As the leaders of Clark-Reliance, we attribute much our success to first looking inside the company for ways to grow. While things may appear stagnant, there may be some opportunities internally to afford your company the chance to expand and become more profitable.
Despite challenging economic times, it is possible to cultivate your business simply by looking inward. Clark-Reliance, a global leader in the level indication and control, sightflow indication and filtration and separation industries, continues to flourish, and in the past five years, we have experienced 46 percent growth.
We offer a four-tiered approach to growing, simply by evaluating internal operations and looking for creative ways to expand.
Never believe that you are in a mature or nongrowth industry.
If executive staff and employees continue to tell you that you are in a mature or nongrowth industry, politely ignore that advice. There is always room to grow. Your customer base is always evolving and they probably have specific production or process problems that would provide you with sales growth. Also, there may be possibilities to acquire market share from within the industry.
For example, if a competitor gets acquired, relocates, or goes through a major change, talk to their customers. These types of changes cause quality issues and increased lead times that will often force customers to reevaluate their previous business relationships. Look at this as your opportunity to engage them, provide solutions and ultimately convert them to your products.
Review your sales channel to maximize your opportunity to sell the most products.
Often, a modification to your sales channel can help stimulate growth. The first step is to look at what geographic areas are important due to high-potential customers and then determine the best sales channel. A precision-based sales approach in specific geographic areas targeting high-potential customers will outperform a blanket sales approach over a larger geographic area.
For example, we identified the Middle East as an important market due to the potential and concentration of oil and gas customers. In order to gain market share, we hired a regional manager who targeted some customers directly while managing the existing sales representatives. This change allowed us to increase market penetration with a “hybrid” sales channel, leading to significant sales and market share in this region.
Look at noncore industries and markets and determine if there is an opportunity for product permutation.
Look at market possibilities that have not been part of your core business but have similar technical applications for your products. Slight adjustments to an existing product can allow it to be sold in a completely different industry. Redesigning an existing product may give you the ability to bring “new” products to a noncore market in a short time frame. Also, product permutation cost is generally low so you can grow sales while improving profit through utilization of existing fixed costs.
Utilize the knowledge of your employees and stakeholders to find more opportunities for growth.
As the barometer of product innovation, improvement and market expansion, employees and stakeholders are the key to interacting with customers and can identify needs that you may not realize exist. Make it a standard procedure for employees and stakeholders to ask existing customers for suggestions.
For example, one of our instrumentation product managers learned of a level control problem being experienced in the flash freezing of food. He opened a dialogue with us about solving this problem that led to a product permutation of an existing magnetic level gage. This allowed us to solve the problem for the food application and we were also able to use the new product in difficult applications with our oil and gas customers. Profitable growth opportunities are presented because of our culture of employee involvement.
We have built a culture that allows our employees and stakeholders to communicate ideas and potential opportunities to us in a frank, open dialogue. Your employees that make up your sales team, inside sales support, engineering and product management, interact with your customers and markets daily. If you couple their ideas with the knowledge of significant stakeholders like your supplier base and sales representatives, you will find many profitable growth opportunities.
Matthew P. Figgie is chairman of Clark-Reliance, a global, multidivisional manufacturing company with sales in more than 80 countries, serving the power generation, petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation. Figgie is a member of the University Hospitals’ board of directors, corporate co-chairman for the 2013 Five Star Sensation and chairman for the National Kidney Walk.
Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. Solon is chairman of the National Kidney Foundation Golf Outing and past chairman of the National Kidney Walk.
Integrity. Peace of mind. Working hard. No surprises. These aren’t just the types of adjectives Dave Michelson hopes his employees, customers and investors associate with National Interstate Corp. They are the very words that these groups used to describe the company when asked to participate in its recent rebranding campaign.
“We developed focus groups and we hired a consultant, just getting descriptive words about what it means to be working here, doing business with us,” says Michelson, president and CEO of the transportation insurance company headquartered in Richfield, Ohio.
Rolled out in 2011, the people-focused branding campaign features the new corporate tagline “an insurance experience built around you.” This line aptly sums up Michelson’s strategy for growing National Interstate since he became CEO in 2008. This involves continual growth through new value-added products and services for customers.
“People in businesses have to buy insurance,” Michelson says. “So it’s really just a matter of finding the niches that we want to be in, attracting new customers and retaining our current customers.”
Here’s how Michelson leads National Interstate and its 494 employees to take advantage of strategic growth opportunities.
When you reach a certain size as a business, growing in new niches is no longer enough to significantly impact sales.
“When we were a smaller company, way back in the ’90s and didn’t have a lot of sales, we were growing rapidly on a percentage basis year over year, but you could move the needle pretty easy by writing one new $10 million program if you were only $30 million in overall sales,” Michelson says. “Whereas when we got bigger and bigger, it’s harder to move that top line needle. We recognized that while we’re still innovators and creating new products and product extensions, in order for us to continue to profitably grow we needed to look at other ways to do it.”
So in 2008 and 2009, Michelson gathered a handful of senior managers from his leadership team to begin searching for acquisition opportunities. In this initial evaluation process, there were several things they looked for in a partner. First, they wanted to marry up. Michelson and his team specifically looked at acquiring expertise in industries that complemented or enhanced the business’s existing insurance products so that they could offer customers a deeper value proposition.
“One of my successes is that I married up,” Michelson says. “I think if you do that, you’ve got a fighting chance being a world class company that I think we are.”
You also need to make sure that your companies have aligned interests. So just like in marriage, it’s important to partner with companies that are honest and transparent about their goals. The rewards are much greater when you take the time to find the right partner instead of rushing the process only to discover serious differences in opinion down the road.
In August 2009, the company began M&A discussions with Vanliner Insurance Co., a moving and storage industry insurer based in outside of St. Louis, Mo. Michelson knew that National Interstate was in the running with several other companies that were looking to buy the business. Yet you don’t want to use the preliminary period just trying to win over your potential partner. It’s also about making sure that the match is right by sharing goals and developing an understanding about expectations of the partnership.
“You’ve got to kiss a lot of frogs to find the prince or the princess,” Michelson says. “So we do that and it takes a lot of time from the entire senior management, … but it’s one of the ways that we’ll be able to strategically and profitably grow this company.”
As you get more serious about the opportunity you can ratchet up the level of involvement from your team.
“If we want to forward with it, we’re going to involve at least another half a dozen senior managers if we think it’s going to be taken to the next step,” Michelson says.
Because the company doesn’t have an M&A department, it spent months performing due diligence prior to closing the deal. However, this was an important step in ensuring a smooth transition and identifying potential roadblocks moving forward.
“We knew that there were some things that we were going to have to do and we did them,” Michelson says. “There were a few small bumps, but by and large we had no major surprises.
“Ultimately they liked us better, and we actually liked them from the get-go. They were very straightforward, very honest. I think we pride ourselves on that as well. So we hit it off.”
Build a team
In June 2010, the company acquired Vanliner from its parent company, Unigroup Inc., for approximately $130 million. After taking control of the business in July, Michelson knew it was going to be challenging on the home front. Inevitably, merging the companies resulted in staff redundancies and there were people who now had jobs that weren’t relevant to the new strategy. In both cases, those employees received a severance package.
“We shed some premium out of their overall portfolio because some of their business we were actually already doing here in Richfield, Ohio,” Michelson says. “So we saw no need to compete with ourselves. As a result, we right-sized that business by about 40 percent downward, but then we had a great moving and storage platform in St. Louis.”
As you make changes within the new company, you have to be cognizant of employee feelings, especially when it involves job restructuring or making cuts that can negatively impact morale. “You want your communications to be straightforward,” Michelson says. “You don’t want to mislead anybody. You have to understand the sensitivities that are involved.”
At the same time, you need people to buy into why the changes are an important part of the long-term growth strategy. Once the ink is dry on an acquisition or you begin to pursue a new niche, it’s your employees who will have to work together carry out the changes.
One way to unite everyone in the success of the company as a whole is to give them the same scorecard. Michelson says the company has all employees on the same bonus plan matrix, which is based on underwriting profitability and how the company performs on sales relative to plan.
“It’s a beautiful thing,” he says. “If we’re all working together towards the same goal and they move those numbers in the right way, everyone benefits to the same degree because they’re on the same plan. That financial aspect I think carries forward into how people interact and work together in the workplace.”
Transparency about results throughout periods of transition is also critical. It not only motivates employees as they see progress but encourages camaraderie as they spot challenges together. When everyone is aligned on companywide performance goals, they see the value of helping out where they are needed instead of just doing their jobs.
“We talk about our results at our monthly employee meetings,” Michelson says. “It’s very transparent and open so everybody knows where the results are and who is driving them favorably and unfavorably. It also creates an environment where if somebody approaches a coworker and needs some assistance, they’re more inclined to drop what they’re doing and help them out.
“They know if there is a product that’s not hitting on all cylinders, in a nice way, they might say to that product manager even walking by in the hallway, ‘Hey John. Hey Sue. What’s going on with your product? You know are you addressing this or that?’”
Lastly, it’s important to articulate the vision of the company so that as more people come on board and changes are made, employees see how they fit into the picture. Part of the reason for the company’s recent rebranding strategy was re-engaging people in the vision, mission and values that continue to drive company’s success and strategy for new growth opportunities.
“We’re not changing who we are or our culture,” Michelson says. “It’s really just more about confirming how we feel about ourselves and how our various constituencies feel about us. So we’ll use this in ads and other things, and it will be fun and it’s something that the employees will own. I found the effort and the tagline to be interesting in that we’re not one-size-fits-all.”
Michelson says that the company takes a conservative investment strategy when pursuing new niches in order to avoid growing irresponsibly.
“Growing is fun, but growing in the wrong niches or growing in the right niche at the wrong pace will generate very bad results,” Michelson says. “That’s not fun and it’s not fair to shareholders. Having that discipline on the operations side is extremely important.”
This strategy has helped company establish a footprint in a number of underserved and difficult niches where it thinks it can make a difference relative to its competitors long-term, for instance, in insuring high-hazard types of vehicle exposures.
You want always to be pursuing opportunities but with the right knowledge and understanding of your business strategy and your capabilities.
“We have to grow our competencies, our skills, our employee base with passion but also in a somewhat patient manner because we want to attack it every day,” Michelson says. “We don’t want to come out passively, but you’re just not going to be able snap your fingers and change some aspect over night. You want to stay on it every day.”
To accomplish this, Michelson relies on his management team to help him evaluate growth opportunities from all sides.
“The feeling that I get in my gut is usually the right feeling but you want to confirm it,” Michelson says. “I’m more of a collaborator in my style, so I tend to get the views of others on my management team. I might not always agree with them, but I seek them out. It helps you make better decisions and more grounded decisions.”
Equally important to having a capable management team when pursuing growth opportunities is having a company culture that embraces innovation at all levels, which casts a wider net for success.
That’s why Michelson tries to step away from the innovation process until his managers have already performed due diligence to evaluate a new niche in terms of size, competitors, barriers to entry, technology and other areas. By letting them drive that part of the business, he can be more long-term in his focus.
“The new business growth and finding new niches is much deeper in the organization, where it should be,” Michelson says. “We’ve got professionals who are going out to industry trade shows and talking to people who run businesses that are in new niches. We’ve got our HR function using recruiters and getting leads on people out in the industry, and we’re getting leads from customers who are really pleased with our service.”
Michelson says he tries to keep an open mind whenever his managers want to enter a new niche, specifically because he knows they’ve done their homework. The key is to ensure that the company grows responsibly, but doesn’t rule out an opportunity just because it’s unusual or challenging.
“If somebody comes in with new or different, I’ll let them show me what new or different is,” he says. “We’ll try things that are well thought-out and if they don’t work we’ll adjust them.”
As the company grows its value proposition, its revenues have followed suit. The company has also achieved double-digit raises for its shareholders annually since 2005, and generated $438.6 million in revenue in 2010, a year-over-year increase from 2009. The financial results of the Vanliner deal are also already meeting expectations just one year later.
“So we’ve opened up our minds as to the different ways you can go at niches and not try to just have one playbook, but have something that’s pretty flexible and scalable,” Michelson says.
How to reach: National Interstate Corp., (330) 659-8900 or www.natl.com
1. Partner with businesses that add value.
2. Engage people to drive growth together.
3. Be patient evaluating investment opportunities.
The Michelson File
President and CEO
National Interstate Corp.
Born: Grand Rapids, Mich.
Education: Bachelor of science degree in business administration, Miami University; master of business administration degree, University of Alabama at Birmingham, 1991
What part of your daily routine would you never change?
I wouldn’t change my 5 a.m. alarm. With the early start, I’m able to work on top priorities before the meetings, phone calls and e-mails.
What makes a good culture?
You want to have fun working with the people that are here versus you see somebody walking down the hall and you just want to walk the other way. We don’t have that here, but I’ve been at companies where it existed and it wasn’t fun. You didn’t want to be there as much because it just wasn’t comfortable being in that building around some people that you just didn’t want to interact with. So the group we have here is an interesting group. It’s a fun group. We’re not perfect and we’re looking to get better every single day here, but the people are our secret sauce.
If you could have dinner with one person you’ve never met, who would it be and why?
Bill Gates. I’d be interested in his perspectives on entrepreneurship and running a fast-growth company. But, of as much interest, I’d want to learn about his views on philanthropy as he gives away the vast majority of his wealth.
One of my life lessons learned early in my business career was to surround myself with smart people. At the expense of being a bit boastful, I have been “top of my class” in the achievement of this approach, and the results speak for themselves.
A byproduct of an innovative and creative management team is the exploration of how to improve an already well-oiled machine. Our machine is firing on all cylinders.
What has been my formula? Enter the concept of joint ventures as a fast-tracked strategy for growth.
Many businesses today have experienced organic growth, while others have done so through acquisition or aggressive new business development initiatives.
For 115 years, Fernley & Fernley grew organically. Our clients typically came and stayed. At one point, the average account was with us for almost 24 years. However, about a decade ago, I came to an epiphany: for our company to continue to grow, we needed to take a hard look at our service delivery model, evaluate what we did well and what could be done better, and what could be done more efficiently through outsourced joint partnerships.
It was a philosophical shift for us, since we had rarely outsourced any of our management services, keeping them strictly in-house. Well, the concept of outsourcing was launched, and we never looked back. We subscribed to my self-imposed mantra of “do what you do best and farm out the rest.”
Growth through acquisition was also part of our growth structure. In 2006, we purchased an association management company that specialized in the medical and health care arena. It proved to be a low-risk venture, a great investment and it immediately positioned us as a player in this growth market.
Joint ventures have proven to be a valuable strategy and, in many cases, offer considerable advantages over acquisitions (even though acquisitions are still in our future). First and foremost, they cost less and offer minimal risk. Any privately-held company like ours is well-positioned to capitalize on this strength. Unlike public companies that have more rigid requirements, joint ventures for privately-held businesses are cleaner with obligations to a more limited group.
Was there a defining moment when Fernley & Fernley launched the joint venture concept? To be perfectly honest, no. My rationale was fairly simplistic:
1. We needed to develop a recognition and awareness that time and resources (within our firm and others) would continue to be stretched.
2. We also needed to develop a vision that our clients’ needs were going to change and we would have to be nimble enough to change with them.
3. We had to become aware that our clients’ needs would be growing exponentially as the composition within the membership would be more diversified, requiring a broad set of service delivery models.
4. We realized that a need to broaden our scope of management services was going to be required by the changing customer base.
5. We needed to position our company as being the total solution provider to our clients. We would be the central point for all their needs to be met — whether we provided the service in-house or outsourced it.
In the end, I came away with six lessons learned about joint ventures: Pick your partners carefully, educate them on your industry and clients — both internal and external, set clear expectations for everyone involved, allow them to fail (but only once), be sure that your partners are a cultural fit and ultimately, hold them accountable.
Joint venture relationships will continue to be part of any growth strategy going forward. Great opportunities exist by embracing this concept. Don’t sit on the sidelines. Embrace the concept, be aggressive and watch your company grow.
G.A. Taylor Fernley is president and CEO of Fernley & Fernley, an association management company founded in 1886. Reach him at firstname.lastname@example.org, or for more information, visit www.fernley.com.
Lynn Britton saw the weather reports on the evening of May 22, 2011, and knew Southwest Missouri was going to get hit hard. But there was still no way he could be prepared for the tornado that struck Joplin, Mo., and completely destroyed St. John’s Mercy Hospital.
“I don’t think there is ever a perfect disaster plan or disaster drill,” says Britton, president and CEO at Mercy, a 38,000-employee company which operates hospitals in more than 200 communities, including Joplin.
“You can’t anticipate every single kind of scenario that is going to emerge in a unique situation. What you have to do is be sure that the leaders you count on have been effectively groomed and mentored in your organization and that you’re confident that in the moment, they can make thoughtful decisions.”
That moment had arrived for Britton and his entire team. He was home when he got the call that Sunday evening from Michael McCurry, Mercy’s COO and executive vice president, that erased any doubt as to how real and how devastating the situation was.
“He told me a tornado had hit, a direct hit to the hospital,” Britton says. “While he didn’t have complete information because there was such a challenge on the ground in Joplin, he had enough to know we had probably lost the hospital, and he was worried as I was on that phone call about the work force, our co-workers and patients.”
Instantly, Britton faced a nearly impossible task. The list of problems running through his head seemed to be endless and every issue seemed more important than the last.
“There was so much that needed to be sorted out all at once,” Britton says. “We had our own work force, co-workers and physicians that we needed to be concerned about and interested in understanding how the tornado impacted them. We had our patients, those that we care for, who had ongoing needs that we needed to very concerned about. And then the broader community.
“Mercy is a not-for-profit organization. We exist solely for the purpose of serving the health care needs of the community. I can’t think of a greater time when those kinds of needs were present than in the tornado. The challenge was how do you focus on such a broad-based need and address it in very specific ways to all those different constituencies simultaneously?”
If the hospital and its staff had been untouched by the tornado, they would have had a massive job ahead providing care to all those who had been victims. But the hospital was gone. So there were still all those needs for all those people, plus so many others who needed help, and seemingly no capacity to assist with any of it.
That’s not the way Britton saw it, however. He had to convince his team that in the midst of all the devastation, there was still reason for hope.
Create a sense of purpose
Command centers were already up and running in Joplin late Sunday evening to provide immediate care. So Britton began preparing for his trip to the site the next morning by doing a little research on other recent disasters.
“I asked a couple of team members to do some quick research for me to see if there were any lessons learned from the other communities who had been through this sort of thing,” Britton says. “What happened to help the community come back strong? What happened to help companies that were really devastated by the disaster? What didn’t work? What were some of the lessons learned?”
Britton came away with an important piece of insight that would guide his decision making in the hours and days ahead.
“With Hurricane Katrina, most of the medical community did not have any continuity of jobs,” Britton says. “So they left the community, went to other places and established a new life. By the time the health care providers and hospitals wanted to try to rebuild, there was no medical work force to operate them. So they really struggled at bringing back to full operation the medical resources in New Orleans. I thought a lot about that and what we had to do to prevent that from happening with the Mercy work force.”
The Mercy hospital in Joplin had about 1,880 workers and Britton had a message for each of them: The hospital would be rebuilt and when it was ready to open, they would all have jobs.
“Even though it was going to take three years or more to build the hospital, they were going to stay employed,” Britton says. “We needed them to be flexible with us and we had to find ways to keep their skills in use. But we couldn’t reopen a hospital in three years if we didn’t have any current medical skills.”
It was certainly a message that offered hope for the future. But in the immediate aftermath of what was happening, it wasn’t much more than that.
“The local management team — you could imagine what a daze they were in,” Britton says. “They had lost their hospital, the very place that they come to work every day. The place they got their identity. At the same time, a number of people from the corporate office had descended on them to take control. The local team was in a fog and we were stepping in. It occurred to me on Monday night that wasn’t a good thing. I had to get that local team re-energized and refocused.”
Like everything else, that was going to be a challenge too. There was no conference room to gather in, no e-mail network to use to deliver his message and in most cases, no accessible phone lines.
Before he could energize this team, he had to find a way to get them all in one place.
“If your facilities are destroyed, as our’s were, we had to rent space at the Holiday Inn convention center,” Britton says. “We had to create a command center and get the word out that that was the gathering place. There had to be a place, one place, where everybody could come together. You just have to have a gathering place where people can begin to reconnect to each other.”
Spreading the word to everyone he could, Britton worked to gather his team. He then explained that he wanted a temporary hospital set up by the following Sunday, just one week after the tornado had struck.
“I gave them a number of big, hairy, audacious goals that they needed to see to,” Britton says. “One of them was we wanted to have an acute care presence back within a week in Joplin. I gave that job to the chief nurse and chief physician. I wish I could describe the look on their faces.”
Not surprisingly, it was one of great shock. But it was quickly followed by one of purpose and appreciation at being given a meaningful job to do.
“It’s an important responsibility for leaders to find that strength and demonstrate it to their team,” Britton says. “They needed to latch onto something like that to try to figure it out. When they first got that assignment, they were sort of shocked and unsure. But by about 3 o’clock in the afternoon, I could see they had a spring in their step and a sparkle in their eye and they were coming to me saying, ‘We think we’ve got an idea how we can do it.’ They did it and it was evident why people need challenges.”
The team traveled to nearby Branson and asked a disaster team if it could move its field hospital to Joplin.
“We brought it there and it was the beginning of a recovery for that team,” Britton says.
As Britton tried to give his people meaningful things to do and as much normalcy as he could provide in such a devastating situation, he also made an effort to be compassionate to the great stress everyone was feeling.
He began listening to stories and sharing those stories with as many people as he could.
“The maintenance worker who came in and had to walk the last mile because of the debris and risked his life to shut off a gas line because gas was leaking into the hospital — he had to crawl through debris carrying a 3-foot long wrench so he could turn off the main valve to the gas line,” Britton says. “Story after story and I made sure I told them over and over to help that team appreciate what an amazing job they had done.”
He told of how the hospital had been evacuated in 90 minutes, with 183 patients, two surgeries in progress and a number of patients in the ICU.
“That’s that moment where you have to find within yourself that strength to be inspirational,” Britton says. “They just lived through a devastating experience and you have to relate that experience to them. You have to be present.”
There were an endless number of decisions that Britton had to make, but it was his presence that was the most important thing he could provide at that time.
“If you’re decisive and you have all the right intent and righteous cause for what you’re doing, I don’t think people are going to remember a decade from now the nuance of one or two decisions you have gotten wrong,” Britton says. “What they’ll remember is whether or not you acted and tried to look at the bigger picture and to do the right thing. You do those things and people will remember that. They’ll remember that you stood for something and you made a difference in the lives of people at a time when they were vulnerable and they needed you the most.”
Think of your people
As the days began to pass and the immediate crisis began to ease a bit, of course, people’s concerns turned back to their job security. Britton had promised that everyone’s job would be protected, but many still didn’t believe him.
“I had to answer 1,000 times, ‘What does it mean that I still have my job?’” Britton says. “I would say, ‘Were you worried about your job before the tornado?’ They would say, ‘No.’ So I would say, ‘Well, then don’t worry about it now. You have your job.’ They’d say, ‘Well, when does the paycheck stop?’ All that sort of stuff. You just had to really be present and patient and continue to repeat the messages over and over and over again.”
So how did Britton put his people to work when their place of employment was a pile of rubble?
“You have to call on others to help you,” Britton says. “When we announced we were keeping all the co-workers on the payroll, we knew those other hospitals would grow their business for the short term because that displaced volume had to go somewhere. So we called each one of them and said, ‘What if we shared our talented work force with you? You pay us whatever hourly rate you would pay for the same skill and we’ll keep them on our payroll and pay their benefits to it helps defray the cost.”
Britton credits the tenacity with which everyone at Mercy shared the stories of how they were getting through it all for the strong response from other hospitals and businesses from other industries.
“It was a great testament to how once we had rallied around the work force and the community, that everybody rallied around us to really help us through it,” Britton says.
Britton admits that he wasn’t approaching decisions in the immediate aftermath of the tornado from a purely business perspective. Missouri Gov. Jay Nixon noticed just that when he met with Britton the Wednesday after the tornado hit.
“His worry was that the board of directors would somehow be upset with those decisions,” Britton says. “I said, ‘Governor, I’m fine.’ He said, ‘Well, what does the board think of all this?’ I said, ‘I haven’t talked to them. They don’t know these decisions. We haven’t taken the time to convene them or have that conversation. But here’s what I do know.’”
Britton proceeded to talk about his confidence that the board would back his decision to support the Mercy employees and help Joplin recover, even if there was substantial financial risk involved.
“If I went in there and said, ‘Board, let’s take the insurance money and run,’ they’d fire me on the spot and they should,” Britton says. “I absolutely felt confident I’d have their support around it. And, of course, I did when the time came.”
The people of Joplin and of Mercy have begun to recover. What remained of St. John’s Mercy was demolished in January and ground was broken on the new hospital earlier this year.
As Britton looks back, he says overcoming seemingly impossible situations requires a leader who can step down from his pedestal and truly feel what his people are going through.
“You need to think about the situation you’re going into and how people are reacting,” Britton says. “Think about how people are reacting to their trauma and put yourself in their shoes. Think through what you can do to be compassionate and supportive and help them out of that dilemma.”
How to reach: Mercy, (314) 251-6000 or www.mercy.net
The Britton File
Lynn Britton, President and CEO, Mercy
Born: San Angelo, Texas
Education: Bachelor’s degree in business, Abilene Christian University; MBA, Oklahoma City University
What was your very first job?
My family owned a hardware store and I was a salesman on the sales floor when I was 9 years old. I had my own clientele. They would come when I was going to be there after school, and I was the only one they wanted to wait on them when they came into the store. It would be all about something they wanted and what assortment of things we had. and I would talk about the features of this or that product. Or they needed to solve a problem in the house and I’d help them with that.
How did you gain all this knowledge?
I always give my dad a lot of credit. He was the kind of father who taught you that you start at the bottom and you have to work your way up. So I did that and we had lots of dinner conversations about how things went at work. He was also president of the chamber of commerce and president of the school board and all those kinds of things.
He would let me go with him to meetings, and I was always fascinated how it was he would choose to give someone an assignment or why he would pick a certain position on something. So we’d talk about that on the way home after those meetings. It was a tremendous learning opportunity. It formed me as a young man.
I give him a lot of credit. We lost him about 20 years ago and I miss him greatly. There are still times where I’ll do something and I’ll think for a split second, ‘I have to tell Dad about this.’
Alfred P. West Jr. sums up his company’s ongoing challenge in one sentence:
“You can’t stay still, you have to continually innovate or you’ll die.”
West is the chairman and CEO of SEI Investments Co., a wealth management solutions business he founded more than 40 years ago. He has grown the company entirely through organic methods, meaning he has relied solely on the intellectual fuel of his employees to power his company’s engine. Organic growth has lifted SEI to $900 million in 2010 revenue, after posting revenue totals in the billions prior to the recession. But the recession’s effects, coupled with an ever-changing industry, has driven home to West and his team that SEI needs to remain responsive to client needs — and to do it, they need to stay a few steps ahead of industry trends.
“We always have to be watching where our clients’ problems are coming from,” West says. “We really have to stay ahead and keep track of emerging needs, and be able to sort out today’s needs from the needs that are going to be emerging, because most of the time, a client or somebody in the market, if you ask them, they’ll tell you what they need right then and there. But usually it’s not much that you can build on. By the time you get the product developed and built, particularly if it’s a technology product, the need is no longer there.”
West has needed to make innovation a key component of the culture at SEI by promoting the development and exchange of ideas, but also ensuring that new ideas stay true to the mission and vision of SEI by managing the innovation process on a macro level. The balance between freedom and setting boundaries is something that West has needed to master over the course of decades.
“We seem to innovate every 10 years,” he says. “We’re in an innovation phase right now, which has lasted longer than 10 years, thanks to the external environment that we are going into. It’s a much bigger change at the end of the day than we probably anticipated.”
Manage the process
When it comes to innovation, and innovating to serve customer needs, West says companies tend to do four things — and three of them are bad.
Companies will do the right things right, the right things wrong, the wrong things right or the wrong things wrong.
“When you do the right things right, you’re doing the things that are really critical to get done, and the right thing to do, and doing those things correctly,” West says. “You can also have the things that really need to get done, but maybe you don’t do them so well. That’s doing the right things wrong. Those are the tasks that you’re continually trying to get into the ‘right things right’ category.
“Then, you can do the wrong things right, where it just kind of creeps up on you. Maybe it was the right thing to do at some point in the past, but times have changed and whatever you were doing doesn’t fit anymore. You have to continually work to find those things out.
“Finally, doing wrong things wrong is the worst. You’re doing something you don’t need to be doing, you’re doing it poorly and you’re upsetting clients and customers.”
Innovation is all about taking the intellectual power of your team and harnessing it in a way that propels your business forward. At SEI, West encourages his team to think beyond the prescribed procedure for how to arrive at a solution to a problem, to challenge themselves to create new concepts and come up with new, more effective and efficient solutions that will allow the company to better serve its clients.
“A good example of questioning the process was when we had this very large report for one of our largest clients,” he says. “It took two hours a night, one night a week to run the report. It was so large; we were running out of space to finish all the rest of their work and get everything up and running by the morning. So finally we went back to our source and said ‘Can we do something about this report?’
“They said, ‘We don’t need that report? Who are you even doing that report for?’ And yet, they were receiving this report on a weekly basis. It illustrates how you need to figure out the things you really need to be doing for your clients, and how you might be taking up resources on a needless task. That is the biggest source of doing wrong things right.”
You can promote innovation in the form of new products and solutions, but often, the best innovations weed out inefficiencies inside your own organization, which has a direct effect on the service you can provide to your customers. West says you need to follow the chain of where your resources end up. As a business with finite cash reserves and a certain number of employees, you have a set amount of resources from which you can draw. Designing new processes that improve your company’s performance has a cascading effect that can carry your ability to improve the products and services your customers purchase from you.
“You follow that chain of where your resources are going,” West says. “If something is wrong, you do an analysis. We call it a root-cause analysis. Sometimes, the analysis will come back and show us that we don’t need to be doing the task in question anymore. Sometimes it comes back and shows us that we’re not doing it as right as we could be, and there are some changes that we could make.”
Ultimately, managing the innovation process comes back to effective change management. You want to position your processes and your people to move quickly and produce ideas that will help your company take advantage of business opportunities when they arise — which can be a hard-to-predict game.
“It all starts with the culture, because most things do start with the culture,” West says. “A big part of it is pushing collaboration, which starts when you hire an individual. A collaborative mindset is one of the most critical characteristics we look for because creating new innovations is a process that takes more than one person. So you start there and set the ground rules that everybody’s ideas are the same and have the same value. You tell your people that you need to have these ideas come forth, no matter where they are in the organization.”
West promotes the idea of collaboration leading to innovation through, among other things, the structure of SEI’s offices.
“We have no offices and everyone sits at the same desks,” he says. “I sit in the middle of the floor at the same type of desk as everyone else. You cannot tell hierarchy in the company by just looking around. It sends the message that you don’t have to go into this big office to tell someone your idea, and you don’t have to be intimidated by someone who is higher up in the organization than you are. It sends a message that everybody here is equal in terms of their ideas.”
Listen for innovation
Managing the process of innovation is only part of the equation for building an innovative culture that can leverage the brainpower of your team members to meet customer needs. You also need to create opportunities for dialogue with your employees and customers.
At SEI, West and his management team use multiple channels to spur everyone to talk about, and listen for, innovative ideas.
“We recently produced a site called ‘SEI Ideas,’” West says. “It is a social media site that has so far been very successful in ferreting out a whole lot of ideas, and then having people pick up on those ideas kind of virally. We are getting a lot of traction on ideas with methods like that. It has been far more effective than comment boxes or simply pushing for ideas through team leaders.”
The use of social media is part of an overall philosophy of collaboration that West has fostered. Because the best innovations often come as the result of multiple employees putting their heads together, West tries to ensure that employees are meeting and sharing ideas on a regular basis.
Ideas often cross-pollinate throughout the organization when someone with an idea and the passion to promote the idea is able to connect with others who are open to new ideas but might bring a different perspective to the table that allows the idea to be further shaped and refined.
“When we organize groups, we usually go through the process of finding people who are keen on the idea, and they bring it forth,” West says. “We have multiple segments or business lines with all of them trying to grow their business, and in doing so help to inspire innovation. So through that, we’re pushing for innovation on an everyday basis.”
Listening to customers is another key to a well-built innovation strategy. To know how you can best leverage your ideas to serve customers, you should talk to the people who will be using the products and services that are spawned from your employees’ initial ideas.
It’s an area that West says SEI needs to work to improve.
“We don’t do as good of a job as I would like to do on that,” he says. “We certainly get our clients involved in the prototyping stage. But it also helps that, if an idea is initially marketed, that you do have clients who are innovators as well. We call them ‘early adopters,’ and we usually take things by them.
“But what is even better than that, and what we haven’t been able to do, is actually put a client on the team. You can talk to them, but if you can take it a step further and actually have them put a representative on the innovation team, that way, if something goes a little wrong and you need to correct it, you can do that sooner rather than later. A lot of times, things go wrong during the process because you didn’t understand what the customer wanted as well as you could have. That is a concept we are working on.”
Building customer representation into the innovation process can help you, as West calls it, fail quickly. If there is a mistake in the design or implementation of a new product, you can find out and correct it in short order.
“Innovation really is a process of learning by failure,” West says. “A fear of failure is often what squashes an innovative culture. That is why you want to promote the idea among your people that it is OK to fail, and fail quickly. You push it, fail quickly, fix it, fail quickly and fix it again. If the failure is the result of trying to do something, you learn from your mistakes.”
Learning from mistakes, and doing so in rapid-fire fashion, is the best way to speed the process of turning wrong things done right, and right things done wrong, into right things done right.
“The reason you want to fail quickly is if you drag a failure out, it costs you a lot more,” West says. “You probably found out it was a failure pretty early. The people who hang on do so because they are afraid that this was their only chance to prove themselves, so if they admit failure, they basically feel like they’ve lost their job. You can’t allow people to feel that way, or you’ll never have any innovation.”
How to reach: SEI Investments Co., (610) 676-1000 or www.seic.com
The West file
Born: Brooksville, Fla.
Education: Aerospace engineering degree from Georgia Tech; MBA from the Wharton School, University of Pennsylvania
West on what it takes to build an innovative culture: You first have to be dedicated to it. We only grow one way, and that’s organically. We really have nothing that we can hide behind so by definition in our business, we have made it a very important thing to do. I know there have been other organizations, 3M has always been, as has Google — and Apple was probably No. 1 — that are held up as great innovative companies. And it is all about doing things that have never been done before, but meeting a need.
Apple is a great example. They met needs that people didn’t even know they had. That is the definition of emerging needs. If you innovate properly, you end up doing that. We’re doing things that are much more mundane with investments and investment technology, but we still have to look out and ask where is all this going. Most of the time, people won’t know that it is a need.
What you’re doing in marketing terms is creating a new category. And new categories are tough to bring out. Because we can come up with a new category, people didn’t know they needed it, but once they tried it out, it really does have an exponential curve if it is a successful innovation. It turns out we have successful innovations every year, but we have a major innovation about once every 10 years.
West on predicting the future needs of customers: We look at industry trends. They’re usually predictive of some major changes. When it looks like something new is coming, that is when you gear up to design new products. You have to keep your ear close to the ground in one sense, but also looking out for good ways, and you are definitely looking at trends.
One big trend we caught in the ‘90s was advisers who were moving from commission to fee-based visits. That changed an awful lot in that industry, and we came out with an offering that moved in to fee-based, and we did very, very well for a period of time. That was the case of a big industry trend where you could see the handwriting on the wall, but a lot of the people doing day-to-day business were not willing to give up a commission-based business model. It wasn’t until later when they had to give it up.
Bill Sasser created The Management Trust in late 2005 as part of an industry rollup, merging six companies to form an employee share ownership plan, or ESOP. The community association management company is owned by its 700 employees, but it is Sasser’s job as chairman and CEO to provide value and profitability for the company’s employee-owners. As part of that, he has helped to spearhead a growth-by-acquisition strategy that has helped the company broach new markets and new lines of business.
Smart Business spoke with Sasser about the acquisition strategy at The Management Trust – which is the DBA name of The Management Association Inc. — and how to effectively implement an acquisition strategy at your company.
At the outset, what was the process like to roll all of the companies together to start The Management Trust?
We really invoke the ESOP culture quite a lot in just about everything we do, and probably our biggest cultural difference between an ESOP company and a nonemployee owned company is the degree to which we engage our employee owners. That really kind of changes the dynamic considerably. What we've done is we operate with a high degree of transparency for all of our employee owners, because they are our shareholders.
In doing so, they understand the good, bad and ugly of what our strategic vision is, what our financial performance is, all of those sorts of things. So as we are going through the post-merger integration issues, which is compounded by the recession, we would share with them the challenges we’re having. What we have found, and this is the beauty of an employee ownership culture, is even when you are sharing with them news that is not entirely positive, they feel honored and respected for being given the information at all.
Moving forward, what has been your growth strategy?
Historically, we have relied heavily on the homebuilders to fuel our growth. Obviously, over the last five years, there has not been a lot of home development. So we really found ourselves in the position of needing to reinvent the company. What we have done is a couple of things: No. 1, we realized we needed to find recurring nonvolatile revenue streams that are predictable, as opposed to the volatility of the real estate market. We went about doing that, creating some proprietary programs and so forth, and in so doing, we built a model that became scalable. So once we realized that we had built a strong business model that could prosper even in a difficult economic time, and had recurring predictable revenue streams, that is what then gave rise to the acquisition strategy.
What makes for a good growth opportunity in your situation?
I think it is a couple of things. First of all, every company's long-term strategy is going to be somewhat different. My job description is very simple: the creation and preservation of ESOP share value for our employees. That is really what I do. Parenthetic to that is a lot of different things. But as it relates to the acquisition opportunities, we look for three different things. We look for companies that are either strategic markets, meaning markets that we know we need to be in to grow this company into a national presence. We look for companies that have what we call a strategic skill set, which may be a particular area of expertise that we can leverage throughout all the positions of the management trust. Again, with the idea that we want to create a business model that is scalable. Thirdly is simply tuck-unders, where we just acquire a focused business and fold them into an existing office of the national trust. The most important criteria that we look at when we are exploring a potential acquisition opportunity is where we can create value.
What would you tell other business heads about developing an acquisition strategy?
I think if I had to identify a couple of key points for somebody considering acquisitions, the first point would be to find a point of differentiation between your company and other acquirers in that business space. If the company is simply trying to compete on price while not considering other factors, a bidding war is going to ensue, and that is not going to work. Sellers want to find a company that is going to be a good fit. So any way you can differentiate yourself from your competitors is better. I think that culture is critically important in any acquisition strategy. You need to find a company that is going to fit.
How to reach: The Management Trust, (714) 285-2626 or www.managementtrust.com
From Thomas Edison and the Wright Brothers to Steve Jobs, Bill Gates and Mark Zuckerberg, America has long been a nation of inventors and innovators.
But Gary Shapiro says we aren’t doing enough of it anymore, and it’s why other nations have closed the competitive gap on the U.S.
It’s why Shapiro, the president and CEO of the Consumer Electronics Association, wrote “The Comeback: How Innovation Will Restore the American Dream” (Beaufort Books, 2011). Shapiro’s book offers readers perspective on where America went off course, and what can be done to correct it.
Smart Business recently spoke with Shapiro, who is primarily based in the Washington, D.C. area but maintains a Detroit-area residence with his family, about his book and what CEOs can expect to learn from it.
Could you explain what you think business leaders will learn from reading your book?
I have heard from many business executives and CEOs who have read it who believe the fundamental message is true: That innovation is important to our national strategy and their corporate strategy. Almost every week during 2011, I spoke somewhere in the world about the book, and I’ve heard from so many of them. For American CEOs, when it comes right down to it, they feel the success of their business is tied to the health of the U.S. economy. They are concerned about the health of the U.S. economy and feel the book provides a strategic plan for a way out. In terms of how innovation will make a difference in their business, it is a competitive world out there and you have to run just to stay in place. The book challenges them to take a similar approach to their company as for the country.
What drove you to write this book?
In the beginning, I had an experience in China, which affected me. I was raised to believe that if you are not part of the solution, you’re part of the problem. I have never served in the military, but I'm appalled by the fact that we have hundreds of thousands of Americans risking their lives and limbs while the rest of us are doing nothing for the country but taking from it. The best you can do is to wake up people to make a difference, and do what they can to improve the country.
Why is innovation such a central concept to getting America back on track?
We have three choices now as a country. We can cut spending dramatically, we can raise taxes dramatically, and we can grow. And growth comes from innovation. The numbers don't lie. We have to do something pretty dramatic as a country, and we have had a failure in leadership to do so. So as we wait for the next presidential election, and nothing really significant happens, that is a challenge for us, and hopefully we have this presidential election year where we can refine the debate and challenge Americans to focus on what is truly important in the future.
Given our culture and our system, how do we speed up innovation?
The way we do it is we attract the best and the brightest. We have strategic immigration. We encourage free trade, we enhance the university system, not only to attract the best and brightest, but to have places that can go and encourage science, math and technical training. And also encourage baseline technical skills. There are three million jobs open in the U.S., and they are not being filled due to a lack of people having necessary skills for the necessary geography.
How to reach: Gary Shapiro, (703) 907-7600 or email@example.com
Carl Camden’s company finds jobs for people. That in and of itself could have served as a buffer against most recessions.
As the economic crisis caused untold numbers of positions to vanish at companies all across the country over the past four years, you might have thought that Kelly Services Inc., which Camden leads as president and CEO, would have had an increased demand for its services as people looked for employment and companies living hand-to-mouth looked for short-term staffing solutions.
But this wasn’t just any recession. This recession’s impact was so severe and hit so many companies across virtually every industry; it took a big bite out of Kelly Services as well. People needed jobs, but companies weren’t looking to hire, even for temp positions.
The company had to cut 1,900 positions as it lost money for the first time in its history.
“Our sales went down by a third during the recession,” Camden says. “The demand for our services was actually sinking with the recession. The whole definition of what we were as an industry changed. In coping with the recession, we had to open new product lines, new services, new types of relationships with customers.”
Camden and his leadership team had to fundamentally restructure Kelly Services as a more centralized organization, renew his employees’ focus on customer service and ensure that multiple lines of communication were accessible to everyone in the company, so that everyone was able to speak with upper management and stay informed on the progress of the changes the company was implementing.
At the same time, Camden had to react to the recession’s fallout, while maintaining a proactive approach regarding what Kelly Services would look like, and operate like, after the recession.
Form a plan
First responders in an emergency, such as a natural disaster, say their training takes over in a crisis situation. They immediately know what steps need to be taken first and what gets moved to the top of the priority list.
CEOs aren’t completely unlike first responders when dealing with a financial crisis that threatens their business.
As the recession deepened in late 2008 and early 2009, Camden and his team surveyed the situation and immediately recognized that the company needed to reduce expenses and get more efficient — with an eye toward maintaining those efficiencies after the recession.
“You first have to reduce your expense space, obviously,” Camden says. “But one of the things we tried to do in that time when we were reducing our expense space was to do it in a way that yielded structural advantages to the company, advantages that could remain as something permanent as we came out of recession.”
The solution that Camden’s team formulated was to shut down several branch locations and transfer those capabilities to a central location.
“We could then serve more customers and do it anywhere they happened to be,” he says. “They’re not reliant on a branch within the network. It was an opportunity to reduce costs and an opportunity to increase our services while we did that.”
Camden likens it to how banks have evolved. Several decades ago, banks were entirely based on a brick-and-mortar infrastructure. Now, banks offer more services to consumers, but with fewer branches.
“Growing up when I did, you had banks every two or three blocks,” he says. “Today, you can drive for quite a while without seeing a bank branch, because we do more banking with ATMs and call centers. We were able to centralize a significant part of our business in much the same way, decreasing the number of our branches while increasing the number of services we provide to our temporary employees and customers by using automated systems, online service centers and call service centers.”
In a time of head-count reductions and major change, morale can trend downward in a company. However, those who survive the cutbacks and are willing to adapt to the organizational changes can actually become more productive in the short term. Camden relied on that uptick in production to help expedite the transition for Kelly Services.
“People get very focused very quickly on what it is going to take to survive and do well and keep the customers happy,” Camden says. “I think a time of extreme economic turbulence is a better time to make the changes we made because people put aside petty territoriality or the belief that we’ve always done it this way so we should always do it this way and get a lot more focused on what needs to be done right now.”
But you can only ride that wave for so long. Those who survive the cutbacks will initially exhibit relief that they’re still employed and a willingness to do whatever it takes to keep their jobs. In any time of upheaval, there will still be an element within the company that is resistant to change, and if those who were initially on board with the change don’t see a long-term point to what is going on, over time more and more of them will become skeptics, and then outright cynics. Some can’t stay with the company.
“Of course, there is going to be some resistance,” Camden says. “There always is. Any time you are asking someone to change the nature of their job, there is always resistance because people like things to stay the same. Every time you go through a big change, you’ll have, within the normal array of responses, some people who have to leave the company because they don’t want to do what is going to be required.
“Eventually, some of those people might come back because they figured it out and understand it,” he says. “But the notion that you can make everybody wholeheartedly embrace the change is not an effective notion because they don’t, they won’t and you waste a lot of time trying to convince the ones who don’t want to believe in what you are doing. You’re better off letting them leave, and maybe they’ll come back.”
Make change interactive
If your employees are going to see a long-term benefit to the changes you are making, you need to get them involved with the change. You need a culture in which their opinions are valued and mechanisms within the company that allow your employees to share their ideas and concerns.
Camden, as a general principle, doesn’t like business meetings. But as the recession tightened its grip, he held more meetings to begin facilitating discussions that helped improve the flow of information throughout the company. Out of those meetings, Camden and his leadership team developed and emphasized a policy to solicit input from throughout the organization, on all topics.
In any time of change, employees are going to be primarily concerned with the future of their jobs, and if they retain their positions, how their job description might be altered. But employees will also be concerned with what type of company they’re going to be working for in the future.
“That is why we really opened up the company and asked people to start sending us their ideas, big and small,” Camden says. “We received lots of great ideas, many perhaps not sweeping in nature, but all contributing to an ability to simultaneously reduce our expense ratio and build more capability.
“They were as small as ways to change the time that cleaning crews are working and as big as the types of travel we engage in, and how we might be able to hold meetings across different geographies in a manner other than face to face, using more electronic types of communication. Even as the economy starts to recover, I still see a strong desire for people to have more contact with each other, but while having fewer face-to-face meetings.”
One of the ways Camden has bridged the communication gap without herding all key members of the company into the same room is by using social media platforms. Kelly Services utilizes both external, public platforms, such as LinkedIn and Facebook, and custom-made internal platforms specific to the company’s needs. Camden says social media has not only increased his ability to get messages out to the entire company, it has also improved the ability of individuals to directly address another individual within the company, making communication more of a personal matter.
“The social media platforms really promote themselves,” Camden says. “I find that the over-50 and under-30 people are the two groups that are most quickly growing in the use of social media. They’re the ones who let all of their fellow employees know what is going on. With no promotion, it’s on a nice, rapid adoption curve inside the company. Personally, I find myself able to communicate with thousands of Kelly employees via social media platforms, whereas if I had engaged them via traditional hierarchical methods, I’d be communicating to a much smaller number of people, and probably using typical, boring speeches.”
Set the stage
If you are going to increase your accessibility via different communications platforms, you also have to remember that you are being watched, all the time. As the leader of the company, everyone else is going to take reaction cues from you in a time of uncertainty. If you are panicky, other will panic. If you are calm, others will remain calm. If you dodge questions, others will fill in the blanks, often with inaccurate information.
“Your tone matters,” Camden says. “People are listening to your tone as much as, if not more so, to what you are saying. Staying calm is not incongruent with having a sense of urgency. People are looking for whether you remain calm and have a perspective on how we’re going to find our way out of the situation.”
Along with that, as you pilot your company through the change, your people are going to be looking for indications that your words follow your actions. If you don’t adhere to the mission and core values of the company in your behavior and the decisions you make, you will add to the feeling of instability and damage your ability to achieve buy-in with your employees.
“They will be looking to see that you are not changing who you are just because of the financial contingencies of the moment,” Camden says. “You have to maintain a sense of real transparency, because people don’t want to be surprised. If they read about it in a magazine before you tell them what is going on, the result is going to really suck for you as a leader. You need to step up and be as transparent and quick in your communication as you can.”
The organizational change and communication strategies implemented by Camden and his leadership team have helped aid in Kelly Service’s recovery. The company posted $4.95 billion in 2010 revenue, up from $4.31 billion in 2009.
“In a crisis, one part of my job is to assure the investment community and the banking community, along with the customer community, that all was going to be fine, and not only that, it was going to get even better,” Camden says. “But the second part of my job has been internal. To send an internal message, a culture message, to make clear what it is we are migrating to so that the response to a crisis is seen not just as a reaction but rather a proactive opportunity to take steps toward a set of improvements. You want to focus everyone not just on where you are, but what you are evolving into, what you are in the process of becoming.”
How to reach: Kelly Services Inc., (248) 362-4444 or www.kellyservices.com
The Camden file
Born: Dover, Del.
Education: Bachelor’s degrees in psychology and communication, Southwest Baptist University, Bolivar, Mo.; master’s degrees in communication and clinical psychology, Central Missouri State University (now University of Central Missouri), Warrensburg, Mo.; doctorate degree in communication, The Ohio State University
Camden on soliciting critical feedback:
You keep around yourself unpleasant people who tell you that you are messing up. Actually, I'm kind of serious about that. I often tell HR that I am not going to promote somebody because they never disagree with me. You don't want to have people high up in the company who haven’t found at least one thing you're doing that is stupid. You have to have a group of people around you who are willing to challenge you.
Camden on tuning out negative news during the recession:
You can’t disassociate the two. What you have to make clear is how does what is happening in the outside-of-the-walls part of the world influence or link to what you do. To try and separate the two and say, "Don’t worry about the man behind the curtain." Not many people are that great in compartmentalization.
You have to say, "This is how what we are doing affects us." I would say there are a whole lot of people out there who are desperate for jobs, and are looking to us to enable them to live the way they want to live. We have to step up our game to help those people find the ability to make a living. So I would disassociate myself from the realities of the economy, I would create a sense of urgency around it, in the sense of the good we can do in people's lives.
As leader of the Americas Strategic Growth Markets for Ernst & Young LLP, Herb Engert works with entrepreneurs on a daily basis.
His practice guides leading high-growth companies, and takes a leading role in putting on the Ernst & Young Strategic Growth Forum.
Smart Business sat down with Engert at the 2011 SGF — which brought together more than 2,300 of the world’s top CEOs and business leaders in Palm Springs, Calif. — to discuss his firsthand insight into what makes a successful entrepreneur.
Q: What traits define the successful entrepreneurs you see at the SGF?
The No. 1 characteristic of a leader is actually having vision. … They do see things that perhaps we don't see. But they actually look for opportunities — unmet opportunities.
They are bold; they are not afraid to take risks. They actually really are just unafraid. They’re out there, they're on a mission, they’re growing their businesses, and they’re not worrying.
Q: How can successful entrepreneurs retain that vision?
You’ve got to work on the business, not in the business. I think great CEOs can actually see the fact that they need to bring in and surround themselves with great talent, because they need to take that step back. They need to continue to let the creative juices flow and to not get so in the business that they don't see some of the things that maybe they saw when they first started the business.
Being able to admit that you don't know something and either go find somebody that does or get somebody to help you, it's key. Most of the great leaders, most of the great CEOs out there, clearly are humble enough to basically know that they don't know something, and actually will go seek help, bring in a great team.
Q: How are these entrepreneurs groomed for success?
There are a lot of CEOs that actually do come out of corporate America, so there are a lot of seasoned entrepreneurs that actually are very successful and they actually have grown up in large organizations. They come to their entrepreneurial roots, ultimately, coming out of larger organizations where maybe they were in an ‘intrapreneurial’ role. … That training ground, that proving ground, has actually been most helpful to them.
Q: Why is intrapreneurship important for large companies to foster?
What I really think is the missing opportunity is that concept of ‘intrapreneurship,’ because if most organizations were smart, they wouldn't let some of those people leave. They really would foster that spirit of entrepreneurship and promote those ideas and incubate them inside their organizations.
As much as corporate America is incubating those ideas, I think we have to do more of that because there are some large organizations that really do make a world of difference. They've got the resources and they can really commit. And if they really empowered the spirit of ‘intrapreneurship’ and empowered entrepreneurs within an organization, just think of what they could create and what they could develop and where they could take themselves.
How to contact: Ernst & Young LLP, www.ey.com
When Paul Gaffney became president and CEO of AAA Northern California, Nevada & Utah, the company had more than 4.3 million members, a century of history and $2.6 billion in revenue. At the same time, it was essentially a startup.
That summer the milestone decision had been made by the California State Automobile Association to split up its two big operating businesses, a motor club and an insurance carrier, into two separate companies.
“Whenever you have things combined that have some different business drivers, you end up being inefficient in surprising places,” says Gaffney, who assumed leadership of the auto club in 2010.
He wasn’t surprised to find that the 111-year-old company had gravitated toward a hierarchical culture, but he realized that the transition was a perfect time to reengage employees at the “new” company in a culture that was participative and would drive the kind of ideas needed to excel in the service business.
“So we really wanted to invert that leadership pyramid and put the folks who are on the front lines with our customers at the top,” Gaffney says. “That’s a change for people. People actually like where that’s going, but it’s different than their historical experience. So we’ve had to do a lot of work to explain to people what we mean by that.”
When you’re coming into hierarchical culture, not everyone in the organization may be jumping to start sharing his or her ideas. So the first step for Gaffney was to get people at all levels of the company motivated to play a more active role.
One way to do this is by reminding people how they fit into your company’s vision and mission. Because the company’s heritage had been lost a little bit when it was tied to the insurance business, Gaffney began highlighting aspects of this history using storytelling, for example, the fact that the club invented the eight-sided stop sign.
“We have a historian on staff and we try to make those rich elements of the history of the club very apparent to our employees and in our Via (member) magazine,” Gaffney says.
He encouraged his leaders in the organization to utilize meetings and other internal communications as opportunities to share member stories and anecdotes.
“One thing that we’ve done very proactively is to make sure that our club member is always front and center, even if the thing that we’re working on might seem so ‘back-officey’ that you don’t know how it could be connected to the member,” Gaffney says. “So we tell a lot of member stories. That’s a very important part of our culture, is to remind everyone why we’re here.”
Sharing stories about your company helps employees to connect to your customers and your business in a more participative way, because it facilitates a more personal response.
“It just seems to work well though because it is a tool that lowers the barriers to having dialogue versus monologue, because people can tell you what parts of a story resonate with them, what parts they have questions about and what parts trouble them,” Gaffney says. “Storytelling just seems to be a medium that unlike PowerPoint, really draws people in.”
Another way to motivate employee participation is to ask more questions. This helps draw out people who may be more reserved in bringing their ideas to the table.
“When you ask folks, they usually have things they want to tell you, but when you don’t ask they generally don’t want to bring them up,” Gaffney says. “It’s the rare individual that will proactively bring up something that they know could be improved. But when you ask them, most people respond to that invitation.”
Gaffney now asks everyone in a leadership role at the company to double their question-to-statement ratio.
“The way we find inefficiencies is we try to make the environment one that is really conducive to everyone being curious, because you can’t find inefficiencies by having some specialized group looking for them or by expecting that a couple people at the top will do things,” Gaffney says. “You actually have to have the whole company constantly looking at things and saying, ‘Why do we do this that way? Could we do this more efficiently?’ That has yielded for us a lot of great opportunities that we might not have otherwise uncovered.”
Get with your top people
Gaffney knew his top leaders were historically used to a top-down culture. So to facilitate the transition, he has spent a lot of time coaching the company’s management to help them shift toward a bottom-up leadership structure.
“I spend a lot of time with the folks at the top couple layers of the official org chart, just talking to them about what it means to be in service to the folks who are in service to our customers — so in service to them rather than in charge of them,” Gaffney says.
Providing a model for what you want leadership to look like is important in helping people evolve their approaches and buy into the changes.
One way Gaffney offered this was by implementing a training program to help people examine different approaches to leading. He also decided to run the program personally.
“It’s a leadership development program that is based on reading about leaders in other situations and engaging in a group dialogue of how did those leaders approach the situation, and how did they model the kind of leadership that we’re looking for,” Gaffney says.
In the process, Gaffney realized he had to make some changes in his own leadership style to be more inclusive. As CEO, you are the number one model your managers will look to copy.
“In wanting to be a great role model for how we want every manager and leader around here to behave, that’s helped me even more focus on ‘Hey, am I asking enough questions and reducing the amount of statements that I make?” Gaffney says. “Becoming more aware of that boundary line of when do you really need to tell the organization to do something versus giving it a lot of room to be a healthy organism — that’s a line that is difficult for any CEO to find.”
Because his ideas could easily dominate the conversation, Gaffney says he must make a concerted effort to delegate lower level projects and push decision-making out in the company.
“I don’t think there’s any circumstance where the CEO doesn’t make a couple calls, but out of 100 things, is it 12?” Gaffney says. “Certainly a couple years ago, I think I would have been more toward the ‘We’ve got to get this done and we should do this this way,’ and moved more toward ‘You know what there are only a few things that I’m actually going to weigh directly in on and I’m going to work more aggressively on the other things to make sure that the way that those decisions are getting made is as participative as possible.’”
Although it may require some personnel changes — which it did at AAA — Gaffney says that the real driver of the change in your leadership team is getting people to see the benefit of doing things differently. And this is a more gradual process.
“What I try to do and what I encourage the people who report directly to me to do is to be very aware that we’re asking for a transition in a collection of learned behaviors,” Gaffney says. “To me, the successful way to coach folks through that is not to criticize their historical approach but to ask them some questions about how they might do things differently if they really wanted to be in service to others rather than in charge of others. That takes a lot of time but it can be a very important ingredient in the transformation.”
In this kind of transformation, Gaffney recommends making sure that your top leaders are high in their sense of urgency. Those will be the people who will be worth the big investment of your time.
“Do they tend to be the kind of person who when there’s something to work on, they own it?” Gaffney says. “When there’s something to work on, they believe they have the capacity either to work on it themselves or find the right kind of help to work on it, versus someone who has low urgency and someone who tends to look at circumstances outside themselves to explain why they can or cannot fix something. It’s very difficult to help someone if they’re low in their own sense of urgency. It’s very unlikely that my investment in them is going to help make any change.”
Create an idea system
A bottom-up culture is most successful when you can actually implement ideas into your company to solve problems, innovate and improve. So with more people involved in the decision-making process, you need to teach employees how to evaluate ideas so the best ones rise to the top.
“Everyone is in touch with the emotional goodness of coming up with an idea,” Gaffney says. “It’s a little bit more of a challenge to get people to balance their emotional enthusiasm for something that sounds right and seems to intuitively be a really good idea and then put it through the rigor of could it possibly be big enough for us to actually work on and be excited about.”
Gaffney says to first acknowledge the quality of the idea, particularly if it’s being delivered enthusiastically, then ask questions to turn the thought process back on the employee.
“When trying to flesh out an idea — even if I know instinctively that it could never be big enough or it couldn’t make a profit — instead of sharing my point of view, I try to be in a place where I ask the employee, ‘OK, if you were to run this business, how much do you think you’d sell this for, and how much do you think you’d sell, and how would you go about figuring that out, and what did you think the costs of this thing would be?’ Really what I’m trying to do is get all 2,200 of these folks to think through those things all the time, even in their day-to-day operation.”
Even if the idea doesn’t end up working, pushing employees to find solutions themselves teaches people how to come up with ideas that will work.
“I’m sure there are some people who would rather not have to do that, but those ideas don’t make it anywhere anyway,” Gaffney says. “I think a lot of people react to that by realizing, ‘OK maybe this one wasn’t good enough, but I now know a lot more about what ingredients need to be in my next idea.’”
That also pushes decision-making down in the organizations, which frees your senior leaders up to focus on other priorities and pursue new opportunities as well.
“I think the number one advantage is people have wider ranges of responsibility now,” Gaffney says. “They go to fewer meetings. They have to prepare fewer presentations and that inspires them to just get things done.”
As an example, the company was able to deploy its new finance, HR and payroll backbone in just four short months.
“We were able to do that that quickly because the people that had to do the work had that insight that ‘Hey, there are so many opportunities here, we need to unlock them right away and take a little bit of risk in moving quickly onto a new platform,’” Gaffney says.
“It’s perhaps an inevitable consequence of making an organization leaner, but it’s also the kind of environment that you encounter in a startup, where there’s more work to do than there are people and you have good people in the roles. You give them authority. You let them make decisions; and in my experience people embrace that kind of environment with great enthusiasm.”
How to reach: AAA Northern California, Nevada & Utah, www.csaa.com or (800) 922-8228
1. Engage people through dialogue
2. Be a model of participative leadership
3. Help people evaluate their own ideas
The Gaffney File
President & CEO
AAA Northern California, Nevada & Utah
Education: AB in Computer Science from Harvard College, Cambridge, Mass.
What’s the best piece of business advice you’ve gotten?
Essentially to never stop learning. That has come in a variety of forms, some of them more harsh than others. One of them is to remember that even in moments of great success, you’re just a human being and something else is going to go wrong tomorrow and you better not rest for any period of time on success.
Why do people like working for you?
I’d hope they would tell you that we try to do this in a pretty fun way, and it’s an environment where all 2,200 people in the company speak to everyone else on a first-name basis. I’m Paul out in the field. I’m not the president. And I think that helps people see their work as a pretty natural extension of their life.
What do you like most about your job?
What I love about this company and the businesses that we’re in and the people that are in it is we have no inherent conflict between any other party and the needs of our customers. We don’t have stockholders to please – this company is essentially owned by its members. We have a pretty clear business model that articulates making just a small amount of profit each year that helps sustain the long-term viability of the company and provides great value to members. We don’t sell anything, and as long as I’m here we won’t sell anything where the nature of the sale benefits someone in a way disproportionate to how it benefits the customer. It’s really a blessing to not have any of those conflicts. And most other business it’s not nefarious, it’s just easy for those conflicts to creep up.