As investors, our focus is on companies in the lower middle market. This typically means companies with annual revenue between $15 million and $75 million. As such, our strategy for value creation is different from investors who focus on larger companies. Those investors, typically, include financial engineering as a significant part of their value creation strategy.
We, by contrast, base our value-creation strategy on three elements: leadership development, enterprise improvement and growth. If we accomplish the first two, growth usually results. Even if it doesn’t, such as during the recent recession, significant value can still be created.
Good leaders make good companies. It is not required that our leaders have a long track record of success. We can support them in accomplishing that. What is required is that the leaders possess the personality traits and capabilities that are required to realize the vision of the company. For example, if the success of a company hinges on continually developing creative, new products, then the leader of that company must possess a personality and leadership style that fosters ideation and creativity. By contrast, such a leader likely would not be effective if they needed to streamline manufacturing processes. Good leadership is paramount.
Be sure you have the right team in place. Do a critical and honest analysis of your senior leadership relative to the company’s needs, and adjust accordingly. If you are the owner and at the center of most activities, this may mean firing yourself.
One of the elements we look for in an investment is the ability to evolve the enterprise. If accomplished, this also will create value without the need for growth. However, when coupled with growth, the value creation is multiplied. Enterprise evolution, typically, is accomplished by harvesting one or more of the following:
Strategic planning. For us, the strategic plan is the cornerstone of enterprise improvement. It is not a just a budget. It sets the management team’s vision.
Sales and marketing. This is an area that often can be improved. In our experience, a majority of lower middle-market companies have not invested sufficiently in this area.
Systems. Often there is an opportunity to evolve an enterprise by improving or replacing systems, including accounting, ERP, oversight, reporting and accountability.
Asset utilization and balance sheet. In lower middle-market companies, there almost always is the ability to improve and create value through better asset utilization and balance sheet focus. This may include using a return on investment framework for capital budgeting, as well as basic items such as improving accounts receivable, accounts payable and inventory turns through focus and technology.
Professional support and other external resources. Most business owners and senior leaders build a relationship of trust with their service providers. When making an investment, we appreciate and respect those relationships. We often find a level of complacency. Often, the mere introduction of a competitive scenario will yield better service at the same or even reduced cost. This is most often true with auditors, senior lenders and insurance and benefit providers. Providing services should not be an evergreen annuity for the service provider.
If you are able to accomplish some or all of the leadership development and enterprise improvement initiatives described in this article, you will create value irrespective of business cycles. Even better, you are likely to also create growth.
Dan Lubeck is founder and managing director of Solis Capital Partners (www.soliscapital.com), a private equity firm headquartered in Newport Beach, Calif. Solis focuses on disciplined investment in lower-middle market companies. Lubeck was a transactional attorney, and has lectured at prominent universities and business schools around the world. Reach him at email@example.com.
There seems to be a widely held belief that success correlates to time in the business world. In other words, business owners need to have a number of years under their belt before attempting to expand or branch out. I ask, why? Why not let your experience be a part of your growth?
I look back at the evolution of my duct cleaning business, DUCTZ. It grew from my daughter’s bedroom into the nation’s largest duct cleaning franchise with more than 150 units. Now, along with its sister franchise, HOODZ, it benefits from ownership by BELFOR, the world’s largest property restoration company. All of this in less than five years’ time.
How? Through partnerships, mergers and acquisitions. And most importantly? A forward vision and an open mind from all members of our team.
When I started DUCTZ, I had a passion for what I was doing, but insufficient knowledge for how to share my vision. I needed access to the people and places that needed these new services. Who better to open those doors than the contractors who did have the access? Once you convince key people that you offer a quality service, they will naturally begin to refer you to others. Then, it’s not about how little time you’ve been in the business, it’s about how long of a time they’ve been in the business.
Seeking a way to accelerate my growth, I identified an existing, synergistic franchise with a growing number of units. I reached out to this company. It turns out, the timing was right and a partnership was a great fit. We hitched our wagon to theirs and increased our reach almost overnight. That was step one.
Step two was to seek people or services to fill a void in my current system. I met with a company that helped write the federal government standards for indoor air quality. My recent partnership had afforded me the credibility to negotiate with this new company; we identified our strengths and their needs. Together, we would “have it all” and the merger became a reality. This move, single-handedly, made us the largest duct cleaning franchise in the nation. In effect, I had to give up a piece of the pie, but in so doing, I orchestrated the opportunity for a much bigger pie.
When we established our niche as the nation’s largest duct cleaning franchise, we were given an opportunity by BELFOR to do work for them around the country. Why? Because we were strategically positioned — we had locations in the places where they needed us. This association with BELFOR enhanced our credibility on a local level, which led to increased referrals and contractor relationships. It wasn’t long before BELFOR made the offer to acquire our company. An association with a company of this magnitude opened a new world of opportunity while reinforcing our core model.
Here are some other things to remember about accelerating growth:
Never lose focus on your core business.
Whether embarking on a partnership, merger or acquisition, if you’re not careful you can strategize your way into an entirely different business. Stay open to diversification as long as your core business stays intact.
You cannot be afraid to think outside of the box.
To think out of the box is your job — if you don’t, someone else will. Your competition is strategizing about how to get ahead of you as we speak. My advice is to actively live your role as a strategist — don’t get bogged down in the daily emails and operations — that is not where your time is best spent.
The best strategy? Never stay static — it’s crucial to remain dynamic and to keep moving forward.
John Rotche is the president of Ann Arbor-based BELFOR Franchise Group Inc., a multiconcept franchise system. The company’s two franchise concepts, DUCTZ and HOODZ, center on the compliance and proper maintenance of commercial kitchen hoods and residential and commercial air duct, carpet and upholstery cleaning services. For more information, visit www.belforfranchisegroup.com.
Gary Schaffer wakes up in France most days out of the year even though Inmedius Inc., a provider of enterprise software solutions, is based in Pittsburgh. The president and CEO of the global company likes being centrally located.
In the mornings he speaks with India and in the evenings he calls the West Coast and his daytime hours are busy contacting everywhere in between.
“Our largest challenge is having a moderately growing company and a company that is worldwide and the challenge is dealing with the virtualization of our work force,” Schaffer says. “How do you keep everybody communicating and in sync with each other when you have offices around the world?”
It’s a challenge that Schaffer and his 75 employees are always looking to solve and improve within the company.
Smart Business spoke to Schaffer about how he keeps his global business in sync.
Synchronize processes. The more highly distributed you are, the more business process driven you have to be. If we’re all in an office together and we’ve got a business challenge, we can just lean over the cubicle and say something to our colleague. If you’re on the other side of the world and something has to get done, you have to have an agreed upon process that you all agree beforehand is going to happen.
As a small business you don’t necessarily want all the overhead of huge business processes. As a distributed small business, you have to have those processes in place. That’s another challenge. How do you deal with a small business that has the needs of a large business business process?
The first thing you have to do before you put a new process in place is agree on the process. Then monitor the process and document the process in either a task list or check list.
Make sure someone owns it. What I’ve found over the years is that without direct ownership by somebody, not by a group of people but by somebody, these things do not work well. You need to be able to hold one person responsible and one person needs to be empowered to make sure the process works properly.
Promote strong employees. Inmedius is really a niche software services business, so we don’t have a big pool of competitors we can pull from or necessarily people who understand or know our domain before they come to our company. We are actively promoting people in our company into different roles to take up more management roles. We had somebody that was in a finance role and was just moved to the director of operations. That’s because someone that was in finance over the years will understand our business, understand our products, understand our services, and understand our customers.
You need to sit down and systematically do ‘what if’s.’ What if we move Bob, who is a great performer in production, into a sales assistant role? What would that look like? What advantage would that give us? What disadvantage would that give us?
Some of these may be very unnatural. When you talk about product innovation, one strategy is to take all your assets, all your products that you own and say, ‘What would it be if we mixed this product with this product? What would that give us?’ Unless you do that systematically, you’re never going to come to those conclusions. You have to do them with people and roles too. You have to line up all your people and line up all your roles and say, ‘What would that look like with this person in that role?
Find the right people. Personality profiling is a must. That’s how you know what the best way to manage that person is. You have to also get a very good understanding of what work environments people work best in. You have to go beyond just skills.
Those other areas are as important, or more important, than the skills. Somebody could be a fantastic programmer but not a team player and they are on a team programming project and that’s not going to work out.
Somebody may be a great programmer but doesn’t like interacting with customers. So we better make sure we get them in the right role because if the role is to lead the programming group and be contacted by customers, the person is going to fail. You have to look at whether they need a structured environment or an unstructured environment. Different parts of your business have different needs.
HOW TO REACH: Inmedius Inc., (412) 459-0310 or www.inmedius.com
When David Lingafelter became president of Moen Inc. in late 2006, the flow of prosperous times had been replaced by a plug of economic uncertainty.
Moen’s business is faucets, sinks and accessories, and it’s significantly dependent on the U.S. new construction market, which started declining in October 2006 and rapidly continued downward throughout 2007. That was hard, but then the global financial crisis hit, too.
“Just when we thought, ‘OK, is this thing going to bottom out,’ the rest of the world takes a dump,” Lingafelter says. “Everything else just goes in the swirling uncertainty. Consumers back even further away, so a business that was many, many years of record sales, year after year, you have this transition. That’s been the toughest challenge.”
Add to that, this entire decline was happening as Lingafelter was taking over his new role as president.
“The normal thing of going from a product manager to a president has its own challenges, but those are manageable compared to a business environment in one of your core markets in one of your core segments declining 70 percent,” he says. … “Most people say, ‘Wow — good timing.’”
While it was challenging, it wasn’t all hopeless. The company was strong in other areas, and he recognized that, as well.
“We’re a billion dollars,” Lingafelter says. “We have a highly recognized consumer brand, and we have a good team. So it wasn’t, ‘Oh my gosh — let’s start over.’ It was, ‘OK, what’s changed, what is changing, what does the trajectory look like, and what does that mean to us?’”
What that meant was sticking to what had gotten the company where it was — good strategic planning and accountability.
“It’s not that we’ve done it differently because of that, but it’s just more important, and what we’ve done throughout the year is we’ve had to iterate more,” he says.
Moen’s approach to planning involves aligning the leadership team, diverging and converging, prioritizing initiatives and then measuring. Sticking to this process, even in the challenging times of the past few years, has helped Moen continue to build its $1 billion brand.
“We’re still bullish on our growth in China and with the retail markets — it continues to grow as consumers look for that value in do-it-yourself,” he says. “It’s good. It’s not double-digit growth, but we’re positive. We’re positive on our growth opportunities in places, but we’re not out there spending way ahead of the growth, so we’re continuing to be cautiously optimistic.”
Align your team
Before you can do any game-planning, your leadership team has to understand what’s guiding the process.
“First and foremost, your leadership team is aligned,” Lingafelter says. “If your leadership team is not aligned, then they’re coming in with different headsets. They’re coming in with different glasses on.”
This is the time to look at your vision, mission and strategic initiative pillars to understand why you’re in business and what the purpose of your organization is. Keeping these elements at the forefront of each executive team member’s mind will ensure that your team stays on the same page.
“If everybody says, ‘OK, yes, we understand our vision, yes, we understand our mission, yes, we understand our goal, [and] yes, we believe in our strategic initiative pillars,’ then you get better alignment,” he says. “Then you have a balanced discussion. It’s still not easy, but having those guideposts to help you through the decision process, I think, is key.”
If your team isn’t aligned already, Lingafelter says you have to recognize it’s not going to happen quickly.
“You can’t do it in a [single] meeting,” he says. “It’s not like we’re going to set the vision from 9 to 10. It’s not a completely evergreen process because you don’t want to change it all the time, but I think you have to have a disciplined process of understanding your marketplace, understanding your opportunities, understanding who you are and have enough vision to say, ‘Here’s the direction that we want to go,’ and that process you need to have as much fact-based information as you can.”
At Moen, the company’s three main strategic initiatives are growth, business improvement and organizational excellence, so anything the company as a whole does has to support one of those initiatives. Then that cascades down to each business unit level, and anything that unit proposes must also support one of those three initiatives.
“We use the same language as it moves through the organization,” he says. “Common language makes communication a heck of a lot easier.”
If you can start with these commonalities, the entire process of prioritization and planning is going to be a lot easier.
“It must start with leadership alignment,” he says. “If you don’t have that, you don’t have a prayer because everybody will communicate differently. It’s OK to have a different style, but your fundamental message has to be around those strategic guideposts and those initiatives.”
Diverge and converge
Once you’re aligned with what your vision and mission are, then you have to lead your team through a process of diverging — brainstorming — and converging — bringing everyone back together again to decide what’s most important.
“The diverge and converge can happen at the team level, the group level or the corporate level,” Lingafelter says. “The process is the same — it’s exactly the same — if you boil it down.”
Often you’ll have to facilitate this process yourself because it’s not something that comes naturally to many team members.
“Allow them to diverge on the facts, and then you converge on to your strategy,” he says. … “[It’s a] process that says, ‘OK, this is what we’re going to do. We’re going to talk about our marketplace, and we’re going to get information on our marketplace — let’s all get on the same page. Let’s talk about the company. What are we good at? What are our strengths? What are those things that we think are our competitive advantage and how do those marry up with the marketplace?’”
The amount of people that you involve in this process depends on the size of your business.
“It’s tough to do on your own, but I would say, no matter what, get multiple heads in there to help you at least with the assessment because a lot of times, different views get you to a different place,” Lingafelter says.
For Moen, this happens across the organization at the business unit level.
For example, if one business unit says they want to grow with new construction plumbers, they may start by brainstorming what they know about them. What are the facts? What are the trends they’re seeing? What do they think the future state as it relates to that specific area looks like?
“This is not days and days,” he says. “It’s let’s spend a few hours talking about this, and then you get to the next session, and someone facilitates and says, ‘Let’s take off our headsets and let it run.’”
Sometimes, you need to do some pre-work to these sessions. In those cases, Lingafelter says unit managers may ask their team to brainstorm on their own and come to the table with their top 10 things that they think are challenges with new construction plumbers.
From there, the diverging has to end, and the converging begins.
“Then you do simple things like, ‘Let’s prioritize all these ideas. What do you think? Let’s bring it in a little tighter,’” he says. “It’s not rocket science. You just need to facilitate through the process.”
From there, that business unit will come to the corporate level with, say, its top three things they want to do because they feel those are the priorities as it relates to new construction plumbers. That unit would then take those three items to the corporate level and talk about not just the ideas but what they think they can return on each item and how much each will cost.
“They’ve gone through diverge, converge and this is what they’re recommending they can do,” he says. “It’s not hard, but it’s a process — you have to have a discipline.”
By doing this within each business unit, it helps the corporate level not get bogged down in initiatives that aren’t very important and focus on what will be most beneficial.
“We’ve done this long enough, and our people are seasoned enough to know that wish lists aren’t going to fly,” he says. “The more confusion that they create, the less likely they are to get their initiatives communicated.”
After every unit brings its top initiatives, from there, the leadership team has to prioritize which initiatives out of all of those most-important ideas to focus on.
“When you’re talking about strategic tradeoffs you’re not diverging anymore,” Lingafelter says. “You’re trying to converge on the decision.”
At this point, every business unit has identified what its most important priorities are, but now you have to take it a step further.
“It’s not like we have a bunch of initiatives — ‘Oh, some of these aren’t so important,’” he says. “No, we neck it down to the most important initiatives. So you say, ‘OK, now we’re going to neck it down to only the most important, and you have to make prioritization discussions.”
The vision, mission and strategic initiatives drive those discussions and help identify where tradeoffs will be. This process starts with discussion to identify the facts.
“You try to get everything on the table — have the conversation about tradeoffs,” he says. “Listen to the downside. Otherwise, if we don’t do this, here’s the implication, and you have to vet both of those because a lot of times, the premise on the upside is probably higher than it actually is, and the scenario downside is probably lower than it actually is, so as leaders, you have to try to manage the message or manage the communication a bit. It’s probably not that bad, and it’s probably not that good.”
First, he looks at what the costs are for each initiative. It’s important to look at total costs — operational, finance, IT, human resources, etc. — not just what’s on the surface, and include any of those in the total cost. Then you have to look at what the returns on those investments are.
“A lot of it comes back to getting results,” he says. “If you say, ‘Look, is this in a shorter-term strategy, where it’s within the calendar year? Is it a longer-term strategy? Is it further out than that? Is it changing our positioning?’ You look at how long it takes for that to pay off, and we make calls that way.”
You also have to look at what your company’s strategic initiatives are that everyone was aligned to.
“A vision and strategic initiatives don’t just tell you what to do — they tell you what not to do,” Lingafelter says. “When you’re making tradeoffs without having guideposts, you can naturally steer off course. You have to have leaders that say, ‘OK, wait a minute, let’s remember — what’s our strategic initiative? What’s our focus? How is this relevant?’”
For example, at Moen, Asia is a growth market for the business, so they’ll make investments there, even if they could get a higher payback somewhere else. Sometimes that means cutting one business unit’s budget to fund that other initiative. Someone may get upset and ask why his or her budget is getting cut when three of his or her projects have a higher return than what the company is doing in Asia. But Lingafelter explains to people that the company will still fund that Asia initiative because its strategic guidepost says it wants to grow internationally and diversify from U.S. new construction.
“You come back to those guideposts,” he says. “You come back to those decisions. You know why? Because everybody had the same glasses on when you elected that process. It may not have been exactly the way they thought, but everybody needs to be aligned so you can have rational versus emotional discussions.
“This is not a perfect science. It doesn’t come without stress. It doesn’t come without discussion. Compromise can be dirty sometimes, but you can end up in a better place. I believe that. Taking your marbles and going home because you’re not getting everything doesn’t work.”
It’s important as the leader that you properly facilitate this process so everyone has the opportunity to share what their priorities are and why they think they’re important.
“You try to facilitate consensus and communication because I have very skilled, very smart and very capable people, and you don’t want to disenfranchise them in the process,” he says. “You don’t want people taking their marbles and going home, so you continue to go back to, why is it important? Is it a growth initiative? Is it a business improvement initiative? Cost, quality, service, new products? Is it organizational development?”
You also don’t have all the time in the world to have these conversations and make these decisions. At Moen, they’re constrained by when they have to provide guidance to the parent company, Fortune Brands. It’s important to communicate those time constraints as well so people understand when the stopping point is.
“There are hard stops,” he says. “This is the decision time frame. This is when we need feedback. This is the discussion we’re going to have. This is the prioritization discussion we’re going to have, and we have to stick to those timelines.”
Lastly, you have to look at your budget and what, of all your ideas, is feasible within it. Fortune Brands has a performance expectation for Moen to get results, so he can’t get caught up in something that is risky or too expensive.
“It isn’t a wish list, but it’s a heck of a lot more than we can afford,” Lingafelter says. “It’s prioritized because it’s a strategic initiative that we’ve talked about. There’s never enough funding. This is no different than any other business. The government can print money — we can’t, so we have to control the budget.”
Once you’ve heard all of the initiatives and looked at the facts, then it’s time to make the important decisions of what to focus on and communicate that to your team.
“You try to listen and then repeat back, ‘OK, this is what I’ve heard. I think these are the tradeoffs, and I recommend this is how we go forward,’” he says. “Are there times a leader just has to say, ‘We’re going north?’ Absolutely.”
Taking this approach to prioritization is also helpful when last-minute opportunities arise long after you’ve done your planning.
“That gives you things on deck, too,” he says. “You can say, ‘We have a few extra dollars, where do we go?’ It’s not, ‘Oh my god!’ We can say, these are the three things on deck, and let’s go fund them.’”
Once you choose your top initiatives, then you have to make sure that people focus on them and follow through.
“Every initiative has the ability to track it,” Lingafelter says. … “Each initiative rolls back, at the end of the day, to growth, business improvement or organizational development.”
For example, a metric in organizational development could be that every employee has an individual development plan. A way to measure that is to say that every employee will have an IDP by March 1.
“That’s a metric,” he says. “That means you have to spend one-on-one time, you have to establish an IDP, log an IDP — those kinds of metrics have to be tied to your initiative.”
It’s critical to take the time to put in some sort of way to measure each initiative.
“If you’re not disciplined with prioritization and establishment of initiatives and tying a metric to it, then it will be tough to track,” he says. “Are you executing and exceeding or excelling in your initiative? You have to just be disciplined to say, ‘OK, here’s the initiative, what’s the metric — how are you going to measure it? What’s the cadence? Again, it sounds simple, but everybody has to have that same headset of process of here’s how I want to present my initiatives.”
At Moen, a new three-year strategic plan is completed every year. That plan is put in a binder or spiral bound, and each initiative is given its own page that outlines the key action, the things they’re going to do to reach it and the timing.
Then, when Lingafelter meets with the person in charge of that particular initiative once or twice a quarter, he asks how they’re doing with it in regards to both progress and timing. Each initiative is coded with green if it’s on track, yellow if it’s a little behind and red if it’s falling behind or being killed. If it’s red, then he discusses the reasons — did they have enough resources? Is the situation different than they originally thought? Have business conditions changed? Or did you just miss it?
“As long as you don’t have too many, then you move on,” he says.
Each initiative will have a plan not just for that current year but also for each year in that three-year plan.
“They’re much more detailed than the next year — a little less detailed the next year and a little less detailed the following year,” he says.
As the company moves through its strategic plan for that year and prepares the next three-year plan, because metrics are such a crucial part of measuring progress, Lingafelter can adjust numbers up or down as needed so that the next plan is likely to be achieved. For example, in the fourth quarter of 2008, numbers got worse, so he adjusted the numbers for 2009 to reflect that.
“It’s generally one of two things — most recent performance and trend lines,” he says. “We look at how we did last month, how is the quarter going and how does the future forecast look. We do a lot of modeling, so we look at what’s happening in the market and we say the trajectory looks like it’s going to be up, flat or down, and we make adjustments based on that. We use a rearview mirror on performance and we use the windshield on forecasting and trend lines so we have that dialogue all the time.”
While this is a lot of work and requires a lot of give, take and communication, Lingafelter recognizes that this process is why Moen and his 3,000 employees are still doing well despite its largest market being down.
“When your culture is built around this kind of teamwork, it helps,” he says. “Leadership’s job is to continue to facilitate that and continue to lead. I think our organization has done a heck of a job through the adjustments that we’ve had to go through.”
How to reach: Moen Inc., (440) 962-2000 or www.moen.com
When Jeffrey Bowman stepped into the president and CEO role at Crawford & Co., he knew it wasn’t just the top leader that was changing — the organization was going to need to, as well.
“I use the term ‘acting with a sense of urgency,’” he says. “It was changing the speed to be a global organization and being able to demonstrate that we were a global organization with global clients. … Crawford is actually 70 years old this year as an organization, so a lot of organizations around the 60- to 65-year mark really get themselves to where they have to go through some cultural changes.”
One of the things he saw that needed to change was how the company shared its plans with employees. Typically, plans weren’t shared at all with those working at the insurance company. When nobody knew the plan, people tended to not care what other areas of the organization were doing, so silos had been built across the business.
“We had silos in our organization between various divisions,” he says. “We weren’t sharing best practices around the globe in either management information or technology. We had a very siloed effect around what we were doing around that. We didn’t have a head office that was really dictating to our overseas operations exactly how we expected them to behave as a public company and as a large organization.”
To get the organization acting more as one, he knew he would need to come up with a good plan and hold people accountable. His hope was that in doing these two things, Crawford would start to act more cohesively and become better positioned for the future.
“It’s a journey, and your strategy helps you lay that journey out because you can never change a culture immediately,” Bowman says. “You have to work at cultural changes, and you have to work at the messaging in organizations.”
Create a plan
The first thing Bowman had to do to get the company operating more cohesively was create a strategic plan.
“It’s like a journey — you have to have a point you want to get to,” he says.
Start with what the basics of your organization are — why you exist and finding a way to support that.
“It was really a case of bringing it to a focus of, ‘That is where we start — our mission, vision and value proposition are critical to the organization,’” he says. “Then your strategy comes out of that. … It becomes the focal point of what you do. It’s how you send your messages out. Your vision has to dictate how you behave.”
Bowman looked at many different facets of the company in creating a plan, including talent management, products, financials, dealings with clients and company culture for employees.
“You have to have different parts in the strategic plan,” he says.
As you identify the things that you want as part of your plan, you have to be open to changing it based on what other people say, regardless of whether that person is a clerk or a senior person.
“You have to outline those issues which are important, and what you want to do is make sure you can talk to anybody in the organization about it,” Bowman says. … “They have to have an understanding of what you’re trying to do.”
Bowman and his team created the strategy for Crawford within his first 100 days. They also mapped out what they called the storyboard, which was a breakdown of what they were trying to create in their overall strategy.
“Do you know all of the constituent chapters within the storyboard?” Bowman says. “Does it match the strategic goals we’ve set from the group point of view? Don’t overengineer it. Make sure the execution over a one-year or three-year goal is possible. It’s like MapQuesting something — you start somewhere, and you have an end-direction of where you want to get to. Your vision becomes your destination.”
Another key to creating your plan and map for getting there is to make sure you clearly define what you’re saying you want to do.
“You can wordsmith sentences that become ambiguous,” Bowman says. “What you have to do is create a series of effectively executable plans that are then absolutely easily translated.”
For example, you might say something such as, “We’re going to increase sales around the world,” which is a very wide open statement.
“Increase is a good word,” Bowman says. “Sales is a good word. Around the world? What does that mean? It has to be more defined than that. What’s the marketplace? What is the product we want to grow? That’s where a lot of strategies have to be planned in the sessions that you do prior to laying those strategic plans out.”
Once they had set a three-year plan, he put it up on Crawford’s website, which may not seem like a significant thing to do, but for this company, it was.
“The strategic plan was a very interesting part of it because No. 1, the company had never really communicated with its employees what the strategic plan was,” Bowman says. “We created that within the first 12 weeks, and then we put it on our website, so not only did our clients see what the strategy was, our employees did, our investors did, our bankers did and anyone else did — and our competitors did, and I think that was a very good thing.”
Even in having finished creating it, he knew he would have to continue to refer back to this plan and storyboard as he moved the organization forward.
“A strategy document is a living document,” he says. “Events change, and you have to change an organization to implement the goals.”
Once he had an overall plan in place, Bowman then had to create goals that would both advance the organization but were also achievable so he could hold people accountable to meeting them.
“The biggest issue is taking it and translating it into executable goals,” he says. “It’s a very simple process with a strategic plan. You make people accountable for the results that come out of it. That’s by spending a lot of time understanding the benchmarks that we talked about and making sure that it’s a sensible plan, and it’s not an academic exercise. There are a lot of strategic plans that are more academic than they are practical. We’re looking for accountability. We’re looking for results. If you have a script and a way you’re working, then people are much more inclined to follow that journey.”
One of the things that Bowman and his team spent a lot of time doing was dissecting the number of goals that were achievable.
“You can put down lists and lists of goals — you’re not going to achieve all of them,” he says.
They look at which goals are most important, and they make that distinction by looking at them as they relate to the vision and mission.
“You then link that to the goals you’re trying to achieve,” he says.
There had to be consistency in terms of strategy, financials and the objectives that they were trying to achieve.
Another element of this process was Bowman had each country leader prepare an initial budget and objectives, and those went up to regional reviews. After that, they went to the head office, and he and his team would go through those to make sure there’s a link between what the company is trying to do at a corporate level and what’s going on in those regions and make sure they eliminated duplications around the world.
For example, as part of the efforts to eliminate the technology silos, Bowman appointed a global chief information officer for the first time in the group’s history. Previously, there had been an IT director in the United Kingdom, United States and Asia-Pacific. Before this, they may have only talked once a year and were each doing their own thing. By creating one head position, it would eliminate those duplicate efforts and put the whole company on the same IT strategic road map.
Bowman also made sure to hold people accountable to meeting goals. Just as the board of directors rates his performance each time he announces the quarterly results, he needed to do the same for his people.
“Make sure people understand what they’re accountable for,” Bowman says. “They do things that they understand much easier than things that they don’t understand.”
The key to doing this effectively is using data to help you determine what’s best for them to focus on.
“The world we live in, you get swallowed up in the amount of data you’ve got,” he says. “You have to cut through and say, ‘What is the important data that you’re going to measure people on?’”
He says you have to decide what’s important and track that. Crawford creates a lot of dashboards and produces a lot of analytical information to make sure it’s using its assets in the best way.
Bowman also uses financial incentives to make sure people stay on track. He put a compensation program in place for senior management, which went a long way in the organization. In this plan, 20 percent is based on the group, 60 percent is based on their division and 20 percent is based on their personal performance. By dividing their incentive up in this way, it causes them to look beyond themselves. As a result, he sees more cross-selling among divisions.
“It effectively brings in an approach where people are interested in what’s going on in other divisions,” he says.
Aside from silos breaking down, Bowman has seen other clear changes in Crawford over the past three years.
“Nobody gets frightened about strategic planning,” he says. “People understand what they’re accountable for. It enables us to do more detailed return on investment calculations, understand areas that we need to manage better and where we need more urgency.”
Crawford did struggle as many of its clients suffered through the recession — one whole unit depends on workers’ compensation claims, and with 9 million people relying on unemployment benefits, that area certainly took a hit. But despite those challenges, it has gotten through well. While revenue went up and down during the recession, total revenue has grown overall from $1.05 billion in 2007 the year before Bowman took over to $1.11 billion last year. As the organization looks forward, it will continue to tweak its strategic planning to ensure it stays on track and doesn’t get stuck in the past.
“The thing about a strategic plan is it’s a living document,” he says. “You’re always looking at accountability and making it better. It’s a mindset.”
How to reach: Crawford & Co., (800) 241-2541 or www.crawfordandcompany.com
The Bowman file
What was your first job as a kid, and what did you learn from it that still applies?
I worked in my father’s engineering company handling payroll. I was 15. It wasn’t a huge company. I played soccer and that was one of my passions. [I learned to] work hard and keep your nose clean.
As a child, what did you want to be when you grew up?
Professional soccer player. I nearly got there. That was still my passion.
What’s the best advice you’ve ever received?
I’ve had quite a lot of mentors — I have a father who was an engineer and things were very straightforward, as most engineers are. There’s a logical approach to it. His advice to me was make sure you understand and communicate with people in the right way.
During my business life, before I got into the insurance industry, I worked in a couple of different industries. I worked in the record industry. … My age comes out here. ‘Saturday Night Fever’ and ‘Grease’ — I was involved in those, managing the distribution of the records. I had a boss at that time who was a northerner from the United Kingdom who was probably the most frightening individual I’ve ever worked for, but he was the most direct, he was the most honest, and he told it to you exactly as it was. What I think a lot of people don’t like these days is they don’t like being told the truth, and this guy managed me with a steel fist in the organization and taught me attention to detail, and that was a really big thing from my point of view. That stayed with me. Read it properly. Understand it before you say something.
Stan Hasselbusch always looks for the next way to keep his company growing and expanding its presence. L.B. Foster Co., a manufacturer, fabricator and distributor of products and services for the rail, construction, energy and utility markets, acquired Portec Rail Products last year as a way to improve its product line. Part of the company’s strategic growth plan is to grow through acquisition and Hasselbusch made good on that strategic goal.
“We looked at a half-dozen different companies,” says Hasselbusch, president and CEO. “We looked at companies that were primarily related to the rail industry, and we weren’t going to be foolish and we did a lot of due diligence. We were looking for something that was going to make a sizeable contribution to our organization.”
Portec Rail Products was a company that fit all those requirements. A $100 million company also based in Pittsburgh, Portec is one of L.B. Foster’s biggest acquisitions. Hasselbusch knew it was going to take a lot of hard work and time to integrate the organization, but it would help continue the growth of a company that saw revenue of $475 million in 2010. Here’s how he did it.
Plan your acquisition
Acquisitions can’t be taken lightly. They can allow your company to grow, offer new products or reach new customers. They are a crucial step in growth, and they need to be given the time and effort to be done right.
“You have to really do the due diligence and have patience,” Hasselbusch says. “Having patience is something that if you’re going to have a growth strategy, you’re just not going to grow for the sake of growing, you’ve got to have patience.”
Planning out the various stages of an acquisition will help you navigate through what is often a very long and difficult process.
“Plan for what you need to do,” he says. “Make sure you have a very strong strategic plan. It’s got to have how you’re going to go through an acquisition, your diligence plan, your integration plan and your plan going forward. There’s a lot of planning and then it’s following through with strong execution.”
Hasselbusch and his team referenced the plan and kept patient while looking at companies that were going to benefit them and fit well within their organization.
“We’re not going to step out of our wheelhouse,” he says. “We’re not going to go out and do something that’s not familiar to us. We are basically in three products. About 45 percent of our business is in rail, about 45 percent of our business is in construction products and about 7 or 8 percent is in tubular products. But really our focus is in the rail side of the business and in the construction side of the business. So when we go looking for acquisitions and growth in our company, that’s what we’re looking for.”
You want to look for companies that will be a good compliment to your existing business and help continue your growth.
“Our strategic objective in the railroad side of our business is to strive to become a premier distributor of products beneath the wheel,” he says. “[Portec] had a couple of products that really played into that very well. They had a large presence in what’s called friction management. Friction management is lubrication of the wheels and the rail to minimize friction and slows down the wear of the wheel and the rail. That’s an up-and-coming market.”
Having an understanding of your market is a big part of the planning process, as well. Hasselbusch knew what part of the rail market they wanted to expand upon, and Portec was the company that offered those products.
“You need to know the market you’re going to serve,” Hasselbusch says. “You have to understand the markets that you serve if you’re going to be successful in the first place. You need to be able to know what you can do internally from an organic standpoint or what needs to be looked at outside of your current organizational set up.”
Portec fit the plans Hasselbusch and the company had to move forward with for growth in the rail industry.
“Looking at Portec, it really looked fine,” he says. “We liked the size of it. We liked the fact that it does have a global presence or at least is a springboard to get into the global market. They do a lot in the service sector, which compliments what we’re doing. They have good research and development and engineering, which compliment some of our efforts very well. They have products that we can use in our bag of tricks of rail products and we liked their people.”
Finding a company that matches up with your own is the most important part of an acquisition. The company you acquire has to be complimentary in the things they offer or make.
“You have to understand how they are going to compliment or strengthen your business,” he says. “You want to look for companies that would be accretive. You’re going to look around a lot. You have to ask yourself how the product will complement what you’re currently doing.”
It is also critical to find a company that has a similar culture. If cultures are too different, the acquisition will be extremely hard to make work.
“You have to look at the people,” Hasselbusch says. “You have to look at the people so when you buy an organization it’s going to come in and you can grow together. You can’t lose focus. One of the big things we are seeing during this integration is how the cultures match up.”
Communicate growth plans
Communication plays a big role in growth and especially in mergers and acquisitions. Hasselbusch constantly communicates the company’s plans for growth to his employees.
“We’ve always … expressed to them the importance to grow,” he says. “One of the areas of our strategic plan to grow is to grow through acquisition. They know that that’s always going on, that we’re looking at people. [Our employees] know that we are always looking for ways to grow the company. You have to communicate this all the time.”
During an acquisition process there are a lot of moving parts and a lot of variables that constantly need to be addressed. Communicating often is the only way to keep things going smoothly.
“You have to over communicate,” he says. “You have to make sure everyone in the company is aware of what’s going on.”
L.B. Foster has town hall meetings twice a year where everyone in the company gathers to hear what’s been going on in the organization. At the end of those meetings they have a Q&A session where employees can comment on what things have been happening throughout the year.
Integrating two companies together takes a lot of hard work and dedication. The process can’t be rushed. Nothing good will come out of an integration if it is forced or rushed.
“It’s very time consuming and you have to be prepared for that,” Hasselbusch says. “There’s just a lot of work to do and it doesn’t stop. It doesn’t stop in the diligence phase, it doesn’t stop as you go forward and you close and it doesn’t stop through the integration. It really steps up and you’ve got the deal down and you take a deep breath and it’s not over — it’s just starting.”
Patience and communication are extremely important while trying to successfully bring two companies together.
“Communicate on both sides with your company and theirs,” he says. “There’s a lot of hard work and a lot of patience that’s going to be required and you can’t over communicate. You’ve got to be prepared for that. If you’re going to do it and do it right, you’ve got to put the time in and it’s got to be quality time. It’s not going to start by itself.”
Nothing is more important than communicating and getting to know the company you have brought in.
“When you bring in a company that’s 20 percent of the size of your current organization, it can be a challenge,” he says. “You have to stress communication. You can’t overdo communication. You have to take the time and put forth the effort to get to know them. That’s the only way you can do it.
“You have to communicate with them and try to understand them and where they are coming from. You can’t spend enough time with the troops. You have to be out with them and press the flesh. That’s the ultimate communication. You have to do that a lot.”
Integrate your teams
When it comes time to integrate the newly acquired company into your own, you have to be willing to take time and plan how you want to make the process work.
“There’s got to be a very detailed integration process,” Hasselbusch says. “You’ve got to be able to nail that. If you lose that, you’re going to take a long time catching up.”
For Hasselbusch and his senior executive group, the first step of integration was visiting several of Portec’s facilities around the country and internationally to get a feel for the operations and people.
“It was very important for me and my senior executive group to spend some time visiting each one of those facilities because at the end of the day, it’s about the people,” he says. “You can have ideas and you can have approaches and you can have plans, but it’s about the people.”
Throughout all the hard work and planning that goes into an acquisition, you also have to create buy-in for the future of the two companies.
“The integration has been a lot of hard work, but there’s been a lot of buy-in on both sides and there’s been a lot of working together,” he says. “There are certain compromises that you have to deal with, and it’s a give-and-take process throughout. That’s the big thing — bringing people together for a common cause.”
Another aspect of compromising during an acquisition is finding the best practices between the two companies. It is very easy for the acquiring company to keep doing things how it always has. However, that won’t improve your company and it won’t help the integration process if you don’t consider all avenues.
“We’ve spent a lot of time trying to better understand their operations at their plants,” he says. “We really looked at this and we’ve told the people at Portec that we’re looking for best practices. It’s not our way. We’re going to look at you, we’re going to meet you, we’re going to try to understand you and we’re going to try to meld the best practices.”
It takes full understanding of each company in order to decide what practices can be improved and what practices to keep. It takes careful consideration on both sides.
“We’ve not gone into this integration like it’s our way or the highway. It’s looking at it from both sides. They do some things in engineering and research and development that we can benefit from. We do some things in operations that they can benefit from. You’ve got to dig in. You’ve got to really understand the cultures, you’ve got get to know the people, and better understand the products.”
The willingness and ability to keep your mind open and listen to what everyone involved in the process has to say will help you make the integration a better and quicker success. “You’ve got to go in there with your eyes wide open,” Hasselbusch says. “You have to open up and listen. We’re not saying that our way is the right way. Sometimes you’ll agree and sometimes you’ll disagree and all you can do is reach a middle ground. At the end of the day, at some point you’ve got to come on board and you have to move forward and you have to move forward together.”
HOW TO REACH: L.B. Foster Co., (412) 928-3505 or www.lbfoster.com
The Hasselbusch File
President and CEO
L.B. Foster Co.
Born: Cedar Rapids, Iowa
Education: Attended the University of Dubuque in Iowa. He went to work for L.B. Foster straight out of school. He started in 1972, and it’s the only place he has ever worked as a professional.
What was your very first job, and what did you learn from it?
I delivered newspapers. I took away from that experience how important people are.
Who is someone you admire in business?
Warren Buffett. I really like his approach. It’s a very wholesome and down to earth approach and he has been very successful. I find him very interesting.
If you could invite any three people to dinner, who would they be?
Babe Ruth, John Kennedy and Michael Jordan. My wife would have to be there, as well.
If your day is off to a bad start, how do you turn it around?
I go in my office, take a deep breath and start all over again. We are really fortunate here. There is a light attitude throughout and there is a lot of humor in the office. There are always going to be good and bad days and you just have to be tolerant and try to work through them...
Ravi Kathuria is president of Cohegic Corp., a management consulting and executive coaching firm that he founded in 2002. His objective is to make business leaders think about and implement ways to make their companies more coherent. That objective is what made Kathuria write his book, “The Coherent Company: The Struggle for the Next Level – A Business Parable.” The book follows a fictional senior sales executive, Trent Wertheimer, as he becomes CEO within a business intelligence company, Hintec. Trent quickly digs himself into a hole because he thinks he knows how to lead a company, but doesn’t. With the help of a mentor, Trent learns how to transform the company and himself by implementing the Cohegic method to give Hintec coherence and clarity. “The Coherent Company” is a look at leadership in practice as Trent implements the Cohegic method and tries to turn around the company in his new role as CEO.
What is the message of the book?
This book offers the road map for business transformation. Most business books focus on one aspect such as strategy, execution or work processes. Few business books tie them all together. This book connects mission, vision, philosophies, work processes, strategies, goals, roles and responsibilities, culture, execution and measurement.
What business problems are addressed in the book?
The primary reason that the book was written was because companies lack clarity and coherence. The issue that companies have is that they are not really crystallized in their business spirit. Their mission statements are not well-written and they have not crystallized very clearly their business model. When you look at a majority of mid-level companies, you’ll find that their mission statements and core philosophies are not crystal clear. Because they don’t have clarity around that, it creates a lot of confusion in the organization.
Companies get confused between mission and vision. They are confused about what vision should stand for. Companies have to connect their strategies, goals and visions together so that they drive clarity in the organization.
What makes the book different from other business books about leadership methods?
It’s the fact that the book is presented in the backdrop of a very intense and realistic story. It shows leadership in the real world, leadership in practice as opposed to leadership in theory. Leadership in theory is very easy to talk about. Nobody is challenging you. Leadership in practice is very difficult. Your ego, your self-awareness, your inhibitions, your preferences, your tendencies, your habits, all comes into play. Overcoming all of that is a huge challenge and as a leader you have to really perform at a much higher level and you have to help the organization succeed in spite of yourself.
What would a new leader or entrepreneur take away versus what an experienced leader would take away from the book?
I think a new leader and an entrepreneur must understand that the core of their business is the most important. They must seek to drive very clear thinking in their business model and define why they are creating that business and that company. They have to ask, ‘Do I have clarity about what I am doing and why I am doing it?’ If they don’t have that, success will be a little harder.
Experienced leaders need to understand that clarity cannot exist just in their mind. Clarity has to exist in everyone in the organization and they have to make sure that that clarity is consistent and coherent.
If a leader cannot connect all those strategic aspects, a company cannot perform. The questions that the book raises are not easy questions to answer. Those questions are difficult and take time to answer. If companies can go through and ask themselves these questions, it will make a powerful impact.
HOW TO REACH: Ravi Kathuria, 281-403-0250, or www.cohegic.com
As the CEO of LG Chem Power Inc., which supplies lithium ion batteries to the auto industry, Prabhakar Patil is dealing with constant change. As the auto industry shifts toward more reliance on renewable energy sources for vehicles, Patil must keep his company ready to answer the challenge.
It became particularly evident in 2007, when Patil’s company began rolling out prototype battery packs for GM.
When we got started with GM, the original announcement came out in April of ’07,” Patil says. “The first prototype pack had to be delivered by October of ’07, which was a very short period given that the first time we were doing a battery pack of this size and magnitude, for a plug-in application.”
To address the needs of the evolving auto industry, Patil needed to keep everyone at his $25 million, 150-employee company focused on a well-defined mission and set of goals.
Smart Business spoke with Patil about how you can adapt to change by putting your company’s foundational principles at the forefront.
How do you get people on board with these new ideas and concepts?
People recognize that we are sort of fortunate to be in the position that we are in. There is a fundamental transformation that is taking place in terms of what I call the transportation paradigm, shifting from internal combustion petroleum-based engines to more electrified vehicles. Not that the transportation industry is going to roll over to all hybrid vehicles anytime soon, but there is a basic and fundamental shift that is going on. To be part of that is indeed sort of a privilege and, in some sense, luck that we area in the right place at the right time. We have to do everything to make sure it is successful. What would make the opportunity go bad more than anything else is if it disappoints the customers when these vehicles are on the road, and that is something that none of us want to be responsible for.
What would you tell other business leaders about relating the goals of the company to employees and their individual work?
It is figuring out a way where you personalize the relationship between the job and the person. Sometimes, it can be an intellectual kind of connection but is much better if it becomes a more visceral connection, where people internalize the significance and importance of what it is they’re trying to do, because of the impact that it is going to have either on their own lives or on the family that is going to be using the product or on making a fundamental change in the technology. You have to find a nobility of purpose, something that people can relate to, something that people can say, ‘This is critical, painful though it may be for the hours I have to put in. This is something we have to do and do right.’
How do you find nobility of purpose in a company’s mission?
In our case, it was relatively straightforward to
do. It’s seldom that you get a chance to do something that is good for the environment, for the country, for the community. In many ways, what we do is our opportunity to address the environmental issue as well as the energy security issue.
Does your own visibility and accessibility in the organization help to reinforce the mission?
It is doing it by example. I encourage suggestions and ideas, and I encourage our team leaders down the chain to have that kind of accessibility to their teams. For example, just looking at the subject of quality, once they see the due diligence, time and effort that is put in to not cut corners, I think that communicates the message more than anything else that quality is an important subject for us.
How to reach: LG Chem Power Inc., (248) 307-1800 or www.compactpower.com
What some business leaders might consider risks, Amanda Huntington sees as opportunities. She knows that to position her company for long-term growth and success, she’ll sometimes have to make decisions that, short term, seem rather daunting.
“Probably the biggest challenge that we’ve had is really being faced with decisions that weren’t always simple decisions. They would have put us in a position or they did put us in a position where we might have had to lose market share in the short term or spend money that we didn’t really want to spend at the time to make those decisions, but it was because we knew that in the long-haul they would be the right things for us,” says Huntington, co-founder and CFO of IntegraClick LLC. “They would give us the longevity that we were looking for, and it was the right thing to do for our publishers or for our advertisers and for the people we serve and work with every single day.”
Business decisions are rarely black and white, but the key to setting your company up for growth and market competitiveness is knowing how and when to make the tough calls or take calculated risks that will better your business. It’s by making these decisions that Huntington and her business partner, John Lemp, have built IntegraClick and its operating cost-per-action (CPA) network, Clickbooth LLC, from a start-up in 2002 into a thriving online marketing solutions business, topping multiple lists as one of Tampa’s fastest growing companies and generating 2010 revenues of $120 million.
However, before you make any big decision affecting your business, you first need evidence to back it up.
Build a case
There’s a big difference between being a risk-taker with your business and just making risky decisions. To determine where there is potential to improve your business you have to keep a constant watch on changes, trends and issues affecting your industry.
“We spend a great deal of time trying to keep our finger on the pulse of the industry and looking at ‘What have we heard? What are publishers talking about? What’s the next thing coming down the pipeline?’” Huntington says. “But also, ‘What are our competitors doing that maybe we could do better? How can they challenge us?’… It gives us a great ability to better ourselves all the time, because the competition is pretty fierce.”
For example, several years ago Huntington and Lemp noticed a certain type of incentivized marketing being used was making some advertisers unhappy. After looking into the issue further, they realized it was also losing them some clients and volume by not converting well to customers.
“We would talk regularly and it keeps coming up,” Huntington says. “Every month from an accounting side, I can see that clients didn’t like having to pay for the traffic, weren’t happy with the quality etc. … It just became sort of an obvious thing.”
Often when she’s facing a major decision affecting the company, Huntington brings in her top people from key departments to think through the issue from all sides.
“We’re trying to really integrate all of the relevant parties into the bigger decisions, because they’ve been here a long time,” she says. “They’ve escalated to these positions that they are in. They know how things work. They know the industry better than most, so I want their opinion, and at the same time, I want them to know mine so we can come together on the best thing for the network as whole.
“If it’s a marketing-related issue, I’m going to bring in the heads of the marketing team and John and say, ‘OK, tell me what you know, because I want to get this from all angles. What are the possible rewards that this could bring us?’ I may be able to say, ‘Here are some of the concerns I have, but tell me more about what you think of this long term.’”
When considering how to move your company forward, it’s important to understand the risks and rewards of making a change, but also the consequences of doing nothing. Huntington says she always weighs the long-term benefit over the short-term setback when making a tough decision. In the case of incentivized marketing, the benefit of eliminating the marketing type at IntegraClick seemed to outweigh the setback of losing a few clients.
“We did some homework and we looked at how much it was going to affect us or what we thought it would affect,” Huntington says. “We felt like we could come through it, because it would probably be a fairly short-term issue.
Being among the first companies to make a change seems scary when you’re thinking about how it can impact your revenue, customers and growth. But you can’t simply wait for change to happen; you have to drive it yourself.
“The industry is constantly evolving,” Huntington says. “So what we might have been accepting of in 2004, we’ve realized that’s not a good long-term plan now.”
Though there’s nothing wrong with conservative thinking, simply going with the status quo can be the biggest risk of all, because if you wait too long to adapt your business as needed, especially in a competitive industry, you’ll be left behind.
“We try very hard to proactively look at what our customers need,” Huntington says. “Where are the holes that need to be filled? Of those holes, can we fill all of those? And if we can’t, what is the one thing that we can do most successfully, or the two things that we are going to be the best at?
“That’s the reason we’ve been successful, there’s always been that push. In order to survive in this industry, and what’s really kept us going, is the ability to adapt. I think that’s something any new business needs to recognize and not be afraid of. It’s recognizing that there can be room for improvement, learning from mistakes, adapting and not letting yourself get buried by the fact that maybe you can’t, or you don’t want to or that it’s a scary thing.”
Once you’ve discovered an area where your business can be better, whether it’s in customer service, employee relations, best practices or processes, you’ve got to be willing to take the steps necessary to act when action is needed, even if it means doing it alone. It’s by adapting proactively that companies set the pace for their competition and become industry leaders.
After Huntington and Lemp saw that customers were increasingly unhappy with the incentivized marketing, they didn’t wait for their peers to take action, they went ahead and eliminated it from IntegraClick’s network completely.
“We were the first network to go out and say, ‘We’re going to stop this,” Huntington says. “We don’t want to be involved with this type of marketing anymore. It’s just not a long-term success plan for any of our clients. They are not happy with it. Even though it lost us a significant chunk of our revenue at the time, all the other networks followed suit within a year. As a whole, it’s just not even on the map anymore as a marketing type. It’s really cleaned up and improved the industry.
“While it did hurt for a little while, it actually gave other advertisers and our current advertisers a little more faith in using our network versus another one that still allowed it, because they knew that the quality they would get from us was going to be significantly better. So in the long term, it brought us additional volume and made up for that short-term lag.”
However, change can’t just be a reaction to something that’s wrong. Even successful business models can become stagnant and obsolete if they aren’t set up for continuous improvement.
“Within the company we always train for that: ‘If this isn’t working, what else can we do?’” Huntington says. “Be creative. Find those alternatives so that you are never having to shut a door or close out a client. If we can make it work, we will.
Stick to your guns
Sometimes a good long-term business decision carries some short-term hardship, and as your company experiences a negative effect on profits, client retention and so on, you may start to question if you made the right choice. Yet by doubling back on a tough decision, you risk losing even more, such as the trust and confidence of your employees and customers as well as credibility. If you can’t trust in your own decision-making, how will others?
That’s why it’s extremely important to research and be clear about the consequences of a decision upfront, so once you’ve looked at the evidence and weighed the risk, you can commit to the decision either way, 100 percent.
“If we make a change, we just really stick by it,” Huntington says. “We go out there with a firm stance and do a press release. We push forward as a team and as a unit. Everyone is on board and anybody who wants to come back to us or wants to work with us will have to abide by the new policy.”
For instance, when Huntington and Lemp recognized the lack of compliance standards in CPA advertising, they ultimately decided to release their own compliance guidelines for IntegraClick clients. Though the partners knew none of their competitors had compliance guidelines, they confidently enforced the new guidelines strictly with every client, no exceptions. Those clients that didn’t or couldn’t comply were no longer in the network.
“When we changed over to the next compliance standards, everyone pretty much told us we were crazy,” Huntington says.
“We did lose clients, who just may have been in the pipeline already just getting something going, and they didn’t want to have to make the changes and someone else would pick them up without those changes.”
It’s not easy to take risks when you know full well it’s going to cost you a client or a chunk of revenue, but if you’ve done your research, you’ll take comfort in knowing that the decision is the best one for your business in the end.
“That’s one of those decisions where it’s not an easy decision, but you know you have to do it because at the end of the day, you want to be around,” Huntington says. “When some of those other competitors might take the traffic, you might lose the market share to them, but they may not be around.
“We released those compliance guidelines, and anybody that came into the network had to stick with them. That’s just an example of the difference between us and some of our competitors. We make those proactive changes and it’s to be able to better our network for our advertisers. We are known throughout the industry as the network with the best quality, because we have done those things proactively to try and reduce any fraud that might happen, keeping any sort of garbage out of the network.
“I absolutely feel that we’ve found our direction and we’ve been able to rise to the top of the network market because of the way we’ve handled so many of these situations. …We’re still changing. We’re still adapting. We’re always trying to better our network.”
HOW TO REACH: IntegraClick LLC, (941) 584-6543 or www.integraclick.com
The Huntington File
Co-founder and CFO
IntegraClick LLC and Clickbooth LLC
Born: Glens Falls, N.Y.
Education: State University of New York at Geneseo
What do you like most about your job?
I love everything. It’s kind of hard to pinpoint because I’ve been here from the beginning. It’s amazing to actually see what this has become. Going from an apartment and working out of an apartment when we first got going to be able to look at all this. … I feel a lot of pride just because I’m proud of the people who have come on board and actually helped build this, all the people that have been with us for a long time, all of our executives that have risen to their positions. For me, it’s kind of watching this grow up. That’s really the most rewarding part of this job.
What is your definition of success?
Success is being true to yourself, and being happy with that at the end of the day. I also think the most successful people are probably very tired, because my most successful moments are usually the culmination of a great deal of hard work and many hours spent, whether I'm working to implement a new process at the office or putting together a family dinner, when it's all said and done well and as I planned, I sleep the most soundly. ... It’s never defined by money or a job title, but by whether you can look at yourself in the mirror when you are alone or in a quiet moment, and feel happy with who you are and the effort you give to whatever you do every day.
Charlie Sheen has talked a lot about winning in the past few months. So I couldn’t help but think about the standards of winning in business, and how much they have changed. The truth is this: In this fragile economy, winning is essentially effective risk management. A definitive factor in business success and failure has always been the amount risk one is willing to take. While getting credit or capital is harder these days, that should not stop business owners and entrepreneurs — especially the little guys — from taking risks.
While our company, WDFA Marketing has faced challenges, there have been a few actions that we have taken to help us both manage risk and to take those risks necessary to keep our agency moving in a forward direction. Those actions include the following:
First, increase the level of communication with creditors and vendors.
There is nothing wrong with telling your key partners what’s going on with your company, especially how you plan on growing, when you expect things to get better and what you’re doing in the immediate future to keep things moving. If you’re behind on paying vendors, work with them to create a plan. Chances are you aren’t the only one that’s having cash flow issues.
Second, look at your product and service according to today’s economy.
We live in an on-demand society, so businesses have to be nimble. The consumer wants it and they want it as fast as they can get it. Spend some time looking at your operational processes and figure out ways you can be more efficient. Also, don’t be afraid of incorporating more technology into your day-to-day routines companywide. It’s not as difficult or as expensive as you may think.
Try out different pricing models. This is an economy in which you want to bet on consistent long-term gain rather than monumental short-term gains (though those are nice too).
Don’t be afraid of creating partnerships and be open to revenue-sharing models. You never know when that crazy idea that you drew on a bar napkin flourishes into the next great phenomena.
If you want to test out a new concept or service and can’t find the right amount of funding, downsize your idea and cut costs. Focus on creating a flawless execution that can be easily scaled up. Create results on your own and take those out to help get funding. Note results and numbers that showing potential.
Lastly, spend extra energy and resources on employee morale.
Never forget that the people who should believe in your vision as much as you do are your team. As a leader and visionary, you’re delegating while your team is executing. Without them you would just be talking to yourself.
Buy lunch once a week or bring in snacks and put them in the break room. Happy (and full) people are productive people.
You might not able to distribute the high bonuses or raises that you’re used to, or that your team expects. Instead, talk to them. Discuss your successes and address failures by sharing what you learned. Show them the road that you are walking down and the great potential that it holds.
As challenging as conducting business is today, with a little bit of smarts and effective risk management it’s still possible to move forward, even if it’s just one inch at a time.
Raj Prasad fulfilled a lifelong dream and founded his own agency, WDFA Marketing, at age 25, bringing on his two friends and former co-workers as managing partners. Because of his leadership, WDFA has earned accolades as Inc. magazine’s Fastest-Growing Marketing and Advertising Agency and San Francisco Business Times’ Tenth Fastest-Growing Private Company of 2010. Learn more at www.wdfamarketing.com.