Subir Chowdhury has gained a reputation as one of the world’s foremost experts on Six Sigma, the business management process pioneered by Motorola in the 1980s, which is aimed at promoting operational efficiency and minimizing errors. In the years he has spent traveling the world coaching companies on the principles of Six Sigma, he has discovered a need for a concept that is centered on the basics of Six Sigma, but can be adopted by virtually any business.
With that in mind, Chowdhury wrote “The Power of LEO — The Revolutionary Process For Achieving Extraordinary Results,” published by McGraw-Hill earlier this year.
Smart Business spoke with Chowdhury about the concept of LEO and why it matters in the business world.
Can you briefly explain the concept of LEO as explained in the book?
When I talk about it, it’s ‘listen, enrich, optimize.’ The ‘listen’ portion is about seeking input from all the stakeholders in the organization, from suppliers to employees to customers. If you think about what someone like Steve Jobs did, he understood what the consumer wants. If the consumer is a rich guy or a poor person, it doesn’t matter. He truly tried to understand their voice, and when I talk about listen, much of the time senior leadership doesn't take the time to listen. Not just with external customers, I'm also talking about internal customers.
The second thing I talk about is enrich. The way I explain enrich is in a very simplistic form. Any single day, you, myself, anybody, we go to the mirror and look at ourselves, and how many of us asks ourselves what we can do better? That mindset is what I call a continuous improvement mindset. Having that mindset is so critical as to how you can enrich anything you are doing. How you can enrich communities, how you can enrich your family life, your work life, or enrich your customers. It’s having that mindset of enriching. So when you have that mindset, you create new ideas for improvement and new solutions to problems using simple techniques. For example, when you go to the hospital setting, all the nurses, all the physicians, if they don’t have that mindset of enriching, it will lead to medical errors. Because then, people are just going there for the sake of the job. They don’t have the mindset of enrichment.
The third thing is optimize. That is where you come up with the best solution and correct all shortcomings in it. Looking at the example of the iPhone, Steve Jobs realized that the customers may only have the product for two or three years but within those two to three years, he wanted to ensure that customers would have a great experience. With a couple of years, the new versions of products would come out, though within that several year window, he wanted to optimize the customer experience.
What drove you to write this book?
I had been invited in by a lot of companies, after five or six years of applying Six Sigma around the world, and getting the question of why they’re not getting results from Six Sigma.
They invited me because I’m one of the leading authorities on Six Sigma, so when I visited some of these companies, I posed some questions to CEO-level people about what set of tools within Six Sigma they have gained education. They have maybe learned about 20 or 30 percent of the tools. So they go through the training but do not have the overall education.
That was the time when it kind of hit me that every organization is different. Every organization has different requirements. You are teaching the tools that they don’t have a direct education for. People were gravitating to Six Sigma because it was popular without really understanding the subject matter, without understanding the tools and how they are applied. I tried to come up with something centered on what the customer really needs, what their needs are and how they fit into the culture. Every organization has different culture.
I took all the Six Sigma tools and put them in a big office, along with all the different tools of other management strategies. I was trying to find out what is fundamental for all those tools? What it boiled down to was basically three things: listen, enrich and optimize. Everything basically comes back to those three things.
How to reach: Subir Chowdhury, www.asiusa.com
Picture your company a year from now. Then five years. Then ten. What will your organization look like? Will it be structured the way it needs to be for success? A clear understanding of how the work needs to be done and how communication needs to flow creates the foundation for good work force planning and the creation of strong decision-making structures.
Often the organic growth of a company naturally creates a structure that works. But the unchecked morphing of departments and hiring practices can also result in disjointed responsibilities within positions or departments. When these stress points become obvious and painful, someone inevitably shouts, “We need to reorganize!” But knee-jerk reactions can cause drastic shocks to the organization. By slowing down and thoughtfully evaluating the following structural elements, you’ll make valuable improvements methodically and without drama.
Who’s in charge?
People often take the structure of an organization for granted — until things start falling apart. Before breakdowns happen, take a critical look at the authority relationships in the hierarchy.
- Do they support the best communication and decision-making?
- Does the chain of command support local autonomy?
- Do distant authority figures hinder productivity?
For example, if the team at an oil drilling site needs to make a quick decision in the field, communicating with and waiting for approval from a distant boss can jeopardize operations. But if the chain of command supports them, the team members can proceed based on their expertise and knowledge of the local conditions without a loss of productivity. In this decentralized organizational design, the team structure and a clear understanding of who is whose boss can create a very diverse group of job responsibilities.
In departments like corporate accounting, a centralized chain of command connects experts and those doing similar functions regardless of the geographic location of the individuals or the lines of business they support, providing standardization and efficiencies.
Too flat vs. too tall
Another potential pitfall in a company’s structure is how flat or how tall the hierarchy has become. A clear visualization of your structure can help you spot overtaxed managers or single-branch “stacked” levels of organizational chart boxes with too little distribution of management.
In a “flat” organization, potential issues include:
- Too many direct reports for managers, often of very diverse work responsibilities, which stretch the managers too thin.
- Not enough opportunities for career development and upward mobility.
- Too wide a gulf between the planning and communication requirements of each level in the organization.
On the flip side, a too-tall a hierarchy can waste the flow of communication or decision-making with authority that is sliced too thin — think of bureaucratic organizations that have lots of red tape.
Analyze the flow
If you look at the organizational chart on both a macro and a micro level, you can evaluate whether the structure of the organization as a whole and the structure for each position make sense for the right flow of information and style of decision-making.
- Are there isolated positions duplicated throughout the organization without bosses that can understand their needs — such as software help desk people reporting to nontechnical managers — just so that they can be stationed in the departments they support?
- If decisions are made along the lines of client or product divisions, are teams grouped in reporting relationships due to their geographic location just so that a local boss can watch them work?
Visualization illuminates problems
Making work force data visible and easy to understand facilitates structural discussions. An organizational chart that doesn’t match the reality of decision-making helps pinpoint the choke points in your chain of command. Your organizational chart should not look like modern art that you have to squint at to interpret. Instead, it should be a realistic depiction of the authority structure.
By visualizing how the company is structured and evaluating its current design compared to the ideal, you can pinpoint barriers to positive interactions between departments and positions. Then you are ready to design your organization for a successful future.
Lois Melbourne is co-founder and CEO of Aquire, a work force planning and analytics solutions company based in Irving, Texas. Visit www.aquire.com for more information.
Steve Giacin has felt the pressure that comes with being the president of a business during a time of economic recession. But he doesn’t try to compare his challenges to those of the people he has had to lay off from Kaiser Electric Inc.
He doesn’t think you should either.
“One thing leaders say that they shouldn’t say to people is, ‘This is a lot harder on me than it is on you,’” says Giacin, president at the 150-employee electrical contractor. “I’ve heard people say that, and I don’t agree with it. Leadership isn’t a some time thing, it’s an all the time thing. If that’s what the task is and that’s part of leadership, you need to rise to the task. You have too many people relying on you.”
Giacin has been forced to let employees go who had put in more than 10 years with the company and he’s issued salary reductions for those who remained. He says the key to getting through these difficult decisions is decisiveness.
“It is important to try to look like you know what you’re doing in that situation,” Giacin says.
One way you can be effective at that is to keep cutbacks from being spread out over multiple occasions.
“If I saw a cut or two here and a month later, a cut or two there, it would make me wonder if the leadership of the company really had a handle on what was coming at us,” Giacin says. “When you make those types of cuts, if you guess, err to making another cut rather than having to cut someone else a month later because something changed.”
Giacin says his feelings have changed in this area based on the rising uncertainty that has plagued the economy of late.
“Before we were in the heart of how bad this situation is currently, the last thing you wanted to do was cut too much, too quick,” Giacin says. “I don’t think you can do that anymore. If your company is right-sized for what you’re faced with and you see that you have to reduce that, you better do your homework and you better be looking out further than a month or two when you’re dealing with people’s livelihoods and families.
“I think the status quo is over for all of us. I don’t think it exists anymore. If you’re not on your game every day, you’ll be eaten alive. You won’t be around very long. I believe everybody in the company has that same sense of vision. They are all looking at me for what direction we are headed and how we are going to get there.”
Facing that kind of pressure, Giacin says it’s incumbent upon any leader to take time for himself to gather his thoughts and think them over before making a decision.
“It’s impossible to do when you’re here in the fire every day,” Giacin says. “All leaders need some avenue to be able to step back. You’re never completely away from it. But like I said, you can step back and not be in the office. You can truly reflect on some things and evaluate what’s working and not working moving forward.”
Once you’ve taken that time to pause, report back to your people on what you’ve come up with.
“That’s part of the constant communication you have to have,” Giacin says. “When you have a company our size, it’s a very close, family-type culture. When you let someone go and there is no communication, I don’t feel that’s appropriate. We typically get everyone together and discuss where we’re at and what led to this decision and how we’re going forward with what we have in front of us and who is doing what going forward so everybody knows.”
How to reach: Kaiser Electric Inc., (636) 305-1515 or www.kaiserelectric.com
Stay in front
If you work for Steve Giacin, you better not be lazy about returning phone calls or e-mails. It’s a big no-no in the eyes of the president of Kaiser Electric Inc., particularly in tough times such as these.
“With all the mediums that we have at our disposal these days, I consider that to be unacceptable,” says Giacin, who leads the 150-employee electrical contractor. “Don’t let the day go by without returning a phone call or sending a reply to their e-mail. Just to say, I did receive your request and I’m working on it. I either have the answer and here it is or I’m looking into the situation and I will be back in touch with you tomorrow.”
Giacin expects a lot from his employees, but he expects even more when his company is going through a difficult economy like it is now.
“Everyone in our company is working harder than they ever have,” Giacin says. “We have fewer resources to cover the things we need to cover on a daily basis. So you have to maintain that consistency and have constant communication through the ranks of your company.”
And that has to start at the top with Giacin.
“I can’t have a lack of responsiveness to my employees or to our customers,” Giacin says. “That has to be transparent to them. If that means my work day and my work hours have to be expanded to cover that, that’s what has to happen.”
There are better ways to grow sales than to merely throw money at the problem, whether that means more money spent on advertising, a bigger sales force or beefed-up expenditures in other business areas. A close look at your pricing policies, your customer relationships and your sales team’s needs and capabilities can reveal ways to grow revenues even when times are tough.
Look at pricing first
Start with pricing and get over the belief that you can’t raise prices without dampening sales. By keeping prices flat or using price discounts to try to keep demand or close sales, you create two problems. First, you destroy the value of your brand and the integrity of your pricing. Second, you train customers to negotiate harder to get every last penny, which ultimately destroys your customer relationships by undermining customers’ trust in your company.
Instead, look at pricing as a strategic tool that must be managed and based on value, market demand, product lifecycle and cost structure. An important first step is to review your pricing policies with a sharp eye, including looking at any flexibility the sales force has to set price. If your sales team has authority over pricing decisions, put an end to that authority quickly.
After this review, you’ll hopefully feel better prepared to bite the bullet and raise prices — especially if it’s been more than a year since you last took a price increase. After all, your customers are seeing increases at the gas tank and the grocery store almost on a weekly basis. They won’t be overly surprised that you’re raising your prices as well. And customers usually aren’t as price-sensitive as a pure economic analysis would suggest. At the end of the day, your customers expect you to take increases from time to time to cover your own cost increases.
And while you’re focusing on price, review the pricing discounts you offer and evaluate their effect on revenue; modifications may add to your bottom line without driving away customers.
Boost customer focus and service
By letting your customers know about your plans to enhance customer focus at the same time you implement a pricing increase, you’ll dampen any complaints about the price hike. As you consider ways to boost customer focus and service, consider all customer touch points. By scheduling a tour of customers’ facilities, for example, you’ll communicate that you care about your customer’s business as much as your own.
Other ways to enhance customer service include the following:
- Improve product and service delivery processes so it’s easy to do business with you.
- Provide value-added services that are hard for competitors to duplicate.
- Review order fulfillment and delivery statistics and improve the metrics. Even if you’re at 97 percent on time and complete, you’re leaving 3 percent on the table.
- Evaluate customer complaints and identify ways to eliminate concerns and problem areas.
Enhanced customer service will earn your company not just more loyal customers but also a larger customer base as these highly satisfied customers refer contacts to your company.
Challenge your sales team
There’s a lot you can do to strengthen your sales force and increase the business it generates. Start by setting stretch goals. For example, if you normally set 2 to 3 percent as the target for increased sales, up the target to 4 to 5 percent — or whatever figure you have at least a 50 percent chance of meeting. Your people will rise to the occasion.
And don’t underestimate the impact of training on qualifying and closing, time management and sales management. Your sales team will not just appreciate their new skills. The team will become a loyal, well-tuned engine driving your company’s growth.
Tony Arnold is founder and principal of Upfront Management, a St. Louis-based management and executive consulting firm. Utilizing C-suite experience as a CEO and executive experience in early-stage start-up and Fortune 100 companies, he brings unique skills, insights and perspective to enable clients to improve business performance. Arnold can be reached at (314) 825-9525 or firstname.lastname@example.org.
Business executives searching for a corporate home in the Dallas-Fort Worth area should take a close look at Frisco, especially if they do business in one of the sectors that Frisco’s economic development team deems a good fit: technology, finance, energy or recreation.
“We’ve developed seven industry targets,” said Jim Gandy, president of the Frisco Economic Development Corp. “These include companies that are in computers and electronics, medical devices, telecommunications, software and media, financial services, entertainment and recreation, and renewable energy. Those are the types of companies we’re most interested in attracting to Frisco.”
Gandy said his group has comprehensively analyzed Frisco’s economy and demographics, and those seven sectors make the most sense in regard to the types of companies to attract to the city.
“Over the years, we’ve done numerous studies, sort of an internal audit of Frisco’s strengths and opportunities,” he said. “And when you look at all the things Frisco has to offer, from location to low cost of doing business to the availability of a knowledgeable, skilled work force, these types of companies match up really well.”
Gandy emphasized Frisco’s demographics as the key asset it provides companies doing business in the North Dallas suburb.
“Our average age is 34, and over 50 percent of our population over the age of 25 has at least a bachelor’s degree,” he said. “So our citenzry is very young and very well-educated. It’s a readily available, skilled work force.”
And that pool of workers is growing quickly: The U.S. Census Bureau ranked Frisco as the fastest-growing city in the United States for the period 2000-2009. And on top of that, Frisco has abundant undeveloped land for companies looking to build new headquarters.
“In the 2010 census, our population was about 117,000,” he said. “In 2000, it was 33,714. So from 2000 to 2010, we grew by 247 percent. And we have 72 square miles of land, of which 54 percent is still raw land, so there’s a lot of development that will occur in Frisco over the next 20 years.”
Finally, Gandy says location is always a key factor in deciding where to base a business, and Frisco offers advantages there, as well.
“It always floats to the top that we’re talking about our location,” he said. “Our ease of proximity to or from anywhere in the Dallas-Fort Worth Metroplex, and our proximity to DFW Airport. Also, being located in the Central Time Zone gives you a lot of conveniences for traveling to the East Coast or West Coast, which in most cases can be a day trip — out for a meeting and back in one day.”
How to reach: Frisco Economic Development Corp., (972) 292-5000 or www.friscoedc.com
Counties: Collin and Denton
Population: 116,989 (2010 Census)
Land area: 72 square miles
Government system: Council-Manager
Mayor: Maher Maso
City Manager: George Purefoy
The future is all about digital, and the companies that will come out on top will have the most outstanding user experiences, Amy Buckner Chowdhry says.
Buckner Chowdhry is co-founder and CEO of AnswerLab, a consulting firm that helps many of the world’s leading brands build user experiences across digital platforms.
“We wanted to offer the whole tool kit — that no matter what a client’s business question is when they’re developing a digital product, we wanted to be able to offer the right research methodology to answer it,” Buckner Chowdhry says.
Founded in 2004, the firm of 30 has worked with clients such as Google, Facebook, Microsoft and Honda.
Smart Business sat down with Buckner Chowdhry at the 2011 Ernst & Young Strategic Growth Forum to discuss how AnswerLab works to create and implement user experiences that meet the needs of both company and customer.
How is bringing in an outside firm beneficial to the development process?
In your average organization, you don’t have one person who’s that decision-maker. You have multiple people, and what happens is that the competing needs of each of the groups can result in an experience that gets watered down.
It’s incredible to see how easy the user experience within an organization can go south because there are too many stakeholders — there are too many people involved in making the decision around what gets launched.
When you bring in an outside, independent and objective research firm to help in your process, you can get back to what the voice of the customer is.
How do you engage the customer to identify their needs?
It typically involves recruiting them into a research environment where we’re engaging with them one-on-one or in a group setting.
We can start with a database or a list that our client has of their customers. We reach out to them for a particular research study and maybe do focus groups with them. We may visit them in their homes to watch how they use a product, bring them into the lab environment and watch them behind the mirror as they try to use a product or bring them in to do something on a page to track their eyes to see what they’re looking at on the page. Do they notice the fad or do they not notice the fad?
What process do you have to turn a good idea into a tangible product or service?
The day to day is about getting these projects out the door to clients. That’s what most of our teams focus on. But we need to also be innovative in taking what our services and research are and taking them to the next level. We go through a rigorous strategic planning process where our entire management team meets quarterly.
We do a SWOT [strengths, weaknesses, opportunities, threats] analysis, and we sit down and look at what are the opportunities here. When a new product will help address some of the items that come up on our SWOT analysis, we turn that into a strategic priority for the quarter and we track against it.
If we identify that a specific threat may be that a competitor has a competing product, or if we identify that there’s a huge opportunity on the table to basically grab this unmet need from our clients, then that becomes a product or a goal that we drive through as a strategic priority. We take the results of strategic planning process and put it into a one-page plan ... and that’s on every single person’s desk in the office.
We have an online tool that we use. Everyone has to log into on Friday and update it, and it shows our progress toward implementing these strategic priorities. So there’s the goal to get this product launched, and there are all the tasks associated with it and all the people who need to help make sure that happens.
How do you stay motivated and keep creativity flowing for yourself and for your organization?
We focus a lot on trying to ensure that our team can get the right professional development that they want. We have a series of learning luncheons that we set up where we’ll bring in outside speakers to talk with the team and keep them engaged. We’ll watch a ‘Ted talk’ during lunch together. We’ll have individuals within the company present on the work that they’ve been doing.
How to reach: AnswerLab, (415) 814-9910 or www.answerlab.com
You could say that Tim Westergren is a bit of an expert when it comes to managing feedback. As founder and chief strategy officer of Pandora Media Inc., which runs the streaming music web site Pandora.com, he’s elevated the business philosophy of “listen to your customers” to another level.
“Consumer feedback is a huge influencer on Pandora,” says Westergren, who helped develop the Music Genome Project technology that allows the site’s users to craft their own music radio stations using thumbs up or thumbs down feedback on suggested songs.
Considering that Pandora has never advertised itself any more than a bit of search engine marketing, the value of this influence couldn’t be more apparent. For all intensive purposes, the company has expanded almost entirely through word of mouth to 100 million registered users. Since it made its IPO offering in June, the company has also experienced at least triple-digit growth every quarter since.
“We have a saying at Pandora: ‘It’s the playlist stupid,’” Westergren says. “It’s as simple as that — making it a super easy, intuitive experience and nailing the music choices. That’s really the basis for Pandora’s success so far.”
By staying attuned to the needs and interests of consumers and employees, Westergren has helped scale the business from start-up into a major public company with $138 million in revenue last year. Here’s how.
Know your audience
Pandora’s users have substantially shaped its evolution since the beginning. Perhaps the most obvious example is that fact that the web site was originally launched as a subscription only service.
“Not many people do know that because listeners ensured that it did not last long,” Westergren says. “We pivoted because they said, ‘This ain’t the way.’”
The site went free not long after.
With today’s technology, Westergren says it’s even easier to gain insights about who your customers are and what they want.
“You have a pretty intense feedback loop, which I think is becoming ever more true of all companies right now,” he says. “You have listeners who are much more participatory than they had been in the past.”
The company utilizes a combination of implicit and explicit user feedback to guide its direction. This involves monitoring how people are using the site — which features are gaining popularity and which are waning — as well as looking at feedback in the form of tens of thousands of monthly e-mails from listeners.
“That can influence the small things, little tweaks to the design, and that can affect big things like what large features we might want to add or a new domain we might want to go after,” Westergren says. “So we pay heed.”
An example is the company’s recent web site redesign, which was two years in the making and tested extensively with users before the September release. Some changes included removing the 40-hour listening cap for users, adding new “follow” and “shuffle” options and overhauling the design itself.
“When you do these things you have to get sort of a critical mass of feedback because otherwise you are just guessing at what the right answer is,” Westergren says. “So that’s a prerequisite for any significant change. We had a pretty good notion before this launched how it was going to impact our listening audience.”
If you have a large market opportunity, understanding your customer is even more critical if you want people to choose you over a competitor. Westergren’s strategy for differentiating the company from others with a similar business model — Spotify and Sirius XM Radio to name a few — is fairly simple, and it doesn’t rely on marketing.
“It’s really by creating a product that they love,” he says. “Someone finds it, uses it and it solves a problem for them.
“If they love using it, they will be a long-term loyal listener and they will tell other people about it.”
As your customer base expands, resist the urge to be satisfied with past or current success.
“There’d be ways for us to kind of contract, and be more conservative and focus a lot more on near-term results, but we believe that the opportunity is big enough that it warrants a certain audacity,” Westergren says.
Maintaining consumer loyalty over time requires you to keep finding ways to serve your audience as their needs evolve.
“You need to really actively innovate, actively challenge yourself to maintain the pace and the velocity of innovation and effort that you have had in the previous years,” Westergren says.
That’s why the company’s innovations are driven by both customer feedback as well as the intuition of its leadership.
“It’s kind of a natural life cycle,” he says. “You feel it. You feel it in terms of your own disposition toward your product and you feel it from consumers.”
By investing heavily in its foundation via technology, talent and strategic business investments, the company is working to take advantage of the largest possible opportunity.
For example, several years ago the company’s growth accelerated sharply when it introduced its mobile application for smart phones and seized on consumer demand for mobile listening capabilities. Mobile now accounts for 70 percent of the company’s listening audience.
“I don’t think about the future in terms of obstacles anymore,” Westergren says. “I think it’s more about how do you prioritize the opportunities? That’s our challenge more than anything.”
Solidify your values
While there’s an immense amount of development that’s gone into getting the company to where it is now, Westergren says that all growth initiatives still fall under one primary area of focus: personalization.
Everything from redesigning the web platform to a higher performance HTML5 site to growing mobile offerings to expanding artist selections has worked in harmony with the goal of increasing the level of personalization for users. Westergren says that this is an area that the company has been singularly focused on for more than a decade.
“We’ve essentially been on this path for a long, long time,” he says. “That’s not only about the Music Genome Project and playlist station personalization capabilities. It’s also about streaming and structure. It’s about all of these deployments to multiple platforms on multiple operating systems in multiple environments.
“We’re the first company that’s really doing that at scale, and to me that is the promise of the web.”
As the company continues to hone the concept of personalization in new and exciting ways, Westergren also knows that amid all the change, he needs to make sure the company doesn’t stray from the core values that have helped it grow.
Staying close to your core doesn’t mean that your company’s not changing. Instead, having strong core values acts as a taproot for your business that helps the next generation of leaders and employees to be successful.
“There are lots of things that have to happen when you go from the early stage into a more mature stage,” Westergren says.
“You go through a period where you really need to clarify and codify the core of your company, who you are, why you are doing what you’re doing, your vision and so on – really cement that in such a way that as the company gets big and has more moving parts that you still have a nice, clear anchor vision for everybody to rally around.”
Westergren defines the company’s set of core capabilities as the areas where the company needs to be No. 1, and stay No. 1.
“So the challenge that we give ourselves constantly is ‘Are we meeting that?’” he says. “Are we really the best in the world at that? And if we’re not it’s sort of an all-hands-on deck response.”
This also goes for cultural values. A set of cultural guidelines called ‘Pandora Principles’ govern some of these fundamental areas for employees, ensuring that the company’s culture stays integral as more people come on board.
“It’s kind of like a manifesto,” he says.
“There are things like how do you want to treat each other as employees and what kinds of people do you want to work at your company and how do you want to communicate with each other. Each one of those areas benefits from having core values and principles.”
Develop future leaders
As the company has grown larger, Westergren’s ability to control its direction, even with the help of his management team, continues to get harder. So it has become even more essential to attract and to cultivate a new generation of leaders who can be empowered as new ambassadors of the culture, mission and vision. Doing that requires a successful mission and culture.
“There are two things that people look for in business: a mission that they can really get behind and get excited about, and a place that really values them, treats them well,” Westergren says.
The company’s mission, “enabling people to enjoy music they know and discover music they love,” is one that employees and consumers have naturally embraced.
“This is a product that listeners are deeply passionate about and that trickles down to everyone in the company,” Westergren says. “You know when you say, ‘I work at Pandora,’ somebody goes ‘I love Pandora’ or they are excited to hear that your work there because they love the product.”
However, while driving a unique mission is exciting for employees, that alone isn’t enough to keep people motivated to do more.
“I read somewhere recently that the best employee perk is giving people a place that they love to work,” Westergren says. “That’s kind of it right there.”
As a leader, facilitating a culture that encourages collaboration and avoids hierarchies gives people the freedom to contribute their ideas and run with them.
“So your role as a leader once you have them in the company is to help them do what they do,” Westergren says. “It’s not to control them. It’s not to micromanage them. It really starts with a place of trust.”
Trust covers everything from what level of supervision you give your people to what level of access to information that they have, which at Pandora is very transparent. It also means having faith that the talented people that you hire are going to do a good job. When you build a culture of trust, employees feel like they are part of the solution and want to step into more active roles.
“It’s not, ‘Oh, you solve this. I’m the employee and I’m looking to you to solve this problem,’” Westergren says. “They feel much more sense of ownership, where they want to know how they can help. They understand that things change, and they trust the same way that you trust them that you are doing the best job that you can.”
The team at Pandora has grown to 295 employees since 2005, and the company continues to build its bench of talent. Because people enjoy working there, they also tend to stick around, making it easier for the company to develop leaders internally.
“We have a long tenure in our team, and an unusually long tenure I think for a technology company,” Westergren says. “We’ve been able to grow that part of our company really successfully.”
As you develop the next level of leadership, you gain the latitude needed to keep up with constant change and fast growth.
“You need to stay very closely connected to your company,” Westergren says. “Don’t let layers insulate your leadership from what it’s like to be a line-level employee.
“You give people responsibilities. You empower them. You compensate them properly. You give them a nice environment to be in. If you treat them well, they will reciprocate with effort and innovation and all sorts of contributions.”
How to reach: Pandora Media Inc., www.pandora.com or (510) 451-4100
- Make decisions with a good understanding of your customer
- Solidify your core mission and values
- Develop the next generation of leadership
The Westergren File
Founder and CSO
Pandora Media Inc.
Born: Minneapolis, Minn.
Education: B.A. from Stanford University
Westergren on his management style: There are some unique things I can bring to this as a musician. Managing and operating a band can teach you a lot about how to operate a company believe it or not. So I think there are some really interesting insights that experience brings to this.
Westergren on how Pandora levels the playing field: I think one area that, to me, is particularly exciting is the impact that we are beginning to have on artists. Because of the way we analyze and recommend music, Pandora is a place that is a completely level playing field for musicians. So once your song gets added to the collection, we’re blind to popularity in recommending any given song on a playlist. We have over 900,000 songs in our collection and over 90 percent of those played last month.
What is your favorite station on Pandora?
That’s an unfair question to ask a musician. Actually, I’m pretty scattered in my tastes. I like all sorts for music. I’m a piano player so I’m somewhat partial to piano music, but I also really love a good melody. So I can listen to punk music or classical music or country music if it has a good melody. So I don’t really have a single spot that I sit on very long.
In 2011, Pandora:
- Hit 100 million register users
- Was the most downloaded free music application on Apple’s and Google’s app stores
- Made its stock market debut with a market value of $2.6 billion
- Reached its 10 billionth thumb rating. The song was a thumbs up for “Ridin’ Solo” by Jason Derulo.
Many businesses — especially in this economy — would love to be in the position of Petplan. The pet health insurer has experienced explosive growth over the past few years, climbing to $18.7 million in revenue during 2010 and a debut on the Inc. 500 list (No. 123) in 2011.
But with explosive growth comes daunting challenges, and it has fallen on the husband and wife team of Chris and Natasha Ashton to lead the way. The co-founders and co-CEOs of Petplan — which is the DBA name of Fetch Insurance Services LLC — have needed to chart a course for the blossoming business and ensure that the resources are in place to sustain growth.
“We debuted at No. 123, but getting there sure wasn’t as easy as ABC,” Natasha Ashton says. “Managing that growth has meant taking our hands off the nitty-gritty and delegating. Bringing in the right kind of people to enable us to handle the growth and then accelerate it further is a constant thing. We’ve had to expand our office, pretty much double our head count and make sure the team members weren’t distracted throughout the construction. We also had to make sure the technology wasn’t going to falter and that we were able to maintain the same level of exceptional customer service that we have become known for.”
The Ashtons have been on a constant search for the best possible talent to aid in the company’s growth. But adding intellectual muscle to the work force is only part of the equation. The company’s employees have to be properly managed and motivated.
“We always have very lofty goals and ambitions, but one of the things we are very good at is taking those goals and breaking them down to manageable goals,” Natasha Ashton says. “Our aim is to become the first billion-dollar pet insurer globally. But when your long-range goals are ambitious, you know there are a number of steps you need to take before you can get there. So you break it down into manageable chunks, and delegate those, which ensures that we hit every goal along the way.”
“A lot of how you handle growth comes down to your core values as a company,” Chris Ashton says. “It drives who you decide to partner with as an organization, but it also drives the kind of people you look to recruit. You want people with a great skill set, who have relevant experience, but who also have the right personality. In our case, you want people who can thrive in a fast-growing, high-energy business like this, because it doesn’t suit everyone.”
A great deal of the Ashtons’ jobs revolves around communication. When the landscape is constantly evolving, new ideas are suggested by team members on a daily basis and maneuverability is important, management needs to define the company focus and communicate it consistently, while encouraging dialogue around new ideas.
“Part of it is cultural,” Chris Ashton says. “Do you really encourage people to speak their minds? We strive to reward people for having great ideas by publicly recognizing them. There are also structural things you can have in place. We have built an intranet that includes discussion boards, and we encourage people to contribute to the discussion boards along every aspect of the business. It’s key, because as you get bigger, nobody can be as involved in all areas of the business at once, like you used to. So you keep your finger on the pulse of what is going on, what the customers are saying, and continue to encourage the good ideas that are coming from our customers and our employees.”
How to reach: Petplan, (610) 595-3353 or www.gopetplan.com
Offices with adult-sized playground slides? On-site pet care? Table tennis in the lobby? Call it the Googleization of the American workplace, or whatever you want. Unconventional trends are becoming quite conventional.
It can mean you cultivate a more engaged, upbeat work force. But it can also mean that your HR questions just became a lot more vexing. Not only do you need employees who match the skills required for the position, they also need to be able to thrive in your unique workplace. One employee’s whimsical atmosphere is another’s irritating cacophony of background noise.
At Petplan, co-founders and co-CEOs Chris and Natasha Ashton are on the front lines of trying to answer the question of fitting employees to the workplace. The workplace atmosphere cultivated by the husband and wife team includes bright colors, animal figures positioned throughout the office and frequent visits from family pets.
For the Ashtons, the first question they often need answered from a prospective employee is “Are you an animal lover?” If you think dogs are too noisy or cats are walking lint balls, shedding everywhere, Petplan is probably not the place for you.
“We want people who believe that pets are fun,” Chris Ashton says. “There is a reason people have pets, and we want people who are also going to have that sense of fun about them. We want them to be able to bring that personality to work.”
Inflation is coming. It drives your costs up and results in lower profit margins unless you raise prices. But customers hate price increases and they hate having to pay more.
How can your company increase prices and upset your customers the least? Here are six methods to explore.
1. Cut variable costs.
Is there a way to reduce the costs of your product without significantly affecting your customers’ perception of the product? This is extremely common in the packaged food industry. What used to be 28 ounces of Prego spaghetti sauce is now 26 ounces. A package of Rolos used to have 11 chocolate caramel chews. Now there are 10. What looks like a half-gallon (64 oz.) of Breyer’s ice cream is now 48 ounces. Customers quickly recognize price increases, but they are slower to recognize reductions in product quantity, especially when the size of the packaging remains the same.
Look for something that costs you money that you can de-bundle from the purchase. Customers who want the de-bundled feature will pay extra for it, and it allows you to maintain or lower prices for customers who don’t use the de-bundled feature. At the worst, you’ve only raised prices on some of your customers.
A recent example is how some airlines have de-bundled checked luggage so they now charge customers for checking bags. Although many people saw this as a price increase, it would have been more readily accepted by their customers had they announced they were simultaneously lowering the prices of their flights for people who don’t check bags.
3. Introduce new products.
It’s possible to create a new but similar product with a slightly different feature set. Charge more for the new product and attempt to move as many customers as possible to the new product. Of course, this also means you need to build some added value into the new product.
4. Raise fees.
When gas prices hit $4 per gallon, many companies added a fuel surcharge to their bill. This extra fee isn’t looked at as a price increase, but rather just a way of passing some cost increases through. Now, four years later, some vendors have not removed this fuel surcharge even through fuel prices are back to normal. Many customers do not consider fees when making purchase decisions, so raising fees is preferable to simply raising prices.
5. Raise prices on select segments.
You’ve considered the first four options and they don’t completely solve your pricing issue, so you have to raise prices. Consider only raising prices on select customers. First, look to raise prices on your least preferred customers, those you wouldn’t be too upset to lose. These could be the ones who are expensive to service or are just a pain to deal with. They could also be the ones who negotiated the best deals, so they may not even be profitable after your costs increase. Then look to increase prices on new customers. The advantage here is that new customers don’t recognize price increases. They only see the new price. Do your best to hold prices level for your best existing customers.
6. Raise prices with a purpose.
If you’ve come to the conclusion that you have no choice but to actually increase prices, at least blame inflation. Customers may become very angry if they believe you’re raising prices to increase your profit at their expense; however, they are more accepting if they believe you are simply passing on costs. Apologize to your customers for your price increase, but explain how your costs are going up and that you have no choice. Look and act contrite. Do something nice for them, such as giving them a limited time coupon for a discount to the old price.
Mark Stiving is a pricing expert with a Ph.D. in marketing from U.C. Berkeley and more than 15 years of experience helping companies implement value-based pricing strategies to increase profits. A speaker, coach and consultant, Stiving has worked with esteemed companies such as Cisco, Procter & Gamble, Grimes Aerospace, Rogers Corp., as well as many small businesses and entrepreneurial ventures. Read more from Stiving on his blog at www.PragmaticPricing.com, and learn more at www.markstiving.com.
Barry Wolfson joined Tervis at a time when the company was expanding nationally, increasing sales and enjoying double-digit revenue growth. From the outside, it was a CEO’s dream. Internally, the company’s 700 employees could barely keep up.
“When your business is growing 60 percent a year, it’s everything you can do to just focus on running the business day to day,” says Wolfson, CEO since 2010.
“I just think that there wasn’t an opportunity for anyone to say ‘Hey, we need to step back for a moment,’ because there really wasn’t time to step back.”
By restructuring the business in a way that allowed it to scale, Wolfson has helped the company — known for its tumblers that “keep hot drinks hot and cold drinks cold” — manage the demands of fast growth.
Smart Business spoke with Wolfson about the keys to scaling a fast-growth company.
Set your timeline. There were things that we put on the timeline that we said, ‘In 2011, we need to get these things done.’ There are other things that we’ve started to work on during the year and say, ‘OK, now over the next five years, where do we see the company going and what are the capabilities that we have to put in place to get there? So there were short-term things — less than a year — that were very critical for us to do… and then the other is developing this longer-term vision and strategy for the company. Phase one was a little bit of an Extreme Makeover Tervis edition as we just put in place the basic capabilities to support growth. But the phase that I’m in with my senior management now is a little bit longer-term vision in terms of what products and markets do we want to focus on.
Take a forward-thinking approach. This is not something that happens in one day, that you go from ‘This is the right way to do it’ to ‘You can’t do it this way.’ It happens over time.
When you are in senior management, you have to look a little bit further down the road and say [what’s] fine today are the things that we need to do differently. It wasn’t necessarily changing every aspect of the business. Tervis has been a successful company for 65 years and so it’s a matter of saying ‘Hey, what can be preserved the way that we’re doing things and what needs to happen differently to be able to continue to grow profitably, and grow in a way that makes sense for all involved?’
Allocate resources. It was first huddling with my senior management team…then between us prioritizing here are the things that we believe in our experience and at our level that we needed to do and the time frame of doing them. We went through that process, identified a number of things that we needed to get after, and then it was a process of saying, ‘What are the resources involved in doing this — people and investment capital?’ At that point, it’s engaging with the ownership of the company and getting their support in making the investments that we needed to make both in people, systems and plant equipment.
Build a deep bench of talent. You look at how fast we’ve grown — there are many, many people in the organization who have not been here very long. So continuing to develop a culture and the key people in the organization is something that I spend a lot of time on. Generally, besides the culture, it’s continuing to develop intellectual capital that’s required in the business. Develop people from within with additional skill sets and complement that with bringing people in from the outside that can give us different perspectives on the various levels of growth and business that we are trying to achieve.
Think sustainability. Sustainable growth will come from us continuing to reach out to a wider audience of potential customers in various different markets and geographically. Staying very fresh, relevant and innovative in our product offerings is something that again fuels growth.
You have to be very intentional about the growth. We don’t see growth for growth’s sake. We want to be a strong consumer brand out there in the marketplace that is a high value brand. We don’t want to grow just to sell more tumblers. … Resisting that growing for the sake of growing is extremely important in a business that has the opportunity to grow.
How to reach: Tervis, www.tervis.com or (888) 508-8859