There really wasn’t a battle plan for what Brett Healy faced in 2009.
Healy is the president and CEO of Webasto Roof Systems Inc., a company that supplies sunroofs and other roof systems to auto manufacturers. Like just about every other auto supplier, Webasto was dealing with automaker bankruptcies, downsizing and reorganization, and the cascading effect it was creating throughout the industry.
“It involved lots of things that you weren’t going to find in a Harvard Business Journal review,” Healy says. “As we rolled into 2010, it was basically a matter of trying to keep people motivated, because people were very unsure about the environment. People needed to remain motivated around the idea that we still had a viable company, keeping them on task and focusing on getting back to normal business volumes.”
Motivation was a key aspect. Healy and his leadership team had to spearhead a period of consolidation in the company’s head count and plant capacity. Between 2008 and 2009, Webasto Roof Systems— the Michigan-based arm of German vehicle component manufacturer Webasto AG — had to remove three plants from production and reduce head count by 200.
If there was any good news, Healy had begun the consolidation ahead of the economic crisis, so he already had a plan in place for reshaping the company’s future. But when the crisis hit, it took Healy’s methodical plan and turned it into a scramble.
“I took this role at the beginning of 2008, before anybody even recognized a serious crisis was coming,” he says. “Just sizing the company, I knew we were heavy in terms of capacity. We had low capacity utilization in some of our plants. One of our consolidations was executed in 2008 in proper order, but as things started to deteriorate in 2009, we took a plan that was going to take about three years and had to accelerate it into about nine months.”
To get his people motivated, Healy had to restore their faith in the present. To keep them motivated, he had to build a better future.
As he started down the road of navigating his company through the darkest days of the recession, Healy had to take the most difficult step first. He had to admit to his people that the financial crisis was unprecedented in its scope, and management was getting an on-the-job education just like the work force.
In company meetings and his president’s round-table forum, which Healy holds monthly, he had to face his people with a combination of confidence and humility. He had to be a leader, but he had to admit that the company was sailing into uncharted waters.
“They were asking questions like, ‘We just had a layoff, is there going to be another layoff? Are there going to be any other plant closings?’” he says. “They saw that two of our customers (GM and Chrysler) went bankrupt and wanted to know what that was going to do to us. Those are three loaded questions.”
When faced with answering big questions about your company’s future, you really only have one recourse. You have to tell the truth, and do it without mincing words.
“We told our colleagues that we’ve never been through this before,” Healy says. “We’re checking with other people to see if anyone has information on how this happens, and based on our own knowledge of the business, we’re going to do A and B. And if that works, that’s fine. But if it doesn’t work, we’re going to try C and D. So you simply show your people what you’re going to do. There are companies that tend to have a culture of secrecy, and I really don’t subscribe to that. When people don’t know what is going on, they have a tendency to use their imaginations, and they can imagine things much worse than they really are. During that whole time, we remained focused on making sure everyone had the facts, and the facts were changing very quickly.”
Healy wasn’t trying to sugarcoat the situation, and he wasn’t trying to force his company to wallow in grim reality. What he wanted to do was give his people an accurate reflection of the challenges the company faced, then immediately get everyone focused on solutions to pull the company back to growth mode.
“All is not perfect,” Healy says. “I wasn’t trying to paint a rosy picture, but if you just keep talking to people, it does work. Whether you’re the janitor or VP of engineering, with us you’re going to hear the same exact presentation of our plans and objectives for the year. We had cards made up that put the corporate focus on one side and on the other side, we had our quality actions that drive success. We talk about this in great detail in our first company meeting of the year, and it will be the lead in our company meetings for the whole year. We’ll talk about how we’re doing compared to our corporate focus for 2011 and how we’re doing against the things we’ve been talking about.”
Form a strategy
In any crisis, you need well-defined strategy for the future, aimed at helping your company’s recovery. At Webasto, Healy used industry forecasts and data to formulate a strategy and give his people goals to pursue, both in the short and long term.
“We’re very data driven, because in the automotive world, there are some very good forecasting services,” Healy says. “We started our planning process by triangulating various forecasting services’ projections of volumes. From there, we already knew the projects we had been awarded, and we had a good idea of the projects we’re going to focus on in the future. That is the beginning of the business planning cycle. There are also some other items that go into that, in terms of buying behaviors, customer shifts in desiring various vehicle options, but basically, we start with a projection of what the volumes are going to look like and hone our strategy around that. It’s a five-year plan, and it goes into hyper-detail for the year that you’re in.”
Healy and his management team project their plan out as far as 20 years, though it’s a broadly defined direction at that point. The plan then comes down to 10 years, which is defined a little more, to five years, which gets into planning specifics and, finally, the well-defined one-year plan.
“The one-year plan is set in stone,” Healy says. “But as much as I say it’s set in stone, you still need the ability to move and adjust. It’s just that when you move and adjust, make sure your modifications are still within some guideline of business practice, so you don’t blow your brains out on any of your particular metrics.”
In a crisis mode, when dramatic change is often necessary, it can be difficult to decide where to remain steadfast in your leadership approach and where to change. Though you might be tempted to say you need to remain steadfast on matters of culture and mission, Healy says your budget is another good place to remain rock steady. Any plans you make will need funding to become reality.
“We’re sticklers for cost management and cost control,” he says. “But things change. Literally, by Jan. 2, something has already changed. You have to adapt to it but stay within the guidelines of your business plan. A great example would be capital budgets. We have not exceeded the capital budget plan since I’ve been running the company. To me, it’s pretty simple. It’s like a household budget. You only have so much money to spend, and if something changes in the environment, you have to reprioritize your expenditures. The new widget machine we desperately needed becomes a third priority because something with the ability to generate more growth and EBIT for the company has taken priority.”
When planning your company’s next set of moves, it’s OK to take a little bit of time, ponder the various scenarios and gather input — as long as the pause for research and introspection results in definitive action. Healy took decisive action to plan and communicate with his people. Without that action, his company’s confidence in him would have waned, and he could have become a less effective leader.
“What I have learned is that there is such a thing as acting too fast and moving too fast,” Healy says. “When I took this role, I always told myself that the most important thing is to be decisive. I still feel that is the most important thing, but I have learned over the past three years that it is OK to take a day to ponder something. I don’t think it’s OK to ponder for weeks and months, because people still expect you to act. A company is like the economy. It functions well when there is confidence. Confidence comes from people looking to the management team and feeling that these people know what they’re doing, are agile and decisive, and are looking out for them and the interest of the company.”
Creativity is another key to crisis management. At Webasto, Healy tried to get everyone thinking about new ways to do things. He wanted everyone in the company to get into a problem-solving frame of mind. He wanted people who were willing to constructively challenge policies and processes. In one case, a responsive work force saved Healy a significant amount of money.
“We had quoted a project where a new mechanism was going to be required that was a pretty expensive investment,” he says. “The original review from our engineering department said it has to be new because eventually existing systems won’t work. But some of our colleagues outside of engineering challenged that paradigm and asked the test department to run a part with this existing mechanism on it. The test ultimately validated it and ultimately found out that the paradigms the engineering department had were not really accurate in that regard. It saved the company about half a million dollars and it used carryover standard parts.
“In that scenario, nobody did anything wrong. Engineering did what they were supposed to do. They followed the standards that had been set. But we had some people who embraced the idea of creativity, and we really try to promote that kind of thing.”
To promote it, you need to ask for it, keep asking for it and applaud it when you see it.
“We’ve got a long way to go to continue promoting creativity, but it starts from my level with a culture where that sort of thing is applauded when we see it. Whether it’s large or small, it needs to be recognized as a behavior that is appreciated in the company.”
It’s an approach that helped Webasto Roof Systems rebound to $380 million in 2010 revenue, up from $250 million in 2009.
“You always have to go back to what is important,” Healy says. “Go back to the basics when things get a little weird or a little cloudy. Just go back to the basic premises of the business and the values you are trying to promote. It’s really not that complicated. I think a lot of managers make it more complicated than it has to be.”
How to reach: Webasto Roof Systems Inc., (248) 997-5100 or www.webasto.us
The Healy file
Born: Evansville, Ind.
Education: Business degree, Michigan State University; executive management training at the Fuqua School of Business, Duke University
First job: I’ve been working since age 12, when I worked on a horse farm, taking care of the property.
What is the best business lesson you’ve learned?
I’ve worked for five or six managers in my career who were very influential in my creation as a CEO. I wouldn’t say all five were positive. I’ve learned as much from the negative traits of my managers as I have from the positive traits. I’ve learned not to take yourself too seriously and open yourself to criticism. If people are telling you something, it’s probably true, and you have to adjust the dials on your approach.
What traits or skills are essential for a business leader?
No. 1, common sense. No. 2, a sense of humor. No. 3, a keen interest in the company and the people who work there. No. 4, the ability to look at things through others’ eyes. And No. 5, an interest in a balanced approach to short, mid- and long-term objectives.
What is your definition of success?
The feeling that I enjoy what I do, that I made a significant contribution, which allows me the rewards to live outside my business life as to what I need. For a family, it’s the same thing. Balance and a priority to raise my kids the right way, teaching behaviors and expectations, and a partner in my wife aligned on the same channel of expectations.
In the early days of his business, Carmen DeLeo’s company relied on word of mouth.
CDM Electronics, where DeLeo is the general manager, needed customers to tell other prospective customers about the company’s line of computer components. But as the company grew to $20 million in 2010 revenue, its marketing needs became more complex, and DeLeo needed to carve out a presence on the Internet.
“It was an easier transition for us when we were looking into online, because we felt we were already technically savvy, and the good learning curve would be shorter,” DeLeo says. “That was the impetus for getting that going.”
Smart Business spoke with DeLeo about how to conceptualize the website and online marketing strategy that will fit your business, and how to find the people that can help you make it a reality, and enhance it as the needs of your business grow and change.
Out of all the options, how did you narrow it all down to what would work for your company?
The way we did it was to forget about online for a second. We put ourselves in the position of engineers and technical buyers, who are our main customers. They’re the ones who are going to fit the profile for us. Some of the things they would come to us for include specification of part numbers and drawings. The way we decided to build this was figuring out what our customers need, so let’s try to get as much information on the site as we can, and we can make it a 24-7 part of our customer service.
What would you tell other leaders about formulating an online strategy?
First is, you need to put yourself in the position of your customers, how your customers see it. Number two would be content. If you supply the site with as much content as possible, it is only going to help serve your customers. We’re still very early in that the computers that are doing these rankings of the value of your website are still extremely rudimentary. At sites like Google, it is obvious humans don’t review the results, but they still do a remarkable job of returning what is relevant. Even having an ugly site with content is still better than a website with no content on there. If all you have is an address and a little bit about the company, it’s not going to do you much good.
However, the third thing is the look of the site. Once you do get a human to view the site, you want to make sure it portrays the image that you want for your company.
What would you tell other leaders about finding a technology partner to work with?
For us, what we did was we reviewed the old traditional methods – so industry sources. Probably the best thing to do would be to go to an industry trade show and start talking to some of those. You can get a couple hundred companies in one shot, all in your industry. Most of the time, you can find someone who has been through exactly what you’ve done and is willing to help. It is networking. That is a great way to make it efficient.
How can you make sure your online strategy aligns with and complements your overall business strategy?
Results would be what to look at. After six months’ time, did we achieve the results of what the overall strategy is? Part of our strategy is to hit bigger OEMs and target larger and more technical projects. After a few months, we started to see requests to come in from those types of individuals. Some patience is required, but I’d say in a relatively quick time frame, certainly less than a year. Otherwise, that would be a red flag, because things do seem to happen fairly quickly.
How to reach: CDM Electronics Inc., (949) 250-1525 or www.cdmelectronics.com
If you asked your employees, would they be able to tell you your firm’s core objectives?
Do you know?
Simply put, a core objective is a critical force that drives the company. Yet every day businesses operate without a solid sense of their core objectives. Many companies don’t know the role core objectives play or how they form its underlying foundation.
It is a well-known fact that Southwest Airlines considers flight turnaround time to be one of its core objectives. Many Southwest decisions support this turnaround objective, including the hiring of in-house mechanics and cross training of all personnel. The flight and ground crews understand the importance of the objective and work together to ensure turnaround times are met, and because the objectives are measurable, flight-by-flight performance is published for all to see so teams clearly know if they have met their objectives, and they can make adjustments if they have not.
The reality is there are generally four or five objectives that drive each firm. Because every business is different, it’s important to identify which objectives are critical for your business and your customers. The further removed your core objectives are from your customers’, the more opportunity you provide a competitor to step in and close the gap. A good example is when the domestic automotive market let the Japanese step in between it and its customers. While quality was not a core objective in practice of the domestic automakers, it was for customers. So when Japanese automakers took advantage of this disconnect, they turned an entire industry on its head.
Once your firm has identified its four or five key objectives, there are several strategic mapping methods you can use to your match core and customer objectives. My firm uses a COAR map designed by CASE Weatherhead School of Management’s Sayan Chatterjee. It is designed to map the relationship between four areas: customer outcomes, company objectives, activities and resources.
Here’s an example of how this works:
Let’s say your entrepreneurial 10-year-old wants to earn some extra money this summer by operating a lemonade stand. If we asked a 10-year-old (and we did) what his or her core objectives would be, the answer might be: Repeat customers, great lemonade and make a profit.
If we asked the 10-year-old’s customers for their core objectives, they might say: Lemonade that is readily available, great taste and reasonable prices.
In this case, the 10-year-old’s core objectives match the customer’s objectives. With the objectives in hand, effective activities follow easily: recipe, location and cost-effective supplies. Every decision this 10-year-old makes should then align with the established core objectives. If your company’s core objectives are to make a profit and enjoy repeat customer business by selling superior lawn services, the activities and resources that you assign to ensure you have superior lawn services will determine how successful you’ll be in achieving repeat business.
We like the COAR map because it illustrates the interconnections between the customer and the company’s objectives, the core metrics that we should track and the financial allocations for activities and resources that support the objectives. Understanding the connections between customer and corporate objectives, activities and resources is imperative for long-term business success. Once you’ve aligned these connections, you’ll have a good handle on the driving forces at work within your firm.
Victoria Tifft is founder and CEO of Clinical Research Management, a full-service contract research organization that offers early- to late-stage clinical research services to the biotechnology and pharmaceutical industries. She can be reached at firstname.lastname@example.org.
Driving market impact doesn’t happen by accident. Quite the contrary. Leading companies attribute market strategy as the reason they are in the No. 1, No. 2 or No. 3 position in the marketplace. As CEOs, we know that the only constant we can rely on is that the marketplace will continue to shift, so that means our market strategy needs to shift, too. This is easier said than done when faced with the day-to-day minutia of running a business, but driving market impact is in fact one of our top responsibilities.
Create a strategic marketing foundation
These days more than ever, the marketplace is cluttered with choices. Your chosen strategic position is your company’s brand foundation. So to drive market strategy, you need to know what it takes to do better than average in your industry and know the sustaining sources of competitive advantage. You also need to know how to be a better than average player and know the maneuvers that will get you to the end goal. Industry leaders regularly analyze their market position and keep the company’s competitive advantages focused, clear and sustainable. On the athletic stage, coaches seek out similar advantages in hopes of leading their teams to national championships.
If you read between the lines, you can probably already see that a company will emerge with a huge market advantage if a brand foundation exists. Now take that advantage and create a well-defined, well-executed brand message backed by a strategic marketing plan. When done effectively, this should enable you to penetrate the industry and put you one step closer to market domination.
Throughout a given year, I meet and consult with numerous business leaders. Many of these leaders have a good understanding of the industries they are trying to penetrate, the main competitors and the needs of the market. So they are better than average at understanding the game. Their inability to reach market domination resides in their ability to be a good player. They may have product superiority, but they are seriously brand or marketing handicapped. Sometimes this is a result of a lack of brand clarity, a lack of strategy, a lack of execution and/or a lack of a dedicated marketing budget. All of these are required to achieve and sustain a lead position.
Diversify your plan of attack
It is often said that variety is the spice of life, and you need some variety in your marketing approach. But be careful to make sure that you are in fact making an impact with your marketing spend and not spreading your budget too thin by not being effective in any of your collective efforts. Today, there are more choices in the marketplace to reach customers and it continues to multiply daily. The smaller the marketing budget, the more need to pare down the number of marketing options to those that most effectively and efficiently reach the target audience. In theory, it is better to do one thing well than to do three things mediocre and never reach a level of meaningful market penetration.
The communication choices have grown, but the same marketing science of reach and frequency applies. The biggest difference might be that with the birth of social media, you need to listen and participate differently than more traditional ways of the past. Social media doesn’t replace traditional media, at least not yet. But its presence has changed the game. It’s still important to reach your target audience, just through a different mix of mediums and you still need to touch your audience enough times so that your message is being penetrated and heard. You also need to make sure your marketing program is reaching all of the audiences you need to achieve your goals — new customer acquisition, retention and growth of current customer revenue, and generating overall industry awareness of your brand.
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 United States. Reach her at (614) 885-7921 or email@example.com, or for more information www.greencrest.com.
Even if Grant Cornwell had come to the College of Wooster unaware of the school’s deep commitment to tradition, it wouldn’t have taken him long to figure it out. As just the 11th president in nearly a century and a half, Cornwell recognized how the school’s traditional roots and mission had helped the college build a strong reputation in higher education. Yet after assuming his new office in 2007, he was also aware that it was time to bring some of those traditions into the next century.
“These are very traditional, tradition-bound places, and that pretty much creates a kind of stability that protects the integrity of the mission through time,” says Cornwell. “For the most part, that’s a very good thing. At the same time, what that means is when there is a leadership transition, it’s a time when nearly everything needs to be rethought. I think my greatest challenge has been systematically working through our business practices and our kind of culture of decision-making and trying to bring it into this new era of strategic management.”
Cornwell’s challenge was not to change the college’s mission but to make it more relevant and effective with the changing nature of knowledge and global society.
“I have spent a lot of time in my research and in my consulting helping tune liberal arts colleges for this era of globalization. … That’s what I’ve been doing for 20 years, and that’s what Wooster felt it really needed to do now,” Cornwell says.
“As a college, Wooster is a great liberal arts college. In terms of the integrity of its core mission, it’s extraordinary: the teaching, the quality and depth and rigor of the teaching and learning that goes on here. At the same time, the college, the core mission, is supported by an organization, and I would say that the organization was only good. It emerged that really my work was to work with the organization to bring it to the level of performance worthy of the mission of the college, and move it from good to great.”
Though this kind of transformative change doesn’t happen overnight, to Cornwell, speed was not an issue at all. It would take a systematic change, and therefore, a systematic plan.
“We’ve had a very inclusive and transparent strategic planning process that has probably been slower and more complex than maybe some are used to, but that has been intentional because it’s gone in really three broad steps,” Cornwell says.
“If you look at other kinds of institutions of higher education, they can be whipsawed by trendiness. If something emerges on the landscape as a hot topic, they build a major in it and they hire faculty and then in five years it’s like, ‘What was that about?’ There’s a kind of stability and durability to an approach to liberal education that is deeply, deeply rooted in history yet not backward-looking.”
Communicate the plan
To get people on board with change, you first need to communicate what it means for them and for your organization.
Whether it’s through meetings, phone calls or informal chats, the more you actively involve people in building the new vision, the more you make change a blanket commitment across your organization.
“A leader has to know whether the ideas that they are putting forth are resonating with the people who have to move them forward and implement them, and so to be able to listen and meet in a common vision is critical for a leader,” Cornwell says. “What would be something to hold somebody back is the mistaken notion that leadership is the product of individual genius or a strong hand. I just don’t see that at all, at least, in the way that I conduct my work or what I see as successful. It has to be a commitment to listening, collaboration and building commonality of buy-in and inspiration.”
No matter what business you’re in, changing a vision doesn’t just affect employees but also customers, competitors, investors, the community and any number of people who are invested in its success. Facing the unique challenge of leading a college, Cornwell realized that the success of his vision involved a lot of people.
“These are complex organizations,” Cornwell says. “The stakeholders include students, of course, the faculty, of course, the board of trustees, the alumni, parents and the local community. So the first step was to work with all of those constituencies to rearticulate our mission and also articulate our vision of who we want to become to better realize our mission.”
It’s easy for people to grow accustomed to thinking and operating a certain way, and so it takes inspiring leadership to show people the benefit and the urgency of making changes.
“One critical element of success is the ability to articulate and communicate a vision in a way that is inspiring to others, because it doesn’t do any good to have a brilliant vision for a place if nobody else is inspired by that vision,” Cornwell says. “Communication is critical.”
By opening up communication with stakeholders, Cornwell was able to share the advantages that global learning and diversity could bring to further the mission of college, such as international learning opportunities for students, teachers and staff and a competitive edge in the higher education arena.
“It’s mostly a function of will,” he says. “Really, Wooster was completely ready to do this. The whole campus really just needed permission and a little urging to get on with it.”
Pick your battles
Now that you have a rearticulated sense of your mission and are clear about what you want to achieve, the next step is choosing which areas you want to track and show progress in carrying out the new vision.
“The second phase was going back to all of those same constituencies to say, ‘How will we know that we’re making progress?’” Cornwell says. “‘What are we going to measure? What are we going to attend to? What are we going to track? What are we going to study to know whether the things that we are doing differently are actually moving us from where we are to where we want to be?’”
In the strategic planning process, a pitfall of many businesses is to rush from point A to point B without thinking about what needs to happen in between. Strategic planning is meant to be a process, and while it’s tempting to start implementing changes right away and put your vision into action, it’s important to make sure the changes you’re making are set up for continuous improvement. Otherwise, the progress you make toward your goals will not be sustainable.
“If you are really going to make this kind of transformation, there’s no single tactic,” Cornwell says. “It has to be a systemic commitment, and so everything that you do has to be insolent by that set of values and that vision. So yes, it has to influence faculty hiring and staff hiring. It certainly influences new student recruitment. It also influences how you organize your work on campus, what the curriculum looks like and how you provide kind of developmental support for the community to become more diverse and international.”
A vision filters throughout an entire organization, so there isn’t just one way to measure its success but many. To create a road map for Wooster’s progress, Cornwell again worked all of his constituencies to develop key metrics that would be a good reflection of the changes Wooster was making.
“Each metric that we look at is itself a composite of a number of metrics, some of which are quantitative and some of which are qualitative. … It’s structured and systematic,” he says.
While using a systematic approach can take longer, it gives you a better opportunity to assess how your goals align with the vision while keeping focus on your core mission.
Implement your strategy
With the plan in place, and people rallied behind your vision, it’s now a matter of putting your goals and vision into an actionable strategy.
“That’s the most fun part of leadership, because it’s translating vision into practice,” Cornwell says. … “I’m a philosopher by training and I love ideas, but I think ideas are most interesting when they are actually put on the ground and put to practice in the world.”
You know who you are, what you want to accomplish and how you are going to measure the progress on your plan. Now your job as the vision leader is to help your senior leadership team execute it to the best of their ability.
“A leader has to have this mix of compassion and high expectations,” Cornwell says. “My real job is to help everybody else be successful. The role of the president is to try and make everybody around me as successful as possible, and that means making sure that they are satisfied, that they have a scope of creativity but also that they are held to account for their performance. They all have very clear goals that we talk about and negotiate on an annual basis, and we refer to those goals in every single meeting — how are we doing on achieving those goals? It’s a constant check-in with what we agreed that we’re doing.”
From bringing an international focus and diversity to Wooster’s campus, to implementing new studying abroad programs, student recruitment pipelines, and channels for student, faculty and alumni research around the world, Cornwell’s strategic planning process has successfully married the tradition and history of Wooster with a global approach to liberal learning.
In his first two years, more than half of the new tenure-tracked faculty hired brought either domestic or international diversity. The newly recruited classes have been the most diverse in Wooster history, in the number of international students, countries represented, as well as in the number of U.S. minorities attending.
For Cornwell, the goal again was not to change the mission but take it to the next level. So far the new vision has succeeded in helping Wooster carry out its mission better. In 2009 and 2010, U.S. News & World Report ranked the College of Wooster fifth out of the top 10 colleges in undergraduate teaching.
“The important thing for the College of Wooster and what I’m trying to do in my time here is not change Wooster but help it more fully realize its potential in who it already is,” Cornwell says. “That means both being committed to continuous improvement on the delivery of our mission, but it also means that making sure that more and more of that market knows how good we are. That’s what I get up and do every day.
“Tradition is not something that needs a lot of care and feeding. If anything, you have to always say, ‘Listen, we value these traditions, but we have to have them be dynamic traditions. Tradition doesn’t mean you do things the way you’ve always done them; it means that you hold on to a sense of yourself while you continually innovate.”
How to reach: The College of Wooster, (330) 263-2000 or www.wooster.edu
The Cornwell File
The College of Wooster
Born: Aurora, Ill.
Education: B.A., St. Lawrence University —1979, M.A.; University of Chicago —1982 Ph.D.; University of Chicago —1989
Affiliations: Serves on the advisory board for the National Institute for Technology and Liberal Education; member of the SAGE Group, a collective of national educational leaders formed by the Association of American Colleges and Universities
If you could have dinner with any one person who you’ve never met, who would it be and why?
I would definitely have dinner with Obama. Actually, what I’d love to do is play basketball with Obama. I’m a basketball player, and I have this idea that I’d just love to be in a game with him.
Who are your role models for success?
I’ve had a number of very influential mentors throughout my career and they’ve been different people at different times, but I’ve learned a lot by watching people lead and talking to them about leading. A lot of what I’ve learned has been learning what not to do, too. Even mentors and leaders who I admire, I see how they have had shortcomings that have kept them from fully realizing their aspirations. I’ve learned a lot from those, too. So it’s been more a series of more personal mentors throughout my career.
What is your favorite part of your job?
What I like most about my job is when I walk out of my home and walk to work every day and I walk past thousands of students and know that these are wonderful young people whose lives are being changed by their time here, and that I have a part in that. That’s deeply inspiring on a day-to-day basis.
Shortly after the movie “Saving Private Ryan” was released, I spoke with a World War II veteran who was one of the first soldiers to jump out of a landing craft to storm the beaches of Normandy. He said the movie was the most accurate depiction of that glorious and horrific event that he had ever seen. He was one of the lucky ones.
The beaches of Normandy are a good analogy to today’s post-recession landscape of buyout investors and operating companies: Many are dead, many more are severely injured, and a few are strong and thriving. What factors make the difference? The first and most important of these is debt. When used appropriately, debt can be a very cost-effective source of capital for growth. When used excessively, debt can put a company at risk of loss and cause a tremendous shift of resources and time away from your main focus — value creation.
The problem with debt is that lenders cycle greatly in their willingness to lend. At times like today, underwriting is very strict, and except for the most ideal borrowers, debt is very hard to get. Typical leverage today is around 2 to 2.5 times earnings before interest, taxes, depreciation and amortization (EBITDA). By contrast, at times like those from 2003 through 2007, debt is abundant and aggressive. Typical leverage during that period was around 3.5 to 4 times EBITDA, and often got as high as 6 or 7 times.
Lesson 1 from the recession: Don’t overlever
Even if lenders are willing to lend, only borrow to the extent the company can cover under conservative projections. If debt alone cannot meet the company’s capital needs, then look at bringing in equity. We often say, “It’s better to own half a watermelon than a whole grape.”
Lesson 2 from the recession: Run your company during boom times as if times were lean.
We have heard many leaders bemoaning that their companies would be far more successful if they had run them during the boom period as they are running them now. Without question, success can bring complacency. However, the best leaders we know resist this tendency. Their companies’ cultures foster continuous improvement and cost-reduction regardless of great performance.
Similarly, the advice we often give entrepreneurial and family business owners is, “Run your company as if you are preparing to sell it in three years.” This means eliminating underperforming employees (which can be difficult, even when done with great care and consideration, but is critical), and building cost-cutting and improvement initiatives. These efforts will grow EBITDA and result in a more successful, resilient and valuable company.
Lesson 3 from the recession: If you follow lessons 1 and 2, recessions can create great opportunities for growth and value creation.
Recessions eliminate the weak and reward the survivors. The weak generally are overlevered and are spending their time and significant dollars appeasing their debt holders. The strong, by contrast, are appropriately capitalized and well run. They are poised to bring in more work and to acquire other companies.
There are many companies, including our portfolio companies, which have thrived during the recession. These companies are growing revenue and EBITDA and are taking market share. They are accomplishing this both organically, often picking up business from failing competitors, as well as through acquisition. Those acquisitions often are of struggling competitors at very advantageous valuations.
Follow these lessons, and your company will be positioned to thrive through down cycles, and to dominate once the market turns positive.
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 firstname.lastname@example.org.
In last month’s column, we offered three suggestions to form the foundation for a leadership team: Clearly define your value. Clearly define your role as CEO. Clearly define the purpose of your team.
Until you understand the value your organization provides to stakeholders, the role you need to play within your team and the value your team will deliver within your organization, it will be virtually impossible to ensure you have the right people to lead with you.
Once you have clarity in these three critical areas, it becomes an easier (but never easy) job to fill the roles on your team. One simple way to think about selecting leaders is to focus on doing and being.
Doing is the ability and proven track record to accomplish what the role requires. Both are critical if one is to serve on a leadership team. It’s not enough to have ability. If one is to be a leader, there must be a track record that instills confidence and trust from peers and other employees who must believe in that leader. And, of course, when hiring an outside resource for your team, one must take great pains to ensure that you have thoroughly vetted the claims made regarding past performance.
Study leadership roles
Have you identified the competencies necessary to perform each role within your team? For example, what is the role of your CFO? In addition to financial acumen, does she need to be the point person for the investment community because that’s not your area of strength? It is imperative that you think about the complement of strengths on your team and not just the strengths of team members in isolation.
What about HR? Do your employees need more of a relational HR leader rather than one that prefers to focus on HR transactions? Do you need an HR leader that prefers to be a face of the leadership team and interact with employees or one that is in his office poring over the latest compensation and benefit options?
In addition to the competencies for each role, you need to think about the competencies that your team as a whole needs to possess. These may be found in one person or multiple team members.
Think about questions
Are there people on your team who naturally ask the following types of questions?
1) Where are we going next? What are the latest, most relevant trends in our industry?
How are customer needs changing? How do customers describe our value? What is the strategy? How will the strategy cascade throughout the organization?
2) How will this initiative get done? What’s the timeline for getting it done? How much will this cost? Who will be affected? Who will do it?
3) How will these initiatives be communicated? How do we use these initiatives to develop our people? What are our greatest strengths? How do they differentiate us?
You’ll notice that these questions are a blend of strategy and tactics, tools and people. A well-rounded team will have people who have a natural preference for being advocates for the critical domains of your business.
What happens when you don’t have the ideal complement of team members? Look at your succession plan to identify your next generation of leaders. Find the leaders who can serve your senior leadership team by filling in the gaps. This creates an opportunity to see them grapple with both strategic and tactical organizational issues.
Ability and track record are critical for your fellow leaders. Ensuring that you have a good match for both the role of the individual and the strengths needed for your team are essential for building a high-functioning team.
Andy Kanefield is the founder of Dialect Inc. and co-author of “Uncommon Sense: One CEO’s Tale of Getting in Sync.” Dialect helps organizations improve alignment and translation of organizational identity by discovering and using the unique strengths of the organization and its people. He can be reached at (314) 863-4400 or at email@example.com
Michael B. Kennedy Jr. was wondering what was taking so long to get a computer rendering completed at KAI Design & Build. He stopped by the desk of the guy who was working on the project and asked what the delay was.
“He said, ‘I’ve been working on this for 25 hours over the past month,” says Kennedy, the 97-employee firm’s president. “If I had this software, I could have been done in five hours.’ A quick ROI in my mind and I said, ‘How much is the software that you need?’ and he said, ‘It’s $1,000, and they said they didn’t have it in the plan.’ You’re a $100-an-hour person and you just said you’re spending 25 hours. That’s $2,000.”
The situation drove home Kennedy’s strong belief in staying in touch with his people to collaboratively come up with the best way to manage a business.
“You really have to get out there and talk to your people,” Kennedy says. “Ask them, ‘Do you have what you need to do your job?’ It’s going to make your business more profitable and your people happier. There’s no way as president I can know what that person is doing in their cubicle to make their job more efficient. Unless you go around and talk to them and implement their ideas, you’ll never know.”
When Kennedy stepped in as president at the design and build firm in June 2008, he assumed the leadership role that his father had held since founding the firm 30 years earlier. He felt he had to prove himself worthy of being the leader.
“My position was to build that trust first,” Kennedy says. “I heard everybody out and asked them if they all had the tools to do their job. I do that with everybody from a lower staff member to an executive. Do you have the tools to do your job? Is there a way you can more efficiently do your job and how can I help you? Instead of a dictatorship, it’s an entitlement. I wanted people to feel like I had an open ear and they could trust me. Then I had to perform.”
That, of course, is the key. Anyone can go out and ask for feedback. It’s what you do with it that makes the difference.
“The difference is when you write it in a plan and put it on a shelf versus coming up with your missions, goals and strategies,” Kennedy says. “Those are the three boxes of a business plan. You’ve got your mission, you’ve got your goals and you’ve got your strategies. Then it sits on the shelf. How do you drive that down to the lowest level of your company? That’s where you need to write the initiatives to implement your strategies. Then you need measurable objectives that you measure yourself on yearly, monthly and weekly in your reports.”
Again, it’s the next step that is key. You need to have those conversations with people to see what they need in order to help you achieve your goals. When everyone is involved, you don’t have the disagreement over the need for software that Kennedy had to deal with. Everybody is on the same page.
“The last thing that is the most difficult thing once you get your initiatives and objectives in is getting the individual objectives at every level,” Kennedy says. “How does the receptionist and the assistant, what are their individual objectives to help us on the overall objective? It’s getting all those driven down.
“Everybody at every level has to understand, ‘Well, how do I contribute to that? How am I measured against that?’” Kennedy says. “We started rewriting those objectives and metrics into their yearly evaluation so they know what’s expected of them and how they contribute to this business plan.”
How to reach: KAI Design & Build, (314) 241-8188 or www.kai-db.com
Michael B. Kennedy Jr. makes sure everyone at KAI Design & Build has a copy of the company’s business plans when those plans are presented. But it doesn’t end at that meeting.
“Each manager, through people’s evaluations, would talk to them individually on how they fit into that role and what we needed them to do,” says Kennedy, president at the 97-employee firm. “Then with the formation of committees, you put the vision out there and have committees in place that meet quarterly or monthly so they can have the buy-in of the plan and take ownership of it. You don’t want to just drive it down their throat. You want input and you want them to take some ownership of it. You explain the theory and concepts and why it makes sense and then you have them buy into it and own it.”
If you find that people that tend to be waiting on you to move forward with plans you thought you had communicated, you clearly didn’t make them feel like they actually owned their role.
“Or they don’t feel like they can make a mistake,” Kennedy says. “Depending on your business, maybe you don’t want them to be allowed to make a mistake. Or you need to define what level they can make decisions without asking you.”
How to reach: KAI Design & Build, (314) 241-8188 or www.kai-db.com
Jeffrey S. Davis and his team at Perficient Inc. were not ready for the bursting of the dot-com bubble back in 2001. Despite the warning signs, tough decisions were put off and fingers were crossed that the seemingly inevitable recession wouldn’t turn out as bad as everyone feared.
“We waited too long to really respond to it,” says Davis, who was COO at the IT consulting firm at the time. “We knew what we were going to have to do in terms of layoffs was going to be very unpleasant. So we had a lot of noise among the executives and senior managers in the company. Some people were saying, ‘That’s disaster. If we lay off anybody at all, everybody else will quit, and we won’t have a business left.’ Or people said, ‘That’s not what I’m here for. I refuse to lay anybody off.’”
Davis and his team were in denial.
“People didn’t want to believe it after things had gone so well, especially for the prior couple of years,” Davis says. “From 1999 to 2001, it had just been a phenomenal year for the tech industry. It was hard for people to accept that it was over and over really rather quickly. Denial is exactly the right word.”
Perficient took a pretty big hit like a lot of businesses, but eventually did what it had to do in order to survive and the lessons that Davis learned through that difficult time stuck with him. And those enduring lessons proved to be crucial when the economy began to plummet again in late 2007.
“It was amazing to me the kind of repeat that we had,” says Davis, currently the president and CEO at the 1,015-employee company. “We had the same type of people, salespeople, saying, ‘Oh, we just have to sell our way out of this.’ All the same things were playing over again.”
Fortunately for Perficient, which took in $215 million in 2010 revenue, Davis and his colleagues on the senior management team knew they couldn’t afford to wait around and hope for the best.
“We were able to tune that out and move the business along with what we needed to do,” Davis says.
Make a list
The first thing Davis did this time around, and the first thing you should do when you sense that trouble is ahead, is make a list.
“I would start making a list of every area where I can cut costs as quickly as I can,” Davis says. “It is fairly complicated, especially when you’re talking about taking people out of the business. Any kind of resource you have in the business, theoretically, you needed. Otherwise you shouldn’t have had it. And that happens too. When find yourself in these situations, you start to realize, ‘Gosh, why were we doing that anyway?’ So you start making that list with, ‘Here are the things we can impact immediately.’”
Davis suggests making your list in three tiers to account for the range of severity you might be about to experience.
“Here’s the not-so-bad recession list,” Davis says. “Here’s the pretty bad recession list, and here’s the Armageddon list. We were prepared in phases to go through each of those if we had to.”
This list can’t be something that you do yourself while locked alone in your office. You need to get your colleagues on the management team and your department heads involved from the beginning.
“I wanted to make sure people bought into it and as unpleasant as it is, this is where we are and this is what we have to do,” Davis says. “While none of us liked it, we all agree it’s the right thing for the company and ultimately, it’s the right thing for those folks who are left behind. So it was definitely a collaborative effort and not a mandate.”
Davis had each manager and department leader come up with percentages of cost reductions and dollar figures. It’s not your job to identify specific individuals to let go. Let your people who work with them on a regular basis and know their strengths and weaknesses make those decisions.
“They are closer to it than I am,” Davis says. “I hope they have the right answers because it’s going to be difficult for me to come up with given that I’m a couple steps removed. You’ve got to rely on your folks, hold them accountable but also rely on them to make the right decision.”
You can acknowledge that these are decisions that no one likes to make without falling into tired clichés.
“Just be upfront and honest,” Davis says. “This sucks, but here’s where we’re at. I’m not going to candy coat it for you. Here’s what we have to do. For the people I mentioned and I would even extend it to your 17 general managers, our executive team is about 21 people, I would treat everybody on the team like that. They wouldn’t be in those positions if I felt like a conversation like that was going to be send them into a tailspin.”
You can also offer your hope that the worst doesn’t happen and that the draconian cuts you’re talking about won’t have to be made. But if you don’t plan for the worst and the worst happens, your stress is going to be a whole lot worse. So you need to maintain a sense of urgency.
“I never had anybody that was that much of a holdout,” Davis says. “But if I did, I would say, ‘If you’re not going to do it, I’ll do it for you.’ Usually when you offer something like that, they tend to take it more seriously. Because the last thing they want is for you to be making the decisions for them.”
Help people grow
Unfortunately for Davis, he did have instances where people came back to him and hadn’t come up with enough to cut out of their part of the budget. The claim was that there were too many things they couldn’t afford to live without.
“It’s a process of education and less of a negotiation,” Davis says. “It’s not really a negotiation when we know who the winner is going to be and that’s me.”
If your people have a hard time even drawing up a list of possible cuts, try being a mentor to them rather than a tyrant.
“With those people, it’s more of a process of, ‘Let me walk through it with you.’ Make it more of a mentoring exercise. ‘Let’s go through it together. Here’s why this function is no longer going to be necessary or here’s why you’re not going to need this many of that particular title or function in the scenario we’re talking about.’”
You can also encourage people to look beyond just getting rid of employees to reduce costs.
“Those are some of the things that don’t immediately strike the person serving in the trenches wrestling with this,” Davis says. “To your point, maybe they are hung up on the people side of it. And they aren’t even thinking about the fact that, ‘Hey, we’ve got that extra conference area over here that some other tenant has been wanting for two years. Let’s get rid of it.’”
Whether it’s offering alternatives or just encouragement, you need to remove the fear your leaders may have about making important decisions. Show that you trust them to make big decisions in the best interest of the business.
“You’ve chosen this person for this job,” Davis says. “They are either your person or they are not. If they’re not, you should do them a favor and get rid of them. If they are, you should support them. People are motivated knowing they have a boss who believes in them. I can’t think of a better way to be motivated myself than knowing my board has confidence and believes in me and believes in where I’m taking the company.”
If people do make mistakes in the cutback process, try to remember that you’ve made plenty of mistakes yourself.
“At this level, if you’re still trying to manage people, there’s something wrong,” Davis says. “You’re not doing your job correctly or you’ve got the wrong people. But your business is not going to grow. You’re not going to reach your potential either if you’re still trying to do everybody else’s job for them.”
You’re not going to have a team of leaders that feels like it’s marching forward together if you become a micromanager. You need to buy in to them and they need to buy in to you and you need to trust each other.
“If you’ve got that buy-in, they’re going to work really hard,” Davis says. “They really believe in their heart of hearts this is what needs to happen not just because you told them so, but because they understand that it really does need to happen. They’re going to work very hard to make it happen.”
Davis has been two through major recessions at Perficient and he has seen the cultural damage they can cause. So when cuts need to be made, he suggests you try to get it right the first time.
“Honestly, as cold as it sounds, the right thing to do for the business is to go down as deep as you can,” Davis says. “If that’s more than necessary, that’s unfortunate. But that’s better than having to make four cuts. That continual cut, cut, cut just kills morale. In the service business, those are your assets. That’s what you care about and that just kills it.”
Once the announcements have been made and those who are being let go have been notified, you need to move quickly to refocus everyone’s energy. Show people that this isn’t the first step toward going out of business.
“Try to give some concrete evidence that you’re taking action,” Davis says. “When the chips are down and they’re kind of down anyway, they want to know that you’re doing something. You’re not just sitting around waiting for the economy to get better.”
Davis took advantage of a declining market and made some investments that the company might not otherwise have made.
“We’re trying to gain share, so frankly, we did some experiments,” Davis says. “It allowed us to try some things that we might have been a little more reticent to try if we weren’t working so hard to turn things around.
“We invested and built organically a health care business unit that is focused on that industry. Before we did that, it was already part of our business, but in 2008, it was probably about 15 percent of our revenue. It’s 25 percent today. From 2009 to 2010, we added $12 million in revenue in the health care industry.”
You can’t promise people that you’ll never have to make cuts again. But you need to reassure them that the company is moving ahead.
“Let’s all get back to work,” Davis says. “It’s unfortunate, and we’ll miss our colleagues, but we’ve still got a job to do. For your own sake and the benefit of your family and yourself, we need to keep slugging it out every day. Let’s move on and keep moving it forward. That’s the speech I would give.”
Davis says it’s the need to work with his people and help them continue to grow that helped him weather the storm at Perficient a little bit better the second time around.
“I’m pleased to say we never got more than even halfway through the second list of cuts and never even had to get to third list,” Davis says of the three cutback scenarios that were considered.
He added that he continues to grow as a leader and learn the value of empowering others.
“I’m a better motivator of people that I was 10 years ago and I hope I get better every day,” Davis says. “That’s the most important thing as a leader is motivating. It’s making sure you have the right people around you, of course, but motivating them and not managing them.”
How to reach: Perficient Inc., (314) 529-3600 or www.perficient.com
The Davis File
Jeffrey S. Davis
President and CEO
Born: Tulsa, Okla.
Education: Bachelor’s of science in electrical engineering, University of Missouri-Columbia; MBA, Washington University in St. Louis
What was your first job?
I ran a newspaper route when I was 10 for the St. Louis Post-Dispatch. I collected my pay, and I got a checking account and for 1975, I was making pretty good money for a 10-year-old kid.
Who has been the biggest influence on you and why?
My dad, James. There are a number of things [he taught me], and they are all an offshoot of the same thing. He had an incredibly high level of integrity.
What’s the best advice you ever received?
My mother used to always say, ‘Your sins will find you out.’ I think the best thing I ever learned in my life that I’ve tried to always apply is to do the right thing. I was like any other kid. I was probably about 15 when I finally figured out I can’t lie my way out of trouble. Some kids probably learn younger than that, but I was 15. That was a life lesson that stuck with me.
Who would you like to meet, and what would you want to ask that person?
President Ronald Reagan. How did he manage to muster up as much charisma as he did in the face of a bunch of crappy stuff and a bunch of naysayers? How did he always manage to hold his head up and do the right thing and convey that in an amazingly charismatic way? He connected with people at all levels and from all walks of life in this country. He did a better job of that than any president in my lifetime.
Jack Ouellette knows that he is fortunate to be in charge of a company with rich history and he takes pride in celebrating that fact. In 2010, American Textile Co. celebrated 85 years of business. The company made a day out of it. Employees at the Pittsburgh facility brought their families and they enjoyed food, costumes and false store fronts that would have been in vogue in 1925. While celebrating where you came from is certainly important, looking forward is critical, as well. Ouellette, CEO of the 325-employee company, knows that he has to keep his eye on the future in order to stay in business for another 85 years and beyond.
In 2005, Ouellette saw that the company was becoming too one-dimensional. So he did what any CEO would do: He looked for ways to expand the business and break out of a stagnant slump by focusing on the company’s core competencies.
“We have intentionally been looking to grow the business,” Ouellette says. “We did that by looking around and asking ourselves, ‘What products are similar to the ones that we currently are involved in?’ It’s using all of the same skills that we have in basic mattress covers and pillow covers to make these items. We felt that there was a tremendous tie-in and a high correlation between those items and sleeping pillows.”
Here’s how Ouellette expanded into a new market by utilizing existing competencies and more than tripled revenue between 2007 and today.
Do the research
Making the decision to create a new product or enter a new market can make or break you. It can’t be taken lightly or done too quickly before knowing how and if you can do it.
“You have to make certain that you’re doing your homework upfront,” Ouellette says. “When we were first trying to determine what products we wanted to expand into, we checked with our customers to find out if some of the items we were looking at would have enough room for a new supplier. When we went to the retailers and said we’re interested in getting into the pillow business, they welcomed that idea. They said the industry does need another supplier.”
In American Textile’s case, the company had good products and an audience buying them. The company wanted to expand its business of making mattress and pillowcases by manufacturing something that wouldn’t require a huge change in the company, and pillows were a perfect fit.
“For us, the question became what product do you want to get involved in?” Ouellette says. “We are in the textile business and we make things that protect mattresses and pillows. The one thing that we required of ourselves was we didn’t want to write a plan that saw ourselves making batteries for automobiles two years from now. We wanted to make certain that whatever we did we utilized our existing core competencies the best we could.
“I would suggest that any company that wants to grow should look around and ask themselves, ‘What are similar types of products that can be manufactured or distributed?’ You have to look at who the competition is and understand what the market looks like. Is the market ready for another manufacturer or distributor of those products? You also have to be honest with yourself and ask whether you’re just going to be me-too or will you be able to provide some innovation in that category that will differentiate you from the competition?”
Build your plans
Entering a new market, whether it’s a new product or a new geography, takes time and careful planning in order to do it successfully. You must be willing to listen to the advice of your team members.
“When it comes to identifying a new area in which to grow, you have to trust your executive management,” Ouellette says. “When they are giving their expert opinion on where to go, you have to believe in them. People who have been in a leadership position for a long time, I think their real expertise comes in being the experts in what has happened in the past, but that may not be the path to the future. To be able to listen to and not have all the answers on where you want to go in the future and trust those people who might have a better vision of the future is really critical.”
Because of a big pillow company going out of business, there was plenty of room for American Textile to come in and pick up the slack.
“When we first had an opportunity to ship some pillows in 2005, we knew that there would be some good growth opportunities — or assumed that there would and that turned out to be true,” Ouellette says. “An important ingredient in identifying when and how you want to grow is making sure you talk to your customers. Identifying an area that might suit your competencies is only really good if the customers are ready for another company to come into that market.”
Once it is clear that you can expand into a new market, planning must be the next priority. You have to have the ability to plan for further out than just your initial launch.
“I think the biggest thing is to have a strategic plan,” Ouellette says. “You generally plan for just one year and you have to force yourself to look out further than that, like three years. To look out any further than that is difficult to really come up with good, solid ideas. I would advise actually following that strategic plan and making certain that there’s the right group of people. Once you have that plan, you have to make certain that everybody in the company knows what your goals are.”
Once a strategic plan is in place, it is to your advantage to continue to follow and update that plan. If you create it and never look at it again, there is little point to it.
“I know a lot of people talk about strategic planning. I think there’s a couple of ways a company can go,” Ouellette says. “One is to have a plan and just (put) it away. The other, which I highly recommend, is having a plan and really working it every single month. 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.”
Communicate and monitor your plan
Strategic plans can get complex and will help guide your company for a long time. It is very important that the CEO be out in front communicating the direction of the company and how that plan is coming along.
“A strategic plan can be kind of complicated, because it touches all of the company and it goes out for an extended period of time,” Ouellette says. “The thing that we did was boil it down into a very concise statement. Ours is called ‘Focus on five.’ The five means the five letters in focus and each of those letters means something. The F stands for ‘first to market.’ The O stands for ‘optimizing sales.’ The C is ‘channel expansion.’ The U stands for ‘us or the employees’ and the S stands for ‘systems and processes.’ Every month, we have an event where we pull the company together and we call it a ‘Focus on five’ meeting. The first thing we do is to have one of the sponsors of each of those initiatives talk about what they have been doing in that area. It’s that constant reinforcement. With our planning team we have quarterly updates where we get in a room and spend two hours going over the strategic plan.”
When your plan takes effect, you have to continue to monitor the growth you are seeing. Check your growth against your plan and communicate the results as you go.
“In the long term, you have to absolutely set goals,” Ouellette says. “You have to make sure people understand those goals, and you have to make certain that you’re tracking those goals on at least a quarterly basis. That shows everybody a commitment to it and makes certain that everybody is making a contribution to that plan on a regular basis. Otherwise it’s kind of like college where you go to the classes but the only time you study is for the final. We don’t want that. We want people studying for the final every single month.”
When new initiatives are created it is easy to forget about other areas of your business. It is important to keep tabs on the core areas of your organization.
“You should also make certain that you don’t take your eye off of the core business,” Ouellette says. “Oftentimes because something is new and exciting in the developmental stages, a lot of the resources that you apply to your core business can be siphoned off to go to the new venture. Growing another product line is not an additional duty for the people who are involved in your core business. You have to keep that core business funded properly and the proper attention on it. You have to make the investment in people and in resources to fund that new business.”
A big reason that Ouellette and American Textile have been successful is because they stuck to what they were good at, but they have also been innovative in how they improved upon their core competencies. Having people who can foster innovation is important to be able to continue to grow your company.
“Innovation plays a significant part in our company,” Ouellette says. “We were once told by a major retailer in this country that ‘new’ sells, and it does, provided that ‘new’ makes sense to the customer. Having a group of people responsible for product development is a major ingredient in being able to grow. If you come out with a product that’s just the same as everybody else’s, it becomes a commodity and a price war. When you come out with a product that is new and different, that’s what the retailers are looking for and that’s what the consumers are looking for. Have a group of people who are trying to develop ideas based upon where trends are going, what the consumer is doing, how people live today and how that differs from how they lived last year. If you can find products that can solve their problems or fit their newer lifestyle, that’s a way you have an opportunity to grow more rapidly.”
It’s very difficult to just create innovation out of thin air. You have to work at it and create a culture that will support innovation within your organization.
“You really need to create and invest in developing an innovative culture,” Ouellette says. “When most people think of Pittsburgh, they think of steel. We tried to get people from Pittsburgh who knew the textile industry, but unfortunately, most of the people who know textiles are located in the southeastern part of the country. You can either try to move the talent to where you are, or you can move where you are the talent. The latter has really worked for us. The major catalyst is getting the experienced people in the industry.”
Having people that understand your industry in and out is crucial for growth. If you are unable to properly understand your market you will lose to the competition. You have to be willing to do what it takes to get the right people.
“The first dollar spent on the right talent is so critical,” Ouellette says. “If you don’t have the right people who are charged with the responsibility and know how to execute the plan, not just have the desire but the know-how, that makes all the difference in the world. You’ve got to get the right talent and you’ve got to pay for that talent. They have to have all the right experience and background, not just 80 percent of it. You’ve got to have the whole thing in our opinion.”
HOW TO REACH: American Textile Co., (412) 948-1020 or www.americantextile.com
The Ouellette file
American Textile Co.
Born: Springfield, Mass.
Education: Bachelor of science degree from West Point; MBA from Duquesne University
What was the first job you had out of college, and what did you learn from it?
My first job after college was second lieutenant of the United States Army. I was a fire direction officer. I was responsible for computing the data required to fire 155 millimeter artillery weapons. I learned the importance of how to manage a small team, and I’ve found that those same skills for managing a small team apply to larger organizations. It’s all about people.
Did you see any action?
I was a pilot in Vietnam for one year between 1970 and 1971. I flew an army reconnaissance plane on the Cambodian border for six months, and then I flew a twin-engine transport plane for the last six months all over Vietnam, Cambodia and Thailand.
What is the best business advice you’ve ever received?
It is taking care of the people whom you work with. You have to always be aware of that.
If you could invite any three people to dinner, whom would you invite and why?
I would invite Dwight D. Eisenhower because it would be fascinating to hear about the Normandy invasion. I would love to invite [George] Herbert Walker Bush to dinner because I think he had one of the most interesting resumes of any president. And I would like to invite Arnold Palmer to dinner. Not only was he a tremendous golfer, but he had the ability to excite people and motivate people and anybody with those types of skills would be worth talking to.