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When a company decides to expand or enhance its core activities, sometimes a strategic decision is made to acquire another organization that offers the team, the technology or the assets needed to achieve its goals. From a buying company’s perspective, there are three main focal points of an acquisition process in order for the purchase to be successful: strategy, integration and acceleration.

“The strategy needs to be determined early and shared widely and quickly,” explains Francois Laugier, partner and director at Ropers Majeski Kohn & Bentley PC. “Integration is almost equally as important as strategy; because  integration is really about capturing the long-term benefits of an acquisition.”

Speed in execution is also of the utmost importance. “You get the chance to effect change in an organization that you’ve acquired during the first 100 days of the acquisition. There is a tempo to an acquisition, and it is incumbent on the buyer to make sure that it keeps beating the drum and moving people along quickly.”

Smart Business spoke with Laugier to determine a road map for successfully acquiring a business to enhance core activities and products.

What can a company do to prepare for the acquisition process?

The buying company needs to know precisely why it desires to purchase another organization, and that strategy needs to be communicated throughout the core management team that will be involved in the process. Early on, lawyers, investment bankers and consultants need to be involved, because most of the aspects of the acquisition are negotiated in the initial stages.

Nearly 60 percent of the failed acquisitions are failed integrations, not failed negotiations. A team specifically dedicated to integration should be assembled the minute discussions start with a prospective party. This team must ensure that the new assets and employees of the target corporation are quickly and efficiently integrated into operations.

What steps are involved in an acquisition?

At the outset, a buyer must decide whether it will be purchasing assets or stock. If the company being acquired has significant liabilities or unknown liabilities, buying the assets of the company provides flexibility. However, when buying assets, there are a number of transfers that need to take place for the target company to be functional inside of the acquiring company, such as intellectual property rights or foreign employee visas. The alternative choice is to purchase the stock of the company. A big advantage of a stock purchase is the predictability of the process, because domestically or abroad, the acquisition of the stock of a company is often similar. The drawback is that a business may be unintentionally taking on liabilities.

Next, a letter of intent is drafted, where an outline of the terms of an acquisition is determined. Although legally not binding, once there is a handshake on a letter of intent, it is very difficult to later change its terms. For this reason, it is imperative to involve advisers early to draft terms. The due diligence period comes after the letter of intent. The target company completes a legal due diligence checklist and provides the buyer the documents and information requested, thereby reducing the odds that major issues will go unnoticed. The disclosures cover four major areas:: corporate structure,  intellectual property, human resources and tax.

Negotiations of the definitive agreements take place next. The secret to success for negotiations is to move quickly and to keep exchanging redlines of the documents without a lag. The acquisition team needs to work closely together so that all of the fact-finding that took place in the due diligence process gets integrated into the agreements, minimizing risks and maximizing the long-term benefits of the acquisition.

Once a deal is closed, how can a company successfully integrate the target company’s assets?

Integration is really about assimilating the intellectual property and the assets, but, most importantly, the employees of the target corporation. Integration is the true key to success. The first place to start is to roll out the red carpet for the employees of the target, give them an employment agreement, give them equity in the new corporation if you can and honor the benefits that they had in the target company, basically providing them with incentive to do well. An individual should be designated in the buyer’s team to lead the integration and successfully capture the benefits of the acquisition. As soon as the deal closes, the buyer should explain all the synergy and benefits to everyone, including customers, suppliers, the new employees (most essentially) and existing employees. It’s important to understand the culture of the company being acquired and combine it successfully with the culture of the buying company.

The most complex factor is often integrating the information technology systems. Obviously, the legal compliance and the accounting processes need to be integrated as well. The lines of products and services must be considered so that there is no overlap or redundancy. The message that is communicated to the world — all of the marketing, sales, human resources, etc. — need to be integrated after the closing of the deal.

Achieving long-term success is a result of learning about and blending the two companies as successfully as possible. Next is managing an organization that has grown in head count, in lines of products, assets and people, and that may come as a big change. After that, it is time to embrace new resources and reach a new level of success.

Francois Laugier is a partner and director with Ropers Majeski Kohn & Bentley PC. Reach him at francois@rmkb.com or (650) 780-1691.

Published in Los Angeles

Ira Sharfin had thought Indianapolis would be a great market for his company, Continental Office Environments, an office interior and furniture business. The company already had offices in Columbus, Toledo and Pittsburgh, and it made sense regionally to be in Indiana.

But after some years of trying to operate the branch location, including through the weak economy, the numbers just weren’t there. There also was a problem in that Continental Office Environments and a competitor were both selling the same high-end furniture brand. Continental wanted the exclusive right to sell the furniture.

The decision was about to be made to exit the Indianapolis market and find another way to grow profitably.

“We suffered from not being able to drive enough volume,” Sharfin says. “From the Indianapolis standpoint, we just couldn’t get enough scale.”

Contrary to conventional wisdom, the plan was to grow the company ? by closing the store, which was sold at the end of 2010.

“It turned out that in order for us to grow in other areas, we just couldn’t be all things to everybody,” Sharfin says. “The effort that it would require to get the business to the size and scale that we wanted wouldn’t allow us to invest and grow other areas.”

By closing the store and growing the company in other areas (Continental’s flooring business grew about 400 percent in a year and a half, with 30 new employees hired), the numbers were much better overall. The revenue loss from the Indianapolis market has been replaced by the growth in other areas.

“We are still growing, not for growth’s sake but because there is demand out there, because we’ve got some pretty strong capabilities,” he says.

Sharfin, who had a 17-year business consulting career before becoming CEO of Continental, knew that his task was to look at the overall revenue targets and at the bottom line to see what the best route was.

Here’s how Sharfin found the solution to his predicament, made it happen and how the $120 million company is realizing the rewards.

Make the decision

Closing an office so that a company may focus its energy elsewhere is not as simple as it sounds. Leaving a market means a CEO must check his or her ego and pride at the door. As much as you want something to work, especially with all the time and effort you put into it, sometimes it’s just not the right fit. Every so often you have to prune to grow.

Once Sharfin decided this was the right direction for the long term, he had to rein in any lamentations for leaving, and start the communication process.

“I have no regrets of being in Indianapolis, because I think you learn from those experiences, and I met a lot of great people, but it just didn’t fit for us,” he says.

“You will never want to impact people’s lives like when you close a store. It’s tough when you are sitting at the top ? and you really are trying to make something work ? to look in the mirror and say, ‘This just isn’t the best fit for us. We are really taking time and effort away and focus from other things that would drive profitable growth, which would help us further our strategic goals.’

“As a business leader, you constantly have to ask yourself the questions: Are these the right markets for me? Are these the right products? The right services? Should I be investing more in other areas?

The more the situation was analyzed, the more the challenges arose.

“It’s very difficult sometimes to pare down,” he says. “I think it’s easier to expand, grow and add, but it’s much harder to realize, ‘Hey this just isn’t working for us.’”

As far as options, Sharfin started with the obvious ones that would allow the company to grow profitably.

“You want to grow financially stable,” Sharfin says. “It allows you to invest and do things in the community and do things for your associates. It’s the bottom line that you want to track ? monthly, quarterly ? your top line and what your order entry numbers look like.”

When you consider scale, you need to make a concerted effort to judge how long it would take to drive the volume needed in a market to put you on solid footing.

“It may take you too long to become large enough to really drive adequate volume, and you may think you are either going to invest for the next few years and make a commitment or you could exit now and focus on other areas that you thought would have a greater return,” Sharfin says.

There are few, if any, instances when closing a store or location can be decided and carried out overnight. Rather, it may involve discussions and planning sessions taking up to a year or more.

“About a year before we got out of the market in Indianapolis, we had the sense among my executive team that we really should look at options for exiting, because the store was consuming resources and attention, and we probably weren’t going to get the same return as if we focused on the other three markets,” Sharfin says.

“The first approach is to vet your decision quite a bit,” he says. “Don’t use only your executive team; use your managers as well. Ask for their input and engage them ? which I think certainly helps. When you engage people, and the more that you can share without getting into all the details, it’s all the better.”

Sweat the fine points

Communication is very critical at this point. Spending any time on the “if onlys” doesn’t gain support from employees who may fear for their jobs. You should realize that at this difficult point, your decision may not make new friends with anybody.

“You know some employees wouldn’t be offered a job if another dealer acquired your business,” Sharfin says. “I always believe you should be as open as you can with employees whether it’s good news or bad news.

“You tell your company that you are going to invest in areas where you can grow and be profitable and, occasionally, you are going to have to make decisions that may be less popular but they are for the good of the company,” he says.

People need to have a clear sense of the direction in which the company is going. Think externally as well as internally.

“Some manufacturers may ask questions, but you may not have any clients concerned about the strategy where you are going,” he says. “However, you will get questions from your people, and without sharing details or confidential information, tell them that part of your plan was to grow where you were strong and to continue to expand in areas you were very good at.”

Once employees understand the decision, questions should die down pretty quickly. If you explain your reasoning for the change, it will help keep open the lines of communication as well as trust in your leadership.

“Do it through face-to-face meetings saying that this is isolated to this market,” Sharfin says. “Tell them that you are doing fine in spite of the economy. You are meeting your overall company objectives and your financial targets, but you will be able to exceed those going forward by refocusing your efforts and closing the location.”

You have to cascade communication throughout the company and make sure people are grounded in the company’s vision and strategy.

Tell them this is actually going to help you focus on areas that all employees are involved in, and depending on the size of the company, you will have more attention to focus on those groups of people and of those businesses if you’re not distracted trying to grow or fix another part of your business.

“Obviously, you see it in Fortune 500 companies all the time where the CEOs communicate that they are exiting businesses because it’s no longer strategic or that they can realize a financial gain by reinvesting,” he says. “People still need to hear from you that everything is fine and that reiterates your strategy.”

What may speak loudest is your decision to hire people at your other locations ? in order to grow.

“Any fears that employees had will lessen as employees see new people coming in to bring in new business,” he says. “They will be seeing the physical results of the things that they had been told.

“As you grow your business, you may add more sales and business development people and others,” Sharfin says. “That is the way that people will really get it ? ‘Oh, now I understand. They are really serious about growing our business in expanding the areas where we are already strong.’”

After Sharfin decided that keeping the status quo wasn’t the most viable solution, he realized he was learning two lessons.

“One lesson is to know your strengths, and if your gut is telling you that something may not be good in the long term, it probably isn’t,” he says. “But the biggest lesson is, don’t ever rule out any potential business partners. You might never think that a competitor would strike a deal with you for your business.

“We spent about a year talking back and forth with our competitors, and I really grew to like them,” he says. “We were able to work a deal, they absorbed a bunch of our folks and I think it was a win-win. I still talk to those guys today.”

Start to see the rewards

If you know where your company is strong, a large part of your strategy should be to grow in existing geography and go deeper with the clients that you already serve. Grow some different services and capabilities in the markets that you are in.

“Try to leverage existing relationships and what additional services and products you can deliver to the current client base,” Sharfin says. “I learned early in my career the best future customer is the customer you already have. You always want to be as relevant as you can and not pitch everything.

“There are a lot of different areas that you can kick around with their management team or your leadership team ? things that you could be doing for clients that you are not even doing yet.”

By investing in your new and existing employees so they are trained in the new areas of business, it will give you the best chance to achieve profitable growth. It’s also time to re-emphasize that an attitude of grace goes far.

“Tell your salespeople, and believe this even when you lose a sale, you want to win graciously and lose graciously,” Sharfin says. “If a client decides not to select you, say, ‘We respect your decision; we are disappointed. Keep us in mind. Is it OK if we continue to call on you from time to time, or if we have some cool ideas for cool new products, can we share those with you?’ Always take the high road because you never know what could happen.”

If you communicate well with employees and customers, it can’t help but see you across the finish line where employee buy-in is the prize.

“I think buy-in is critical,” he says. “I’m not a big believer in consensus. I think you vet issues, you get people’s opinions and ideas, you get general agreement, you make a decision, and you move on. If you try to get consensus, it takes you forever. You may not have everybody agree, but if you explain why we’re doing it, why you made a specific decision, I think you do get that buy-in.

“It’s hard to grow and really be successful long-term if you don’t have buy-in. I think you can fake it, and you can get through a year or two, but at the end of the day, especially when you have a challenging economy, if you don’t have buy-in, you’ve really got your work cut out for you.”

And with that commitment and a plan to expand, you are in line to focus the company’s energy on its strengths and grow.

“It actually pays off,” Sharfin says. “It’s great when a plan comes together.”

How to reach: Continental Office Environments, (614) 262-5010 or www.continentaloffice.com

The Sharfin file

Born: I grew up in Columbus, but I was born in Brooklyn, N.Y. I only lived there a few months, but I always joke with people if they give me a hard time, I say, ‘Listen. Don’t mess with me. I’m from Brooklyn.’ The people who know me say, ‘Yeah, but you were in diapers when you left.’

Education: The University of Michigan, so I am very popular in Columbus. I have an industrial engineering degree from there.

What was your first job?

My first job was working for my dad’s construction company when I was 14. I was a construction laborer, really a go-fer. They didn’t cut me any slack. They worked me, and in looking back, I appreciated it because it was hard work. You know, hot summer days in August working on the roof of a new building. You would bake, and these guys had me running for tools and parts, lunch, and I learned a lot about working hard. It was a good place to start, and I made a lot of mistakes. They would send me for 10-penny nails, and I would come back with 12-penny. I definitely got a workout.

What was the best business advice ever given you?

Don’t argue over nickels. I learned this early in my career. Be fair when you are doing deals, don’t try to take advantage of people because it always catches up with you. I’ve always tried to live by that. It was from two people: my father, and Frank Kass, who is a business partner of mine. Frank always uses that statement as well. Frank over the years has been a mentor, and he’s reminded me of that.

Who do you admire in business?

I would probably say Howard Schultz. I have never met him; he’s the CEO of Starbucks. What he did was he created an unbelievable brand name and a brand where people have an emotional attachment. I really admire that. I am not a coffee drinker, but people tend to feel good when they think about Starbucks, or see the logo. One of the reasons I admire him is that a few years back, he shut down all the Starbucks stores saying, “We’ve gotten away from our quality and our roots, and we need to retrain our people on making the perfect espresso.” He had a lot of critics. He shut down stores. And I think they benefited from that.

What’s your definition of business success?

I really learned a lot over the years from learning through mistakes and having a company where people truly buy into the vision. I think when you are viewed by your customers as a valuable partner, that’s the definition of success, being able to solve their complex problems, and I think also giving back to the community. I would be remiss in saying driving profitable growth. Not being profitable, but continuing to drive profitable growth, whether it’s for shareholders, whether it’s being able to provide a home for a lot of associates. Also, that you can also give back to the community the more profitable you are. If it’s first and foremost about making money, then you lose sight of your people, of your customers and community. I think making money should be the lesser concern.

Published in Columbus

The old saying that the sun never sets on the British Empire applies well to Atlanta-based Global Payments Inc. Daylight is always shining on some part of this company’s domain, too. 

In the company’s decade of existence, Paul Garcia has led Global Payments from its birth as a $300 million-a-year spinoff from National Data Corp. to its current status as a $2 billion-a-year Fortune 1000 company with more than 3,700 employees living in 26 nations around the world. 

Doing business in far-flung locales presents an interesting set of geographic and cultural challenges for the electronic payment processing firm’s leadership team. Garcia, Global Payments’ chairman and CEO, recently talked with Smart Business about the nature of those challenges and about how he and his team work to surmount them. 

Q. Looking back over the last few years, what is the greatest leadership challenge you’ve faced? 

I would say it stems from having almost 3,800 employees in 26 countries. We are strong believers in our company’s values, but those are sometimes very tough to translate. You have cultural issues, you have language issues, and you also have time zone and distance issues, obviously. 

Today, I spoke to our colleagues in Asia. They’re 13 hours ahead of us. If it’s morning your time, it’s night there. So you’re in very different ‘head spaces,’ you know? Their day is over, and they’re thinking about going and getting a cocktail somewhere, and your day is just starting. Or vice versa. 

Obviously, [everyone] wants to go home at night. So we do our best to mix it up. And that’s a challenge. All those geographies, all those cultures, all those time zones. And there’s always something going on. You have things happening 24 hours a day, literally. So sometimes you have to disconnect. Sometimes you have to put your BlackBerry down. 

Q. At what stage in your company’s development did this start to become a significant challenge for you and your team? 

Let me give you a little history. We just had our 10th anniversary. Ten years ago we had about $300 million in revenue, and we were all basically from the U.S. Today we’re at $2.1 billion, with 45 percent of it coming from outside the U.S. So we have significantly more revenue outside the U.S. than we had in entire-company revenue when we began. 

These challenges started to become evident pretty quickly, because we started doing deals outside the U.S. right away. The first was Canada, which in some ways is not that big an adjustment from the U.S., but, you know, it’s still a different country. In fact, in my opinion Canada is more like Europe than it is the U.S. in a lot of important ways. 

Then we did a deal in Asia. And that immediately created challenges with distance and cultural differences. Then we added the U.K. to that. Then we did deals in the Czech Republic, and Russia, and now we’re also in Spain, and Brazil. … 

So it happened quickly. When I took over this company, I looked at the opportunities, and I said, you know, the most dramatic opportunities are outside of our borders. So that’s what we focused on. 

Q. Let’s talk about the specifics of some of the difficulties posed by doing business around the globe. What’s a typical situation that you run into with time differences? 

Well, take this interview, for example. If you wanted to chat with me and you were in Hong Kong, it would now be midnight your time. So we’re only going to have a skinny window. You’re going to talk to me at 7 or 8 o’clock [p.m.] your time, which is going to be 6 or 7 a.m. my time. Then if we go too much later, I’m now really cutting into your evening, and you’re really cutting into my morning. So it creates practicality issues, in terms of just finding a good time to talk. And ultimately, management is about people talking to people. 

Culturally, it’s a different type of challenge. For example, on Dec. 31, you would wish me Happy New Year. But if you were talking to someone in one of our 11 Asian countries, you would be mistaken, because their New Year starts three weeks later. And right after that — right around now, in fact — they have what they call Golden Week, which is their big shopping time, when all the merchants are very busy. So this is a huge peak period for our business there. But this time in the West is not a busy shopping period at all. It’s just the opposite. 

So it’s very different. There are different cultures; there are different shopping patterns; there are different consumer behaviors; there are different expectations from employees. And you have to ‘get’ all of that. 

Q. With such distant business units, how do you structure your management team? 

One of the things we do is that, unlike a lot of American companies, we don’t say, you know, we created this whole merchant credit card environment, in terms of automation and sophistication, and consequently we’re going to make sure we have people from our head office in all of these regions running these businesses. We do the opposite. So we have a really smart Russian guy that runs [our business in] Russia. We have a really smart Chinese guy that runs China. A very accomplished Indian lady who runs India. We’ve got a top-notch English guy that runs England. We have a great Spaniard that runs Spain. A Brazilian that runs Brazil. … All the way down the line. 

So they’re running their country or region. And they ‘get’ the cultural differences, because they’re from there. And they know what they need. Our job is simply to provide support to them. Where we can provide assistance, we do. But most of the time we stay out of their way. 

Q. What else have you done to overcome the geographic challenges? 

I know this sounds trite, but the most important thing is to hire good people and empower them and give them objectives. 

So this is how we do things here. If you’re in charge [of our business] in a given country, you’re really in charge. You have a lot of latitude to run your business. Now, if you make your numbers, you’re going to do well. You’re going to be rewarded; you’re going to make your bonuses; you’re going to receive equity compensation; you’re going to be given even more latitude. If you you miss your objectives, then, frankly, unless we all understand that there were extenuating circumstances, you’re probably not the right person for that job. Because we ask you to set the objectives. We have realistic goal-setting, and we expect people to make those numbers. 

Now, that doesn’t mean make them at any cost. You always do so in an ethical, honorable way. But we do expect production. That’s the capitalist world we live in. 

Q. Can you give an example of a situation where a translation mistake was made or where there has been confusion or misunderstanding because of the way something was translated? 

Here’s a good one; it shows how even the best intentions can lead to unintended consequences: We had a meeting once, right after we did a deal in China, and we told the people there that it’s really not part of our culture to work six days a week, so we won’t be requiring people to come in to the office on Saturday. We expect you to get enough production in the five days a week, and it would be an exception that you would have to come to work on a Saturday. And the staff seemed upset by this. So I said to the guy running it, what am I missing here? He said, if they don’t come to work on Saturday, all their neighbors will think they’ve been fired. So they’re going to put on a suit and go somewhere. 

Q. How did you respond to that? 

We said, you know, that isn’t what we meant to convey; that isn’t what we’re trying to accomplish. So we will continue to adhere to what you’re doing in this region. The office will remain open [on Saturdays], and we’ll continue to serve the beverages, and we encourage you to come in. And I apologize because we weren’t being culturally sensitive. 

Q. Your company has grown quickly, and a lot of the growth has come from acquisitions. What types of challenges does that pose? 

There’s an old expression — it’s kind of corny, but it’s true — that the first word in merger is ‘me.’ When you merge companies, you’ve got to answer the ‘me’ questions. What about my job … my pay … my location … my boss … my products … my future … my retirement? And you’ve got to encourage people to ask those questions, because they’re important. They’re providing for their families, they’re working for that reason, so you need to have answers. And we have good, crisp answers for every one of those questions. That’s how you start off a new relationship properly. 

Q. Let’s delve into what you’ve learned as you’ve addressed this challenge. For example, let’s say I’m the CEO of a company and I’m thinking of expanding into a country in Asia. What’s the most important thing I should know? What should I be watching out for? 

The first thing you have to do is answer this question: What exactly can you do that will advance things — whatever service, whatever product, whatever business you’re in — what can you do to make that business better? But if going in and doing it is going to cause some serious cultural shifts, don’t even think about it. 

Also, always look for good local management. Those are the two keys that I have never violated, and it absolutely has paid dividends. 

So those are the things that you have to do, and you have to be very honest about them. And if you’re talking about, OK, we are going to have to change this wholesale; we do it this way in this country, but they don’t do it this way in that country — forget about that. That’s a disaster. 

Q. So when you say forget about that, what would you do instead? 

Well, you have to look at things that you really can do. And if the answer is, I don’t know if I really can make this better, then save your shareholders the write-off. Don’t do the deal. 

Q. Don’t go into that country at all? 

Yeah. Let me tell you: The road is littered with companies that do deals internationally and they fail. Because they’re either arrogantly thinking they can run it from the United States, or they don’t understand the local markets, or they try this one-size-fits-all [approach]. It doesn’t work that way. 

Q. So you’ve had situations where you’ve given serious consideration to expanding into a country and reached the conclusion that it’s a bad idea and backed out of it? 

We’ve had several. Several [markets] that I’d really like to go into that have tens of millions — in one case, hundreds of millions — of people. But I haven’t done so because their payments market is different. It’s either priced in a way that you can’t make money, or the relationships you have with the merchant and the card-issuing bank are not defined in the same way. We’ve resisted going into those markets, until either we can think of a way that we can help — I mean, if we get to the point where we really believe we can change it — or it changes on its own. So you’ve got to be disciplined about that. 

Q. I gather that your company has a very decentralized management structure, with a lead person in each country who has a lot of autonomy. Would you say that’s an accurate description of how your business is set up? 

Absolutely. And I think that translates into a couple important things to remember. No. 1: Management is simply people taking care of people. Your job as a manager is to help someone do their job. And to always be a moral example, to make ethical decisions that are above reproach. 

And the other thing to remember is that people want to do well. It’s very important for someone’s life — what they do, how fulfilled they feel, coming to work feeling that they’re doing something that’s meaningful, receiving appreciation in an environment that’s conducive to success. And that’s the CEO’s job. It starts with one person, then it filters down from there. 

HOW TO REACH: Global Payments Inc., (770) 829-8000, www.globalpaymentsinc.com 


Name: Paul Garcia 

Title: Chairman and CEO 

Company: Global Payments Inc. 

Born: Newburgh, N.Y. 

Education: Ithaca College, Ithaca, N.Y.; bachelor’s degree in history, 1975 

What was the first job you had? 

I started working when I was 14, and I’ve had some doozies. I worked in a factory at night. I drove a laundry truck. I was an industrial plumber. I was a form setter. I’ve been a waiter. A busboy. … Then, post-college, my first job was with Citigroup in New York. I got into the payments business, travelers checks, commercial instruments at that point. It was very exciting. 

What’s the most important business lesson you learned from that job? 

Show up. Just, be there. Be there on time, keep your nose down, raise your hand when someone needs a volunteer. And don’t give up. Don’t get discouraged. It’s not perfect. I mean, I was naive to think that, ‘Boy, Citigroup, they’re going to have the most enlightened managers.’ It wasn’t necessarily the case. So you have to hang in there. It’s amazing what you can accomplish if you just hang in there. 

In a nutshell, how do you define success? 

That’s a tough one. The first thing you would say is, ‘What’s your return to your shareholders?’ I mean, this is capitalism, so you’re expected to make money. But I think it’s deeper than that. I think you could have significant shareholder return, but if you’re a [company] that is not helping your community, not helping your people, and not providing a true service to your customers, that’s built on a house of cards. That’s going to collapse. So while ultimately the bottom line is the most important thing, it has to be a sustainable bottom line. There has to be true service, with employees who are loyal and customers who are loyal.

Published in Atlanta

Barry Wolfson joined Tervis at a time when the company was expanding nationally, increasing sales and enjoying double-digit revenue growth. From the outside, it was a CEO’s dream. Internally, the company’s 700 employees could barely keep up.

“When your business is growing 60 percent a year, it’s everything you can do to just focus on running the business day to day,” says Wolfson, CEO since 2010.

“I just think that there wasn’t an opportunity for anyone to say ‘Hey, we need to step back for a moment,’ because there really wasn’t time to step back.”

By restructuring the business in a way that allowed it to scale, Wolfson has helped the company — known for its tumblers that “keep hot drinks hot and cold drinks cold” — manage the demands of fast growth.

Smart Business spoke with Wolfson about the keys to scaling a fast-growth company.

Set your timeline. There were things that we put on the timeline that we said, ‘In 2011, we need to get these things done.’ There are other things that we’ve started to work on during the year and say, ‘OK, now over the next five years, where do we see the company going and what are the capabilities that we have to put in place to get there? So there were short-term things — less than a year — that were very critical for us to do… and then the other is developing this longer-term vision and strategy for the company. Phase one was a little bit of an Extreme Makeover Tervis edition as we just put in place the basic capabilities to support growth. But the phase that I’m in with my senior management now is a little bit longer-term vision in terms of what products and markets do we want to focus on.

Take a forward-thinking approach. This is not something that happens in one day, that you go from ‘This is the right way to do it’ to ‘You can’t do it this way.’ It happens over time.

When you are in senior management, you have to look a little bit further down the road and say [what’s] fine today are the things that we need to do differently. It wasn’t necessarily changing every aspect of the business. Tervis has been a successful company for 65 years and so it’s a matter of saying ‘Hey, what can be preserved the way that we’re doing things and what needs to happen differently to be able to continue to grow profitably, and grow in a way that makes sense for all involved?’

Allocate resources. It was first huddling with my senior management team…then between us prioritizing here are the things that we believe in our experience and at our level that we needed to do and the time frame of doing them. We went through that process, identified a number of things that we needed to get after, and then it was a process of saying, ‘What are the resources involved in doing this — people and investment capital?’ At that point, it’s engaging with the ownership of the company and getting their support in making the investments that we needed to make both in people, systems and plant equipment.

Build a deep bench of talent. You look at how fast we’ve grown — there are many, many people in the organization who have not been here very long. So continuing to develop a culture and the key people in the organization is something that I spend a lot of time on. Generally, besides the culture, it’s continuing to develop intellectual capital that’s required in the business. Develop people from within with additional skill sets and complement that with bringing people in from the outside that can give us different perspectives on the various levels of growth and business that we are trying to achieve.

Think sustainability. Sustainable growth will come from us continuing to reach out to a wider audience of potential customers in various different markets and geographically. Staying very fresh, relevant and innovative in our product offerings is something that again fuels growth.

You have to be very intentional about the growth. We don’t see growth for growth’s sake. We want to be a strong consumer brand out there in the marketplace that is a high value brand. We don’t want to grow just to sell more tumblers. … Resisting that growing for the sake of growing is extremely important in a business that has the opportunity to grow.

How to reach: Tervis, www.tervis.com or (888) 508-8859

Published in Florida

For Doug Bergeron, slowing down has never been part of the plan. He didn’t slow down after leading the buyout of VeriFone Systems Inc. from Hewlett Packard back in 2001. In fact, he spearheaded the turnaround of the struggling San Jose, Calif.-based company to return it to profitability. A decade later, VeriFone’s U.S. business has more than doubled to $500 million in revenue today, an accomplishment that somehow pales in comparison to the company’s global expansion.

“That’s pretty impressive, but what’s more impressive is that we grew our $100 million international business to $1.2 billion, 12 times the size of what it was when we purchased it,” says Bergeron, CEO of the company, which provides electronic payment systems and solutions such as credit card terminals.

Now that VeriFone has run out of time zones for expansion, Bergeron says his next challenge is mapping the road for the company to grow to $3 billion in revenue.

Partner up

To set the strategy for the company, much of Bergeron’s time goes to finding ways to merge and partner with companies that can further its vision for point-of-sale payment solutions. Last August, he announced that the company may spend up to $1 billion annually on acquisitions in emerging markets and data services. Around the same time, it acquired the electronic payments company Hypercom Corp. for approximately $485 million.

“We’ve realized that we’re an integral part of the payment system but we need partners,” Bergeron says. “We’re not going to do this on our own.”

Bergeron seeks out partnership opportunities that can be meaningfully large in furthering the company’s major goals.

For example, in 2011VeriFone partnered with Google to incorporate Near Field Communication technology into the company’s payment systems and introduce Google Wallet, an Android application that allows consumers to make payments with their phone using virtual versions of their credit cards.

“It’s hard to participate with 25 small companies,” Bergeron says. “It’s better to pick ISIS, which is AT&T and Google, Groupon, partnerships with companies like that, that have staying power and a lot of financial resources. We know that we have confidence that we can get shoulder to shoulder with them and move a market.”

In addition to seeking partners with big shoulders, Bergeron isn’t ashamed to say he always looks for a good deal.

“We will never overpay for anything,” he says. “Remember we paid $50 million for VeriFone in a market that is $4.2 billion today.”

You also want to partner with businesses that complement things that your company is already doing.

“I look for businesses where part of the problem gets fixed by being inside VeriFone,” Bergeron says. “Maybe they lack international distribution. Maybe they lack an R&D capability that we have internally. Maybe they have great products but a lousy sales force. We have a great sales force. So I look for something that not only is a good value, but once we put it inside and take some time tuning it up, that the outcome will be a much better outcome than it would have been before.”

Lastly, try to acquire companies where you could take some of the managers and make them great managers within your business. Bergeron has brought on a number of VeriFone managers, presidents and executive vice presidents through acquisitions.

He makes it clear that once people join VeriFone, there is no combining cultures.

“I’ve seen companies go broke trying to bend over backward trying to merge their culture with your culture,” Bergeron says. “We’re a very successful company. It’s a great culture. It’s fun. It’s fast. It’s feverish. But we’re not going to compromise our culture for a company that we bought.”

To protect your culture, it’s important to treat people as common citizens of the company from day one so they don’t feel like outsiders.

“They are not from the other guys,” Bergeron says. “They are not from the competition. They are VeriFone. We’re a better company for that as a result of it.”

Make strategic investments

To double the size of a billion-dollar business, it’s no longer about deciding which markets to enter. It is about building out existing businesses and services. That begins with casting a wide net to find new and profitable business opportunities.

“We’ve taken the philosophy that we have to invest prudently and not wildly, but we have to have our nose in almost everything,” Bergeron says.

One of the newer markets Bergeron is excited about is taxicabs. While you couldn’t use a credit card in a taxi three years ago, today the company’s electronic payment technologies are universal in taxis throughout New York, Boston and Philadelphia. The key is to look for broad market opportunities, he says. Pick markets with lots of upside, and don’t pick too narrowly.

“A lot of stuff we have our nose in will never ever pay off for us, but that is the price of admission to having the certainty that all of the stuff that does move on from trial to mainstream, VeriFone will be a part of,” Bergeron says.

As a leader, you can’t be overconfident and think you know how to pick all of the winners from all of the losers. You innovate successfully by staying actively involved in many different projects and experiments.

“If you try to be too cute and say I’m going to work on this project, not this one, this one, not this one because I want to optimize my spend … inevitably you probably won’t overspend,” Bergeron says. “That’s for sure. But you are going to miss some of the winners.”

Once you’ve found what seems to be a profitable market, you’ve got to get completely committed.

“Don’t just allocate a little bit,” Bergeron says. “If you are going to pick some projects, get committed and put some wood behind your efforts.”

That may mean taking an initial hit to surface an idea with customers, whether it’s offering the product or service for free initially or on a trial basis. To get retailers get on board with Google Wallet, for example, Google has provided large subsidies for many retailers to be able to upgrade the VeriFone systems with the technology.

“Often in the beginning of new innovations, you have to make it free just to offset the chaos that you’re asking a customer to go through,” Bergeron says.

“We are counting on retailers coast to coast to post these pilots saying, ‘I want to be part of that. I see a lot of consumers wanting to use their phones as a method to pay. I want to get a piece of that.’”

In other cases, such as with putting credit card capabilities in taxis, it may just take some evangelizing until people begin to see the benefit.

“With usage, people find that people spend more on plastic,” Bergeron says. “Governments collect more sales tax. Everybody wins with the electronification of payments. Typically the resistance is fairly short-lived.”

Either way, the goal with any investment of time and resources should be stimulating business.

“Ultimately, beyond the chaos, if customers aren’t willing to pay for something then it’s likely that no incremental value is being delivered,” Bergeron says.

While it takes some patience to evaluate an investment, a CEO needs to have the operating discipline to be able to call a dog a dog. If an investment isn’t profitable, move on and spend your time, money and R&D expenses elsewhere.

“Things do sometimes take longer to progress than one would like, but there comes a day in the evolution of any project where milestones aren’t being met,” Bergeron says. “Customers aren’t adopting. Customers aren’t paying. I think economics can be a great determiner.”

Cast the roles

Bergeron says to scale properly, make sure the right people are in the right positions over time. One of the main ways companies don’t scale properly is by not making sure the right people are the right positions over time.

“They think that it’s the same job, the same skill set,” he says. “It’s not.”

Bergeron gives the example of Asia, which used to be a $50 million division for the company. “When Asia is $250 million, like it is going to be next year, that’s a whole different set of skills,” he says.

“The guy running Latin America is running the company, in a sense, bigger than VeriFone was ten years ago.”

Bergeron says it is his responsibility to ensure all employees in the first two levels of top management are the right people for their jobs every year. In a company that was approximately 30 percent larger in 2011 than it was the previous year, one year can make the difference in someone outgrowing his or her job.

“It might be that there is some terrific employee somewhere in this organization whose skills and whose drive and whose capabilities have tripled in the last 10 years,” Bergeron says. “But guess what? We are six times larger, and that person has fallen behind.”

Today, the company has 700 U.S. and 2,800 international employees. When you’ve reached a certain size, developing the next generation of leaders is no longer a matter or training.

“At a certain level of executive management, there really is no training,” Bergeron says. “We’re not IBM. We’re not going to be sending people to Harvard for a summer workshop.”

Instead, you need to work with people to improve their skill sets in areas that can prepare them for the jobs they will be filling, for instance, by exposing them to different experiences.

“Part of the human development business is identifying areas of growth, and not just saying here is where you need to grow and walk away, but giving them a chance to work on those areas and providing the necessary additional experience,” Bergeron says.

“If there is a guy that I think is going to be running a continent one day, not just a country, and my concern is he doesn’t have multicultural experience, then I make sure that I take him out of his comfort zone and I give him a couple of countries where they don’t speak English. He has to travel there and learn how business is done another way.”

Bergeron believes that the company’s commitment to promotion from within is a cultural strength. It motivates people that if they work hard they can scale with the business.

“I want to give people at least the more-likely-than-not chance that if they continue to improve, there is going to be another bigger job for them if they want it,” Bergeron says.

With rare exceptions, very few of the company’s current executives and managers were outside recruits.

“For the most part, people who are running large countries, large continents today, were sales people that became product managers, that became country managers and just continued to overperform at every level,” Bergeron says.

As for Bergeron, his board is still giving him the thumbs up as the right CEO for the job. With the company six times the size it was when he took the job, it seems like a pattern that won’t break soon.

“I guess I scaled pretty well because the board has kept me,” Bergeron says.

“Time will tell, but it sounds like it’s going to be a very exciting next three or four years here.”

How to reach: VeriFone Systems Inc., www.verifone.com

The Bergeron File

Douglas Bergeron

Chairman and CEO

VeriFone Systems Inc.

Born: Windsor, Ontario, Canada

Education: York University in Toronto, Canada — B.A. with honors in computer science; University of Southern California — M.S.

What was your first job?

I had a paper route from age 10 to 16, gave accordion lessons from 16 to 20, and played accordion on Friday and Saturday nights in a wedding band.

What is one part of your daily routine that you wouldn’t change?

I love reading to my kids before bedtime when I'm not out of town.

Who are your heroes in the business world and why?

I admire Larry Ellison for his tenacity and unwillingness to accept no for an answer.  I try to live by that motto myself.

What is your favorite part of your job?

I love communicating to employees, customers, and investors. I love taking complex concepts and boiling them down to memorable and relevant simple themes.

Bergeron on the benefits of mobile payment technologies: The early word is that consumers are very anxious to replace a fairly simplistic experience that is the use of a credit card with a more robust experience that the retailer may know more about you based on the fact that your phone is a rich source of data for you. And as long as you permit it, the retailer may like to know who is there, why you are there, where you were before, what you are buying, (offering) some of the benefits that come from online purchasing, (such as) the one-click Amazon experience where they are suggesting other things to buy and knowing where to ship things automatically. There is an opportunity to create a richer customer-to-retailer experience once we start replacing cards with phones.

Published in Northern California

When Jane Lloyd arrived in the U.S. from Australia two years ago, she was working with very nearly a blank slate. The managing director of U.S. investments for Sydney-based DEXUS Property Group was in charge of developing an administrative team to oversee the company’s stateside portfolio of properties. After moving to the company’s Newport Beach U.S. headquarters, she needed to recruit people who worked well together while providing an insider’s perspective on the 15 U.S. markets in which DEXUS operates.

Smart Business spoke with Lloyd about how she built and continues to maintain a cohesive and productive leadership team at DEXUS, which generated nearly $90 million in revenue in 2010.

When you moved into your current position, how did you assess what you needed to do for the business moving forward?

Initially, I dealt with moving here from Australia, spending the first six months in Chicago and then moving to Southern California. From there, I needed to establish a team in order to execute DEXUS’ business strategy in the U.S.

Because we were setting up a whole new platform, I needed to understand effectively what our property portfolio was. We have $1.3 billion of property across the United States, so I needed to understand what that property looked like and what those markets were. And then I needed to put a team together on the West Coast and get that team up to up to speed in terms of how DEXUS operates. Then I needed to leverage the deep market knowledge that the team has, being local players. So as far as assessing the situation, if you think of it in terms of people and property, it’s establishing a good team and understanding where the property in the markets are.

When it came to establishing the team, how did you do that?

We had two options. One was we could just do one by one by one, and recruit that way. The other way was to look at hiring an existing team. We looked at about 50 companies on the West Coast. We interviewed 15, did due diligence on three, and at the end of the day, we chose a really great team here in Newport Beach. One of the really important things for us was cultural fit, and we’ve found that the team has been a great cultural fit. Beyond that, we’ve built the team from an initial count of nine people to a total of 21 in our office today.

How would you tell other business leaders to build a team that can address the needs of the markets you serve?

First, you need a clear plan. We’re very focused on what our strategic plan is, and remaining nimble with regard to whatever the market opportunities are as they arrive. Then you need to continually communicate that plan. To that, we have formal and informal communication mechanisms such as team meetings, performance reviews and so forth. The other thing, which is something we’re very big on, is celebrating your successes. We try to stop occasionally and just socialize with the team. One of our favorite things we do is to have drinks on the patio on Friday afternoons. We have drinks and discuss the week, and if there is something we want to acknowledge within the team, that is normally the time to do it.

Once you have the team in place, how do you develop a strategic plan?

We think that in order stay ahead of your competition, you need good, solid research-based metrics, and that needs to be complemented by strong local market knowledge. So it’s a combination of research and market knowledge that helps you understand where you want to go and what you want to do, and then stay ahead of your competition. In terms of the way we run our strategic planning, we have a top down and bottom-up approach. Our board is involved annually in looking at a three-year strategic plan, which we develop. And we also have contributions from all of our teams in terms of input and making sure everybody understands what all of that looks like, and more importantly how we’re going to execute that plan.

How to reach: DEXUS Property Group, (949) 724-8886 or www.dexus.com

Published in Orange County

About a month after Jim Nixon bought Varel International Inc. in 1998, he stood before his employees and put a slide up saying that in three years, the company would be making a $100 million a year in revenue. His employees thought he was a comedian.

“Several of them actually laughed,” the president and CEO says. “They thought it was hilarious. That was the starting point.”

It was a rough place to begin, but the laughing wasn’t unwarranted. When he bought Varel, he realized that he had to completely overhaul the entire business to the point where people questioned why he bought a company instead of just starting one from scratch.

“I had an inkling when we bought the company in 1998 that there was a lot to do,” Nixon says. “Being forever the optimist, there was a lot more to do than I actually thought.”

The beginning of his problems was that Varel, which manufactures high-performance drill bits, had major quality issues.

“The company had an attitude that quality wasn’t terribly important, and if there was a problem with the product, you would just give them a new one,” he says.

As a result, the business had a really bad reputation in the industry. Additionally, the organization was very local in nature instead of being a global competitor, as it had nearly no international business.

“That was a very significant challenge, but we came in with our eyes open and we knew there was a lot to do, but there’s always more than you expect, and that was true of this also,” he says.

Despite the laughs, he was determined to change the business into a top-notch organization.

Improve processes

To start, Nixon was looking at the company’s numbers and saw a line item called “performance credits” of about $300,000 a month, which was significant for a company doing about $2.5 million a month in revenue.

He inquired as to what performance credits actually were and was astonished to discover that when a distributor’s customer didn’t like the performance he got, Varel was simply giving them a new product to replace it.

“There was no investigation into what was wrong, so you never learned from it,” he says.

He realized that if they wanted to save money, they had to create better products, but without knowing what was wrong with the products, he didn’t know where to start. He began by looking at Varel’s processes. What he found was astonishing. The company claimed to be ISO 9000 certified but what he discovered was the only part of the business that was actually certified was the engineering design group — about five people. So he had about 1,100 people in Mexico manufacturing products with no quality systems in place.

“So our first thing was get a recognized quality system in place at our primary manufacturing facility,” he says.

It took about nine months to get them certified, and by the time that process was finished, the performance credits had dwindled to nearly nothing. The tradeoff, though, was that the scrap in the manufacturing plant was about $250,000 a month now.

“At least then we knew where we had to attack it,” Nixon says.

He started working with the unions in Mexico to change the philosophy of the plant. Workers were operating in an old-fashioned batch-and-queue manufacturing environment where a machinist would machine all the pieces he was given and then move them to the next operation, and so on. He changed it to implement Toyota’s lean model of manufacturing and production, which calls for people to be their own inspectors. Operators began working two or three machines, and they became responsible for the quality that came off of their machines. The only time an inspector was looking at parts now was during the set-up process of getting a machine up and running.

Not only did quality improve, but scrap levels dropped from about 7 percent initially to less than 1 percent. On top of that, the business had been making products primarily for the mining industry, but by improving, they started doing more for the oil and gas field market.

“The most important aspect of that is understanding what your issues are and drilling down deep enough to understand what the true underlying issues of the product actually are,” Nixon says. …“The first stage of any product-based business has got to be really understand the quality issues you have within the product, stabilize them, and from there, move forward with improved technology, with improving designs and improving the product for your customers.”

Get better people

With processes in place that were improving the company, Nixon next needed to ramp up the quality of people he was bringing into the organization.

In the past, Varel had traditionally hired people locally who had some understanding of the industry, but there was no expertise. He decided to change the approach by bringing in experienced veterans from the industry and build the organization out through recommendations from potential customers as to who they thought had the best technologies and who were the best sales people.

“We went from being a somewhat parochial, ‘Let’s hire locally in Dallas,’ to ‘Let’s hire all over the world,’” Nixon says.

But doing that wasn’t exactly easy.

“Initially, our ability to hire the best quality people was somewhat low because that was linked to the old quality image,” he says, “Until we really started building momentum in the company and changing the image and reputation in the industry, it was difficult to hire the very best people.”

He overcame that by targeting what he calls renegades — people who were with major competitors and were unhappy and felt as though they were being held back. He put in place a lucrative pay and incentive system to attract these talented individuals.

As a result, he started hiring people from Australia, Malaysia, Indonesia, the Middle East and all over Europe.

“As we’ve gone through changing the image and improving the quality and expanding our business, it’s become easier and easier to hire some of the best people in the industry to come and join us,” he says.

As he brings them in, he’s kept them there by giving them the ability to achieve results without being micromanaged.

“You put in place the measures for accountability, and then you review those measures on a regular basis,” he says.

He has monthly reports that define how each region and reviews those and asks questions around them, so people understand that they’re responsible for it.

“You can’t say, ‘You’re accountable to this, but you can’t do anything unless I approve it,’” he says. “You have to give them both. The way to do that is push that authority down and let them know that they have that authority and not to second-guess them and not to micromanage them but really to lead them to it. Have regular reviews but other than that, let them run their business.”

Differentiate yourself

By about 2005, the business had grown to approximately $90 million in revenue, and for the first time, the company’s oil and gas business was larger than its mining business. Additionally, Varel was having success with some major companies around the world.

“Through 2005, we had gotten to the stage where we could compete with them, our products were as good as them, and we were making progress in most of the markets we were in, but we still didn’t have a clear identity as to who we were and what the differentiators were,” he says.

The next step then was to focus on differentiating Varel from its major competitors.

“We felt as though we had enough foundation laid that we could actually start to tell the story about who we were and what we can do and start to market ourselves really well,” Nixon says. “We didn’t want to go out and make a big hoo-hah about who we were and what we could do until we had in place all the building blocks for doing it.”

Many of his competitors are huge companies with tens of billions of dollars in revenue, and the way they approach business is to have central engineering and manufacturing capabilities. Seeing this, Nixon saw an opportunity to provide a more agile and flexible company to the marketplace. He set up small manufacturing facilities close to the customer base and built the technology around those to make them stand-alone facilities. While much of the competition is building product and saying, “This is what we offer,” now Varel is saying, “Here’s what we’re capable of, what can we build for you?”

Nixon says that it’s also very difficult to get a first sale from a customer, so they went about building relationships with potential customers so that when an opportunity finally presented itself, they already had an established relationship.

For example, one company needed a drill bit in the middle of the night but couldn’t get a hold of its usual bit provider. The man at that company finally remembered that he had met with a Varel guy and found his business card and called to see if a $600 bit could be delivered to him. The Varel guy made it happen.

“When he gets there, not only is he delivering the bit, but he’s delivering breakfast for the rig crew,” Nixon says. “He now has a customer for life. That foreman spent five hours trying to get a guy on the phone, he calls the Varel guy because he finds his business card, and a guy is up and in his truck delivering a $600 bit. Our major competitors won’t get out of bed for a $600 bit, but that’s what builds the relationship, and that’s what builds the breakthroughs.”

He also works to differentiate Varel by being completely honest with customers, even if it costs them a sale because he doesn’t want to just sell a bit — he wants to sell service and value, as well.

“The first time you say to the customer, ‘We have a bit that can do that, but it’s probably not the best bit for that, why don’t you let me get you one of these from someone else,’ all of a sudden, that guy is going to believe everything you tell them in the future because you’ve just taken a sale away from yourself and given it someone else in order to get him the best product,” he says. “It’s all about building the customer relationship and building the customer’s confidence and your reputation that you won’t let them down.”

See results

By 2006, Nixon’s efforts were paying off and his people’s attitudes had changed. That year, he had a revenue goal of $120 million. Initially, they thought it was too aggressive, but by year’s end, they had hit $140 million, and they were pumped up and believing they could do anything.

“It was a cultural change — the first time we blew away our plan and targets was when the momentum was building,” he says. “It’s very exciting to see people start to have a great deal of pride and enthusiasm about what they’re doing, and that feeds into the customer service model.”

Revenue has continued to climb and Varel did nearly $300 million last year — a far cry from the approximately $30 million in business it had when Nixon first bought it. And everywhere else you look inside the company shows how much Varel has changed. The company previously had three patents, two of which had expired, and now has about 70 patents to its name. Productivity drastically increased; Nixon says that he had about 1,100 people manufacturing about 2,600 units a month when he bought the company, and today, he has about 750 people manufacturing 5,500 units a month. He’s even rolling out lean practices to all the other areas of the company beyond just manufacturing and seeing nice results, as well.

While mining made up most of Varel’s business initially, now it accounts for only about 20 percent of the company’s business, and the oil and gas field represents about 80 percent. And on top of that, its customers are now top-tier organizations from all over the world.

Varel’s competition has also taken note. A third party does an annual survey of the largest players to gauge market share. In the past, there have always been four major companies and then an “all others” category. As Varel has improved, the third-party now has Varel as its own category — creating five majors and “all others” now.

“That tells us we’ve changed significantly,” he says. “The other thing is they’ve come to us three years in a row now and asked us to join their market consortium. Of course we’re saying, ‘Nah.’ We keep saying no, and they keep coming back to us and asking us to join. Clearly they understand that we’ve become a significant part of the market.”

How to reach: Varel International Inc., (800) 827-3526 or www.varelintl.com



Jim Nixon, President and CEO, Varel International Inc.

Born: I was born in Glasgow, Scotland. I’m the  youngest of eight children. I’ve got five older sisters, so effectively I had 6 mothers. I had a very charmed childhood. 

Education: Degree in mechanical and production engineering, Stow College of Engineering in Glasgow, Scotland 

As a child, what did you want to be when you grew up? 

An engineer. My first memories were of getting a lot of grief from my parents for dismantling things around the house, whether it be an electric kettle, or an electric plug. I remember I managed to disassemble a tricycle when I was just over four years old. 

What was your first job ever as a child, and what did you learn from it that still applies? 

I had a paper round. I delivered papers when I was 11 years old. At 6 a.m., I had to start, so I would pick up papers and sell them at the bus stop for the public transport service and then go to school. Then after school I actually had a delivery round and picked up four or five dozen papers and delivered them to private homes around the area. 

That taught me a lot about cash flow. The guy who you bought the papers from was always looking for his money on a Saturday, so if you didn’t collect your money from your customers on a Friday night, you couldn’t pay him.  It was a very simple cash-flow model. 

What’s the best advice you’ve ever received? 

My father ran a butcher shop, and he worked extremely hard to provide for the eight children he had. He told me, ‘Son, your role in life is to find the gold in everyone and polish it up.’ Basically what he was saying was find the good in people and don’t waste your time trying to make them perfect -- just make them as good as they can be at what they’re good at. 

What brought you to the U.S.? 

I moved to the U.S. with Dresser Industries to run the global operations for one of their divisions. Shortly after I moved, Dresser was acquired by Halliburton.  … I moved over here to become president of one of those divisions, and Halliburton doesn’t have division presidents, so that was really the catalyst for me to buy this company -- to take control of my own destiny, having moved my wife and my family over to the United States and then find the opportunity I had moved for had closed on me.

Published in Dallas


Richard Chaifetz didn’t realize how many troubled people there actually are in the world when he first launched ComPsych Corp. But as the business took off, he got a clearer view of society’s ills.

Instead of just focusing on treatment and counseling for things like drug and alcohol abuse, depression, and marriage problems, Chaifetz saw there was even more he could do to help people.

“People’s problems don’t stop at those four or five issues,” says Chaifetz, the company’s chairman and CEO. “And in fact, if you have issues related to stress or depression or you’re using drugs or your kids are using drugs, it’s impacting you in many more ways.”

Chaifetz had a built a network of successful psychological service centers that were meeting a need with the general public. He had more than 250 doctors working at about 20 centers in the Midwest region. But he thought he could do more by branching out to work directly with employers.

It wasn’t that he wanted to abandon what he had built. He just felt this opportunity was too significant to pass up.

“That’s how you stay relevant,” Chaifetz says. “Companies that don’t change and don’t respond to the marketplace become obsolete and they die. That’s the biggest challenge for most entrepreneurs going from an entrepreneurial business into a maturing business and being able to reinvent yourself appropriately while holding on to your core competencies and being able to expand out into new markets and remain relevant to the marketplace.

“That’s why most entrepreneurs can’t transition into running a more mature company. They don’t have the leadership capability. They are idea people and are good at startups, but they may not be able to move the ship in the new direction as the demands of the marketplace and the vision necessitates that.”

Chaifetz worked with his team to make the transition and made a concerted effort to figure out what his potential clients actually needed, rather than just telling them what he could provide. The result is 13,000 organizations covering 35 million people who have benefitted from his services.

Here’s how Chaifetz was able to adapt his company to meet a newly identified need and grow as a result.

Think through your ideas

As Chaifetz saw the opportunity to expand his services, he didn’t let his excitement get the best of him and force him into making a rash decision. He realized he already had a pretty good thing going with the company he had built.

“We had a very viable and large business,” Chaifetz says. “I just didn’t think it had viability very long term based on what I saw changing in the marketplace in terms of reimbursement and other kinds of pressure.”

The key to making a good appraisal of whether a risk is worth taking is that you first make sure you know what you’re already good at.

“You have to look at two things,” Chaifetz says. “What are your core competencies? What are you good at doing? You don’t necessarily get rid of what you’re doing today to fully embrace something completely different unless what you’re doing today is basically gone or is going to disappear very quickly.”

Chaifetz did not believe his existing business was going away any time soon and perhaps not at all. But he saw an opportunity to make his company better and he felt it was an idea worth pursuing, albeit with caution.

“You have to make sure that there are legs to your new idea,” Chaifetz says. “People get caught up in the excitement of something that they think might be viable and go straight forward on that without looking long term at what that might be.”

Chaifetz wanted to identify potential obstacles he might face in advance, before going forward with any concrete plans on this new direction.

“Sometimes people look out a year or two in front of themselves and don’t try to anticipate what the challenges may be three, four or five years down the road,” Chaifetz says. “That’s the problem with a lot of these startups that want to go public real fast and they blow up. They disappear either before they go public or after they go public; they are not sustainable businesses. They don’t have a model that’s long term in nature.

“When somebody looks at their business, they have to extrapolate out what the challenges are going to be from a competitor perspective, an investment perspective and a viability perspective. What’s the revenue potential for the business?”

If you are the kind of leader who regularly skips these steps in pursuit of the “flavor of the month,” you may have a hard time garnering much support for your next moment of inspiration.

“I very regularly and quickly evaluate whether the direction I’m going is viable and is making money for me or if I need to tweak it,” Chaifetz says. “If it’s a wholesale change, then I’d go back and rethink it so you’re not spending fruitless time or wasting time trying to rejigger something and causing distractions for other things that you may be doing. The flavor of the month is just a distraction of the month, as I call it. The flavor-of-the-month mentality results in a distraction and everything else gets affected, such that nothing is successful.”

Encourage debate

You may think silence is a sign of approval when you bring a new idea to your people. You’ve done such a good job laying out your case for this idea that you didn’t miss a thing in your presentation. Maybe you are that good. But more likely, you’ve unknowingly created an environment where people don’t feel comfortable asking you questions.

“If I sat with a group of my direct reports or a larger group and no one said a word, I would challenge them on that,” Chaifetz says. “The first thing I’d say is, this silence is concerning to me because I can’t believe everyone accepts every word I said to them. I’d like you to tell me what you’re thinking or I’m going to ask you more questions. We’re not going to leave this room until we get some people to share what’s going on. I can’t believe there are no questions about this. You’ve got to be willing to ask those questions.

“Unfortunately, a lot of leaders just want to hear what they want to hear. When there is silence, they assume there is acceptance and they move on. The silence can be a total rejection of your views.”

Chaifetz wanted his team to challenge his plan to take ComPsych in a different direction.

“You have to be willing to ask for feedback from the people in your company,” Chaifetz says. “You have to be willing to listen to it and you have to be willing to be challenged. You want to be challenged. It doesn’t mean you don’t fight the challenge or argue or have healthy discussions, which I certainly do. But you have to hire people who are willing to challenge you. If they aren’t, they are yes men and women and they are automatons and they’ll just follow you down a path that could lead to self-destruction.”

In the way you act, the way you speak and the way you listen, you need to demonstrate strong interest in receiving employee feedback.

“I have very strong opinions about things,” Chaifetz says. “But I’ll also be very candid and tell them, ‘Here’s my view on something, but I really want your feedback. It’s not set in stone.’ If you demonstrate a track record of listening to the people that work for you and you modify your views based on that, they can see that their input is important. You have to respect all those views, you have to give them a chance to talk about them and if you’re getting silence, you have to address the silence.”

Just as you don’t want silence from your employees, you also don’t want to hear dead air when you’re talking to potential clients about a new service you want to provide. So don’t just ask, ‘What do you think of our new idea?’

“Asking someone to respond to something will give you exactly what you’re asking for, a response to that question,” Chaifetz says. “But it doesn’t help you decide what it is that is going to be the next great thing in the marketplace or what’s going to be cutting edge.”

So you can’t just ask a customer if they like your new idea. You’ve got to dig deeper than that to see what would really help them.

“Our primary interest in talking to them is to find out and ask them questions about things they like and what kind of challenges they face,” Chaifetz says. “More in the scheme of trying to understand what’s important to them so we can build a product around it. That’s as opposed to taking a product to them to test. … When you function in a silo and constrict yourself to just what you’re interested in at any moment without expanding your horizons and challenging yourself to be open-minded, you get that constriction in your products and services and you become staid and not relevant anymore.”

Solidify your team

When you’ve gathered feedback, engaged in open discussions with your team and reached a decision to move forward with a plan, you need to make it known to everyone what you intend to do and what the goal is.

“A good leader makes it clear where you want to go and reinforces the behavior that is consistent with that,” Chaifetz says. “A good leader quickly makes sure they provide input when the behavior is not consistent with that and makes sure the people on the team are aligned both emotionally and cognitively. They buy into it from a passion standpoint and they understand it and embrace it. Be willing to take people off the bus.”

In other words, if you find there are people on your team who are reluctant to be part of your plan after it’s been fully discussed, you need to make a change.

“Either move them into a different position or take them off the bus completely if they are not aligned,” Chaifetz says. “I had several people I had to move either into different positions or out of the organization early on when we made the shift because they were set in their ways, old-school thinking, and they were not willing to embrace the new direction we were going.”

Often, you’ll find people are nervous when your company moves in a different direction. But they’re likely to find confidence in your confidence as the leader.

“Make sure the people who are on board, that you reward them appropriately,” Chaifetz says. “Motivate them. You’re enthusiastic and having that enthusiasm and passion is contagious. It’s a very strong part of leadership. People pick up on the commitment of a leader to a direction or to a view or to a decision.”

If you’ve been honest with yourself and your team throughout the process, odds are that you’ll succeed.

“You will sometimes fail,” Chaifetz says. “But for the most part, if you do your homework in terms of understanding the marketplace and going with your gut if you have a good gut, typically, you’ll be successful.”

How to reach: ComPsych Corp., (312) 595-4000 or www.compsych.com

Richard Chaifetz, chairman and CEO, ComPsych Corp. 

The Chaifetz File

Born: New York

Education: Graduate of Saint Louis University; Doctor of psychology degree, Illinois School of Professional Psychology

Chaifetz on being patient: I’m impatient. My impatience has not changed. Our ability to wait is certainly greater because of the resources and the depth and breadth of our business. But my impatience has not changed. I still evaluate things the same way. What happens is when companies get big, they become less impatient and more tolerant. They are able to spend money and look back years later and think, ‘Oh my God, I lost $100 million on this venture. We should have probably cut it off earlier.’

When you’re gritty and you’re newer and you’re younger in your business, you can’t afford to be patient in that way, because you run out of capital and resources and other things. I’m still impatient for that reason. I don’t like to waste capital and resources.

Chaifetz on hiring: We hire people who are bright, inquisitive, have high energy and high integrity and one of the most important things is what I call intellectual curiosity. They are interested in what’s going on around them. They read a lot. They try new things. They experiment in their personal lives with different kinds of activities and learning experiences and travel and such. If you get people like that in your organization who embrace challenges and are intellectually curious, they kind of have a feel for what’s going on in the world and it mimics my view of things and that’s how I am. You can’t help but then be able to get a sense of what may work.

Published in Chicago

Establishing a foreign subsidiary may have lucrative business advantages, but if you’ve decided to pursue this strategy, it’s important to stay informed, plan ahead and follow proper compliance with both U.S. and international requirements. Failing to do so can result in undesired consequences and potential IRS penalties.

To ensure proper compliance domestically and abroad, engage a solid group of advisers in the initial planning stages, says Sonia Agee, partner at Ropers Majeski Kohn & Bentley PC.

“It is critical to have the right team in place,” says Agee. “Generally speaking, that team consists of a U.S. legal counsel, accountancy professionals on both sides of the operations who understand the coordination of the various tax and reporting requirements between the U.S. and foreign jurisdictions, and a foreign counsel who also has the same knowledge and understanding.”

Smart Business spoke with Agee about the steps to take when expanding overseas, and how to maintain compliance with both domestic and foreign regulations.

What initial talking points should business owners discuss with their counsel when they’ve made the decision to expand overseas?

When a business client first comes to us and expresses interest in looking at overseas opportunities, first and foremost we need to get a clear understanding of the goals and strategies for pursuing foreign operations. We assess the specifics of what the company plans to accomplish by expanding overseas, and how it may be different from or impact what they’re doing here in the U.S.

Once the company makes the determination to expand internationally, it is critical to ensure that the new business venture is properly structured overseas. The necessary steps will vary widely depending on the jurisdiction in which the company is looking to operate. In addition to U.S. counsel, it is important to have good counsel overseas who has worked with cross-border issues, because there is often a delicate balancing act to making it work overseas, as well as from a U.S. perspective. Not all forms of entity will work for all ventures, so making sure that the foreign venture is properly structured minimizes liability to the company.

What potential legal landmines exist with foreign subsidiaries?

Once the setup with regard to the actual structure is determined, you must look at the detailed aspects of the company’s operations. The company must coordinate a number of things, including the work force: will it be necessary to hire a foreign work force, or will the company be bringing key individuals from the U.S. or from other parts of the world into that new jurisdiction? In either case, there are both immigration and employment law issues to coordinate in the U.S. as well as from the foreign perspective. For example, if the company plans to replace a local work force by moving overseas, it is imperative to hire employment counsel because, depending on the size of the work force, there may be a number of formal requirements to avoid liabilities.

Additionally, many jurisdictions have varying laws surrounding intellectual property. Some jurisdictions simply don’t provide the same protection that we have in the U.S. in terms of intellectual property rights, so it is important to identify those issues and determine the best way to deal with them.

Finally, the company must be sure that appropriate reporting and compliance is in place. There is a myth that if you earn the money overseas and don’t bring it back to the U.S., you don’t have to report it. The general rule under U.S. tax law is that worldwide income is reportable and taxable in the U.S. If a company is formed as a subsidiary of a U.S. entity, the U.S. entity has a reporting requirement. Conversely, if a company goes overseas and is formed as a ‘sister company’ to the U.S. company (the ownership of the foreign entity mirrors the ownership of the U.S. company) there are still reporting requirements. Not only must the appropriate forms disclosing the existence of the foreign entity be filed each year, but, in addition, all income from the foreign entity likely needs to be reported here in the U.S., either through the U.S. entity or through the shareholders.

If a company has a foreign bank account for the foreign business, and a U.S. person has signature authority over the account, the U.S. person is required to file a reporting form disclosing the existence of that account as well as their authority over it. There is a significant penalty an individual can incur for failure to report; it can be up to a $10,000-per-year penalty for not reporting a foreign account, so it’s very important if you are looking to go overseas that those reporting requirements are dealt with each year. If they’re not, every year can carry its own penalty and fine.

What other issues should you consider to get the most benefit from a foreign subsidiary?

Another question to ask is ‘Can the entity here in the United States have a subsidiary overseas?’ In most instances, the answer is yes, but a U.S. company does not want to inadvertently forfeit U.S. tax benefits by having an entity formed overseas that may not work with the U.S. requirements — for example, S corporations may only have qualified S subsidiaries. A foreign entity may not comply with the requirements and the S status benefits would be lost.

Again, working with foreign counsel to ensure the form of the foreign entity chosen does not present any problems for the intended purposes is extremely important, as there may be other limitations overseas. For example, a company may not be able to have a direct foreign subsidiary due to specific limitations on ownership imposed by the foreign jurisdiction. Each jurisdiction has its own requirements that need to be understood in the context of the proposed foreign operations before making any decisions.

Sonia Agee is a partner with Ropers Majeski Kohn & Bentley PC. Reach her at (408) 947-4889 or sagee@rmkb.com.

Published in Northern California

As he looked around at his executive leadership team, Alain Couder saw no clear disorder or conflict. The reason that his company’s leadership was not effective had nothing to do with a particular leadership style or group dynamic. But then again, the issue wasn’t really what people weren’t doing at all. It was that they didn’t realize what they needed to do.

“They didn’t know what they didn’t know,” says Couder, the chairman and CEO of Oclaro Inc.

Oclaro — the product of two startup companies worth more than $200 million apiece — had quickly emerged as a tier-one company with potential to reach No. 1 in its core optical and high-powered laser markets. After completing three more acquisitions, it had risen to third in its industry and become an employer of thousands of people around the globe. Yet, that meant many of the $393 million company’s employees, who had come from smaller companies, now lacked the skill set required to operate in a larger, global company.

“To get all of those startup people and turn them into a company that can be operating at $500 million in revenue and get to $1 billion was my biggest challenge,” Couder says.

Choose the right people

With a career that included working at both large corporations and small startups, Couder knew from experience that Oclaro was not prepared to scale for the next phase of growth.

“Because of my background working in companies like IBM or HP or others that are really well-structured and well-organized, it was clear to me that Oclaro was not that way,” he says.

So he began the process of putting in place a new leadership structure — one that that made sense for Oclaro’s new size and objectives. He hired an external consultant to go into the company and take stock of its operations, people and processes. By using an outside consultant to evaluate his team, he was able to eliminate partiality and really find out who would be able to help scale the company.

“Specifically what you learn is that they go into the company and see how you operate,” Couder says.  “They see what information systems you are doing. They speak to your managers and then they tell you, ‘This guy knows what he is doing and this guy needs to learn or needs to be replaced.’”

After getting this feedback, the first decision Couder made was to replace three of his key executives. While these personnel decisions can be difficult to make, a CEO has to be confident that the leadership team he or she has in place will be able to lead effectively when moving to the next stage.

“I choose an executive team that is appropriate for the size of the company,” he says.

“I make sure that I treat the people who are leaving well, but that I put in place people who are stronger and can help me scale the company to the next level.”

When you are growing a company significantly, you want to bring on executives who have experience and past success in their area of expertise. They also need to have the right personality and values to be a good cultural fit at the company.

“[It’s] are they going to be able to work in a constructive fashion with the rest of the team?” Couder says. “If you bring in someone who has a very different set of values than the ones that you have in place for the company now, then it just doesn’t work well.”

How do you identify the people who can scale successfully?

“It’s talking about what you want to achieve,” Couder says. “You create a dream of what can be achieved and then you explain what it takes to do it.”

When you start doing that, you’ll have some people who are enthusiastic and some people who start to resist change.

“I work with them and coach them and try to help them improve, but at some point in time when the company scales, some people are going to scale with the company and some people are not,” Couder says.

Once you’ve explained the vision, it’s more worthwhile to focus your time and resources on the people who seem energized about the vision for growth rather than on to trying to convince the opposition.

“You need to spend the time with the people who are enthusiastic and forget about the other ones,” Couder says. “Otherwise, you spend all of your time with people who are resisting and then do nothing in the end.”

Eventually anyone who has a “wait and see” attitude will either leave the company or decide to be part of the change and move with the enthusiastic people. The best thing to do is respect people’s motives and then focus on who can help you grow. While two of the executives that Couder replaced remained within the company, the third one left.

“They are able to drive their own lives and their own convictions,” Couder says. “And that’s fine. That’s part of change management. Not everybody is happy in a larger company. Some people are much happier working in startups and they should go work in startups.”

Empower your people

Leading an organization with more than 3,000 employees meant Couder and his executive team needed to start shifting their attention to more of the big-picture goals and high-level decisions of the company.

“You always need to shoot for the No. 1 position,” he says.

That means people lower in your organization need to shift to take over new responsibilities and decisions, as well.

“When you scale a company, you want to be able to move the decisions lower in the organization,” he says. “So this is the notion of empowerment.

“In a startup, the CEO is at the center of everything, is aware of all the decisions being made, in touch with every customer — he is involved in all of that. As you scale the company, if the CEO continues to do that then the CEO becomes a bottleneck.”

When you take a set of people with a startup mentality and ask them to manage in a larger, more structured corporate environment, you need to give them the right tools and support to be successful in that culture.

“It’s then helping the people you choose succeed in what they are doing,” Couder says.

“And as a result of that, the CEO becomes increasingly in charge of setting the right direction.”

To empower his managers as decision-makers, Couder implemented a global management training program for leadership teams all across the company. The three-day training program included approximately 80 managers and included twice daily training on leadership best practices.

“We coached them on leadership, how to make decisions, how to coach your team, how to train them, how to make them go, how to make them passionate about what they do, how you can create a team that is going to win together and all those kinds of things which are so important to success,” Couder says.

You and your people both want to feel comfortable with them making decisions independently. So first, you need to spend time giving them context of how to make those decisions and their impact on company.

“This is a part of the delegation and control,” Couder says. “As the company gets larger, I delegate more and more, but I want to make sure that we still have the proper controls in place and make sure that everything is moving the way that it should.”

By giving managers leadership best practices and skills that they can pass on to their teams, you push those practices out and the organization itself can become more nimble in decision-making for growth. Moving forward, a good measure of your team’s empowerment is how many decisions get pushed up in the organization. If it seems like too many, sometimes giving yourself some distance to think and reevaluate your own decision-making process can help you gain perspective. It also gives management a chance to brainstorm new ideas independently.

“One of the pitfalls is to always be acting and acting,” Couder says. “In fact, if I take a week of vacation, the team always comes back with new ideas and new things to be done.

“As you have a larger company, the best ideas are in the company. The CEO doesn’t need to have any ideas. He just has to listen.”

Dance to the same music

Lastly, when you are talking about scaling a global, multicultural organization such as Oclaro, which has operations in Europe, R&D in North America and manufacturing in China, to more than $1 billion in revenue, everyone in the organization needs to be working toward the same goal if you are to have any chance of success.

“You need to get the whole team and the whole company to be pushing and pulling in the same direction,” Couder says.

“So it’s also to encourage people to talk to each other and to learn from each other.”

That is where internal communication becomes incredibly important.

“There are three dimensions to the flow of information, top down, bottom up and also networking at the company level,” Couder says.

For a company that is growing very quickly, it’s vital to have good communication so that everyone’s expectation is clear and employees can work in harmony across different departments, divisions or operations.

“We need to make sure that we learn the same dance and that this dance fits the music,” Couder says. “Before in the company, you had different music and different sides and different dances, and therefore, the cooperation inside was a lot more difficult.”

To get everyone on the same page, Couder created a cross-functional task force to simplify and streamline some of the company’s key processes such as product life cycle, and train everyone — executive team included — on a set of leadership best practices. Part of that training included learning a standard vocabulary for operations that would be used by everyone in the company worldwide.

“You create a common language and that helps to have everybody dance to the same music across the company,” Couder says.

“When we talk between different geographies between China and the U.K. or California, we have the same terms and the same words,” Couder says. “We know exactly what we are talking about. There is now no ambiguity in what we want to do.”

When it comes to top-down communication, Couder believes that there is no replacement for meeting with your team in person.

“Through the questions, I get a pretty good understanding of what they know, what they don’t know and what kind of progress they are making,” he says. “That is one measure I use, and unfortunately I can’t find any replacement for travel. Video conference is great, but it doesn’t work for that. …You need to feel and communicate your actions with the people.”

Couder schedules a half hour with each of his direct reports three times a month to talk about their progress and maintain alignment on the organization’s goals. Whenever he travels, he also meets with his leadership teams during brown bag lunch sessions to find out what is working, what isn’t and offer his support to meet any challenges.

With a strong, empowered team that has everyone pulling in the same direction, Oclaro is no longer a bunch of pieces, but one united company that can scale successfully for growth.

“If you want to be able to be organized as a company, you can be empowered but within a certain context, within a certain set of processes and methodologies and tools that are common to everybody in such a way that it boosts harmony in the way we work,” Couder says.

“We know that we now have the best practices and the tools, and the means and the people involved to be able to compete in a much more effective way.”

How to reach: Oclaro Inc., (408) 383-1400 or www.oclaro.com

The Couder File

Alain Couder

Chairman and CEO

Oclaro Inc.

Education: Paris, Ecole Superieure D’Electricite

Born: Paris

First job: Teaching in Africa at the Abidjan University

What would your friends be surprised to find out about you?

I have raised six kids and have nine grandchildren.

What do you to regroup on a tough day?

Hiking in the mountains is my favorite getaway.

What is your favorite part of the job?


Do you have an innovation tip?

You always need to invent a better way of doing what you do, a better way of communicating, a better way of writing a memo, a better way of making a presentation. It’s not only about product innovation. It’s about finding ways of doing things better in a smarter way. It’s about working smarter, not only harder.

Couder on choosing the company’s name: Oclaro is the new name that we choose to merge Avanex and Bookham. We are big believers that when you merge two companies of similar size and you have one which is acquired and the other which is the dominant … by adding a new name and a new set of values, that helps in fact create a new company. Oclaro stands for optical and clarity, which is how we created the name.

Published in Northern California