Terry Cunningham knows that you need to have a compelling story for potential customers if you want their business. So when he joined EVault, A Seagate Co., around three years ago, his first objective was finding out how well the company’s story resonated with its customers and its 400 employees.
“We spent of time looking in the mirror and saying, ‘Well, would you buy it, and if not, why not?” says Cunningham, the president and general manager of EVault. “What’s not true about it? What is it that the customer would say, ‘I don’t really buy that story and here’s why’?”
Often, the problem isn’t that you don’t have a compelling story, but that you’re not communicating it correctly. Cunningham realized this was the case at EVault, which provides online backup and disaster recovery using cloud-based systems.
“So they had the right idea — the previous generation of the company,” he says. “It just wasn’t told in a way that had a broader market appeal.”
At the time, the company was serving only a small niche of industries that were legally required to backup their data anyway. But Cunningham knew that there was an opportunity to communicate to more consumers and markets that the cloud was a better way to handle their data protection and disaster recovery.
So how do you go about broadening the appeal of your story? Cunningham says the first step is floating the idea with people who may not think that they need your product.
“You begin with getting to the prospect that isn’t compelled buyers or compelled markets,” he says. “Go beyond the regulated industries that are required to do it and get to somebody that doesn’t care.”
Even if they seem unenthused at first, if you can open up a dialogue you will probably be able to identify some pain points.
“So now we get to the prospect or customer that at first doesn’t care that much because he thinks everything is OK, but then in the conversation, you discover that there are some challenges that they’re facing,” Cunningham says. “So OK, what’s the first problem you’re trying to solve, … what’s the second problem you have to solve … and so on.”
As you find these pain points, you can walk the customer through what a new solution might looks like and how a new story could meet them.
“Then it’s the usual sort of discovery process,” Cunningham says. “Let’s say we did have all of this. How much would you pay for it? When would you do it? What are all the other issues?”
Using this feedback, the company has been able to retool its story with pricing, packaging and other specifications that reach a broader spectrum of consumers. Now, Cunningham says the key to growth is being able to tell that story in a way that is simple and memorable.
“The early stage of that is to get out and tell the story and tune that story in the simplest possible way so that people can retell it,” he says. “If I give you the pitch, can you turn around and give it to somebody else easily?”
To help employees communicate it effectively to others, Cunningham regularly travels around to the company’s different offices to talk about the new story and why it is significant.
“The ultimate goal here is to communicate a story that gets told and retold by others, and we don’t have to keep doing all the heavy lifting,” he says. “If this is a better way, then eventually the world adopts it as proof that is really is a better way. You need everyone in your company to be able to communicate the story passionately and with the same enthusiasm.”
How to reach: EVault, A Seagate Co., www.evault.com or (877) 382-8581
The next best thing
When Terry Cunningham goes out to dinner, he loves to eat at restaurants that have paper on the table. That’s because when the whiteboard is out of reach, he has a spot to sketch out the next great idea for his technology business.
“They used to deliver crayons for the kids, now they deliver crayons for people like me to draw pictures while we’re talking about something,” he says.
As you continuously recast the story of what your business means to customers, you always want to be asking yourself, “What’s the next step?” even if it means sketching out the plan in Midnight Blue.
“[It’s] what’s changing from our customer’s perspective and how does it affect us to make sure that we’re not becoming irrelevant without even knowing it,” Cunningham says.
“There isn’t a technology company on the planet that isn’t sort of assessing where they’re at because the world is changing very quickly. So they’ve got to sort of reassess and figure out what the customer, target or prospect is looking for today.”
The key to long-term growth is to consider what the customer or the market is saying today, but never stop looking forward and innovating.
“I see a lot of companies and people I’ve worked with just chase the current model or market and they basically end up saying ‘me too,’” Cunningham says.
Successful CEOs don’t simply accept the hands that they are dealt. They like to write their own futures. They are able to envision how they will achieve their objectives. But how are they able to predict how the world will change? Are they merely lucky?
Peter Micciche, president and CEO of Certain Software, recently recommended the book titled “Flash Foresight” to his fellow Alliance CEOs. Authored by Daniel Burrus, a leading forecaster and corporate strategist, the book discusses a variety of triggers that enable us to separate what we can know about the future from trends that are only temporary. There are “hard” trends that will clearly continue and there are “soft” trends that will not.
Hard trends are based upon measurable, tangible and predictable facts or events, such as the aging of the U.S. population and continued improvement of technology. So to begin to predict the future, Burrus recommends we start with certainty. If we are to create successful companies in the future, it is critical that we get in front of these trends rather than lagging behind. They include:
Dematerialization — You only need to look at your phones, computers and cars to notice that most everything is becoming smaller, lighter and more portable with less environmental impact.
Virtualization — Software has enabled us to simulate most any process. For example, online businesses such as Amazon and eBay have virtualized retail stores and garage sales.
Mobility — Just in the last few years, we have begun to take for granted that we can access almost anyone, anytime from anywhere.
Product intelligence — Through the use of sensors and microprocessors, our tangible products and surroundings are becoming “smart,” including our cars and appliances as well as roadways and buildings.
Networking — The creation of highway, railroad and phone networks enabled the economic advances of the past. The next generation will grow up taking the ability to engage and share with others around the world for granted.
Interactivity — Traditional media such as television, books and newspapers was limited to one-way communications. Increasing interactivity will not only transform entertainment and advertising but also politics as we witnessed in the recent “Arab Spring.”
Globalization — The reason we are globalizing isn’t because our governments think we should, but because technology has made it possible. We want to engage with others around the world to enrich our lives as well as our pocketbooks, and it’s impossible to stop.
Convergence — Technology has enabled products to be merged with other products. Just look at your smart phone and think about how it has eliminated the need for old products such as maps, calculators and restaurant reviews.
So how can we take this knowledge and generate breakthrough ideas? Here are some techniques proposed by Daniel Burrus:
Anticipate — Think ahead about the problems that you will be facing several years from now and address those opportunities proactively rather than reactively.
Transform — Steve Jobs created the personal computer industry, but he transformed the music, animation and cell phone industries. He understood how technology would enable new business models and got ahead of the curve.
Go opposite – The future path of success will almost certainly be a path that no one is on currently. Whichever way your competitors are going, think about going the opposite direction.
Redefine and reinvent — Agriculture is an industry that is challenged by lack of water, arable land and unpredictable weather. Solazyme, a local Bay Area company, is creating a new industry based upon algae that produces food, fuel and chemicals in ways that promise to reinvent those industries.
Take your biggest problem and skip it — Many industries have issues due to legacy systems that have limits. Ask yourself how you might let go of the old stuff and skip into the future.
Paul Witkay is the founder & CEO of the Alliance of Chief Executives. Based in Northern California, the Alliance of CEOs is a strategically valuable and innovative organization for CEOs. Paul can be contacted at firstname.lastname@example.org.
As the new president of Burger King Corp.’s North American business, Steve Wiborg was charged with leading a brand suffering from declining sales and a limited menu. Under siege from a market flooding with fast food hamburger competition, it was struggling to keep its foothold in its narrow niche of 18- to 34-year-old male burger consumers.
Yet at the same time, the company was initiating a four-pillar strategy to enhance its menu, overhaul the restaurant image, streamline operations and improve marketing communications, even phasing out the company’s Burger King mascot. Wiborg had the opportunity to apply his 20 years of experience in the Burger King system to help the No. 2 hamburger chain start fresh and expand its appeal.
“When we’re looking at a larger consumer base, we’re really expanding our target to Quick Service Restaurants,” says Wiborg, who became the president of North America and executive vice president of Burger King Corp. in October 2010.
“Any of these changes has to do with focusing on 100 percent flawless execution. That’s really what everything is focused on right now in order to make everything we do or any of those four pillars come to life.”
Today, Wiborg is leading the roll out of these initiatives across 7,200 restaurants. Here’s how he drives execution to help is team deliver results and grow Burger King as a quick-service authority.
Engage your team
To make the brand more competitive, improvements in the new strategy called for the company to add new products, such as salads, desserts and breakfast items, as well as improve upon some existing products, such as a new french fry recipe. Wiborg was also responsible for implementing the company’s new “20/20” design at all of its North American locations, which would create a more attractive and brighter environment for guests. Coming in, he and his leadership team examined research to see where the brand stood in terms of cleanliness, speed of service, food quality and operations.
“That’s always going to be a challenge as we look to innovate off of different platforms and make sure we’re looking at our opportunities from competition,” he says.
But to make the sweeping changes the brand had in mind, Wiborg knew he needed to go outside of corporate to involve people in the process, especially because 90 percent of the company’s restaurants are owned by franchisees.
“It’s really our restaurants and employees that make the change in the end,” he says.
In the past year, Wiborg has added numerous programs and initiatives designed to increase collaboration between franchises and the corporate office. By inviting more employee and franchisee participation, it’s been easier to get people on the same page with consistency and alignment on goals.
“It’s a big system … and getting them all to agree is never going to happen,” Wiborg says. “You get a majority of them to agree, and as long as the other group understands where you are going and what their part of it is, then you’re going to have the best success.”
Because menu innovation was a change that would affect many franchisees, who would end up implementing it at their restaurants, Wiborg selected a handful of franchisees that had been in the system a long time and brought them to the company’s headquarters in Miami. Along with the brand’s vendors and suppliers, they spent three months working with R&D to update the menu to appeal for a broader audience.
“We had to take a look at every single item on our menu and make changes,” he says.
Recent menu additions include everything from funnel cake sticks to a Chef’s Choice burger and a variety of breakfast menu items.
Wiborg says that collaboration with franchises, combined with the initial research the company did in 2010, revealed the areas of the company’s menu and marketing strategy that had strong appeal — flame grilling and the Whopper, for example. But it also helped clarify areas for improvement and opportunities to reach more consumers, such as adding a dessert platform with soft serve ice cream.
Again, many changes in product often come back to execution. For instance, the decision to start cutting lettuce and onions in restaurant creates higher quality sandwiches but also requires more labor.
“There are a lot of things that go into the menu innovation process and how we roll that out,” Wiborg says. “Engagement of our franchisees has helped every step of the way.”
One way the company has improved employee engagement is by making sure everyone works together to set priorities rather than having the corporate office in Miami hand them down. Wiborg says that engaging your team is vitally important.
“I think you’ll be pleasantly surprised at the engagement that you get from your employees when you make them part of the process and not just the execution part of the process,” he says.
To increase collaboration between corporate and the restaurants, the company created a marketing council, a restaurant council, a people council and a diversity council, each made up of approximately 13 franchisees and corporate members.
While Wiborg thought he’d initially have to twist some arms to get people involved, it was actually the opposite. It was just a matter of ensuring the councils were formed to represent a diversity of opinions. So to get a well-blended group, the company’s directors picked half of the council members and let the National Franchise Association, which a majority of the system belongs to, choose the other half.
“The great thing is there is a wide range of thinking on these councils,” Wiborg says. “It’s not everyone thinks the same and we all move cohesively. But if we can come to agreement in these councils of how to move the brand forward, I know we can move the system forward.”
For example, when the people council recognized a new way to improve communication at restaurants through virtual learning, the company introduced the initiative in 2011.
“It has been a great way to actually get things done within the system because it’s not just me of Burger King in Miami saying that this is the way we should do things,” Wiborg says. “It’s a group of 13 franchisees plus Burger King that all across the United States and Canada are coming up with the ways to move forward.”
To build a better and stronger brand, Wiborg also knew that the company needed to narrow the range of excellence. So another challenge of execution was getting franchisees and employees operating in one consistent way across the system.
“We have all levels of excellence,” Wiborg says. “You may go to one Burger King and it’s your favorite Burger King, and then you go to another one and it’s less consistent. So it’s really about consistency.”
Wiborg says that for any brand that has national or global locations, improving brand consistency is often the result of how much support people have out in the field.
“So when you’re talking restaurant image and you know that that’s a very capital-intense decision, in order to move in the right direction, it was about coming up with programs that enable people to do that type of stuff,” he says. “It’s one thing to say we want to do 1,000 reimages in here in 2012. It’s another thing to be able to get there. So just because people know what I’m doing and I’ve been in Burger King a long time, you have to create ways for people to execute.”
That is true for each one of the four pillars the company is implementing. So to help franchisees and employees execute the numerous changes, the company launched a field optimization restructuring program in September to double its number of sales and operations coaches nationwide.
“When you look at operations, it’s one thing to say, ‘We want to have cleaner restaurants serving the best food with the best people and the fastest service,’” Wiborg says. “It’s another thing saying, ‘I’m going to double the field staff for Burger King.’”
Instead of having 80 field people working on operations, the company now has 160 people helping franchisees identify strategies to improve their businesses and offering field support.
“If I’m serious about being the best restaurant and operations company, I think I need to back that up by putting more people in the field working on becoming the cleanest restaurants, the fastest service, the best quality service, and that’s what we’ve done over the last six months here,” Wiborg says.
This added support has helped people stay focused on execution across the board so that no one area or location suffers. If one restaurant needs more help, the company has available resources to accommodate people.
“We have more touches now and we have more people in order to get that more consistent brand up there,” Wiborg says.
Be part of the process
Even through Wiborg felt employees trusted his leadership in implementing changes because of his history with the organization, he also knew getting them to buy in wholeheartedly would take personal investment.
“You have to be part of the process and lead throughout that process in order to be a good leader,” he says. “It’s one thing to say you want the process, it’s another thing to be part of the process.”
To help restaurants embrace the new menus, store images, marketing and operational improvements, Wiborg has been actively involved in discussions and implementations with restaurants. When they began to do the reimaging, Wiborg went out and visited franchisees in a 13-city tour. In the meetings, he worked with franchisees to take them through the new programs and help them understand the timelines, details and execution process.
The company did the same thing with the menu platform rollout. Wiborg often invites groups of franchisees from the NFA or larger franchisees in before rolling out new programs to get their feedback and figure out what support they need to be successful.
“I roll them out for them first and they help kind of shape things a little bit and work on the communication piece,” he says. “So it’s not just about Burger King. It’s about our franchisees and Burger King. If they are more successful, we’re more successful.
“The key to success of Burger King is helping all of our franchise businesses be more profitable and the best QSR business out there. Their engagement, the councils, working hand in hand helped us overcome that and get everyone moving in one direction.”
Wiborg says the four pillars — menu, restaurant image, operations and marketing — probably won’t change but will continue to evolve at different levels. For instance, the restaurant reimaging has already begun, with much of the progress anticipated to take place in 2012. On the other hand, menu innovation is something that Wiborg says is ongoing.
“I think Burger King is two things,” he says. “One is it’s a restaurant company and the second is it’s an operations company.
“Our biggest opportunities are moving all of those four pillars constantly and making those changes with the menu innovation, restaurant image and so on.”
While the company’s global revenue for the third quarter of 2011 was slightly higher than in 2010 — with $608.1 million — only time will tell how these changes play out and how consumers and employees will embrace them.
“I’ve seen a lot of success in the building blocks of what’s to come,” Wiborg says. “Now it’s about the executing part over the next year.”
How to reach: Burger King Corp., (305) 378-3000 or www.bk.com
The Wiborg File
President of North America and executive vice president
Burger King Corp.
Education: B.S., Northern Illinois University
Burger King fast facts:
- Founded in 1954, Burger King is the second largest fast food hamburger chain in the world.
- The company operates more than 12,300 locations serving more than 11 million guests daily in 76 countries and territories worldwide.
- In 2009, BKC was recognized by Interbrand on its top 100 “Best Global Brands” list and Ad Week has named it one of the top three industry-changing advertisers within the last three decades.
- In October 2010, the company was purchased by global investment firm 3G Capital, which is focused on long-term value creation.
Wiborg on menu innovation: Every time we roll out a menu, we look how that fits into our brand. The different things that we’ve rolled out, whether it be toppers or different products or Chefs Choice Burger, it really needs to take the place of something else but be a higher quality. … So it really doesn’t stretch our brand it really stretches the ability for our consumers to want to go to Burger King.
1. Get your team engaged in key changes.
2. Provide support in areas of focus.
3. Be personally involved in the transition.
“One of the hallmarks of successful companies is being open-minded and receptive to ideas for improvement from the employees, who are closer to the work than the executives are. It’s kind of built into your DNA. Either you are or you aren’t receptive. You have to be curious and receptive and then be willing to work with it. Then you need to set up a pattern and a tempo of consistency on this topic. If you do it once, and it goes away — a flash in the pan idea — it becomes not effective. If you do it every year, you’ve been doing it for 10 years, people come to expect it, and it becomes part of the culture.” — Chip Perry, President and CEO, AutoTrader.com
- Be receptive to ideas for improvement.
- Foster a collaborative environment.
- Reward employees who suggest innovations.
Two months into his role as president of American Beverage Corp., Kevin McGahren-Clemens was looking at a company that had realized a $40 million loss. The 500-employee, $150 million beverage company was in a dire situation.
It was January 2009 when American Beverage’s parent company, Royal Wessanen, had trouble with its European business. In order to raise cash to focus on that area, the company decided it would need to sell its U.S. divisions, starting with its strongest, American Beverage. That April, American Beverage’s previous president left the company for a job with a competitor. McGahren-Clemens, who had been hired in 2006 to aid with some of Wessanen’s other divisions, was called on to run the day-to-day operations until American Beverage was sold. However, within a couple of days on site, he realized the business wasn’t in good shape.
“Due to poor fundamental management over time, results were becoming impossible to deliver so financials began to be increasingly manipulated to achieve targets,” McGahren-Clemens says. “No reliable financials existed, meaning no clear picture of profitability by product line, channel or customers existed either.”
Not only did the company have an unclear financial picture but prior management also had built an organizational structure with little involvement, communication or transparency with the broader work force and its focus as a consumer products company was wrong.
“The company had been managed for quite some time with a very short-term focus of delivering quarterly earnings instead of building any sustainable value for the long term,” McGahren-Clemens says. “Very little time or money was ever invested in consumer research or marketing as the organization’s focus was on short-term sales customers and not relationship building with consumers.”
The company was taken off the market and a turnaround effort began with McGahren-Clemens at the helm.
Evaluate the business
American Beverage’s previous president led the company behind closed doors. Since very little information was shared throughout the organization, McGahren-Clemens had to evaluate everything within the business to understand where to start.
“It was a situation where we really had to start from scratch because this person who was running the company, everything went through him and he was now gone,” he says. “In some ways it was easier that way. We literally just revisited and challenged everything. Basically, we just took the company apart over the next three to nine months to really understand what we had.”
Since a lot of information was unclear, McGahren-Clemens had to prioritize and become clear on the fundamentals.
“I put together a top 10 ABC priorities list, and that’s literally how I explained to everybody what we were going to do,” he says. “The first step literally was confirm and clarify financials because we had no idea what we were working with. Nothing was as it seemed. Things weren’t as possible as they looked and thoughts were not in the right place, and everything was manipulated. It was like driving a car that had no speedometer, no gas gauge, no anything, yet you had to operate it day to day.”
Establishing those fundamentals was critical, but the way to do that was to make sure everybody in the company was involved, which was not the way things were set up before.
“It was really getting everybody involved, breaking down walls between functions, making sure everybody was talking, making sure everybody had input, gathering information from everybody we could,” he says. “Everybody knew a piece, but they didn’t know how it all worked together. So it was gathering all the information and getting all the brutal facts on the table so that we could say, ‘What do we have? What do we go do?’”
When your employees are not clear about how the company is performing or what is truly driving the performance, you have to gather that information.
“It’s kind of a combination of doing your own analysis and getting as much information as possible and just objectively looking at it versus what does everybody think it is,” he says. “You have to look at customer lists, your profit by customer, your product line, what’s selling and what isn’t selling. In time, you really do have to contact all the people in the company who have knowledge and have more of a dialogue with them and try to pull out of them what’s working and what isn’t working. How else will you know beyond the numbers and what the numbers are telling you what’s working and what isn’t working? There’s no manual for gathering this information when it’s not clear what’s true and isn’t true.”
Before going any further, ABC needed a new senior leadership team to help turnaround the company.
“I started by first working on ultimately gathering the strongest senior team possible because you can’t do anything difficult within a fairly large organization alone,” he says.
“As we stand right now today, there’s only one holdover, which was the HR person. Operations, sales, marketing, finance, and IT all turned over. There’s usually a transition period like that because in a situation like this or anywhere, it’s hard to really attract the talent you want until you have some stabilization. You have to work with what you have, and that’s what we did for a while. As we began to get some stabilization and I had a better handle on the situation, I could go out and recruit people. I could very clearly explain what they’re getting into and, at the same time, explain the opportunity, which was fantastic because it is a lot of fun being apart of building something from scratch.”
The next step in the turnaround was to confront the brutal facts and communicate those throughout the organization.
“The key is being very objective about the state of the business absent biases about what it used to be or you want it to be — you have to focus on what it is now,” McGahren-Clemens says. “In my mind, this is the single most critical step in any recovery because nothing matters if you don’t fix the right things. Next, with the help and full buy-in of the senior team, you need to set very clear priorities as a team that, in turn, are clearly communicated to the entire organization in a very candid, transparent way. It is important to then create a true dialogue with everyone in the entire company by truly maintaining an open-door policy and walking around a lot to gain input, answer questions and dispel rumors. And then provide regular updates, both by e-mail and in person about your progress.”
To do this McGahren-Clemens met with 100 of the company’s employees one-on-one to gain a better understanding of what could be done and explain where the company needed to go.
“I believe the key is engaging everyone in an ongoing dialogue about how they personally fit into the big picture and why elevating their own game is crucial to our success going forward,” he says. “Once our situation had stabilized and moved out of crisis mode, since I only had around 100 salaried employees, I felt it important to sit down with each person individually for about an hour to connect directly. I would start by asking each person if they knew what had happened and why and whether they understood where we now were and what challenges we faced. Inevitably, people underestimated the seriousness of our situation, both past and present. Most importantly though, I would then ask everyone what performance barriers or morale issues they face plus what they thought we still needed to do to improve the company and our ability to complete a full turnaround and begin driving profitable growth.”
He had to be careful during this process not to scare his best employees away from the company but also make it clear that the company needed a change.
“From the very beginning, it was always challenging striking the right balance between creating a sense of urgency by explaining to people how dire the situation really was without being demoralizing or scaring people,” he says. “It’s a balance of painting a picture of, ‘This is a very, very challenging situation, but we can get out of this,’ and, ‘There is a lot of upside for people who help us with that.’ With the one-on-ones, you can tailor that message and tailor the questions much more specifically by reading the individual. How much do they understand or not understand? Some of them just had no idea how much the company made before or how little we made now or what the problems were. Some people want to know, and some people don’t want to know, and the reality is you’re trying to get a read on who those people are because that’s who you need going forward.”
To help get ABC to sustainability, McGahren-Clemens needed to find those individuals within the company who had the ability to be leaders.
“One thing I’ve always found to be true is, in general, there are some hidden gems within your organization that can move up to the next level,” he says. “Don’t immediately think you have to do everything externally. It’s going to be better if you can pull somebody from within who has some knowledge of the organization. Who’s acting without asking and doing the right things? When you really ask around and start to talk to people, they all know who’s who and who’s pulling their weight and who makes a difference and the same names begin to come up. You have to get out there and ask because it’s not going to be necessarily evident, but in times of crisis, it becomes a little more evident than normal.”
Now that a leadership team was in place, the right people were found and brought in, and progress was being made on understanding the circumstances of the company’s struggles, it was time to start putting plans in motion.
“It was very clear to me from day one that it wasn’t a situation where we could just cut our costs. It was about fixing the business and growing out of it. I believe all sustainable growth begins with a thorough knowledge of target consumers combined with engaged employees who have full access to information and the necessary tools to do their job — such as clear priorities and budgets — and none of those conditions existed.”
McGahren-Clemens had to switch the focus of the company from the short term to a long-term focus on branding and consumers.
“In the consumer marketing world of products, it always starts with spending, and there is a delayed gain on the profit because you’re going to have to invest first in market research to understand consumers, understand your competitors, understand what your product brings to the party, what gaps there are and its further investment to go fix those gaps,” he says. “We had products we had to improve the quality of. We had to add vitamins to our juice products, we had to change the packaging, we had to add benefits, and that’s time and money based on the consumer research. Then you have to go out to the market and support those products. Those are the basic steps that most brand companies do ongoing, but we literally had to start.”
Not only did the focus of the company need to change, but the employees needed to start thinking differently as well.
“It was getting everybody internally to understand that it is ultimately what the consumer thinks that matters, not customers,” he says. “Customers are very, very important, but those retailers and distributors care most about what the consumer says too. We had to go out and say, ‘We don’t know how good our products are. Let’s go do taste tests. Let’s get consumer thoughts.’ There were a lot of brutal facts that came up that you have to go out and be willing to hear. That commitment was something we had to build internally.”
With McGahren-Clemens’ leadership, the hard work of ABC employees and a renewed focus, the company has made a rebound.
“The company has been totally made over, and we have a great foundation from the ground up,” McGahren-Clemens says. “You can go in and renovate a house or you can take the whole house off and start over and that’s what we did. We know all the pieces and feel very good about the infrastructure and the talent and processes and the potential, and we feel we are just starting to scratch the surface. All of the investments we’ve made in consumer research, product enhancements, innovation and marketing the last three years are just starting to bear fruit.”
The journey from 2009 to today has been a long one. It took teamwork, communication and a unified focus to get there. The biggest key for McGahren-Clemens was to never let the task at hand bring him down.
“Don’t get too caught up in the enormity of the situation or the challenges or the tasks and just take it one day at a time,” he says. “Focus on ultimately where you want to be and know you can be and just work toward that. Trying to stop and think about how much has to be done can be overwhelming.
“I wish there was one clear formula or one sequential order of steps that would make it very cut and dried for people in a similar situation, but I liken it to a football game where you’re calling audibles along the way. You have a game plan, you practice it, you have a lot of ideas, you’ve studied your opponent, you know what has to happen, but the reality is you’re still going to have to make adjustments throughout. You have to be flexible enough to do that. You have to have a series of steps you’re ready to pursue and an order to them and a way you’re going to approach things, but you also have to be open to reading new information as it arises because it’s going to arise all the time.”
HOW TO REACH: American Beverage Corp., www.ambev.com
You need evaluate the business to understand what the problem areas.
Once you know the situation and where to start, communicate those facts to your employees.
Once you have buy in, put your plans in motion.
The McGahren-Clemens File
American Beverage Corp.
Born: New York City
Education: Studied economics at William and Mary and received a MBA from Northwestern
What were your biggest fears during the turnaround?
Looking back, I didn’t really think that much about it because it wasn’t productive. But if some of our biggest customers had said, ‘We’re not going to buy your product anymore.’ We wouldn’t have been able to get through the stabalization period. If Wessanen had not supported us and just decided to shut it down, but they did support us and were great throughout. Or if a lot of our talented people had walked out saying, ‘This is too big a risk. I don’t know how it’s going to turn out; I’m just going to leave.’ Any of those scenarios, particularly losing the talent we did have, would have been very damaging.
What has been the best business advice you’ve ever received?
I remember having a manager once where we were in a pretty bad business situation where things weren’t going the right way. We were managing a cheese business at the time and he just stepped back and said, ‘All right everybody, remember it’s just cheese.’ The whole room just burst into laughter. I’ve used that so many different times and kind of had to use it in this situation.
What is your favorite American Beverage product?
It would be the one that’s selling the best right now; the Daily’s Frozen Pouch. It really is a great product. I also like the Little Hugs. I buy cases of it for my kids and the whole neighborhood drinks it and I drink it as well.
If you could switch places with somebody for a day, who would you switch with?
It would be fascinating to be the chairman of the Communist Party of China right now. They are such a hybrid between old-line communism and new-age capitalism and there’s no script for what they’re trying to accomplish as they become a global power economically, but at the same time their social freedoms are lagging behind. It’s fascinating how that’s going to play out and I would love to understand all the different tensions within the country.
The borough of West Chester, Pa. has about 4,200 structures listed on the National Register of Historic Places. That’s out of about 6,000 total structures in the borough.
That’s why, when looking to grow as a business destination, West Chester can’t help but brand itself around its history.
“The borough is only 1.8 square miles, but we have a great number of local landmarks that have connections to people like Abraham Lincoln and other notable folks,” says Malcolm Johnstone, executive director of the West Chester Business Improvement District. “We have a lot of historic interpretive signs that you see in a lot of towns. That’s why we’re branding West Chester as a historic destination.”
But West Chester doesn’t live in the past. The borough is in constant competition for new business with other boroughs and regions in the metro Philadelphia market. So West Chester uses its history as a means of spurring future growth.
The historical building space in West Chester’s downtown area can be, in many cases, built to suit a given business, Johnstone says, allowing business owners to house their companies in a unique environment, apart from the fluorescent-light sterility of modern office parks.
“Any space can be converted, and we do have property owners who will build to suit,” Johnstone says. “Our largest component is professional office space, so people who are looking for space that has charm and is connected to history will be able to find it.”
With a downtown area that dates to well before the invention of the automobile, West Chester has needed to get creative about how to adapt its infrastructure to include ample car parking. The borough’s leaders solved the problem with parking garages. The largest parking garage opened several years ago and can accommodate 800 vehicles. Total, the West Chester downtown area has about 3,000 parking spaces, which can accommodate daily business traffic as well as the many special events that take place in West Chester year round.
“We used to max out our parking when big events happened, and that no longer occurs,” Johnstone says.
In addition to history and an improved infrastructure, West Chester offers financial incentives for business to start or relocate to the borough. The Chester County Economic Development Council can meet with a business owner looking to start or relocate, and construct a financial package to suit their needs. In addition, grant money of up to $5,000 is available for business owners who want to make improvements to the front of a historical structure, such as awnings or signs.
“That grant is funded by the state department of community and economic development,” Johnstone says. “At the local level, our agency attracts and awards those dollars.”
Land area: 1.8 sq. mi.
Mayor: Carolyn Comitta
Phone: (610) 692-7574
Kay Napier freely admits that she felt a little lost in early 2010.
After years as a successful vice president with Procter & Gamble and McDonald’s, she had taken over as CEO of Arbonne International LLC in August 2009. But she couldn’t admire the view from the summit for too long. About a month later, it became apparent that Arbonne was headed for a crisis.
“The company had grown very rapidly and hadn’t built the infrastructure that they needed to be successful, either at the current volume rate or to get set for future growth,” Napier says. “There was a lot of volume sold that didn’t get to the end consumers’ hands. There was a lot of positive momentum in the business, but not the follow-up that needs to happen from a training standpoint. So in that setting, what goes up must come down.”
The company, which sells health and beauty products to consumers through more than 30,000 independent consultants, was suffering from poor business practices that had created a large amount of debt. In September 2009, the company’s board made the decision to file for Chapter 11 bankruptcy, in order to restructure the debt to equity and allow the company’s lenders to become the owners of the business. The company officially declared bankruptcy in January 2010.
Napier had never gone through a bankruptcy before, so almost as quickly as she settled into the CEO’s role, she was undergoing a baptism by fire, dropped directly into the middle of an organizational turnaround.
“I was very concerned, as were the potential new owners, that we would have a lot of defections, particularly in the field because these people are independent contractors who can go work for another company very easily,” Napier says. “Any time people here the ‘B’ word, you’re going to be concerned about defections.”
Napier had to get nearly 1,000 internal employees, as well as tens of thousands of consultants, to see past the bankruptcy proceeding and look toward a new future with Arbonne. The new CEO had to instill confidence in a company that she was still learning about herself.
Read and react
In some ways, Napier is glad she was still a rookie CEO when news of the bankruptcy first emerged. She didn’t have a chance to overthink things. Much like a first responder in a disaster situation, she had to rely on her training and instincts. And her training and instincts told her to start informing everyone in the organization, employees and consultants alike.
The first item she needed to make clear was that the company was not in jeopardy of going under. Everyone was still going to have a job, both now and in the future.
“In this case, there was no liquidation,” Napier says. “Everyone got paid, it was business as usual largely. But you can say that, and your people will come back and say ‘Sure, just wait until next month when you cut our paychecks or whatever.’ I had to trust that our new owners and potential owners were telling me the truth regarding that, because that’s what I was communicating to our troops.”
To help simplify communication and ensure that Arbonne’s corporate leadership was broadcasting a consistent message to everyone in the company, Napier and her leadership team produced a series of videos that laid out, in a straightforward manner, what the bankruptcy meant for the company.
“They were done in an interview style,” Napier says. “I told everyone in the video that I had to learn about this, too. I told them what this really will be is a strengthening of the balance sheet, because for us to continue with the level of debt we had would have been a very challenging business situation. We also wanted to outline that everyone would get paid, and that this would ultimately be a good thing for the organization, not a bad thing.”
Your messages in a time of crisis should be realistic, but whenever possible, optimistic. Employees normally only see surface evidence of what is happening within the company, and if the surface evidence looks like bad news, they’ll start envisioning worst-case scenarios — unless you intervene with the truth.
“Communicating in these situations is like producing a good ad,” Napier says. “Someone has to see it six times before it really sinks in. If you assume saying it one time is enough, you’re wrong. You have to reassure your people twice as much as you think you need to. In my case, I was just coming in, so they didn’t know me from a hole in the ground. They had to trust that I was telling them the truth, and that was the case for both the employees and the consultants.”
Napier says communicating during the bankruptcy wasn’t a complicated process. It was a matter of doing simple things repeatedly.
“You know your subject, which is an old Dale Carnegie principle, and you know your heart,” she says. “I think that is some of the best training for any communicator. I was definitely living and breathing my subject, and I maintained a positive attitude because I wanted to be positive about this situation. I knew this had the potential to turn into a great situation for us over the long term.”
Get others involved
In addition to a jump right into crisis communication, Napier also had to jump into prioritization. She was already working on a number of new initiatives when bankruptcy proceedings began, and she had to determine how to best lead the company on a day-to-day basis in addition to piloting the company through the bankruptcy. It took the involvement of Napier’s leadership team, which at the time was a combination of holdovers from before.
“There wasn’t a lot of balance right away,” Napier says. “I’d be lying if I said there was balance. I had to perform some delegation of responsibilities, but at the same time, there were gaps with what I had in terms of resources, so I couldn’t delegate everything. For example, I didn’t have a head of marketing until we emerged from bankruptcy, so in addition to the CEO hat, I had to wear the marketing hat, as well as the bankruptcy hat. I think we did well collectively with the bankruptcy, and I think I did reasonably well as a CEO overall. On marketing, I think I deserve a C-plus. There were things that happened with marketing that, if I had more time to devote to it, we would have done a better job. But I could only work so many hours in a day.”
When Napier did delegate, it was more out of necessity than by design. But by trusting her team to take on responsibilities and help her lead, she began to develop a sense of familiarity with them, and they began to understand her leadership style and trust her decision-making skills.
“For any leader in a situation like this, I would tell them that whatever you do is going to be magnified,” Napier says. “If you’re not positive, no one is going to be. Even if you are a realistic executive, and you might be realistic about your bottom line and financials, you have to be a cheerleader when leading your management team and the people in the field. Because if you don’t believe in what is going on, they’ll never believe.”
Napier kept coming back to the old saying about making lemonade when life gives you lemons, and began preaching that to her leadership team. She asked her team to follow her example by remaining positive and finding whatever positives might exist within the crisis.
“The first thing you’re going to do when considering joining a company is decide whether there is a future in terms of business growth,” she says. “When I looked at this company, I knew there were financial issues, but I believed in the fundamentals of the business. That is what allowed me to come in and be positive about the future. You can make lemonade out of lemons in most situations, and people are going to keep looking to you to do that. So you need to maintain a positive attitude even when you just want to scream and run out the door. If you stay positive, others will respond, and you will start to feed off of each other.”
Over the course of the first months on the job, Napier’s focus on getting others upbeat and involved started to pay dividends.
“When I announced to the national vice presidents that we were filing for bankruptcy, one of our consultants told me that she was excited that we were going for bankruptcy,” Napier says. “I still kind of kid her about it, because it summed up the attitude that we’re going to turn this into a great thing for us, and we have. We have great new owners who are in it for the long term; they don’t force me to do anything that isn’t right for the business in the long term and they challenge me in a very good way. It’s all in the power of how you approach it, how you get others to approach it, and continually trying to make lemonade from the lemons you were given.”
Prepare for the future
Arbonne emerged from bankruptcy in 37 days and rebounded to post $353 million in revenue during 2010.
“I think it’s still the world record for the fastest Chapter 11 emergence in history,” Napier says.
To make sure the circumstances that led to Arbonne’s bankruptcy never appear again, Napier and her team have begun to reform how the company does business. In particular, Arbonne has revamped its training regimen for independent consultants.
“Before the bankruptcy, there was a lot of product being sold by people who were not ready to enter the business,” Napier says. “It wasn’t a majority of the growth, maybe 20 percent, but no matter what business you’re in, if you recruit somebody to do a job, but don’t teach them how to do a job on an ongoing basis, you’re going to be a flash in the pan. We had a lot of that, people being recruited with no follow-up.”
Napier and her team have produced a video aimed at giving prospective consultants a detailed overview of Arbonne, its business concept and what is expected of consultants from a business standpoint. Arbonne’s leadership team has also solicited input from the field on the training topics most in need of emphasis.
“There were not as many company-generated training devices as there should have been,” Napier says. “The problem is that when you leave anyone alone – be it employees, consultants, your kids, anyone — if you don’t give them a structure, they’re going to create their own stuff. So you want to get everyone involved in that creative process. Our consultants are much better at creating these training vehicles in collaboration with us than we would have been by ourselves.”
Napier has learned a lot of what she now knows as a CEO on the fly. Now that she has a chance to step back and look at Arbonne since the bankruptcy, she says she is glad that her first few years on the job didn’t just follow the script. In the long run, the need to react to a crisis is essential for any CEO.
“It’s kind of like your mother teaches you: Get in there, and do what you have to do,” Napier says. “I had never been through anything like that before, and I think my career background prepared me to walk into a situation that I knew nothing about and do the best I could. You have to know what the goal is and coalesce around that goal.”
How to reach: Arbonne International LLC, (949) 770-2610 or www.arbonne.com
The Napier file
Education: Double major in studio fine arts painting and economics from Georgetown University
First job: My first real job outside the house was at a pharmacy in Montgomery, Ohio, when I was 16.
What is the best business lesson you’ve learned?
When you’re dealing with something difficult – be it a bad boss, a bad experience or just a challenging experience – you can use that to emerge as a better leader, better manager and better person. I am a huge believer in persistence. If it doesn’t kill you, it’s going to make you stronger.
What is your definition of success?
In general, success is reaching your goals, and feeling like you have accomplished something. If you’ve set your goals as a person or a company, and you achieve some of those goals, you start to feel a sense of self-worth and satisfaction. Outside of business, success also comes from learning about life, self-development and helping your family achieve their goals.
Mike Duggan always found it offensive that hospitals profit more when a patient’s health problems are more severe.
“It’s really true: Hospitals make more money the sicker you are,” says the president and CEO of the Detroit Medical Center. “If we recycle the same sick people through hospitals over and over, the doctors and hospitals make more money from that. The fact is, the worse off patients are, the better the doctors and hospitals are, which never made any sense to me.”
Last May, Duggan and his leadership team at DMC decided to do something about it by applying to become one of 32 medical systems nationwide that will participate in the Medicare-operated Pioneer Accountable Care Organization Model program. DMC was officially named a program participant in December. As part of the program, DMC will receive money from the federal government based on its preventative-care track record moving forward.
“It started off as a moral question, and most of the DMC physicians agreed with it,” Duggan says. “Doctors went into this business to keep people well, and the idea that you succeeded more if you keep patients well appealed to a lot of doctors, it appealed to us, but you are going to find that most hospitals in the country didn’t apply for the Pioneer ACO, and really are resisting that direction.”
One possible reason for resistance is the fundamental changes required at the operational level. The ACO model requires a high level of coordination between doctors and hospitals to ensure that patients receive adequate preventative care and are maintaining follow-up doctor appointments after a hospital discharge. For doctors used to running their own practices, Duggan says they can experience some culture shock when placed in an environment where they and hospital administrators have to hold each other mutually accountable for a patient’s care.
That is the challenge that Duggan has faced, and will continue to face throughout the year. With 14,000 direct employees, and more than 1,000 physicians positioned as 50 percent stakeholders through DMC’s physician hospital organization, Duggan has to keep 15,000 people focused on a new approach to health care by emphasizing the reasons for change, and keeping everyone plugged into the organization’s progress.
Give them the paintbrush
When outlining any rationale for change, you have to spell out the reasons behind the change if you want to get buy-in throughout your organization. In DMC’s case, however, Duggan tried to put the change in the hands of his doctors and employees as much as possible. He outlined the resources at DMC’s disposal, the business model, and how the resources and model, if properly implemented and utilized, would make the ACO model a success. From there, he wanted the 1,000 stakeholder doctors to put two and two together, and come to the conclusion that this was the right way for DMC to operate.
Duggan wanted the stakeholder physicians to see that DMC had a highly integrated electronic medical records platform, a doctor-driven operational structure and a constructive relationship between doctors and administrative staff.
“We were the first system in Michigan to become 100 percent electronic, and that system is now being rolled out to the doctors’ offices,” Duggan says. “That means we’ll have someone in a central control capacity that will be able to see that Mrs. Jones was discharged on Dec. 7, she has a follow-up appointment with her doctor on Dec. 11, and then we can see if she showed up to her appointment. If she didn’t, we’ll be on the phone asking if she needs a ride or needs a nurse to come to her house.”
The real-time electronic updates have fostered a positive working relationship that is essential when implementing a system that requires coordinated movement from many different parts within an organization. Ultimately, no matter how you accomplish it, in order to develop the strong working relationships that can help smooth a large transition, the right hand has to know what left is doing. If there is a sense of disconnect, communication has broken down and problems can arise in your plan’s implementation.
“The great thing about this is I have been providing administrative support, but this has been a doctor-driven process,” Duggan says. “The doctors are driving the medical side, and we have been working together seamlessly. If you talk to doctors at a lot of other hospitals, there is a contentious relationship with them and the hospitals. When you have people that want to be a part of a big change like this, you have to keep them close and connected. I think we’ve been effective in doing that.”
Another factor working in favor of Duggan’s plan is the fact that doctors have, in a very real sense, bought into DMC’s future. In December 2010, the health system became a physician hospital organization. The 1,000 doctors that paid $1,000 to join the organization represent nearly half of DMC’s 2,500 affiliated physicians. By literally buying in to DMC’s future, the doctors who joined the PHO have become advocates to their peers for the switchover to an ACO-based operating model.
With that level of engagement, Duggan has had a great deal of help in aligning the organization.
“I don’t spend a lot of time with skeptics,” he says. “I just say, ‘Here is the reason why I think it makes sense to sign up; if you don’t want to sign up this year, you could sign up a year from now after you see how it all works. It’s your own choice.’ But so many doctors have gone and persuaded their colleagues that this is the right thing to do. And it’s because we’ve taken that approach. The key is to be totally honest and direct, and don’t twist anybody’s arm. If you believe this is the direction to go, it’s going to be a lot of fun. If you don’t believe in this direction, nobody is going to criticize you, and you can reevaluate a year from now.”
Build on the momentum
When you’re trying to build support for a large-scale organizational change, it’s nice to have people take up the cause and advocate to their peers, even if you don’t ask for the help. But as the leader, you often can’t just wait for that support to sprout on its own. You have to cultivate it. And the way you cultivate it is by searching for the dreamers and the complainers in your company.
The dreamers are the people who still have a sense of idealism about their work. They still want to change the company, the industry and the world for the better. The complainers might seem like a destructive force on the surface, calling your decisions into question, but Duggan sees something else.
“The person who is always calling you, complaining that you aren’t doing enough, that is normally where I start looking for my change agents,” he says. “The person who doesn’t care enough to call up with a company probably isn’t your guy. But I’ve always relied heavily on the people who care enough to call up. I engage those people, because while some complainers are just complainers, a lot of complainers are problem solvers who just want a shot to make things better. Your most vocal critics are often your best change agents when you’re trying to promote a change like this.”
Duggan points to one of the other administrators at DMC, who has been a highly antagonistic critic ever since Duggan was hired as CEO. Duggan has repeatedly sought his critical colleague out for service on panels, knowing that he’ll bring a different perspective to the table. When you’re trying to facilitate a major change, it might seem counterintuitive to give a voice to your harshest critics. But bringing them to the discussion can accomplish two things — it can bring a fresh outlook to the proceedings, and it can win over not just the critical person alone, but also like-minded skeptics who see you accepting a differing viewpoint.
Duggan got his dreamers on board during a trip to a seminar in Minnesota last June.
“We had a couple of private doctors who have had a drive their entire life to change the way medicine is practiced,” Duggan says. “When the feds had the seminar in Minnesota, I got those doctors to go along with me. After three days, they were very excited, and we came back to Detroit with that attitude. I’m picking people who are leaders and change agents by their nature. If you engage them and allow them to take an active role in the direction you’re headed, you don’t have to do anything. They’ll just take over and embrace what’s happening.”
Duggan placed his dreamers and complainers in influential positions, leveraged their passion to improve, and allowed their attitude to become contagious to the rest of the DMC organization. Once the doctors bought in, administrators and staff members followed the example and started to believe in Duggan’s plan.
“I think once the hospital staff and administrators heard the doctors talking with more enthusiasm, we started to see more interest in our meetings,” he says. “Now, I think you’ll find the leadership at all of our hospitals deeply involved in the planning. But it’s like any new idea. It takes awhile to catch on.”
Any major change is going to challenge your ability as a communicator. Even after the initial rollout of your plan, you’ll need to keep your message in front of your people, and continually give them opportunities to offer their opinions and ask questions.
Like many leaders of large organizations, Duggan has created numerous touch points between himself, doctors and hospital staffers, in an effort to ensure that their engagement level doesn’t wane as the ACO model moves from a novel concept to an everyday way of life. Duggan says communication is still a work in progress.
“If the doctors have one criticism, it’s that we have not communicated frequently enough,” he says. “There is a whole series of steps involved, and we’ve been putting more rigor around it. I wanted a monthly newsletter, but it didn’t go out every month. We were busy, so we stopped and said ‘You know what? This is going to be a priority from now on. This is going out every month.’ I think we’ve improved, but there are a lot of grind-it-out details that you have to keep executing on. There hasn’t been any magic to it.”
To an extent, the challenges Duggan faces are not unlike a franchisor. The leader of a franchise-concept company might have more control over the customer experience, but Duggan still has to get independently owned businesses under the same corporate umbrella to adhere to a uniform set of standards and practices, as DMC forges ahead into uncharted waters in the U.S. medical field. So far, Duggan believes the results have been good, but it will be an ongoing process for quite awhile.
“That’s what is going to be fascinating about all of this,” Duggan says. “The doctors have agreed to the standards and protocol, they’ve agreed to be on electronic records and be measured, and now we watching all these different businesses find a way to implement new standards in a way that works for their practice. It’s going to be fascinating to watch.”
How to reach: Detroit Medical Center, (888) 362-2500 or www.dmc.org
The Duggan file
Education: B.A. and juris doctor, University of Michigan
What is the best business lesson you’ve learned?
I don’t tolerate feuds among the management team. That is a guiding principle in business, for everyone to see the team as unified. You can’t drive change with people bickering with one another. You can disagree, but you can’t allow people to hold grudges.
What traits or skills are essential for a leader?
Honesty. Really, beyond that, anything else is secondary.
What is your definition of success?
Essentially, it is succeeding in making the world a better place than how you found it.
From South Korea to the Soviet Union and the United States to the United Kingdom, organizations around the world are looking to grow through global expansion. In fact, in most industries, the term “business without borders” is already a reality. By working in technology for more than two decades, I have experienced this move to a global economy for the past several years as tech companies, such as IBM and Microsoft, have long realized the revenue potential of expanding outside of the U.S.
However, more recently, I have had the opportunity to play a central role in building a global corporation. As a native South Korean, I had lived and worked in that country for most of my life. Several years ago, I found myself serving as CEO for a software company that was expanding outside of South Korea to the U.S. With that experience under my belt, in 2010, I helped $1.4 billion South Korean giant SK C&C strategize a plan for the global growth of its mobile commerce technology. I became CEO of CorFire, the mobile commerce business unit of SK C&C USA, with the understanding that I would open its North American headquarters.
I was excited about bringing the mobile commerce lifestyle to its full potential in the United States — technology that South Koreans have embraced for nearly 10 years. However, I was equally enthusiastic about building a truly global company — one that would sell its technology platform around the world and partner with companies regardless of geography. I also understood that building and managing a global work force brought a unique set of challenges, or in business-speak, “opportunities.”
Think globally, act locally
While this phrase is often used to refer to environmental issues, the term’s essence was central to the decision-making process around building CorFire’s global operations. As CEO, I needed to create a vision for our work place and culture. To be successful on the business side, we would need to bring the best practices from South Korea. However, we also would need to establish a local presence and integrate new ideas and cultural nuances, from the U.S. or other countries, into the environment.
In order to do this, I was keenly aware that I’d need to surround myself (and listen to) other people who had experience in managing global workplaces. Together, we could identify the guiding principles for our new company, brainstorm recruiting strategies, set the corporate tone and, in sum, determine who we wanted to be when we “grew up.”
Communicate, communicate, communicate
It is no coincidence that successful companies typically have strong, effective communicators at the helm. Effective communication is even more critical for new companies and ones that are bringing diverse cultures together. For executive teams that are building diverse workplaces, it is critical to examine various communication styles and develop ones that work within the framework of the organization.
For example, there are many South Korean workplace practices that are similar to those in a U.S. office environment. Yet, there are South Korean business customs that U.S. workers haven’t accepted or even experienced. In setting the tone for our company culture, I drew on the value management system of SK, which is based on respecting the dignity and creativity of each employee. I also kept an open mind to other communications methods that worked best for the entire team — regardless of my comfort level or familiarity with them. In the end, we landed on a philosophy where employees are encouraged to talk openly and often and where divergent opinions are heard and respected.
More is more
The business of yesteryear was one where many ideas became synthesized into one. The world’s most successful companies have tossed that approach for one in which more ideas, more strategic thinking and more tactics to solutions are examined, accepted, and executed as they make sense. In a global company, the tenet of open-mindedness is especially critical. While fundamental processes to conducting business must be in place, there also needs to be the willingness to keep the door open for new ways to work, build teams and cultivate innovation.
To build a successful and innovative global company we need more diversity than ever, and we are not going to achieve that within the confines of a rigid, inexpressive workplace culture. Differences in culture and business backgrounds are good and, in fact, are a valuable asset. The richness and varying experiences of our new team is helping us deliver the passion that will, in turn, create the profits and help us be the global company we want to be when we grow up.
When Eric Affeldt came in to run ClubCorp USA Inc., it was a 50-year-old company that had been operated by one family, and he recognized that change wasn’t going to be easy for the organization.
But change was necessary for the business, which owns and operates private clubs. With an aging population, many of the clubs’ members would soon not need a club or be physically unable to use one, so making them more appealing to younger people needed to happen.
“My biggest challenge is an ongoing challenge, and that’s how do you get people to look at the business differently every day,” he says. “Certainly markets change, consumer spending patterns change, consumer desires change, and you could continue to deliver the same product a consumer liked 20 years ago, but you may find yourself a dinosaur.”
He wanted to send a message that change was going to be a new part of the organization, so on his business card he printed his title as “catalyst and CEO.”
“(That) addresses the biggest challenge, and that is that many people are reluctant to change,” he says. “We’re all creatures of habit, and we all get in ruts, some are good, some are bad.”
Then he dug in. Here’s how he changed ClubCorp from a parochial organization to one that’s keeping with the times.
Paint a vision
To start the change process, Affeldt recognized that change must be intentional and that it started at the top with him, thus the title on his business card.
“It obviously indicates something is going to change,” he says.
Even though you know something is going to change, you have to have a specific idea in mind.
“No. 1, [great leaders] set direction, so they have a dream, they have a vision, and they have some place in their mind they can see going and get other people to go with them,” he says.
He wanted to focus on underserved markets and target more women and younger people to encourage them to become members of the clubs.
But he couldn’t just have an idea in his head of where the company was going to go and not let other people in on the secret — nobody would follow because they wouldn’t understand. So he set out across the country to talk to employees. In his first year in the company, he visited about 130 of 154 locations.
“It was face to face, answering questions, trying to convey a different sense of energy and focus, and frankly, curiosity, and just getting people comfortable that if I’m going to suggest that it’s OK to challenge the way things have been, it probably is OK,” he says.
For the most part, he received positive feedback from employees about the new direction, but he also encountered some resistance.
“There are clearly some that said, ‘This is not what I signed up for, and, frankly, who are you to tell us what to do?’” he says. “We’re the oldest company of our type in the industry. There were a few folks who thought we were too cool for school. … It’s always a challenge because it’s not unlike a new exercise program — it hurts for a little while to do some different things. You might know it’s beneficial, but it hurts for a while until your muscles get used to the new routine.”
He was also met with some opposition from club members. On one business trip, he was dining alone and an older member of the club approached him and asked why he was going to focus on bringing in younger people to the club — the older folks were the ones that paid his dues.
“I said, ‘Thanks, I appreciate your input, but the reality is with an aging demographic and people dropping out of clubs due to people not being able to play golf anymore, or they’ve retired and have no need for a business club anymore, it’s important to bring the next generation of consumers into the club. It doesn’t mean we don’t care about you, and we do want to have programs to serve you, but we need to keep new consumers coming in because the reality is, most people, myself included, won’t belong to a club because they either won’t have the interest nor the time or physical ability to do so,’” he says.
Affeldt says the man intellectually understood, but he really didn’t want to hear it, and that’s the common response most people took. He says the key is to continue to reinforce the plan and why it’s important and let them come around.
“Part of it is just stick-to-itiveness — here’s what we’re going to do, and we appreciate if this is new or different, but we are going to do it, and we are going to help you do it, and we’re going to tell you why we think it’s important,” he says.
Once he had a vision in place and had communicated it to people, he had to provide the means to do so and give people a reason to care.
“No. 2, [great leaders] allocate resources,” he says. “That’s both people, getting the right people in place as well as capital dollars to grow the business.”
For the first part of that, he created an 11-member executive committee, and he said about seven of those members turned over in the first year, so having the right top people was critical. He and his colleagues pulled out their rolodexes and recruited sharp people they had previously worked with who would complement his team.
“It’s important to have people who have different skill sets than you do,” Affeldt says. “I use this analogy all the time that if you grab two batteries and put the pointy ends together in a flashlight, the flashlight is not going to work. It has to be a plus and a minus. You have to have people around you that have different skill sets that complement yours. At the same time, you have to have people around you who like to be challenged.”
When he was bringing those people in, it was important that they know the change the company was going through.
“Another critical word in my vocabulary is communication,” Affeldt says. “Very clearly articulating both to the people who stayed and the new people that our intent was not to milk this company, so to speak, but to transform it into ways that were more appealing to existing members and future members — making sure they were signed up for running faster, jumping higher and pushing the envelope.”
By communicating this goal upfront, he was hoping to get people who embraced change.
“There’s a quote I’ve used from Gen. Casey, who said getting people to embrace change is the toughest job of any leader,” he says. “The key word there is embrace — not tolerate or stand for it, but embrace it. It’s important to find people who have that same sort of passion for change and improvement, however improvement is defined.”
Aside from hiring the right people, Affeldt also allocated resources toward his employees in a way not many companies do — he created a 501(c)(3) for them. As the company celebrated its 50th anniversary, he decided to have a one-day fundraiser at his clubs to raise money for a multitude of charities, including a new one just for his team members. It was designed that when hardships hit his employees, they could receive free help, which they never had to pay back. Since starting it, he’s given away about $1.5 million to people who have lost their homes to flooding or fire, had their cars break down, or reached insurance limits and weren’t able to pay for medical expenses.
“By establishing that foundation, a lot of line-level employees said, ‘Wow, apart from actually paying me, these people are providing a safety net for me if something nasty happens to me,” he says.
Aside from the nontraditional resource allocation in the charity program, he also increased financial incentives for people to outperform their financial targets and invested about $250 million in capital back into the business.
“Our employees see we’re not just talking about improvements and then taking all the money to the bank and running away,” he says. “We’re actually reinvesting in them and their clubs.”
And when you put resources toward your employees to help them, it also creates the buy-in you need from them to do a great job and embrace the change. If you’re unsure of putting more money into your people, let data guide your decision.
He says, “For the skeptical, you can always tiptoe into the pool and try programs to see what kind of reaction you get with your employee partners, but there’s enough data that exists from a lot of organizations that shows what the power of incentives provides for growing companies in a variety of different industries.”
He had to make sure that people were actually working on changing and that it just wasn’t a pretty plan sitting on a shelf.
“No. 3, and most importantly, [great leaders] ensure execution,” Affeldt says. “It’s not enough to have a great idea and to have other smart people working around you. You can’t just put your feet up on the desk at that point and say, ‘I hope it works.’ You’ve got to ensure that it works.”
The financial incentives he created certainly helped ensure that, but he doesn’t go off of his hunches to gauge whether execution is happening.
“We’re a relatively good size company – almost $700 million in revenue,” he says. “Clearly, the change is reflected in our financial performance as well as in some of the metrics we measure our business.”
He uses member numbers, the number of rounds of golf played, the number of meals served and other similar metrics to track ClubCorp’s progress.
“There are all kinds of analytics you can look at to say, ‘Something is happening here and hopefully something good,’” he says. “Then you say, ‘Why did that happen? Hopefully you can trace that back to, ‘Here’s the plan we had, here’s the people we allocated against it, and the performance is better.’”
As he looks around the organization today, the numbers are proving that ClubCorp. is growing and improving and changing each day, and he anticipates that continuing as he looks toward the future. But even more important, his people are now fully bought into the change.
“What they’ve told me is it’s a more egalitarian, collegial atmosphere, and the constant questions that I pose about, ‘What next, what next, what next,’ have sunk in,” Affeldt says. “People are now very comfortable with trying to come up with something that’s radical.”
How to reach: ClubCorp USA Inc., (972) 243-6191 or www.clubcorp.com
The Affeldt File
NAME: Eric Affeldt
TITLE: President and CEO
COMPANY: ClubCorp USA Inc.
Born: Los Angeles, and I grew up in Orange County, Calif.
Education: B.A. in political science and religion from Claremont McKenna College
What was your first job ever as a child, and what did you learn that still applies?
Pulling weeds and clearing out lots for a developer in our little community where I grew up — my first paid job, let me put it that way. I think I was 10.
I vividly remember I was working at a neighbor’s house over the weekend clearing a lot, and the nice neighbor lady wanted to pay me on Saturday night, and the job wasn’t finished yet. I said, ‘No, I can’t do that.’ My dad had taught me that when the job is finished, then you get paid. That was one of the first things I remembered from working.
And frankly, several of the jobs I had, there’s a lot to do with attitude. You go and do a job, trying to do as well as you can and hopefully enjoying it as opposed to saying, ‘Oh, I have to go pull weeds.’ Your attitude is extremely important.
What’s the best advice you’ve ever received?
I have to answer, because my faith is an important part of me, what Jesus said when asked, ‘What do I need to do to be saved?’ — love the Lord your God with all your heart, soul and mind and love your neighbor as yourself. That’s really good advice for everybody.
I don’t know if this was specifically said to me or came to me through parents, but the importance of being kind to other people is important and recognizing that everybody has their own stuff. It’s important to be kind as you go through your life, and people will respond to that.
What’s your favorite board game and why?
I like backgammon, frankly. It’s strategic, it’s fast, it’s quantitative to a degree, and there’s a cautious way to play, and there’s an aggressive way to play, and depending upon who you’re playing and the roll of the dice, you have to make decisions in real time as to how fast and how slow you want to play.
As a child, what did you want to be when you grew up?
A kid, I wanted to play professional baseball. A younger man, I wanted to go into the ministry or play professional baseball or go into politics.
So how’d you get where you are now?
Oh gosh, that’s a really long story. A lot of serendipity, meeting people, friends would call it God-winks — things that just happen and you say, ‘How did that happen?’ — meeting people who encouraged me to go into finance and then to take a risk and to start my own company, then being invited to join another company with a friend. And through all of that, raising my hand too many times and volunteering for new things and just giving things a try.