Every morning, Jim McCann awakens with one goal in mind: to move his company, 1-800-Flowers.com, forward.
“We are in a constant state of reinvention,” says McCann, the company’s CEO. “It’s like Andy Grove’s book, ‘Only the Paranoid Survive’; we’re very uncomfortable when we’re not moving forward. The most uncomfortable state for us is if we’re status quo. If we’re status quo, the world is continuing to change and we’re just not changing.”
That’s because innovation seems to come naturally for McCann, who parlayed a single flower shop in Manhattan into the world’s premier florist and gift shop. He accomplished this by thinking differently about how to interact with his customers and employees, along the way rewriting the definition of what a flower shop looks like.
In the 30-plus years since McCann started the company, he and his brother, Chris, who serves as president, have expanded through organic growth and acquisitions to become a public company with thousands of employees and annual revenue in excess of $700 million.
Beyond the well-known 1-800-Flowers.com brand, McCann’s holdings are widespread and include Cheryl & Co., The Popcorn Factory, Fannie May, Harry London, Ambrosia, BloomNet and 1-800-Baskets.com.
Smart Business sat down with McCann to discuss the power of innovation and how to build meaningful relationships with customers.
Q: What are some of the ways you applied innovation to adapt during the recent economic downturn?
We looked at this as a great opportunity, especially to find talent, but we did some other things as well that helped the company. We made sure that we were able to know the customer and serve them well. We took care of the finances and preserved our cash position. And we decided to invest for the future. The investments we made were in talent, technology and new business lines.
What a great opportunity to attract people that we otherwise might not have been able to attract. We also put money into video, social networking and mobile applications. And, we launched new businesses — Celebrations.com, a social network, and 1-800-Baskets.com. People thought we were crazy to do this in the midst of a recession, but they’ve proven successful.
Q: You’ve also been on an acquisition spree, not just in recent years but over the past decade. What’s been your strategy there?
The idea of following a strategic planning process is important to building your business. There may be things that are easier and quicker, but they don’t fit into the diagram that we’re developing to build 1-800-Flowers.com. We’re a public company, so the challenge is that the outside world may not understand why we’d buy rather than build. At that point, we tell them to trust us. We can’t detail the whole plan, but we explain to them that this piece isn’t just willy-nilly; it’s part of something larger.
That may scare away some investors in the short term, but those longer-term investors who have seen us make moves and watched them come to fruition will make their own judgment and, hopefully, trust us that we know what we’re doing.
We can’t not do things because some people don’t understand. We have to keep thinking ahead and looking at good opportunities for the company to grow and become better.
Q: How do relationships fit into the equation of interacting and serving your customers?
We have 30 million customers, and we still spend a lot of time trying to create relationships. You can measure relationships, but it comes down to the quality. You’re measuring the quality of a relationship. When we look at a relationship with a customer, the more engaged we can be with a customer, the better the relationship is.
I need a lot of help running our gift shop at 1-800-Flowers.com, and if I get the help from customers, that makes my job easier. It makes my input better, and I think it makes it more interesting and more fun for our customers to be part of the process.
I’ve been trying to do that for my entire life. Today, we’re doing this through technology, and it’s been getting easier every day because of the evolution of the new technologies. Whether that’s Facebook or Twitter, it makes that engagement not only easier and possible, but if you’re not doing it, you’re missing the boat. I want my life to be fun, more interesting. I want to have more and better relationships, and technology allows me to expand the realm and depth of relationships with vendors, staff people and customers. It’s all about the relationships.
Q: So how do you build those relationships?
Here’s one practical example of how we do things. About two years ago, a lady in Ohio wrote to me and said, ‘My sister tried to make this floral arrangement for my other sister’s bridal shower. You can see from the photographs [that] it’s a mess. But I bet you can figure this out.’
So I worked with some of our talented florists and we came up with a terrific design for a margarita bouquet. We took one of those 2-foot-tall margarita glasses and we did a flower arrangement, color appropriate, with attachments, and made a margarita display for the wedding shower.
Well, as we did this, other people both inside and outside the company heard about it, including friends of the bride, friends of the woman who asked for our help, members of our staff and several of our customers. They all got involved to help. When we were done, there ended up being this whole group of people conspiring and collaborating on these designs. And it was a great success.
So we saw an opportunity for a new product, and when we decided to take it to market as another idea for the company, I went back to the same group of people and engaged them. I said, ‘How should we market this? What should our advertising be? What should we say on the ads?’ So our customers suggested the product, designed the product, suggested the marketing platforms, designed them, contributed to copy and made the single biggest floral introduction in the flower business. And it was all customer-generated.
Q: In what ways have the customer service systems you’ve built played a part?
First, I challenged our people who were dealing with our customers to handle any issue that comes up in such a way that the customer is inspired to write to me about you and what you did and how you did it.
It’s not so much what you do as much as how you do it and how you empathize and directly connect with that customer. So I tell our people to handle it like you want to inspire that customer to, on their own, write to me about how you handled their issue.
The second thing I tell employees is that if you aren’t sure what to do, read this book, and I hand them a book that’s a set of binders filled with letters customers had written to me about the wonderful customer service treatment they received from a driver who brought a package, for a telephone customer service person or online help service person who helped them with something. It’s not like it hasn’t happened before, so I tell our people to read through this ledger and it will inspire you to do something above and beyond for the customers.
Q: You’re known for your innovation. Technology certainly is an area where the company has flourished. So how do you use social media and Internet marketing to push the company forward?
We’re using technology to get more intimate and personal with other customers. It sounds like a contradiction, but it isn’t. It’s true. How else can we get to know our customers well and learn how to serve them better? How can we recreate the personal relationship I had with our first 30 customers in our 700-square-foot store in Manhattan that we had 30 years ago? Thirty years later, we have 30 million customers, and the only way we can learn about them, to serve them better, to engage them, to get them to help us, is to use technology.
(A customer) might not be that interested in helping us design a new product and she might not be interested in helping us to come up with a new saying, but she really has an interest in promotional things because it’s an area of work she’s interested in. If we give her the opportunity to not be bombarded in the areas she’s not interested in but tickle her to see if she’d like to get involved in helping with promotional pushes, we engage her on something she’s already told us she might be interested in and benefit from her thoughts and outside-the-box thinking. It’s a good way to engage a customer without having to sit down across the table from her in her kitchen and talk about the ideas.
Every day we figure it out a little bit better; we take three steps forward and, hopefully, take only one or two steps back. We weren’t part of Twitter two years ago, but it’s a big part of our life today. What a great opportunity we all have to interact with our audience and find out what’s going on in their world while sharing what’s going on in our world.
Q: Let’s talk about being entrepreneurial. In what ways have you kept a culture of entrepreneurship in the company even as it has grown?
When people think about entrepreneurial cultures, it’s difficult for us to get our arms around that. But as I think about that and some of the more entrepreneurial people and organizations I know, such as the Ted Turners and Ted Waites (Gateway) or Wayne Huizengas of the world, those entrepreneurial heroes of mine, did they make (fewer) mistakes than other people? No, they probably made a lot more. The remarkable quality they had and that we try to embody is, when we take that shot to the stomach, it hurts, we fall down, but we dust (ourselves) off and get back up. That’s what it’s all about. We don’t worry about a mistake we made four years ago but instead worry about whether the mistake we make tomorrow is one we don’t get up from and learn from. We just have to keep moving forward.
How to reach: 1-800-Flowers.com, www.1800flowers.com
With more than 14,000 employees, a top-line brand name to protect and a publicly traded company to run, Elsenhans, chairman and CEO of Sunoco Inc., had a lot at stake.
“We had to get clear about a competitive cost structure so we could position ourselves well,” she says. “We invested more in our people for leadership development and addressed gaps in our leadership pipeline. We also invested in our brand to position us for the future in our industry, and then looked for ways to turn weaknesses into opportunities. It was a chance to look back and decide what’s really important.”
That’s the core of Elsenhans’ philosophy for how to manage through tough times: Do those actions that ensure the company stays strong and robust, but give employees hope and an idea of where the business is going.
“There are a lot of things in the industry that gave us concern,” she says. “As a leadership team, we asked ourselves, ‘What are our strengths? How do we turn threats into opportunities?’”
One opportunity was to transform Sunoco into a pull company instead of a push company, bringing consumers to it through its various divisions rather than pushing out its products to them. Explains Elsenhans, “We were looking to raise our brand as a pull point and then use our company to be in transportation and energy markets and meet the demands of those future markets.”
None of this was easy, and Elsenhans says it required increased communication and a lot of explanation about what was happening throughout the organization.
“Visibility is critical, now more than ever,” she says.“Leaders have to be out there. It can’t all be video and e-mail. It’s also being able to answer (employees’) questions transparently. You have to be realistic and not sugarcoat where you’re going.”
Doing those things help a CEO build good will and secure much-needed buy-in from employees.
“By telling employees some idea of the path, it builds on it,” she says. “You get the framework out and let them fill in the picture. That’s how a larger cap company can be entrepreneurial, can get a business back on track and get it growing again.”
It also is important to work with customers that may also behaving trouble. Elsenhans says you can’t just throw them to the wolves.
“You have a contract, which protects your rights. And that’s important,” she says. “But if you can be a bit more flexible and meet a customer’s need during a tough time, you can build a better customer for down the road. Companies that have worked hard to be flexible are going to come out of this better.”
The bottom line is that CEOs managing through tough times need to have the ability to be flexible and adapt. That, Elsenhans says, will make or break your business.
“If you don’t innovate, you’re going to die,” she says. “Even very large companies. If you are not attuned to the disruptive forces in your marketplace and reacting to those through innovation, you’re going to be left behind.”
How to reach: Sunoco Inc., www.sunoco.com
business strategy class required many late nights. The class met
two nights a week from 6 to 10 p.m., and throughout those 10
weeks, he and his classmates often bonded in the halls over
snacks as they dreamed of how they would take on the world after
graduation. On the day of his final, Bettinger and his classmates
felt pretty confident that they would ace their final exam after
doing so many business case studies.
“We were ready to graduate,
thinking we were going to go out and change the world and all be
these successful businesspeople,” he says. The professor handed
each of them a blank white sheet of paper and told the students
their final assignment. “I’ve taught you everything about business
strategy as you go into the real business world,” he said. “Your final
exam is, ‘What’s the name of the lady who cleans this building?’”
Bettinger had no idea.
“We had spent four hours a couple nights a week there for the
last 10 weeks,” he says. “We had taken two or three breaks
every evening to get a soft drink or use the restroom, and she’d
been there every night. I often say to people that I didn’t know
Dottie’s name — her name was Dottie — but I’ve tried to know
every Dottie since.”
That message stayed with Bettinger as he started The
Hampton Co., a retirement services provider, after college and
grew it until The Charles Schwab Corp. acquired it in 1995.
He worked his way up the Schwab ranks, and last year, he
took over as president and CEO of the $4.99 billion financial
services giant. Despite his position, he still remembers to focus
on the people — both himself and his team.
“That’s a powerful message because it reminds us that business and the decision-making is a part of it, but people are the
biggest part,” Bettinger says. “ ... If we fail as leaders of people,
we will fail as business executives.”
Know your role
After Bettinger’s business got acquired by Charles Schwab,
he took on a new role in the larger organization and had a performance review with his new manager.
“When you were running Hampton, you were the most capable person in the firm at sales, marketing, accounting ... but
now that you’re at Schwab, you’re not the best at any of
those,” the manager said. “You may be competent in all of
them, but you’re not the best at any of them. Your job now is
to go out and find and recruit and recognize those people that
are better than you at each of those things.”
The honesty felt like a slap across the face, but Bettinger
realized that the job really had changed and he needed to
change with it.
“As you move up in the organization, you become less of the
person who does something and more of the person who actually invests in building the team who will go out and actually
do the work,” he says.
If you don’t accept this as your personal role, you’ll likely
squash your organization’s growth. As your role or your organization changes, you need to recognize how you should
change, as well.
“Each time I have moved into a broader range, I’ve had
another (personal assessment) done to try to align the dynamics of the new broader role with my strengths and my long list
of weaknesses,” he says.
This constant re-evaluation of yourself as it relates to the
position you’re in is crucial in business.
“It really begins with emotional intelligence ... and at the
core of emotional intelligence is the ability to look in the mirror and be honest with what you see back,” he says.
Often it’s hard to see your own weaknesses, so that’s why
having a third party do the evaluation can help in seeing yourself in the proper light.
“It’s easier for that independent organization to do,” he says.
“They’re not contingent on that leader for their job. They’re
open, and they’ve done this before with hundreds and thousands of executives.
He says once they paint that picture for you, it can be very
telling and accurate.
“Then it just comes down to how motivated are they to
change, because now they have someone holding the mirror
up to them,” Bettinger says. “What they do with that mirror
then will really be the determinant of whether they want to
change, because they believe their organization will be more
healthy and they’ll be better able to serve their employees and
clients and shareholders.”
The ability to be humble and see yourself for what you really are will ultimately dictate how successful you are.
“Success is never permanent,” Bettinger says. “Failure is
never permanent. Career success is attributable to many factors — not just the leader. The leader plays a role but only a
part of it. When you emphasize that if you choose to be a
leader, you’re really choosing to serve others as opposed to be
served yourself, it helps ensure the level of humility that is
needed to both be honest with what you see back in the mirror as well as attract people around you who are highly capable themselves.”
Build a team
Once you know where you stand as a leader and what your role
is, then you can focus on the people surrounding you. Bettinger
says it’s vital to establish a strong team, and one of the keys to
doing that is balancing your strengths and weaknesses with those
around you. He suggests using an outside organization to help you
with that, as well. He used a large, global organization that
worked with hundreds of Fortune 500 CEOs to make sure he had
someone with experience helping him.
“It can help you identify areas of strength and areas that you
need to build out your team with certain personalities and skill
sets and capabilities so you have the most effective functioning
team possible,” he says.
Another key to assembling a good team is to take people with
“To the extent that you can, build a team and be surrounded by
a team of people that have different experiences in life and different environments they were in, whether it’s different businesses
or different geographies — just different life experiences,” he
When people have different experiences, they will bring different views to their decision-making process. He says you also need
to have people who share the same core beliefs as you.
“If you have fundamental agreement on the core beliefs, there’s
lots of room for debate and differing views,” Bettinger says.
For example, at Schwab, everything centers around the fact that
team members want to be the advocate for their client. The belief
is that if you do right by the clients, they will choose to do more
business with you. If people don’t agree with this, they won’t be a
good fit. If they do, then he can sleep easy knowing he won’t
waste time simply trying to get people to buy in to a decision that
aligns with the organizational values.
“Talk about the philosophies that you have of leadership,”
Bettinger says. “Ask the other person about their philosophy of
He often asks people to talk about what they have viewed as
their greatest failures and successes in life. Doing so allows him
to learn more about their psyche.
When he’s interviewing for a senior team member, he also likes
to gain more insight into that person’s character. One way to do
that is by taking the person to lunch or dinner.
“It’s less of because of what they’re going to say to me, but I like
to see how they treat the waiter or waitress,” he says. “I know
how they’re going to react around me — they’re trying to get me
to hire them for a job. What I want to see is how they treat those
who maybe they view can do very little for them or they’ll never
interact with again. That gives me a glimpse into the character of
Once you have your team established, then you have to foster trust among the team members so that you can collaboratively move the organization forward. He says it’s crucial to
have confidence in each other and promote openness, transparency and vulnerability.
“You have to encourage the team to have healthy debate,” he
says. “I always feel like if my team can’t have healthy debate,
it’s my fault. It’s not their fault. It’s I haven’t created the environment to ensure that can occur.”
The first part of this involves listening more and talking less.
He says that in order to be an effective listener, you have to
have a dose of humility.
“If you begin from a position that you’re right with a capital
R, it’s very hard to set aside the views that you might have at
that point in time and listen as actively as you should to other
people’s views,” Bettinger says.
You can’t listen if people don’t talk, so make people comfortable voicing their opinions.
“Make as clear as they possibly can that it is not only safe for
the people on their team to have differing views from the
leader but actually an expectation,” he says.
Part of that comes from criticizing yourself.
“You have to be, to a certain extent, self-deprecating, self-critical, so people recognize that you would be the first to recognize if the king walked into the office one day without any
clothes on,” he says.
You also have to admit your mistakes to everyone in the
organization — all the way down to the lowest levels.
“They have to recognize that when they put together a team,
they own that team’s mistakes,” Bettinger says. “You can’t take
credit for the successes as a leader, nor can you pass off the mistakes. You have to attribute the successes to your team,
and then you have to personally own the failures.”
This trait is the fine line that divides successful leaders from
“Both probably make 50 percent good decisions and about 50
percent of decisions they make aren’t as good,” he says. “But
the difference is that the better executives are more open and
willing to admitting the half that they made that maybe weren’t
as good and are willing to do something about it. The executives that are more mediocre struggle to understand which 50
percent were which and maybe don’t have the humility to
admit that they were wrong and reverse course.”
Your people will help you identify the wrong 50 percent, but
you have to leave room for people to counter you.
“When a leader makes a point, they also have to always wrap
around that this is not necessarily the correct answer, but this
is how I see it right now,” Bettinger says. “You have to give
those openings — that room for people to maybe say, ‘Well,
you know, Walt, I agree with you — I think your point is
wrong.’ You have to create the openings. If you make a series
of definitive statements, it’s very hard for people in an organization to voice their opinion if they’re contrary.”
Bettinger also makes it a point to thank people who counter
him so they know he appreciates their feedback. That humility
acts as glue, and it makes you, your team and, ultimately, your
He says, “If the leader doesn’t leave room for the capabilities
and the competencies of the people on their team, it’s very
hard to keep a team together.”
HOW TO REACH: The Charles Schwab Corp., (866) 232-9890 or www.charlesschwab.com
Every day, there are millions of possibilities as to how Jim Davis could spend his time. As president of Chevron Energy Solutions Co., a wholly owned subsidiary of the $221 billion Chevron Corp., he recognizes time is limited and that he has to make choices each day.
“There’s an endless list of things I could be working on, but the challenge is determining what are the critical few that are going to be the most impactful to the organization to drive it forward and to achieve its goals,” he says.
Davis says that as the leader of your organization, you have to choose three to five initiatives to focus on. Everything else needs to be delegated.
“One of the good asset tests is saying, ‘What would keep me up at night if it went really poorly?’” he says. “That’s a real good indication that you’re on the right track to determining what your key metrics are.”
But once you determine what keeps you up, you have to actually stick to focusing on those few things and not get caught up in all the other possibilities. To do that, Davis relies on his 400 people to carry out the rest of the tasks.
“Getting the right people in the right roles and then empowering them to perform in those roles goes a long way to meeting that challenge,” he says.
Hire the right people
Davis starts by making sure that he gets result-oriented people for his organization from the beginning.
“You want to look for people that are always driving for results because, at the end of the day, that’s what business is here for — to produce financial results — so finding productive people that can help toward those financial results will really be a strong attribute of candidates,” he says.
“Look at how they’ve managed their life and their academic career and whatever working career they’ve had, so there’s proof that they’ve demonstrated,” he says. “Achieving results is one of the key things that leaders can use to determine whether or not this person is going to have success in your organization.”
To get an accurate picture of their results beyond what they put on their resume, you have to ask them to talk about their past.
“One of the things I like to do is have them tell me stories about their career,” Davis says. “Tell me stories where they’ve succeeded, where they’ve failed. Hear them tell the story of their life and career, and typically, you’ll learn an awful lot about an individual by how that story plays out.”
This strategy has helped Davis find out about some candidates’ characteristics outside of the office, including volunteer and philanthropic efforts or the challenges in caring for family members.
“They really prove the mettle of that person in a completely different way than perhaps what their GPA or the highlights of their career might be,” he says.
Some stories have also made him realize that some employees don’t have the values or work ethic to be successful within the organization. Additionally, if they can’t give you examples of their successes, that’s a sign that they don’t have a record of achievement.
In addition to results-driven, successful people, Davis also wants passionate employees in his organization.
“The keys are that people are passionate about the business,” Davis says. “I always look for people who are passionate about what our mission is, what our vision is and passionate about our customers.”
In order to gauge whether someone is passionate or is just putting on an interview face, Davis asks him or her what he or she is passionate about, and instead of leaving it at that, he probes further.
For example, if someone says he or she is passionate about the environment and saving the planet, he’ll ask that candidate to talk about examples in his or her life about what he or she has done to support the environment. He says good answers could range from how the person recycles and conserves energy at home to organizations that he or she is a member of to projects or programs that he or she initiated in college.
“If someone comes up short and says, ‘Well, I’m going to get started as soon as I come to work here on saving the planet,’ I know I’ve been tossed an interview answer.”
Put people in the right roles
Once you have the right people in your organization, you have to look at where they’re at.
“A real critical part of a leader’s role is to make sure that they have the right team in place in the right roles, so you can delegate critical initiatives to them, so that you’re not trying to carry the weight of the whole company on your shoulders,” Davis says. “The collective strength of that leadership team can be leveraged exponentially further than an individual strong leader can.”
The biggest challenge you need to be prepared for is recognizing when someone isn’t working.
“The real challenge for a leader is if you recognize that, that person is not in the right role, to act and to make a change,” he says.
He sees it frequently in other organizations, and he also sees leaders afraid to make any changes.
“My advice is to act and to act swiftly —not irrationally but act swiftly — to get that person out of that role and into a role where they can succeed and be productive for your organization,” Davis says. “Letting people flounder and fester in the wrong role can be cancerous to an organization.”
You have to look for the signs of trouble from people both inside and outside your organization.
“Typically, you’re going to get lots of different feedback from that person’s peers, possibly from their supervisors, possibly from their customers or suppliers,” he says. “You may even observe it yourself in meetings and interactions.”
The difficulty becomes that leaders tend to put off unpleasant things and hope the problem will resolve itself.
“It’s like a warning light on any dashboard— whether it’s an automobile or an airplane, you better pay attention when that red light comes on,” Davis says. “Business is the same way. You have warning lights tha
t come on, on your financial dashboard or in terms of managing your people, and it’s just like the warning light on an airplane — you better pay real quick attention to it because something really bad might happen if you don’t deal with that right away. Rarely does a warning light come on and it’s good news.”
When you see the warning signs, it’s important to point them out to the person who’s struggling.
“Gather the information and the facts, and then you sit down behind closed doors with that individual,” he says. “You’ll find quickly that, that person also recognizes that they’re in a difficult role that may not be the ideal fit for them.”
For example, Davis teams his business development people with engineers to go out and collaboratively develop large capital project opportunities for customers. A lot of times in a small team environment like that, the engineers will look across the table thinking they can do sales and want to switch. Oftentimes they do, but just as often, when they get on the other side, they struggle to meet their sales quotas and to make cold calls, and they realize it’s not all it’s cracked up to be. In those situations, rather than letting them flounder, the managers will move them back into the engineering side.
“If you react early enough, oftentimes, there’s not permanent damage done, so you can work with that individual to manage them out of that role and into a new role,” Davis says. “The problem is when you let it fester, and suddenly, there’s damage done to that person’s career, reputation, relationships internally as well as the damage that might be done through your organization as well as to your customers, suppliers and financial results.”
If you let it get to that point, then it’s too late. “You’ll find it’s too late to manage that person into another role in your organization,” he says. “It might mean that you’re left with nothing other than to manage that person out of your organization. That is, in many cases, the fault of that person’s leadership in ignoring all the warning signs and ignoring the distasteful or difficult thing to do and letting it get to the point where there’s no other recourse.”
Empower your people
Once you have all the right people and they’re in the positions best suited for them, you have to work to empower them in their roles so you can focus on your three to five most important initiatives. It starts with laying out expectations.
“It’s setting clear performance expectations, being very clear about what their responsibilities are, what their authority levels are, and then basically giving them confidence and the encouragement,” Davis says.
When you tell your employees what their responsibilities entail, you also have to explain to them how you’ll hold them accountable.
“Have the right metrics and the ability to check in on interim results — where you can check in on the right frequency,” he says.
In most cases, that doesn’t mean daily, and probably not even weekly, but it needs to be regular depending on the job.
“There are times when people are working on things that are so critical that maybe it is appropriate to check in every day, but in general that’s something that the supervisor or leader has to work with each of their direct reports on and say, ‘Here are the responsibilities I’ve given you,’ and, ‘OK, here’s an appropriate interim check-in.”
When you’ve discussed what the best interim check-in is, it helps you make quicker adjustments.
“You can do the fine-tuning easily that way, so there isn’t some major overhaul that needs to be done because you didn’t check in frequent enough,” he says.
Once you’ve set expectations and explained how you’ll hold them accountable, then back off and leave them alone to do their jobs.
“Where organizations and leaders get in trouble is when they feel the need to micromanage their employees to where they’re constantly looking over their shoulders, constantly checking in, almost henpecking them,” he says. “Not only is it most likely demoralizing to that employee, it also says, ‘This company doesn’t trust me.’”
While you have to hold people accountable and make sure they achieve the results you need, you also have to provide encouragement, as well. When you combine accountability with encouragement, your business will find success, and you, like Davis, will be able to focus on those top priorities.
“One of our jobs as leaders is to be the biggest fan of our employees,” Davis says. “The most effective coaches tend to be the biggest fans of their players. Oftentimes, you’ll have leaders who aren’t fans of their employees. That employee or that player picks up on that, so you have to cheer them on and encourage them and support them.”
HOW TO REACH: Chevron Energy Solutions Co., (800) 982-6887 or www.chevronenergy.com
Anne Sweeney likes to think about how taking a risk on a cartoon mouse can turn into a $35.5 billion entertainment juggernaut.
That keeps Sweeney, co-chair of Disney Media Networks and president, Disney-ABC Television Group, from getting a big head about how Disney and ABC programs like “Hannah Montana” and “Grey’s Anatomy” have taken over the television world. Instead, she focuses on how The Walt Disney Co. was created by a man with the ingenuity to borrow $500 to start a company in his uncle’s garage with nothing but a few drawings.
“That’s really how the company started was with great risk and seizing opportunity, being experimental,” Sweeney says. “You have to look back at Walt Disney and think, why did he believe that theme parks for families would work, why did he believe that these little animated films that starred a mouse would captivate people? Everyone that signs up to work for Disney has signed up to be an innovator and has signed up to explore new tasks.”
So Sweeney, who is responsible for the entirety of Disney’s global entertainment and news television properties — which includes, among other things, the ABC Television Network family — has pushed the envelope by growing through innovation. Disney has stayed ahead of the consumer curve, creating outlets for its programming through high-tech toys, like iTunes and its own Web content, while also expanding franchising capabilities.
“I decided a long time ago that not only is change good, but I’m not afraid to change,” she says. “I think the greater danger for companies and human beings is not making the changes and maintaining the status quo.” Refusing the status quo has kept Disney surging forward. Since Sweeney took her role in 2004, her group has exploded, growing from $11.2 billion in ’04 to more than $15 billion in ’07, equaling roughly 42 percent of Disney’s overall revenue.
Keeping the momentum behind that much growth isn’t easy, so Sweeney is constantly pushing new angles for fresh ideas on what consumers want next. Here are a few strategies Sweeney uses to keep that mentality.
Make employees tinker with toys
Don’t feel intimidated by the fact that Sweeney is on Forbes’ and Fortune’s short lists for the most powerful women in business, you still want to work for her — especially if you want to play with the world’s latest toys.
That’s because Sweeney keeps employees thinking fresh by sending them home with the latest technology and asking them to apply it to their business.
“It really has been a great thing for our team to make sure that they have technology in their hands and are using it as it comes out,” she says. “This dates back to when TiVo and (ReplayTV) came out, I distributed them to my [executive] team and said, ‘Take them home, play with them, understand what the technology is and does, and think about it in the context of your business,’ and since then, they’ve taken home PSP [PlayStation Portable] players, and I think they were the first kids on the block with both the video iPod and the iPhone.”
The result from giving employees the latest business technology creates an interesting cycle.
“The initial reaction is, ‘Wow this is great,’” Sweeney says. “Then they take them home and, by the next weekly staff meeting, the ideas are absolutely flowing and it’s, ‘OK, can we do this,’ or, ‘What if we did that.’”
When Sweeney passed iPhones out to her top people before they became a national sensation they instantly came back with ideas on how to get Disney in on the innovation. “Now, you can get the ABC News widgets on your iPhone, and that really came out of people taking the phone, falling in love with it, using it and thinking about their business,” she says.
Not every business can use technology as fun as an iPhone, but Sweeney’s point remains: Putting the industry’s latest technology in the hands of your decision-makers and asking them how it can fit your business creates an advantage in your evolution. “It’s an absolute game changer,” she says. “To finally hold it and tinker with it is the thing that really gets people thinking. I look back on the countless meetings and conversations I had about the digital future of television as recently as three years ago, and all we ever did was talk about it, and suddenly, iTunes happened to us, and we were the first company in there with‘Lost’ and ‘Desperate Housewives.’ It really changed the culture of our company, and we were living that change. We weren’t just talking about it; we were figuring it out.
“I see how excited people are by the opportunity that new technologies have given us as outlets, and the great lesson and the thing people talk about the most is, what’s going on with our viewers. That’s the greatest opportunity for everybody here.”
Update your grassroots communications
Sweeney has another interesting take on technology: It can be added to old-fashioned forms of communication to spark growth.
She likes brainstorming sessions with small groups of people and personal connections, but therein lies the rub: When every group under her charge is in production, she has roughly 15,000 employees. So she has to pepper in improving communication outlets in her goals.
“You need your culture to be fully informed on what’s going on,” Sweeney says. “That’s the reason our company is growing as fast as it is. “My favorite thing to do is make sure people are educated, and my approach is really very grassroots, it is to bring people together in small and large groups, to walk the halls. We have a little series called ‘Coffee with Anne,’ and I pulled together 20 to 25 people.”
Those smaller groups started out as educational opportunities, but Sweeney quickly found that conversations about what was happening led people to throw out additional ideas. Now, whenever she’s traveling, they double as brainstorming sessions. She then gives every idea a chance by sharing the thoughts from one session with other groups and knows there’s life to one when she sees instant interest.
“I’ve actually funded some of the projects that have come out of that,” she says. “It’s promoted a lot of good cross-divisional work and ideas, some people have actually moved from division to division because they were inspired by someone they met at the coffee or someone they heard or something they wanted to work on next.”
Sweeney also keeps an open e-mail box where any employee can shoot an idea her way. Some ideas will fall flat when she brings them up to others, but to keep generating creativity, technological and personal outlets have to be available.
“It’s my job to start the conversation,” Sweeney says. “We don’t have a culture where people are punished when things don’t work out; we have a culture where experimentation is highly encouraged and celebrated. “I do something every day; it could be eating lunch in the commissary, it can be picking up the phone and calling a few people into my office to discuss a new idea.”
Sweeney spreads this agenda continuously to make a large company feel a bit smaller. She regularly puts videos of her presentations up on Disney’s internal Web site and hosts town-hall meetings when she travels. Each time she communicates Disney’s energy in a smaller setting, she is giving employees who might be reti-cent to speak more encouragement to come forward with ideas.
“It’s about making yourself available,” she says. “It’s about engaging them in larger conversations so they begin to learn what the company’s about, so they begin to understand the goals in a real way. It’s leaving the door open so they can wander in and say, ‘I have this huge idea, but I don’t know if it’s right for us.’ And it’s really developing a relationship where that idea can be on the table, rolled around, and, whether we end up doing it or not, everyone leaves feeling, ‘Well, that was great for the floor,’ and maybe that’s something that resurfaces a few months later, and its time has come. It’s encouraging a high level of communication and making sure people are constantly being educated about what our successes are, where our failures have been, where we are in our different business and what our expectations for growth are.”
Make sure you have a life
While you may want to work in a culture that generates ideas the way Disney does, Sweeney may not want you — unless you have a life.
“While I want to work with smart, innovative people in every single division and every single field that we touch in this company, I also want to work with people who have a life, who have interests outside of work,” she says. “We are a company that touches so many consumers in so many different ways; we really want to work with people who are a part of that, people who are living in their world, who have interests, who have hobbies and who are different from each other.”
Sweeney takes this philosophy into interviewing. When the standards for the position are met, the thing that will separate the creative employee is vigor for life.
“Yes, I want them passionate about Disney, absolutely,” she says. “But I also want them passionate about their own lives. “You can just talk about why are you here, here’s the job, here are the responsibilities and, sometimes, it’s as simple as, ‘What is your passion?’”
Sweeney remembers an early conversation with one of her key executives where he mentioned how passionate he and his future wife were about wine. Subsequently, he came out with his own wine.
“What do wine and television have to do with each other?” Sweeney says. “At the end of the day, I have a very creative, driven, passionate executive here who is driving our success for ABC and prime time.”
Pushing that drive for a life is something that has to come from the top. If employees see Sweeney working 80-hour weeks, many will follow suit.
“I have to take vacations; I can’t just tell people to take vacations,” she says. “I have to be judicious about sending e-mails out on weekends. I do have a fair amount of insomnia, and I’d get up at 3 in the morning and turn on my computer and go through my e-mails, and people were waking up at 6 and having an e-mail from me at 3 a.m. Then I started to see that I was getting responses back at 3:30, 3:45, and I realized that I was the problem, I was now giving people insomnia. Unless it’s terribly urgent, I now save those things as drafts in my mailbox and send them out at a more appropriate hour.”
Sweeney has found that creativity at Disney isn’t sparked by overtime but by people who have a work-life balance.
“The important thing that I’ve learned is that when you have a life, and you’ve truly encouraged your team to have a life, the results for your company are much stronger than if you ask them to give you 24-7, and the work becomes a grind,” she says. “I find that we have real surges in creativity when people have been able to get out in the world and step out of the zone that we’re in Monday through Friday. They come back refreshed with a million ideas. My favorite day with every employee is the first day back from vacation, where you can just feel that every light bulb is lit, and they’re fired up, and they’re just ready to go.”
HOW TO REACH: The Walt Disney Co., (818) 460-7477 or www.disney.go.com
2006, the company was in poor shape.
Same store sales — one of the most relied-upon measures of
financial health in the restaurant industry — had been falling
steadily for two years. Restaurants were closing. Shareholders
His predecessor, Stewart Owens, had stepped down after profits fell eight out of nine quarters prior to his resignation — and
net income in fiscal 2005 had dropped 48 percent from the previous year.
The only bright spot was sales, which were growing, but at a
lackluster, single-digit pace.
“When I met all the people and looked at the historical performance, I realized these are good people. They just needed a
rudder,” says Davis, chairman and CEO of the nearly $1.7 billion,
Columbus-based company. “They needed somebody to come in
and say, ‘Let’s see what we can do.’”
Find a better course
Davis wasted no time bemoaning the situation at hand when
he accepted the top post of the underperforming restaurant
and food product chain. He knew decisive action was needed
and that he couldn’t turn around the company alone. So he set
out to meet the crew.
“In my first six months on the job, I hit about 100 restaurants,” he
says. “In the first nine months, I visited all of our plants.
“I had to be visible. I talked with managers and asked them
three questions: What do you like about working at Bob
Evans? Where can we improve? And what would you do if you
He got some interesting answers.
“I heard everything from new product ideas to how we
should control our development, to wanting to better understand how to track our business, to what kind of Christmas
party we should have,” Davis says. “Everybody has different
points of emphasis. But it created an environment of really listening to the people closest to the action.”
It also helped him lay the groundwork for some sweeping
First came a change in management compensation.
“You have to be tough-minded about performance and link
your pay to clear metrics that are a stretch for the organization
but are still achievable,” Davis says. “It’s a simple principle:
Things get better; people make more money.”
Davis started by linking officer compensation to specific company
goals and used a cascade process to bring the system to other levels,
including restaurant and plant managers. Individuals eligible for performance-based pay are measured against each metric twice annually — once at a six-month check-in to see how they’re progressing toward each goal, and once to determine if they’ve met each
goal and, thus, qualify for the incentive pay.
“It’s almost like taking the SAT: Here’s the metric; here’s your
score,” Davis says. “That makes it relatively easy to say, ‘Here’s
where I did well, here’s where I didn’t do well and here’s where
I have to do better.’”
Performance metrics are linked directly to the other big change
that Davis instituted in his first few months on the job.
“Within the first 30 days, I said, ‘We don’t have a strategic
architecture,’ so I took that very seriously, and we crafted our
BEST Brand Builders,” Davis says.
The acronym BEST stands for Bob Evans Special Touch, but
essentially, the brand builders are a five-pronged strategy for
rebuilding Bob Evans.
“I’ve worked in large businesses and small businesses and
having clarity of purpose and vision is essential,” Davis says.
“It’s the leader’s job to articulate the vision, but we also have to
say how we’re going to get there. That’s where the Brand
Builders come into play.”
- Win together as a team.
- Consistently drive sales growth.
- Improve margins with an eye on
- Be the BEST at operations
- Increase returns on invested
“It’s hard to argue that these aren’t things you need to do to
build a business,” Davis says. “They’re very clear measures.
And each of the five Brand Builders are tied to incentive pay. I
think everybody bought in to it. It gave us a road map to follow.”
Communicate your plan
Once the direction was clearly set, Davis’ next task was to
“broadly and boldly” communicate the five BEST Brand Builders
to the more than 50,000 employees throughout the Bob Evans
“We’ve got people working in plants, we’ve got people working in restaurants, we’ve got satellite facilities, we’ve got people in California, people in Ohio,” Davis says. “We had to find a
way to connect with all the different constituent groups across
Posters, mouse pads and other assorted paraphernalia were
emblazoned with the five expectations set forth in the Brand
Builders. Davis began hosting departmental lunches and companywide meetings to reinforce the importance of the Brand
“It’s a way to motivate and get people energized around the
Brand Builders,” he says. “They’re the key to our future success.”
In addition, Davis now has his own corporate blog within
“I have a blog where people can go online and ask me anything,” he says. “People want to know what’s going on in their
Despite all the improvements in internal communications,
what probably speaks the loudest to employees is seeing actual results.
“The first half [of fiscal 2007] was pretty rough,” he says. “But
the second half was really strong. That’s when the business
started to turn and cash flow started getting better, and we
started being smarter in where we were spending and investing our money.”
For example, when Davis promoted Mike Townsley to executive vice president of food products, he immediately combined the corporately owned but separately branded Bob
Evans Farms and Owens Foods product lines into a single unit,
helping reduce overhead, streamline operations and maximize
buying power. In addition, Davis’ Brand-Builder-inspired
stance that business segments now had to “earn” capital
investment by meeting sales and profitability expectations
helped send a message of fiscal responsibility throughout the
company and stave off losses.
“We went from restaurant openings as a birthright to
whomever has the best return on investment will get new capital in the future,” Davis says. “If we want to improve shareholder value and drive stock price, we have to be great at
return on value.
“I think the majority of people understood what we were trying to do [with the Brand Builders]. But we started really hitting our stride when we started getting results. When that happens, people start to realize these Brand Builders really do
Get buy-in at the top
Communicating with shareholders and board members was
also a vital part of Davis’ turnaround plan for Bob Evans. After
all, measurable change was going to take time and shareholders had already run out of patience with Davis’ predecessor.
“One of the first things I did was visit some of the top shareholders,” Davis says. “I said, ‘Here are my thoughts on the business. Give us time to craft a strategic plan.’ When we came back
with the Brand Builders, I think they saw we were serious
about performing. Then, when the results came, that spoke
“The best way to earn the support of shareholders is to show
progress in operating results, and our Brand Builders generated improvements shortly after we implemented them.”
As for the Bob Evans board of directors, Davis was careful to
get alignment with them on the direction he was sailing before
he got too far.
“You have to make sure you have a direct line with the
board,” Davis says. “Change starts at the top.”
Board members were very receptive of the Brand Builders
concept, and together with Davis, they crafted a five-year
strategic plan to further solidify Bob Evans’ course.
“Everybody rallied around it,” Davis says. “We are headed in
the right direction today.”
So where would Bob Evans be today if Davis had not taken
control and set a clear, performance-centered direction for the
“It’s hard to speculate,” Davis says. “The business didn’t get
to where it was overnight. I kept reminding myself of that. I’m
just proud of our team and our company for galvanizing as
quickly as we did and moving in a better direction.”
The clearly humble Davis says what he has done with Bob
Evans isn’t so extraordinary. It’s basic change management.
“You start with a plan, you communicate it, you get alignment
from your key stakeholders and your board, and then you don’t
waiver,” he says. “You have to keep driving it.”
There is, after all, still a long way to go.
Although sales and net income are still plodding along, same-store sales have rebounded into the positive column and cash
flow has improved dramatically. So much so, in fact, that the
board of directors has authorized the repurchase of up to 3 million shares during fiscal 2008 on top of the 2 million shares
repurchased in fiscal 2007.
Shareholders are regaining confidence in the brand, and
employees seem to be encouraged, too.
“I’m seeing people smiling a lot more,” Davis says. “It’s a reaffirmation that we’re at least trying to move in the right direction.”
But it’s just the beginning.
“I’m one of those happy-but-never-satisfied guys,” Davis
says. “You can never rest on your laurels and think your turnaround is complete. There’s a fine line between positive and
negative sales, so you can’t become the least bit complacent.
There are a lot of external factors out there. You have to
always be on your game.”
Still, the progress he’s seen is encouraging.
“When you see it work, it’s so rewarding,” Davis says. “When
you sit in a meeting, we’re not challenging which direction
we’re going anymore, we’re challenging the best way to get
HOW TO REACH: Bob Evans Farms Inc., (800) 272-7675 or www.bobevans.com
In the airline industry, just running a company in the black is an accomplishment. But somehow, Colleen Barrett, president of Southwest Airlines Co., has found a way not only to operate in the black but to expand the airline’s reach and grow, as other airlines are filing bankruptcy, cutting service and even folding. Barrett and the company’s two other top managers, Herbert D. Kelleher, chairman of the board, and Gary C. Kelly, CEO, have done this by building a culture of employee warriors who help them look out for the company’s best interests. “We tell our employees over and over and over that if they want to continue to enjoy job security, which is very rare in our business, and if they want to increase their personal welfare from a financial standpoint, the only way we can continue to do those things is if we make more money,” Barrett says.
Southwest’s legendary warrior spirit started in the early days of the airline’s epic fight for the right to fly planes. The company spent three-and-a-half years in court fighting just for the right to put a plane in the air.
From those early days, everyone has been ready for a fight, always understanding that the airline’s very survival was at stake, every single day, with every single customer. With that attitude, employees have helped build the airline into a company that brings customers back, time and again, because it has taken flights beyond functional to fun.
Since its founding in 1971, Southwest has grown to 32,000 employees and reported $7.6 billion in revenue in 2005. Drawn to the airline by low fares and high customer satisfaction ratings, some 88.4 million people flew Southwest in 2005.
Since 1987, the airline has maintained the fewest overall customer complaints as published in the Department of Transportation’s Air Travel Consumer Report, according to Southwest.com, the company’s Web site. In 2005, Southwest ranked first in customer satisfaction. In 1973, the airline adopted the first profit-sharing plan in the U.S. airline industry. Through this plan and others, employees own at least 10 percent of the company stock, increasing the employees’ ownership mindset.
Barrett says that early fight was the basis for how the company thinks and operates today.
“The competition and the arrogance of people who didn’t think we should be there caused us to want to be there even more,” Barrett says. “I’ve often thought that if they had just left us alone, we probably would have been out of business in a year or two. Every step we took, they tried to block, and that built up a fire in the belly, and a ‘By God, nobody is going to do this to us’ sort of mentality that I think created what we now call our warrior spirit.”
So how exactly do you engage your employees in helping grow your company? Barrett says it starts with hiring the right people.
Southwest has defined what kind of personality matches nearly every type of job within the airline. For a customer service representative, the company looks for proactive extroverts who won’t be afraid to lean toward customers when talking to them. “We have learned over many years how to talk to people,” Barrett says. “It doesn’t matter what the subject. When they answer us, words that they use in their answers will give us certain kinds of personality characteristics that will be a good fit for each job that we have profiled. We have profiled almost all jobs at Southwest.”
Conducting interviews in a group setting is one way Southwest both culls applicants at a quicker pace and sees how applicants deal with people they don’t know. Some 50 to 60 people are interviewed at one time for similar jobs. “In a group setting, we are really looking for the superstars,” Barrett says.
The main interviewer has the participants play a few games to warm the group up and tells them they are expected to be respectful of each other. The interviewer then asks individuals to answer questions in the midst of the group and watches not only how they answer but how others in the room react to them. Are they looking at the person who is speaking? Do they laugh when the person says something funny?
Barrett says the company also sometimes watches how applicants act when they go to lunch in the Southwest cafeteria. Do they talk to others while they are in line? Do they sit in a group with people they don’t know and converse easily? Or do they find a quiet corner and sit alone, hoping to be unnoticed? The better fit for Southwest, in most cases, is the natural extrovert.
In the book “Nuts! Southwest Airlines' Crazy Recipe for Business and Personal Success” by Kevin and Jackie Freiberg, the authors tell the story of a pilot being interviewed for a job at Southwest who is rejected because he is rude to several employees during his trip to the interview location. His credentials were sterling, but his personality was all wrong, so he was not hired. “If you are not a warm-spirited, touchy-feely person, you are going to feel so out of your element that you are not going to be happy here,” Barrett says, which is even true for the company’s managers. Barrett recalls one comptroller whom she helped find a new job after he confessed he didn’t like the warm-and-fuzzy culture.
After employees are hired, Southwest has to deprogram them. At most traditional companies, employees strive to be professional, which is often interpreted as suppressing humor and personality. “That’s the craziest thing I ever heard,” Barrett says. “One of the most important and significant freedoms we allow our employees is the freedom to be an individual. I have to stress, particularly with new hires, and particularly with pilots, do not spend your first year as you would at any other company not wanting to be known and just being low-key until you get off of probation. If you do that, you are wasting the very first year of your life at Southwest Airlines. “Good grief, we hired you because of who you are. We didn’t hire you because you filled a mold.”
Southwest has handbooks and guidelines that employees are given to help them handle tricky situations with customers. But those are only guidelines. Barrett wants employees to make their own judgments on how to best handle a customer. “I can’t sit here in Dallas, Texas, and write a scenario for every single thing our employees will run into, so they have to use some common sense,” Barrett says. “I don’t want people using rule books as reasons not to help customers, or each other.”
Southwest encourages its employees to have fun. The airline has a book of games that circulates among flight attendants that gives them ideas for how to keep customers entertained. Southwest employees contribute their own ideas to it, and the book is changed about once a year so the games don’t get old.
Among the games flight attendants have used is one that gives a prize to the person on board with the oldest penny. The prizes aren’t usually anything special — it’s whatever they can find on the plane, including luggage tags and extra snacks. But it’s basic psychology, again, that aids Southwest: People love to win. “People will do anything to compete,” Barrett says. “It doesn’t matter how silly the prize. ... It’s unbelievable what you can get grown adults to do.”
And Barrett trusts that Southwest is hiring people who know how to judge when it’s the right time to play a game.
“You have to know your audience,” Barrett says. “A bunch of businessmen taking a 6:30 a.m. flight from Dallas to Houston reading The Wall Street Journal, they don’t want you playing games with them. But on Friday afternoon, when it is the end of a long week and they are loosening their ties and having a cold beer and they are on their way home, then it is probably OK. You learn that sort of thing from your peers, and you learn it from their body language.”
Barrett also applauds efforts to diffuse difficult customer service situations with humor. For example, a ticket agent in Houston was faced with an upset customer claiming he was a big shot and entitled to special treatment. “He really was all over her about, ‘Don’t you know who I am?’” says Barrett. “So she got on the speaker and said, ‘Ladies and gentlemen, I have a problem. Maybe you can help. This gentlemen in the blue suit and green tie, he doesn’t know who he is. Can anybody help him?’ Eventually he was falling down laughing at it. You have to know if you can pull it off.”
And what if the customer doesn’t laugh? Barrett says she might visit with the employee and talk about what went wrong. But she is careful not to scold unless it is warranted, because she wants her employees to take chances. “I’m OK with failure as long as they learn from their mistakes,” Barrett says.
Not only does Southwest trust the employees’ judgment on the best ways to handle customers, Southwest considers those employees experts on how to save money. Its pilots know the shortest routes that save the most jet fuel. And, also recounted in the book “Nuts!,” a flight attendant once suggested the company stop buying special trash bags imprinted with the company logo for collecting trash at the end of a flight; use regular garbage bags instead. It saved Southwest thousands of dollars. And a computer technician told the airline he could build the computers it needed much more inexpensively than it could buy them, so the airline took him up on his offer.
Little things matter
What keeps employees wanting to work so hard for their employer is, in part, self-interest in keeping Southwest in business so that they can reap the rewards of ownership. But Southwest also works hard to take care of its employees, creating the kind of place they want to stay.
Barrett has a seven-employee internal customer care team that keeps track of every single employee’s birthday, significant anniversaries, the birth of children and other important events, and makes sure that cards go out for nearly every occasion. Barrett’s office sends out about 75,000 cards annually, and she knows it is meaningful to employees because she hears from them if she misses something.
“You really have to be good about it,” Barrett says.
What may be the key for Southwest is sincerity. Barrett says no company can sell employees on a fun family culture if it isn’t practiced, and believed in, from the very top down. The message from management has to be the same for both employees and customers, and it has to be honest and sincere. “We’ve always underpromised and overdelivered, and we’ve always kept it simple,” Barrett says. “We do not purport to be all things to all people, and we don’t make any bones about who we are and what we stand for. We talk openly, both internally and externally, from the same mouth, if you will. We don’t worry a lot about inconsistent messages because we don’t use them. Sometimes we’ve been ridiculed, and we’ve been the butt of many jokes, but it works for us.”
HOW TO REACH: Southwest Airlines Co., www.southwest.com
The last several years haven't been kind to Chicago's candy-making industry. In 2001, Mayor Richard M. Daley pleaded with Congress to revise the U.S. sugar policy after Brach's Confections Inc. announced it would cease operations at its Chicago confections plant by 2003.
Most recently, the Archibald Candy Corp., the parent company of Fannie May and Fannie Farmer candy, closed and filed for bankruptcy in January. Employment by Chicago's candy manufacturers has fallen from approximately 15,000 workers to 8,000 since 1970, according to published reports. Yet, somehow, Tootsie Roll Industries Inc. continues to thrive in a struggling market.
Headed by the husband and wife team of Melvin and Ellen Gordon, the company's 2003 fourth-quarter sales of $92.1 million were 2 percent higher than fourth quarter 2002 sales, according to the company's most recent financial statement. With approximately 1,950 workers and annual sales close to $400 million, President and COO Ellen Gordon attributes much of Tootsie Roll's continued success to effective promotions and marketing, and selective acquisitions.
Whether it's the legendary Tootsie Roll -- the company produces more than 60 million a day -- or more recently acquired brands such as Junior Mints, Charleston Chew or Sugar Daddies, the Gordons stick with tradition by packaging all of the company's brands in its brown, red and white image. And the Tootsie Roll, though slightly smaller than the original, still sells for the same one-cent unit price that it did more than 100 years ago. Automation and technology have helped keep the Tootsie Roll at the same price, Gordon says.
"We update our products to make our packaging contemporary and fresh, while we also maintain some of the old nostalgia," Gordon says. "And that's really important because, while we want to perpetuate some of our products as part of Americana from generation to generation, we have to make sure we're contemporary, awesome, cool."
Even diet fads don't seem to affect business. Most of the candy is low fat, and Tootsie Pops contain no fat.
"There is a place in a well-balanced diet for a sweet or a treat," she says. "We believe that, and our sales have been very, very good."
A family affair
At age 71, Gordon doesn't have the typical corporate executive background. She spent the first 20 years of her "50-some-year" marriage to Melvin raising their four daughters, while Melvin, 83, has served as chairman of Tootsie Roll since 1962.
Gordon studied at Vassar and Wellesley colleges while starting a family before transferring to Brandeis University, where she first majored in mathematics and then in Russian. She says she always had an interest in linguistics, and that it has helped her with analytic work in business. She attended Harvard graduate school before leaving to join her husband at Tootsie Roll.
"Many years ago, as a housewife, Ellen listened to business skills and became attuned to them and became enamored with business as a career," says Melvin Gordon. "She's had a good background by listening to the problems I faced in business."
In 1978, Ellen Gordon was one of only two women to be elected president of a company on the New York Stock Exchange. In a time when the feminist movement was still gaining steam, Gordon was doing the unthinkable. It was so uncommon that she says she would receive letters addressed to Mr. Ellen Gordon.
"There just weren't very many women executives -- it was very scarce, so it was different," she says. "People weren't used to seeing women as executives. I think men weren't used to having women in their groups, and I think it was an adjustment. It was an adjustment for women, too, and a lot of that is better now, although it is continuing."
Gordon considers her husband a mentor, someone who was instrumental in her learning process as a businesswoman. But that doesn't mean the couple always agrees on everything. To resolve disputes, the two negotiate like typical business partners would.
"We've had a pact since we began," says Melvin Gordon. "We don't do anything until we lobby each other until we come to a consensus."
Ellen Gordon says that, for the most part, the system works well.
"I've done it for so many years that I'm used to it," she says. "You've got to talk it out, persuade each other. The awful thing is he tried to lobby me in the middle of the night at two in the morning.
"He would tap me on the shoulder and say, 'What do you think of ... '"
Staying ahead of the pack
Acquisitions have played a major part in Tootsie Roll's ability to not only stay afloat while others sank but in its ability to increase profit margins. In 1988, Tootsie Roll bought out the Charms Co., known for its Charms Blow Pops. That investment made Tootsie Roll Industries the world's largest lollipop producer.
Five years later, the company purchased the caramel and chocolate brands of the Warner-Lambert Co., which included Junior Mints, Sugar Daddies, Sugar Babies and Charleston Chew. And it ventured into the cotton candy business in 2000 with the acquisition of O'TEC Industries and its Fluffy Stuff Cotton Candy. Also that year, it acquired Andes Candies, which includes the Andes Créme de Menthe Thins, Cherry Jubilee Thins and Toffee Crunch Thins, as well as a line of Mint Patties.
A lot of care goes into purchasing another company or product.
"It has to be a brand," says Ellen Gordon. "And it has to have a niche, a message, and we take a look at it and see what we can bring to the table, if our marketing or manufacturing expertise can help it. We have to look at it and see what potential there is for us and how it fits into our organization."
Tootsie Roll has walked away from some deals that management did not consider "the right fit for various reasons," Gordon says. But there are still deals to be made -- the company plans to continue growing its line of brand names to keep it going for another 100 years.
"We keep our nose on the times," Gordon says. "Styles have changed. We keep coming out with new products and things that would fit the times better and fit the consumer better at that time."
The company also continues to invest in its own equipment to stay lean and productive. Tootsie Roll invests millions of dollars to ensure that its plants are state-of-the-art, Gordon says. The company continually implements new equipment and updated information technology to run more efficiently, using its in-house design team to build some of the machinery.
As the race for the White House heats up in the upcoming months, free trade and the loss of manufacturing jobs -- including those in the candy-making industry -- will be hot campaign issues.
Many in the industry blame government subsidies to sugar growers for the rising cost of sugar. Tootsie Roll has tried to combat the problem by buying futures for sugar to hedge. However, Gordon says sugar isn't the only cost factor to monitor; corn syrup, cocoa, chocolate, packaging and labor also play a major role.
Gordon says she can't comment on whether the same issues that have shut down other candy manufacturers or driven them out of Chicago and the United States could also force Tootsie Roll out of the area. (The company also has plants in Tennessee, Massachusetts, Wisconsin and Mexico City.)
"We're happy to be here," Gordon says. "We've been here since the 1960s."
Gordon says she and her husband eventually plan to hand the business over to their four daughters, who are all experienced business professionals.
Brainstorming for new ideas at Tootsie Roll doesn't always start at the top; the process often flows from the bottom up. Gordon says the company cross-trains its employees in various areas to encourage creativity, and she has an open-door policy in which any employee may request an appointment to speak with her.
"We try to get the ideas of the people who work for us to come out because we know they have the key," Gordon says. "As the employees begin to get in touch with you, their confidence increases and our confidence in them does, and then their performance increases."
Despite reports of a recent labor dispute and threatened strike by one of the company's unions -- the union in February ratified a new four-year pact --Gordon says employees tend to stay at Tootsie Roll for their entire careers.
"I like that because it gives us a chance to know everybody and their families, and I like having that feeling that it's a good company, a profitable company," she says. "I want people to be happy. They spend a lot of time at work and you take them away from their families by making them come to work, so I want it to be a good place. But it's not always perfect. Some days it's not so easy."
Melvin Gordon describes his wife as a persistent leader with an uncanny ability to multi-task.
"Ellen has a sharp, keen mind and the ability to see into the future," he says. "She comes in with a list arm's length long and gets everything done in a day. She won't take no for an answer."
HOW TO REACH: Tootsie Roll Industries, (773) 838-3400 or www.tootsie.com
Segal was in Ohio to rally his troops for the store's grand opening in a new outdoor mall called Legacy Village. A gorgeous view of intense crimsons, oranges, and yellows lined the back windows of the store, the company's first in the state.
It was obviously autumn outside, but inside it was already looking like Christmas, as Segal, Crate and Barrel's founder and CEO, points out.
"A month ago, this was all browns and oranges. Now it's all reds and blacks," says Segal, pointing to a display of Christmas throw pillows, stockings and dishes. "We have more and more collections of goods come in, so changeability of the store is very important."
Crate and Barrel's evolving store design has been crucial to the upscale housewares and furniture retail chain's success. When it was founded in 1962, dishes, flatware and martini glasses were displayed on the packing crates and barrels in which they arrived. Today, merchandise is meticulously presented, with the highest attention to detail.
In the chain's newest store, "vignettes" of drinking glasses, coffee cups and serving dishes are stacked on six-foot-high shelves and practically glow under track lighting. You'll see design details like unfinished wood ceilings, white brick, cultured stone and corrugated metal wall panels.
"Every store is an evolution," says Segal, seated on a clay-colored leather sofa in the store's furniture collection. "We try and make the collections unique, and we try and make them different. At the same time, we want everything a consistent high quality and comfortable."
Equal attention is given to where Crate and Barrel opens a new store. The chain has 123 stores in 23 markets, with an estimated $800 million in annual sales, although it doesn't reveal exact figures.
The expansion over the chain's 41-year-history is not as rapid as that of competitors like Williams-Sonoma, Pottery Barn or up-and-comer Restoration Hardware. But Segal, who privately owns the business with German mail-order company Otto Versand, isn't interested in rapid growth at the cost of quality.
"We've always made profits, we've always done well, and we've kept the quality consistent," he says. "Its very easy to open stores. It's very hard to run them well."
When Gordon and Carole Segal returned from their Caribbean honeymoon in 1962, Gordon was inspired as he washed a set of Arzberg dishes the couple had bought during the trip.
"How come nobody is selling this dinnerware in Chicago?" he asked his new bride. "I think we should open a store."
And thus the idea behind Crate and Barrel -- to offer European and other contemporary housewares not easily found in the United States for a reasonable price -- was born.
"We thought there had to be other young couples like us with good taste and no money," Segal says. "So I said, 'Wait a minute, there must be a market for this.'"
Both 23 years old, with no retail experience, the Segals opened the first Crate and Barrel with $17,000 in a 1,700-square-foot abandoned elevator factory. The rent and inventory ate up all their start-up funds, so they built shelves using crating lumber and displayed products out of packing crates and barrels, hence the name of the store.
"We were so nave, we were so lacking wisdom. If we would've been any older, any more intelligent, we wouldn't have had the energy or would've had the wisdom not to do this," says Segal, who can now laugh about the couple's youthful hubris. "We had no idea how to price things because the invoices for much of the merchandise hadn't arrived yet, so we wound up selling stuff below what it cost us."
Luckily for the Segals, the St. Lawrence Seaway had opened just a few years earlier, allowing goods to be imported directly to Chicago from foreign markets. Accessible jet travel allowed them to find smaller factories, ateliers and other vendors in new foreign markets.
"All of a sudden, the world was becoming smaller," Segal says. "More direct transportation, quicker means for people to travel. People were getting more worldly, people were getting a better sense of what was going on elsewhere. All of this started happening in the early 1960s."
In 1968, the assassination of Martin Luther King Jr. prompted riots in most major American cities, including on Chicago's West and South sides. Between April 6 and April 8, the city battled widespread looting, violence and arson.
Buildings on Division Street burned to the ground, just six blocks from Crate and Barrel's store on Wells Street.
"With the political issues that were going on at that time, we started getting a little afraid of just having one store in the city," Segal says. "We thought, 'Well, maybe we should have a suburban store.'"
Crate and Barrel's second store opened in the Plaza del Lago shopping center in Wilmette. The chain's first large mall store opened three years later in Oak Brook.
"Those things became so popular that we realized that there was a concept there," Segal says. "People like (design and display director) Ray Arenson started joining us in those days, and they evolved into our store display people, and they figured out how the architecture should work and how things should be built."
Segal was careful not to oversaturate the Chicago market, and the first store outside the Windy City opened in 1977 in downtown Boston. With the arrival of that store, and one later near Harvard Square, Segal diversified the chain's products by offering more furniture, such as living room and bedroom sets.
Initially, he planned to keep furniture and housewares stores separate. But when he brought the furniture concept to Crate and Barrel's flagship store on Michigan Avenue, he decided to combine the two, which was a turning point for the chain.
"This combination of a bigger store, housewares and furniture is what truly made us really, really successful," Segal says. "In this era of a lot of competition, this has brought us a whole level up to where we wanted to be."
It was Segal's friend and mentor, Stanley Marcus, former CEO of Dallas-based Neiman Marcus, who prompted Crate and Barrel's first store in his city, and the first location west of the Mississippi.
"He liked us a lot," Segal says of Marcus, who died in 2002. "He had such a long-term perspective on what he was building, and he brought such excitement to a retail environment -- certainly a very upper-end retail environment."
Crate and Barrel expanded throughout Dallas, Boston and other existing markets throughout the 1980s and '90s, and tapped new major cities on the West and East coasts and a handful of cities in the Midwest. The chain opens about five stores a year.
"Many of our competitors have more stores than we do," Segal says. "What we've always believed in is we'd rather be the best than be the biggest. We don't have public shares, so we're not trying to make other people rich, we're just trying to satisfy ourselves and satisfy our customers and our staff."
Part of Segal's security in staying private comes from $12.4 billion Otto Versand, the Hamburg-based mail order giant that purchased a majority of Crate and Barrel in 1998. The firm maintains a hands-off policy with most of its 90 subsidiaries, and allows Segal to operate and expand the company under his guidance.
"We don't need to have a public constituency because they have a totally different motivation," Segal says. "We've always decided that we'd be a better company psychologically as a private company rather than a public company."
Perhaps borrowing from his mentor Marcus, who preached customer service throughout his career and later wrote a newspaper column on the subject for the Dallas Morning News, Segal is a strict customer service advocate. He invests in exhaustive employee training, promotes almost exclusively from within and structures each store to include several levels of supervision.
"Gordon Segal is the only retailing executive I have met who purposely seeks to hire school teachers to work as sales associates in the store," wrote Leonard J. Berry, a professor of marketing at Texas A&M University. "Segal has a clear vision of what he wants Crate and Barrel to be."
That vision may look a little different than that from the small abandoned elevator factory run by a husband-and-wife team. But according to Segal, it's actually not that far removed from the original spirit of that quirky shop on Wells Street in Old Town.
"We went into this business to make customers happy, to satisfy their needs," he says. "That's still our mission, 40 years later. That means if somebody buys something and for some reason they don't want it -- they got it home and it didn't look right, they showed it to their spouse and they didn't like it -- all we want when they return something is that it's a joyful experience. As joyful as it is to buy something."
HOW TO REACH: Crate and Barrel, (847) 272-2888 or www.crateandbarrel.com
Edward W. Stack had all sorts of doubters when he suggested expanding his family’s business beyond its two stores in upstate New York. Even his father, the founder of what is today Dick’s Sporting Goods Inc., didn’t see a reason to grow.
But what Stack had that others didn’t was a vision to build on what was already a solid business.
“You’ll have a lot of people who won’t really share your vision and will tell you all of the reasons why it won’t work,” Stack says. “But if you really believe in it, you move forward anyway and find ways to make it work.”
That confidence in his vision helped Stack, chairman and CEO of the sports and fitness specialty retailer, overcome obstacles, such as moving the company’s main offices from Binghamton, N.Y., to Pittsburgh, taking the company public (NYSE: DKS) and expanding from two stores to a national business. As of May 1, Dick’s Sporting Goods had 424 stores in 41 states, as well as 91 Golf Galaxy Inc. stores in 31 states.
As the company has grown throughout the years, the vision has evolved and helped to create what is now a $4.4 billion company that employs nearly 26,000 people. Just as important as developing a sound vision is being able to clearly communicate the vision and being aware of when it needs to progress.
“If you don’t have a solid vision, you probably aren’t going to be able to grow profitably,” Stack says. “It isn’t any different than if you were going to jump in the car and drive from here to New York City. If you didn’t have a road map or a vision of how to get there, you wouldn’t get there.”
Communicate the vision
Although you might have a strong vision on paper, it’s not truly developed until it is clearly communicated to your employees and is being lived.
“There’s no silver bullet,” Stack says. “You need to do a number of things. You need to get out and talk. You need to give the ability to communicate through a Web-based communication function. You need to be able to get your message out with the people who are running the particular business areas for you. And you need to get feedback.”
The first step in making sure your vision is going to reach all of your employees is to outline an effective chain of command for communication and present the same message from multiple avenues. For example, Dick’s uses an intranet site to supplement direct communication about what is happening throughout the business.
You need to state and repeat a clear and concise vision for employees, but just as important is your ability to rely on your team to get that message out.
“If you don’t have an effective management team, your vision will never grow to the heights that you hope it can, because one person or two people can only do so much,” Stack says. “To grow a business from two stores to 500 stores takes a lot of smart people to understand the vision to make that happen.”
You need to make sure the roles of your management team are clearly defined when it comes to communicating anything within the company, and you need to have the right people in each of those functions who can speak about the vision. At Dick’s, the message is communicated from top management to district managers, then to store managers before it gets to store associates. But the message can’t be lost as it’s funneled through the organization.
Stack says it’s fairly easy to tell who on the management team understands the vision, has bought in to it and can articulate it — because they’re engaged and participating in the business.
“They live that aspect of being out in the business, of wanting to communicate, of listening, getting feedback of what’s right and wrong out of our business,” Stack says.
Just because you’ve set a vision and you’ve asked for it to be passed through the organization doesn’t mean employees don’t need to hear it from you.
“You need to constantly be talking about what the vision is, what the goal of the business is. You have to constantly communicate that and then you have to represent that vision. You have to follow through; you can’t say one thing and do another. It’s very important for whoever is starting a business that you have a clear vision and you follow through on that vision. You never ask somebody to do something that you wouldn’t do yourself.”
Stack’s commitment to the vision is shown by his presence in the company’s stores. He spends about five or six days each month talking with associates and customers in Dick’s Sporting Goods stores.
As the leader of the company, you need to be visible. You need to verbally communicate the vision to your employees, you need to show them that you live the vision, and you need to use that time to ensure the right message is getting to those who directly work with your customers. Stack uses his time in the stores to accomplish each of those tasks.
While you’re casually speaking with employees and customers, listen to what they’re telling you. In their comments, is there a separation between your vision and how it’s being executed? Other aspects of the business Stack looks at to test whether the vision has been clearly communicated are the appearance of a store and its sales numbers.
“If sales aren’t what they should be at a particular store and other stores in that region are doing fine, then you know you’ve got somebody who may not be doing his or her job properly,” Stack says.
You need to take the time to ensure that something so valuable to your business — your vision — is really being communicated and lived. If not, you need to examine where the disconnect is occurring. It may, in fact, start with you.
“If you’re having a difficult time communicating your message to your employees, the problem is probably with you, not your employees, which means you need to find a different way to communicate,” Stack says. “One of the best ways to find a different way to communicate is to go ask them. You need to ask the associates that you’re working with and say, ‘All right, this doesn’t seem to be getting across. What am I missing? What do you need from me to do a better job? What do you need from me to understand better what we’re trying to do?’ If the message isn’t getting out there, you have to look inward, not outward.”
Just as you need to be talking with employees and customers to make sure your vision is clearly in place, you need to be out in your organization speaking with them to understand your business and whether the evolution of your vision is really meeting the needs of your customers. The final piece of communication is asking for feedback.
“If you’re in tune with your business, you’ll see things changing or modifying … that it’s time to reinvent your vision or to make some modifications to it,” Stack says. “You need to be aware of your surroundings and what’s going on in your business and what’s going on with your competitors and what’s going on in the marketplace.”
Stack uses that face-to-face time in the stores to really get a grasp on part of that equation, and it’s something he encourages all of his managers to do, as well.
“You need to talk to your customers, because without customers, you have no business,” he says. “You need to have information firsthand to understand your business. Your customers are the ones you’re trying to serve, so you need to get out there and talk to them.”
While in the store, Stack approaches the customers and asks them about their shopping experience to try to solicit feedback. You don’t need to make a grand to-do about who you are or what title you hold. Simply ask questions to understand how customers feel about your company — more specifically, what they think you’re doing right and wrong.
“What service are you not providing that you need to provide to keep those customers?” Stack says. “You can’t be afraid to hear bad news.”
Along with the customers, you need to be gathering information from those on your staff who directly communicate with the customer. Ask them what the customer is saying about your business.
“We’ve been able to create a level of trust with our associates out in the field that they are confident telling me or telling other members of my management team when things aren’t right,” Stack says. “They’re not afraid to deliver bad news. They know we’re not going to shoot the messenger.”
It takes time to build rapport with employees, but it’s something you need to do. The best way to build that trust is to show that you’re actually listening, that you appreciate their input and that they won’t be reprimanded for sharing negative information.
“You talk to them, and you listen to them,” Stack says. “Then you act on their suggestions or you come back and communicate as to why you can’t, but the communication doesn’t end when you leave. You can send the message to them that you value their opinion by fixing the problem that they have or you come back and say, ‘I understand your issue, we cannot make this change and this is why.’ After you’ve done that for a while, they get to understand you, they get to trust you and others on your management team. They’re only too willing to tell you what’s going on in the business as long as they know there aren’t going to be repercussions. We’ve developed that kind of a relationship.”
One of the ways in which Stack developed that relationship was by implementing a fun and engaging process that Dick’s dubbed the “stupid list.” He met with his store managers, told them to go back to their stores, share the idea with their staff and submit through e-mail three things they felt needed to be changed. No topic was off limits.
“I think it’s really simple,” he says. “Ask people for the things that you have them do that they view as not adding value. We did it as a fun thing.”
Gathering the feedback is just half the battle. The second part is analyzing. When you’re gathering information from so many places, you are not, obviously, going to be able to act on every decision.
“We looked at the 10 things that our associates indicated the most,” Stack says. “If somebody said, ‘This is a stupid thing,’ and we heard that 50 times and something else we saw was stupid but we got that three times, we went with the thing that we heard more.”
Don’t try to tackle the concerns and ideas presented by employees on your own. You need to involve individuals with firsthand knowledge of the reason for the process. Stack took the ideas deemed stupid to the management team that executed that portion of the business.
“If it has to deal with your buying group, you go talk to the people in your buying group and say, ‘These are some of the things (the employees) viewed that we’re doing wrong. How can we change that?’” Stack says. “You go right to the source and put somebody in charge of making those decisions.”
Once the decision is made, you need to follow up again with everyone and explain what decisions were made and why. Stack follows up with verbal and e-mail communication.
Remember, the purpose of gathering feedback is to better understand your company and find ways to help your staff execute on ways they can better serve customers.
“It’s a great educational tool for the CEO to see what truly is going on in the business,” Stack says. “I’ve tried to make sure that I’m not insulated from bad news, but sometimes people don’t want to tell the CEO bad news. This is a great way for you to get right into the heart of the business and see what’s right and what’s wrong.”
How to reach: Dick’s Sporting Goods Inc., (877) 846-9997 or www.dickssportinggoods.com