumbs-up to a new idea and green light it for rollout, it’s usually better if you can get a sample-sized result before you implement it throughout your company’s entire footprint. That way, if miscalculations are made, the effects won’t hurt the entire company.
Myers has set aside regions of stores for new product, service and policy testing. If the reception and results are positive, PETCO will roll out the new idea to larger regions until it takes effect across the entire chain.
Throughout the rollout process, Myers and his leadership team are frequently checking the new idea’s progress and gauging how well it is being received via feedback.
“You don’t just roll a new concept out to 1,000 stores and see how it turns out,” Myers says. “You take some small samples, learn what the outcome is there, what the challenges might be in implementing that new direction, and be sure you keep communicating with everyone on how to overcome them and how to avoid the pitfalls.”
If an idea is a success, it will begin to sell itself as people throughout the company start to buy in.
“More often than not, you find someone who has been a success with what you’ve just tested, and you let them be a promoter of change with the people they work alongside,” he says. “That one-to-one communication makes the new idea more personalized, and the more personalized you can make the experience, the more receptive people will be to the idea, and the more they will believe that it can be successful.”
How to reach: PETCO Animal Supplies Inc., (888) 824-7257 or www.petco.com
Michael Perlman sees a lot of similarities between being a football coach and a CEO.
“I’ve always assumed a head football coach would probably make a great CEO because you have to get everybody fighting together toward the same common goal,” says Perlman, president and CEO at BrandsMart USA, a $1 billion electronics retailer with 2,500 employees. “If they are fighting each other, you have a problem.”
In football, it’s common for a strong offensive team to blame a porous defense for not holding a lead or for a stellar defense to get frustrated with a futile offense that can’t score any points. In the business world, the ideas of teamwork and camaraderie are just as essential to success.
Your job is to remind everyone that it takes all their contributions to make the company succeed and then prove it to them. The challenge is in establishing that proof and selling them on their value to the company.
Perlman looks to his leaders to convey the knowledge he has provided them to their direct reports. The process then continues on down the line until everyone has received it.
“If you do that, you wind up with an organization where everybody thinks alike,” Perlman says. “An organization of like-minded people will always win.”
It’s similar to the way that a veteran player on a football team will take a young rookie under his wing and show him the ropes.
It’s not that you’re looking to create a group of clones that are similar to you in every way. The intent is to encourage ingenuity while moving forward together toward a common goal.
“Like-minded people believe in the same goals, but aren’t necessarily structured by the same methods of getting there,” Perlman says.
Here’s how Perlman has developed a group of employees that can put their own unique skills to use toward the common goal of helping BrandsMart USA serve its customers.
Provide learning opportunities
The effort to teach employees has to start at the top. You need to take an active role in giving people chances to learn and coaching them to become more productive workers.
Perlman has found success by engaging employees in troubleshooting missions. He’ll assign a similar task to two or three individuals at different levels in the company and see how they handle it.
“I can tell an operations person and a store sales executive both to go out and build a table shopping the competition on what they are doing for delivery charges,” Perlman says.
“You get these different protocols back and then you figure out what’s the real right way of doing things. The key is you have to challenge people now and then and allow them to come back to you to ask questions when necessary.”
The idea is to get employees to open their minds about a specific issue and put their own skills and talents to use to find a solution rather than passively relying on your direction.
“If you take a 25-year-old and say, ‘Here’s your job and here’s how you do it,’ he gets bored,” Perlman says. “You take a 25-year-old guy and say, ‘Here’s your job and this is how we want the end result to look like. Why don’t you do it how you want to do it and then we’ll discuss if your way is better or worse than the normal way.’ If you challenge people, you can really drive creativity.”
Perlman says your ability to read people will help you be better able to tap into that creativity.
“If I come out with a new concept, I’ll say, ‘Does anybody have an opinion, good, bad or indifferent?’” Perlman says. “‘Does everybody agree with this? If you don’t agree, tell us what your issues are.’ If everybody is sitting there, giving you that blank stare, that’s not good. If they are sitting up in their seat and looking up at you, that’s a good thing. Reading people is very important and if you’re not good at it, start playing poker. Even if you lose a little money, you’ll make out in the long run.”
It’s through this constant communication that you will develop a fluid list of ideas to toss out to your people for consideration.
“They’ll tell you where the problems are and what the customers are saying,” Perlman says. “It can sometimes involve just asking people, ‘This is how we do this, this is how we’ve been doing it, what would you do differently?’”
When you get an answer that seems to make sense, listen to it.
“Most people tend to not listen to the people who they have assigned various tasks,” Perlman says. “The larger you get, the more you have to delegate. In turn, you then have to really listen to what your people tell you.”
Make employees feel valued
You hire employees to do a job and fill a role in making your organization work. In order for them to buy in to your leadership and give their all toward their work, you need to show them that you value their efforts through positive reinforcement.
“My experience is that 75 percent of all people need positive reinforcement every 90 days,” Perlman says. “Without that, their world crumbles.”
He likens it to being a parent who is trying to encourage a child.
“If you tell them to do their homework in September and you don’t come back again until November or December, you think they did their homework all the way through?” Perlman says. “Probably not.”
The lesson is that you need to constantly provide this reinforcement, whether it’s an e-mail, a pat on the back or a commendation at a company meeting. One of the best times to do it can be when business is a little slower.
“When business is very fast, you don’t have the time to work on those things,” Perlman says. “We’re doing something called the ‘wow factor’ now, which is where we want the store upper management to do something that is above and beyond for the customer every day. It could be anything. From the head store manager carrying a package out to a customer’s car in the rain to almost anything. We use e-mail and send them around talking about these wow factors. Then they compete with who has the best wow factor this week. When the store manager does it, the guy underneath him does it and that’s how that works.”
But showing value is more than just saying, “Good job.” It’s following through on commitments that they agreed to follow when you hired them.
Perlman recalled a young employee who had worked hard to earn a promotion and done everything he had to do to make it happen. The only thing left was Perlman’s authorization to make it official.
“He already had all the documentation on file,” Perlman says. “I was unable to do it the first day it came in. I went to do it the next day. He called me the next morning and said, ‘Why haven’t I been approved yet?’”
Perlman promptly took care of the authorization and the promotion went through. The lesson learned was just as he might need to give a little boost to employees to get things done, sometimes he needed a boost, too.
It’s the idea that everybody operates under the same set of rules that provides a level of comfort for employees to know what to expect.
“If you have a name-tag rule that everybody has to wear a name tag, certainly the top executive better be wearing a name tag,” Perlman says. “It can be simple things like where employees can park. We have a health care plan and the same plan for an hourly warehouse guy is the sam e plan that I’m on. There’s no unfair deals. I may get paid more than that person, but I don’t have a different 401(k) plan. I don’t have a different medical plan. If it’s good enough for you, it should be good enough for your people.”
Reinforce the fact that while some employees may work in different departments, you do all work for the same company. Getting to know their names is a good place to start.
“There was a time when I knew everybody in the company,” Perlman says. “I haven’t been there in years. But there’s a familiarity that you can develop with your people that’s important. Know as many people by first name as you can.”
Everybody would like to work at a company where nothing bad ever happens. Unfortunately, that’s just not realistic. Bad things do happen every day and problems arise and people have disagreements about how to deal with them.
As you work to bring everyone on track with your goals for the organization, you need to be sure you are creating an environment where employees can raise concerns and questions without fear of punishment.
“Let’s say I walk up to a guy in the warehouse and say, ‘How is this going,’” Perlman says. “‘Are we having any problems with a particular brand of big screens?’ He may look immediately toward his boss who is the warehouse supervisor, who may look to the guy who runs the warehouse who may look over to the store manager to see if he is getting anybody in trouble. But you still want that guy’s response.
“He’s scared of saying something that could get somebody else in trouble and, in turn, get himself in trouble. The reality is, you’re looking to put somebody at ease.”
The key is to not penalize people for raising concerns.
“The famous comment on that is the old production line that allowed anybody to stop it if they saw a problem,” Perlman says. “But if the guy did stop it, he got in trouble because it slowed down production. Here they go and they develop this great system that any one person can stop a line if there is a problem. On the other hand, the guy has to be absolutely positive he is right. Otherwise it could really affect the company’s productivity.”
You have to make it clear that someone who is raising a concern is not a bad guy and should not be viewed that way.
“Whenever I speak to people as a group, one of the things I’ll always say is, ‘Within the company, we may disagree with one another every once in awhile, but there are no bad guys in the company. The only bad guys I know are the competitors,’” Perlman says. “ Get everybody focused on the bad guys, which are the competitors. If you can get everybody thinking that we’re the good guys and they are the bad guys, that goes a long way toward getting that concept across.”
Mohammad Abu-Ghazaleh had a tough story to sell. At the time that Abu-Ghazaleh led his company to the purchase of Fresh Del Monte Produce Inc. in 1996, the producer, marketer and distributor of fresh and fresh-cut produce had reaped some rotten returns. Not only did the purchase come with the assumption of $300 million in bad debt, but it also came with a criminal record — or, rather, two criminal records. First, the company, which had been a part of the Polly Peck International family, fell on hard times when that company’s chairman, Asil Nadir, fled as it folded under financial pressures. In the fallout, Fresh Del Monte was taken over by Carlos Cabal, a Mexican businessman with his hand in banking, hotels and insurance. Within two years, Cabal became a fugitive of the Mexican government, accused of embezzling $700 million from his own banks. To this day, charges hang over the heads of both men. Meanwhile, Abu-Ghazaleh was left with an internal and external mess.
“The company was like a ship without a captain in the middle of the ocean, and it was really a miracle the company had gone through these two dramatic episodes and was still floating,” Abu-Ghazaleh says.
And then, it’s only natural that everybody was a little suspicious of Abu-Ghazaleh, the company’s chairman and CEO, when he started to tell the story about how the company was planting seeds for brighter days.
But Abu-Ghazaleh, the son of a famed fruit importer and businessman, believed that if he could restore faith both internally and externally he could turn the company around. The story wouldn’t sell overnight, and maybe some people would never believe it, but he began healing the company one day at a time.
First, he established a new relationship between management and employees and external people by setting a new tone for ethical behavior and keeping promises. As he began to establish that credibility, he improved on it internally by taking his tale on the road, visiting all of Fresh Del Monte’s locations after doing his homework to understand where the company was headed.
Here’s what he learned along the way.
Set the example
Abu-Ghazaleh doesn’t have to think long about where the financial troubles that plagued many of the nation’s former powerhouse companies in late-2008 stemmed from. His own experience with Fresh Del Monte taught him how important leadership integrity is to long-term success.
“The whole thing transcends from the top down,” he says. “We see it now in the market today, this whole turmoil with many of the financial companies and other companies in things like the insurance industry. The problem is actually management and leadership, in my opinion. It’s greed in one aspect, it’s self-interest, it’s short-term vision, so many factors play into this.”
Abu-Ghazaleh had that in mind when he began digging Fresh Del Monte out from scandal. The basic first step you can take when people — be they internal or external — are having trouble trusting a company’s management has to do with reining in your promises. It’s easy to set high expectations and tell investors, employees and your customers that you are going to do several great things. It’s much harder to live up to that. Since he first took over, Abu-Ghazaleh has been obsessed with keeping his promises. Rather than promising people a full turnaround of the troubled company, he first promised that the faith of investors and employees would be rewarded with steady growth. While he could have promised an immediate turnaround to bring money to the company and fire up employees, he knows that would mean nothing two years down the road if the company didn’t follow through.
“If you go back to all of our statements and my conference calls over the last 12 years or so, you will see we have been very clear in our message,” he says. “I was always saying that I will never try to drive the stock myself through wishful thinking and through ambiguous maneuvers or misstatements. For me, with all due respect to all the analysts, the investors, to everybody, I will not do something just to please the analyst or investor by saying or doing things that will be counterproductive or not in the interest of the shareholders. If you can start with that, you’ll always be successful at the end of the day.”
Beyond being careful about people’s expectations, Abu-Ghazaleh believes you can be the internal motivation for your company by simply knocking out the idea that the boss is out of touch with reality. Television bosses always show senior executives as detached people who come down from corporate to dictate orders before going golfing. It’s a stereotype, but you may be helping to feed it. Remember that everyone is watching you, so if you just told someone to cut expenses, you better have your own expenses listed as No. 1-A on a public audit list.
“It’s the way you act, the way you behave, I mean your day-to-day transaction of business and how you conduct yourself, how you conduct your business,” he says. “You cannot tell people, ‘Save money, don’t waste, don’t do that,’ if you are not an example of this. This is just one thing. You cannot tell people to work hard, and they see you taking vacations throughout the year on the beach and different places in the world — you have to be an example. And you cannot tell them to be honest when you are trying unlawful things or doing things that are not ethical.”
And Abu-Ghazaleh says his rules are there for businesses of every size. Big or small, you have to know that everything you do is documented by your employees and weighed against what you ask them to do.
“These are simple basic examples of conducting business or even a lifestyle,” he says. “It’s simple. I believe that regardless of how big, be it $10 billion or $50 billion or $1 billion or a $100 million operation, it’s just translates to the same way of conducting the business.”
Expand your credibility
Building credibility begins with basic trust, but if you want to dig out of a hole like the one Abu-Ghazaleh was facing, you also need to make a personal impact with every level of your company.
“I personally don’t have any problem meeting with the high-level executives as well as the middle-level management as well as the people in the field, which I do regularly,” he says. “I have to have these relationships with the top people in the business as well as in the field. An employee has to see your face and know that you exist. You have to transmit confidence; this gives them a kind of association or identification. They identify with this company, they feel they are part of this company, we are one team, and there’s not a big boss sitting at the top not even close to the people in the field. These are very important issues that one has to take in to consideration.”
The first part is taking the time to regularly be in front of your people. If you have two locations, you can obviously do more of this than if you have 200, but the point is you have to make the visits and meet with every level of employee.
“I do make visits every year, at least once, to visit these operations, and I meet with the people in the back office or the field and do have dialogue with them and look at the operation in the field,” Abu-Ghazaleh says.
Each visit isn’t just shaking hands. Restoring employee faith in leadership means that you have to show employees that you know your stuff. Abu-Ghazaleh makes sure he has real conversations with people about what their group is doing and how it measures up with similar groups in the company. Creating that type of conversation comes from doing your homework ahead of time. Abu-Ghazaleh has each of his centers send a weekly report on where production is, how that meets with its goals and what problems, if any, have slowed production. You don’t have to get every detail of every day’s work, he says, but you have to have a basis for where that group is headed.
“If there is a problem today, we have to correct it by tomorrow,” he says. “Our business cannot wait six months. We are in a business where everything is perishable, and you have to make decisions on a daily basis.
“I’m not just reading reports. From my background, which is in agriculture and farming, I do know more or less the obstacles, the challenges and the solutions that can be found for our operation, and that helps. When you know the business, it’s easier to speak with people.”
Abu-Ghazaleh says the more you can make these types of visits, the more you’ll have to take to the next meeting. In fact, if you can have these engaging conversations with employees, you will build up a knowledge that creates a benefit for both ends.
“It’s a mutual benefit,” he says. “It’s not only that (employees) take something from me or from the COO, which we are often on these trips together, but we learn from them. We learn that if we see something wrong we can rectify it immediately, and the only way you can really learn if the business is going right is by being on the spot, by being in the field. And when I say field, it doesn’t mean you have to be at a farm, it means you have to be at a distribution center or a factory. When you are there, with the knowledge one builds, you can even read behind the lines, you can tell if things are right and if something is not right.”
But if you’re looking to turn a company around, you can’t just go through this process once. You have to stay on top of each unit’s reports and continue to make visits. Building up confidence in the short term will quickly be forgotten if employees no longer have a touch point with you the instant the company starts to improve.
“You are not coming every six months to look at this report, you are reading it every week, and you are watching the macro environment,” Abu-Ghazaleh says. “You have to be aware of what’s going on around the world, what’s going on with the raw materials, fuel, so many factors, and you have to put this picture all together ... so it takes time, it takes effort, but if that’s what it needs, then that’s what you have to put in.”
It’s been more than a decade since Abu- Ghazaleh took on the challenge of changing Fresh Del Monte’s story. But from a company with $300 million in bad debt, Fresh Del Monte has been able to see solid fruits to its labor, pushing beyond $3.36 billion in sales in 2007, along with $179.8 million in net income. To Abu-Ghazaleh, a majority of the company’s resurgence is about rekindled faith in management.
“I think at least 50 percent comes from that because all the players adapt to that kind of mold and you have to build respect between the top management and the middle management and the lower management,” he says. “Big company, small company, middle-size company, news spreads around very quickly. If there is something wrong, it spreads even faster. So it’s very important the image and the attitude you portray to people at the end of the day. In one word, ethics in everything in life, that is the most important thing.”
HOW TO REACH: Fresh Del Monte Produce Inc., (800) 950-3683 or www.freshdelmonte.com
If you want to become an approachable leader, don’t shoot down someone’s idea, even if you’ve heard it before, says Steve Kopitz.
Kopitz, founder, owner, president and CEO of Summit Sports Inc., says that it’s easy to cut ideas short when you’ve been in business awhile and think you’ve heard it all, but you need to keep an open mind.
“We may have tried it 10 years ago,” says the leader of the sporting goods company, which posted 2007 revenue of about $20 million. “It may have not worked back then, but it may work now.”
Smart Business spoke with Kopitz about how to be more approachable to your employees.
Q. What is the biggest challenge to being approachable?
The biggest challenge is getting people over the hump of really believing that it’s true. They’ve usually worked for people that are not approachable or who say they are. We have a saying in my company, and that is, ‘No one can be fired for anything that they say.’ Meaning, you need to feel comfortable and you should feel comfortable in voicing your opinion, even it’s completely against what we’re doing. Maybe it’s you think everything we’re doing is ridiculous, but we want to hear that opinion. Even if we maybe don’t agree with it, when we’re done hearing it, we still want to hear it, and I don’t think that corporate culture exists in most companies.
So, you can’t just have a person come in and you tell them, ‘Well, nobody ever gets fired in our company for what they say (and) that all of a sudden they’re just going to be an open book and tell you everything that they feel. It takes time, often months or years, before people truly believe and understand that philosophy.
Q. How can a leader create an open corporate culture?
The best thing that you can do is simply go around and ask people how they really feel. That doesn’t mean they’re necessarily going to tell you the first time, but, over time, they’re going to get comfortable when you seem to really be interested in their opinion, and especially when their opinion actually ends up being something that you implement.
Because we sell sporting goods and it’s something that everybody who works in the company really likes, we have these things called ‘Sports Bucks,’ and that’s basically gift certificates that we give employees for a variety of reasons.
One of the things we give them to (employees) for is for good ideas. So, when an employee comes up with a good idea, we’ll give them $25 or $50 or $100 of ‘Sports Bucks’ that they can use toward free sports equipment of their choice.
So, not only do we compliment them that it’s a great idea, but we really reinforce it by rewarding them with some cool sports equipment.
Q. How do you become more approachable?
The first thing is you have to be very open-minded. You think you know the way, and I have very strong opinions in my business, but I never make any decision without consulting at least multiple people. Because, even though I think things are really clear, after I consult multiple people, I find that sometimes, my ideas are not as well thought out as I thought.
I try to emphasize to all of my staff, ‘Don’t make any decisions in a vacuum. Run your ideas by other people.’
Sometimes, you’ll change your idea completely, or some times, you’ll get an enhancement on it. But, even at the top, it’s very dangerous to make decisions without getting as much input as you possibly can.
Q. What other advice would you have for a leader on how to become more approachable?
One is just a real open-door policy. I’ve got about 150 employees, and they all can and often do call me or e-mail me or sometimes even stop in to say something or even invite me to lunch if they have something really on their mind.
Q. What does an open-door policy mean to you?
It means that every employee has to feel comfortable. I mean, your door can be open, but that doesn’t really mean anything. They’ve got to feel comfortable that they can really speak their mind and get a bit of your time and that you really will give them the feeling and the sense that you really care about their opinion.
Even if you don’t agree with it, they don’t always have the information that you have. But, sometimes there’s a morsel, that if you shut yourself off just because maybe you’ve done it before or it’s something that you are totally against the best ideas come out of the craziest ideas.
So, you’ve got to let a person completely explain what their thought process is and not shut them down in the very beginning because once you shut them down the first time, they’re not going to come back and talk to you again.
HOW TO REACH: Summit Sports Inc., (888) 271-7500 or www.summitonline.com
When Rick Voigt vets an acquisition opportunity, he lets the other guys talk first.
Voigt, co-founder, president and CEO of 38-employee Today’s Business Products, wants to hear what the leaders of the company he’s considering purchasing have to say about their company its money-making points, the areas that need improvement and, above all, what they think is a fair asking price.
“Think about buying a car,” says Voigt, who has completed two acquisitions since 2004. “If I tell you I’ll give you $10,000 for your car, you might say, ‘Sure, but I was only going to ask for $8,000.’ So that’s why you have to ask what they have in their mind as a fair price. After you establish that as a base, which is really the most you would pay for it, then you can work it out to a number that works for both of you.”
It’s all part of Voigt’s philosophy on acquisitions: Take it slowly, listen constantly and gather as much information as possible.
When you are purchasing a company, Voigt says you’re not really purchasing the company itself. In fact, because of potential legal liabilities, you might not want to purchase the company pound for pound. What you are purchasing is the business of its customers. As such, you want to make sure that you can adequately serve the new customers you are absorbing through the acquisition.
One of your first stops when vetting a potential acquisition, Voigt says, should be the company’s customer lists.
“After we’ve signed the confidentiality agreement, we’ll sit down and look at their customer lists,” he says. “I try to find out about the relationship with each customer. That’s where the ‘80-20 rule’ comes into play. You can probably assume that 80 percent of their business will come from 20 percent of their customers. So you really have to look at the top 80 percent of the business, how long they’ve been an account, what is the relationship with them and are there additional opportunities.”
Voigt says that due to attrition, you can only safely assume that 60 percent of an acquired company’s customers will shift to your business. The remaining 40 percent might not be the right fit for what you offer.
To maximize the number of customers you are able to bring over to your business, search the management staff of the company to be acquired for potential leaders who could fill roles on your management team. They will give you valuable insight into the history of the business, and they might be able to bring additional customers with them.
“If they have some quality current staff, we let them interview. If we can use them, we bring them on,” he says.
Customers and employees are the first groups of people you have to consider when vetting a potential acquisition. But Voigt says the litmus test of whether you pull the trigger on a purchase will be in the numbers. If the numbers you see don’t equal the words you hear, walk away.
“It all goes back to trends,” he says. “If the owner is telling me business is great, and I look at his trends and they’re going the other way, I can see that what he’s telling me doesn’t add up. That’s the big thing. You have to know you’re going to have a return on your investment.”
HOW TO REACH: Today’s Business Products, (216) 267-5000 or www.todaysbusinessproducts.com
Lessons of acquisitions
If you have the financial clout, purchasing another business is a way to quickly increase your company’s size and customer base.
But the road to a successful acquisition can be covered with booby traps, says Rick Voigt, president, CEO and co-founder of Today’s Business Products, so you have to go on the defensive and remember that your first responsibility is to protect your own company.
Voigt has completed two acquisitions since 2004 and has learned a number of lessons along the way. Here are a few of them:
- Do what you say you’re going to do. “If you make a promise, you have to fulfill it. The last acquisition we made, we went above and beyond our promise to the owners. The first acquisition, we had a retirement party for the owner. He was just shocked. He said, ‘I can’t believe you’d do that for me.’ We invited his customers over to see us. It was very well-received, and he was very happy. Now, we tell potential acquisition candidates to call him, and he’ll tell you how we work.”
- Hold the other party accountable.“When you’re talking to a potential buyer, once they have made the commitment to sell, if they’ve changed their minds, it has to cost them something to get out of it. You’ve put the time and money into making this proposal, and you have to say that you’re not going to let them do this and just walk away from the table. That clause has to be in the contract.”
- Hire an experienced attorney. “Make sure you are purchasing only what you want to purchase, that you’re not purchasing bad debt, tax liens or impending lawsuits.”
When running a business, it’s easy for you to make the job a lot harder than it needs to be. Just ask Mick Parker, president and CEO at Village Pantry LLC.
“My background, my upbringing and my personality fits in well in this convenience store business,” Parker says. “It’s not rocket science. We’re just selling beer, Twinkies and gasoline.”
With a chuckle, Parker says that there is a bit more to it than that when it comes to running a 1,400-employee, 170 location company like Village Pantry. (The company does not disclose annual revenue, but Dun & Bradstreet estimates it to be more than $120 million.) But Parker stands firm behind the notion that the essence of strong leadership does not need to be complicated.
“I don’t want a strategic plan that would take four binders on a shelf and never get read,” Parker says. “I want it simple and actionable.”
This kind of simplicity becomes even more critical in a business such as Village Pantry, where many of the employees earn $8 an hour and are using the job as a steppingstone to other positions in the future.
“You have to identify who your constituents are and make sure that your overall goals align with their needs,” Parker says. “For us, our mission is very simple. It’s to make Village Pantry a great place to work, shop and invest. When I presented this to the organization, it was very clear on the order. A lot of people will say customers come first. I’m a Southwest Airlines believer. They believe in the people first, and if your people are happy, your customers are happy. I’ve kind of adopted that belief.
“I spend quite a bit of time talking about making this organization a good place to work and trying to align them on that. I believe if your employees feel you are sincere and you are caring, and they believe that and then you demonstrate that, that’s part of being a role model. I think other things fall in line.”
The key to making this work, of course, is being a leader who your employees are willing to accept as a role model.
“The only thing that will convince them is delivering on what you say,” Parker says. “Consistency. You can say something, but until you walk the talk and deliver on what you’ve said, you’re probably suspect. I’ll never forget the first day I was here. I said, ‘I totally see where you’re coming from if you don’t believe me; it’s my job to earn your belief and earn your respect. We’ll do that through simplicity and consistency.’”
Parker says Village Pantry has been able to grow quickly because the map showing where he wants to take the company is an easy one to follow. When new acquisitions come into the picture, it doesn’t take much to get them on board with where the company is heading.
Here’s how he does it.
Share the love
Before you can get employees aligned to a mission or vision, they need to be aligned with each other. Often, the best way to do this is to get them together outside the workplace in a setting that allows people to temporarily set aside the roles they play on the job.
In December, Parker gathered many of his employees at a local sports bar.
They wore red and green, in large part because of the upcoming Christmas holiday. But there was another more official motive that Parker had in mind for getting employees dressed in the traditional holiday colors.
“As hokey as it may sound, we made everybody wear name tags,” Parker says. “Those of us who had red were new and green was old. The idea was to get people to understand who had been around for a while, who can help you and who is a good resource.”
If you want a successful company, you need a culture in which everybody feels like they are on the same team and working toward the same goal.
“Take personal responsibility for each other’s success,” Parker says. “I believe if you are personally attached to the people you work with, you’ll take responsibility for their success. Logically, you’re more concerned about your friend’s success than somebody you don’t know.”
When trying to drive change in your culture to reach these goals, you must be the agent of change and lead the way to transformation by engaging your leaders throughout the organization in this effort.
“Define it, implement it and then reinforce the culture,” Parker says. “Be good coaches and good trainers. Be good at providing feedback and rewarding success. The leadership group should develop and communicate the vision and then make sure that everybody is aligned.”
While it is up to the CEO to get things started, it won’t mean a thing without support from those other leaders in the company.
“If their boss doesn’t make them feel like they are a valuable person, it doesn’t make any difference what I do,” Parker says. “If I don’t make sure that the six folks that report to me feel that way, then they won’t have the six folks that work for them feel that way. It has to come from your boss first. It can be an empty promise when it comes from me and the layers in between don’t support it. You completely lose all credibility.”
Obviously, it takes more than just a manager telling an employee that he or she is valued for it to be worthwhile. The positive attitude must be ingrained in the culture and part of what the company’s mission and vision is all about.
It also must be reinforced with action. Show your employees that you have more than just words and catchphrases to offer them and to show them that you value their role in the company.
Parker went to work updating Village Pantry’s employee compensation plan by putting together more competitive pay packages that included bonus and incentive plans and scheduling regular performance evaluations.
He also sought to create better training programs to help employees grow within the company.
“I want an organization where people can grow and they can make contributions,” Parker says. “We believe in breadth, not necessarily depth.”
If you set out down the path to enact a new mission statement and align your employees toward a vision, don’t turn around the next week or the next month and launch an entirely new plan.
“I don’t want to be a flavor of the week,” Parker says. Parker faced a challenge in convincing his employees that his plan would be around for a while after Village Pantry employees had faced a number of different visions and strategies over the years.
“They’d had lots of different leadership,” Parker says. “Everybody was the flavor of the day, and there was no consistency. It’s very confusing to your employees. They don’t know whether what they are doing is right or wrong because it might change. There is another danger to it. Some people may not embrace change because they think if they wait it out long enough, it’s going to change anyway. That’s a real risk.”
Following through on what you say you’re going to do is the only way to convince employees that you’re being forthright with your words.
When you have a large company with employees working at many different locations, it is easy for the message that you give as the CEO to change by the time it has been passed from one person to another and then another.
This is where simplicity again becomes critical. “As you push messages down, there is a chance they can get convoluted,” Parker says. “When you whisper in somebody’s ear, by the time it gets to the last person, it’s something totally different. Our business can work that way. That’s why we try to keep our messages simple and consistent. I would encourage repetition. You have to say the same thing over and over and over again, and it will finally start sinking in. It’s not a one-shot deal. It’s simplicity and consistency.”
Use your tools
Parker says the most foolproof way of communicating with employees is to meet with each of them in person. Since that is often impossible, the next best thing is to make sure you bring in people you can trust to deliver the message on your behalf.
Getting that type of person takes more than just some undefined gut instinct.
“The danger is your gut is wrong,” Parker says. “Use the tools that you have available to you or if you don’t have those tools, explore if you need them. There’s lots of assessments available that can help you make a good decision. ... Do good due diligence.”
The hiring process is much different for management positions than it is for lower-level employees.
“In reality, the further down the organization you go, we’re probably trying to weed out the bad apples and trying to make sure we don’t make a bad hiring decision at the store level,” Parker says.
Do whatever you can to find other people who can offer you their thoughts on a person you may be thinking about hiring.
“I look for some target hires with people that have proven track records,” Parker says. “They were tried and true and proven, and I trusted them. Where I didn’t know, and I was making a key hire, I found people that could talk about them.”
Group interviews can also be helpful. “We have different personalities in the interview process,” Parker says. “We have some people that are very probing and can almost put you on the defensive. Then you have other people that are more soft and are more, ‘How do you feel?’ It’s really kind of interesting to look at the dynamics. A lot of it is just personalities.”
These dynamics can lead to interesting but fruitful post-interview discussions as to who is the best candidate for the job.
“It’s not necessarily a democracy, but we usually try to come to a group consensus,” Parker says.
As Village Pantry grows, Parker wants someone who has experience with quick development. As an example, he identified the head of Midwest store development for the legendary coffeehouse chain, Starbucks, to take a key position.
“A proven-track-record kind of guy,” Parker says. By getting the right people who buy in to your plan for the company, the consistency of message to your employees is ensured.
“You owe it to your employees that they know how to do what they are supposed to do to be successful,” Parker says. “Don’t make somebody feel bad for asking what is potentially in their mind a dumb question. This isn’t rocket science.”
HOW TO REACH: Village Pantry LLC, (317) 594-2100 or www.suncappart.com
Kip Tindell, co-chairman, CEO and one of the founders of The
Container Store Inc., wanted to build a strong team of great people
that could help grow his store of home and office organization
products into a national chain of stores dedicated to helping consumers organize their lives. Since the store’s founding in 1978,
he’s done that, and he’s proud of what the company has achieved.
But Tindell says the success has come as a result of one key focus:
quality. He wants his stores located in the very best locations for
his potential customers, even if that means waiting for the right
location. More important, he only wants the best employees, even
if it means spending more — a lot more — than the industry average to get them.
“The most difficult and frustrating and rewarding and wonderful
part of any business is the people aspect of it,” Tindell says. “I’m a
big advocate of the fact that you can’t achieve uncommon results
unless you are surrounding yourself with people who are awesome. If you’re going to have a golf team, why not have Tiger
Woods on it?”
The $550 million Dallas-based retailer has 39 locations and 3,500
employees, and has never shuttered a store. The company has
grown at a steady pace of 15 to 20 percent annually.
Tindell’s commitment to quality calls for careful analysis and a lot
of patience, regardless of whether it’s real estate or people. For
Tindell, rushing would lead to a dilution of the company’s quality,
and that, in turn, would put the entire company in jeopardy.
Great customers make great employees
The Container Store’s success starts with knowing its customers,
and knowing them well. By simply collecting phone numbers of
customers at the checkout point, the store knows who shops,
what they buy, where they live and even their average income.
Tindell says The Container Store’s strongest customers have a
household income of $100,000 and up, are highly educated and
highly likely to be female.
And here’s what’s interesting: Tindell sees those people as great
potential employees. Tindell says if they like shopping at the store,
they’ll love working at it, and he’s been proven right, time and
To capture those potential employees, The Container Store’s
staff members have little cards on hand that they are free to hand
out any time they meet someone whom they believe would be a
great employee. The card invites the recipient to apply for a job at
the store, and this doesn’t just happen when a store has openings,
The Container Store invites anyone to apply at any time and
begins training new employees before others leave so the company’s always ready when a vacancy occurs. Not that it happens
much: Annually, the retailer’s turnover is in the single digits. The
company hires about 6 percent of those who apply.
“We always have backups,” Tindell says. “We are very big on succession planning. I run across a lot of great retailers and business-people that I’ve admired over the years that, as they became older,
they didn’t have any succession planning, no one chosen to replace
themselves or their top people.”
Almost two decades ago, Tindell adopted the one-equals-three
philosophy, where one great person is the equivalent of three good
ones. Instead of staffing a store to the max, Tindell’s philosophy is
to hire only the very best people.
“If you really believe that, you can afford to put your money
where your mouth is,” Tindell says. “It takes a lot of bravery to pay
50 to 100 percent above industry average, but it works because
everybody wins. The employee wins because she is getting 50 to
100 percent more money than someone else might pay her, and the
company wins because it is getting three times the productivity for
only 50 to 100 percent more pay, and the customer wins because
they are getting this really great person who is thrilled about their
compensation and loves to come to work every day.”
Employees aren’t paid on commission, because that tends to
encourage them to sell more than a customer needs. Instead, they
are trained to help customers solve problems.
A good example is a customer who wants something to organize
his or her shoes. The employee is trained to ask deeper, more probing questions of the customer about that person’s entire closet. If
his or her shoes are disorganized, chances are, so is that person’s
closet, and The Container Store sells a variety of products that can
help tame that troubling, disorganized beast.
Ultimately, the store will sell more products by helping customers solve problems rather than just meeting the immediate
need that brought that person to the store, and Tindell says the
customer is happier in the long run.
Part of what keeps employees working for The Container Store
is the company’s level of investment in them. It spends about 240
hours training employees before they start work, and continues
the training as they continue to work so that they are always up to
date on the latest products.
“You can’t lose them once you do that,” Tindell says. “Once you
have that kind of investment in an employee, you need to have a
very, very low turnover rate, which we do.”
That’s at least in part because of a few great perks. Besides its
higher-than-average pay, employees receive a 40 percent discount
on products. Because many of them are already storage aficionados, that’s a really nice perk, and it encourages them to continue to
get to know new merchandise as it comes in. Tindell says the more
merchandise they know, the more products they can demonstrate
and the more customers will buy.
For a new store, Tindell has a very deliberate process to staff it.
The company opens up a nice office near the store that’s set up as
if it is a location of The Container Store. Applicants get the look
and feel of how the store will operate.
Before their group interview, applicants are given a homework
assignment: Find a product on the company’s Web site or in its
store that they like and give a presentation on how the product
works and its major features. Applicants are interviewed in
groups, and product demonstrations take up most of the initial
interview time. That shows how potential employees sell and
how they interact with others.
“They get a good flavor in this group interview for the quirky
culture of The Container Store,” Tindell says. “People leave the
interview and go home and say, ‘Oh my God, I hope I get this
job.’ It’s a thrilling process.”
After the first cuts are made from the group interviews, the
company’s representatives from its home office and retail locations personally interview potential associates in several oneon-one interviews.
“We start months in advance,” Tindell says. “We hire our
employees a couple of months before the store opens so that
they are fully trained. They participate in the set-up of the
store. Most retailers hire employees a day or two before the
store opens because they don’t want to pay them for the previous month or two. We hire them as early as possible.”
Group interviews continue year-round, even though stores
might not have openings, to ensure every store has enough
employees whenever they are needed.
Tindell says one key change has helped the company redefine
how it thinks about recruiting: Recruiting is under marketing
at the company; The Container Store has no human resources
“We just wanted to break the mold on that whole concept,”
Tindell says. “The people who are in charge of recruiting for
the company understand that it’s not their job to go out and
recruit great people for The Container Store. It’s their job to
make sure that the rest of us are constantly recruiting great
people to work for The Container Store. A key part of everyone’s job is to find other great people to come and work for
The Container Store.”
The recruiting card is a handy tool for doing that, even if it
means giving them out at a family gathering.
“We are happy to have friends, cousins, relatives,” Tindell
says. “People know which of their cousins are great and which
are not. ... It takes a little bit of boldness to recruit a soccer
mom at a soccer game. We are huge on the concept of our customers make our best employees.
“Employees get recruited right off the sales floor. We really
want our employees to be people our customers can relate to.”
Part of what keeps The Container Store strong is knowing its limits. Similar to his philosophy on employees, Tindell says he’d
rather have one great location than three good ones. He concentrates on finding the very best retail locations for stores, which, as
it happens, are in plaza-style, outdoor shopping centers that allow
the stores to be on one level.
Customers are buying large, bulky items, in many cases, and
wouldn’t want to carry them around a mall.
“There is a limit of how fast we can grow,” Tindell says. “We are
not limited by capital. Money has never been our limiting factor.
Our limiting factor has always been the people aspect of things. We
have learned we can grow at 15 to 20 percent a year. It’s right for
us. We take the best real estate development locations we can
Currently, The Container Store has some 29 markets it is examining, and the company waits patiently for the right space in those
markets. And until it taps out the U.S. market, Tindell won’t consider international markets, as he says that’s a whole other type of
market. He says there are more than 100 cities he’d like to locate
in, and as he sees it, that means The Container Store has decades
of potential growth ahead of it without ever sacrificing its quality.
“It’s the most exciting period in our history,” Tindell says. “We are
in this adolescent stage. Even though we’ve been in business since
1978, everything just keeps getting better. Now, everybody wants
us in their shopping center.
“That wasn’t always the case. Now, everyone seems to want
to work for us. The average person we hire is better and better
and better. The products we are able to develop with manufacturers are getting better. ... It’s so much fun and so exciting
because it just keeps snowballing. We are really hitting our
stride right now.”
HOW TO REACH: The Container Store Inc., www.containerstore.com
When Earl Hesterberg arrived at Group 1 Automotive Inc. in 2005, the company resembled the United Nations more than a chain of auto dealerships.
Group 1, which operates 101 dealerships primarily located on the East Coast, West Coast and in the South, had 15 operating clusters but none were speaking the same operational language and none were really able to communicate with each other.
The problem resulted from the company’s roll-up strategy, which was quickly building the company’s scale, but the various parts weren’t operating as a cohesive unit.
“We had 15 clusters of dealerships that were all operating autonomously,” says Hesterberg, president and CEO. “That meant we had 15 different ways of doing things. So we needed a mechanism to really integrate the business and operate it with more uniformity.”
Hesterberg cut down on the layers of management by shifting from 15 operating clusters to four regions, each with its own vice president that reports directly to him.
The company’s leaders also implemented new operational software and financial practices, standardized across the entire dealership chain.
“We’ve begun to switch all our dealerships to a standard chart of accounts,” he says. “We didn’t even have them all on the same accounting format. Ford dealerships would use a Ford financial statement, Toyota dealerships use their own, and it was virtually impossible to compare performance across our dealerships on an apples-to-apples basis.”
Getting all 101 dealerships in the $6 billion chain to speak the same language has been instrumental in enabling Houston-based Group 1 to grow into new markets with minimal problems. Acquisitions are rarely easy, and Hesterberg says forming standard practices and driving them across your company is a key first step. But successful integration starts with acquiring a company for the right reasons, communicating who you are to newly acquired employees and finding the synergies to make your investment pay off.
Playing the field
Finding the right acquisition isn’t just a matter of making sure that you can align your practices. In fact, Hesterberg believes in giving his dealerships a great deal of autonomy in how they conduct their day-to-day business, so long as the metrics and technology provide a way to communicate and compare performance.
As important is making sure that an acquisition is going to fill a need your company has.
When Hesterberg and his senior managers are considering a dealership purchase, they look at two things before all else: market growth and brand growth.
“If we go into a new market, we prefer some ability for market growth, meaning a growing population,” he says. “If there is not a very strong indication of market growth, then we really have to be with one of the top brands in the industry, a BMW or a Toyota.”
It’s why Group 1 has concentrated growing in what Hesterberg refers to as the “smile around the U.S.” The vast majority of Group 1’s dealerships are located in 13 states down the East coast, across the Gulf Coast to Texas and Oklahoma, then up the West Coast, all areas with booming populations.
Hesterberg says once Group 1 has carved out a presence in an area, the goal is to begin building scale in that area. Having an isolated dealership or two in a city isn’t really cost-effective; the bang for the advertising buck isn’t good when you are advertising for only one or two locations in a city, and there is always the threat of being squeezed out by competitors who are more entrenched.
Hesterberg says the key to creating longevity in a market is to become one of the biggest fish in the pond.
“We always look at where we can make an acquisition that we can tuck into an existing operation and give us more scale,” he says. “We bought some dealerships in New Hampshire recently, about an hour north of Boston. We would not have gone into New Hampshire as an isolated venture, but we have eight or nine dealerships in Boston to give us a very powerful position in that market. We have management there, administrative help there and media buying power there.”
Once you have decided to pursue an acquisition, it’s important to find people who have local ties to the area and understand the customer base to which you will try to sell, and let them decide how to best market your business. “The dynamics of each market can be a bit different, the dynamics in terms of the demographics, the income, is it a luxury market, an import market,” Hesterberg says. “For example, some East Coast markets have been heavy lease markets, but Texas has historically not been a big lease market.”
Knowing your market and your customer base is critical, especially if you have investors looking for a quick return.
“We pay a significant amount of money for an acquisition,” Hesterberg says. “We need to start to generate a return on that investment immediately. We don’t intend to wait three or four years because that’s not fair to our shareholders, so we can’t afford to have a lot of trial and error as someone learns the market from the ground up.
“So experienced local management is a critical part of the success formula.”
Being the new boss
Another important part of the acquisition success formula is having employees who are on the same page. While having standard technology and practices can help assimilate employees quickly, it takes a great deal of direct communication from the corporate office to really give employees a sense of belonging to their new company.
Hesterberg drives Group 1’s business philosophy down to the dealer level before his company even assumes control.
“Recently, I’ve gone out and had dinner with all the dealer department heads prior to an acquisition deal closing,” he says. “It’s just to answer questions and show them that we’re real, we’re human beings.”
Throughout his business life, Hesterberg says that 90 percent of all problems he’s encountered have been due to a lack of communication from management. It’s why, from the get-go, Group 1’s management and human resources department are on-site, educating and communicating with the employees of a new acquisition.
The first order of business is to put out any rumor-driven brush fires within the employee ranks, before they turn into a raging blaze.
“They’re worried that everything is going to change,” Hesterberg says. “They’re worried about losing their jobs. That’s something we deal with early on, that we intend to work with the people who are here.”
If you’re making an acquisition, you’re probably purchasing it because it was attractive. That fact needs to be communicated to employees if you intend to keep them on board.
“When we purchase a dealership, we’re paying based on their current level of performance,” Hesterberg says. “We don’t want a dealership to go backward, so we generally keep the employee teams very much intact.”
In almost all cases, Group 1 is a larger company purchasing dealerships from a smaller entity, so the company attempts to make its new employees feel at ease by selling them on the positives of working for a large company. “Our HR department does some training early on,” he says. “We frequently find that by being a bigger company, we have benefits that hadn’t been available to some employees before, like a 401(k) plan with a matching employee stock purchase program. So that shows some of the positives of joining our team.”
After addressing the initial concerns of employees, Hesterberg says it is important to begin coaching them in the culture of your company right away.
Within several weeks of taking over, all employees have been trained on Group 1’s employee handbook and workplace harassment prevention, have taken drug tests and gone through background checks. “It sets the tone that you are working for a large organization with morals and values and ethics,” he says.
On the first day of assuming control, Group 1’s management gives employees a toll-free hotline number to report potential workplace problems. Complaints are personally reviewed by Hesterberg and summarized for the company’s audit committee, which meets quarterly.
The hotline is a way for company leaders to keep tabs on what is going on in the field. It is also designed to give employees a sense that corporate management is interested in what is going on in the field and willing to address problems. “If they’re uncomfortable with what’s happening, if they think business is being done improperly or people are being treated unfairly, they can call the number,” he says. “It can be completely anonymous. That way, there is a mechanism for people to communicate if something is bothering them. And it’s outside their normal chain of management. “Most of the time, going through your chain of management works. But sometimes, people perceive management as part of the problem. This gives them a way to report something without fear of retribution.”
Cross-pollination of ideas
Group 1’s leaders try to reach out to the company’s dealerships in multiple ways, especially in the first few months after an acquisition. But in the ensuing months and years, Hesterberg wants dealers to come to him.
Twice a year in person, and at least twice a year over the phone, Hesterberg brings all his dealer general managers together by domestic, import and luxury brands.
The meetings give Hesterberg and his senior managers a chance to find out what is going on in the field. It’s also a chance for general managers to speak to each other, spreading ideas across the organization. “They’ll compare performance data, financial statements and sales reports,” he says. “They’ll share ideas, they’ll compare performance numbers. We’ll also use the opportunity to train them.”
Hesterberg calls the general managers’ meetings Group 1’s main mechanism for sharing ideas. It helps paint a picture for what moves the company should make next.
Hesterberg says there is always strength in numbers when it comes to cultivating and spreading ideas throughout the company. You can’t have everybody speak at once, but the more minds at the discussion table, the better. “We reinforce our corporate values, we share best practices, we learn from each other,” he says. “That’s one of the advantages of having 101 dealerships. We have enough Ford dealerships, we have enough Toyota dealerships, that we can learn from each other.”
Hesterberg says that you shouldn’t expect all of your managers to have the same management style, the same demeanor or interpret every piece of information the same way. What you should expect is that they adhere to the same values and have high ethical standards. That’s the importance of communication. “We can’t expect 101 general managers to have the same personality or management style,” he says. “But we expect them all to represent the values of honesty, integrity and hard work that we have in this organization.”
HOW TO REACH: Group 1 Automotive Inc., www.group1auto.com
Bill Watson wants to make sure his employees never get a case of the Mondays, so he sometimes creates change simply for the sake of creating change. “It keeps the people energized and excited; it shakes things up,” says the president of Grimes Horticulture. “You can’t let your employees get bored into the mundane ‘9 o’clock: Drink coffee; 12 o’clock: Eat lunch; 1 o’clock: Call everybody who owes me money’ sort of routine.”
So he changes schedules, avenues of communication, promotions and anything else he can to keep employees from slipping into a rut. The strategy has translated into $10 million in 2006 revenue for the gardening supplies vendor.
Smart Business spoke with Watson about how to inspire passion and trust in your employees.
Q: How do you motivate employees?
If the leadership of the company is smiling and enthusiastic about the day, the rest of the employees will just fall right in suit.
If you’re an employee, you want to know that your company is doing well. You want to know that things are going in the right direction, the environment is stable and secure. And the leadership of a company does that by being upbeat, smiling, moving forward on a positive way.
If I walked in the door every day frowning, saying, ‘Woe is the company, woe is me,’ we would fail. You have to just give the image that you’re not afraid of failure. What separates the men from the boys is simply the guy who keeps moving forward.
Q: How involved in the day-to-day operations should a leader be?
You need to spend 10 to 20 percent of your time working on what’s going on in your company. And when you do that, you have to have an outside-in viewpoint.
As a manager, it’s pretty easy to get involved with what’s going on internally inside your company. That matters, but what matters more is how your customer sees you. The only way you can see that is to get involved with the day-to-day operations of how your company is communicating with your customer.
As a manager, you’ve got to ask yourself, ‘How did I treat myself today?’ You’ll get some real realizations of how dumb you can be in how you’re treating your customers. Once you become a customer of your own company, there are some light bulbs that go, ‘Pop!’
Q: What is the greatest challenge you’ve faced in business?
You can’t let the business world set your goals, your aspirations or values. Every day, it’s a challenge not to let the business world take you down a path full of quick fixes, lack of integrity and poor ethics. The challenge is not this one thing you go after it’s every day. You’ve got to fight making those short-term decisions that will take you in the wrong direction quick.
It’s so easy as a business leader to take the shortcut, to do something wrong to make the Enron kind of decisions. It’s tough, and every business leader fights that because people expect quick results. Unfortunately, quick results sometimes conflict with good ethics, good morals and business sense.
Q: What pitfall should a CEO avoid?
Lack of trust. If you don’t have trust in your employees and your employees don’t trust you, then you’re not going in the same direction together. You’ve got to have a company that is a team.
Without trust, you don’t have that. We spend a lot of time discussing where the industry is going and where our company fits in with the industry. But if people don’t trust you, it’s just words.
Q: How do you inspire trust in employees?
It starts at the top; you have to demonstrate it first. You have to walk the walk and do what you say you’re going to do.
As a business leader, before I say something, I better make sure I can do it. Or, at least tell them I’m not sure. Because if I say we’re going to go right and then tomorrow we go left, I’ve lost their trust.
Q: How can you improve your leadership skills?
Read. Find any book you can find about leadership and how to manage people. As the CEO of a company, you’re never going to be the one who does anything. You’re going to be the person expected to lead.
There have been so many phenomenal leaders in history. If you go down to the bookstore today, you could probably come out with 500 books on leadership. Read every one of them, because every one has a good idea in it or a good method you could learn from.
You’ve got to be a leader, and that’s not something people are born with. A lot of people think, ‘He was a born leader.’ Pardon my French, but that’s a bunch of crap.
HOW TO REACH: Grimes Horticulture, (800) 241-7333 or www.grimesseeds.com
Marty Betagole loves a challenge, and that’s exactly what she got when she assumed her role as president of Mike Albert Leasing Inc. Mike Albert is one of the top 12 vehicle fleet managers in the country, with more than 20,000 vehicles leased throughout the United States and Canada and more than 8,000 vehicles sold each year in the used car market.
Betagole’s great-uncle, Mike Albert, started the company in the 1920s as a used car lot, and in the 1950s, her father, Robert Betagole the current CEO of Mike Albert Leasing suggested the company begin leasing vehicles as a way to generate used cars to sell. “If you look up entrepreneur in the dictionary, my father’s picture could be there,” Betagole says.
And while she says her father’s management style is directive, she herself uses a highly collaborative approach.
“It’s a double-edged sword,” she says. “Being collaborative means you gather more ideas. However, it takes more time and patience to execute.”
Smart Business spoke with Betagole about why patience, confidence and an ability to listen are critical to growing a company.
Q: How do you manage change?
Change and leadership are unavoidably linked. If you do not change to meet the times, you disappear. Likewise, if you change too much and you lose sight of what you are all about, you may also disappear.
This quote sums it up nicely: ‘Preserve order amid change and preserve change amid order.’ That is what I try to do.
My change management style is to take a collaborative approach. There are two ways to listen, and each is equally important. You must listen internally and remember that good ideas abound in your organization.
Do you want an engaged staff who embraces change? Pay attention to their thoughts. You must also listen externally to what your customers are saying and what your competitors are offering.
Change is scary. You may feel the fear, but as a leader, it is essential to maintain your composure and reassure the troops, especially during uncertain times of change.
Q: How do you communicate your vision and message to staff?
I don’t, really, because they are part of building it. People more naturally support that which they create.
One tactic I use is to plant seeds of ideas. I sometimes perceive when we need to shift directions or change our approach. I may subtly suggest ideas in conversations with staff, so that they gradually adopt them.
This is not meant to be manipulative; it is a smart strategy for building buy-in and support.
Q: What are the key skills of a great leader?
There are many skills needed, but these three come to mind immediately.
Confidence. You must stand by your convictions and trust your intuition. You are in a position of visibility and scrutiny. All of your decisions won’t be popular. Great leaders cannot be oversensitive.
Patience. While I don’t have patience with myself, I try to be tolerant and understanding of others ... to a point.
Ability to listen. The most effective leaders know it is more important to listen than to roar.
Effective leaders are also not afraid to break the mold and be daring.
Q: How do you grow your company?
By investing in it, employing quality people and identifying customer needs, then filling them.
We have invested significantly in our company so that we are prepared for the future. This is an easy area to neglect, and we have been guilty of this.
Keeping up with technology is essential, especially in a mature industry like ours. It is one way to differentiate yourself in the market. Moving forward, we will strive to stay ahead of the curve.
I’ve learned some lessons about employing quality people over the years. For example, we used to hire sales professionals with a background in the leasing business. The logic was they could bring customers with them.
Now, we focus more on evaluating the skills the individual brings to the table. The best person is not necessarily one with a background in leasing.
When it comes to serving customers, flexibility is the name of the game. I have my personal opinions as to which type of lease arrangement makes the most sense. But the more important priority is to consult with your customer or prospect and suggest the best arrangement for their particular situation.
HOW TO REACH: Mike Albert Leasing Inc., (800) 98LEASE or www.mikealbert.com