Delegation is the essence of leadership. It is the soul of management and the empowerment of the organization. Those who will not delegate cannot lead, cannot manage and cannot help grow an organization through the empowerment of its most important resources and assets.
All leaders and organizations achieve their goals and their visions through their people. The strength of an organization comes from the diversity, not the conformity, of its skills and capabilities. An organization is a team of individuals with unique gifts, backgrounds, personalities and strengths. The key is to realize that all of these individuals, with all of their unique strengths, are using their energy working toward the same goal of completing a project, improving the bottom line or growing the organization.
Who to choose
The first key to delegating is choosing the right people to whom any authority or responsibilities will be delegated. There is such a wide spectrum of people ranging from the outspoken to the reserved, from extroverts to introverts, from technicians and administrators to marketing and sales to management, from experienced to relatively newer staff that no cookie-cutter approach could ever be effective or successful. But certain character traits surface in successful examples of delegated authority.
The right attitude is one of the most important aspects to be considered. To determine someone’s attitude, their beliefs must be determined. Beliefs govern behaviors and behaviors determine what someone becomes — attitudes are begotten from beliefs.
Attitude is also a function of character, personality and core values. You can’t readily or easily guide a rude, dishonest, abrasive, amoral, insensitive, bigoted, lazy or narcissistic person to be polite, virtuous, genial, principled, thoughtful, tolerant, energetic or selfless. This is an assessment that has to be personal and delicate. If you fall short today, you might learn, grow and become the superstar of tomorrow.
For some people, good character and simple human decency are not in their current nature and may never be. But many people are self-starters and self-motivated, flexible and adaptable, they do take responsibility and admit mistakes, are energetic and resourceful, are goal-oriented and achievement-driven.
It’s this kind of person to whom we must ultimately delegate authority. So, the people you recruit and select today will largely determine the culture of an organization, the service an organization renders to the public, and the reputation and success the organization will enjoy or endure in the future.
Once you’ve identified the correct person to delegate responsibilities and authority to, you can’t just throw tasks at them. You must use one-on-one mentoring, group learning, team dynamics and on-the-job experience to guide and shape the capabilities of the person to make sure the task will be successfully completed. The proper budget, technologies and facilitating and enabling support must also be provided.
Effective communication is imperative in a delegation situation. The delegator should not dictate the communication, rather, the delegator should inquire, question, guide and support the chosen person to clarify and enhance mutual understandings, agreements and accomplishments.
Just as the delegator should not dictate communication with those to whom they delegate tasks, they should also not lapse in communication. Delegation is not an abdication. The person to whom something is delegated takes on some of the responsibility and accountability of the task, but the delegator must take responsibility for making the decision — be it good or bad — of whom to transfer power to.
You must always remember: Everyone who has responsibility is always responsible to someone else. And, you are all working together to empower your organization or realize a goal. There is no greater joy than seeing your company soar on the wings of people you have empowered by trusting and delegating responsibilities and authority to.
We end as we begin. Delegation is the essence of leadership. It is the soul of management and the empowerment of the organization.
Thomas M. Nies is the founder and CEO of Cincom Systems Inc. Since its founding in 1968, Cincom has matured into one of the largest international, independent software companies in the world. Cincom’s client base spans communications, financial services, education, government, manufacturing, retail, healthcare and insurance. To learn more about Nies, go to http://tomnies.cincom.com/about/
I just had a great weekend in Texas. The sun was shining, the kids were laughing and many memories were formed. My boys played some baseball and, yes, as the good dad, I had camera in hand and clicked away with their every movement.
Even though I am not that artistic, I was confident I got some great candid shots. A few hours later, as I was running a bunch of errands, I decided to go to CVS and get the pictures developed. I walked over to the machine with my CD and a big grin on my face and started to view my pictures. I felt really good as I viewed one great picture after another.
I viewed all the pictures and chose the ones I wanted with a few different sizes and then hit the finish button. As the machine is printing out my code, a message on the machine mysteriously appears and reads, “We have made you a special gift.” OK, so I lose all my senses of where I am, and as I am feeling a little special I actually start talking to myself. Haven’t we all done that?
As I gain my composure the screen says, “Here is your special gift.” I look, and basically they took my 30 pictures and put them in a beautiful book. The book is formatted very nicely, and the machine lets me review the book, page by page, and also will allow me the opportunity to customize the book. Although it was great — beautiful and very thoughtful (thanks CVS) — I didn’t purchase the book for $19.99.
I then had another CD and wanted to print five more pictures. I went through the same process, and, again, after I was finished the machine said, “We have made you a special gift.” I was like, ‘I know — another book — and thanks but no thanks!’ Much to my surprise, that wasn’t the case at all. Apparently CVS has more than one special gift that they will offer customers. This special gift was a collage — they took the five pictures and placed them on an 8-by-10 picture, made them different sizes and actually had one of them as a background for all of the other pictures. It was really nice and cost $6.99. I paused for maybe three seconds and, with a smile on my face, hit the purchase button. I actually couldn’t wait to get a frame and show the kids.
So please join me up in the clouds — in fact, way up in the clouds — and relate this story and what CVS did and how that might relate to your business.
In my mind, CVS was amazing, and as a customer, it made me feel very special. Ask yourself these questions:
- Did the business give me a few choices?
- Did the business show me the finished product?
- Did the business make it easy for me to buy?
For me, the answer to those three questions were all yes. This forced me to really think about my business, what changes we need to make to ensure we can teach every member of our team to create more revenue as we are creating revenue.
In fact, think about a few more things CVS did:
- It used technology.
- It was creating more revenue for itself in a very creative way — not only did the store try and sell me a book and collage (the special gifts), I also bought a frame for the collage in the store.
- All of this was done in a very quick manner.
So I ask you, shouldn’t every business be more like CVS? I look forward to hearing from you and seeing how your business is like CVS.
Merrill Dubrow is president and CEO of Dallas-based M/A/R/C Research, one of the top 25 market research companies in the U.S. Merrill is a sought-after speaker and has been writing a blog for more than four years. He can be reached at email@example.com or at (972) 983-0416.
Louis D. Astorino and Louis P. Astorino solve problems within their business differently, but that makes them a good father and son team. Astorino, an architecture and engineering firm, has survived the down economy and found ways to expand its business by finding solutions to the problems.
“The last two years have been a challenge because of the economic crisis,” says Louis D. Astorino, chairman and CEO. “Overcoming that and trying to keep the organization together has been extremely challenging.”
Despite the economic roadblock, Astorino has continued to be recognized as one of the best firms in the area.
“We learned to work smarter and more efficiently with less staff even though we’re continuing to grow,” says Louis P. Astorino, senior principal. With more than 100 employees and revenue in excess of $33 million in 2010, Astorino keeps looking for opportunities to grow.
Smart Business spoke to the Astorinos about how they expand their business.
Look for growth.
Louis P. — You need to go where the growth areas are. You also need to have key people in those areas. It’s important that you find the right growth market and have a leader there that you can depend on and trust in their abilities to help you grow that market. You have to be cautious when you are expanding in terms of where you are looking to expand and who you are bringing on staff.
Louis D. — You’ve got to make sure your opportunities are solid, especially when you are moving out of your local area, and you’ve got to be cautious. Secondly, internally you’ve got to make sure you’ve got the right culture. You need people behind you who are looking to help you grow and to make your company a better company. One of the things you have to do is look at the risks and make sure your risks are as minimal as can be. And if you are taking a risk, make sure it’s for a long-term advantage.
It takes a lot of strategic thinking to find all the business opportunities that are available. You have to have a mentality to take a good look at everything because it could be a good business possibility.
Know your clients.
Louis P. — You have to find clients that want a good service and want the best value that can help their business. If you can find a way to help their business and your goals are aligned, that’s the best way to deliver the best product.
Louis D. — You’ve got to sit down and have extensive discussions with your clients. You’ve got to find out what’s on their minds. Find out what’s important to them rather than what’s important to us. Don’t use intuition. Find out what’s important and then solve that problem. We use something called the blue door theory. A client will have ideas for a building and say, ‘Do this, this and this.’ But the designer will be thinking in the back of his mind, ‘That’s not going to work. So I’m not going to draw that, I’m going to draw what I think works.’ If you go back to a client without his idea drawn and say, ‘Here are some other ideas.’ You’re basically slapping him in the face saying, ‘You don’t know what you’re talking about.’ Our expression is if a client wants a blue door, you better sure as hell draw a blue door. That’s the only way of showing him that the red door, the yellow door, or the green door is better.
Louis D. — Some periods of time schools are strong. Some periods of time housing is strong. Some periods of time sports are strong, but then it dies off. The way we deal with it is by participating in all of those market segments. You have to remain flexible. There’s more than one way to do something and you have to be flexible in your thinking.
Louis P. — You have to also be aware of trends in the marketplace. Be prepared to respond when new opportunities present themselves. You have to do enough research to know where the market is going and where the money is going to be spent. As the markets fluctuate you have to be able to react to that specific market segment.
HOW TO REACH: Astorino, (412) 765-1700 or www.astorino.com
Stan Hasselbusch always looks for the next way to keep his company growing and expanding its presence. L.B. Foster Co., a manufacturer, fabricator and distributor of products and services for the rail, construction, energy and utility markets, acquired Portec Rail Products last year as a way to improve its product line. Part of the company’s strategic growth plan is to grow through acquisition and Hasselbusch made good on that strategic goal.
“We looked at a half-dozen different companies,” says Hasselbusch, president and CEO. “We looked at companies that were primarily related to the rail industry, and we weren’t going to be foolish and we did a lot of due diligence. We were looking for something that was going to make a sizeable contribution to our organization.”
Portec Rail Products was a company that fit all those requirements. A $100 million company also based in Pittsburgh, Portec is one of L.B. Foster’s biggest acquisitions. Hasselbusch knew it was going to take a lot of hard work and time to integrate the organization, but it would help continue the growth of a company that saw revenue of $475 million in 2010. Here’s how he did it.
Plan your acquisition
Acquisitions can’t be taken lightly. They can allow your company to grow, offer new products or reach new customers. They are a crucial step in growth, and they need to be given the time and effort to be done right.
“You have to really do the due diligence and have patience,” Hasselbusch says. “Having patience is something that if you’re going to have a growth strategy, you’re just not going to grow for the sake of growing, you’ve got to have patience.”
Planning out the various stages of an acquisition will help you navigate through what is often a very long and difficult process.
“Plan for what you need to do,” he says. “Make sure you have a very strong strategic plan. It’s got to have how you’re going to go through an acquisition, your diligence plan, your integration plan and your plan going forward. There’s a lot of planning and then it’s following through with strong execution.”
Hasselbusch and his team referenced the plan and kept patient while looking at companies that were going to benefit them and fit well within their organization.
“We’re not going to step out of our wheelhouse,” he says. “We’re not going to go out and do something that’s not familiar to us. We are basically in three products. About 45 percent of our business is in rail, about 45 percent of our business is in construction products and about 7 or 8 percent is in tubular products. But really our focus is in the rail side of the business and in the construction side of the business. So when we go looking for acquisitions and growth in our company, that’s what we’re looking for.”
You want to look for companies that will be a good compliment to your existing business and help continue your growth.
“Our strategic objective in the railroad side of our business is to strive to become a premier distributor of products beneath the wheel,” he says. “[Portec] had a couple of products that really played into that very well. They had a large presence in what’s called friction management. Friction management is lubrication of the wheels and the rail to minimize friction and slows down the wear of the wheel and the rail. That’s an up-and-coming market.”
Having an understanding of your market is a big part of the planning process, as well. Hasselbusch knew what part of the rail market they wanted to expand upon, and Portec was the company that offered those products.
“You need to know the market you’re going to serve,” Hasselbusch says. “You have to understand the markets that you serve if you’re going to be successful in the first place. You need to be able to know what you can do internally from an organic standpoint or what needs to be looked at outside of your current organizational set up.”
Portec fit the plans Hasselbusch and the company had to move forward with for growth in the rail industry.
“Looking at Portec, it really looked fine,” he says. “We liked the size of it. We liked the fact that it does have a global presence or at least is a springboard to get into the global market. They do a lot in the service sector, which compliments what we’re doing. They have good research and development and engineering, which compliment some of our efforts very well. They have products that we can use in our bag of tricks of rail products and we liked their people.”
Finding a company that matches up with your own is the most important part of an acquisition. The company you acquire has to be complimentary in the things they offer or make.
“You have to understand how they are going to compliment or strengthen your business,” he says. “You want to look for companies that would be accretive. You’re going to look around a lot. You have to ask yourself how the product will complement what you’re currently doing.”
It is also critical to find a company that has a similar culture. If cultures are too different, the acquisition will be extremely hard to make work.
“You have to look at the people,” Hasselbusch says. “You have to look at the people so when you buy an organization it’s going to come in and you can grow together. You can’t lose focus. One of the big things we are seeing during this integration is how the cultures match up.”
Communicate growth plans
Communication plays a big role in growth and especially in mergers and acquisitions. Hasselbusch constantly communicates the company’s plans for growth to his employees.
“We’ve always … expressed to them the importance to grow,” he says. “One of the areas of our strategic plan to grow is to grow through acquisition. They know that that’s always going on, that we’re looking at people. [Our employees] know that we are always looking for ways to grow the company. You have to communicate this all the time.”
During an acquisition process there are a lot of moving parts and a lot of variables that constantly need to be addressed. Communicating often is the only way to keep things going smoothly.
“You have to over communicate,” he says. “You have to make sure everyone in the company is aware of what’s going on.”
L.B. Foster has town hall meetings twice a year where everyone in the company gathers to hear what’s been going on in the organization. At the end of those meetings they have a Q&A session where employees can comment on what things have been happening throughout the year.
Integrating two companies together takes a lot of hard work and dedication. The process can’t be rushed. Nothing good will come out of an integration if it is forced or rushed.
“It’s very time consuming and you have to be prepared for that,” Hasselbusch says. “There’s just a lot of work to do and it doesn’t stop. It doesn’t stop in the diligence phase, it doesn’t stop as you go forward and you close and it doesn’t stop through the integration. It really steps up and you’ve got the deal down and you take a deep breath and it’s not over — it’s just starting.”
Patience and communication are extremely important while trying to successfully bring two companies together.
“Communicate on both sides with your company and theirs,” he says. “There’s a lot of hard work and a lot of patience that’s going to be required and you can’t over communicate. You’ve got to be prepared for that. If you’re going to do it and do it right, you’ve got to put the time in and it’s got to be quality time. It’s not going to start by itself.”
Nothing is more important than communicating and getting to know the company you have brought in.
“When you bring in a company that’s 20 percent of the size of your current organization, it can be a challenge,” he says. “You have to stress communication. You can’t overdo communication. You have to take the time and put forth the effort to get to know them. That’s the only way you can do it.
“You have to communicate with them and try to understand them and where they are coming from. You can’t spend enough time with the troops. You have to be out with them and press the flesh. That’s the ultimate communication. You have to do that a lot.”
Integrate your teams
When it comes time to integrate the newly acquired company into your own, you have to be willing to take time and plan how you want to make the process work.
“There’s got to be a very detailed integration process,” Hasselbusch says. “You’ve got to be able to nail that. If you lose that, you’re going to take a long time catching up.”
For Hasselbusch and his senior executive group, the first step of integration was visiting several of Portec’s facilities around the country and internationally to get a feel for the operations and people.
“It was very important for me and my senior executive group to spend some time visiting each one of those facilities because at the end of the day, it’s about the people,” he says. “You can have ideas and you can have approaches and you can have plans, but it’s about the people.”
Throughout all the hard work and planning that goes into an acquisition, you also have to create buy-in for the future of the two companies.
“The integration has been a lot of hard work, but there’s been a lot of buy-in on both sides and there’s been a lot of working together,” he says. “There are certain compromises that you have to deal with, and it’s a give-and-take process throughout. That’s the big thing — bringing people together for a common cause.”
Another aspect of compromising during an acquisition is finding the best practices between the two companies. It is very easy for the acquiring company to keep doing things how it always has. However, that won’t improve your company and it won’t help the integration process if you don’t consider all avenues.
“We’ve spent a lot of time trying to better understand their operations at their plants,” he says. “We really looked at this and we’ve told the people at Portec that we’re looking for best practices. It’s not our way. We’re going to look at you, we’re going to meet you, we’re going to try to understand you and we’re going to try to meld the best practices.”
It takes full understanding of each company in order to decide what practices can be improved and what practices to keep. It takes careful consideration on both sides.
“We’ve not gone into this integration like it’s our way or the highway. It’s looking at it from both sides. They do some things in engineering and research and development that we can benefit from. We do some things in operations that they can benefit from. You’ve got to dig in. You’ve got to really understand the cultures, you’ve got get to know the people, and better understand the products.”
The willingness and ability to keep your mind open and listen to what everyone involved in the process has to say will help you make the integration a better and quicker success. “You’ve got to go in there with your eyes wide open,” Hasselbusch says. “You have to open up and listen. We’re not saying that our way is the right way. Sometimes you’ll agree and sometimes you’ll disagree and all you can do is reach a middle ground. At the end of the day, at some point you’ve got to come on board and you have to move forward and you have to move forward together.”
HOW TO REACH: L.B. Foster Co., (412) 928-3505 or www.lbfoster.com
The Hasselbusch File
President and CEO
L.B. Foster Co.
Born: Cedar Rapids, Iowa
Education: Attended the University of Dubuque in Iowa. He went to work for L.B. Foster straight out of school. He started in 1972, and it’s the only place he has ever worked as a professional.
What was your very first job, and what did you learn from it?
I delivered newspapers. I took away from that experience how important people are.
Who is someone you admire in business?
Warren Buffett. I really like his approach. It’s a very wholesome and down to earth approach and he has been very successful. I find him very interesting.
If you could invite any three people to dinner, who would they be?
Babe Ruth, John Kennedy and Michael Jordan. My wife would have to be there, as well.
If your day is off to a bad start, how do you turn it around?
I go in my office, take a deep breath and start all over again. We are really fortunate here. There is a light attitude throughout and there is a lot of humor in the office. There are always going to be good and bad days and you just have to be tolerant and try to work through them...
It wasn’t too long ago that we had to eliminate the use of offensive language from the workplace, bringing an end to the old way of doing business. But we missed a certain four-letter word when we cleaned up our office talk. Can't is just as vile to the business environment as any other four-letter word. It facilitates resistance against change and hurts our ability to receive the gift that change brings – the opportunity to reevaluate and improve our business models.
Training teams to get past can't allows businesses to respond quickly to the ever-changing markets in which we operate.
The first step is to create a culture that embraces change. When faced with a challenge, the tendency is to first focus on what can’t be done when we should instead be seeing what is possible. Change is a chance to take a deeper look at your business, your customers and your environment to make sure the business model meets the needs of your target market.
For example, when Hurricane Ike and the recession dealt a double blow to my Houston-based yacht sales company, we updated our sales strategy. We created customer support programming that put us ahead of our competitors, who had little success with hurricane clearance sales in a devastated community.
Change provides the opportunity to make competitive gains by being the first to create new approaches and develop innovative solutions. Today’s most successful organizations are driven by people who understand the value of change and thrive off of it, instead of responding to it with can’t.
In order to overcome the destructive can’t attitude, you must challenge it. Can't holds us back because it focuses us on all of the problems instead of the solutions, which prevents creative thinking. Being blind since birth, I’ve heard this word a lot in my life. Whenever I was told I couldn't do something, I learned to ask, “Why not?” In doing so, I eventually found that I could succeed if I stripped away the menacing roadblock of can’t.
This approach has proven effective for solving problems in both business and personal pursuits. Every time employees or team members say “can’t,” respond with “why not?” Plow the path to creative and innovative solutions by throwing out objections and turning the focus to how.
Most importantly, eliminate the distraction of can’t by implementing a creative thought process and motivating your team to understand and believe that all things are possible. This is done by facilitating discussions and challenging your team to tear down convention and remove preconceived thoughts to enable fresh, creative ideas to flow.
When evaluating the current business model, ask your team to define the problems and come up with potential solutions. Challenge each team member to write five answers on sticky notes and place them all on a board. Then do it again. After a few iterations, all preconceived solutions are on the table and you can move to new creative ground. The result will be a new business model backed by the synergy and fresh thinking that has emerged within the group.
When you eliminate the negativity of can’t among your team, you set the stage for a brighter, more productive future for your organization.
Vince Morvillo is founder of Sea Lake Yacht Sales and an entrepreneur and motivational speaker based in Houston. He was the first blind person in history to win a national sailing championship. To contact Vince, visit www.VinceMorvillo.com.
In the early ’90s, Neil Hoynes and some college buddies wanted to tour the country following the Grateful Dead. To do it, they needed money, and that discussion sparked what would become Ripple Junction, a manufacturer and licensee of apparel.
“We discussed different options to pay for it like veggie burritos, grilled cheese and then T-shirts came up,” says Hoynes, founder and president. “We figured that T-shirts would be best, and we did the math on it, and the goal was to sell 15 T-shirts at every show to pay our way around for the summer.”
They sold all 80 shirts they brought to that first show, and from there, the company took off. Today, Ripple Junction is a leader in its industry and employs more than 40 people.
Smart Business spoke to Hoynes about how he grew Ripple Junction from the ground up.
How do you find the niche that your company serves best?
You’ve got to be able to adapt, and you’ve got to be able to adjust quickly to things that aren’t working and change them. If you don’t feel like you’ve found your niche, you’ve got to keep trying new things.
Also, finding something that generates cash flow while you’re looking for that niche is really important. That cash will let you live on for another day so you can find that one thing that you’re going to do and do well.
What challenges did you face growing from an entrepreneurial business to the next level?
The first thing is policies. When you’re a small company, you don’t have a lot of them. You try to balance policies and procedures without having too many of them because you don’t want to become bureaucratic. You also need to have standard operating procedures for everybody who’s doing any repetitive task or any sort of job. That’s the kind of stuff you have to get ironed out, and you’ve got to have a way to do it that everybody knows how to do.
It’s also determining specializations. As you grow, you’re going to need to start hiring specific individuals to take ownership of what you identify as a key success. If it’s a key success factor, there has to be somebody that owns it so they can really drive it forward. When somebody’s in charge of something and it’s not a natural part of their job, if it’s a small thing, that’s OK. If it’s a big thing and it’s crucial to your company’s success, you’ve got to have somebody that owns that and can drive on that.
How do you plan and hire for growth?
As you grow you start seeing the gaps that just kind of naturally present themselves. You start realizing that this isn’t happening, this isn’t getting done and you ask yourself, ‘Can we get this done with the people we have?’ When you’re growing, the answer is usually no.
You have to go out and hire somebody to do that specific thing. The quicker you can identify that gap and fill it, the better off you are.
More important than the timing is making sure it’s the right person. We’ve done the snap-hire before and it almost never works out. It’s better to be thorough and find the right person who is comfortable in your environment and also you’re comfortable with them. You spend more time upfront, but then a year later, you’re not filling the position again.
How do you find new hires and areas where your company can grow?
You have to hire people that round you out. You don’t want a bunch of people that have the same skill sets. I’m always trying to hire people that can shore up my short-comings or shore up someone else’s short-comings. You have to look to find that person that will complement other skill sets.
That’s my big thing is trying to chart the strategy of where we’re going looking at what our business is right now and then identifying how we are going to keep growing.
You look at who you’re selling to now and then look at that customer and find out what their needs are. Find out if there is an opportunity for a new product that nobody’s selling them or if there’s a new way to do things. Then try to put the pieces together and create a great product for them.
HOW TO REACH: Ripple Junction, (513) 559-3900 or www.ripplejunction.com
While every business appreciates referral sales, many seem to overlook the usefulness of referral data. Referrals are easier to close and more profitable than leads from most other sources. But more important, referral sales are the most accurate test of whether or not your customers believe that your offering works.
If you think about it, prospects are created primarily by circumstance, not by marketing. When a bee stings your child at the playground, you don’t need Madison Avenue to point out the problem. You immediately want a solution. You know that there are all kinds of pain relievers out there, but this isn’t a muscle cramp or a migraine. In this situation, you need a tailored response.
When you get to the pharmacy, you see a host of products on the shelf — everything from generic ibuprofen to something called, let’s say, Auntie Beth’s Children’s Strength All Natural Bee Sting Be Gone. I’m guessing you’ll go with the product that seems to be designed with exactly this situation and your sobbing toddler in mind. Whichever product you choose, from the business’s point of view what is most important isn’t the fact that you bought its product — it’s what happens next.
Let’s assume you go with Auntie Beth’s bee sting product. You swiftly apply the treatment. Within minutes, you and your child will make a discovery about the product that will stick with you much longer. It will become part of the story you tell the ice cream man when you wander back to the park, that you share with the rest of the family when you get home, that you tell your officemates when they ask about your weekend, and that you pass on to other parents at playgroup.
Auntie Beth’s just took the marketplace equivalent of a final exam, and whether it passes depends on one thing: Does your retelling of the bee sting story create new customers?
If the product was a dud, it gets a zero. If it worked, it becomes a hero. When an offering effectively solves a problem — when it becomes a hero — customers tell others in ways that drive referral sales.
Some businesspeople might think they already know that their products work because they have tested them in the lab. The problem with this thinking is that lab tests are constructed to determine whether the product offering does what the company intends for it to do, not what the customer wants it to do. Furthermore, controlled tests are lousy at discovering whether customer enthusiasm about the offering will be high enough to generate referral business.
You might then ask, ‘What about sales data?’ For one, nonreferral, first-time sales don’t speak to the effectiveness of your offering but rather the effectiveness of your advertising, positioning, distribution, promotions and pricing. Although repeat sales send back a more useful signal — whether customers perceive your offering to be good enough, at least some of the time — only referral sales can tell you whether your offering is really taking off.
For most businesses, referral data should be treated as the most important operating metric. Referral business is the ultimate truth-teller — and sometimes the truth it tells is a harsh one. If your referrals aren’t strong, you need to go back to work on the offering, your marketing or both. But given proper attention, referral data can point the way toward a rapidly growing market share. Once you’re able to secure referrals from referrals, you’re well on your way to market dominance for your offering.
Jerry McLaughlin is CEO of Branders.com, the world’s largest and lowest-priced online promotional products company. Contact Jerry at JMcLaughlin@branders.com.
Jay Chaudhry knows from experience that there are many considerations involved with bringing a new product or service to market. How you handle matters such as timing can be the difference between success and failure.
“That’s the toughest thing,” says Chaudhry, founder and CEO of Zscaler Inc. “If we had a crystal ball to figure that out, we’d be off doing very good.”
Though he doesn’t have a crystal ball, Chaudhry has managed to grow Zscaler – his sixth company ? from a startup cloud security provider to 120 employees in four short years. Yet, timing is just one obstacle in capitalizing on new market opportunity.
Smart Business spoke with Chaudhry about how business leaders can set their companies up for growth in new markets by overcoming these initial challenges.
Strike before the iron is hot.
The most important thing I look for in a new opportunity is: ‘Is the timing right?’ The right timing and the right area are the most important stops. Many times people start too early. It’s a little market. It never evolves and that’s tough. Then they get stuck and are swimming upstream. But that’s few. I think the majority of people end up entering in the market that’s too late. They are already in Times Squares with the product. If you enter a market when the market is already that hot, by the time you are able to deliver a reasonable product, it’s a little bit too late. If you look at all the products I’ve done … I look for a new market opportunity. The market is still not there, but feels like it’s going to happen in the next 12 to 24 months.
Go with your gut.
If we are too early in a new market, we could be starving because the market doesn’t take off. If we are a little too late, then it becomes a ‘me too.’ So first, I do my homework. I work in adjacent markets quite often and not in totally different markets, so there’s a feel for the markets … I’d not be accurate if I told you its all spreadsheet driven numbers and that stuff. It’s not.
Is there an easy way to quantify timing? Not really. A lot of gut feel goes into it. I need to listen from the market and from the customers, what and how they take it. But at the same time, I also keep in mind [the] saying, ‘Don’t listen to your customers; otherwise, you’ll never innovate.’
Don’t fear mistakes.
We push people to push the envelope and try to new things and make mistakes. I often say if you don’t make any mistakes, you are playing too safe. If you are playing too safe, you are never going to achieve anything significant.
We are the only company that doesn’t require any hardware and software. It’s because we gave people enough time and freedom, and didn’t really kill any of the ideas to say this is no good. In the process, I realized that some of these things may not work, but that’s part of trying and learning new stuff. You don’t want to kill those ideas up front as if you know the answer, because you don’t.
Look ahead, and behind
There’s a cost or there’s a benefit of getting ahead of the market and becoming significantly large. If you throw too much money and add too many people, are you creating indigestion? Because it’s not just hiring. How do you really get those people trained to become productive members of the company? If you are a little slow, you’re behind, your sale got ahead, your support function is behind, your other stuff is behind, then your customers suffer. So it’s constantly watching and monitoring and adjusting to make sure you’re putting enough resources in investments.
We’re pretty pleased with where we are, but we’re executing the way [businessman] Andrew Grove said, ‘Only the paranoid will survive.’ As confident, comfortable and less paranoid it makes you it as a leader … they are shooting at you from behind. How do increase the gap between you and the second party out there so they can’t shoot at you, so you are out of the shooting range?
How to reach: Zscaler Inc., (408) 533-0288 or www.zscaler.com
Steve Plochocki knew that now was the time to strike.
It was February 2009, and the federal government had just passed the American Recovery and Reinvestment Act. The stimulus bill allotted $60 billion to assist health care businesses in improving technology.
Plochocki is the CEO of Quality Systems Inc., which provides software and electronic medical records to doctors and hospitals. With billions in stimulus money about to be injected into the health care industry, the market was about to grow like never before. And Plochocki had to position his company to take advantage of the new business, and do it before the stimulus bill became active this past January.
“The stimulus bill was great news for us, but we needed to create an operating model that we would be able to deliver on, and have products certified, in time for January 2011,” Plochocki says. “It was something I was going to be doing over time anyway, but the beauty of the stimulus bill was that it shifted everything into overdrive and forced us to get those pieces in place very quickly. I used it as a catalyst to get where we needed to get to anyway, but get there faster.”
The solution for Plochocki was to reorganize the company into four separate operating sections, each with its own leader and each responsible for developing new products that could help Quality Systems and its 1,560 nationwide employees capitalize on the five-year stimulus window, which lasts through the end of 2015.
“We needed to create that type of organizational structure, our president became our COO, we put marketing and sales plans in place, we expanded our sales organization by about 40 percent, and we formed implementation and training teams. We were able to put all of the support and mechanisms in place for what we believe is going to be a very strong five year run for us.”
To better serve the company’s various markets, Plochocki and his leadership team divided Quality Systems into an ambulatory unit, which focuses on developing technology for small facilities, clinics and physicians; a practice solutions division, which focuses on revenue cycle management, billing and collections; the inpatient solutions unit, which focuses on hospitals; and a dental unit.
“All these units had been operating in a fashion of togetherness, but none of them were getting the right type of attention,” Plochocki says. “This setup enables us to create a leadership head at the helm of each one, with their own sales, their own marketing, their own development capabilities, their own initiatives for certification and their own financial analysis support teams.”
But before he could move forward with the new organizational setup, Plochocki needed to show his people the field they would be playing on. He needed his managers to understand the stimulus bill, the bill’s goals and where the industry could be at the end of the stimulus window.
“We put the plans together in a collaborative process,” he says. “Through that effort, we were able to realize the importance of having that division element in our organization. Once we understood with greater clarity exactly how the stimulus was going to work, what the government’s desires were and where they wanted to see the software medical records sector in five years, we brought our leadership team together and laid everything out on the board.”
Plochocki and his leadership team had a series of strategy sessions to help everyone in the company gain a better picture of how the stimulus bill would alter the health care technology market, and the ways in which the company needed to change in order to answer the needs of the new market.
“You lay out the market, you lay out the circumstantial opportunities, you take a look at what you have and where you want to be,” he says. “It was a typical planning process where we had all the different functionalities of the company represented.”
Plochocki also wanted to foster ongoing collaboration among the business units. Each unit was to have its own specialization, but in the interest of improving customer prospects for all units, Plochocki wanted everyone in touch with each other, regardless of their area of specialization.
“Every one of these product lines can be provided as a group to the customer,” he says. “So each one of these business units has a core team of their own specialists, and then we have a hundred salespeople who sell all the products.
“An example would be, if I am a specialist selling hospital software to a hospital, and they have an interest in revenue cycle management, then I can bring in the revenue cycle management specialist to work with me on creating a packaged opportunity for them. And there is money in it for both of us. I put incentives in place to make sure that if they can build or expand an order, they go do that.”
Build a winning team
To implement a system with business units that are independent yet collaborative, you need people who can realize the vision of what you are trying to create.
Plochocki, who played quarterback in high school, says it’s not much different from sports: The team with the best players is usually the team that wins.
“Finding the right people for your organization is always going to be a very key feature,” he says. “Everybody in our organization knows that when I go to fill leadership positions, one of the most important things to me is chemistry. To me, chemistry means having people who are good listeners, who have a general bent toward collegiality, they are more homed in on encouraging processes rather than discouraging processes, and they have an overall positive attitude. If you can bring the right group of people together with the right skill sets affixed to those personality traits, you’ll find that you can move processes along rather quickly.”
It’s all about learning the people that you’re working with, and learning what motivates them to do the best possible work, and using that knowledge to play to everyone’s individual strength.
“When I was playing in high school, the coach told me, ‘As the quarterback, you have to try to use everybody around you to win the game,’” Plochocki says. “You have to use the players around you to win the game. My coach wasn’t going to judge me on my statistics. He was going to judge me on wins and losses. It’s the same way running a business, which is why you have to get to know the people around you and try to bring out the very best in them.”
The button you push with a highly motivated employee is not the same as with an employee who might have the talent or skills to be great, but lacks the confidence.
“You fuel the energy of the first one and build the confidence – and your confidence in them – with the second one,” Plochocki says.
But in order to grow your people as professionals, you also need to have their trust. You build trust through all of the principles of good management, like honesty and integrity. But you also build it through engagement.
As Plochocki and his leadership team were going through the process of restructuring the company, they also made it a point to find opportunities to engage employees in shaping the company’s future. If employees feel like they’ve had a hand in building the new version of your company, they’re much more likely to buy in and remain on board for the long haul.
“It usually takes a few meetings for them to realize that you are genuine about it,” he says. “But after a while, if you stay consistent in your messages, the ground troops will start to feel a bit more empowered, and they’ll feel like management really does want to know what they have to say.”
One of the Plochocki’s first projects upon taking the CEO job was to set up a president’s advisory council, which serves as a vehicle for employees throughout the company to offer input and suggestions to upper management.
“One of the very first things we did was change our logo,” he says. “We were going to change our logo and get a new lobby sign. As part of our new organization, we were going to give our company a whole new look and feel. So instead of going out and hiring some marketing or consulting company, I opened up the opportunity to the organization. I said, ‘You folks have built this company, you know this company better than anyone. I want your suggestions and recommendations as to what our logo should look like, the way our company name should be displayed, and when we decide a winner, there will be a cash prize affixed to it.’”
Plochocki says the response to the logo initiative was substantial, and he accomplished exactly what he had set out to do. Employees throughout the organization were involved with management on a project.
“We had so many entries,” he says. “People became so engaged in trying set the new company look and logo, we had more things coming in than we could even deal with. I had to expand the committee to review everything, and the logo we have today was designed by a software developer in the company. You develop another flavor for your organization when you behave that way.”
Moving forward, Plochocki says Quality Systems is well-positioned. The company began the stimulus window in January with all of its products certified to comply with the stimulus bill, with all four sectors in growth mode, 2010 revenue of $292 million (up from $245 million the year before), and a well-stocked pipeline for new business.
“We have a fixed time to benefit from this opportunity, which means we have to get things going on the front end of it,” he says. “Necessity is the mother of invention, but in this case I’d say necessity is the mother of urgency.”
From there, the challenge for Plochocki and his team is to maintain that sense of urgency over the five-year stimulus window and beyond. It can be easy to spend months preparing for a big shift in your business, and once you’ve lined everything up, to ease your foot off the accelerator, thinking you’ve got it all under control.
However, Plochocki says you need to remain vigilant and keep hammering away on the principles that made your plan a success in the first place.
“We just got the pieces in place at the tail end of 2010,” he says. “We got our products certified in October, and now we’re on to the execution phase. If you are a buyer of software, you know who is certified. So now we’re into pure blocking and tackling execution mode. All the preparation we did to get ready for this game took place over the prior 18 months, but we still have to keep focused on the task at hand.”
How to reach: Quality Systems Inc., www.qsii.com or (949) 255-2600
The Plochocki file
Education: Bachelor’s degree, journalism, Wayne State University; MBA, Central Michigan University
First job: I grew up on the lower East side of Detroit where a lot of different ethnic groups lived, and my first job was as a paperboy. I delivered the Detroit Free Press, the Detroit News, along with the Polish, Russian and Italian papers. Whenever I’d deliver a Free Press or Detroit News, I’d ask them if they’d want an ethnic paper. So I kind of took a paper route and turned it into a diversified paper route, which is not unlike what I’ve done here.
What is the best business lesson you’ve learned?
Early in my career, I had built up the best sales territories in the company I was working at. Then my boss approached me and asked me if I wanted to change territories. I was comfortable where I was, so I asked him why I’d want to do that. He told me that if I want to grow and explore everything that I can do, I need to step out of my comfort zone.
You should welcome opportunities to step out of your comfort zone. It will give you the greatest growth potential that you can imagine.
What traits or skills are essential for a business leader?
You have to have a genuine regard and liking for people. That was one of the questions I had at a panel once. A guy asked me if CEOs don’t like people. I told him that it’s not that CEOs don’t like people, it’s that a large percent don’t want to have to do with people. The harder thing to do is to continue to reach out. Maybe it’s the salesman in me, but if I have a difficult person, instead of getting rid of the situation, I try to make the person come around. I try to find out what I am missing, or what the person doesn’t understand.
Dan Benning gets that fitness is hard. That’s why, when he took over as president of 24 Hour Fitness’ North Division in 2007, he wanted to help his company make it even easier.
While 24 Hour Fitness’ mission of “easy and accessible fitness” was simple, Benning saw that it wasn’t always translating into the fitness experience of customers and employees.
Potential customers and fitness club members often had to jump through hoops to find, join and use the facilities. His noticed some of the 10,000 employees at the clubs struggled with a lack of leadership and were either scrambling to solve problems for customers or passing off responsibility with little accountability. To grow the company, he wanted to take the mission and really put it to work at his 200 clubs.
“From a vision, it’s not really complicated,” says Benning. “It’s ‘Fitness is hard enough. Let’s make it easy for people coming into fitness to make it easy to join and make it easy once they have joined; once they have joined, make it easy for them to use our clubs, and then for our team members, make it easy to run so they can spend time with our members and their team members.’”
Simplify the sale
The first problem was, when it came to buying gym memberships, consumers were conditioned from past experience to anticipate a hard sell, run-around pricing games and an overall negative experience. Making fitness easier and more accessible started with changing the negative perceptions consumers had about fitness clubs in general.
“They hated the sales process,” Benning says. “They hated it because it was a lot like a timeshare. It was a lot like buying a used car 20 years ago.”
Because much of customer’s alienation stemmed from the pricing games involved with buying a membership, Benning decided to getting rid of price negotiation completely. The clubs would offer one fixed membership price for everyone.
“Buying a gym membership five years ago – and even today with most of our competitors – is not a pleasant experience … We’re very focused that from a pricing standpoint, you know what the price is,” he says. “There is no high-low, ‘Let me go talk to the manager’ type stuff. We think we offer a great value. We go out with that great value and we give that to the consumer.”
If you don’t have transparency in the information you give customers, it’s hard for them to trust that they’re getting a fair deal. So Benning also spearheaded improvements to the 24 Hour Fitness USA Inc. website to include actual membership prices and better information about club locations. The company also became the first fitness club to let consumers sign up for membership online or by using a mobile phone.
Making these kinds of customer-centric improvement in the sales process benefits customers as well as employees. When customers are armed with more knowledge upfront, they are more empowered coming into the sale. They can spend less time weeding through information and more time getting answers to their questions. Pricing transparency also takes pressure off employees to sell, so they can really focus on helping customers, who are again, more receptive to the information they’re receiving in the first place.
In other words, when you make it easier for customers to buy your product, you make it easier to sell.
“The makeup of our sales force – it’s not about the art of the sell – it’s about interacting with friendly people who are in tune and focused on helping you achieve your fitness goals versus what’s in it for them,” Benning says.
“[It’s] taking away those barriers so that the consumer that already has enough trepidation about walking through the door…and take what the consumer is expecting, which is a high-pressure sale, and turning that into a ‘Here’s how we can help you,’ and introducing them to the folks in our clubs, and showing them all the things that they are going to be able to do to help them achieve their goals. That’s been a difference-maker for us.”
Listen to your customers
Making the customer experience easier starts with the sales process, but once customers buy your product or service, it’s the experience they have after that that determines the reputation and success of your business.
To find out how to improve the customer experience – making the clubs easier and more convenient for members to use – Benning decided to go straight to the source.
In addition to using customer surveys, 24 Hour Fitness became the first company in its industry to start measuring customer satisfaction scores through J.D. Power and Associates. Benning and his senior managers also dedicate most of their time to visiting clubs in person to get feedback from employees and members.
“The difference between today and four years ago in our clubs – there’s a significant difference in the way that we’re focused on the member experience,” Benning says.
He says the answers to a more successful company can be found in the clubs by talking to employees and customers.
“That’s where we find out what we’re doing that’s working and what we’re doing that’s not working. Some folks have the principle of you call the plays as the officer from the tower and you hope it gets run. We believe that you find the answers out in the clubs, you make some decisions and then you spend time with your team members and your customers, listening to their questions, concerns, getting them to understand why you’ve made changes. You’ll often find that you’ll tweak what you do based upon members’ and team members’ feedback.”
When it comes to making changes to improve your business for customers and employees, Benning quotes Will Ferrell’s fictional race car driver, Ricky Bobby in saying, ‘If you’re not first, you’re last.’
“As soon as you start waiting for someone else to do something, you’re going to lose,” he says. “That’s in everything. That’s in business. That’s what’s going on in your office or your club today. Don’t wait for someone else to talk to that member. Don’t wait for some other company to beat you to the punch because you’re worried about will it work or not. It’s ‘Figure it out, involve a bunch of people and be first, because if you’re not first, you’re last.’”
For example, when club feedback indicated that members found it a hassle to carry membership entry cards, 24 Hour Fitness implemented cardless check-in using fingerprint IDs. As the first fitness chain to do so, it has already enrolled around 2.5 million members in the program.
“Our members love it,” Benning says. “Our team members love it because it allows them to focus on the member versus the actual card checking experience. So the actual interaction of team members with our members has gone up based upon that process.”
The more opportunities you have to get customer feedback, the more data you have to use for continuous improvement.
“Our members know that if there is something going on that they really like, they’ll serve it up,” Benning says. “If there’s something going on that they don’t like, they’ll serve it up and we’re quick to act on what those are. We have ways for the consumer to communicate with us if they have an issue, and that is whether they just want to recognize a team member in a club or whether they want to say ‘Hey, this is going on in this club and I don’t like it.’ We have it built so that the consumer can do that via the phone. They can do that through our website. And as it relates to how we react to that – there’s all a mechanism around that that makes sure the consumer’s issue is handled, good or bad.”
Empower your team
Because most of the clubs are open 24 hours, keeping the clubs clean, equipment working and customers satisfied is an around-the-clock job for 24 Hour Fitness employees. Benning recognized that the new vision couldn’t just apply to customers; he needed to make fitness easier for employees too.
“I’m a big believer if you make our clubs easier to run for our team members, they can spend more time with their team members and with their members versus trying to figure stuff out. We’ve taken a lot of the junk out of running the clubs and work hard to make it easier through systems, processes and technology, so that our team members can do what we want them to do, which is serve those who serve our members and serve their members,” Benning says.
For instance, having different leaders in different parts of the club was confusing because it fostered a pass-the-buck mentality among employees in aligning goals and handing issues. So Benning first added one leader in each club to have final say and authority over decisions.
Secondly, he increased opportunities for employees to learn about the organization, implementing new programs such as 24 Hour Fitness University and management interest days to show employees potential career paths, and increase internal transparency about how the company operates.
“Transparency is sort of a cornerstone to trust,” Benning says. “We do everything in our power to make sure our team understands what our vision is, where we are trying to take the organization, what role we play in it, and if they want to play a bigger role, to have an opportunity to do that.”
Building that trust is the key to getting honest feedback from employees. The value in connecting with your employees on a personal level doesn’t just come from sharing your vision firsthand, but opening up communication so you can find out what they need and provide them with the resources and support need to be successful.
“What people forget is when you’re 20 years old and you see the president, or regional vice president, or division president, or CEO or whoever walks into their store, there’s a lot of scary mystery associated with that person … and that gets in the way of creating a great experience for our team members,” Benning says. “I spend a lot of time connecting with team members, getting to know them, getting them to understand that I’m a real person, and I need their help and that they’re important.
“Sometimes people look at that as taboo, that you shouldn’t get to know people past a business standpoint. I think that’s a bunch of malarkey. I believe that the more connected you are to your team, the better off that you’ll be.”
Not surprisingly, as the company’s employee engagement scores have improved, its J.D. Power customer satisfaction scores have also gone up. In spite of a recession, Benning has led 24 Hour Fitness to grow in workouts, improve in membership and consistently increase its satisfaction scores of members and team members, even achieving an A-plus rating from the Better Business Bureau.
“We are the first club chain to achieve that rating,” he says. “We’re proud of it. Our team members are proud of it, and it goes back to if you focus on the consumer, you focus on your team members and you have a simple strategy to deliver on your service promise, great things can happen.
“You have to have a plan. You’ve got to share it, and you’ve got to share it a lot. And you do that in lots of different ways. You do that in big meetings. You do that in town hall forums. You do it in small team meetings. You do it on phone calls. You do it in your written communication, but that communication of what you are trying to do is clear. Whatever you communicate, tie it back to what your vision and plan is so people understand that it’s not a poster on the wall, but it’s the way that you operate.”
How to reach: 24 Hour Fitness, (800) 224-0240, www.24hourfitness.com
The Benning File
North division president
24 Hour Fitness USA Inc.
Born: Des Plaines, Ill.
What was your first job?
I’m a high school graduate. My dad died when I was a junior in high school and my brother was in college, so I worked through high school and then after high school to help put my brother through college. At the same time, I figured I’d get him through college and then I would go to school. The circumstances came where I had the opportunity to be a police officer, but I decided, based upon my grandmother not wanting me to go do that … I started selling on the sales floor.
I was a sales counselor at Circuit City and I was making a lot of money and the rest is kind of history. I did 20 or so jobs at Circuit City. I’d call myself self-educated because I was fortunate, from everything to being at the right place at the right time to I believe I work harder than anybody else. I may not be able to always outthink you, but I promise I will outwork you.
What do you do to regroup on a tough day?
I love sports, and that’s why I think I have the best job in the world, because I get paid to work out and I get paid to help others lead a healthy lifestyle and workout. So I do. It is an amazing stress reliever and to relax and do something positive for yourself. I’d also tell you that I love team sports. I was fortunate enough to make some time to coach my son’s high school football team this year. It was an unbelievable experience. I will play you in anything. I like the team the best, but I’ll play you in tiddlywinks. I’ll play you in flag football, but I will play with you and compete with you on anything that you want to compete on.