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/
Every morning, Jim McCann awakens with one goal in mind: to move his company, 1-800-Flowers.com, forward.
“We are in a constant state of reinvention,” says McCann, the company’s CEO. “It’s like Andy Grove’s book, ‘Only the Paranoid Survive’; we’re very uncomfortable when we’re not moving forward. The most uncomfortable state for us is if we’re status quo. If we’re status quo, the world is continuing to change and we’re just not changing.”
That’s because innovation seems to come naturally for McCann, who parlayed a single flower shop in Manhattan into the world’s premier florist and gift shop. He accomplished this by thinking differently about how to interact with his customers and employees, along the way rewriting the definition of what a flower shop looks like.
In the 30-plus years since McCann started the company, he and his brother, Chris, who serves as president, have expanded through organic growth and acquisitions to become a public company with thousands of employees and annual revenue in excess of $700 million.
Beyond the well-known 1-800-Flowers.com brand, McCann’s holdings are widespread and include Cheryl & Co., The Popcorn Factory, Fannie May, Harry London, Ambrosia, BloomNet and 1-800-Baskets.com.
Smart Business sat down with McCann to discuss the power of innovation and how to build meaningful relationships with customers.
Q: What are some of the ways you applied innovation to adapt during the recent economic downturn?
We looked at this as a great opportunity, especially to find talent, but we did some other things as well that helped the company. We made sure that we were able to know the customer and serve them well. We took care of the finances and preserved our cash position. And we decided to invest for the future. The investments we made were in talent, technology and new business lines.
What a great opportunity to attract people that we otherwise might not have been able to attract. We also put money into video, social networking and mobile applications. And, we launched new businesses — Celebrations.com, a social network, and 1-800-Baskets.com. People thought we were crazy to do this in the midst of a recession, but they’ve proven successful.
Q: You’ve also been on an acquisition spree, not just in recent years but over the past decade. What’s been your strategy there?
The idea of following a strategic planning process is important to building your business. There may be things that are easier and quicker, but they don’t fit into the diagram that we’re developing to build 1-800-Flowers.com. We’re a public company, so the challenge is that the outside world may not understand why we’d buy rather than build. At that point, we tell them to trust us. We can’t detail the whole plan, but we explain to them that this piece isn’t just willy-nilly; it’s part of something larger.
That may scare away some investors in the short term, but those longer-term investors who have seen us make moves and watched them come to fruition will make their own judgment and, hopefully, trust us that we know what we’re doing.
We can’t not do things because some people don’t understand. We have to keep thinking ahead and looking at good opportunities for the company to grow and become better.
Q: How do relationships fit into the equation of interacting and serving your customers?
We have 30 million customers, and we still spend a lot of time trying to create relationships. You can measure relationships, but it comes down to the quality. You’re measuring the quality of a relationship. When we look at a relationship with a customer, the more engaged we can be with a customer, the better the relationship is.
I need a lot of help running our gift shop at 1-800-Flowers.com, and if I get the help from customers, that makes my job easier. It makes my input better, and I think it makes it more interesting and more fun for our customers to be part of the process.
I’ve been trying to do that for my entire life. Today, we’re doing this through technology, and it’s been getting easier every day because of the evolution of the new technologies. Whether that’s Facebook or Twitter, it makes that engagement not only easier and possible, but if you’re not doing it, you’re missing the boat. I want my life to be fun, more interesting. I want to have more and better relationships, and technology allows me to expand the realm and depth of relationships with vendors, staff people and customers. It’s all about the relationships.
Q: So how do you build those relationships?
Here’s one practical example of how we do things. About two years ago, a lady in Ohio wrote to me and said, ‘My sister tried to make this floral arrangement for my other sister’s bridal shower. You can see from the photographs [that] it’s a mess. But I bet you can figure this out.’
So I worked with some of our talented florists and we came up with a terrific design for a margarita bouquet. We took one of those 2-foot-tall margarita glasses and we did a flower arrangement, color appropriate, with attachments, and made a margarita display for the wedding shower.
Well, as we did this, other people both inside and outside the company heard about it, including friends of the bride, friends of the woman who asked for our help, members of our staff and several of our customers. They all got involved to help. When we were done, there ended up being this whole group of people conspiring and collaborating on these designs. And it was a great success.
So we saw an opportunity for a new product, and when we decided to take it to market as another idea for the company, I went back to the same group of people and engaged them. I said, ‘How should we market this? What should our advertising be? What should we say on the ads?’ So our customers suggested the product, designed the product, suggested the marketing platforms, designed them, contributed to copy and made the single biggest floral introduction in the flower business. And it was all customer-generated.
Q: In what ways have the customer service systems you’ve built played a part?
First, I challenged our people who were dealing with our customers to handle any issue that comes up in such a way that the customer is inspired to write to me about you and what you did and how you did it.
It’s not so much what you do as much as how you do it and how you empathize and directly connect with that customer. So I tell our people to handle it like you want to inspire that customer to, on their own, write to me about how you handled their issue.
The second thing I tell employees is that if you aren’t sure what to do, read this book, and I hand them a book that’s a set of binders filled with letters customers had written to me about the wonderful customer service treatment they received from a driver who brought a package, for a telephone customer service person or online help service person who helped them with something. It’s not like it hasn’t happened before, so I tell our people to read through this ledger and it will inspire you to do something above and beyond for the customers.
Q: You’re known for your innovation. Technology certainly is an area where the company has flourished. So how do you use social media and Internet marketing to push the company forward?
We’re using technology to get more intimate and personal with other customers. It sounds like a contradiction, but it isn’t. It’s true. How else can we get to know our customers well and learn how to serve them better? How can we recreate the personal relationship I had with our first 30 customers in our 700-square-foot store in Manhattan that we had 30 years ago? Thirty years later, we have 30 million customers, and the only way we can learn about them, to serve them better, to engage them, to get them to help us, is to use technology.
(A customer) might not be that interested in helping us design a new product and she might not be interested in helping us to come up with a new saying, but she really has an interest in promotional things because it’s an area of work she’s interested in. If we give her the opportunity to not be bombarded in the areas she’s not interested in but tickle her to see if she’d like to get involved in helping with promotional pushes, we engage her on something she’s already told us she might be interested in and benefit from her thoughts and outside-the-box thinking. It’s a good way to engage a customer without having to sit down across the table from her in her kitchen and talk about the ideas.
Every day we figure it out a little bit better; we take three steps forward and, hopefully, take only one or two steps back. We weren’t part of Twitter two years ago, but it’s a big part of our life today. What a great opportunity we all have to interact with our audience and find out what’s going on in their world while sharing what’s going on in our world.
Q: Let’s talk about being entrepreneurial. In what ways have you kept a culture of entrepreneurship in the company even as it has grown?
When people think about entrepreneurial cultures, it’s difficult for us to get our arms around that. But as I think about that and some of the more entrepreneurial people and organizations I know, such as the Ted Turners and Ted Waites (Gateway) or Wayne Huizengas of the world, those entrepreneurial heroes of mine, did they make (fewer) mistakes than other people? No, they probably made a lot more. The remarkable quality they had and that we try to embody is, when we take that shot to the stomach, it hurts, we fall down, but we dust (ourselves) off and get back up. That’s what it’s all about. We don’t worry about a mistake we made four years ago but instead worry about whether the mistake we make tomorrow is one we don’t get up from and learn from. We just have to keep moving forward.
How to reach: 1-800-Flowers.com, www.1800flowers.com
Year after year, Todd S. Nelson watches as Education Management Corp. adds to its list of locations. As the company expands into new cities and new states, like its recent venture into New Mexico, the more Nelson and his top team are removed from direct contact with their students.
However, that doesn’t mean they don’t have a pulse on the students’ needs.
“If you’re planning ahead and you understand your growth, make sure that you are providing the resources to be able to maintain that healthy level of contact with your customers,” says Nelson, CEO of EDMC. “Really the key is making sure that you’re planning ahead ... regardless of how fast you’re growing or how big you become; (maintaining customer contact) is a very core guiding principle that will help you and your company to stay successful.”
In order to maintain that healthy level of contact, you must stay in touch with your customers, monitor and measure customer satisfaction and hold employees accountable to providing great service.
Nelson has done just that to better understand those who EDMC serves, its students, and to better determine how to make the $2 billion company (NASDAQ: EDMC) stronger.
As one of the largest providers of private post-secondary education, EDMC has four primary education institutions — Argosy University, The Art Institutes, Brown Mackie College and South University — as well as Western State University College of Law. With 20,212 employees and 136,000 students, as of October 2009, providing quality education and service is a constant priority.
“As an organization becomes larger, it’s easy, at times, to get caught up in the organizational issues,” Nelson says. “As it gets bigger, it’s easier to get more removed from the customer, and that is a huge mistake. If you’re not communicating with them, you don’t know their perception of whether you’re doing a good job or not.”
You need to be in touch with your customers so you understand what they think of your company and the service you’re providing. Without that connection, you won’t have a strong hold on your strengths and weaknesses.
Nelson says making that connection can be broken into two simple, but necessary, steps. Step one is provide the customer with an avenue to communicate with you. Step two is being proactive in personally connecting with the customer.
Nelson oversees institutions with 136,000 students. They’re in 98 locations in 30 U.S. states and Canada, so reaching out to each one of them is nearly impossible. Even if you can’t directly talk to all of your customers about their questions, concerns and general feedback, you have to give them the ability to reach you.
“By providing them an avenue to have access to you, that allows them, those who may have low-end type of feedback, an opportunity to communicate with you,” Nelson says. “Then, you can make sure that you’re addressing their issues.”
There are fairly simple ways to give customers constant access to the company or divisions within the company. You can set up hot lines or e-mail addresses that cater to specific segments of your organization. Perhaps you send out a survey that is readily available to them when they use your product or service.
“The most important thing is to make sure that you have and you’re providing them a tool at their fingertips that they, at any given time, can communicate back with you,” Nelson says. “There are a lot of different things that you can do. Just make sure that it’s accessible and visible for the customer so they know they can get in touch with you.”
Communication is at its best when the tools to converse are simple and allow for timely and ample reply. While you have to use a communication structure that works best for your company, it’s always a good idea to ask those whom you’re serving their preferred method of communication.
“By talking with them or communicating with them and asking them that question, they’ll let you know,” Nelson says.
That ties into the second step: being proactive in maintaining that line of communication. You don’t only need to understand how your customers want to be communicated with but, also, how often. Those are two questions that can differ drastically based on your company, industry and service offering. The easiest way to find out that information is simply ask the customer.
Nelson says a direct conversation, whether in person or by phone, tends to be the most efficient means for communicating.
“Your ability to communicate effectively is enhanced because you’re not only able to hear what they’re saying, but you can put it in the context of whether there’s body language,” he says. “Also, I believe it shows your commitment to your product and the customer. For example, in my past, when I’ve had someone who has physically taken the time to talk to me about something, I know it’s a priority.”
Depending on your number of customers, you’re going to have time and, possibly, geographic limitations trying to touch base with all of them. Those restrictions mean you need to work even harder at determining who to engage in conversation to understand the views of your organization.
The best thing to do is reach out to a methodical sample of your customers.
In EDMC’s case, the company picks a communication vehicle and then pulls from a cross-section of students based on geographic locations, degree programs, online students and on-ground students.
“Where there’s any differentiation in a particular class of your customers or group of your customers, you would want a reasonable sample,” Nelson says. “Again, it’s us proactively going out and communicating with them and not waiting for them to have to come back and communicate with us.
“It’s a way to build a better, more responsive, healthy organization because, at the end of the day, the most important people are your customers and your employees. It’s just incredibly important that you know what they’re thinking. Otherwise you could lose touch with whether you’re really doing a good job providing that service or product to your customer.”
As your organization grows, you have to put techniques and processes in place that allow you to monitor how well you’re meeting customers’ needs and expectations.
But measuring customer satisfaction isn’t only about asking the right questions and properly compiling the data. The person or department you put in charge of this segment of your business needs to have a strong understanding of analytics and they have to work with you, the CEO.
“Sometimes they might report directly to the CEO, but if not, they have to have direct access to the CEO,” Nelson says. “That’s the key to keeping clear and timely communication with your customers.”
Also, whomever you give the responsibility must have the technical training to perform the job and a deep understanding of the organization as a whole. At EDMC, the Academic Programs and Student Affairs Department undertakes surveying students.
“I would think that as a person is developing their own management team, that it is very important that they recruit or find within part of their management team someone who has expertise in that area,” Nelson says. “You want to hire the best and brightest in an area like that that is so important to the future success of the company.”
Like Nelson says, measuring customer satisfaction must be seen as a priority, which means how you gather feedback and the topics you’re gathering feedback on are just as important.
One of the easiest and most effective ways to capture the information you’re looking for is by developing a format to survey customers. When creating the survey, think of how your customers prefer to be communicated with because their participation is an essential part of the process.
EDMC performs a variety of informal and formal, electronic and physical surveys. But the company sees the best response is when it keeps the customer in mind and asks: How can I make this convenient, user-friendly and in an appreciative way?
Not only must the survey be easy to access, but the questions must be on target and easy for the customer to understand.
“The types of questions that you would ask would be related specifically to the profile of that particular customer,” Nelson says. “In our case, if someone is one of our doctoral students in our doctoral pharmacy program, you would want to ask them about their faculty member, their classroom facilities, the clinical facilities, the curriculum — those things that are very specific to that particular customer.”
You want to survey customers in every area they might have expectations of your service, as well as the service outcomes. For example, EDMC tracks how students are doing in the program they’re enrolled in, graduation rates, whether they’re finding jobs and the salaries they earn. EDMC also surveys potential and past customers, as well.
“It’s all, in some way, related to the customer,” Nelson says. “Everything that we can, we try to measure and make sure that we’re tracking.”
Obviously, it’s a lot of information to collect. You need a solid team because the process doesn’t stop there.
“It’s very important that that data is then quickly analyzed because, again, there is a shelf life to the data you collect,” he says. “Quickly analyze it and put it in a format that the leadership of the company at all levels has access to for the areas of the company they’re responsible.”
If customer service is one of the core values you list, then everybody from you and your management team down to the newest hire need to treat it as such.
There are several ways to send the message that customer service is a priority and that employees will be held accountable to upholding that value. First and foremost, Nelson says it starts with the CEO’s leadership.
At management meetings, employee meetings and whenever Nelson has the chance, he makes a point to report on where EDMC stands in terms of the level of student interaction and satisfaction.
“If you’re talking about it and you’re reviewing it and you’re sharing it with the people who work directly with you, it becomes very obvious,” he says. “So first is by being an example.”
Part of the communication is making sure you and your management team share with employees what metrics the organization is tracking. EDMC uses the standard methods of communication, such as company Web site, department meetings, companywide voice mails and e-mails to get the message across, but the important point is that employees are hearing it repeatedly.
Using metrics to gauge customers’ thoughts makes holding employees accountable easier, because you always know what grade the organization is making when it comes to service and specific aspects of service. As the leader of the company, you can’t reach out to every employee and every department. But you can get the conversation rolling by following up on the metrics with your direct reports and setting the expectations to follow suit down the line.
“In other words, on a regular basis through the management structure, you follow up to make sure that they’re following up,” Nelson says.
You can maintain customer communication and monitor customer satisfaction, but remember they are directly linked to your employees and their abilities. Nelson says the commitment to EDMC’s students has to be shown during a new hire’s interview process.
“For those who are current employees, you continue to do management development and employee training to make sure that those values that are so important are being reinforced and framed and taught to the people in the organization — all of us,” Nelson says.
HOW TO REACH: Education Management Corp., (412) 562-0900 or www.edmc.edu
When Jonathan Congdon threw a party in 2001, he wasn’t sure if anyone would show up.
The “party” was actually an online forum for customers of Product Partners LLC — the parent company of Beachbody and its in-home fitness and weight loss programs like Power 90 and P90X — where Congdon serves as president. There were plenty of customers, but he felt the way an anxious party planner feels after sending invitations.
“I just remember nervously watching those forums and wondering if anybody was going to come on and ask anything or start talking to each other,” Congdon says. “We realized we had people that were doing our program who needed to talk to other people who were doing it and needed to talk to us. We saw people coming on the [message] boards and very actively posting and speaking to each other and asking questions, giving incredible support to each other — better than we could have done.”
Soon after Congdon founded Product Partners in 1998 with Carl Daikeler — who’s now chairman and CEO — they realized they were good at creating comprehensive DVD-based weight loss programs and clearly articulating what customers could expect from them. But not until those message boards started filling up did they realize they were good at something else, too: building relationships with customers beyond the product.
“What we became was a company … that provides a community for people to interact with each other, which probably quintuples the likelihood that they’re actually going to do the program all the way through to the end,” Congdon says. “If you’ve got five times as many customers doing the program as you would have if you weren’t good at creating community for them, you then have five times the number of satisfied customers who are willing to buy more from you. And then you’ve increased the odds that some of those people are going to become evangelists for your brand.”
Congdon learned the secret to satisfying customers is offering support then staying out of the way so they can use it.
“Our job is to make sure that the customer experience is top-notch, that we deliver products really quickly, that when they call and have a complaint, that we handle it really quickly, and that we’re just a well-oiled machine,” he says.
Find service stars
With 70,000 new customers jumping on the Beachbody bandwagon weekly, Product Partners’ 300 employees can’t handle the sales volume — which totaled $350 million in 2009. The company also uses third-party vendors for giant spikes in demand, especially during infomercials.
Whether or not your customer-facing forces are full-time employees, the key is training everyone to the same standards for a consistent customer experience. But first, make sure you’re training the right people — ones who care about your customers and your standards.
“One of the keys to our success is that we’ve worked hard with our vendors to make them better so we’re better,” Congdon says. “We don’t just farm out work to our third-party vendors. We create standards … and we choose vendors who are willing to work with us like that. I almost said, ‘be managed like that,’ but really, that’s not the way it is. You’ve got to find a vendor who wants to work with you.”
It starts with a clear explanation of what you expect. That will weed out the self-selecting few who know they don’t match and secure a better fit with the rest.
“It’s really common for a vendor to tell you that they’re beating industry standard,” Congdon says. “And then we have to say, ‘We just don’t care what the industry standard is because we’re trying to create a new industry. We’re in the industry that wants a zero percent [error rate].”
Explain why those expectations are important. When searching for people who will serve your customers best, that means answering why your standards matter to customers.
“We need to have a zero-error environment because … if they let themselves get to a point where they have 70 pounds to lose, they are very quick to find any excuse not to work with a company that’s going to ask them to work hard to lose that 70 pounds,” Congdon tells candidates. “So we have to get out of the way. The product coming late or somebody rude on the phone or whatever and they’re gone.”
The second step in identifying customer service stars is an attitude check. Optimists are the best match for the customer-centric culture at Beachbody because that upbeat positivity translates into a more enjoyable interaction for the customer.
“You’re not going to have somebody say, ‘Eh, I don’t like life,’ in an interview,” he says. “The pessimist is going to tell you what was wrong with every company they’ve been to and how what they tried to do couldn’t get done and it was always somebody else’s fault.
“Hopefully they’re willing to share a little bit of the blame. I’m perfectly willing to hear from somebody how they’ve learned from their mistakes. But the people who seem to have never made any mistakes, those are the dangerous ones.”
People who share the blame for past mistakes are more likely to take initiative in solving future problems for the sake of the customer.
“We don’t accept anything less than 100 percent,” Congdon says. “It’s easy to say we are great because we’re 99 percent, but if you’re thinking about the customer then you’re thinking about the 1 percent who didn’t get the product as quickly as they were supposed to.”
Train employees to believe
You can spend that effort finding upbeat employees who are passionate about customers, but it’s moot if you don’t get them to believe in your company and what it does.
“It’s a paradigm shift in the way customer service thinks,” Congdon says. “We’re not trying to get them to [buy] the product so we’ll make more money. We’re trying to get them to [buy] the product because they need to improve their life, and the way they’re going to do that is by using our product. ”
That’s easy for him to say, right? His products actually help people get healthy — thus improving lives. But that same strategy can apply to any company, regardless of what product or service you offer. Just focus on the benefit you provide customers, even if that’s as simple as making a task more convenient for them.
“The point is: If you believe in the product that you’re selling, you should know how you’re affecting people and why the company exists, why it’s good,” he says.
But employees won’t fall in step automatically.
“You have to train people on what the product does and why it’s better than something that’s comparable,” Congdon says.
At least that’s the idea if you manufacture a product. If not, then the training should cover what’s special about whatever it is you do. Maybe that comes down to the experience customers have with your company.
“If I’m a Best Buy, I can’t train all my [employees] on every single product that I sell,” he says. “But I can train them on the Best Buy experience, on what happens when somebody walks in the store, on the fact that I’d rather walk into that store than some other elec
tronic widget and music retailer. So I might be training somebody on the experience and the customer service and the prices and everything else that I consider the best thing about my company.”
So in addition to teaching employees about Beachbody’s programs, there’s also a service aspect. That training involves explaining the expectations and metrics that define great service, down to what phone calls should sound like.
It starts with some of the basics, like: The customer’s always right — and when they’re not, don’t correct them.
“We realized that … when somebody called to say something and they were incorrect, it wasn’t our job to let them know that they were incorrect,” Congdon says. “If their expectation was the product should have gotten there in four days, it didn’t really matter if we said, ‘Well, if you’ll go to the Web site, you’ll notice that it says five to seven business days.’ There was absolutely no upside in showing them that their expectations were off.
“Ignore the fact that you’re right and the customer’s wrong. Just ask them what you can do to make it better. We’ve found that returns went down based on that.”
Congdon also wants customers to hang up the phone feeling like their issue was handled. The only way to know is to ask.
“Even if the call didn’t feel good and was a little tense, you have to, at the end of the call, basically ask, ‘Have I taken care of what you were concerned with?’ and ‘Is there anything else I can help you with today?’” he says. “We must ask that question and then we must say whether the person said, ‘Yes, my issue has been handled,’ or, ‘No, it hasn’t been handled yet; I’m not satisfied,’ which then can create more conversation. We will get them to the point where they say yes.”
Look beyond statistics
Congdon is surrounded by customers every day. It’s not just the ones who tour headquarters daily; the office walls are covered with thousands of customers’ before and after pictures.
“You cannot get away from the customer in our company,” he says. “I am shocked when I go to other companies that sell direct like we do and I realize that there is no sense of the customer inside those offices.”
If you make fan belts, you’re probably not going to have photos of people who love your product plastering your office. But to keep the focus on customers, you can make heroes of people who create a positive experience for them.
You’ll only recognize who’s doing that if you have ways to measure it. That starts with the expectations you set in training, but you won’t always know initially if those will have tangible, measurable effects.
“Do I try to make improvements without knowing how I’m going to measure them but because I know it’s better for the customer? Yes,” Congdon says. “Does it usually turn out that I’ve got something measurable that happens as a result of hitting that mark? Yes.”
For example, Congdon realized shipping products on time — within five to seven business days — wasn’t good enough. Customers expected the low end of the range, and they’d start calling on day four to ask where their product was. They’d whittled down the official deadline.
So Congdon set the internal deadline on day five to meet that expectation and realized it reduced canceled orders by 50 percent, returns by 40 percent and “where’s-my-order” calls by 80 percent.
Although he didn’t set out to, he can monitor when shipments go out as well as what effect that has on other statistics.
Those statistics can also contribute to your broader understanding of whether your expectations are resonating with employees.
“Certainly, it pays off in the reactions of your customers and the number of complaints that you get or the number of positive letters that you get,” he says.
Plus, the unresolved complaints go straight to the top for Congdon and Daikeler to handle.
“I’ve had people that were a little frustrated after they say that 99 percent of the products went out in 24 hours and then I respond with, ‘Well, what happened with the 1 percent?’” Congdon says. “(That) sounds great, but not if you’re one of the customers that fell into the (1) percent. You can look at statistics generally and go, ‘Wow, that looks like an A+,’ … but always think about individuals rather than the stats. We feel that 1 percent because those are the complaints that come to us.”
While the company has gotten good at dealing with those, it doesn’t have as many because complaints have dwindled. Instead, Congdon and his team are getting a lot of unsolicited praise, as more than half of their sales are now sparked through word-of-mouth recommendations from other customers.
“My job is making sure that we don’t get in the way of that and that our operations literally remove any barrier to that word-of-mouth transaction occurring,” Congdon says. “What we do is we try to give our customers all the tools possible … and let our customers be our best spokespeople and our best salespeople.”
HOW TO REACH: Product Partners LLC, (800) 714-7254 or www.beachbody.com
Visit Beachbody’s online community: www.teambeachbody.com
After years representing employers in labor and employment law, after years of extensive experience in litigation over those same matters, after years working with unions on negotiation and arbitration, Yund has tucked away a few lessons on leadership that he has been able to reference while guiding Frost Brown Todd LLC.
Take, for instance, the employees who are considering unionizing. Yund’s experience shows that his clients who win union elections aren’t going through the process because they necessarily want better pay or benefits. They think about unionizing because of leadership.
“Supervisors who are trusted are consistent in what they expect of their employees,” Yund says. “It’s the supervisor who is a bully or is inconsistent or can’t be trusted who causes people to think that they need a union, not better pay and better benefits. Whether it’s people deciding to unionize or leave and go elsewhere, I think it’s because of good supervision — people are in positions of authority at the company who they can trust, people who are consistent in saying one thing and meaning it, not saying one thing and doing another.”
What does this have to do with how Yund leads his 925 employees as the firm’s managing member? Well, first of all, it’s a lesson in how to retain quality employees and it’s a lesson in the importance of good leadership.
Consistency and trust are also wound into the keys Yund sees as essentials to being a good leader.
Here’s how Yund uses the fundamentals of leadership to guide his employees.
To lead in any industry, you must have experience and be knowledgeable about the company you plan to guide. That’s understandable. But Yund’s reasoning behind the obvious is that it is linked to an essential trait that good leaders must possess: confidence.
“That’s necessary in order that the leader can have the confidence to know what to do,” Yund says about being an expert on your company. “If you don’t have the confidence to know what to do, nobody else is going to have confidence that you know what you’re doing. To lead others, you have to inspire confidence, and to inspire confidence, you have to be confident, and to be confident, you have to have that experience and knowledge of the business.”
Confidence can be a chain reaction. If you’re the first domino to fall, you can’t expect others around you to stand strong.
Having confidence in your own abilities and your own decisions to lead a company starts with understanding your business. And understanding really comes down to being a better listener than a talker, Yund says. Separate yourself from anything that can be a distraction — your BlackBerry, your e-mail — and take the time to really be in the moment, ask questions, and listen to what your employees and clients are saying about the business.
“You have to commit yourself to spend the time necessary to get to know the people, the product, the company,” Yund says.
Yund had been with Frost Brown Todd for 32 years before being named as the managing member, so the learning curve wasn’t quite as steep when he was named to his current position a year and a half ago. However, that doesn’t keep him from continually learning about what is happening within the firm. Even after three decades with Frost Brown Todd, do you think Yund knows it all?
“The answer is no,” he says. “I do think that’s necessary to keep (a commitment to understanding the company). Just because you have to have confidence that the path you’re taking is the right one, you also have to be flexible and adjust where necessary.”
Case in point, when Yund took over as managing member, the country was in the thick of the recession. So he worked with Frost Brown Todd Chairman John R. Crockett III to develop a plan that would guide the firm through the economic downturn. The goal was to make sure that the economy and its continual uncertainty didn’t negatively affect the firm in a way that it lost key people.
Yund wanted input from his partners and clients. Receiving input — listening to your employees’ ideas — can’t simply come from walking around the hallways and having meetings with your senior executives. Frost Brown Todd surveyed both employees and customers. Questions were sent to the firm’s 100 largest clients. In addition to an online employee survey, Yund and Crockett personally interviewed 40 partners asking questions such as what they needed, what could management do better, and where they saw opportunities for the firm to improve and prosper.
You have to put in the effort that will allow you and your employees to have confidence in your decisions and your ultimate plan for the company. And that effort means constantly keeping the pulse of the organization.
Taking the second step of inspiring confidence in employees comes from how you present yourself and your decisions. You need to not only be communicative but open and honest.
“Make sure you never appear to be hiding the ball,” Yund says. “Make sure you don’t do anything that makes people doubt that they can trust you. That’s probably the biggest thing, so that they not only have confidence in you but confidence in their own ability to push the agenda of the company forward and the confidence to make mistakes.”
As Yund communicates the plan and the firm’s message to his department heads and practice group leaders, he asks them to use the same confidence and to lead their people in a direction that is consistent with what has been laid out for them. You do that by sending a clear message but also by consistent communication and consistent expectations. You should expect the same standards of your managers that you want them to expect of others.
“Why is consistency important?” Yund says. “Because people get confused if they get mixed messages.”
Yund spends a lot of time in his car. And if Frost Brown Todd’s eight locations were more than 250 miles from the home office, his sky miles, not his odometer, would be the true testament of his efforts to reach out to all of his employees and partners.
You’re never going to have as much time as you’d like to interact and communicate with employees, so you have to spend your time wisely when it comes to spreading your message. One thing Yund wants his employees to know is that he is approachable.
“You have to be approachable,” he says. “I don’t mean that in I wish I had more time to spend in walking-around management, but when I do walk around, I want to let people know I’m having fun at work, so they can feel that they can have fun at work and they should have fun at work. I think the better companies are ones where people really like their jobs as opposed to just dread Monday morning and can’t wait for Friday evening.”
When Yund talks about fun and approachability, he doesn’t mean performing juggling acts or playing practical jokes in the hallway; he means simply letting employees know that you enjoy doing your job. It’s like with any lead-by-example scenario: If you are able to demonstrate to your employees that you like your job, that sentiment rubs off.
“When I hear peopl
e complain about their jobs, and this goes back long before I was the managing member, my general response was, ‘Man, I really like what I do. I can’t think of anything else I’d rather be doing. It’s a fun place to practice law with great partners and great clients,’” he says. “If you give off the aura that that’s the way you feel about your job, I think you’re more likely to have other people feel that way, too.”
Building that approachability starts with taking advantage of whatever opportunities you have, no matter how short or how limited, to demonstrate that you enjoy talking to your people and you enjoy getting to know them. Yund tries to reach out to his 925 employees, a little more than half of whom are lawyers, by not only traveling to all of the Frost Brown Todd offices but by inviting employees to visit the larger Cincinnati and Louisville offices in order to spend time with them and introduce them to other firm employees.
It’s a circular answer, but in order to build relationships with employees and show them they can reach out to you, you must be accessible.
“That doesn’t mean sitting in my office with the door open because there are, of course, times when I can’t do that,” Yund says. “It means getting out of my office and making sure that when people come to talk to me about a problem, which is most of what I do, I don’t look at it as a chore.”
Naturally, when employees have a problem or they did something wrong, they might be worried about the reaction they’re going to receive from you. Yund takes a tip from former President Ronald Reagan by using a bit of tough-minded optimism. You have to make sure the problem gets fixed, but you also have to reassure your employee that everything is going to work out.
If you want your employees to feel that they can approach you with a problem, you have to be willing to help walk them through their dilemmas.
“I think there’s a lot to be said for helping people solve problems. That’s mostly what lawyers do anyway, so maybe it’s easier for me,” Yund says. “But I look at when people bring problems to me as an opportunity to do my job. I’ve already said I like doing my job, so I don’t want to make them think it’s difficult to bring a problem to George because my reaction is something other than optimistic.”
Relay a simple message
A big part of leadership is keeping everyone working toward the same goal. You do that through your vision.
When it comes to communicating a vision, there are two things that you need to keep in mind, Yund says. You have to keep it simple, and it must be something that is important to your business.
“It has to be something that is specific to your business theme, something that will explain a lot of what you do when you’re consistent about sticking to your plan,” he says. “That helps communicate your confidence. It helps you do what you say you will, and it helps you align your actions to your message. But I think it’s important to develop an important-to-your-business theme that is very simple.”
In Frost Brown Todd’s case, the firm thinks clients are more likely to seek services at a larger company because they expect that their needs will be met with the range of lawyers provided. In order for that to happen, the firm has to be organized and communication structures have to be such that it can meet each client’s need. The message is simple, but it’s important to the firm based on its history of having offices scattered throughout several states.
Put it this way, Yund says, “I think the easiest message to get across is the one that is simple.”
How to reach: Frost Brown Todd LLC, (513) 651-6800 or www.frostbrowntodd.com
When Charles Allen took the wheel of Crowe Horwath LLP in 2007, he didn’t need to change direction or make repairs. His company — still called Crowe Chizek and Co. LLC at the time — was a well-oiled machine, far from broken.
In fact, it was one of the largest regional accounting and consulting firms in the country. But that didn’t mean the new CEO couldn’t rev the engine.
“It wasn’t necessarily a business that needed to be fixed,” Allen says. “It was one that needed to be positioned to get to the next level.”
That much was obvious, at least to a man who had spent his entire career at the firm — plenty of time to recognize potential for additional growth. He had been watching the client base expand geographically across all 50 states and even internationally. He decided it was time to catch up.
“Many clients had operations that were located outside of our footprint,” Allen says. “What was happening was we were a regional firm but we were really doing business nationally from our regional locations. So we believed it was in the best interest of those clients and our people to expand nationally in order to manage the travel requirements and the stress on our people but to also better serve the clients in the localities that they were in.”
So he set out to reposition the regional Crowe Chizek as a national firm that would be known globally as Crowe Horwath after garnering the support of Horwath International, which became Crowe Horwath International.
The previous CEO focused on daily operations for the last nine months of his term while Allen took over big-picture items.
“I had a chance to sit and contemplate what needed to be done and then spent time with others, both inside and outside the firm, better understanding the profession, the market and where we needed to go before I started to put together the vision and the priorities,” Allen says.
During the gradual takeover, he heard clients talking about their need for national support and employees about the national travels they took to accommodate. That led him to the vision of catapulting the firm from regional to national status.
But to vet that vision and drive the change through the company, he’d need to engage all of the other stakeholders.
“What we’re trying to do is to move an organization of 2,500 people — and an international network that’s even much broader than that — in one direction,” Allen says. “It’s taking investments and taking risks to support this effort … to really invest in our future.”
Invite various perspectives
Allen’s first action was calling together a task force to vet his vision and determine how it would play out across the company. To do that, he pulled from research he’d already done.
When you start listening to your company — whether it’s to familiarize yourself as an incoming leader or just to keep a continual watch — you’re not only learning how units operate and where they’re headed, but you also identify who’s leading the pack.
“The first thing I did was to better understand the business units outside of those that I [had been] running. I did spend a significant amount of time with executives in their individual businesses to understand their strategy models and their individual plans within those business units,” Allen says. “I also wanted to understand their individual commitments to the firm, how long they intended to be engaged in the role they were in, the energy levels they had, their desire to play on my team.”
Those conversations pointed him in the direction employees saw for the firm and revealed who would take it there.
Specifically, look for energetic people with a commanding knowledge of their business unit. Those are the thought leaders who will bring the best input to the collaboration.
“It’s a process of gathering individual data points, marketplace perceptions, understanding the skill sets of the people,” Allen says.
Make sure you’re looking in all corners of the business — and beyond. Allen’s task force included people from various business units, the chief people officer, chief operating officer, previous CEO and a retired partner from a Big Four auditing firm.
“It was a diverse group, and that was part of the intention,” Allen says. “It was made up of those in a leadership position in the firm, past leadership, leadership from an outside firm to give us an outside perspective with a business knowledge.”
As tempting as it might be, you should pass up the seat at the head of the table. Don’t just hand it to one of your executives, either, because with an executive-level title comes a certain amount of influence. If you want your team to be a conglomeration of best ideas from various perspectives rather than a top-down initiative, you need to give control to someone further down the totem pole.
“I asked one of our young partners to lead the strategic task force, not one of the senior management, because he wouldn’t overinfluence others during the process,” Allen says. “He would be the one that was gaining and building consensus, not leading the thinking going into it.
“I could have led that strategic task force and I could have driven it the way that I wanted to drive it, but that would have not necessarily had the buy-in from others on that committee. And quite frankly, I’m not sure we would have gotten all the thoughts out that we needed to get out to get where we needed to go.”
To help facilitate open idea-sharing, communicate your expectations at the start.
“We set the stage upfront that everyone needed to check their hat at the door, that people needed to leave their personal priorities outside of the discussion,” he says. “We were working to develop a strategy for the firm, not for individual units or individual people. The only way you could get to the right decision was to make sure that people were open and felt freely about communicating and disagreeing.”
Keeping the focus on the common goal means keeping it fresh in everyone’s minds Your vision should be part of each discussion.
“Keep it in front of them at the beginning of every meeting,” says Allen, whose team met monthly. “Every session, go back to the vision. Restate the vision and work off of the key elements of the vision.”
But the vision should be more than a mantra you repeat; it should be the foundation of your agenda.
“We took the key elements of the vision and broke them down and then assigned folks from the task force to develop the strategic plan for those elements,” Allen says.
Then, as people bring strategies back to the table, continue to weigh them against the vision.
“There was a point where we could have gotten off track,” Allen says. “There was an issue that came up that was more tactical than it was strategic. Pretty quickly, we had a discussion as to whether or not if we went down that path it would take us off of the main objective.”
Roll it out
Allen’s task force got on board with his vision to flesh out the strategies that would achieve it. That was the confidence he needed to start rolling it out across the rest of the company. But bringing everyone on board took more effort than he expected.
“I underestimated the amount of time it was going to take to communicate and the effort and preparation that goes into communicating,” he says.
>It took a tiered approach, starting with the firm’s executive committee — which is essentially their board — then the partners, then the board and CEOs of the Horwath International network. He secured buy-in from each group before moving on to the next, and he secured buy-in from all of them before ultimately cascading the vision down to his employees.
At each stop, pull out the elements of the vision that are most relevant to each group.
With the international network, Allen’s focus was on rebranding to Crowe Horwath and Crowe Horwath International to build global recognition. Inside the organization, it was emphasizing how the new vision would create development and leadership opportunities.
But you may not always know what issues top each audience’s concerns, so it’s especially important to make your message two-way by inviting input.
Allen gave response opportunities to the partners and the international network immediately during his presentations. Laptops were set up on tables so people could send in comments as he talked. A group of leaders at one table sorted through the comments and kept the most popular topics flowing to Allen so he could address them right away.
“It was like having 300 people all yelling at you at the same time,” Allen says.
That feedback will help you flesh out your message as you go along by adding their questions to your future presentations.
“It wasn’t only getting the feedback but it was responding to people’s questions, helping them understand and starting to build consensus,” Allen says. “We could start to see where the concerns were [and] address the concerns so that they better understand why we were heading in the direction we were headed.”
But by welcoming input — especially when it’s anonymous — you invite reinforcement as well as criticism. Don’t go in expecting everyone to jump on board right away.
“You will never get 100 percent consensus,” Allen says. “If we get the majority of the people on board with where we’re headed, that’s what we were trying to accomplish. You gain the majority and then what happens is, as you move forward, those outliers come on board.
“My response has always been, ‘I understand your perspective and I appreciate your perspective, but this is where we’re headed.’ Understanding their perspective and respecting that may not change the direction we’re on but may help that individual continue to be successful. You can’t fit everybody’s specific need and concern.”
That broad consensus-building process is preparation for the message you give the people who will carry out the vision — your employees. Only after Allen perfected his vision through the input and support of those other groups did he take it back to his employees.
He worked with his communication team to put the finished version of the vision into a brochure that explained verbally and visually where he was taking the firm. Thanks to feedback from the executive committee and international network, he was able to get a clearer picture of the vision and condense it into a succinct statement that would stick with employees.
Then he traveled to each office with his chief operating officer so he could present that vision and respond to concerns personally.
“It was a process of consensus-building starting at the very top of the organization, taking it all the way down to those in the individual offices,” he says.
Allen rallied his troops to achieve a revenue milestone of $507 million in 2008. Under his leadership, Crowe has opened offices in Los Angeles, New York, Tampa, Atlanta, Dallas and Philadelphia, bringing the total number to 25 U.S. locations. The firm continues to be named a best place to work, making seven lists while Allen has been in charge. According to an annual independent survey, he also led Crowe to a firm-high client satisfaction rating 26 percent higher than its major competitors.
Now, keeping employees in the loop is just as important as it was when he first introduced the vision.
“People need to know what you’re doing and when you’re going to do it and why you’re doing it,” says Allen, who keeps employees updated on the vision with monthly scorecards, periodic webcasts, annual visits to each office, the company intranet and a weekly newswire. “We are tracking our progress and trying to be transparent in regards to that. It also gets everyone involved in achieving the overall result.
“People ask me what’s the biggest challenge I’ve had in the taking over of the firm. I learned very quickly that communication to build consensus was critical to achieving the vision, the strategy and the initiatives that we put forth. Don’t underestimate the skills and time and effort it takes to accomplish that. Communicate, because that’s key to achieving what you want to try to achieve.”
How to reach: Crowe Horwath LLP, (866) 662-7693 or www.crowehorwath.com
MaryAnn Rivers was staring at a two-headed monster when she looked at the future of Entertainment Publications LLC.
On one flank was the problem that every business in southeastern Michigan has faced during the past couple of years, to greater and lesser degrees: the economy. Entertainment Publications produces, among other things, coupon books for purchase. But when the economy falters, consumers are less likely to spend money on nonessential expenses, which means fewer coupon books sold, and fewer coupons used from books that are sold.
On the other flank was the changing face of the market that Rivers’ company serves. Entertainment Publications has historically had a major presence in grassroots fundraising, supplying schools and community organizations with sales items. In recent years, some aspects of the company’s fundraising business have undergone a shift in focus.
“We have a gift wrap and products business that we sell to schools as a portfolio of products that we offer for fundraising,” says Rivers, the company’s president and CEO. “For many years, it was a highly profitable product. But if you think about gift wrap and a lot of those gift items, with Costco and some of the big-box stores being very competitive, where you can go in and buy 10 rolls of gift wrap that are fairly high quality for a fairly low price, the value proposition just isn’t there for consumers to pay the price that they need to pay in a fundraising environment. It wasn’t a highly profitable product anymore. We didn’t completely abandon it, but we did make some significant changes to the business model.”
For Rivers and all of the 700 employees at privately held Entertainment Publications, change has been the one constant, and the impetus for change has come from consumers, the marketplace and the economy itself.
Keeping her company nimble enough to react to change has caused Rivers to analyze herself as a leader and a communicator and look for other employees who could lead and communicate throughout the company.
It has been an ongoing task and has required Rivers and her leadership team to embrace change and thrive in an uncertain environment — then ask everyone down the ladder to do the same.
“Once you anticipate what the need is, it’s all about leading people through it quickly, being able to rally the troops and get them moving as fast as they need to, getting them to understand the critical nature of the situation and why it’s so important,” Rivers says.
Stay focused on the basics
When leading your company through a time of change, first you need to identify the areas that aren’t going to change — namely, your core values and operating strategy. Then you have to align your senior leadership on the values and strategy. Leadership team members need alignment first since they are the ones who will carry those foundational cultural principles to the rest of the company.
“I look at (core values and strategy) in kind of two different ways,” Rivers says. “They’re very connected but very different. To relate to the strategy, you need to first get your leadership team very clear and aligned on that strategy. That takes time. It takes a lot of debate and a lot of challenging on what that should be and what that is. But you need to make sure everyone on your team is absolutely aligned.
“From there, you go out and start talking with your stakeholders and constituencies, and really get input from them.”
A focused strategic plan should also be free from distractions that might encroach from the periphery of the business. You and your leadership team should comb through the fibers of your business to see if there are any units or initiatives that don’t fit with your overall direction. A streamlined business is able to adapt to change more effectively and, as a result, is better able to weather the challenges that the market and economy can pose.
“Take all of the other distractions away,” Rivers says. “Get rid of ancillary businesses, ancillary and unimportant initiatives, things that are taking away from the core, uniform strategy that you’re trying to deploy. It’s an ongoing effort. It’s an evolution, and you keep working through it. You keep building momentum over time, and eventually it does pick up.
“Doing that is a lot about assessment and analysis financially. How those businesses or products or channels are either contributing or not contributing to the overall business. You need to understand it, figure out what it is doing and make a case to the organization as to why it doesn’t make sense to play in this arena anymore.”
On the core values side, your task is to engage the company as a whole, creating a dialogue with employees from all levels. You can tell them what you think the company stands for, but they also need to tell you what they think the company stands for.
“The values are so personal for employees, and you really want to get them to buy in to those values,” Rivers says. “But there is also a point in time when you’re never going to get consensus, so you get input and you pick core values, and you start to build those values into the organization and the culture.”
Build the case for change
Any time you try to initiate a major change in a large organization, chances are you will face some kind of resistance. It starts when you make the decision to streamline and build a more nimble, agile business that can react to change.
“You can make the case for why you can’t play in a certain area anymore, but there is still going to be resistance,” Rivers says. “Sometimes, those are pet projects or pet businesses that you’re trying to eliminate, things that people really want to hang on to. You can get some of the same issues when it comes to culture. There are things that are great, things that you want to keep, and there are certain aspects of the culture that you need to move on from. You have to be very stubborn in some cases, having patience but also really sending the message that this has to change. Sometimes the most painful moments are when you come to the realization that change has to occur.”
As the leader of the business, you can’t control how every person reacts to impending change. But you can build the case through constant and consistent communication that repeatedly states your reasons for change. From there, you need to listen to what your employees are saying, what their concerns are and what feedback they want to give.
You need to make yourself available across multiple communication avenues, and you need to open yourself up to tough, challenging questions from employees who might have dissenting opinions or concerns about their future — and be willing to answer those questions in a frank, straightforward manner.
“There are always ‘me’ questions,” Rivers says. “What does this change mean to me; what does it mean to my future role? With what has gone on with the economy, people are wondering if they’re going to have a job. They have concerns about their families and themselves. They’re looking for a level of confidence in the business strategy and the way we’re going to market, that it all makes sense.”
As with many other aspects of leadership, fielding challenging questions is a learned skill. It’s something you resolve to focus on.
“I personally like question-and-answer sessions where people ask tough questions that you have to answer,” Rivers says. “You don’t dodge any of them, regardless of how tough the questions are. Then you have to depend on your leadership team, which can continue to work with their teams and get them to understand the case for change. You have to go back and make the case again sometimes.
“You also have to be very involved in walking around. I go out in the field on sales ride-alongs a lot. If you have salespeople in the field, you need to get out and talk to them and listen to what they’re saying. The more you listen and respond to the things that are important to them, the more likely they are to trust you and buy in. If you don’t listen, they’re not going to listen back.”
Listening takes practice. It goes hand-in-hand with a willingness to absorb and candidly answer tough questions.
“You have to provide opportunities and set up situations where people feel comfortable providing feedback and giving information,” Rivers says. “You have to truly be committed to genuinely listening, and recognizing that you get more knowledge and information by sitting back and listening than by continually talking or trying to send messages. Some people have a natural gift for listening, but we frankly can all become better listeners. It just requires practice. You can also find someone in the company who is accountable, someone who is willing to be honest with you and tell you if you’re not listening enough.”
Build change leaders
You can’t build the case for change alone. You need other leaders throughout your organization who can also keep the case for change front and center with their peers and direct reports.
Rivers says that internally, you will be able to identify the people who truly embrace change by working with them over time. But it also helps to bring in fresh perspectives from outside the organization, which means you need a recruiting and interviewing process that helps to identify change agents.
“By working with people, you start to get a sense for how comfortable they are with change,” she says. “Certain people thrive on change. They love it, and it’s fairly easy to spot that. On that front, it’s about engaging those people and spending time with them to really understand where it is you’re trying to go, and doing it maybe a little more intensely than you would with other people. You need to infuse those types of people into different areas of the business, because you have to get the message to different groups.”
When it comes to balancing the internal element with some new blood from outside the organization, you need to find out a lot about potential new hires in a short period of time. Rivers says you can do that by, in essence, scaring them.
“When you interview people, you share everything with them,” she says. “You tell them exactly how it is, almost to the point of you’ll know who you scare. You can kind of tell the people who get a look in their eyes that they’re not sure about this, and then you know the people who are really engaged, really excited about change and thrive on that. You’ll see the people who want to be a part of that.”
Rivers says Entertainment Publications has made “significant progress” in installing a change-focused mindset throughout the organization. The company is continually adapting its processes, products and the way it takes products to market. High school fundraising has become a market that Rivers and her leadership team has zeroed in on, focusing on growth. The company is well-positioned to continue thriving despite the state of the regional or national economy.
“You need to create some level of comfort and confidence with change, and then create a sense of urgency and continue to push people through that,” Rivers says. “The reality is, when people start to see that they can have success on the other side (of the change), and they start doing scary things that different, it becomes invigorating. It becomes exciting, and other people see it. That’s what builds up the momentum that creates the energy, and that’s when the movement starts to take place.”
How to reach: Entertainment Publications LLC, (888) 231-7283 or www.entertainment.com
With more than 14,000 employees, a top-line brand name to protect and a publicly traded company to run, Elsenhans, chairman and CEO of Sunoco Inc., had a lot at stake.
“We had to get clear about a competitive cost structure so we could position ourselves well,” she says. “We invested more in our people for leadership development and addressed gaps in our leadership pipeline. We also invested in our brand to position us for the future in our industry, and then looked for ways to turn weaknesses into opportunities. It was a chance to look back and decide what’s really important.”
That’s the core of Elsenhans’ philosophy for how to manage through tough times: Do those actions that ensure the company stays strong and robust, but give employees hope and an idea of where the business is going.
“There are a lot of things in the industry that gave us concern,” she says. “As a leadership team, we asked ourselves, ‘What are our strengths? How do we turn threats into opportunities?’”
One opportunity was to transform Sunoco into a pull company instead of a push company, bringing consumers to it through its various divisions rather than pushing out its products to them. Explains Elsenhans, “We were looking to raise our brand as a pull point and then use our company to be in transportation and energy markets and meet the demands of those future markets.”
None of this was easy, and Elsenhans says it required increased communication and a lot of explanation about what was happening throughout the organization.
“Visibility is critical, now more than ever,” she says.“Leaders have to be out there. It can’t all be video and e-mail. It’s also being able to answer (employees’) questions transparently. You have to be realistic and not sugarcoat where you’re going.”
Doing those things help a CEO build good will and secure much-needed buy-in from employees.
“By telling employees some idea of the path, it builds on it,” she says. “You get the framework out and let them fill in the picture. That’s how a larger cap company can be entrepreneurial, can get a business back on track and get it growing again.”
It also is important to work with customers that may also behaving trouble. Elsenhans says you can’t just throw them to the wolves.
“You have a contract, which protects your rights. And that’s important,” she says. “But if you can be a bit more flexible and meet a customer’s need during a tough time, you can build a better customer for down the road. Companies that have worked hard to be flexible are going to come out of this better.”
The bottom line is that CEOs managing through tough times need to have the ability to be flexible and adapt. That, Elsenhans says, will make or break your business.
“If you don’t innovate, you’re going to die,” she says. “Even very large companies. If you are not attuned to the disruptive forces in your marketplace and reacting to those through innovation, you’re going to be left behind.”
How to reach: Sunoco Inc., www.sunoco.com
Dan Gilbert has a keen eye for detail. If your company’s signage, Web site or marketing materials contain any kind of misspelling, misdirection or misleading verbiage, he’ll see it and he’ll let you know about it.
Take, for instance, the sign Gilbert saw at an automobile repair shop offering “alignment” — a sign that was off-kilter. Or the store that featured two signs near its entrance, one reading “Store Closing” and the other “Now Hiring.” Or, better yet, the store with the neon “scrapbooks” sign that unfortunately had the first “s” burnt out.
Absurdities like these are what Gilbert thrives on. As the chairman and founder of Quicken Loans Inc., the majority owner of the NBA’s Cleveland Cavaliers and the American Hockey League’s Lake Erie Monsters, and the operator of Quicken Loans Arena, Gilbert has more than a full plate. Yet, there’s always time in his day to focus on the little things that truly make a business great.
“If you do just one thing better than your competition, they’ll eventually figure it out and your advantage will be gone,” Gilbert says. “But, if you do a thousand little things differently, your competition won’t be able to keep up and you’ll be successful.”
Opportunities to make a difference are everywhere, says Gilbert, and they’re usually found in the little things. Quoting Al Pacino from the film “Any Given Sunday,” Gilbert says, “The inches we need are everywhere around us.” That quote is just one of Gilbert’s “isms” — guiding principles that shape the culture at all of Gilbert’s companies.
Whenever a new employee begins work at one of Gilbert’s companies, he or she is given “Isms in Action,” an employee handbook that defines and highlights the “isms.” But don’t think these handbooks are just given out, only to be placed in a desk drawer and never looked at again. Gilbert actually takes the time to spend a full day with the new employee, going over the “isms” and how things should be done.
From always being aware of your surroundings to being obsessed with finding a better way, the “isms” focus on empowering employees to do whatever is needed to grow themselves and the business. There’s no red tape or committees at Gilbert’s companies, just employees who are trusted and expected to do whatever needs to be done. To Gilbert, failure is an option, as long as it’s not intentional. Employees can’t be afraid to fail; they have to be able to take chances. As a leader, you have to foster creativity.
“You don’t want people who ‘just work here,’ you want empowered people who aren’t afraid to do whatever it takes to grow the company,” Gilbert says. “If you don’t build a good culture, there is no question that a bad culture will take its place.”
With a strong leader and empowered employees, Gilbert’s companies are set up for success. Still, those organizations are always looking for ways to improve, even when things are going great. And, the onus of improvement isn’t just placed on managers. Expecting managers to fix all the problems is, according to Gilbert, like expecting pilots to fix the plane. Often, front-line employees have the answers you’re seeking; they just never get asked. In other words, encourage everyone in the organization to submit ideas and find a way to “build a better mousetrap.”
And this isn’t your typical suggestion box that gets emptied and analyzed once a year. Whenever one of Gilbert’s employees submits an idea, someone gets back to him or her. Sometimes the idea is implemented; other times it’s not. But the submitter always gets feedback and an explanation of why his or her idea will or won’t work.
“It’s like the Napster of business,” Gilbert says. “Every day employees are ‘downloading’ ideas. Those ideas build and grow, and in turn, the company builds and grows.”
Another “ism” that helps Gilbert’s companies become and remain successful is: “Numbers and money follow; they do not lead.”
“Business will never be what you forecast it to be. Spreadsheets don’t analyze alternative universes,” Gilbert says. “Those who focus on expenses and expenses alone are destined to go out of business. Focus on revenue growth, not cost control.”
More than just sports
In addition to Quicken Loans and the sports franchises, Gilbert and his partners also operate and invest in several other businesses, including ePrize, based in Pleasant Ridge, Mich.; Fathead LLC in Livonia, Mich.; Veritix in Cleveland; Boston-based Xenith LLC; and Xeko in Seattle.
Gilbert was Rawlings Sporting Goods’ largest shareholder and was instrumental in effecting the sale of Rawlings to K2 in March 2003. He is a founding partner in private equity group Rockbridge Growth Equity and an investor and financier with Rock Companies.
On top of all that, Gilbert launched Bizdom U in Detroit: a nonprofit academy that trains, mentors and finances young entrepreneurs and their start-up businesses. Also, in November 2009, Gilbert successfully backed a proposal to authorize first-class casinos in Ohio’s four largest cities, which will create 34,000 Ohio jobs and generate millions of dollars in tax revenue for public services, safety and schools.
See how the Cleveland Cavaliers go above and beyond to serve their fans.
Len Komoroski, president, Cleveland Cavaliers and Quicken Loans Arena, talks about embracing challenges and leading change.
Danny Ferry, general manager, Cleveland Cavaliers, on how to work with top performers to improve the organization.
On one hand, he is a part of a cable and Internet service giant with more than 100,000 employees and $34 billion in 2008 revenue. Comcast Corp.’s brand recognition is extremely high throughout the country.
On the other hand, Stemper is trying to sell a lesser known array of products in the Comcast cache. The company is primarily known for residential cable and Internet service. Stemper’s job is to build its business customer base by connecting with the needs of businesses.
“We have a great brand that is known for our residential services,” Stemper says. “The challenge has been to build the same brand awareness and understanding with businesses.”
Stemper has responded to the challenge by leveraging Comcast’s ground-level presence in the markets the company serves. In other words, he is relying heavily on local-level employees to build relationships with potential customers and keep corporate management in touch with the wants and needs of businesses in the company’s footprint.
“We have a lot of employees out in the markets we serve, people who are citizens of the areas we serve,” he says. “We really stretch hard and spend time in the field, and do it all the time. We’re always getting information on what is going on in the markets, what is working, what do these customers want and how can we offer them the best services. It’s listening, it’s probing, it’s seeking to understand how to come up with the best ideas.”
The lesson has been reinforced to Stemper time and again: If you want to grow your business and your brand, stay close to your customers by building relationships at the interface point. You do that by enabling employees to build those relationships and by getting out of the office and personally visiting your markets. If you use what you learn from your customers, it all adds up to a company that is more nimble and responsive to customer needs.
Stay plugged in
To build customer engagement into your work force, you must first set the example from the top of the company. Stemper has made it a priority to get out of his Philadelphia office and visit Comcast’s field employees in the markets with the most growth potential for the company’s business services division.
Stemper calls it “zero degrees of separation.”
“I spend a lot of time in the field offices, with front-line sales and customer care and technical folks,” he says. “They are the ones who are really out there with zero degrees of separation between them and the customers. And when we get customer complaints, if they find their way to me, I personally follow up with them. I don’t delegate them away.
“You really want to see and understand, touch and feel, what is happening out there, both in the good areas and the areas in which you can improve. You need to do that to understand firsthand what it is your customers need, what they’re happy and not happy about. That’s not something you want to leave to chance and levels of filtration. When a customer or a business prospect comes along, that’s not something you want to leave to chance.”
Staying accessible to customers is something you really have to live. Stemper says you have to believe, as a leader, that what customers have to say is important and can help you improve your business. You need to work each day toward building and maintaining the relationship between customers and all levels of your organization.
When Stemper isn’t traveling to a market, he’s frequently on the phone with Comcast’s representatives in the area, bouncing ideas off of them, getting feedback and taking the pulse of the market. It’s an ongoing process.
“You really have to be that way all the time,” he says. “This isn’t something where you can just read a book and decide to be this way. You really have to believe that this is critical to how you operate, the way you process and take in information. You have to want to get as much firsthand information as possible.
“When I call up someone in one of our markets and ask them what is going on, it drives the culture. It says that those of us in corporate management want to know what is going on. If that is a part of your culture, the people who interact with the customers are going to think very naturally about sending ideas up the chain, and people in leadership are going to think very naturally of reaching back to the people in the field.”
Enabling all levels of the organization to feed ideas upward is critical to the customer interaction process. Once a customer comes to a ground-level employee with a concern or idea, that employee becomes the bearer, and in some cases the advocate, for the customer’s message. If you don’t construct avenues for feedback or you aren’t responsive to feedback, those avenues will wither and you’ll end up with frustrated employees and customers looking to take their business elsewhere.
Like any other aspect of communication, it takes constant maintenance and repeated requests for feedback sent to all of your departments and geographies.
“It’s just being relentless in terms of being hands-on, listening and seeking to understand,” Stemper says. “Then you have to take action. When people see their ideas go into action, the pump is primed. But you can’t let up. You can’t do it for the first six months of a job, and then you get into a routine where you operate differently. This has to be the way it is all the time.”
In many cases, responding to customer needs isn’t about rolling out a new product or service that takes large helpings of time and money or fundamentally alters the way you do business. Sometimes, it’s about taking what you already offer and presenting it in a specific way.
Stemper and his associates have kept their eyes and ears open for those exact types of opportunities — ways to serve up Comcast’s standard business offerings to meet the wants and needs of a given market.
“Because we have a local presence in each of our markets, we know how a market ticks,” he says. “We know what they react to, what is important. It might be a sports team that is the be-all, end-all. It might be a particular business issue that is critically important to the broad geography. I trust the intimate understanding of the people in each of our markets to help us know what is going on.”
Develop from within
To help promote a customer-focused mentality throughout your organization, you need people within your ranks who can help promote the cause. You need people who value customer service and are willing to do whatever is needed to keep the feedback pipeline between your customers and your management hooked up and flowing.
You can find a lot of answers in the recruiting and interviewing process if you know the right questions to ask. At Comcast, Stemper and his leadership team often have to sift through many resumes and rounds of interviews to find the right match.
“Clearly, we want people who come from a background that values customer service and who can focus on the idea that you deliver what you promise, you make good on your promises and that a handshake is as good as your word,” Stemper says. “The question is, do they already have that in their professional DNA?
Or, if they’re right out of college, can that DNA be formed?”
When a management-level job candidate comes to Stemper and his staff for an interview, they try to gain an extensive knowledge of the person’s background. You can find a lot of that through checking references, but you can sometimes find interesting answers if you pose situational questions during the interview.
“We try to really draw out of them situations they’ve been in,” Stemper says. “Have you ever dealt with an irate customer? Were you ever in a situation where something you told a customer you could deliver turned out to be a challenge through no fault of your own? How did you handle that?”
Maintaining the discipline to find the right person for the job, not just a warm body to fill the position, is one of the most difficult challenges a leader can face. You need to have a plan in place that will allow you to wait out a gap on your team. It can save you a lot of backtracking — and maybe even prevent damage to your culture — later on.
“It’s something you don’t rush, whether it be in hiring entry-level personnel or senior personnel,” Stemper says. “You want to make the right hire, not just make a hire to make a hire, and you need a plan to wait that out. Sometimes that’s easy to do, and sometimes that is painfully hard to do. But when you’ve experienced a hire in which you didn’t wait for the right person, it makes you become a lot more clever in the ways you prepare to wait for the right person.”
Stay light on your toes
Staying close to your customers is one thing. Taking the ideas that bubble up from the customer-interface level and using them to better your company is something else. The latter requires a lot more action and an ability to keep your company as nimble and adaptable as you can.
Stemper says a nimble company does two things well: It develops channels for customer and employee input, and it minimizes the layers through which that information must travel. Depending on the size of your organization, you might need a certain number of administrative layers to run the company effectively. But information from the ground level should pass through the fewest number of hands possible before reaching the desks of you and your leadership team.
It goes back to building a team that is focused on the common goal of customer service. You can’t reduce the number of links in the communication chain if your company is full of silos, fiefdoms and toes waiting to be stepped on.
“As leaders, you have to be able to leapfrog and get to the front lines,” Stemper says. “You have to build a culture where everyone is trying to be at the front line and nobody takes offense if you leap over them to get to the front line. You want everybody to thrive on the ability to do that.
“To build that kind of an organization, when you come across problems, you don’t take it out on the people in between. It’s called work because you have to work, and you generally work because something isn’t going the way you want it to. That’s why you need to have a management style that is focused on getting it right and doing what it takes to fix things. You want to understand the flaws in your organization and sort out the solution as a team. If you can do that, you are developing a positive place to work.”
How to reach: Comcast Business Services, (866) 647-6516 or business.comcast.com