John Magee walked away from a multibillion-dollar company to start over.
Before helping found Crane Worldwide Logistics in 2008, he worked for Eagle Global Logistics, a global supply chain company that had grown from $80 million to more than $3 billion in the time that Magee was there.
Unhappy with how big the company was getting and the loss of personal touch to its clients, Magee and eight others from Eagle left to start their own supply chain business, but they had to wait out a noncompete agreement for a year.
They took the time to scout how and who they wanted to hire and the clients they wanted to chase. One thing was certain: They didn’t want Crane Worldwide Logistics, a full-service customs brokerage and logistics company, to turn into the same thing they had just left.
“That sitting out actually gave us a chance to reflect on the industry,” says Magee, president of Crane Worldwide. “What did we see taking place in our industry? How did we want to launch a new organization in there? It was truly the best thing we could have done, because it allowed us to get so much set up the way we wanted to do it so that when we launched the organization 12 months later, we could do it, in many cases, very different than the way a lot of our competitors and the industry has morphed into.”
Not wanting to become another huge global company that lost touch with clients and not wanting to be too small and stuck in a niche, Magee and his other team members combined their expertise to develop their plans for growing and staffing their new company exactly how they wanted to.
Here’s how Magee grew Crane Worldwide to $252 million in revenue and 700 employees in 2010 by carefully planning for controlled growth.
Know your destination
Growing a company is ultimately not the biggest challenge, but being able to control it is.
You must clearly identify how you want to position your company and then stick to that plan.
“Since the late ’90s and into the turn of the century, our industry has seen a tremendous amount of consolidation,” Magee says. “All that industry consolidation created a few dozen big players that are $3 billion in annual sales and larger. They basically try to be everything to everybody everywhere. No matter what industry it is, what geography or what type of service somebody is looking for, they try to say yes and they try to do it. I don’t subscribe to bigger is better; I think better is better.”
Being better means staying true to how you want to position your company. You have to be diligent about not faltering from how you want the company to appear to employees and clients.
“You have to know what you’re good at and stick with it,” Magee says. “Don’t take on business for the sake of growing. Don’t sacrifice the company’s results because you’ve taken on something that doesn’t make good sense for your company. Don’t try to grow for the sake of growing, because you’ll spend time and effort and resources on nonvalue-added work. Everybody feels it. The company feels it, the people feel it, and it takes away from that feeling of being in high performance when everything is working right.”
Having started with a company when it was relatively small and watched it turn into a multibillion-dollar company, Magee knew that becoming a huge company wasn’t the right path to go down a second time.
“I can tell you the bigger we got, the harder it was to be great at what you do,” he says. “We want to be this global midsized player,” Magee says. “We want to have high touch, high service and really get back to the core brokering of supply chain solutions. I want to bring this high focus on it that I think a lot of the big guys lost, but be large enough so that people with global supply chains are willing to trust us with it. That was our vision. We want to be a $1 billion company. It’s not because that’s some magical number, it’s really to let the market and, more importantly, our clientele know where we are positioning ourselves.”
Hire for growth
When you have a clear path that you want your company to go down, you need employees who will be capable of continuing that growth. If employees are unable to handle the growth your company sees, you will end up having to let go of them and start the process all over. You have to hire for the future.
“What I saw [at my old company] was us outgrow our management team easily four times, arguably six times during my 13 years there,” Magee says. “When you start making management changes, you run the risk of getting this momentum built up and then, all of a sudden, you have to bring in a new leader who can take us from here to the next level, and by doing that, you run a risk of seeing that momentum come to a stop.”
Because of the experience of the founders of Crane, they knew that they would be able to get their company off the ground and grow. However, they still needed to be smart about who they looked to hire.
“Part of our plan for the future is let’s go hire these key positions above and beyond where we are today, where we’re going to be in two years, but let’s really think about where we’re going to be in five to seven years and let’s hire for that,” Magee says. “That has allowed us to attract the talent that we needed and ultimately that has led to what we’ve been able to accomplish in the first two years.”
In order to hire in front of your growth, you must constantly be on the lookout for potential employees. You want people who you can see working in a higher-level position than what you’re hiring them for.
“If you can envision that you can see this person being developed into two levels above what you are hiring them for, then you probably have a good candidate for the job,” Magee says. “It’s vitally important that your human capital pipeline can keep up with your sales pipeline. If you can’t bring on the right talent, you’re going to ultimately hit a ceiling even though you can continue to bring on revenue. It’s going to hit a ceiling and your customers are going to feel it. As we know with inertia, what’s in motion stays in motion, but what’s at rest stays at rest and you don’t want that momentum to stop.
“You have to prioritize recruiting. You don’t recruit when you have a need. You recruit every opportunity you can. I’m always asking, whether its colleagues, whether it's customers, or whether it's suppliers, ‘Hey who’s out there that I should know?’ Because when the time comes to pull the trigger if you’re starting your recruiting then, you’re falling behind. When the time comes to pull the trigger, if you already have multiple candidates that you’ve been getting to know and been recruiting over time, even though you didn’t have a role for them, it’s a lot easier to finish the process and bring them on board.”
Create the right culture
Controlling growth means setting up the right culture for your company. With the right culture, people will instinctively do things the way you want them done. This requires finding the right people to help you reach your goals.
“Having lived and worked all over the world, whether I worked with some great people or I competed against them, I was fortunate that I knew a lot of folks and a lot of my colleagues knew a lot of folks,” Magee says. “We spent the year that we were off creating a recruiting database. We couldn’t talk to anybody from our former company for 12 months from a solicitation perspective, so we went out and built a recruiting database everywhere else.
“We also defined what kind of culture that we wanted and we called it our Crane Character. I basically took the letters from Crane and I created our character statement. The C stands for customer-centric, the R for responsible, the A for attentive, the N for integrity, and the E stands for execution.”
It is crucial that all employees agree with and abide by the company culture that has been established. If employees don’t mesh with the culture then the odds of it working in the employee’s or company’s favor are slim.
“When we are hiring, can we see the individual that we are bringing on board … developing into two levels above what we are hiring them for,” Magee says. “Do they have the first four values within our character statement? Are they customer-centric, are they responsible, are they attentive, and do they have integrity? If they pass that test, then we bring them in the door. At the end of the day, if they don’t execute … they are probably not staying if they can’t actually do the job that we are hiring them for. But if we’ve done a good enough job betting it, then your success rate on bringing in the right person is pretty high.”
That upfront attitude has been a big reason for Magee’s success hiring people who can continue to drive the growth of the business. You have to be able to tell employees exactly what the company’s plans are and why.
“You have to lead by example,” Magee says. “Have integrity. A lot of leaders tell people what they think they want to hear versus just being completely open and honest with them. I know that’s the only way I want to be treated is if somebody just shoots me straight and is very open and honest. I think if you lead by example, have integrity and be open and honest with everybody and communicate, people will follow that. They want that from their leader and when they feel like they are getting partial truths, that’s not as good.”
HOW TO REACH: Crane Worldwide Logistics, (888) 870-2726 or www.craneww.com
The Magee File
Crane Worldwide Logistics
Education: Received a marketing degree from the University of North Texas
What was your first job and what did you learn from that experience?
When I was in middle school, I went and printed up business cards and started mowing lawns in the neighborhood for $6 a lawn. Mowing lawns was a commitment. If you make a commitment, you’ve got to stick with it. My friends would invite me to the pool or to the amusement park and although I would have loved to go, I said no I couldn’t I have to mow yards that day. That taught me the value of money.
What is the best piece of business advice that you have received?
Don’t set your goals too low and write your goals down. If you look, I think statistics say that only 3 percent of the world writes its goals down, but that 3 percent makes more money than the other 97 percent put together.
If you could have a conversation with any one person, who would it be and why?
Jack Welch. I have a tremendous amount of respect for what he did during his leadership at GE. I’ve read lots of books on GE, and Jack and I definitely don’t subscribe to everything that Jack does, but in my mind, he goes down as the best executive that’s ever run an organization.
Business must be good if growth is one of the biggest challenges you face. That’s been the case at Weltman, Weinberg & Reis Co. LPA, where Managing Partner Alan Weinberg stays focused on expanding and improving the firm.
Throughout its 80 years of business, Weltman, Weinberg & Reis has responded to rapid changes in the industry by expanding its services to include: consumer and commercial collection services, comprehensive litigation, bankruptcy, and real estate default recovery – basically, the capacity to service anything from large national financial portfolios down to individual collections matters, not to mention everything in between.
The firm has also expanded its geographic footprint, now operating 10 offices that directly service eight states. This steady growth allowed Collections and Credit Risk magazine to recognize Weltman, Weinberg & Reis as the nation’s largest creditor’s rights law firm.
Still, Weinberg keeps pushing his firm to improve in order to stay on top. He spoke with Smart Business about staying on the leading edge by innovating and delivering “above and beyond” customer service.
Give us an example of a business challenge your organization faced, as well as how you overcame it.
We recently opened a small office in Florida to initially do foreclosure work. Within a few weeks of opening the office, we were approached by clients to immediately take on a substantial volume of new work. Our approach has always been to be flexible so that we can adapt to any situation. We immediately mobilized a team to determine what staff and equipment we would need to handle the work. We then dedicated the resources within the firm to undertake the activity needed to staff the office and get it equipped, which included having employees from other offices work in Florida temporarily until we were able to hire local staff. We were able to absorb the new work and deliver for our clients.
In what ways are you an innovative leader, and how does your organization employ innovation to be on the leading edge?
I challenge my management team to constantly look at the things we do and look for a way to do them better. I advise everyone that just because we do something a specific way today, that does not mean we need to continue to do it that way.
What is the greatest lesson you’ve learned, and how have you applied it?
Knowing that it is hard to stay at the top forces us to constantly look for ways to be better.
How does your organization make a significant impact on the community and regional economy?
As a collection law firm, our primary function is to collect money owed to our clients that may otherwise go unpaid. The recovery of their funds allows our clients to be financially stable and to put the recovered funds back to work in their businesses. Also, with over 1,300 employees, we are a large employer. We provide good jobs and benefits to our employees while utilizing products and services needed to operate the business.
How have you added “value” to the products and services you provide to customers and clients?
We host online and on-site seminars for our clients that allow them to better understand what we can do for them, but also what they can do in-house to improve their performance.
What is your philosophy on going “above and beyond” for customer service?
We put into practice daily the philosophy of going “above and beyond” for outstanding customer service. It starts at the top with me. I do not have my phone calls screened. I have a direct line and answer it myself. I also respond to all of my own e-mails. If a client calls and needs our assistance on a mattter, I always make time immediately to work with the client on that problem.
How to reach: Weltman, Weinberg & Reis Co. LPA, (800) 884-4128 or www.weltman.com
Deal activity among both strategic and financial buyers dropped off significantly in February. This slowdown in deal volume was due in large part to the rush to get deals done by the end of 2010, which was driven by the fear of tax changes that never occurred.
Strategic buyers led the way in the second month of 2011 by focusing on smaller deals. The Euclid Chemical Co. bought LaFayette, Ga.-based PSI Packaging Inc., which has annual sales of approximately $6 million. Euclid Chemical is a Cleveland producer of micro and macro fibers for the ready-mixed and precast concrete market and subsidiary of RPM International Inc. The move is expected to add a complementary product line and boost manufacturing capacity and expertise for Euclid Chemical.
Cleveland-area Hartland Payments Systems Inc., the fifth-largest payment processor in the country, sold a small portfolio of merchant customers to Sage Payment Solutions, which furthers Sage’s strategic growth goals. I.D. Images LLC, the Brunswick-based and industry-leading producer of variable information printed labels, closed its third strategic acquisition in the last 18 months and expanded its presence in the Southeast with its purchase of Heather Label Inc. of North Carolina.
In a move to continue its transformation and portfolio repositioning, Cleveland-area PolyOne Corp., a premier provider of specialized polymer materials, services and solutions, sold its stake in Sunbelt Chlor Alkali Partnership to Olin Corp. for $175 million. In addition, Smart Business Network Inc. acquired Cleveland-area Wise Group to further expand its Smart Business Content Marketing Division.
As the inventory of quality targets increase later in the year, look for more strategic buyers to come off the sidelines, rested and ready to make quality acquisitions.
Private equity firms were also active in February, although not nearly at the same level as they were in the fourth quarter of last year. Chicago-based private equity firm Pfingsten Partners, LLC acquired Independence-based TPC Wire & Cable Corp., a leading distributor of industrial wire and cable, from private equity firm Premier Farnell plc for approximately $43 million. Pfingsten Partners investment in TPC is aimed at capitalizing on TPC’s market opportunities and growth potential.
James M. Hill is a director on the ACG Cleveland board. He is also executive chairman, a partner and the chairman of the private equity practice of the law firm of Benesch, Friedlander, Coplan & Aronoff. For more information about the Association for Corporate Growth, visit http://chapters.acg.org/cleveland.
Deal of the Month
February’s deal of the month is Mayfield Heights-based Linsalata Capital Partners Inc.’s purchase of NeuroTherm Inc., a leading manufacturer of interventional pain management products. In addition to marking Linsalata’s fifth platform company acquisition in the last 13 months, the purchase of NeuroTherm is Linsalata’s first platform investment in the health care field. Congratulations to the Linsalata team on embarking into the health care sector.
Stephen Polk senses a slow return to normal for the automotive industry as the coming months and years progress.
It’s just that “normal” is going to come with a new definition.
Polk is the chairman, president and CEO of 1,400-employee R.L. Polk and Co., a provider of information and marketing solutions to the automotive industry. He has had a front row seat as General Motors and Chrysler declared bankruptcy and were forced to undergo massive internal restructuring. He’s watched as countless auto suppliers have gone bankrupt or been sold to interests outside Michigan.
But it won’t always be this way. And when things do begin to rebound, businesses all across southeast Michigan will need to function in a new, post-recession environment.
“With the energy we’ve seen so far this year, we’re starting to see a return to normal,” Polk says. “Not to the normal of five years ago but to a new kind of normal. I’m optimistic about the future. Our forecast for 2011 is 12.9 million vehicle sales in the U.S., and I’m confident we can achieve that.”
What will the new normal be? Polk says it will center heavily on every company’s ability to develop and maintain close relationships with customers. Businesses will need to give the employees at the customer interface points the tools and the sense of purpose that will allow them to build those relationships. Corporate leaders will need, more than ever, to stay in touch with customer wants and needs and the ongoing changes in the marketplace.
The coming years won’t be a time to assume. It will be a time to listen and react and to remember that the success of your company’s relationships will determine your long-term success.
“It’s about the success we’ve had in staying close to customers, understanding what their needs are as the world has changed,” Polk says. “While the OEMs, the manufacturers, represent a piece of our business, there are a number of other customer sets we’re dealing with, [such as] the agencies trying to promote products, the dealers trying to sell products. We need to align ourselves with where they are in the world today.”
Commit to your people
In any economy, if your customers are consumers, you have to keep them buying. If your customers are other businesses, you have to keep them selling.
Polk’s company falls into the latter category, so the job that he and his team will have moving forward is to support clients in the auto industry so they can keep producing products that find their way into new car models and, in turn, into consumers’ garages.
Your role as supporter is critical when your customers are going through hard times. It’s something Polk recognized early on, and as the industry emerges from the deepest part of the recession, he anticipates being able to reap the benefits of the support and loyalty his business showed.
“Our commitment was to serve those immediate customers so they could continue to do day-to-day work as they went through the whole bankruptcy phase and came out of it,” Polk says. “Some of it was on our own nickel, as we realized that during the bankruptcy proceedings, we weren’t going to get paid for some things right away. But we were able to maintain a continuity of service, and that helped our customer to continue to sell throughout the recession. There was some recognition that we were there when they needed us.”
In order to commit to your customers to that extent, you need to commit to your employees. Your employees need to be supported by your leadership if they are ever going to be able to support your customers through trying times.
And the key element of that support system is a soapbox — many of them, actually. You need to give your employees a means of being heard by you and your leadership team. If your employees on the front lines feel empowered to relay what they’re hearing from customers, if they feel like management is actually going to listen to them and use their information to make decisions, you’re going to have a staff on the front lines that will engage customers, ask questions and remain aware of their changing needs.
“A lot of it is just listening and training your staff to make sure they’re listening to what the customers’ needs are,” Polk says. “You communicate what you want, really try to build it into your meetings and various avenues of communication. Then you listen back, make sure everyone knows what is important, everything from performance evaluations to planning for the year, it all has to revolve around some kind of customer metrics.”
Use what you hear
If you’ve put your front-line people in a position where they can reach upward in the organization with ideas and information, you need to be able to take what they’re telling you and use it to better the company. Otherwise, you’re sending a negative message to your employees about the effect their work is having on the company’s overall mission.
Polk uses the engagement of his customer-level employees as an opportunity to gain a realistic picture of where his company’s customers are headed and what their needs will be in the foreseeable future, which allows he and his leadership team to begin sketching a strategic plan for the coming years.
“The first part is starting with that very open and realistic assessment of what the current reality is,” Polk says. “What your strengths, weaknesses, opportunities and threats are. You take an environmental scan of where your customers are growing and where they see the most value in the products that you deliver.
“We want to know where we can create efficiencies to help our customers and ourselves, then try to project that into the future. The real challenge is creating a living plan out of it, something that isn’t going to sit on the shelf.”
A living plan has to have some degree of flexibility. If you are going to place an emphasis on listening to customers and reacting to their needs, you can’t formulate a market strategy that is so cumbersome or rigid, you can’t react to an unexpected change.
It’s a delicate balance to stay on your core competencies but remain willing and able to pounce on an opportunity that allows you to employ those competencies in a new way. Polk says you can’t deviate from your mission as a company, but your products, services and areas of focus have to exist in a fluid environment.
“You have to start with a recognition that what you are putting out there in the market is really about how you want to conduct the business,” he says. “There are focus areas that are going to have to change, but it’s understanding the types of services you want to be at, the types of products you want to be building around in each environment. You have to communicate the fact that those areas are flexible, create an understanding with everybody in the company. That is probably the most important thing.”
To understand when you need to take advantage of an opportunity or forge a new direction, you need to be able to measure your progress against your goals. That means you need process checkpoints and a willingness to allow your team to assess where you are in relation to your goals.
“You really need to be able to understand what your checkpoints are along the way in any process or product or in any initiative that you are outlining,” Polk says. “It really needs to be a candid self-assessment of what is the reality that your customers are dealing with, the reality of how you’re delivering on expectations, then making adjustments to it.
“Sometimes you need more effort, and sometimes conditions dictate that you stop doing what you’re doing — even if it’s something that you had been committed to. The right answer is ultimately to be open and honest about the reality you’re facing.”
Make it cultural
You can engage your employees by builing avenues through which they can communicate and make sure that their input and ideas have a bearing on the decisions that will affect the future of the company. It’s all great in theory and better in practice. But over time, as the economy improves and the business environment becomes more stable, it will become easier to let some slack into the organization philosophy to which you once rigidly adhered.
The only cure for that is to make customer focus and employee empowerment a part of your company’s culture. You make that happen, in large part, by rewarding the behavior you want to see and promoting your best and most experienced employees to more influential positions.
“It all starts with building a culture that employees can appreciate and thrive in,” Polk says. “A big part of that is the importance of having a great leadership team in place. Our senior leadership team includes a variety of experience in all aspects of the automotive business. You have to fit the culture to you business, to where you want to take the business in the future. For that, you need to instill a common values system that is shared by all employees and reinforce those values by ensuring that your people are well compensated and are going to have avenues for career growth within your company.”
Ultimately, employees want a fair salary, but more than that, they want to feel like they’re working with upper management, not working for upper management.
If you build strong relationships within your organization, your team will be better able to build strong relationships with the people you serve. The often-referenced cliché about happy employees leading to happy customers — it’s a cliché for a reason. Because it’s tried-and-true.
“If employees understand your business goals and objectives and what their role is within the organization, they can effectively contribute and provide valuable insights in their areas of expertise,” Polk says. “That is why we host regular communication meetings with our staff and also communicate important business announcements in a timely manner. It helps continually engage our employees in an open, honest dialogue with management, which helps solidify our overall communication structure within the team.”
How to reach: R.L. Polk & Co., www.polk.com or (800) 464-7655
The Polk file
Education: Bachelor of science degree, Denison University, Granville, Ohio
History: Great-grandson of R.L. Polk & Co. founder Ralph Lane Polk; employed by company since 1981; president since 1990; chairman and CEO since 1994
Polk on the CEO’s role in setting the stage for the future: My role is to lead the organization and prove a foundational direction for the business. The senior leadership team we have in place at Polk is effective and dynamic, and all of them are accomplished leaders. I work very closely with them, both individually and as a team, to help further develop our business goals and objectives, develop strategic ways we can be supporting customers and representing Polk in the marketplace.
Polk on achieving success in the current business climate: It may sound cliché, but it’s the reality of things — if our customers succeed, we succeed. In our business, it truly is about the relationships and strategic partnerships we have with our customers, to help them achieve their business goals and to help them succeed in the marketplace.
Joe Gingo doesn’t remember how he stumbled upon his pattern years ago. What matters is it works.
During his more than 40 years of moving up the ranks of The Goodyear Tire & Rubber Co. and now as chairman, president and CEO of A. Schulman Inc. (Nasdaq: SHLM), the pattern he uses when it comes to tackling the challenge of a new position has withstood time.
“Every one of the moves I made, whether they were in Goodyear or when I came to Schulman, has been different and has represented its own challenge,” Gingo says. “The challenges are different, but I think how you overcome them is relatively the same. What you have to do is you have to develop a vision of the future state that you would like to have, a strategy of how to get there, clearly communicate that vision and strategy to your associates, and then empower them to execute the strategy.
“As I moved up to a bunch of different positions, each one became a little bit bigger, a little bit wider. But I always employed the same technique in how I overcame them.”
When you’re faced with challenges, you need to rely on past experiences — wins and mistakes — and let the information guide you.
When Gingo arrived at A. Schulman at the beginning of 2008, the supplier of high-performance plastic compounds and resins was being sold and it was losing money in the United States, while its overseas operations were doing well.
Here is how Gingo created a strategy that included turning around A. Schulman’s U.S. operations.
Ask and listen
Gingo’s background in manufacturing served him well when he arrived at A. Schulman. He quickly noticed the company’s U.S. focus needed to shift, and the profitable overseas operations could have the answers. His discovery came from asking, listening and observing.
“Any business or staff position I’ve ever gone into, I generally ask from the start for reviews with each of my division heads and their key people,” Gingo says. “I would ask them what their activities were. It would be a presentation on their part, but it was informal in the sense that we would talk about what they were doing, what their goals were, how they had been established.”
When you’re stepping into a new role, you really need to get a handle on how the company is being operated and where the top managers see their division or department headed. You can’t do that from behind a desk.
So when Gingo arrived at A. Schulman, he did what he’s always done. He met with the division heads and their top reports. He started in the United States and repeated the process in Europe, Mexico and Asia.
To get a complete understanding of each division or operation, you can’t rely solely on the information you gather from the team calling the shots.
“Whenever I’m in an office, no matter where it is, I make an effort to go out and introduce myself to people and just talk to them,” Gingo says. “They have a lot of good insight into what’s really going on. As a leader, you sort of get a colored picture of the situation. You really have to check the points that (management) give you with the people that are living the points.”
When you’re striking up a conversation with employees, you don’t need in-depth details. You’re mainly looking for trends in repetitive answers.
“You say hello to them, and then you say, ‘What do you like about this job?’” Gingo says. “The second question is, ‘What don’t you like about this job?’ Some people are hesitant, but some people are quite open and talkative. You begin to hear patterns. Patterns are things like several people say, ‘This is what I like.’ That gives you an overall view of what’s going on in that division or in that office.”
If employees aren’t warming up to your questions, ask them about what they do and what their day is like. Through the conversation, you should get some indication of what about their job or the company is important to them.
Remember, you’re asking, listening and observing venture is to get an overall understanding of the entire company so you can later strategize for the future. You can learn a lot from engaging people like your customers and suppliers. By asking the right questions, you can get a better indication of what your company’s strengths and weaknesses are.
“One of the ways is talking to customers, visiting customers and finding out what the customer likes about the company, what the customer doesn’t like about the company,” Gingo says. “You can talk to suppliers. Suppliers sometimes give you, ‘Well, here’s your company’s reputation. Here’s what we hear about your company.’”
Analyze the information
The ultimate goal of every business is to make a profit and to grow. Clearly, there are other aspirations to strive for, but fundamentally, that’s what every business has in common.
“The strategy has to be developed around what can you do to make yourself more profitable and what can you do to grow,” Gingo says. “Then you come back to core skills. You start out with, ‘Well, what am I good at, what do I do well?”
That question can be answered with the culmination of your information gathering and analyzing.
“You take all of those things and you say, ‘What do we do well? What is our core skill? What can we build on?’” Gingo says. “One of the ways to really do that is to look at your profitable divisions and say, ‘Well, what do they do that makes them profitable?’”
Gingo tends to look for an anomaly in all of his information and data to start his focus.
“Data that sticks out either bad or good,” he says. “You think: Why is that occurring? What’s interesting about that?”
One of Gingo’s objectives was to return A. Schulman’s U.S. operations back to profitability. So he looked at the overseas operations that were doing well and asked a logical step of questions to figure out a new strategy.
“If I can do that well, for example, in Europe and I can do that well in Mexico, why can’t I do that well in the United States?” he says. “You begin to say, ‘Who are my competitors? Are my competitors different in the United States and Mexico?’ If the answer to that question is, ‘No, they’re not,’ that’s a clue to you that, ‘Hey, maybe I can do it.’ Second, ‘Do I make the same product that I’m making in Mexico and Europe in the United States?’ If the answer is no, ‘Well, what do I have to do to make those products? What kind of equipment do I have to bring in? What kind of technical skills? What new product support do I have to get? What kind of new products do I have to introduce?’
“Fundamentally, you look around, you see what you’re doing good and then look where you’re doing bad and try to figure out why am I doing bad there.”
Engage your team
Once Gingo has a better understanding of the bigger picture, he jots down bullet points and takes them to his team for input.
You generally don’t want a large group. That’s why Gingo sits down with only his direct reports.
“If you have somebody, even in a short period of time, that you begin to believe you have some trust with, you might even see them before that meeting and say, ‘Here is what I’m thinking. What do you think about that?’”
Either way, sit down with your direct reports and present your ideas in a written format. Writing your points not only makes them clearer but will provoke more of a response.
“There’s more reaction if I have words on a page than just talking, because your message sometimes doesn’t get across,” Gingo says. “You have your bullet points up, and you say, ‘Here’s the five points. Here is what I’m thinking about.’ Then you get reaction.”
One of Gingo’s mantras, which he learned from a former chairman at Goodyear, comes into play when he’s asking for feedback.
“The first time I came into meet with him he said, ‘Joe, it’s your opinion versus my opinion. We’re going to make a deal. My opinion will usually win,’” Gingo says. “He used the word usually. ‘But your facts versus my opinion, your facts will always win.’”
The facts have to be put on the table. Even though you’ve put in time and research to understand where you think the company should be headed, you need to listen to your direct reports and be willing to admit when your proposed direction might need to be shifted.
“It’s really important when you’re having a conversation about these little bullets, you let them know, ‘Tell me I’m wrong,’” Gingo says. “‘It’s OK. If you tell me I’m wrong and you have the facts that show me I’m wrong, then I’m going to accept the facts.’”
At the same time, you need to be considerate about your employees own ideas and opinions.
“You can’t shoot the messenger,” Gingo says. “Let’s say you’re in this meeting and somebody says something that is totally wrong, you know it’s wrong. Well, if you want to keep the meeting open and communication to go on, don’t shoot them down. You don’t show them how dumb he or she was.
“You try to diffuse it without embarrassing them because everybody around that room is listening. What is very key for me is when I think somebody is just totally off-base, I do not display it at all. Somehow say, ‘Well, that’s a good thought, but have you thought about this?’ You can in essence diffuse their own argument by the questions you ask them.”
When you’re having a serious meeting to strategize about the company’s future, you need to make sure that everyone has the opportunity to speak to the bullet points you presented. And not only that they have the opportunity, but they take advantage of it.
“No matter what the group is, certain people are going to say something,” Gingo says. “What you have to worry about are the ones who don’t say anything. Literally, you don’t leave that room until everybody has had a chance for input. If somebody says, ‘Yeah, everything is OK,’ then you challenge that but not in a negative way. You say, ‘What do you like? Did I miss something? Is that part good?’”
By listening to the reactions, you should be able to gauge whether or not you’re on the right track. If you get push back from a lot of your sources, you probably want to rethink the direction you plan on heading.
The main point is you need to be open and respect other’s ideas.
Gingo knew when he arrived some of his plants were running at less than 50 percent capacity. While A. Schulman was doing decent business, it was taking it at a loss. Someone in manufacturing presented him a program — a program based on facts — that would shut eight plans. It made sense. They shut them.
Two years after Gingo took over, the company’s U.S. operations turned around by nearly $18 million and was breaking even. The company’s revenue for fiscal 2010 was $1.59 billion.
His experience combined with his time spent with employees trying to understand the company contributed to that accomplishment.
“You have to get out,” Gingo says. “You have to have your pulse on your company and what’s going on good and what’s going on bad. That’s awfully hard from a CEO position because, for one thing, you have a lot on your agenda, so you just have to find time to do it. But truthfully, one of the most boring things to me is having to sit all day in my office.”
How to reach: A. Schulman Inc., (330) 666-3751 or www.aschulman.com
The Gingo File
chairman, president and CEO
A. Schulman Inc.
Education: Bachelor’s in chemical engineering, Case Western Reserve University; J.D. University of Akron; master’s in business management, Sloan Fellowship program at Massachusetts Institute of Technology
What is the best business advice you’ve received?
It was a quote that I got in a training course, and it’s my No. 1 principle. It said, ‘The first job of a leader is to define reality. The second job of a leader is to provide guidance and support. The last job of a leader is to say thank you.’
Gingo on empowering employees: I always tell people who work directly with me, ‘Look, if I have to do your job for you, I have a tremendous cost-cutting program in mind and it doesn’t involve me.’ You really send a message. That doesn’t mean you can’t come talk to me, that doesn’t mean you can’t ask advice from me. But in the end, I’m not going to make your decision for you.
I remember some boss saying, ‘Here’s what I want you to do.’ The employee would come back and, fundamentally if you listened real close, what they said to the boss was, ‘Your plan failed, what would you like me to do next?’
They were never accountable; they always just did what the boss said. I won’t allow it.
I’ll tell people, 'In this situation, here are some of the things I’ve done in the past. But, in the end, it’s your decision. I’m not going to make this decision for you.'
Chris Blase never intended to go into the cleaning business as his career. It was something he decided to do with a couple buddies to supplement his full-time job.
Then he and his buddies lost their full-time jobs and the cleaning business suddenly became a lot more important.
“I thought it would be a pretty simple, straightforward business to start, and I found out it was a lot more difficult,” Blase says. “The biggest challenge by far was recruiting people that were motivated to do a good job. I hired and fired over 1,000 people over a five-year period.”
What followed was a time of stress, struggle and, ultimately, satisfaction as Blase learned what it took to find the right people and build a business that could thrive.?He says his first lesson was to stop trying to be all things to all people.
“I was getting to the point where it was not unusual for me to work straight through the night,” Blase says. “I was doing things like driving away from the gas station with the hose still in my car. And I walked out of my apartment one day and I hadn’t put my pants on.”
Blase was taking all comers as clients, no matter the size or location, and it was burning him out. After selling the business and working for a couple other companies that were suffering from the same problems, Blase decided to strike out on his own again. This time, however, he took a different approach.?He quit trying to do it all and focused on a specific segment, office buildings between 50,000 and 300,000 square feet.
Just as importantly, he made it a point to bring in motivated managers who could help him lead and grow his business. Buildingstars Inc. now provides cleaning services for more than 1,400 customers and took in $20 million in 2009.
“If you can find a way for your key managers to have a vested interest in the company, you’re going to get a totally different attitude toward work and just a totally different approach,” says Blase, the 48-employee franchise cleaning company’s founder and president. “Especially if you’re expanding on a large scale.”
Blase decided to get into franchising. And lest you think this story suddenly doesn’t apply to you anymore, Blase says, ‘Think again.’
“In theory, almost any business is franchiseable,” Blase says. “Companies are going to be faced with a decision where, ‘I’m happy here in St. Louis. I really don’t want to expand beyond this because I don’t want to make the investment and manage remotely.’ They should be asking the question: Would that make sense under a franchise model?”
Blase says franchising is a much more comfortable way to manage people.
“It’s like working with supporting partners versus managing employees,” Blase says.
So the next question is: How do you find people to fill these important roles of leading your franchise units?
“The key is not really looking to sell a franchise,” Blase says. “It’s more based on qualifying or recruiting a franchise owner that’s qualified. It’s not all about the initial investment. It’s more about the recruiting process. You should turn the process around and look at qualifying that person just as strong as you would when you’re bringing on a manager in your company.”
Blase says the difference in providing someone with equity and a stake in the business versus just being another employee in the company can be immense.
“I was able to attract a totally different type of individual that maybe wouldn’t normally go to work for a cleaning company,” Blase says. “It’s all about creating the right kind of management and development system for your key people.”
Put in the time
One of the first things Chris Blase does when he’s looking at a prospective franchisee is ask the person to put together a business plan.
“Have the prospective franchisee go through a very in-depth process to prove that they are competent or capable of managing that unit,” says Blase, founder and president at Buildingstars Inc. “The biggest mistake that companies make is they base the decision on that person’s ability to invest versus their ability to perform.”
The 48-employee franchise cleaning company has more than 1,700 customers and took in $20 million in 2009 revenue.?If you find that you’re not recruiting effective leaders for your business, assess your recruiting style and the questions that you’re asking.
“Am I identifying the same skills and using the same criteria that I would use in hiring a competent manager?” Blase says.
Set aside the investment aspect of franchising and focus on the basics of leadership skill and competence. Make it clear that you want to work with the person to help them grow.?At the same time, you need to stay in touch with customers to get their feedback on how your leader is doing.
“It’s important to be in touch with the perceptions of the customers and hear their positive viewpoints and negative viewpoints,” Blase says.
How to reach: Buildingstars Inc., (866) 991-3356 or www.buildingstars.com.
Doing business in China is complex. It requires more than simply a global understanding of business and a need. Rather, it’s a combination of numerous factors — economic, cultural, geographic and political. So it should come as little surprise that those who understand it best are, themselves, complex.
Dr. Robert Lawrence Kuhn is one of those complex individuals. He’s authored or edited more than 30 books, including the first biography of a living Chinese leader published on the Chinese mainland. He’s been an investment banker and led a top M&A firm. He’s provided consulting services to Fortune 100 CEOs and entrepreneurs. And he’s also a well-known television producer who created and serves as host of the popular PBS “Closer To Truth” series.
For more than 20 years, Kuhn has worked with China’s senior leaders, advising them on economic policy, technology and science, culture and media, Sino-U.S. relations, and international communications. Simply put, he’s one of the world’s foremost authorities on doing business with China.
“Every company has a China strategy whether they know it or not because of China’s impact on the world,” says Kuhn, whose past business expertise includes time as co-owner and president of The Geneva Cos., an M&A firm that represented privately owned, middle-market companies and between 1991 and 2001 initiated and closed more than 1,200 transactions and conducted thousands of corporate evaluations. In 2000, Kuhn sold The Geneva Cos. to Citigroup and subsequently became senior adviser to Citigroup Global Investment Banking.
In 2005, Kuhn wrote “The Man Who Changed China: The Life and Legacy of Jiang Zemin,” which was China’s best-selling book that year. In 2009, he penned “How China’s Leaders Think: The Inside Story of China’s Reform and What It Means for the Future,” which featured Kuhn’s discussions with more than 100 Chinese leaders and officials.
Kuhn, also founder and CEO of The Kuhn Foundation, was a keynote speaker at Ernst & Young’s Strategic Growth Forum in November 2010. After his presentation, Smart Business sat down with him to discuss what executives should know if they want to better engage with the fastest-growing economic power in the world.
Dr. Kuhn, what should American business leaders be thinking about with regard to China?
It’s the second-largest economy, approximately 30 percent of the size of the U.S. But on purchasing power parity, it’s more than half the size of the U.S. Within 20 years, China will be the largest economy in the world.
There are a lot of issues in China in terms of imbalances and needs, and that’s causing a great industrial transformation. But there are a lot of opportunities. Senior leaders tell me — the leaders of the country — that there are some things that have changed in China, reform-related, some things that have not changed, and some things that will never change. What will never change is the need for economic growth and the need to serve the people.
As you look at the issues that China has, and the imbalances, you look at certain industries that will have huge opportunities — social services, health care and education, as well as energy. For smaller companies, particularly for entrepreneurs, there are great growth opportunities in China.
China is a market that has its own characteristics, its own cultural characteristics, its own way of doing business, and the fallacy is that this is only good for big business. China is actually trying to compete more with the big businesses and people over there are looking for more entrepreneurial businesses to partner with. So for American entrepreneurs to associate with Chinese entrepreneurs as they mutually fight the big companies in both countries, that is something that’s supported by Chinese leadership. So the opportunity is definitely there.
How should CEOs and entrepreneurs begin to identify those opportunities?
This is complex. The first rule I have is that you have to like doing business in China. If it’s something that you don’t like and don’t want to do, you really shouldn’t do it. The investment is more in time and your commitment than in financial resources. You have to meet people. You have to see a diverse number of people in your area.
One way to think about it is in terms of your industrial area. Another way is geographically, if you have certain geographic areas that you explore. You will need to have introductions with leaders and potential business partners in several different cities. Then you will see diversity. You will see diversity geographically, you will see it in your industry, whatever industry you are in, and you will begin to get familiar with talking to and getting to know the right people.
Obviously, you should have good advisers — people who know the ground. There are a dozen or so major accounting firms. Of course, (Ernst & Young LLP) is my favorite. I work with them. But all the big accounting firms and consulting companies have different facilities that can be utilized. There are many different ways to go about it, but you shouldn’t be blind.
Another principle is that you should be important. Whatever you do, whoever you are going to work with, you should be important to that individual. If you are an entrepreneur, you get somebody who is going to introduce you to the mayor of a big city. Suppose you get the meeting and you say, ‘Wow, that’s terrific.’ Really, it’s not, because you are not important to that mayor if you are only a small company. They may do it as favor to whomever introduced you to them. I could get you lots of meetings with a lot of people at high levels because they’ll do me a favor. But it’s really of no benefit because where does it go from there if you’re not important? So you always try to be important to whoever you are going to meet. If it’s another company, if it’s an official, you want to be able to bring something that’s important so that they really pay attention to you on a long-term basis.
So what makes you important to them? How do you know?
You have to have advisers, so that you know what the individual is looking for and a certain size company they’re looking to partner with. It’s not something that can be answered in generalities. Rather, it has to be in the specifics of the individual company. Look at it this way: What does that company have? What is its competitive edge? How big is it? And what does it do?
If it’s a business that is generating revenue — $20 million, $100 million, $1 billion — keep in mind that some people in China are paying to get connections with companies of a certain size.
Then, you have to find the people on the other side where what your company does and what you have to offer is important to them. You have to target the content for people interested in the content, and then the size for that project that is appropriate. If you are building a factory or providing a service, you have to know what people want and what would make you important to them.
Because of my background in corporate strategy and mergers and acquisitions and now substantially in China, very quickly I could look at a company and say, ‘Here’s what you should be doing.’
There are people who can sense that, and they’re the ones you need to be working with as advisers in order to do it the right way.
Does it take a lot of self-analysis by the entrepreneur or CEO to get it right? What I mean by that is when companies think about their market strategy — the niche market they serve, the problems they solve, the solutions they bring to the table and how they can position themselves to compete here — does that translate well to how you should approach your business strategy in China?
Everything you do that’s good business in the U.S., you should do in China. Then you have other things layered on top of it. Everything is applicable because that’s just good business sense — strategy, environmental analysis, strengths, weaknesses, opportunities, threats. You’ll see where you’ve got it right and what works for you. Then in China, you have an additional factor — government.
But it’s more granular than that — it’s geographies, it’s companies that are competing, it’s the marketplace. When you are doing business in the U.S., the other companies are your competition and you analyze the competition. But in China, especially for a smaller company, most likely whoever you end up working with will want to do some sort of a partnership.
It may not be an equity joint venture; it may be licensing or joint marketing. There are a lot of structural opportunities, and with those, you are going to form relationships with other Chinese companies. Those relationships are very different than the relationships you would form in the U.S., so in addition to the analysis that you’ll do about why you should be doing in business in China, you must realize that, unless you are leading a large company, you are going to be partnering with someone.
What happens if you don’t find a good partner?
Finding that right partner is critical, and it’s your biggest decision. There are a lot of good stories and a lot of horror stories. Sometimes, people make a decision to partner with one company and give them exclusive rights to all of China. That may turn out to be a good decision. Or, it may turn out that the industry you’re involved with is a very regional industry and that decisions are made regionally.
So if your partner is a company from Guangzhou or Xiamen or Guangdong province and you want to do business down with Shanghai, forget it. The Shanghai people are not going to want to do business with a company that has a partner from Guangzhou and is considered a regional player. So you really have to be very sensitive about what you’re doing and who you’re working with before you make your decisions.
So you really need to spend a lot of time on the front end, analyzing all the factors involved, correct?
Certainly a lot of front-end work is necessary in terms of meeting people, getting familiar with the companies, governments and regions, and understanding how it works. I always advocate taking multiple paths before you begin to even think about making your decision. You should be looking at three or four different approaches — that can be different potential partners, different geographies. I like to work with different geographies, and again, it has to be something where you’re considered important.
If you work in a province, unless your company is doing $700 million or more, you’re not going to meet with senior leaders of that province. You may be working on a municipal level. It depends on who the entrepreneur is. And, there are different associations in China that promote entrepreneurship as opposed to fostering government, state-owned enterprises.
There are a lot of different ways you can do this; you’ve just got to get a feel for it before you really start to make decisions. You shouldn’t marry the first girl you date.
Talk about the importance of understanding the cultural differences. I’ve heard stories about how treating business deals the way we would in America can be a deal killer.
There are some natural business instincts that we all have, and those are all good. But in China, you can’t expect to immediately get down to business. There has to be trust and loyalty built first.
Here’s an example of what doesn’t work: One venture that I was involved with took a long time to put together. The people from the U.S. side had an old-school superiority attitude toward China. They would dictate that they were going to be coming to the city, landing at 1 p.m., expecting a meeting at 2:30 p.m., then at 6 p.m. they had a plane out. They expected that meeting to happen.
But it doesn’t matter whether you’re dealing with a government monopoly or a regional government that is powerful, doing things like that doesn’t sit well. That is really impolite in China — coming in and only expecting to have a meeting. Maybe (the potential partners) expect a dinner afterward, where you get to know each other. So that’s a little bit more of that cultural finesse that’s necessary so people feel good about building a relationship. You need to do that with several different groups as you go forward. It’s not something that once you do it, and then you do your deal, that you can forget about. It’s a commitment. And you need to keep coming back.
The most successful people in China from big companies are the ones where the CEO will come here multiple times a year. That’s the commitment you make.
China is very rigorous in terms of its matching of people that you do business with. If you are working in a city and you have the mayor of a small city — if your business is that size — the mayor will only meet with the CEO of the company. He can’t meet with the No. 2 guy. The No. 2 guy will meet with the vice mayor or someone of that stature. In China, it’s planned in a very socially appropriate way.
You mentioned trust. What does it take to build trust in a country like China, and how big a role does it really play?
It’s becoming more rule-of-law-oriented, but contracts do not mean the same thing here as they mean in the U.S. If a company doesn’t want to honor a contract for whatever reason, they can always find reasons to do so, and your choice is to sue. Suing actually has become more effective now. You can sue. It can be enforced that you can collect. Ten years ago, you couldn’t do any of that. But now you can.
That doesn’t mean it’s good to sue. You don’t want to get to that point. Still, you have to recognize that contracts are not meant to mean what they do in the U.S., and memorandums of understanding, MOU, don’t mean that either.
If you sign an MOU, we’ll say, ‘Wow, we’re going to get that deal done.’ But no, it really means that we had a nice meeting. That’s all it means. It’s a formalization that they can show to their boss, just like a call report — I met with this company, and I can report it to my superior
In that sense, there are different cultural aspects, though those differences are getting less distinct as China becomes more sophisticated. But some of those characteristics will remain a long time. Just as it takes awhile to build that trust, that trust is an entry barrier to others. If somebody else comes along and offers a tiny bit better price, if that trust is there, that won’t matter. Even that’s becoming less true in today’s China. Nonetheless, there is that benefit so that trust is something that can move a company’s ability to do business in China forward.
Everyone agrees that China is the next great superpower, but what does that really mean and what’s next in terms of the country’s evolution?
In every area of human endeavor — economics, business, finance, culture, science, technology, sports, media and military — China intends for its efforts to be among the best in the world. There isn’t a sector that they are not focusing on improving. In every industry of importance, any industry at all, China is going to be developing its companies.
Now, those companies are going to compete with each other, so there are opportunities to ally with some of those companies at whatever level you are working at, in order to help them on their rise. My favorite word in dealing with China is “alignment.” If you try to do exactly what you are doing in the U.S. just to compete and make your company as big as possible and as successful as possible, that ultimately won’t lead to true success in China. You have to think about alignment with government policy, the leaders with whom you do what is in their interest, so that you can align with that.
Sometimes, what seems to be suboptimal from an alignment point of view is actually far better. There are many situations in which getting a smaller percentage of the company will actually turn out to be a greater wealth builder for you, for your company, than if you had a higher percentage, because it incentivizes the other side. You always want to be a resource that that other company uses.
People have stereotypes. They say, ‘Well, how can you trust the Chinese?’ They come at it from the viewpoint that the Chinese were all one entity that gets up in the morning and has a conference call about how to fool the foreigners and get all of their money. That’s, of course, ludicrous. What in fact is happening is that the different Chinese companies within fiercely competitive markets will try to use you as a vehicle, not to cheat you in any way. They don’t care about that. What they care about is competing with their other mortal enemies in that industry.
So if you can help them compete with the other people in their industry, that’s what they are interested in. Even on a provincial or city basis, they compete with each other — cities within provinces, within provinces. All of that is much fiercer in China that it is in the U.S. There’s some competition between states, but nothing like there is in China. So the idea is that you want to be a resource in the right way to one of those main competitors so that they see you as a resource. Then you become valuable, maybe even more valuable than you would in the U.S. And in those situations, even if you have a smaller percentage of the deal, structured properly that can be worth a lot more.
How to reach: The Kuhn Foundation, www.closertotruth.com
Armed with the knowledge of a financial analyst, Charles Chanaratsopon knows what makes a successful business and how to manage that success. In 2004, he took that knowledge and applied it to an advantageous investment market and founded Charming Charlie, a women’s boutique and accessories store.
“I saw an opportunity, not only in an operating store but also in the realty business,” says Chanaratsopon, founder and CEO. “The capital or investment market was very frothy. So you could quickly develop shopping centers on leverage and build quickly.”
Deciding to break into the market for women’s accessories, Chanaratsopon saw an opportunity for big growth with little competition, and his plan has worked. Since 2008, Charming Charlie has been opening new stores at a furious pace, and today, it is one of the fastest-growing private companies in the country.
“The operating business had a lot of demand,” Chanaratsopon says. “A lot of customers were coming in and buying product from us. We had lines outside every day before the stores opened. People just loved the product. I wanted to figure out a way to grow even faster.”
For the last six years, that’s exactly what he has gone out and accomplished. He knew that with the right mix of employees, strategy and innovation, Charming Charlie could be big.
“From the very beginning, when we had three stores, I always thought we had the potential to be all over the country,” he says. “People always talked about how I had big aspirations and thought I was crazy, when at three stores, I thought we could be all over the country. Now we are all over the country, and I think we could be all over the globe.”
Listen to the consumer
Chanaratsopon saw an opening in the market for women’s accessories, due to a lack of stores that strictly focused on accessory needs instead of clothing. Only large department stores offered those products to women.
“Once we saw what the market looked like, we knew we had an opportunity to create a specialty store around it,” Chanaratsopon says. “We saw it as an opportunity that we could exploit, so we did.”
As Charming Charlie took off in the Houston area, Chanaratsopon knew he could grow the business quickly if he continued to offer what customers were looking for and wanted to see in the store.
“That thesis worked out and held very well for the first two or three years,” Chanaratsopon says. “As we opened stores, stores were very busy and business picked up. We went out and built another center and then another center and went out and did it again and again. As we focused on listening to the customer and building our team out, that was basically the steps for our success.
“The key thing is, you need to listen to your customers before you break into a market,” he says. “You can’t really go until you do a market feasibility or market study about what they need. Does it make sense for Charming Charlie to come; do they like the concept? We always explore to see what opportunities are out there before we do a big push. We test the different markets to see if the concept will work. Our concept is very portable, so we are able to now move quickly through the different markets.”
It’s all about making sure there is a net demand for what you sell, before you go out and start something.
“I think that is just moral hazard,” he says. “Whatever you plan, plan on not meeting it. Have a worst-case, base-case and an upside-case plan, because most of the time, it’s very unpredictable in the beginning. You have to mitigate the downside and make sure that you have contingency plans if things don’t go well in the beginning, because capital will be a constraint.
“In our first year or two as we solidified our playbook, we had a lot of key takeaways in ‘learnings’ and mistakes. So before we could go out and do a cookie-cutter approach, it took us a few years to make sure we had the right recipe for success.”
Everything starts and ends with the customer.
“My best advice is to go out and learn the customers, and make sure there is a need before you go out and build anything,” he says. “You survey your current customers and your noncustomers, and you ask them questions about what you can do better to improve. At the end of the day, our boss is the ultimate shopper. We just listen — that’s what we do. I don’t mean to make it sound so simple, but it is. We listen to what they need, and we do it, often. We spend a lot of money listening to their needs, and we try to give them what they want.
“We are not a tech company or a research group. We sell on experience and what we do is listen to our customer and make sure we deliver the best that we can, and that’s our mantra.”
Innovate and adapt
Growth in any industry naturally causes issues that must be overcome. The higher the rate of growth, the quicker a company has to adapt to that growth in order to succeed.
“You’re running at red line all the time,” Chanaratsopon says. “What I mean is when your car is running at 6,000 rpm, to get everybody used to running at that speed and understand what you’re doing is challenging. Not many companies grow this quickly, and that’s evidence that shows the percentage of retailers that can actually go out and do what we’re doing [is small].”
Charming Charlie has seen revenue grow from $9.2 million in 2006 to $51.9 million in 2009, a three-year growth rate of 463 percent. Chanaratsopon expects 2010 revenue to be around $140 million, and he realizes just how special his success has been.
“The odds are against you,” he says. “Five percent of businesses make it, and 5 percent of businesses only make it to $5 million. A very low percentage of businesses make it to a critical mass. So it’s very challenging to move at the current pace we are doing. It’s also very hard to change the mindset of your team when you’re managing three stores to now managing 100 stores. Your management team has to be open to change. When you don’t innovate and adapt to the business, I view it as binary. Either you innovate and you win, or you lose. There’s no common ground these days.”
In today’s economy, innovation and adaptation are very important to a company’s success. Chanaratsopon pointed to the examples of Linens ‘N Things and Circuit City, both of which went out of business within the last few years.
“That’s one of the great things about American capitalism,” he says. “You’ve got to be very sharp and very on, or there’s no room for you. You have to have the mindset to implement your information technology ahead of time and to plan for that is very challenging.
“You need an ability to split up what’s needed during your day-to-day part of the business. You also need to be cognizant of planning for the future and future roadblocks. You need to be able to set up radar or a systematic view for upcoming issues and be ahead of the curve. Have a cognizant view of how you spend your time between your short- and long-term strategy. Depending on what your long-term strategy is, set a blueprint to that plan and measure yourself constantly so you hold yourself accountable to your own business and personal plan.”
Hire smart, build smart
Since the founding of Charming Charlie in 2004, the company has grown to roughly 3,600 employees and has stores in 23 states. Continued success and the ability to keep opening stores in new markets, takes hiring more employees — and good ones at that. Chanaratsopon says the hardest part about getting the business up and running was finding the right people.
“This is a people business,” he says. “It’s hard finding the right team members to help you facilitate growth. There are a few things that are very challenging. No. 1 is finding the right people to help build a team. Whatever you do, be creative in the way you find people.
“We have gone through different people in the organization, and most businesses are team businesses, and without the right team, you can’t do it. You should overhire. If you think you have conviction in that your product or business will succeed, go out and get the best people that you can. Don’t be cheap on it.”
Start by focusing on attitude.
“You need to have people with good attitudes, specifically in a growing business. Attitude is half the battle. You also want people who have the same set of core values. A lot of people undermine that. When you have a small business that’s growing, you have to do many different things that you’re not accustomed to coming from a big retailer. People have to be able to adapt, and hiring on ability alone is not enough.
“My focus is trying to hire experts that are smarter than me in their specific function. I try to find people who are passionate about what they do and the business. I try to just give them the tools and support to help grow the business.”
A fast growth rate and an equally fast hire rate caused Chanaratsopon to adapt once more and create ways for his team to focus on common goals and visions.
“As you get more people, there’s a lot more people to build, as we call it, an ACA model with,” Chanaratsopon says. “That’s alignment, commitment and accountability. What we try to do now to achieve one goal is to find a team dynamic.”
In order to get his management team all on the same path and chasing after the same goal, Charming Charlie holds weekly one-on-one meetings and they build a company goal.
“That’s our road map to success or our blueprint to our business,” Chanaratsopon says. “That gets us all aligned and committed to the business, and we build accountability by having published goals that we need to achieve. It’s during these types of meetings that you need to follow up on your company goals. You need to make sure that people are executing to your goal. If I said, ‘Hey, I want to meet you in Florida.’ I’m sure you’ll get there. But if I said, ‘Hey, I want to meet you in Florida, and here’s a map.’ I’m sure you’ll get there faster. You need to have something mapped out. It may not be a perfect map, but you can change it along the way.”
One way that Chanaratsopon maps out his company’s future is by hiring ahead of time in order to acclimate new employees to the company and the goals it has set moving forward.
“Growth is challenging, but we weather through it by planning ahead,” Chanaratsopon says. “I invest in the future knowing that we are going to grow. I try to put our team players on early so that we can jell before we grow fast. A lot of people talk about what’s your capital budget plan. I talk about what’s my human capital budget plan. I need all these different team members to do this if we are going to open another 100 stores next year. I’m going to hire the overhead or infrastructure today, so we don’t have to do it last minute.”
Chanaratsopon emphasized that having fun and recognizing when employees do a good job are valuable aspects of creating a good rapport within your team. It also helps company culture to provide employees with ways to give feedback.
“Have a good feedback system,” Chanaratsopon says. “Your company is your customer. You want to survey about how your management team is doing. The same way you listen to customers, listen to employees.”
How to reach: Charming Charlie, (713) 579-1936 or www.charmingcharlie.com
The Chanaratsopon file
founder and CEO
Born: Houston, Texas
Education: I attended Loyola Marymount University in Los Angeles and received my MBA from Columbia University in New York City.
What was your first job out of college, and what did you learn from it?
I was a financial analyst at a bank, and I learned how to access money, how to put capital together, and how to understand a balance sheet and the ins and outs of financing businesses. I also learned about what makes a business work and what makes a business fail and the different metrics and how to measure against it.
If you could have a superpower, what would it be and why?
I wish I could fly. I always had dreams of flying as a kid. It felt pretty real in my dreams, so it would be pretty interesting to be able to fly around like Iron Man or Superman.
If you could invite any three people you wanted, living or not, to a dinner party, whom would you invite?
Rodger Federer, Warren Buffett and Barack Obama. I would be curious about how they think.
When one thinks of a boutique, a hospital is not usually the first thing that comes to mind; however, it’s a trend that makes sense.
A boutique hospital is small, specialized and dedicated to delivering highly personalized health care services. And, this is exactly what you will find at Coral Gables Hospital.
“A boutique-like influence is imbedded in the culture and mission of an organization and its employees,” says Jay Miranda, the CEO of Coral Gables Hospital, which is a part of Tenet Healthcare Corporation. “It’s integral for a small hospital to advance with top-notch technologies yet remain small in size, which allows it to focus on what’s most important: patients and their families.”
Smart Business spoke to Miranda about the small hospital trend, and how to maintain the culture of a family-centered service while advancing into the future.
Describe the boutique or smaller hospital trend.
Many South Florida communities, and Coral Gables in particular, have been recognized for exemplifying a particular type of style and living by creating a small town feel within a larger city. This feeling of community and identification with it creates a pleasing environment. As part of the local community, a smaller hospital strives to emulate this theme and bring this same feeling of comfort and familiarity into the health care environment.
The boutique hospital trend is growing because communities are becoming more educated and selective when it comes to their health care; they want very high quality care delivered with service excellence. It is generally smaller in size, distinguished by specialized service lines, and can offer high-quality health care within a more intimate, family-centered setting.
What are the advantages of maintaining a smaller, more family-centered health care delivery organization?
A smaller hospital often strives to put the patient first. It often has the resources to treat each patient and his or her family with respect and understanding in a family atmosphere. In a larger facility, patients and their families can get lost in a mass of ‘bricks and mortar,’ and because of the larger number of employees and organizational loopholes, it can be difficult for patients to get the special attention that they may need. With strategic planning, smaller hospitals can deliver a high degree of attention to patients, yet still maintain the same level of clinical equipment and diagnostics as a larger facility.
A smaller organization may also have more control over selecting employees that have a passion for quality service and who reflect the cultures of the community they serve. For example, at Coral Gables Hospital the majority of our staff is bilingual in English and Spanish. Our employees can relate to our diverse patients and cater to their needs. We look only for employees that exemplify the same feeling of compassion, warmth and service that our hospital is known to provide.
How can a company maintain the influence of a small, specialized company while continuing to develop and expand into the future?
Just because a hospital or ‘boutique’ organization is small in size, it is not necessarily short on resources. From a service line perspective, many smaller hospitals advance technologically and expand specialized services based on community needs. One example of this at Coral Gables Hospital is our stroke program. Many of our patients were coming to our emergency room experiencing signs and symptoms of a stroke. We knew we had to expand this level of service to meet the needs of our patients so we went through the proper processes and recruited neurologists to establish our hospital’s stroke program.
Every hospital — despite its size — must continue to upgrade its facility; continue to seek the most qualified employees that fit the organization’s cultural environment; and continue to recruit experienced physicians that can appreciate practicing family-centered medicine.
What are the challenges of running a specialized health care delivery organization and how have you overcome these challenges?
The challenges one faces today are challenges within the complex health care industry as a whole. A hospital is merely one piece of a much larger structure that is constantly evolving and changing. We have to adapt with the ever-changing industry, but as a small hospital, our No. 1 priority will always be maintaining our family atmosphere and patient-centered culture. Every day, it’s the patients who experience health care and it’s a hospital’s job to simplify the process for them and make it as comfortable as possible.
While the challenges are great, there are also many rewards, such as helping people and being a positive influence in the local community. When each staff member walks out of a hospital, he or she feels an intrinsic reward knowing that he or she has had a positive impact on a human being’s life. In patients’ most important critical, vulnerable and often anxiety-driven moments, they are helping them to feel secure that they are receiving the best care possible. This motivates them to achieve the most positive outcomes possible with each patient.
What strategic advice would you give other smaller, boutique-like companies on advancing into the future while staying true to their very consumer-oriented environment?
In a small hospital, building a family-like culture starts from the top, down through interactions between administration and management, physicians and nurses, and, most importantly, patients. This is the true challenge. Machines don’t talk to or touch people; people touch people. Purchasing equipment is something you to do to advance and support the medical professionals in their ability to deliver the best patient care, but the culture is created through the relationships fostered each day. For any boutique business, building relationships is key.
Jay Miranda is the CEO of Coral Gables Hospital, which is a part of Tenet Healthcare Corporation.
You’ve trimmed all the visible fat from your operations and improved efficiency as much as you can. Yet your bottom line still isn’t where you want it to be. So now you’re thinking about diversifying into a new market or product to improve your bottom line. Not a bad idea. Done right, diversification can be a lifesaver. Done wrong, however, it can be, at the very least, a letdown and, at the very worst, a quick path to disaster.
“Business owners diversify for many reasons, such as to gain a competitive advantage, minimize risks from concentrating too heavily on a particular market, or as a method to adapt to customers’ needs,” says Steve Williams, managing partner at HMWC CPAs & Business Advisors in Tustin. “Branching out to new lines of business, markets and suppliers may seem like a good idea, but, without a careful strategy, adequate resources and realistic expectations, it could turn out to be a bad one. We help our clients to be successful from the initial stages.”
Smart Business spoke with Williams about the best path to diversification.
What are some typical strategies for diversifying?
Diversification can take on many forms. You can take advantage of new market opportunities through introduction of a product developed through research and development. You may want to expand a product or service line to gain additional customers. Another alternative is to take on an entirely new area of business through a merger or acquisition.
Sometimes it makes sense to buy another company for economies of scale, reduced supply-line costs or other economic reasons. One type of diversification is horizontal integration, which involves expansion into the same industry and/or a similar product area. For instance, a vehicle dealership could buy another dealership.
Another type of diversification is vertical integration, in which a company moves into a different level of the supply chain. Usually each subsidiary, owned by the parent company, combines together to form a more efficient and cost-effective supply chain. For example, a manufacturing company might purchase a distributor or retailer. Some businesses use vertical integration strategies to eliminate the middleman — such as wholesalers and retailers — and keep the profits in-house.
These diversification strategies typically require significant capital expenditures. In most cases, you’ll have to pay (i.e., acquisition costs, time, operational changes and other resources) before you can reap the benefits, which may take time to materialize.
What are some easier, less-costly strategies?
There are several less-expensive methods to enhance your product lines and service offerings and provide the best value for your customers while maximizing your business’s growth over time. Some strategies to consider:
- Ramp up sales. If you don’t have an outside sales team, consider hiring salespeople (or contracting with independent sales reps) to prospect for customers. Your distribution channels, which are in contact with a diverse customer base, can also be instrumental in finding new business.
- Add the extras. You can compete nationally and globally by offering value-added services to your customers. For instance, don’t just sell a product; offer a complete package that includes warranties, preventive maintenance contracts, educational and training offerings, and any other services that will make the product more attractive.
- Know your customer. Get to know your customers’ businesses and the changes they’re making, such as an increase in production capacity or new packaging for a product. Offer to support their new business goals by customizing products, services and other offerings to fit their needs. This will convey your value to them, help develop a new business opportunity and keep your customers satisfied.
- Seek smaller fish. Many companies rely heavily on large-volume customers who make up a significant portion of their sales base. Consider diversifying your customer base to lessen the impact should a major customer decide to depart.
Is a business plan needed?
Adding successful products or services, for example, isn’t as simple as just buying equipment and finding building space. Develop a business plan that encompasses goals, production, human resources, financial and marketing issues. Goals, for example, may include increasing sales, gaining a broader product line, and having greater control over quality and delivery. Make sure that the plan identifies important details, such as capital costs, incurring additional debt, time commitment to manage the new product line, etc. Calculate the potential profitability by projecting an income statement that considers all the additional revenue and expense (both fixed and variable costs) factors. Consider how your projected balance sheet and income statement might affect relationships with banks or investors. These are just some of the issues that should be addressed in your business plan.
What about ‘barriers to entry’?
When you expand into new markets, there are ‘barriers to entry,’ which can include capital investment costs, branding, government regulations, taxes and permits, unions, heavily entrenched competitors and a wide array of other factors. For example, when you look to get into new markets you’ll likely be up against many established relationships, so you’ll need to identify solid reasons for customers to jump ship.
Barriers to entry should be fully analyzed, especially the financial factors, before committing to a diversification plan. Consider your company’s strengths (such as a highly skilled work force or any specialized equipment you can bring to the table) as well as its weaknesses (i.e., poor cash flow at the moment). Be objective, honest and realistic in this assessment.
Steve Williams, CPA, is the managing partner of HMWC CPAs & Business Advisors (www.hmwccpa.com) in Tustin. He also heads the firm’s Healthcare Practice and has served healthcare clients for more than 25 years. He can be reached at (714) 505-9000.