Pierre Panos has created a new niche in dining. As the founder and CEO of QS America — short for Quality Service America — he oversees restaurant operations for Atlanta’s Brookwood Grill as well as more than 40 Papa John’s locations, but he also created the fine fast-dining segment in founding Fresh To Order restaurants.
While he strives to create a niche, he also aims to provide, as the name implies, the highest levels of service at all of his restaurants. His efforts combined have allowed the company to earn more than $40 million in sales last year and a 30 percent growth rate for the past 10 years, even during the recession.
Smart Business spoke with Panos about how to set your business apart from the competition.
How can leaders distinguish their businesses?
Don’t follow the pack. When everyone zigs, you zag. You’ve got to swim up river a little bit and do something different. You have to create a niche product. You have to find a niche that has not been developed yet or is just starting. If you’re not the first in the space, do it very, very well because the No. 1, 2, 3 guys can all do it well.
The No. 1 thing is find something you absolutely love doing, stay in it long enough to become the absolute best at it, and that’s when you make a lot of money. People tend to hop around too much today trying to find the next big thing.
How do you know if you’re doing the right thing or if you need to search for the next thing?
Something my dad told me a long time ago that’s an old cliché but it’s so right: The greatest mistake is to give up. With Fresh To Order, in the first year, we never made money. I knew we wouldn’t. We went through it because we had faith in the concept, faith in ourselves, and we knew the business well, and we knew at some point it would kick in and it has.
Sometimes you just beat your head against the wall and you’re not getting anywhere. Unless you’re in an industry that’s literally going away, if you’re very good at it or one of the best, the weaker players will go out of business. The market then is far bigger for far less players, and you can come back strong.
I wouldn’t try to get into something else you may not know as well because you’re not going to be as successful. If you’re an entrepreneur and you’ve tried something that’s not working and it’s a start-up, I wouldn’t tell you to keep on going, bashing your head. Look at what’s wrong. Try to figure out what the issue is. If you can’t figure out the issue, then move ahead. If not, go a little bit to the left and right in the same space and see where the next opening is. It is a hard thing, but don’t carry on forever. At some point you have to pull the plug.
How do you recognize opportunities that could move you forward?
If you know the industry that you’re in that well, you’ll see it. Read as much as you can. You have to be a voracious reader — see what everyone else is doing well and what they’re not doing well. If you have a good peer group of people to talk to in the industry, you’ll find that niche.
A lot of people don’t see it because they don’t read enough, they don’t network. If you do know your space, the niche will show itself, but you have to be aware and have your eyes open. A lot of people are [inwardly focused] — you have to work on your business, not in your business. You have to be out there. If you’re working day to day running the nuts and bolts, you’ll never see the niche. It will just never show itself. If you have people that take care of the nuts and bolts in any business and you’re out there working on your business seeing what the next river of cash will be, it’ll happen because not enough other business entrepreneurs out there are working on their business. They’re working too hard on the day-to-day and trying to find a way to save a few dollars here.
How to reach: QS America, (770) 594-8644 or www.qsamerica.com
They were definitely dropping some “New Coke” references in those first few months. But Patrick Doyle and his leadership team would just smile at each other. No matter what the media pundits said, they knew they were right.
When Domino’s Pizza made the decision to scrap its old pizza recipe in 2009, Doyle’s team had amassed a year and a half’s worth of data that said customers viewed Domino’s as a convenience brand first. They ordered Domino’s for a pizza in 30 minutes, not for quality food. Customers perceived the pizza itself as a brand weakness.
It’s something the leadership at Domino’s never really took to heart. Like its customers, Domino’s leaders had always viewed their specialty as convenience. Any complaints about the food would be offset many times over by the customers who kept coming back for the efficient service. It’s a philosophy that made Domino’s the worldwide gold standard in pizza delivery, with yearly sales in the billions.
That all changed in early 2008.
“We had launched a new ad campaign called ‘You Got 30,’ which kind of took us back to our roots,” says Doyle, the president and CEO of Domino’s Pizza Inc. “While we weren’t guaranteeing anyone a 30-minute delivery, we were reminding them that most of the time, they’ll get their pizza in 30 minutes. The campaign emphasized how Domino’s saves you time and what you could do with that 30 minutes.”
The campaign fell on deaf ears. Consumers had heard it all before.
“They simply did not care,” Doyle says. “The consumers who already used us because they appreciated the convenience already knew what we were telling them. Those that didn’t, who said the convenience factor was great but we needed better food, it didn’t change their minds about anything. So it was right then, in March 2008, about two months after we launched that ad campaign, that we decided we needed to go back to the drawing board with our pizza.”
Take a bold step
To this day, it’s something of a parlor game at Domino’s Ann Arbor headquarters: Who else in the world of business has admitted an inferior flagship product, scrapped it and rebuilt it from scratch?
“We still can’t come up with one,” Doyle says. “The closest example I ever heard was an ad in the late ’60s from Volkswagen, which had a picture of one of their cars, and under the picture it said ‘lemon.’ They were dealing with some quality perceptions head-on, but it was a single print ad from 45 years ago. We have wracked our brains, and our ad agency’s brains, to come up with a comparable example where a company has come out and said, ‘Our product wasn’t good.’ We haven’t yet.”
To make the product better to the eyes and mouths of customers, Doyle and his team had to go directly to the source. The first step was to listen to the people who had an ax to grind with Domino’s. Throughout 2008 and into 2009, Doyle and the rest of the company’s leadership stayed quiet, listened and took their verbal lumps as consumers launched repeated salvos, comparing the crust to cardboard and the sauce to ketchup, among other things.
“We did every possible kind of research,” Doyle says. “We were doing qualitative research like focus groups, where you’re getting people into a room and having them help you get a sense for where the opportunities were. Those were the comments you ended up seeing in the commercials themselves. But then, we also went out and tested every possible ingredient change, every combination of new sauces, crusts and cheeses, until we thought we had it optimized. Then, we took the new pizza ideas to our most loyal customers to see if they’d appreciate the change. We took it to people who weren’t doing business with us. We went to kids, we went to every possible demographic group and kept testing it.”
The rounds of data gathering and testing put Domino’s on the path to wholesale product change. The recipes for the crust and sauce were completely remade, and new cheese would be used.
Doyle and his leadership team had their new product ready for rollout by the fall of 2009. Then came the next step: explaining themselves, first to the company’s 4,900 U.S.-based franchisees, then to public at large.
State your case
The biggest momentum boost for Doyle and his team might have come with a show of hands.
In the weeks leading up to the rollout of the new pizza, the corporate leadership at Domino’s held a series of meetings around the country, meeting with the leaders of all franchise locations.
“We had five meetings over the course of a couple of weeks,” Doyle says. “We showed them the research and talked to them about customer perceptions of the pizza. We had them sample the old product and the new product, and laid out all the implications for them.”
At one point during one of the meetings, Doyle had the franchisees sample the old and new versions, then vote for which pizza they preferred.
“At one point, we did a show of hands,” he says. “It was nearly unanimous. Out of over 1,000 franchisees in the room, there were 12 who preferred the old pizza. It was absolutely overwhelming. We made the case, we allowed them to give us input, but ultimately we had overwhelming support from our system. And that is maybe the most important constituency. Those are the people who pay us to manage the brand. They’re the ones who are relying on us to do the right thing.”
But Domino’s is an industry giant and a public company to boot, meaning the convincing didn’t stop there. When Domino’s made the announcement near the end of 2009, members of the media and pizza-consuming public were quick to whip out references to New Coke, the famous 1985 business blunder in which Coca-Cola reformulated its flagship beverage, resulting in a massive consumer backlash and, ultimately, the reintroduction of the old formula as “Coca-Cola Classic.”
However, Domino’s reasoning for changing their pizza recipe was fundamentally different from the reason Coca-Cola changed its formula a quarter-century ago.
“Interestingly, while New Coke won in blind taste tests, if you went to Coke customers, they’d tell you that the taste of Coke is why they bought the product. It’s what they were used to,” Doyle says. “When they changed the formula, they were messing with what made Coke what it is. What made Domino’s a household name was the fact that we deliver really quickly. We didn’t build our reputation around the taste of the old pizza. So it was a far different level of risk involved with changing something that consumers considered a weakness. At Coke, they were changing something that consumers considered a strength.”
By the time the New Coke questions came raining down, the new pizza recipe had already caused a spike in sales. The company’s first-quarter U.S. sales in 2010 were up 14.3 percent over 2009. Year over year, Domino’s finished 2010 with a 9.9 percent bump in sales.
“It actually made the New Coke questions kind of humorous,” Doyle says. “The fact that sales were up double digits made it very easy for us to say with confidence that we weren’t pulling a New Coke. Whenever we’d get the New Coke question, we’d just kind of smile at each other.”
But before Doyle and his team could chuckle at the New Coke references, there was still a great deal of work to be done. In December 2009, Domino’s had to retrain 4,900 franchises on how to make a pizza. Corporate leadership had to ensure that the old ingredients ran out and new ingredients were stocked as close as possible to the changeover period, which was the week between Christmas and New Year’s Day, when Domino’s rolled out their first ad campaign touting the new pizza.
It was a massive logistical balancing act, and it had to be carried out in the span of several weeks.
“We trained a hundred trainers, they each had 50 stores to cover, and there are typically two to three people in each store who are making the pizzas,” Doyle says. “We’d have the trainers organize the pizza makers into groups of 10 to 15 people per day. Over the span of a couple of weeks, each trainer probably trained about 150 people. You just get the people into a store and go to work. You show them how to do it, and you don’t let them leave until you’re confident they can do it right.”
The scope of the transition didn’t allow for a completely clean break between old and new. There was a period of about a week just before Christmas when a given store could have been selling the old pizza or the new.
Despite the months upon months of research, communication and training, Doyle still had a knot in his stomach as the initial rollout was taking place. Despite overwhelming evidence that the consumers wanted an improved pizza from Domino’s, there was no fallback plan if it failed. Doyle and his staff had to completely commit to the new product, because they were going to finish destroying the reputation of the old product by openly admitting its inadequacy. It was an all-or-nothing proposition.
“I remember one of the meetings with the franchisees,” Doyle says. “One of our greatest franchisees raised his hand and asked a great question: ‘I’m on board with the changes, but what do you do if this doesn’t work?’ All I could do was laugh and say, ‘My successor will have a really hard time dealing with that.’ There was no Plan B. There couldn’t be. On the plus side, when you’re facing something like that, it does tend to help you focus more.”
Domino’s, which generated $6.2 billion in global sales in 2010, also rolled out a similar product change in Mexico. The company’s overseas markets were not altered because they already use different ingredients from those used in North America.
Make meaningful change
Doyle admits that much of what happened is unique to Domino’s, but there are still some lessons about change that are applicable regardless of the nature of your business. Chief among them, you need to make change that has an impact. Otherwise, your customer might not even notice.
Don’t change the label and expect consumers to embrace it as a real, meaningful improvement.
“There are a lot of incremental changes made by companies and trumpeted to consumers as something completely different,” Doyle says. “But consumers tune it out. They know it’s not true. They recognize it for what it is. You have to do things that are material in order to get consumers’ attention.
“You walk up and down the aisle in the supermarket, and there are all kinds of new and improved products, with starbursts and arrows pointing to what is improved. But all they did was change the color of the cap on the jar. And then the company is surprised that consumers don’t get excited about it. You lose credibility as a brand and a company if you so clearly overstate the magnitude of the change. You have to make changes that are real and relevant to consumers, and big enough that they’re going to notice.”
How to reach: Domino’s Pizza Inc., (734) 930-3030 or www.dominos.com
The Doyle file
Name: Patrick Doyle
Title: President and CEO
Company: Domino’s Pizza Inc.
Born: Midland, Mich.
Education: B.A., University of Michigan; MBA, University of Chicago
First job: I was mowing lawns and maintaining some tennis courts when I was 12 or 13 years old. So pretty much as soon as I was tall enough to reach the lawn mower bar.
What is the best business lesson you’ve learned?
The fundamental lesson is that every business is about people, and the companies with the best people are going to win. If you’re recruiting the best and training the best, and getting the best excited about what the company is doing, you’re going to succeed.
What traits or skills are essential for a business leader?
The ability to listen well, the ability to build consensus when you need to build consensus and the strength of your convictions. Once you’ve listened, you go out and lead. That takes a bit of confidence sometimes.
What is your definition of success?
There are a lot of basic ones in terms of creating shareholder value, growing sales and earnings. But personally, what is most gratifying to me is to see the people we’ve brought into this business, whether employees or franchisees, winning and succeeding. It’s about seeing them build great careers and great businesses.
At the recent strategic planning discussion that I facilitated for the Entrepreneurship Institute’s Columbus President’s Forum, several of the 40 top leaders of companies who attended were either going through or had recently been through the strategic planning process and were stuck on how to implement the plan.
It was a question — and a frustration ? around execution. Here is some insight on how to get from vision to execution.
Getting to halfway
Based on my personal experience of participating in more than 30 strategic planning discussions for nonprofit groups, trade organizations and business advisory boards during my 35-year career, too often the strategic planning process stops when the four-hour or so “planning retreat” ends. We walk away with a strategic direction and the facilitator’s documented notes, but due to time, we do not finish the planning process.
To finish requires that we establish action steps, determine resources and responsible parties and define how we are going to measure progress and celebrate our success. Sure, getting through the first half feels a lot like running a marathon, but you’re only halfway there. To finish takes one or two additional four-hour sessions. It is the second half that we never get around to. To move on to execution we have to address some issues.
Changing vision into action
Most anything can be made to happen if it is broken down in bite-size chunks.
You’ve finished the visionary portion of the strategic planning process and now you need to translate that vision into a list of action items in order to realize that vision. Identifying action items is an exercise in prioritization. Understanding the tasks at hand helps leaders and managers have a clear perspective of order and what realistically can be accomplished with the existing team and workload.
Who and how much?
Assessing available resources — human and financial — will drive how quickly an organization can achieve its end goal.
Does the needed talent exist within the organization or does it makes economic sense to “hire in” or “hire out” the expertise? If the talent exists, how can workload be shifted to allow for time to focus on these new initiatives?
It can also be a question of available budget or cash needed. Understanding resources needed to get the job done helps leaders and managers define who will do the work, how much can be accomplished and how quickly.
Measures of progress and timelines
In successful implementation, timelines are not always met. Often, unexpected interruptions occur — some of which are not under our control. If there are mission critical timelines to reach, focus on those.
Establish measures of progress or milestones and adjust as needed in order to achieve those critical deadlines. For initiatives that are more quality-driven, you may have to adjust the timeline several times. In either case, establishing milestones will help responsible parties determine the right course of action to take as you drive the execution process.
Posturing for execution
If we, as organizational leaders, have led our teams through the second half of the strategic planning process, the path for execution should be well-paved.
Along with our managers and associates, we have worked through the critical thinking needed to understand how we get to the end goal. We have removed all known obstacles and provided the necessary resources to accomplish the action steps by the required timeline. We have a clear plan with the proper leadership in place to carry out our organizational mission.
Celebrate the accomplishments
As a part of your planning process, define with team members what their accomplishments will mean to the organization and plan for how they will share in that reward.
Then dance in the end zone.
Kelly Borth is CEO and chief strategy officer for GREENCREST, a 20-year old brand development and strategic marketing firm that turns market players into market leaders. Kelly has received numerous honors for her business and community leadership. She serves on several local advisory boards and is one of 25 certified brand strategists in the U.S. Reach her at (614) 885-7921 or email@example.com, or for more information www.greencrest.com.
Studies have shown that only 3 percent of people around the world write their goals down on paper. However, that 3 percent is more successful than the other 97 percent combined. Think about any winning recipe, whether you’re trying to grow a company to new heights or baking a cake. Without a strategic plan and goals to meet along the way, you’re much less likely to reach them if you don’t write them down and keep track of them. Strategic plans take time, effort, research and people to monitor and drive them forward. You can’t simply devise a plan and then not reference it. You must constantly be checking your progress and making sure you are on track to accomplish what you set out to do. Below is a sampling of what three CEOs previously featured on the cover of Smart Business Pittsburgh had to say about developing strategic plans.
“You have to look at where you want to go and what you’re trying to strive for your business to achieve. It comes down to being able to pick and choose where you want to spend your money and where you want to spend your resources and you really have to do your homework to make sure that you’re making the right decisions.”
Michael Fetsko, formerly of Bombardier Transportation. Currently VP and GM of frieght pneumatics at Wabtec Corp.
“Once a strategic plan is in place, it is to your advantage to continue to follow and update that plan. It requires an individual in the company to have responsibility for that plan and have responsibility for making certain that everybody’s working toward it. Finding the time to work on the longer-term strategy takes a lot of discipline.”
Jack Ouellette, president and CEO, American Textile Co.
“Make sure you have a very strong strategic plan. It’s got to have … your diligence plan, your integration plan and your plan going forward. 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.”
Stan Hasselbusch, president and CEO, L.B. Foster Co.
It’s not a secret that every company wants to grow. It’s the corporate trophy that says you’re winning and on the right track. So when Darrell O. Grimes started as president and COO at MAG Mutual Insurance Co. in 2008, he initiated a new, five-year strategic plan to improve and grow the company, and he is already seeing the fruits of his labor. In 2008, the company had $1.45 billion in total assets, and in 2009, that number moved up to $1.54 billion — not necessarily an easy task in the economy these past few years.
The plan he initially created focused on three main areas: make it easy for customers to do business with the company, diversify the company’s risks and take care of his employees.
Grimes knew that if his team focused on these areas, it would mean good things for the company, and just a few years later, those numbers proved he was correct in his thinking. As he moves forward with completing that five-year plan, he’s confident his team will continue to succeed.
“We have a focus, and we have a lot of people pulling in the right direction,” Grimes says of the $312 million company.
Here are the keys to how Grimes successfully led MAG Mutual’s growth.
Create a plan
Before Grimes could do anything to grow the company, he had to know what he was trying to accomplish, so he started with a strategic plan.
Grimes and his team created a five-year plan, and they started by taking the senior staff off-site for a three-day meeting to work on it. The team started with a blank slate.
“Believe it or not, you have to almost start with a white page, to a certain degree, because it’s a changing environment, and you have to be resilient,” he says. “We had to be flexible and resilient and respond.”
They talked about the issues they’re affected by — health care, interest rates, inflation, the economy, the environment, frequency of losses, state issues, torte reform and so on — to see how things were changing and how their new plan needed to look to stay with the times.
“Make sure you focus on things that you can control,” Grimes says. “In other words, you can’t control, and I can’t control, interest rates. You and I can’t control health care reform. You and I can’t control tsunamis and earthquakes that are actually affecting us today. Focus on those things that you can control, but remain flexible and keep your options open, but have a mission and reason for being.”
Following the off-site meeting, Grimes and his team took the planning back to the office and continued to work on the plan there. Then they had an all-day meeting with the board of directors off-site to go through it. After that, they went back and revised and modified it a bit more, and then they made a final, formal presentation to the board, where it was approved. The entire process took about 90 days.
“You just have to talk it through,” he says. “You just talk it through until you finally say, ‘Yes, that’s the best course of action,’ but you have to remain flexible because the future may surprise you.”
It’s also important to keep the future in mind. While some people create plans and proceed to ignore them, Grimes says you have to come back to your plan each year.
“Even though it’s a five-year plan, we meet every year, and we go through the five-year plan,” he says. “It can be tweaked and modified and get new goals and have goals eliminated, which is very typical, so it keeps getting refined — not substantially but modified.”
Focus on your customers
Without your customer, you’d be hard-pressed to do anything in business, so you have to focus on them, which is the second key to growth.
At MAG Mutual, when a customer calls in, the company’s customer relationship management system displays not just the phone number coming in but details about that particular customer, too, such as the products and services he or she has with the company.
“It’s important to have a CRM system that can give us the one-view of the customer, so that we know how many products they have with us, what products they don’t have with us and what we can cross-sell to provide more services to our policyholders,” Grimes says.
When the call is answered, the conversation starts with a simple question — why are you calling? From there, the caller’s needs are met, but after the problem is solved, the representative may ask him or her about what other products and services he or she may need.
“It’s all focused on the customer,” he says. “Solve their problem, and see if there’s any other products that they need that most of the time they may not even know that we provide, or they don’t know we have the product at all. That’s important.”
It’s a common problem. Because the company is seen predominantly as a professional liability company, many customers may not understand that they also sell automobile insurance, homeowner’s insurance, business officer insurance, workers’ compensation and other products. By educating customers, it opens the door to better serve their needs and helps MAG Mutual grow.
In addition to the service they provide when customers call in, Grimes and his team also get out to talk to customers to find out what’s going on in their medical community. He says there’s a lot of differences in the delivery of medicine based on where you are, so it’s critical that they understand the issues facing their different clients.
“We want to understand what’s going on where they are, and that helps us to understand the issues a little bit better,” Grimes says. … “If you don’t get out and talk to your customers, you won’t know what’s going on, and you may not hear it from your staff.”
Grimes says the key is to listen — plain and simple. He and his team do this through larger meetings with customers and also by taking them to dinner.
“That’s probably the only tip I’ve got, because I don’t think a lot of them really listen,” he says. “My insurance company doesn’t really listen to me. When was the last time your insurance company took you out to dinner? That’s what we do. We’re not the same. We go above and beyond.”
Focus on your employees
The third key to Grimes’ success has been to make sure he listens to and takes care of his employees.
“If you take care of your employees, they will take care of your customer,” he says.
Grimes says his employees are a large part of MAG Mutual’s success, and to make sure that continues, he makes sure to communicate with them what his plan is and how they play a role in it. Sometimes it’s easy for employees to get lost in the overarching company strategy, but Grimes makes sure that’s not the case. He has shared-goal meetings where he and his team take a half a day and look at different goals and decide who will own that. From there, they look at who supports that goal.
“We always assign the goal to one individual so they are the primary individual responsible for the success of that goal, but they also know who’s in support of that goal, and then those are passed down to their support staff and their ultimate staff, as well,” he says.
This results in alignment to the corporate strategy. He wants employees to care about the strategy and its goals, so if the corporation hits its goal, then they get a bonus based upon how they met their individual goals.
And it’s not as if employees are blindly working and have no idea where they’re at. One of the big things Grimes communicates with them about is the company’s financial performance.
“It’s important that they understand that we’re all in the same boat and we’re all rowing in the same direction — that when times are good, they all get bonuses, and when times are not so good, we may get a smaller bonus or no bonus at all,” Grimes says. “If we don’t all pull together and understand what the financial results are, we will not do as well as a company, and we won’t service the clients the way we want to be serviced. It’s an open-book policy.”
In addition to talking about the numbers at monthly meetings with employees, he also makes sure to talk about the industry’s results and how MAG Mutual compares to it. He provides visual presentations and graphics to illustrate the numbers he talks about and aims to educate employees so they better understand how their contributions matter.
On top of these efforts, Grimes also encourages innovation throughout the organization and celebrates when employees suggest new ideas.
“I listen because no one person has all of the ideas,” he says. “It’s a collaborative environment.”
But his support for employees’ ideas goes beyond just listening. He also encourages them to try them out.
“We understand that most ideas may fail, but I’d rather have somebody that tries with an idea and have it fail then have somebody who doesn’t provide any ideas at all,” Grimes says.
If an idea doesn’t work, he doesn’t penalize that employee for it failing.
“You can provide all the ideas you want,” he says. “All you have to do is come up with one good one that we act on, and you will be recognized and you will be celebrated in front of your peers and appreciated, but you will not be penalized for something that doesn’t work.”
This attitude isn’t just a façade either. He says that in private conversations, the executives don’t gossip about or chastise employees for failed ideas — and that isn’t tolerated.
“Don’t cast down somebody who doesn’t have a good idea,” he says. “We’re happy that they provided an idea. … We don’t have politics.”
And employees know that. While many companies may reward employees who produce results, no matter how they got them, MAG Mutual doesn’t do that. They reward employees who focus on the customer and not on themselves.
“So many people are trying to move up in an organization and step over someone else to get up the corporate ladder,” Grimes says. “Just focus on the company and just focus on the customer, and you’ll find that all those other problems go away. … Forget trying to beat the guy down the hall. I think there’s too much of that. If people will do that, they’ll see how much easier it is to move up the corporate ladder without doing it. Just do the right thing.”
How to reach: MAG Mutual Insurance Co., (800) 282-4882 or www.magmutual.com.
Darrell O. Grimes
President and COO
MAG Mutual Insurance Co.
Education: Georgia State University
What was your first job as a child?
Really my first job was just a paperboy — a 10-year-old kid delivering papers in the neighborhood, getting up at 4:30 in the morning, riding the little bicycle to Sandy Springs, Ga., and getting papers and riding them back in my neighborhood, throwing them out. That’s my first job. It was fun. There were three of us that did three neighborhoods together.
What’d you learn from that job that still applies?
Hard work pays off. That was hard work being a 10-year-old kid doing that. You ever seen the Sunday paper in Atlanta? Throw about 52 of those on my bicycle and try to ride uphill at 4:30 in the morning in the dark. It was harder work than you think. You worked hard, and by 6:30 or 7:00 in the morning, you were done, and we were on the swim team and we went swimming in the morning. Same thing — you work hard, play hard.
As a child, what did you want to be when you grew up?
I hate to sound like an oxymoron a little bit — I’m supporting physicians today — but in my family, I have four generations of doctors in my family. I’m the first one who’s not a doctor. So maybe that’s why I’m here today. That’s what I really thought about being. I was just really better with numbers, to be honest with you, and that’s why I followed through and got my CPA certificate. That’s what I was really better at.
Somehow I ended up in a professional liability company defending physicians. My grandfather was what we called them back then, a general practitioner. He used to do visits at home in a horse and buggy, and they would call him up, and he would come over in his horse and buggy and provide medical services, whatever you needed.
What’s the best advice you’ve ever received?
Don’t worry about those things you can’t control. Just try to manage through them. I see a lot of people worrying about things, but it’s just more stress in your life. Manage what you can control. Prepare for the worst, accept the rest. Don’t worry too much about what you can’t control. I think that’s important advice.
While the lyrics from the band Damn Yankees mark baseball season as “six months out of every year,” around my house, baseball is a year-round fascination. Some find it a slow-paced game that takes too long, but for those in the know, it’s a metaphor for life, especially the workplace.
You need a solid team.
Although it seems counter intuitive to not want 100 percent superstars in your organization, you must know that such an environment does not work. For one, it’s simply not cost-effective. Second, there is need for support behind the real movers in your organization. In your typical baseball lineup, you have your hitters with power in the middle and usually your players with speed at the front. Then you often have weaker hitters lower in the order or perhaps your pitcher who is called on to lay down a bunt. Each spot in the order has a purpose and plays a key role in producing runs. Likewise, each and every person in your organization has a role in the success of your business.
You want team players.
In baseball, there is more than just batting average. As a team player, you get points for sacrifice bunts and flies — moving other runners around even though you’re out. You even get credit for runs batted in, again even if it’s not you scoring. It’s the same in the workplace. We all strive to hit it out of the park, but on a day in, day out basis it’s just not going to happen. So we have to promote an environment where we work hard to do the best we can but realize that sometimes our best efforts are for the good of the organization, not just our own personal aggrandizement.
In 2008, the Tampa Bay Rays should not have won the American League East. They had no stars. The team’s payroll was dwarfed by just one or two of the New York Yankees players’ salaries. But, Tampa Bay had a dynamic, unconventional manager with a bunch of players who loved the game. No one told them they couldn’t win. That’s the atmosphere that businesses should strive for — a team dynamic with no hot shots and plenty of people who are willing to take one for the team.
You want people who can contribute.
Baseball is also a sport for anyone. Although not everyone will be Hank Aaron or Lou Gehrig, for every one of these stars there are everyday players who shine. There are players who endure (Jim Thome), players who rise from obscurity (Troy Tulowitzki), and players who rise from the ashes (Carl Pavano). Every season, 750 players are on opening day rosters with the hope of being the player of their childhood dreams. Sometimes those players will be All-Stars, and sometimes in one of the 162 games that season, that player will have the walk-off hit to take home the victory for the team. Similarly, all employees should be encouraged to dream big and contribute to the overall success of the company. Every game and every workday is a new opportunity to make a name for yourself.
Look to your veterans.
Finally, in baseball, organizations look to veterans to be leaders and mentors, especially to the rookies on their teams. Whether in the role of players, coaches, or instructors, these veterans are looked to for leadership in the clubhouse, offering cohesion, wisdom and sometimes a needed pat on the back or a stern look. In our places of employment, we should strive to be good stewards of the talent available to us at all levels. Leadership is not limited to those people with titles or the highest salaries. We are all called to step up to the plate and take our best shot.
Katherine C. “Kacy” Donlon is a founding member of Wiand Guerra King PL. She has practiced in the area of commercial litigation for the past 15 years, concentrating on the defense of businesses and individuals involved in the securities and financial services industries. She also has experience in a broad spectrum of commercial litigation matters, including employment disputes, class actions, business torts and contract disputes. Reach her at firstname.lastname@example.org.
Joy Gendusa used to be a small business owner, which is why she knows from experience just how many misconceptions some of them have about marketing.
“Most businesses fail in three to five years from opening because they don’t market enough to get in the amount of business it takes to sustain themselves and be very profitable,” says Gendusa, CEO of PostcardMania. “I learned this on my own.”
Since she founded her direct marketing business 13 years ago, Gendusa has lived and learned many of the marketing lessons she stresses to clients. Today, with 192 employees and projected $20 million in revenue this year, she’s also a walking success story for how marketing can make or break a business.
Smart Business spoke with Gendusa about the keys to effective marketing.
Be persistent. You will remember when you were a kid — your parents had to tell you the same things over and over again for you to get the message: ‘Do the dishes. Take your shoes out of the kitchen.’ That is marketing. You’re marketing all the time whenever you are trying to get someone to change a behavior pattern. It’s the same thing when you are trying to market your business. … You need to get that message out over and over and over again. I would say that any small business person, whatever amount they think is a reasonable amount of marketing in their minds, they should just ‘10x’ that in their mind.
One mailing one time to one list is not going to change your bottom line. It’s not going to change your life. It’s not going to change your income. Marketing is a continuous activity. So it’s something that you have to do, just like you pay the bills, just like you do everything else that’s a continuous activity.
Make it priority. No outside force is going to come in and do something to you if you don’t budget your marketing. …They’re not going to say, ‘You’re in default of your mortgage. We’re turning off your power. You’re not going to have phone service if you don’t pay.’ These are outside services that are imminent if you don’t pay them, whereas marketing, the effects of it are a little bit later down the line.
It is very easy to turn off your marketing budget just so that you can pay the mortgage or pay the electric bill or pay the phone bill, and when you do that, you’re cutting off your own nose to spite your face. Without marketing you cease to bring in new clients, and when you cease to bring in new clients, you cease to bring in continued growth and new revenue.
I hear a lot of business owners say, ‘Well, as soon as this is done and this is done, then I’m going to market.’ Any marketing is better than no marketing. You always have the opportunity to improve it as you’re going, but keep sending out communication in a broadening sphere so that more and more people are getting your message on a continuous basis.
Keep it simple. When you look at an ad you have to instantly know what it is that they’re trying to sell you. I see businesses that try to cram way too much information onto a postcard. … They’re really just confusing the person. They need to just concentrate on an item or service that will get the person hooked right away and then they have an opportunity to sell them other products and services once they have their attention. That’s a big mistake that guys make. They are so worried about the pennies of the cost that they’re not looking at the big picture and the real return on investment you can get from doing it properly.
Take the reins. Business owners — they’ve also been burned. They’ve relied on experts to tell them what to do. They do what the expert says. They don’t get the results they were hoping for, or they’ve been promised something that is unrealistic, and when they feel that they have been burned they cease to reach in the direction of continuing in that line. So you’ve paid for some marketing and you feel like you’ve flushed the money down the toilet, and now you feel like you don’t want to market anymore because it didn’t work. Well obviously it works, because those big companies are doing it. It’s a matter of getting educated so that you are in the driver’s seat.
How to reach: PostcardMania, (866) 803-2421 or www.postcardmania.com
As he sat in a meeting to discuss the future of his organization, Vince McCorkle had another one of his aha moments. However, he soon realized the revelation was something his team had noticed for a while.
“I had been in one meeting — it was part of the strategic planning process — and said, ‘You know, we behave too silo-like within our health system,’ and I’ll never forget someone said, ‘That’s because we’re structured like silos.’ says McCorkle, CEO of Akron General Health System. “And that person was right.”
When McCorkle join AGHS in April 2010, the organization had recently completed a revitalization process following several tough years. While it had accomplished great strides since, as the dust settled, employees realized it was time to take another look at a developing a plan to move forward.
“The improvements they made were operational improvements, refining the systems, some of the basic blocking and tackling that needed to be done had happened, but everyone was really looking and saying, ‘We want to know where we are going,’” McCorkle says.
Though Akron General hadn’t had a strategic plan in years, the problem with getting anywhere wasn’t just with the lack of a strategic plan, it was the way the organizations itself was set up. McCorkle knew well that if your structure isn’t driving function, then culture can eat strategy. So AGHS was going to develop a new strategic plan, and it needed the combined, united support of his 5,700 employees and a participative culture that could enable one.
“So we’re saying, we want a common mission, common vision, common value systems,” he says. “Certain things are going to make sense to be done at the system level, but we have to respect the uniqueness and the different gifts we have in different parts of the system. It’s not centralization; it’s system thinking.
“If you say we want to behave like a system, then structure will drive function. We have to structure ourselves or restructure ourselves so we don’t behave like silos. For me the ‘aha’ was the structure was forcing us to behave like silos. It wasn’t the behavior. It was the structure.”
Before you can unite people in a vision, you have to first recognize what is keeping them fragmented in the first place. McCorkle knew he needed to understand why and how his employees operated within their own constraints and rules to see where there was opportunity to connect them.
“The great challenge was having the discipline not to just come in and intuitively start doing things but to really go through a defined process involving both internal and external stakeholders to really architect the future of the organization, reaffirm its mission and redefine its vision for the future,” he says.
If your organization is made up of silos, you can’t just write a new rulebook that applies to everyone. As a new leader, you won’t know about all the various cause-and-effect relationships that exist within your organization unless you dig a little, which is why McCorkle decided to spend his first months as CEO seeking input from people who knew the ropes at AGHS, including employees, patients, community members and the board of directors.
“My goal for my first three months was really to listen and learn, to speak with as many people as possible and get their insights,” McCorkle says. “I believe that everyone is 100 percent in their point of view, but that point of view was shaped by where they sit in the organization. So I felt like I had all of these mosaic pieces and I needed to really carefully assemble them together to get an accurate snapshot of current reality as well as the aspirations, these different individuals, clinical leaders, management, trustees had for the future not only of our organization but the greater Akron community.”
To find out what his people think, McCorkle’s strategy has been simple: Ask them and they’ll tell you. And as a new leader, he says if you see something you don’t understand, ask why. There’s probably a good reason why it is the way it is.
Also, in order to get accurate information at the management level, it’s important to eliminate any feeling of organizational or management hierarchy that could inhibit or isolate some people from offering their input or giving honest information.
“I think every one of us in the organization has an important job to do,” McCorkle says. “We are privileged to be able to care for people at some of the most vulnerable times in their lives. Because we have different titles or a nerve chart, it doesn’t mean what I do is any more important than what you do. We’re a community of inspired people wanting to make a difference, and so I don’t believe that we should use the hierarchy of titles.
“I was convinced that our plan would have much more applicability and sustainability if we had that genuine involvement versus someone like myself who comes to work in a business suit saying, ‘This is the direction I think we should go in.’”
It’s important to encourage your employees to share their opinion, but if you want your culture to enable strategy, you also have to make sure employees and stakeholders feel like that contribution makes a difference. This means showing them that their ideas for improving the organization aren’t just heard, but considered and appreciated.
“If you go through a process where individuals can have input and you honor that input — you are upfront and say, ‘We may not be able to do or we may not think what you are suggesting is one of the critical things we need to concentrate on this year or the next three years, but we want your input’— then people generally will feel that they have ownership in the direction of the organization and they can buy into it,” McCorkle says.
His goal at AGHS has been to help every person feel connected to the larger goal of helping patients. He often tells people the story of a group of people who were touring Cape Kennedy at an off time. When they noticed someone sweeping the floor, one visitor asked, ‘But what are you doing here?’ The man sweeping replied, ‘I’m helping to put a man on the moon.’
“It’s that sense of greater purpose; you’re not being a bricklayer but building a cathedral, not being a technician but being a healer,” McCorkle says.
To show people they are part of the vision, you have to make that vision participative. Whether or not a team member’s idea seems actionable or actually pans out, it’s important to show that person that you aren’t just blowing it off. It’s better to tell someone, ‘This idea won’t work,’ then give no feedback at all or worse, say something negative. Just as respecting input is the key to promoting ideas, criticism is the quickest way to kill them.
One way McCorkle ensures he gets a reliable picture of where AGHS stands, positive and negative, is having guidelines for handling feedback. These guidelines ensure his people embrace even the most unpopular ideas with kindness and equitable consideration.
“I didn’t use this language, but essentially, here are the rules of engagement,” McCorkle says. “We want to assume that people always have good intentions, and even if they do something that you say, ‘Well, that was a wackadoodle move,’ you have to say, ‘I’m assuming they have good intentions.’ You do not attack or criticize the person, but you work to better understand their ideas or their behavior.
“I’ve asked many people I’ve met with, ‘If you see me doing something that makes you pause or I’m not doing something that you think I should be doing, would you please tell me, because that’s the only way that I can learn. I have had occasions where people have come in and said, ‘I don’t know if you’re going to want to hear this or not,’ but then they tell me and I thank them. There’s amnesty in that, and that builds trust, I think, when I’m open to that feedback and they are mutually open to that feedback.”
Still, even though a participative management style can help you motivate and unite your team, at the end of the day, you have to remember a collaborative culture is not a democracy.
“I really like a lot of participation,” McCorkle says. “I think it’s healthy for people to be able to disagree, but you can never abdicate your role and responsibilities as CEO of the organization. So you listen. You try to incorporate the best thinking, but then as Howard Sherman said, ‘The buck stops here.’ You have to make that decision. Hopefully, it’s always a well-informed decision and I would say directionally correct. Generally there is more than one way to do something, and when you have the clarity in terms of values, purpose and goals, those decisions usually will be directionally correct.”
Share as you go
Despite working in health care, McCorkle doesn’t believe in the saying “no news is good news.” Rather than being confined to his office as a CEO, he knows it’s important that the engagement and participation of his people is matched by his own willingness to share what he knows.
“I’m convinced that people love to handle good news, they can handle bad news, but it’s really hard to handle no news,” he says. “So [it was] giving feedback on my learnings as I was going, or maybe even saying, ‘This is what I sense. Could you please help me understand it from your perspective?’ There were many ‘ahas’ in that process.
“You might go into one group and you have a position leader and you might have someone that’s a secretary in the same group pulling oars in the same direction. I also believe it’s important not to hunker down in the CEO’s office, but to get out in the organization — talk to people. I try to allow time in my schedule when I do that rounding that I can stop and engage in discussion, see how people are doing, because it’s those personal relationships that I know are critical to forming the culture of the organization.”
As the head of the organization, you have a bird’s eye view of how different areas and teams operate. So the more you learn about what makes each these areas unique, the more you can find ways to bring out their commonalties. Building a two-way dialogue between you and your team can help you identify commonalities and partnership opportunities together that you wouldn’t see just sitting behind a desk. Armed with that knowledge, you’ll be able to connect people in a plan that suits the organization’s best interests.
“I think every day you can look back and say, ‘What did I learn from that?’” McCorkle says. “And it brings fruit to bear. So if I’m working with a group of talented people I might say, ‘Let me share some scar tissue with you. This is something I’ve learned and you may want to consider it as you are forging and architecting this plan.’ That’s maybe something I can bring to the table given my tenure in health care. But there are many ways to accomplish the goal. It’s not Vince’s way that’s important.
“I believe that it is through relationships that we all reach our fullest potential. I am committed to lifelong learning. You can’t have an attitude that because you have a title and a role, you know everything. It’s really valuing people and walking the talk in terms of authentically letting them see you value them and value their insights. It tends to be very, very energizing for me and I think very energizing for the people serving in the organization.”
How to reach: Akron General Health System, (330) 344-6000 or www.akrongeneral.org
The McCorkle File
Akron General Health System
Born: Wilmington, Del.
Education: Bachelor of arts degree, St. Joseph's University in Philadelphia; MBA and master of health and medical service administration, Widener University in Chester, Pa.
McCorkle on making mistakes: If I make a mistake, I think it’s inherently important that I say, ‘I made that decision, and if I had to do it over again, I would make a different decision because X, Y or Z. They always say hindsight’s 20/20 and maybe my rationale for making that decision then was because of X, Y or Z, and either we couldn’t foresee this or I should have done more homework.’ People will respond to that … because we’re human, and we’re not perfect and we’re going to make mistakes. Try to minimize them and move forward. I had a meeting just yesterday with a major consulting firm, and they were coming in and they had made a mistake, and they were there to apologize and, quite frankly, hopefully not lose the account. I had to stop and say, ‘OK, thank you, but let’s not look backward. Time is too important. We’re going to concentrate on the future.’ And they said thank you, and they were immediately energized. I think rather than play defense, they are going to move rapidly forward and help us.
On setting goals: You have to set bodacious goals to say this is where we aspire to be. If we don’t set those bodacious goals, we have no chance of getting to them. If we make a step backward or we make a mistake, it’s not to finger point and assign blame, but to say, ‘What can we glean from this as learnings and how can we minimize the chance that this is going to happen again?’ It’s in that spirit, we’re all in this together. We’re a team and we’re looking to improve having personal mastery but also mastery in terms of the clinical and total system of care that we provide to patients and their families.
At Ceradyne Inc., chairman, president and CEO Joel Moskowitz has seen firsthand the need to constantly grow and evolve his business, which he co-founded in 1967 and has built into a company that generated $402 million in 2010 sales. Ceradyne started as a defense contractor, using advanced technical ceramics in military applications, including nuclear weapons.
“We were a classified facility, and doing a lot of work with nuclear weapons,” Moskowitz says. “That really gave the company its start, but it quickly became evident that were relying very heavily on defense work. But at the time, we were too small to do much about it.”
As the company matured, Moskowitz and his leadership team saw the need to look outside the military and defense sphere for new customers and began to seek strategic partnerships and acquisitions that would allow Ceradyne to leverage its expertise in technical ceramics in new markets.
After several failed strategic alliances in the 1970s, Moskowitz forged a partnership with Ford Motor Co. in the mid-1980s that allowed Ceradyne to broach the automotive market. This was followed by a partnership with a division of 3M that had the company producing a line of ceramic orthodontic brackets. After that, several acquisitions followed, allowing Ceradyne to stretch its products’ reach into the satellite communications and glass and metal fabrication industries.
“We also acquired a company that developed the fused silica ceramic crucible for solar cells, which is going to be 30 percent of Ceradyne this year,” Moskowitz says.
To find acquisitions that can add value to your business, you need to know what your business does well and how you can take that competency and apply it in new ways. It’s an approach that takes the development of and adherence to a well-defined strategic plan, but the creativity and flexibility to be willing to try something new — and the discipline to know a good move from a bad move.
Attack new markets
To seek out and effectively integrate new companies into Ceradyne, Moskowitz and his leadership defined an area of focus for the company’s technological muscle.
“We’ve always had a very clear idea that we make generally large structural ceramics,” Moskowitz says. “That’s different from the high-volume electronic ceramics that are used in ceramic capacitors, microwaves and semiconductor packaging.”
With those boundaries set, Moskowitz has empowered his key decision makers to scan different industries looking for potential targets of opportunity.
“We have a clear, pragmatic culture that starts with me,” he says. “I founded the company in 1967, and a lot of the process starts from that point going forward. Now that we’re a diversified global advanced materials company, every person in a key position is keeping their eyes open. In addition, we have myself and our president of North American operations working with our vice president of business development, and the goal is for us to get to a point where we’re acting in consensus on a given project.”
If consensus on a acquisition cannot be reached, if there are too many questions from key players that aren’t adequately answered, Ceradyne will often scrap the idea and rapidly discard the opportunity, coming to the decision within weeks. If Moskowitz and his team are encouraged by their initial research, it will often take up to six months before Ceradyne is ready to invest money and make the acquisition happen.
“First, you have to be interested in doing the deal,” Moskowitz says. “You have to like it, simply put. Second, the company we’re acquiring has to really want to be a part of the company. We still have a very collegial, entrepreneurial culture, so we never do a hostile deal. There has to be a rationale for the sale, and the people who are going to stay with the company, we have to feel like they like us. After that, you start to get into the things that every acquiring company does — five-year projections, due diligence, speaking to key customers and opening an ongoing dialogue with key employees.”
Moskowitz says it is almost always prudent to approach any acquisition with caution. Stay conservative regarding the type of business you’re willing to buy and the amount of money you’re willing to spend. There will always be another opportunity to make a strategic addition to your company. But digging out from a poorly vetted or poorly financed acquisition could take years. In a worst-case scenario, it could endanger your company.
“Never bet the farm,” he says. “It has to be within reason of your resources. That is the first thing we always try to remember. The second is that, generally speaking, we want it to be within the framework of our core competencies in the areas of advanced technical ceramics and high temperature materials. Third, at least in our case, we want it to add value almost from the beginning. We’re not looking to complete somebody else’s research. We’re not looking for a turnaround. We’re looking to pay a fair price, generally in cash, and have the entity that we acquire add value from the beginning.”
But finding an acquisition that will add value to your company doesn’t mean that you’re not going to have work to do to once the purchase is completed. Acquisitions are almost always a scratch-and-dent sale, and even if you find a company that is a great fit, you will still need to spend some time under the hood. How much time you’re willing to spend is a good indicator of how much risk you’re willing to take.
“If you’re really reaching and going into debt, you’re leaving no room for problems,” Moskowitz says. “And acquisitions are problems. There is a reason somebody is selling it. People don’t sell companies that are going to turn around with phenomenal results in the next 48 hours. So you have do a lot of due diligence, don’t reach beyond your means or theirs, and keep in mind that the people involved in the acquisition are important.”
Lead the people
You might make an acquisition to bring a new area of expertise to your company, a new product or for other strategic reasons. But you can’t lose sight of the people involved. When you’re acquiring any company, you’re almost certainly going to have to handle the people who had been operating the company. You’ll have to decide how to best employ them, or if you can’t move forward with them, how to part ways.
As the acquisition process is progressing, Moskowitz and his leadership team have a simple method for getting on the same page with Ceradyne’s potential new employees: They talk to them. The information gleaned from casual lunches and dinners can be, on some level, more valuable than what you learn through your formal due diligence process.
“First off, you just ask them what they think about your company,” Moskowitz says. “We did an acquisition not so long ago, and at one of the early dinners in the whole process, one of the key people in the company we were acquiring said to us, ‘You know, this investment banker is the one actually doing the deal, but we’d like to express that we would like to be a part of Ceradyne.’ Although these people didn’t have the final say because most of the key management was not a part of the company’s ownership, their desire was made clear.”
If there is dissension on the team of the acquiring company, the more you interact with them, the sooner it should become evident. Acquisitions aren’t popularity contests, but if high-ranking members of the acquiring company have genuine reasons for hesitation, you need to quickly identify and address the issue, or your purchase could be in danger before it ever gets off the ground.
“We’re always talking to the people who are selling, because we want to really see if they like us,” Moskowitz says. “We want them to like us, we want to like them, we want to have a very collegial relationship. Deals often sour because of individuals. They didn’t want to make a deal or they didn’t want to be a part of it. There are a lot of personalities involved when you get into making acquisitions.”
Know when to run
In acquisitions, size does matter. Size equates to risk. The larger the company you’re looking to bring aboard usually means the more money paid out for the purchase, the more people involved and the more complexity involved in piecing the two companies together.
Ultimately, you need to set a level of risk tolerance that is right for your business and not stray over that line, no matter how tempting the purchase may be. You need to know what you can spend and what your company is capable of handling in terms of growth and new areas of practice.
At Ceradyne, Moskowitz doesn’t draw a definite line in the sand, but the red flags start going up once an acquisition surpasses the $100 million mark.
“We’re very cautious past that point,” he says. “We’ve only done one acquisition over $100 million. And it does take a level of discipline to walk away. I always point out to my team the number of deals we’ve walked away from, because it’s as important as the number of deals we’ve actually made.
“Often times, a company we’re looking to acquire has investment bankers, and their job is to get the highest price, and sometimes they can act in a manner where we make up our mind that we’re just not going to do it. If they create an auction type of atmosphere, we’ll say, ‘This is the number we’re going to pay, and if you can get more money, then do it.’ And that becomes the walk-away point.”
Years of watching the aftermath of bidding-war acquisitions has solidified Moskowitz’s belief that it’s the wrong way to do business.
“In the times we’ve been outbid or are not going to the next round of the bidding, in a percentage of those times, things have not worked out for the company that ultimately made the acquisition,” he says. “There might be other reasons it didn’t work out — we just had one of the worst recessions — but for some reason, it didn’t work out.”
And if an acquisition doesn’t work out, you might have your moment of frustration. But then, you have to get back to work figuring out what happened, and your course of action moving forward.
“If an acquisition isn’t working out, you cry,” Moskowitz says with a laugh. “But after you finish crying, you start to think about where you want to go from here. You do your best to mitigate thee problem. For us, that usually means we take a look at reducing resources or maybe reducing people, and try to understand why things are so different than they were a month or two before you said you were going to do the deal. It’s usually a money issue, but it could be an issue with culture. We haven’t found that, because we work so hard before a deal to try and ensure that we’re all on the same page or at least close enough.”
How to reach: Ceradyne Inc., (800) 839-2189 or www.ceradyne.com
The Moskowitz file
Born: New York City
Education: B.S. in ceramic engineering, Alfred University, Alfred N.Y.; MBA, University of Southern California
History: Moskowitz co-founded Ceradyne (NASDAQ: CRDN) in 1967 in order to develop, manufacture and market a new product line of advanced technology, structural ceramics for defense, industrial and consumer applications. The company has grown from a founding investment of $5,000 to become an international, publicly held corporation with research and manufacturing facilities in the United States, Germany, Canada, China and India.
What is the best business lesson you’ve learned?
To create a culture that recognizes the contributions of individuals and to be very clear in recognizing that contribution not only with words or praise but with compensation and other recognition. Without the key people, there is no company.
What traits or skills are essential for a business leader?
The business leader often has to look inside the company, as well as outside to its customers and shareholders. Inside, there must be a concept of collegiality and building consensus with a reasonable focus on objectives and performance. To the outside world, the business leader must be professional and calm, and as a public company, always truthful and transparent.
Marc Graham has seen it all unfold. He knows where the automotive industry stands.
If you’ve listened to any of the news coming out of Detroit in the past two-plus years, you know the automotive industry has seen better days. And it’s not just the automakers; it’s the service providers and component suppliers that rely on the automakers for their business.
So when you find out that Graham is the president and CEO of AAMCO Transmissions Inc., in charge of piloting 5,000 employees and franchisees through the recession, you might think he’s been bailing water in earnest, just like the rest of the industry.
You’d be wrong. AAMCO is actually growing, for a very simple reason: It service the cars that increasing numbers of consumers are keeping in lieu of making new auto purchases.
“This is one of the few areas that actually lives quite well in a recession,” says Graham, who also heads AAMCO’s parent company, American Driveline Systems Inc. “As we’ve gone through the last couple of years, in a situation where consumers cannot or do not buy new cars, they’re leaning back toward an area where they’re taking care of an older car. In the past, when they reached a certain point with maintenance costs, they’d just buy a new car. Today, they’re investing in that vehicle and bringing it back to an as-new mechanical condition. That works extremely well for the automotive aftermarket, and specifically AAMCO.”
But converting AAMCO into a full-service aftermarket auto repair brand has been the prevailing challenge that Graham has faced over the past several years. For more than 40 years of its existence, AAMCO specialized in transmission repair. But as transmissions started to resemble computers instead of mechanical components, Graham began to realize that his company needed more than transmission repair to sustain itself.
“If you’ve driven an older car, you might remember a transmission slipping or feeling a clunk or a grind,” he says. “But in recent years, transmission failures have become more electronic. You might have a light come on in the dashboard or a symptom that feels more like a fuel starvation. So as we looked at that, we said that we really have to start covering the entire car if we’re going to protect our transmission business.”
Graham needed to convert AAMCO from a niche player in auto repair to a comprehensive auto maintenance company. He had to build the case and convince thousands of franchisees — most of whom were running successful AAMCO stores under the old model — that it was a necessary move for the long-term health of the company.
Build your case
This wasn’t Graham’s first business transformation. As the head of Jiffy Lube, Graham oversaw a similar diversification from a core oil change business to a preventative auto maintenance business.
“We were quite successful with that, years ago,” Graham says. “We added about half a billion dollars of profitable revenue to their franchises.”
But AAMCO was even bigger, and even more entrenched in their market niche, with almost half a century of living by a successful transmission-based business model. Graham had to meet his 5,000 employees and franchisees head on, with some corporate vision-based evangelism — though based far more on data than cheerleading.
“What we did, and what we continue to do now, is maintain that constant exposure to doubters of what is working and what is not working, what the successes are, and doing it in a very factual formula,” Graham says. “For me to sit in front of an AAMCO franchisee and say, ‘This is the right thing to do, just believe me,’ works for some situations. But when you talk about the true dissenters, they need to see facts. I’ve dealt a significant portion of my life with the mantra, ‘You can’t hide from facts.’ So as you look at your successes and you’re able to show increases in revenue and strong return on investment, show strong profitability, and continue to show that to the doubters and dissenters, little by little that group erodes into a group that is now the adopter.”
But hammering away on the facts is one thing. Showing your people how your planned company shift will benefit them is something else. You have to put the new business model in a frame of reference that shows each person the benefit on an individual level.
Graham could see the revenue-based benefits that awaited a diversified AAMCO brand. But what his franchisees wanted to see was how the change would affect profit at the store-operator level.
“All of us at the CEO level, we talk about revenue, revenue, revenue,” he says. “But one of the things you hear a lot from the AAMCO team is profit, profit, profit at the operator level. So I’m not showing them revenue. I’m showing them an income that they can attain, and I’m also showing them how this strategic direction supports them in an eventual sale, in the increase and equity of their business.”
Graham and his leadership team constructed the message by breaking down AAMCO’s business from the standpoint of sales, revenue and profit elements as it pertained to their core business of transmissions. Then Graham took the new business and did the same dissection.
“We proved to them that there is a significant amount of volume in the new business, and that volume could be transferred at an equal income rate as the core business,” Graham says. “On a global level, we showed that the opportunity was significant, and underneath that, we showed that it wasn’t just revenue, it was profit. And the last part of the message was underscoring that this great transmission business could be enhanced by total car care. If you take total car care, here are all the reasons why it is going to support and grow the transmission business. That is the hardest thing to hear and understand when, after 40-plus years, they’ve been running a business in a very specialized, one-method platform.”
Work with the stragglers
Graham had to get his franchisees to think about the business in new ways, which meant getting them to realize that each store could utilize its resources in new ways. For most simple auto repairs, such as brakes, AAMCO stores were already outfitted with the tools and manpower to take on the added responsibility, meaning very little in the way of capital investment. But for more complicated repairs, such as air conditioning, investment was required on the store level, increasing the skepticism of some franchisees regarding Graham’s plan.
“If you look at what you have to have in a facility, first of all they already have an average of six or so bays, and they have the technicians with the skills to service a complicated part like a transmission. So for them to transition to brakes, it requires almost nothing in the way of investment,” Graham says. “But some areas do require an investment, and I tried to emphasize that it’s purely a cash issue. If you can get a quick return, that cash issue goes away pretty quickly. So ultimately, it’s a fairly low capital investment to get hundreds of thousands of dollars in new revenue.”
In communicating with reluctant franchisees, Graham kept coming back to the concept of return on investment, and holding up some of the early franchise successes as examples.
“Something we communicate to every franchisee, and something that I’d tell all CEOs, comes back to return on investment,” he says. “Capital, in and of itself, looks like nothing more than cash. When put against the opportunity of profitability and ROI, it becomes far more measurable.”
To leverage his leading-edge franchise successes with the new business model, Graham started to create a dialogue among franchisees, and dispatched members of the company’s franchise support group to maintain personal contact with franchise owners.
“You have to expose everyone to your successes,” Graham says. “Our franchisees came to a website called myaamco.com, which only the AAMCO centers can access. They can see the exposure of the successes. They can see the top 50 and top 100 stores, and how much they’re doing, how beneficial it is to those centers. It drives them harder to get out to those same levels of achievement.”
The franchise support group has been retrained on the sales and marketing, and profit and loss aspects of the company’s business, so that when they go into an AAMCO store and talk to the franchise owner, they can talk about the ways in which revenue and profit can be improved.
“They can sit down with the owner, walk them through the improvements in revenue, items that can improve the revenue, how they can attain profitability and how they can market,” Graham says. “That is a big separation from how it has been done in the past.”
Graham says that currently, most AAMCO centers are involved in the service items that required a more substantial capital investment, and are showing the returns on investment that Graham initially projected.
“Now we have a great story to tell from the standpoint of ROI,” Graham says.
Continue to set goals
Sometimes, Graham’s operations heads do a double take when Graham comes to them with a new opportunity. But for Graham, it comes back to setting goals for the company that are aggressive yet attainable. You find that sweet spot outside of your comfort zone but within your company’s capabilities, by looking at the metrics of the situation.
“Here is how I lay out the metrics, and then I sit with my operators and they lay out back to me how they see the metrics,” Graham says. “What comes from that is the believability that the opportunity is scalable. Then, back to the question of goals and what is palatable on an annual basis.”
When setting goals by which to advance a new plan, you can find yourself tempted to lose patience. There is a new market that needs conquering, and you don’t want to wait. But the data you collect, and the process by which you analyze it, can go a long way toward restoring your nice, steady pace.
“When you see a business that you can grow at a 4x or 5x level, and an existing business that can grow at a nice number, your patience level as a CEO isn’t high,” Graham says. “So a lot of the goal setting, at least in my experience, is offset by an understanding of what is palatable and achievable.
“I was asked years and years ago how I looked at a company that I was getting ready to operate, and I said, ‘I’ll look at a wall, and on that wall are all these different knobs I can turn. Every single knob can create a dynamic that would give us more opportunity and profitability, but I know that if I turn too many, we flood.’ So that whole idea of goal setting, it comes more to an understanding of what level of patience should be applied. You make sure that you’re accelerating the opportunity, but the people in the facilities are able to keep up and enjoy it at an appropriate rate.”
Several years into the new business model, AAMCO is succeeding in becoming known for more than just transmissions.
“On our whole strategy, our franchisees were quite engaged, are still quite engaged, and we have gotten adoption on it,” Graham says. “The big key is to step back and look at the entire landscape. Don’t dive into it. See what the other side thinks, and then try to re-convince yourself from the standpoint of, in our case, the franchisee. Why should I believe this plan? As you break it apart and dissect the landscape, you should be able to convince yourself whether this is the right path to take. Then, you have to listen to your constituency and make sure you are working with them to knock down the barriers to the opportunity.”
How to reach: AAMCO Transmissions Inc., (800) 292-8500 or www.aamco.com
The Graham file
Born: Monterrey, Calif.
Education: Stanford Business School
What is the best business lesson you’ve learned?
Step back, stand in the corner and watch what is going on around you. It’s a fantastic business lesson because the people who are high performers do all the work, but they could perform at an even higher level if someone in your position would be able to mentor them.
What traits or skills are essential for a business leader?
The biggest skill is going to be an open mind. It’s so simple for someone in my position to mandate what I think is right, but you have to refuse to impart direction in that way. You want the entire team pushing forward, which you get far more as a collaborator than as someone who is only dictating rules.
What is your definition of success?
Success means everybody in the process understands what they are doing, they’re driving toward a common goal, can explain the goal and perform at a level that is satisfactory to everyone involved in the process.