When Camille Cheney Fournier was 10 years old, she was already well established as a vital part of the family business.
“We used to have three-part commissions, and we had to tear them and get them all sorted out,” she says. “I was pretty little, because I remember I couldn’t reach far enough to put the checks in numeric order.”
But even in such a seemingly small role, she learned a valuable lesson that has stayed with her through the years and helps her as she now leads the family business, SWS Re-Distribution Co. Inc., as owner and CEO.
“It takes everybody to make the business work,” Fournier says. “It really does. Some of those tasks that I was doing, like putting checks in numerical order or sorting salesmen commission reports, all that had to be done, and somebody had to do it. It was something that even a kid could do so that the employees at the office could do something they had the skill to handle.
“It goes to show that there are so many jobs at a company, and they’re all important, and they’re all needed, and they all need to be appreciated.”
By encouraging teamwork and valuing every job at the company, which sources and redistributes food service products globally, people know how important their roles are. This has helped employees work together to increase efficiencies internally as well as for their customers, which has allowed the organization to grow from $159.3 million in revenue in 2006 to $253.5 million in 2009.
“Without everybody doing their part, it doesn’t work,” she says.
Hire and train team-oriented people
For Fournier, having the right type of people who will be willing to work collaboratively with other team members and customers has been critical to the company’s growth over the past few years. That happens by making sure she hires the right people.
“You have to have the right people that care and are proactive and ask questions that go beyond what is just expected,” she says.
It starts in the interview process by clearly laying out how SWS operates and what the company’s philosophies are regarding customer service, teamwork and collaboration.
“By talking to them, you can really feel that they would be the right person,” she says. “If they ask good questions in the interview process, they’re probably going to be a questioning kind of person to begin with.”
The questions people ask can vary depending on the job, but she says that if they ask about how people stay sharp in their positions and how they make sure they do the best work possible, no matter what the situation, that can be an indication of a good fit.
Once hired, cross-training them is critical to success.
“Staying sharp is really important,” she says. “We try to diversify through the type of job that each person has so their job is broken up a little bit more, they have a little bit different responsibilities so that when they come back to one that may be a little bit more monotonous, they can still be sharp doing that task.”
For example, a customer service person would primarily spend his or her day taking orders from customers and helping those customers build their truckloads of various products. The customer service people may take several of those orders and work with the customers back and forth to make the loads as efficient as possible, but they may also have to take a timeout and check someone else’s order to make sure that other customer service person made his or her order the correct way and in the most efficient manner possible.
“It’s kind of like a puzzle,” she says. “If you have a different set of eyes look at it, all of a sudden you go, ‘Oh, this could be done a little bit differently,’ so they make suggestions.”
Additionally, someone may pull an order for a customer, but then someone else will come through and check to make sure it’s all correctly pulled.
“We try to break up different people’s responsibilities, and then we throw someone in a totally different area of the company to do another task to show them what they’ve done is related to another area of the company, too.”
This approach to training helps not only avoid problems and errors, but it also eliminates silos from being built because employees are constantly doing tasks outside their main area and seeing every aspect of each order from different points of view.
“It’s nice for different areas of the office, whether you’re in customer service or accounts payable or accounts receivable or shipping or purchasing to understand how it all fits together,” she says. “When you understand that, you understand how important everything you do is and how important it is to do it correctly.”
While this approach helps the company, it also helps the employees, as well. As they learn different roles and aspects of the business, it makes them more versatile. One manager started in customer service and then went to shipping and then accounts receivable before landing her management position.
“She knows it from the ground up,” Fournier says. “We try to promote from within, because our business is somewhat complex, and it helps if our employees truly understand all the different aspects.”
Help employees build customer relationships
The greatest compliment that Fournier has received from a customer is that her team is always able to find solutions to any kind of situation or problem that a customer faces.
“Part of it starts within getting all of the people that work in your company to realize how important each of their areas of the company are and that we all make up a cog in the wheel to make it all work,” she says. “It’s important for me to meet with the customer and listen and understand what their needs are and be able to come to them with good proactive solutions and proactive ideas about what they might want to change in the future. It’s important that everybody in my company understand how important they are in making our customer satisfied and happy.”
This started with looking at how trucks were loaded. A typical truck will hold 26 skids of a product, but by being creative, SWS employees can get 35 or 36 skids on a truck.
“When they’re training, they go out and actually see the loads going out,” she says. “What we explain is, ‘This is a heavy product, and it can have something stacked on it. This is a light product, and it cannot, but it can go on top of something. This is really tall.’
“Just to understand what you’re selling when you’re sitting in an office is so important to being able to be a really good partner with your customer.”
One manager took the initiative to create a chart of which products were light, heavy and stackable to give to customers so that the customers could then maximize their orders as well to save money.
“It’s really being proactive,” Fournier says. “I’ve got a great group of people being very proactive that work here.”
That same manager also pulls her customers’ order history so she can see what their needs are and how fast they move through certain products and uses that information to make suggestions to them about what could be a good add-on to their order to create more efficiencies.
“You also have to know what your customers’ sales are and what their needs are and how fast they go through their products, because turns on the inventory is also a very important factor for the customer,” she says. “They have to be able to turn the merchandise fast enough that they want to get as much on the truck as possible so they’re not having to buy another truckload sooner because they’ve run out of a product.”
Beyond looking at their order histories, you also have to communicate with your customers. Fournier and her employees meet with customers over the phone and Internet daily and weekly and also meet with them in person two or three times a year.
“[It’s] communication — meeting with them and talking to them and finding out what their problems are and their concerns and working on solutions to correct any of the problems that their company is facing,” she says.
When she meets with them, she asks them what they like and dislike about different products that they’re currently using, but she also asks what they would like to see changed or made differently.
The approach of trying to save the customer money and time has built strong relationships that have helped fuel the company’s growth.
“We’re all on the same team trying to do the same thing,” Fournier says. “That’s a large, important part of our business — that everybody realized that we’re all on the same team. It’s not just my company that’s a team. The customers are part of the team. The end users are part of the team. We’re all in it together, and if the whole group of everybody isn’t happy and satisfied and saving money and working well, then we’re missing something, and we need to re-evaluate because that’s our job.”
How to reach: SWS Re-Distribution Co. Inc., (972) 466-9720 or www.swsco.net
The Cheney Fournier file
Camille Cheney Fournier
owner and CEO
SWS Re-Distribution Co. Inc.
Born: Dallas — born and raised; I’m a fourth generation.
Education: Bachelor’s degree in textiles and clothing, University of Texas at Austin
As a child, what did you want to be when you grew up?
I wanted to be a buyer in a clothing store. University of Texas didn’t have fashion merchandising — the closest thing they had was textiles.
What’s the best advice you’ve received?
Tell the truth, even if they don’t want to hear it. That’s probably the best. Always tell the truth, always be honest. You have to be fair — that’s another one.
What’s your favorite board game and why?
Monopoly because I like the strategy of trying to buy the different properties. I like the strategy of the different combinations of properties you can buy in your little portfolio. ... I think games keep your brain sharp, and it’s entertainment, and it’s distracting. It’s kind of like going on a mini-vacation, and it takes your mind off of what is going on in your life, and then you’re fresh to come back to it. It’s just like reading. When I read, I usually read fiction, because when I read, it’s a release and I enjoy it, and then I can come back to reality and life and have a fresh perspective. It’s important to have enough down time that you’re always positive and sharp in your business or your family or whatever you’re doing in life.
What’s your favorite book that you’ve read?
Recently, ‘The Kite Runner.’ I’ve read several books that I liked lately. ‘The Help’ was good, too. They’re just different. It’s real interesting to see different people’s perspective. ‘Same Kind of Different as Me,’ that’s probably one of the better books I’ve read.
When the announcement came in November 2008 that DHL would discontinue its Express domestic services in the United States, there was a lot of uncertainty.
The division was asked to reduce its operating costs from $5.4 billion to below $1 billion, a decrease of more than 80 percent. Ground hubs would be closed and stations reduced from 412 to 103. It called for the loss of 9,500 jobs.
The one certainty was the end result of all the changes: return DHL Express USA to the company’s core competency of international shipping.
Difficult decisions are usually made when you’re going through a restructuring process. But as details are fleshed out, you and your employees can’t lose sight of the future.
Jack O’Neill understands this. As vice president of operations, he oversees all Express operations in the United States, including, air, hub, gateway, security, customs, engineering, fleet and customer. He led operations through the realignment, which included relocating its hub in Wilmington, Ohio, to the Cincinnati/Northern Kentucky International Airport.
Additionally, O’Neill had to ensure his 2,300 operations employees stopped thinking about domestic products and services and learned the world of international shipping. In understanding the new direction, the company assumed the philosophy that every employee was a salesperson there to meet customer needs.
To accomplish the task, O’Neill used communication, education and reinforcement of the message and culture.
“It’s really an education. It’s awareness, it’s training, it’s making sure that everybody is engaged in understanding what it is we’re trying to provide to our customer base, what is the real priority and the objective of the organization,” he says. “With that, you engage each and every employee in every facet of the company and make them understand … everything that they do impacts the customer experience.”
The realignment was a major change for the organization, so management’s top priority was getting employees on board.
It should be no surprise that when you’re taking on a large initiative, communication is imperative from the beginning to the end.
“Even when you think you’ve overcommunicated, you probably haven’t communicated enough,” says O’Neill, who spends time in the field every week talking to employees.
O’Neill and the senior leadership team attacked communication from every angle. There were e-mails and bulletins, town-hall meetings and personal conversations. They found the best way to communicate employees’ roles in the realignment was in person because it allowed for providing clear information and receiving feedback.
“You really need to define the objective and your objective really needs to be crystal clear for that message to be concise,” O’Neill says. “If there’s any ambiguity in that objective or any ambiguity in the way you present that, the audience is going to have a hard time interpreting it and understanding it. Then you get mixed learnings or understandings out of that message.”
If multiple members of your leadership team are speaking to employees, you must make sure that the same message is being communicated.
Before conducting town-hall meetings, O’Neill and his team met to discuss their message about international shipping and customers. The company’s communications team helped craft the message and included a set of questions expected to be asked and answers of how to respond.
When you’re tackling complex issues, you need to be prepared and honest with your communication.
“Sometimes it’s a tough message, but you need to deliver those tough messages and be upfront about them,” O’Neill says. “In doing that, you gain the trust and confidence of your employees that you’re being forthright.”
Direct employee conversation is twofold, though. Town-hall and staff meetings are not just about what you want to say but what employees want to communicate.
O’Neill has been in town-hall meetings where employees can’t get enough questions in and others where the audience is silent. If he doesn’t get any questions right away, he starts talking informally about a topic that interests that particular group and asks for their advice.
“Once you ask them for advice on a question that relates more importantly to them, they begin to talk and open up about what we can do to help them,” O’Neill says. “Once that conversation starts to go, you generally get people feeling more comfortable, you get them feeling at ease, because they really feel like you’re there to learn something about them and how you can help them.”
Knowing employees are the crucial link to customers’ wants and needs and that employees need to be properly educated and equipped to do their jobs, O’Neill and the senior leadership took the feedback from the town-hall meetings and discussed it as a group. To better organize the information, they would provide the feedback to a point person who would consolidate it. O’Neill and the other executives would then prioritize the ideas as “easily actionable” or “needs more research.”
“It’s important if you really want the people to engage and rally around the organizational pride, in our case international shipping, you have to provide that closed-loop feedback cycle,” O’Neill says. “If you’re going to ask the employees for suggestions, we need to make sure we circle back and implement them or tell them why we’re not going to do it and make sure they understand the logic behind that.”
Once its determined if the idea is actionable or not, the feedback is either communicated by the direct supervisor or the senior leadership team in the next town-hall session.
“We communicate not only current events but, ‘These are some of the things we’ve heard from you, and these are some of the things we’re doing about it,’” O’Neill says. “It gets the ownership and buy-in that we really are listening to them. It’s one thing to listen; it’s another thing to really hear and understand what they’re saying.”
In communicating with employees, you need them to rally around the change.
As part of DHL’s realignment, all Express USA employees went through training to become a certified international specialist. Everyone from the front-line employee to the senior management team was required to attend classroom and online sessions geared toward international shipping, trade facilitation, processing shipments and clearance activities — all things that, at the end of the day, can affect customer service.
“Each and every employee needs to rally around their roles, what their responsibility is, how it aligns with the overall objective and how they really do impact the customer even though it may not be clearly visible,” O’Neill says. “(Training) is something we have undertaken that helps us make sure that everybody understands their role in satisfying the customers’ needs.”
The senior leadership team was actually the first to go through the certification, as should your team if you’re implementing a crucial companywide program.
“If we go through it first, we get a chance to assess the training and (evaluate) it,” O’Neill says. “By doing that, we can make sure that training is going to deliver what we really want it to deliver as an organization. What were our priorities when we first said we need to develop and deploy that training? Does it, in fact, meet those objectives?”
The second reason for the leadership team to partake in training is employee buy-in.
“You really have to walk the talk; as a leader, it’s one of the traits that is most critical,” O’Neill says. “If you deploy a major training platform and the senior leadership team doesn’t go through it, it sends an indirect message that it’s not that important. If you go through it, you send a couple of messages. One, you sponsor that training because you went through it yourself. Two, you send a critical message that it’s important for the organization to have that training.”
Along those same lines, the Express division’s training staff trains operations managers, supervisors and directors to deliver some of the programs to their employees.
“We support that, because it does make the training more believable,” O’Neill says. “If a manager delivers training, that manager has to support that training. He also knows what message has been delivered with that training with his employees versus a trainer coming in that works for another function. The messaging might not be the same as what the manager might deliver. Something might be skipped; something might be missed.”
The final aspect of company training is testing. O’Neill, along with every Express employee, had to score a 98 percent to become a certified international specialist. The test included questions like shipping requirements to clear customs and international capitals — essential information needed to send a customer’s package.
“Testing gives us knowledge of whether or not the employee really understands,” O’Neill says. “Do they have the information, and did they really hear it and understand it? Do they know how to apply it on their job? If you test them and they fail the test, then chances are, they’re not going to do their jobs the way they were intended to be done. What that means is we’re going to have delays in shipment processing. We’re going to have delays in service. Our customers aren’t going to appreciate that too much.”
You can communicate and you can educate, but that doesn’t mean employees understood the message.
“We think people hear what we say or interpret what we write, but it’s not necessarily the case,” O’Neill says. “You really have to listen carefully to see if people have gotten the message. If somebody hasn’t gotten the message, they’re going to create their own message and usually that’s not the message we want them to give. Listening and having some feedback mechanisms to make sure the message is clear and everybody does what needs to be done is crucial.”
How do you make sure employees heard what you said? You ask them point blank.
“‘What are our priorities? What are we focused on?’” O’Neill says. “You have to ask them those types of questions to make sure that the message has been heard.”
And you have to constantly reinforce your message. When O’Neill went into the organization a year and a half ago, employees couldn’t tell him the company’s core competency. Today, without hesitation, they say international shipping.
Another way to validate that your message has been heard is engaging with employees in their work. O’Neill and his senior leadership team spend days on the road with their couriers visiting customers or sitting next to customer service agents in the call center.
“We get to experience firsthand what our front-line employees are doing, and does it really support the message that we delivered?” he says. “Does it support the direction that we need to go in? Does it support the training we provided them? You really have to inspect what you expect.”
Because there can be a disconnect between top management and lower-level employees, O’Neill has found his staff members are appreciative when he spends time with them and they’re willing to share feedback on what can make their job easier and the tools they can use to better serve the customer.
If you’re spending time with your employees, though, the main thing to look for when it comes to whether or not they understood your message is engagement.
Since the realignment, DHL Express USA has seen more engagement from customers and employees. The business has stabilized and is actually growing. Returning to its core business has meant an improvement in services, which has translated into greater customer retention and growth. For employees, it has given them a sense of confidence in a strategy moving forward.
“The employee that is engaged in the organization has an interest in it,” O’Neill says. “You can tell when somebody is just doing a job because it’s a job, and that’s OK. But we really want people to be engaged in the organization. You know they’re engaged if they’re asking questions. You know they’re engaged if they’re performing the job the way they were trained to do the job. You know they’re engaged if they have a good relationship with the customer. Once again, that customer touch point is so critical, so it’s those types of things that we really try to observe.”
How to reach: DHL Express USA, (800) 225-5345 or www.dhl-usa.com
The O'Neill fileJack O'Neill
Vice president of operations
DHL Express USABorn: Saugus, Mass.
What was your first job?
The first job I ever had was actually a salesman in an electronics department of a department store. It was an interesting job for me, because I never sold anything nor did I know anything about electronics at the time.
What did the experience teach you?
I learned that sales and marketing are critical to success. In this department store in the electronics group, we sold a set of stereo headphones, and we used to sell them for $9.99. They were low quality; it was the cheapest set of headphones we had. We couldn’t sell them. We couldn’t get them off the shelf.
We were having a sale one weekend, so we thought we would put an ad in the paper and try to get them sold for $5.99 and deplete our inventory. In printing the ad, a mistake was made. The mistake said this was a set of stereo head phones, normally sold for $19.99 on sale for $15.99. Oddly enough, the first day of the sale — we must have had 80 sets of these headphones in the store — they flew off the shelf. Customers came in; they thought they were getting a great bargain.
The whole positioning of how a consumer hears a message to me was definitely one of the learnings I took out of that role and that particular experience I had.
What is your favorite part of your job?
I enjoy being on the front line. I don’t enjoy sitting in business meetings. I don’t enjoy that part of the job; I know it’s a necessity. I’m an operations person at heart. I grew up in the business unloading trucks as my first job within the logistics industry. I really have appreciation for the front-line employee and what they do for the organization.
Mit Shah was enjoying the fruits of his labor.
As Shah, founder, senior managing principal and CEO of Noble Investment Group, a company that invests in and manages hotels, he had successfully gotten the business past the struggles that followed the Sept. 11 attacks when travel and tourism dollars fell. Everything was back on track, and the company had been growing, earning spots on the Inc. 5,000 list through the years, and in 2008, it recorded $325 million in revenue.
But things have slowed from the pace Shah and his team are used to.
“We’ve built this model over 17 years — great people, great human characteristics — but clearly the last two and a half years have created a real pause of how we approach our business,” Shah says.
One of his challenges is having extremely talented people, which most wouldn’t think is a problem, but in tough times, it proves to be.
“How do you keep a group of highly successful, highly talented, highly motivated, passionate leaders engaged and focused on the ability to manage what we have when you’re an organization that’s truly built for continuous investment and continuous growth, and that’s how you’re structured?” Shah says.
He’s also been challenged by looking for opportunities to grow the business and figuring out how the market will shake out.
“That has been a big part of my responsibility to continue to surround myself with people who internally and externally will give me good insight as it relates to how do we see opportunities going forward,” he says.
And then it’s been just hunkering down on the business basics.
“Continue to do what the books say you’re supposed to do — stick to your core values during times of great opportunity and during times of crisis, take care of people, make sure that you continue to commit to things that are part of who you are and who you espouse to be,” Shah says.
Over the past three years, by building a solid group of peers to rely on, focusing on his people and looking for opportunities, Shah was able to successfully move Noble forward — earning $346 million in revenue in 2009 — and prepare it for future growth.
Build your peer group
One of the aspects of business that Shah says has been particularly critical the past few years has been forecasting out where the market would go and how things could change, but he can’t do this alone. He’s come to rely on a core group of people that he’s built over the years to help him better make decisions about his company.
For example, he may have dinner with the CEO of Hilton Hotels one day and the president of Wake Forest University on another, and they both play a critical role in his life.
“I always stayed very close to a group of people that I viewed could help me on a broader basis,” Shah says. “It goes back to this peer group — never being the smartest person in the room, always having the smartest room, and always finding people who I could befriend and I could build a relationship with and build a partnership with, who, in essence, I could learn from and build a base of knowledge that I wouldn’t get in just running my company.”
Having a group of people to get feedback and ideas from has also helped him bring in the best people when those openings arise. To build his group, he got out on the road and met with people continuously, and this went back as far as 18 years ago. Over the years, his group has also evolved and today includes top executives of the world’s major hotel chains, basketball coaches, people in service businesses and manufacturing as well as investment bankers.
“That’s really helped me think about things, both then and now, in a way that helps me lead more effectively,” he says. “I have the power of and the benefit of a broad range of thinking, and then I can take those thoughts, and I can incorporate them into my own and lead through that manner.”
To create a group for yourself, Shah suggests getting out more to build those relationships with people.
“Go to meetings, go to conferences, find out the best industry events,” he says. “Walk around, shake people’s hands, get to know people, and take every opportunity that you have to understand those in whatever business and industry are at the tip of being visionary, of being organizations that have had sustainable track records, that are respected among a group of people that you respect, and find opportunities to establish relationships.”
Sometimes that means you have to make the tougher decision in the here and now. You may want to go do something fun, but instead, you need to choose to do what will be most beneficial in the long term.
“There’s been times all across my entire career where it’s an opportunity to either go have a dinner or to be in the same room or to go to a meeting or a conference, and you have no idea what you’re going to get out of it,” Shah says. “But spend those times as opposed to saying, ‘Let’s go find the best place to watch the game tonight,’ and really go and find an opportunity to establish a friendship.”
When you meet people and get to know them, it’s important to remember that they’re people just like you, so use that as a base to build that friendship.
“It doesn’t matter if someone is the CEO of a big Fortune 100 company or if they’re just your golfing buddy,” he says. “At the end of the day, when you peel back everything, people are just, if you find good human beings, decent people. They’d much rather go have a barbecue sandwich than have something fancy. They’d much rather have a beer together and talk about your families than always be talking about how you’re going to win market share here and how you’re going to do that. That all comes, but break it down to just finding quality human beings and building friendships with them.”
Focus on your people
During the downturn, Shah didn’t cut his 401(k) match, community service programs or the company Christmas party. Instead, he doubled the budget for his employee engagement committee so it could plan things like bowling outings and have a really nice holiday party.
“Let’s be honest, this is a tough labor market,” he says. “People aren’t jumping jobs right now, so we get that. You can’t use that as a crutch, because as soon as the market comes back, they’ll leave for a better opportunity once available.”
Despite the challenging times, it’s crucial to make sure you continue to focus on your people and how you can support them. Look at the people that aren’t your senior managers — just your everyday, salaried employees — and reflect on what their intentions are.
“Do they have the character and confidence, and then do they care about the company’s best interest?” Shah asks. “If they do, then making that decision is very easy.”
If you have employees that would leave to go across the street for 5 percent more, then Shah understands not wanting to put the resources out to support them, but at the same time, he also questions why that is.
“What does that mean?” he says. “That means that if you haven’t brought in that person who has that character and if you haven’t done the things to promote that loyalty, whose fault is it? Is it the team member’s fault or the employer’s fault that they’re not loyal?”
When you face yourself with this kind of a situation, that’s when it becomes difficult to decide whether to put money toward your people or to keep it for the company.
“If employers are in that situation, then it’s hard for them to part with their dollars because — they’ll never admit it and they’ll never sit in front of a town hall and say, ‘All of you employees are commodities,’ — they would never say that, and if they feel that, they’ll make a decision and say, ‘We’ll just hoard the cash,’” Shah says. “But if you really believe in your team members, and if you really believe they have the organization’s best interest and they’re going to be there for the long haul, then you take care of them. You always take care of them.”
In fact, as 2009 came to an end, Shah was anticipating a surplus in the budget and predicted that they would be creating a supplementary bonus program with it in addition to putting some of that back into the company as a buffer for this year.
“You always go to the denominator of what’s the right thing to do,” he says.
The economy has changed business the past few years, so you can’t just rest on your laurels and expect clients to come your way.
“You’ve got to look through a number of different avenues,” Shah says. “It’s far different than it ever was. Generating business in general is different than what it was before — in any industry.”
Over the past couple of years, Shah has been diligent about looking for new opportunities, and that starts with knowing your market.
“It’s really about having a very good understanding of your marketplace so you don’t have to be a big national organization or global organization,” he says. “We could be just the best hotel group in Atlanta, but we need to know Atlanta like the back of our hand.”
Knowing your market also goes back to your peer group and having people you can talk to about how the market is going so you can better predict how things may shift. On top of that, it’s important to have a niche.
“You have to find a niche in the business,” Shah says. “I think that companies of the future that are going to be very successful will have a niche. They aren’t broad-based companies that do a lot of things. They’ll find a couple things they do really well, and they focus on those things, and they outperform the competition there. It’s way too difficult to be good at many different things.”
For example, Shah knows that his company is good at hotels, but he also recognizes that it isn’t cut out to go into, say, grocery stores or office buildings.
“You can’t just, all of a sudden, wake up one day and say, ‘I think we’re going to be grocery-anchored retail,’” he says. “There’s some smart leaders in our organization, but we don’t know anything about grocery-anchored retail, and I can’t just go hire someone who knows about grocery-anchored retail and pretend we can be a great company overnight.”
Instead, you have to look at what your company already does and what expertise you already have within the organization.
“You have to say, ‘What are you built to go do that’s as good as or better than the best people that do it in your business?’” Shah says. “Based on that, how do you build that if you have not already? If you think you have it already, how do you go and execute around that area?”
If you see that the opportunities aren’t in that area and you do think you have to explore a different area, you need to do it in a smart way.
“If we don’t know how to do something, we always go get the talent first and go and build a model around it, and then start with one and continue to grow,” he says. “That’s what we’ve historically always done.”
The key is you have to be able to live with whatever consequences come as a result of the direction you head.
“Understand what your downside is,” Shah says. “Know what you can live with. It’s hard. How do you be visionary, be aggressive, be strategic and also manage risks without just being completely paralyzed by it?”
How to reach: Noble Investment Group, (404) 262-9660 or www.nobleinvestment.com
The Shah file
Founder, Senior Managing Principal and CEO
Noble Investment Group
Born: Morristown, N.J.
Education: Bachelor’s degree, economics, Wake Forest University
As a kid, what did you want to be when you grew up?
I wanted to be a basketball coach. If I can’t be a coach, I want to be an announcer.
I’m first generation American. My parents are both immigrants. I’m the eldest child of immigrants. They think about education and stability, and you’re like, ‘Hey! I’m going to be a basketball coach or announcer.’ They’re like, ‘What are you talking about? You’re going to be a doctor.’ I was like, ‘All right, I guess I’m going to be a doctor,’ — until I got to college and took bio and chem and physics and hated all three with a passion.
Did you get the chance to coach at all?
I used to coach kids basketball when I was in college. One of the first things that really helped me think about what I wanted to do with my life was when a friend of mine was going to be the head coach, and he asked me to be the assistant, and he transferred schools, so I ended up becoming the head coach before the first game, and it was the most thrilling thing to me.
I was coaching these 11- and 12-year-old kids, but these kids were just wide open. They listened, they cared, they were good enough where you could teach them things. I was like, ‘This is really great.’ They’re 12, so they’re going to listen to you, and they don’t care that you’re 18 — they’re 11, so they look at you as a leader. I was like, ‘Wow. This is the first time anyone’s listened to me.’ It got me really excited about the opportunity to lead and the opportunity to be somewhere where I could teach and help people maximize their potential.
What’s the best book you’ve read?
I’ve got a number — Jim Collins’ ‘Good to Great.’ It’s kind of a pat answer. It was the first book I ever read that gave real tangible evidence of what companies did over time to help them not only survive but thrive through multiple periods of economic volatility. It helped me think about my business in ways I never had thought about it before.
If you’re looking for something less business-oriented, ‘The Last Lecture’ by Randy Pausch was a great book because it really touched on things that, to me as a human being, we should always think about.
“I thought, ‘Boy, that is just dynamite,’” he says, remembering his initial reaction to the cherry-infused bourbon.
Not everyone at Beam Global Spirits & Wine U.S. was quite as enthusiastic about the idea of messing with the company’s core brand, Jim Beam.
“A lot of people who had been here for an amount of time thought we were absolutely off our rocker to bring out a product that put cherry into our core line,” says Newlands, president, North America Beam Global Spirits & Wine. “Many of the salespeople thought that this was a little silly to be playing with Mother Nature, if you will.”
True, Beam Global has built a legacy on its beverage portfolio, which contains eight of the world’s top 100 premium spirits. That claim to fame, along with $2.5 billion in annual revenue and 3,500 employees worldwide, makes it the fourth-largest premium spirits company in the world.
But keeping the brand successful more than 200 years after Jim Beam launched isn’t just about one man’s tastes or even one work force’s collective opinions. When it comes to releasing new products, Newlands’ decision-making process rides on collaboration, mixing employee input with consumer preferences.
By keeping an open mind to the various perspectives of feedback he receives, Newlands has kept the U.S. operations of the spirits giant strong — accounting for half of the company’s worldwide sales volume.
“Leaders have to be very careful that they don’t think they have all the answers,” he says. “For those of us who have been fortunate to be put in leadership positions, the odds are it’s happened because some things have gone right — but that doesn’t mean you have all the answers. It’s important to recognize that.”
The preparation for soliciting feedback goes way back. In order to find out what employees thought about the cherry bourbon, Newlands couldn’t suddenly ask what they thought. It takes time and consistency to create an environment where people are comfortable sharing input — especially input that challenges your opinion.
As he has moved up the food chain, Newlands has taken every opportunity possible to involve employees in communication. Whether they’re going over the corporate vision or the goals for the year, he encourages his employees to contribute.
“We really do encourage people to challenge and to do it constructively,” he says. “That’s highly useful because obviously no individual’s going to have as many good ideas as the collective group. Creating an environment where constructive challenge is the norm rather than the exception is very helpful.”
If you want collaboration, you can’t dictate decisions. Newlands gives his team practice at being a team by sometimes stepping aside. When the leader backs off, it puts the pressure on the team to work together cohesively.
“I don’t like to be the arbitrator very often,” he says. “I encourage my team to debate issues that they have amongst themselves, letting them know I’d be happy to arbitrate, but I also think it’s a much better scenario if individuals work through debates and issues and come to conclusions. That way, there’s more shared ownership. And anything that creates shared ownership is much better than someone dictating, ‘Here’s the answer, and good luck implementing it.’”
Blend that role with an active approach to collaboration to show you’re serious about it. Make an effort to solicit feedback from others. The most basic opportunity to do that is in your routine meetings with direct reports.
“When I’m doing my staff meetings, I try to leave a bunch of open time on the agenda [to ask], ‘What are the issues? What are the challenges? What are we missing? What did we not put on the agenda?’” Newlands says.
He also asks his direct reports to share what they’ve been hearing from their direct reports. Encourage that dialogue down the line to keep feedback bubbling up at each level.
Stick to that same input-seeking approach any time you communicate, whether it’s a private conversation or a companywide meeting.
“At the end of any conversation I have in any communication forum, I always leave time for questions,” Newlands says. “If nobody really has anything they want to ask, I will stand there and wait, because one question will tend to breed more questions. The more people get what they have on their minds out, the better off we’ll all be.”
But no matter how long you wait, some people just won’t offer their input. So create other avenues to give the shyest employees a chance to contribute.
“Some people are just not comfortable raising their hands and asking us questions,” Newlands says. “So we also have an anonymous avenue where people can submit questions ahead of time — or actually, in many cases, during the event — anonymously. I’m more interested in getting the questions out on the table than I am in necessarily having someone stand up. I’d rather have the opportunity to address a question than to ignore it because someone’s a little uncomfortable saying something publicly.”
Research the options
With that kind of environment, employees started to share their opinions about the cherry bourbon without much urging. But to get the targeted input that would determine the product’s future, Newlands had to ask specific questions.
Opinions and objections will only get you so far before you need more tangible facts to prove an idea. This is where general idea-sharing turns into the result-oriented research that will get an idea off the table and onto the shelf. Think of it as the precursor to consumer testing — and if done correctly, this should help predict what will come from that.
“We tried to … get input as to, ‘If we were to do this, what is the most important thing that we would have to do so that our distributors, the retailers, ultimately, the consumer will engage with it and enjoy it?’” Newlands says. “Ask the tough question of, ‘Who’s going to reject this and why?’ Therefore, you understand the objection before the objection happens. That’s very helpful because if you’re armed with an answer to an objection, you can deal with it. If it’s a surprise, it’s a very tough answer.”
Approach your research like a funnel, starting broadly and narrowing your focus as you go. Newlands starts with a look at the overall marketplace, including assessments of popular products in other tangential fields.
“We had the debate about, ‘Why cherry?’” Newlands says. “Well, if you think about Cherry Garcia, it’s the No. 1 selling flavor at Ben & Jerry’s. If you think about Cherry Coke, Cherry Pepsi, [they’re] very popular flavors within other beverages. So you look around at what I would view as ancillary products, not even in your category.”
In the next level of assessing an idea, look at your closer competitors and the types of products and services they offer. You want to make sure your product is positioned to differentiate you competitively.
The most important step of the idea-evaluation process comes from your customers. Beam Global uses consumer test groups extensively and also goes directly to key accounts and bartenders to find out what customers are asking for and what trends they see coming.
You should know who your target audience is, but a good starting point — at least for the sake of forming a focus group — is your current customers. For example, before launching a single-barrel version of Knob Creek, Newlands brought in other Knob Creek drinkers and asked them questions about the new product.
“We let them taste it. We let them see the packaging we were considering. We talked about the features and benefits of the product to see if it had appeal to that audience,” he says. “What that helped us do was to refine the concept that we’d put in place. There were certain elements [where] the consumer said, ‘I’m more interested in age,’ or, ‘I’m more interested in proof,’ or, ‘I’m more interested in the look of the packaging,’ or whatever.
“We made sure we understood what the things were that were vital to attract the consumer. … We explored with them, ‘Which of these variables are most important to you?’ so that as we brought something new to the table, we were going to catch their attention and interest.”
In order to get that kind of feedback — the kind you can consider fact instead of objectionable opinion — you have to ask the right questions. Consider who you’re talking to and what kind of knowledge they come with. If you bring in current customers, you know they’re already familiar with your product portfolio.
“What you have to do is evaluate: How do you ask the right questions?” Newlands says. “Oftentimes, a consumer isn’t always able to project. In other words, if I told you I could take you to the moon tomorrow, you think, ‘How am I going to get there? I don’t get it.’ It’s hard for you to project that if you don’t know anything about getting to the moon.
“It’s important when you do your research to make sure that you keep the questions and the understanding simple enough that the person has some experience with them and therefore can answer something they feel like they know something about. You have to make sure that your research and the facts that you gather make sense, because you’ve asked questions that are answerable by the people you’re asking.”
Make your decision
Sometimes, by the time you get to this point, your answer will be clear. Sometimes, all of your research will naturally converge toward one direction. Those are the easy decisions.
“The most interesting decisions often come when you can get two answers out of the same set of facts,” he says. “That’s where a little mystery comes in, because sometimes you will have something that is viewed by two consumer groups as very positive and very negative.”
The cherry bourbon met initial skepticism from employees, but consumer test groups loved it. When you face bipolar opinions like that, it comes in handy to have test groups rate which of the product’s features are most important to them. Then look at which areas are easiest to tweak so you can accentuate the pros for one option or another.
“You have to find ways to perhaps increase the positives for one side of the equation or decrease the negatives on another side of the equation to get to a more optimal result,” Newlands says.
To combat the criticism that the cherry bourbon shot too far off the Jim Beam path, for example, Newlands worked the core brand into the name and released it as Red Stag by Jim Beam.
“We made specific choices around it to ultimately maximize its potential for success — and lo and behold, we had some with it,” he says.
Beam Global shipped more Red Stag orders than Newlands ever expected. The offshoot became the second-fastest-growing premium spirits innovation in the country last year, and it remains successful with consumers.
The key during all of this is to actually listen to the feedback you’re getting — which means keeping an open mind and considering opinions different from your own. Newlands fell in love with a certain package for another upcoming product. But when the consumer test groups preferred another, he had to hold his tongue.
“[It’s] focusing your attention on whatever facts you can bring to bear but not being blinded by what you want to see,” he says. “At the end of the day, it really doesn’t matter what I like. It matters what the consumer likes. Make sure that you are open to looking at the realities of who you’re trying to talk to. Not falling in love with an answer but falling in love with the right answer is very helpful.”
How to reach: Beam Global Spirits & Wine U.S., (847) 948-8888 or www.beamglobal.com
Tom D’Arcy knew Grubb & Ellis Co. even before he came on board in November 2009. Then again, who wouldn’t? It’s hard not to be familiar with one of the giants of commercial real estate — especially after you’ve been in the industry 28 years.
“The biggest challenge has just been getting my arms around the company itself,” says D’Arcy, the new president, CEO and director. “I understand the industry, but getting to understand our company — its culture, the information flow, the nuances of the company itself — I’m not there yet.”
When the board approached D’Arcy, he began a prudent due diligence of the company, which involved meeting with key employees, clients and investors to learn what he was getting into.
“What I found was what I expected to find: a strong brand, a broad platform — we have 120 offices spread around the country, 6,000 employees — multiple lines of business, diversity of revenue,” he says. “What I saw was a company that clearly had a lot of resources available, a lot of scale, a lot of scope.”
Now, his challenge is just what to do with all of those resources to take advantage of the growth potential.
D’Arcy continues to get more acquainted with the internal workings of the company’s three main segments: transaction, which includes brokerage leasing and purchase of buildings; investment management of public nontraded REITs; and management services. Then, he combines that knowledge with external barometers of what’s happening in the broader marketplace. The goal is driving the company forward in a way that represents the needs and desires of all constituents.
Basically, D’Arcy has to match the company’s capabilities with opportunities in the marketplace, aligning its capacity with demand for services.
“You can’t just chase every opportunity,” D’Arcy says. “You have to focus in on the highest value opportunities you have as a company. For a company like ours, where we’re so diverse and we have so many resources and such scale, there’s many businesses that we could enter, all which need to make sense. But you really have to try to maintain a focus and focus on those areas that are fully complementary to the core.”
Know your markets
Obviously, you have to know what’s happening around you in order to recognize — not to mention tap into — any opportunities.
D’Arcy’s understanding of the external marketplace comes from parts of the company that are immersed in the outside world. Grubb & Ellis has 100 research professionals scattered across the country, all led by a chief economist.
In each market, researchers keep a close eye on the local ins and outs of the industry — including vacancy rates, rents, sale prices, new developments and new tenants moving in.
“At any point in time, you can get onto our website and you can drill down into the markets and submarkets,” he says, referring to the Metro Trends quarterly reports that include analytical commentary and detailed graphics. “So in almost every market and large secondary market and every asset category, we’re providing real-time research. That’s one of the differentiating factors for us as a company.”
D’Arcy strongly prefers the company’s research capability to the secondhand knowledge leaders get by taking someone else’s word.
“The key is that we’re not just purchasing third-party research, nor are we simply regurgitating what we see in the popular press,” he says. “These folks live in these submarkets and understand these submarkets as well as anybody. It’s all about being local. The closer you are to the market, the better off you are.”
Brokers can then pass that detailed information on to clients. So if a corporate client is considering relocation to a new market, Grubb & Ellis can fill the company in on what’s happening there in terms of rent, vacancies and comparable transactions.
“That’s one of the things that clients are looking for, is that industry knowledge on a market and submarket level,” D’Arcy says. “It’s a clear resource for our brokers as well as for me personally; it’s an opportunity to always keep my pulse and know what’s happening in the marketplace.”
While the local origination of your market research is crucial, that micro-level information can also feed your macro-level understanding — thereby fueling broader decisions you may face. By pooling together local data, you can start to identify broader trends.
D’Arcy, for example, can extrapolate the big themes in retail and industrial spaces from individual market trends. That way, when he decides where to allot additional resources, he has a wealth of information about growing areas of business to back him up.
“When we’re making decisions, we’re making really deeply educated decisions about what’s happening in terms of the trend lines in the commercial real estate market,” he says.
Analyze the facts
Even the best research is just cold data until you apply some analytics. In a service business, that means understanding what current trends mean for your clients’ future. That, in turn, helps determine the direction your company will take as you focus on the areas your customers need.
For example, Grubb & Ellis closely tracks sale prices of buildings. In the third quarter of 2009, for the first time in a couple years, it saw value increasing. That indicated buyers and sellers were getting closer in their ideas of pricing — and the market was nearing the bottom.
While research, charts and tables help convey that, the key is explaining what it means to the client.
“What we’re telling our clients is that the market really does feel like it’s reached the bottom,” D’Arcy says. “We think that the direction of rents is going to be moving higher. So from a corporate perspective, if you’re looking to make a longer-term investment in additional space or move to a new building, now is probably a pretty good time to do that.”
During that analysis, you’ll reveal areas where you need to focus your company’s attention, as well. Grubb & Ellis invests resources in high-return activities — and relies on research to identify demands that will reap the highest return.
For example, when banks began to take over buildings in dealing with problem loans, D’Arcy knew that would mean more appraisal business for banks trying to valuate properties. So in June, D’Arcy announced that the company would enter into the appraisal business. Three months later, Grubb & Ellis Landauer Valuation Advisory Services opened with 12 offices and plans to grow to more than 350 appraisers across the country.
“We’re not simply entering this business because we see a short-term market opportunity,” he says. “We think it’s fundamentally a good business over time, and we’re going to be good at it. In order to do it, you have to be national in scope, and we have the ability, obviously, to be able to deliver that to our clients.”
Although, as a public company (NYSE: GBE), Grubb & Ellis reports quarterly financial results, D’Arcy doesn’t run the business quarter to quarter. Looking longer term will help you validate opportunities as core areas rather than one-off transactions.
The key to evaluating whether opportunities will continue reaping success in the future is considering the past.
“You have to look back at what the business has been like historically,” D’Arcy says. “You’re looking at recent trends and you’re looking at what technology can appear, and then you try to make the best reasoned judgment that you can.”
Knowing what has affected an area in the past can help you predict future obstacles or successes. D’Arcy found that the appraisal business has been steadfast, driven mainly by the expertise of the appraisers. Even technological improvements won’t change the necessary skill set that makes an appraisal successful, so as long as the company can staff those competencies, the business line will be as fruitful next year as it will in the next five.
“We’re trying to make investments in our business so it’s going to create long-term value for our share owners and our clients and our employees,” D’Arcy says. “We’re obviously very cognizant of [quarterly] financial performance. We have strict metrics that we use. But when we’re investing in something, we’re not investing for next quarter or next year. We’re investing over the long term.”
Keep an internal gauge
Of course, to determine what opportunities the company can realistically pursue, you also have to understand how far your internal strengths can stretch by staying in touch with employees. They should be part of your growth equation all along.
D’Arcy taps into the company’s “robust internal communication regime” to keep employees aligned around growth goals. He holds companywide conference calls, for example, and records weekly calls between management directors so employees can tune in at any time. The company distributes a weekly newsletter and recently began posting a blog, as well.
“We try to use a number of different ways to be able to communicate a consistent message — not only to our employee base but also to our clients as well as to the investment community,” he says. “We put out a lot of information and then provide an awful lot of ability to provide feedback. So there are many doors and avenues open for employees to relay information.”
Often, the struggle isn’t providing the avenues but getting people to pursue them. Overcome that obstacle and encourage feedback by confirming that employee input matters.
“Not everybody wants to make a suggestion or say something critical,” D’Arcy says. “And so from a corporate perspective, one of the most difficult things is to get people comfortable challenging decisions. … Once we get that feedback, it’s incumbent on us to make sure that we relay back to the employee base that it is valued, that what they’re saying means a lot to everyone at this company.”
Top-down and bottom-up communication happens in tandem. To keep employees informed about your company’s direction, for example, an important message is articulating financial targets. While D’Arcy reiterates those goals to management directors to pass on to their teams, he’s also asking what tools and resources they need in order to meet expectations.
While it’s important to have those feedback loops built into companywide communication, getting input requires getting personal.
“One of the challenges is making sure you’re getting into the field,” D’Arcy says. “And that’s probably the funnest part of my job, is being able to meet with our team members and hearing what’s on their mind, hearing what’s working, hearing what we could do better.”
In addition to asking those general questions, drill down to get details.
“From an employee perspective, [ask], ‘What are the resources you need? What are you hearing in the field? Is there a message in the marketplace that’s not consistent with what we’re trying to relay as a company?’” D’Arcy says, citing examples of questions he asks employees. “Every aspect of where we are as a company is something that we want to hear.”
That constant loop of communication is critical for keeping your entire company focused on the growth areas you’re pursuing. At Grubb & Ellis, that means rallying the work force around a four-pronged growth strategy that involves recruiting brokers, expanding management services and investment management, and entering into high-margin complementary businesses.
Grubb & Ellis ended 2009 with $535.6 million in revenue and $5.8 billion in assets under management — all thanks to a strategic approach to growing in the right areas.
“The biggest challenge you have is you want to be aggressive from a growth perspective, but you don’t want to be reckless,” D’Arcy says. “You always want to be growing and pushing, going forward, but at the same time, you want to make sure that you’re doing it in the prudent fashion ... on a measured basis with the resources of the company.”
How to reach: Grubb & Ellis Co., (800) 877-9066 or www.grubb-ellis.com
Les Wexner felt very insecure about the opening of his first store. It was 1963 and the youngster, a son of Russian immigrants, had watched and learned from his parents’ tireless work ethic. He had worked in their small store named Leslie’s in downtown Columbus and gained the belief that anything in life is possible, if you are willing to work hard for it. And he was ready to launch a business of his own, but he wasn’t sure it was going to work.
He had no idea at the time that this single store would be the first piece of a business that would one day register more than $8 billion in annual sales and employ more than 92,000 people.
“I wasn’t sure it had any commercial value,” says Wexner, founder, chairman and CEO of Limited Brands Inc. “Then people started coming in and buying and I thought, ‘Gee, it was a pretty good idea.’ So I was curious to play with the idea. Some of it was right. Some of it was wrong. It became more proven from a customer point of view. I could make money and earn a living, and I was very happy, because I wasn’t going to be poor.”
Indeed, not. Limited operates more than 2,600 specialty stores across the United States and its brands are sold in more than 700 company-owned and franchised locations around the world.
“You have to be curious,” Wexner says. “People who are really curious have an enormous advantage. They’ve had it in the past. Curiosity and the ability to see things will be, as I look into the future, a higher and higher priority.”
Curiosity helped Wexner build a business that today comprises some of the most recognizable brands in the world. Bath & Body Works, White Barn Candle Co., La Senza, Henri Bendel and, of course, Victoria’s Secret are present in nearly every mall and shopping center one can think of.
“I had this idea about creating a lingerie business,” Wexner says. “People said, ‘You’re entitled to make a mistake, but it’s not a business. You can’t make money selling lingerie.’”
Victoria’s Secret generated $5.3 billion in 2009 sales, part of the company’s overall tally of $8.6 billion in sales companywide.
Wexner believes such success can be achieved when you realize that in addition to being a great leader, you need to be a great teacher.
Paint a clear picture
You could have the greatest idea in the world. But if you can’t share it with others, it will never amount to anything.
“Words matter,” Wexner says. “What’s clear in my mind’s eye in terms of imagining something, if I’m not real clear about my communication, you won’t understand what I’m really thinking in the fullest sense.”
Wexner has always had a sense of curiosity about what isn’t being done and what markets aren’t being tapped. But if he hadn’t been able to share those thoughts with others, he couldn’t have built his business by himself.
“I’m always fluent when I talk to myself,” Wexner says. “If you’ve got friends or a spouse or other people, there is the opportunity for confusion. An organization is just a large group. That gets to the subject of leadership. First, you have an idea. As the organization gets larger, you tend to discover what you know and don’t know about leadership.”
It’s your job to take those creative thoughts and curious personal discoveries and capture the most important aspect of it. At Limited Brands, it’s known as the main thing.
It reads: The main thing is the main thing is the main thing.
“It’s easy in an organization, just as in a family or a community, for someone to drift off what the main things are.”
You need to paint a clear picture of your idea so that your people can see it, think about it and ask questions about it. The tricky part is, sometimes, you and your people think you’re talking about the same thing, but you’re really not.
“I really like chocolate,” Wexner says. “I’m imagining milk chocolate, and you like chocolate but you like dark chocolate. When I say I like chocolate, you go to what you’re thinking, not what I’m thinking.
“The tension in an organization is you want people thinking about what they are doing. They are not marionettes. You need the feedback from people to say, ‘Did you mean this or did you mean that?’ One of the things you learn as you are developing an organization is you say, ‘This is what I’m thinking and this is what I’m trying to get done.’ People say, ‘Yeah, I got it.’ And then you say, ‘Would you explain it back to me so that I know you really do understand?’”
There are brilliant minds who serve as teachers and professors and bring a great deal of worldly experience to the classroom. But if they are unable to convey it to their students, it’s useless.
It’s much the same way in business.
“You have to think about how you lead, not just what you know,” Wexner says. “I could know things technically, but I may not be able to lead. Good leaders, they see themselves as teachers. They have to know what it is they know. Then they have to get it to a teachable point of view.
It was an aspect of leadership that was a challenge for Wexner at first.
“You know and you’re telling people, but my frustration was they’re not learning,” Wexner says. “They said, ‘Well, you’re not teaching them.’ You have to see yourself more as a teacher. You have to be able to distill what it is you know and what you’re thinking, whether it’s the values of your organization or things about quality or products, into a point of view where you can teach it. Part of teaching is for you to have a clarity of what it is and why. If I just tell you something and I can’t give you the reason, I don’t think it’s nearly as effective.”
Know it before you speak it
Wexner is hardly resting on his laurels after nearly 50 years in business. Limited Brands announced this year that it will open a Victoria’s Secret flagship store in London in 2012. The company’s brands have also launched their own Facebook sites to better reach their clients.
Fresh ideas are the lifeblood of a business and help it continue to stay relevant with a changing world. But you need to make sure the change is a good fit for your company before you implement it.
“People come in and say, ‘I really like what you’re doing. I’d like to come work for you. I would change it all,’” Wexner says. “I would say, ‘Maybe they’re right. Maybe as good as this appears to me, maybe it could be infinitely better. But my intuition is that this is working. I don’t think I want to let a stranger play with it. I don’t want it to get broken. You have to earn the right.”
Wexner illustrates his point by hypothetically placing himself as a new employee at Apple. In this imaginary role, Wexner says he suggests that the company use different fruits each month on its products, beginning with a banana.
“I’m sure they want to hire people who are creative and imaginative and can advance the company, but they have to earn the right,” Wexner says. “Do they understand the brand, their business and the customer when they are making suggestions? If they are seeing the world differently, is it in the context of something?”
The lesson is that in staying fresh, you can’t just hop on board any idea that is brought to your attention, just because it’s new and different. The idea has to be delivered with the context of organizational knowledge.
“I kind of like my own ideas, but have I really earned the right to have this idea?” Wexner says. “It may mean, ‘Well, it’s an idea. But I want to reflect on it.’ Sometimes I will argue against it. ‘I really like this idea, but if it failed, why would it fail? How would somebody else do it? How would a competitor deal with this?’
“I want to get other views. I could ask, ‘What do you think of it? What do you think of this idea? Help me critique it.’”
You need to have thoughtful people bringing you ideas and thoughtful people who can serve as a check against ideas that you get from outside your organization that just may not be a good fit for you.
“If I think Apple ought to be fruit of the month and next month it should be a banana, I’d like somebody to say, ‘You’ve lost your mind,’” Wexner says. “You don’t want people just sucking up and saying, ‘Yes, boss.’ They have to earn the right, and I think it’s an individual and a collective thing to judge.”
You need to spend time talking to your people about your business. Initiate conversations about where both you and they see your industry going to help stay tuned in to what your company needs to do to keep up.
“What do you do after everybody owns a hula hoop?” Wexner says. “It’s an easily copied idea. Successful people in their careers, whether they are entrepreneurs or working in enterprise, think about their own evolution and advancement in a way that they are always saying, ‘What if the dogs don’t eat the food? What if everybody had a hula hoop? What do we do next?’ Then they are able to extend their success.”
Despite all of the success he’s had, Wexner operates with a growing fear that his next idea won’t work.
“It’s probably just in my nature, but the more successful something is, the more successful I am, the greater the fear of failure,” Wexner says. “The more successful a product or a brand is, the greater the fear of failure.”
Every new idea that became great probably had quite a few people questioning whether it would ever work.
“Change implies taking a different tact,” Wexner says. “Most people will reject that new idea or a fair number will reject that new idea, because you’re describing an animal they’ve never seen.”
Wexner brings up the idea of people being willing to spend several dollars for a cup of coffee.
“We’re going to sell this product at a premium price, three or four times what anybody else sells a cup of coffee for,” Wexner says. “You’d say, ‘That’s the craziest damn idea in the world.’ But, in essence, you’re describing Starbucks.”
You need to constantly be asking yourself whether what you’re doing now is working for tomorrow.
“The world is always changing and you have to be sensitive to that,” Wexner says. “Whether it’s channels of distribution or the products you sell or how you organize or how you think. If you don’t keep that flexibility, you obsolete yourself.” •
HOW TO REACH: Limited Brands Inc., (614) 415-7000 or www.limitedbrands.com
Morel, chairman and CEO of West Pharmaceutical Services Inc., has to pull back far enough to see sales operations in 35 countries and somehow process the sum total of the company’s daily operations into a form that can be consumed by employees on the ground, interacting with West’s customers.
“The difficult part is synthesizing that information into a few priorities that you can take an action on,” Morel says. “Once a month, we get together as a senior group and review what is happening in the marketplace, along with our financial results, and we spend a lot of time listening to what the sales reps and business development people are telling us about what is happening in the marketplace.”
In the monthly meetings, Morel brings in representatives from West’s marketing, operations, quality control and regulatory departments. It is a group effort to analyze the data and plot a course for the immediate future.
It’s a daunting task to take a global organization and focus it on a set of universal priorities, which is why Morel needs to build and maintain a communication strategy that emphasizes a straightforward approach, getting employees to understand the big-picture reasons behind the decisions that are made. It’s also why Morel needs to constantly find and develop new leaders who can help promote his messages throughout West’s worldwide footprint.
“The most important thing is that your strategy is universal and applies irrespective of the geographic operating region,” Morel says. “That means you need to find, develop, hire and grow people who have the same set of values that you do, and do it all around the world.”
Recruit top talent
Before you can develop leaders from within your ranks, you need to have the raw materials to work with. That is an issue that has to be addressed in your recruiting and hiring process.
Recruiting is not an exact science. No matter how much of a background file you compile on a job candidate, no matter how forthcoming the candidate’s references are, pulling the trigger on the right hire still comes down to little more than an educated guess.
Ideally, Morel says you want the opportunity to view potential recruits in real-life business situations to gauge their reaction to stress and juggling multiple tasks. But that is not an option in many cases. So you need to simulate that to the best of your ability in an interview setting.
“You get a pretty good flavor for a person’s abilities during the interviewing process,” Morel says. “You’re never 100 percent sure, but what I typically like to do, particularly for entry-level and younger candidates, is talk a bit about their upbringing, what things they think shaped who they are, what role their parents played. From there, you work more toward the technical skill sets.”
Younger management candidates will likely be well-schooled in their area of study, but perhaps lacking in versatility. Morel says you want to find out how willing and able they will be to diversify their skills and areas of expertise in your organization.
“If you have someone who is maybe in their first job, you might have someone who is savvy in one area, and you can identify that pretty quickly. Then you want to find out how broad-based they are by asking questions about what is in the news currently and whether they are familiar with it,” he says.
“We might ask a young college graduate what they think of health care reform and what they think the downstream implications will be. It’s not a right or wrong answer that we’re looking for. We’re looking for that clear indication of whether they are up to speed with what is going on in the world, whether they can think in a pressure-packed situation, which helps give us an idea of what kind of manager they might become.”
Demonstrate the big picture
To get people to be leaders, you have to get them to think like leaders. And that means educating them on how the puzzle pieces of the company fit together on a global level.
At West Pharmaceutical Services, which had $1.06 billion in 2009 sales, including $293 million in the fourth quarter, Morel puts the big picture in perspective by focusing employees on the end mission of a pharmaceutical company: producing drugs and medicines that help the end consumer.
“At some point, you, your family, your relatives or friends, will have used on them the products that we make,” Morel says. “So you want them to ask themselves if they would be comfortable administering this drug to a friend or family member, knowing that you made the packaging component that our customer uses to put it into the marketplace. You really want each individual to think from the personal aspect of how your product is going to be used ultimately. It does two things: It keeps everyone focused on their work, and it gives everyone a sense of pride that the work they’re doing is making a difference.”
You need to drill down as far as possible with your big-picture message. You can’t assume that there is a point in the organizational hierarchy where thinking like a manager is no longer relevant. The employees on the bottom rungs of your company are the people who likely have the most contact with your customers, and it is critical that they understand and reflect your company’s mission and values to the people who purchase your products.
“It can become quite easy for employees to become disassociated from the use of the products they make,” Morel says. “What you have to do is constantly remind them that what we produce goes into critical applications, whether it’s a component for a cardiologist or a drug packaging system that includes an antibiotic or a vaccine or a treatment for a cancer patient. At the end of the day, the work they do has a direct impact on someone’s life when it is consumed in the marketplace.
“That extends to all parts of the business, so we spend a lot of time reminding folks that whether they’re on the operations side of the business or the accounting side, every action they take has an impact on someone’s life.”
To reinforce the wide-angle message to employees, Morel gets out of his office at corporate headquarters and hits the road. He tries to get to all of West’s factories at least several times a year, and spends his visits interacting with employees on a personal level, promoting his vision for the company and doing a lot of listening.
“You give them a chance to ask questions, but more importantly, have a series of messages that are clear and consistent, so that everybody understands where we’re going,” he says. “When you deliver the messages, you try and relay back to them some local anecdotes that you’ve heard from the management team and employees at various locations. You want to tell stories that show how their job is one of the building blocks for the overall strategy of the organization. For us, it varies widely depending on the region we’re in. But all of those building blocks are very consistent in terms of supporting the strategy.”
Develop new leaders
To keep the momentum behind your vision for the future, you need advocates within your company’s ranks. In a perfect situation, every person at every location and level of your organization would be a complete self-starter who quickly embraces the mission and vision and never lets up.
But situations are seldom, if ever, perfect. That means you need to develop a support structure of other executives and managers who can continue to reinforce your messages when you aren’t present.
At West, Morel and his leadership team go through a succession planning exercise with the company’s board of directors twice or three times a year. For each management-level employee, the upper management team develops a profile of the person, including a detailed skill set, strengths and areas for improvement. Upper management then works with the manager to address his or her gaps and shortcomings.
“We form a plan to address those gaps and make sure that they have the skills to move on to the next assignment we have for them,” Morel says. “As we go through the process, it’s not only continual feedback from people in their current assignments. It is also keeping them apprised of what we’re thinking of them in terms of their next assignment, understanding where they want to go next as individuals and understanding how we’re going to fill in the gaps we think they have in their work experience. It’s a process you have to constantly tweak with help from your team and board of directors.”
Ultimately, you want to look for management candidates who can take bigger and bigger steps within a company, potentially rising to an upper management position over time. You identify your high risers by giving them successively more and more responsibility and seeing how they respond to the workload. Some people enjoy the added weight placed on their shoulders. Some find that they can only stomach so much. The only way you can separate the two groups is through putting your plan into practice.
“You’re trying to develop a group of individuals at the higher levels to take on broader management responsibility,” Morel says. “It’s pretty significant for someone going from their functional area of expertise and getting them to take on a broader piece of the puzzle, where they have to manage folks who know more about a subject than they do.
“You need to develop people who can take that next step. They might have a high level of skill in their own area of training, but then they need to meld those skills into a workable group that is going to execute against your business plan and strategy.”
Morel says the identification and cultivation of new leaders is one of the most important tasks on any organization head’s plate. You need to not just keep files on your up-and-coming managerial candidates, but you need to really get to know them, know where they excel and where they might have weaknesses. You need to know their personality attributes and flaws. And you can only gain that level of knowledge through spending regular time with them, both interacting with them and observing their behavior in a variety of different business situations.
“It’s almost a subject that you can’t spend enough time on,” Morel says. “It’s one where you need to interact with those individuals and get a very strong gut feeling about their capabilities. Then, you need to talk to the people you trust who are both above and below the individual in the organizational structure.
“What we really emphasize is how people treat their direct reports and how they treat other people in the company. It’s easy to get somebody to do something for you when they work below you in the chain of command. It is a totally different issue when you need to use softer skills to work with someone who is not from your part of the organization.”
How to reach: West Pharmaceutical Services Inc., (610) 594-2900 or www.westpharma.com
You won’t find Steve Christian hiding in his office avoiding a problem that needs to be rectified. That philosophy wouldn’t be good for anybody and certainly not the organization.
“Don’t avoid confrontation,” says Christian, managing director of accounting and consulting firm Kreischer Miller. “A lot of people don’t like confrontation, but it’s really an opportunity to make an organization better.”
It’s similar to being handed lemons and making lemonade. You take a problem or a mistake, and you find opportunity by breaking it down until you understand what went wrong. You determine how you can fix the problem and how you can avoid it in the future.
Christian says two characteristics of being a good leader are confronting issues and maintaining a constant focus on the good of the organization. Well, those go hand in hand, and that’s how Christian chooses to lead the firm and his 200 employees.
Smart Business spoke to Christian about how to effectively deal with company problems.
Don’t avoid confrontation. Not many people, in my opinion, welcome confrontation. I happen to be somebody who doesn’t mind confrontation because I think it’s an opportunity to make things better.
If somebody has let the organization down, has let me down, they’ve done something wrong, they didn’t serve a client right, well, the easiest thing is just to ignore it. But that’s not what you’re supposed to do. You need to look at it as an opportunity to make that person better, make that situation better, make the organization better.
When you sit down to have these discussions or confrontations, which is sort of a harsh word, it’s really how do you handle it. Do you handle it constructively? Or do you handle it destructively?
If somebody performed less than stellar client service in our business — since we’re a consulting firm, an accounting firm — does it do a lot of good for me to sit there and scream at them, ‘Don’t ever do it again. What were you thinking?’ I’d much rather say, ‘John Doe, what happened here? This is their perspective. Why is it happening? What do you think? What are we going to do differently? We’ve all done that before. Just try to help the situation not recur. We can’t have it back.’
The easy thing for anybody in life is to just ignore it.
Prepare before the conversation. First of all, you have to tell yourself no matter how much I don’t want to have this conversation I have to have it for the good of the organization.
Then you just have to find the best way to communicate. What are you trying to communicate? What do you want to accomplish in this meeting with this person? You have to ask yourself that and then come up with a game plan or an action plan to communicate that.
Take the emotion out of the meeting. Perhaps it’s something that has very much upset me. I may not meet with that person right then. There’s maybe a cooling off period of some sort ... so there’s not a lot of emotion at the end of the day.
But you have to remind people what they need to be doing differently.
Communicate the need to improve. One sign of a good leader is ... you don’t throw people under the bus. When things happen, it’s all about, ‘How are we going to improve our organization?’
The fact that it was John Doe that did it really isn’t relevant to anything. In fact, it’s sort of good that John Doe did this because we’re going to be a better firm for it at the end of the day.
If I see something happening with an individual or individuals and I think it’s something that I worry could be pervasive or I can give people a heads up, be careful of that, I will then communicate, ‘Hey team, we’ve had a couple situations where this has happened. Obviously it doesn’t put us in the best light with people or clients. Just be sensitive to this issue.’
Offer openness in bringing up problems. They have to trust you. I encourage everybody here whenever they have issues or problems, they don’t have to come talk to me, they don’t have to go to HR. But they have to find somebody they’re comfortable talking to because often they have to be part of the solution to whatever the issue is.
If you treat people fairly and they know you have their best interest at heart, and you don’t harm them in any way, make fun of them or criticize them, they’re going to feel comfortable because they trust you. It’s all about trust at the end of the day. You have to be consistent. You have to treat them with respect. You can’t be up and down — up one day, down another.
Admit your own mistakes. We acknowledge that we’re wrong or I acknowledge that I’m wrong. We do two things: We try to right this ship and go another direction whatever that means. What I always do personally is I very rarely dwell on something that already happened. What I want to do is take away from it what can I learn and how could I (make) the process better or my decision-making better the first time around.
I acknowledge it in a meeting, I acknowledge it in writing, if I think we should have done something. I don’t try to justify it. I don’t try to rationalize it in any way. I am comfortable that people make wrong decisions.
You may have evaluated it properly but it turned out to be wrong. If you only look at it, as I said, for what’s the good of the organization — forget me politically in the organization, forget somebody else — but if you only care about the organization and its best interest, it’s easy to admit mistakes.
How to reach: Kreischer Miller, (215) 441-4600 or www.kmco.com
Michael S. Dell is no longer the rock ‘n’ roll kid who became the youngest CEO ever on the Fortune 500, but he’s still hip to keeping up with the kids.
Dell, who founded Dell Inc. in 1984 with $1,000 and an idea to build relationships directly with computer buyers, today oversees a company with more competition in pricing, product and service than ever before.
More than 26 years into his gig as chairman and CEO, though, Dell, whose company did $52.9 billion in fiscal 2010 net revenue, still talks like that fresh-from-college kid about innovation in products and customer service. He talked about these points to a standing room only crowd at the Cleveland InterContinental Hotel’s Bank of America Conference Center in May. Speaking as part of the Cleveland Clinic’s Ideas for Tomorrow series, Dell spent nearly an hour talking about what makes his company tick.
The conversation started with thoughts on health care — including a moment of glee from the Cleveland Clinic folks that Dell Inc.’s properties are entirely smoke-free — and transitioned into how Dell keeps an edge on innovation. His first rule to keeping an edge: failing.
“When you get a business that changes very quickly, you get some of that naturally,” he says. “You just have to change. To be successful, what you have to do is have an acceptance of risk and you have to be pretty explicit about that, because if you don’t accept risk, you don’t get any innovation. And that means part of risk is you have to accept failure because not everything works.”
And when it doesn’t work, Dell gave some advice that should help soothe leaders coming off the rough landscape of the last few years: Failure can be your best lesson for your next big success. He pointed to a tripping point for Dell Inc. in the ’80s when there was a great flux in the price of pieces related to computer memory. The company’s system of holding onto a lot of inventory put it into an unfortunate bubble.
“It created a huge bubble for us at the time, and what we learned from that is you have to be really world class at managing inventory,” he says. “We went from being bad at that to being a lot better at that. Today, we typically have about eight days of inventory; the average manufacturer tends to have 40 to 50. We’re arguably one of the best in the world at managing inventory. And that became a huge competitive advantage that led to all kinds of growth for us. When things are going well, it’s hard to learn because you’re just growing, so you have to make mistakes. One of my guys says I’d rather try to do 10 things and get seven right than try to do five and get five right.”
Mistakes today are even more manageable, as Dell noted that the opportunity to discuss those problems with your customers through social media changes the landscape. Dell.com has more than 500 million users per year, and the company also is active in social media ranging from Twitter to YouTube. In all, Dell estimates that his company has 2 billion conversations per year with customers. His reasoning for the chunk of that coming from social media is simple business.
“The first thing you have to realize is the conversations are going to happen whether you are there or not, so you might as well pile in and get engaged in conversations and begin to understand,” he says. “What we found, for example, in social media, is it has reduced our time to understand new trends and problems.”
Dell followed this up with an example of a computer display released in Australia that showed a glitch on certain test programs. The immediate conversation about that on social media rushed up the company’s chain.
“We were able to solve that problem in about a week or two because we were paying attention to the different things out there, whereas previously, those things might stay out there for quite a long time and not get addressed,” Dell says.
Asked to expand upon points made during his conversation, Dell kept it simple and consistent: “Be willing to take risks and change,” he said.
“Imagine what something could be in five years and start putting the pieces together today.” •
HOW TO REACH: Dell Inc., www.dell.com
In June 2007, on Rolla Huff’s first day as chairman and CEO of EarthLink Inc. (Nasdaq: ELNK), he purchased 100,000 shares of the Internet company’s stock.
And these weren’t stock options.
He opened his own checkbook and wrote a check for $725,000 to reflect the $7.25 per share price.
“I wanted people to understand that I was going to think like a shareholder,” Huff says. “… I wrote a check out of my checking account to buy shares, so I was going to think about this business like a shareholder, and I wanted my shareholders to know that.”
The move was necessary to rebuild confidence in the business. The former CEO, who was well respected and loved by employees and shareholders, had been diagnosed with cancer the previous November and passed away within a couple of months, so EarthLink was being led by an interim CEO.
On top of that, the company had been highly focused on growth, so it had gone off on several paths that it probably shouldn’t have been traveling on, resulting in some not-so-stellar financial results — it would go on to finish the year with a $145 million loss.
“The business was grappling with the loss of their leader, had an interim leader in place, and had two or three growth initiatives going on that were consuming meaningful amounts of cash and also were resulting in the company reporting net losses,” Huff says. “That was the situation. The share price had been under a bit of pressure, but I think, more than anything, shareholders were looking at the cash being consumed, saw the uncertainty in the executive team and were really pressing to understand what the strategy was and when the company would be profitable and create value for shareholders.”
So after Huff bought those 100,000 shares that first day, he began work on making EarthLink profitable for its shareholders once again.
Recognize your strengths
Coming in to the position, Huff knew EarthLink had a lot going for it.
“The first thing I tried to come to grips with was what the core strengths of EarthLink were,” he says. “I would start with the fact that we have an incredible group of employees at EarthLink that were very dedicated to the company and to its customers. That was hugely important.”
He also recognized that the company had millions of customer relationships, and customers actually liked EarthLink.
Seeing these two facts, he came to his first conclusion for how to move forward.
“So I thought that the first thing that needed to happen was we needed to leverage the fact that we had millions of customer relationships and a great team,” he says. “Then, as much as anything, make sure, especially with everything going on in the business that was causing uncertainty, to become very transparent with everybody that we got involved with.”
As a result, after the stock purchase on his first day at the helm of the company, Huff did another big thing on his second day. He had a companywide podcast — the first of many to come — to communicate with his employees around the world.
“While I didn’t have a business plan at that point, I wanted to make sure that people understood that we were in business to create value for our shareholders and take care of our customers,” Huff says. “Those were the prime objectives. While we absolutely wanted to have fun and have a great place for our people to work, if we couldn’t take care of customers and be profitable with the business, that was going to be a problem.
“Secondly, I wanted people to understand that it was critically important that we establish credibility around what we say when we make statements and make commitments to each other and to our shareholders; it was vitally important that everybody was fully bought in to meeting their commitments — their personal commitments and the commitments we had to make as a business — so credibility was absolutely critical.”
Then the last part of his message was that EarthLink needed to retain its customers.
“It was sort of the idea that the customer that we had was far more important to us than the customer we didn’t have,” he says. “That was just a core value that I wanted people to understand. Customers had made investments in us, and we had made investments in the customer, and we wanted to preserve both. That was really critical.”
At the end of this, he had to communicate the ultimate goal to everyone.
“We got everybody’s head around what needed to happen, and part of that was we needed to reduce our cost structure — it was going to impact people, and we needed to make a commitment to our people that they would be extraordinarily valuable in whatever the company did next, but there would be some people that might not be with us a year from now, but we were going to take care of everybody.”
Build a plan
Once he established with his people those fundamental things that he wanted to accomplish, Huff spent the next two months building a plan from the bottom up and trying to understand what worked and what didn’t at the company. He also had to get his team members to agree to either stop doing the things that weren’t working or fix them.
The key to this process was being completely transparent with everyone involved.
He spent the first couple of weeks visiting all of the company’s key partners around the world. He had already told people how he was going to approach the job at hand, so he wanted them to see him in action.
“I wanted people to see that I was looking them in the eye and making that commitment to them because I think it was clear to everyone in the company that there had to be some dramatic changes that occurred,” Huff says. “It was clear. I think calling that out straight away and again being transparent with people mattered a lot.”
He was also transparent with his shareholders and employees.
“I really believe that transparency matters,” he says. “Not just to employees but to shareholders. My first call, I was honest with people and said, ‘Look, there’s a lot of things that need to be changed here, and here’s how we’re going to approach it. We’re going to tell you what we believe is good about this business, what we believe is bad about this business and what we think the prospects are.’”
What was most important to him was that these two constituent groups weren’t sitting around second-guessing him and the management team, so he did podcasts every two weeks so they knew what progress had been made and what Huff was finding.
“I didn’t want the rumor mill to shape opinion,” he says. “People may not ultimately like what the result is, but I wanted them to never doubt that we were being honest with them and open with them.”
He also looked at what EarthLink did well and not so well.
“Being transparent, first and foremost, is critically important, and then I think focusing on what your core strengths are as a business and building off of those as opposed to trying to build off of something that you’re not as strong on — getting that great foundation is great,” he says. “I think the second thing is making sure that whatever you’re rebuilding, you’re rebuilding it with the idea that you’re going to create value for the people that have invested in you. Any other model is not a business. I truly believe that you need to be focused on building business models that create investor returns.”
He says, “If I put $1,000 into this business, explain to me in two minutes how much you think I’ll get back and how you would conduct business to give me a return on that money.”
It often stumps people.
“I certainly wouldn’t say nobody thinks about it, but there are a surprising number, especially of smaller companies, that the business was built around a passion as opposed to a business model, and that’s probably the difference. You need equal doses of both,” he says. “If you’re not building something that provides a return for the people who are giving you money to build the business and investing their careers in the business, you probably ought to rethink the model.”
So EarthLink had to rethink its strategy in a couple of areas. He decided to pull out of a wireless mobile joint venture because it didn’t have a core wireless network and would have to complete with people who had full networks. He also saw that EarthLink was spending tens of millions of dollars on initiatives to build out municipal WiFi networks, but there wasn’t a model to create any shareholder value, so he had to go to those municipalities and tell them that he wouldn’t be working with them anymore.
“Again, it’s this idea of knowing what your core strengths are and building off of those and being close enough to reality to know where you don’t have core strengths,” he says. “You can really want to grow wings and fly around a building, but the likelihood of you being able to do it is slim, so moving your business in that direction is probably not a good idea. I think being connected with the reality of the environment is critically important. You can’t sell yourself an idea. It’s got to be grounded in reality. It can’t be based on you just convincing yourself that it’s a great idea in spite of the weaknesses in the strategy, and, again, just being as open and honest with people as you communicate the strategy as you can possibly be.”
In October, about three months after he started, he made the fateful announcement about job losses.
“This was when the market was still pretty hot and everything was a growth company,” Huff says. “We had to get our house in order, whether it was popular or not. We had to get it done.”
It was a big reduction — between 800 and 900 people. But Huff had been honest with employees, so they knew this was likely coming.
He gave as much notice as he could — four weeks for some and up to seven months for others — so they had time to prepare.
He used the company’s cash to offer severance packages based on years of service so they were taken care of — even giving employees their share of the bonuses they would have received for their work.
“If we have to reduce somebody during the middle of the year, we give them their proportional share of the bonus they would have earned if they would have been here the whole year,” he says. “We want people to share in the value that they had a role in creating. It might have been that they only had the opportunity to create value for six months, but they should participate for six months.”
He didn’t pay it out until they knew what the results were, so some had to wait for that money, but he made good on his promise.
He also had a support structure for people to help with the transition out and offered outplacement services.
He says the key to all of this was being honest and transparent.
“If you’re honest with people, they have the capacity to deal with difficult situations, but what people don’t have the capacity to do, honestly, is work all day and then be concerned whether their boss and their company is being honest with them,” Huff says. “It’s just too much, and it’s too much for the families to go through, especially if you’re a sole breadwinner in your house.
“You need to have a clear view of reality; even if you don’t like the reality, you need to have a clear view of it, and they deserve that. The people that we had to reduce were good people. It’s so important [not only] that you treat them right but that the people who stay behind see that you treated them right. It’s just absolutely critical. … It made a statement — to someone that was staying with us — that we would be staying with them much more credible.”
It created the buy-in and trust needed to move EarthLink forward, and that’s exactly what he got. After the reductions, the company was prepared to move forward, and that it did.
Fast-forward a couple of years, and as a result of Huff’s early decisions, last year EarthLink generated $723.7 million in revenue and $287.1 million in net income — more than $100 million more than the previous year, and the most profitable year in the past five years. The share price has also increased by about $1 a share, bringing more value to the shareholders like he originally sought to do. And through it all, he never got any nasty e-mails or mutinies from employees.
“I think about all of the change that this company went through in such a short period of time,” Huff says. “In most companies, the train would have gone off the tracks. That didn’t happen here. In spite of the massive change, I think people know they did something good here.”
How to reach: EarthLink Inc., (404) 815-0770 or http://www.earthlink.net/