As founder and president of DOMA Properties, Scott Hamilton usually saw about 100 people coming in each week, but in 2007, that number suddenly dropped to about 25. Sales went from 12 to 15 a month down to just two or three.
“It was interesting,” he says. “It was almost like somebody had turned a faucet off. … It was a big drop off, so it became pretty clear that something needed to change.”
Hamilton decided that the company needed to buckle down to weather the downturn.
“It forced us to adjust very quickly,” he says. “… We didn’t have the luxury of stopping and waiting for something to happen. We actually had to react to the market immediately.”
So he made some tough choices and got closer to customers, and as a result, Doma had $50 million in 2009 sales.
Smart Business spoke with Hamilton about how he led the company through the downturn.
What is the key to successfully leading a business even in a down economy?
Through a lot of hard work that’s for sure. The key to our success was to be adaptable to the changing business environment and also to put your nose to the grindstone and work as hard as you can to get to your end goal. We’ve also always done things, even when times were easy, we have always done sort of the proper sales methodology, so we didn’t have to change our sales programming. We did have to work harder at the types of businesses that were made available to us, like the foreclosure business for example.
One of the benefits of being a small business is you can be flexible and change your business model if you need to. In our business, some have struggled with this kind of changing real estate. We’ve actually been pretty quick to adjust to the changing market. I don’t know that we could adjust as quickly if we were as large as a Coldwell Bank or something like that.
How do you know when you need to adjust and what steps did you take?
When the sales stop happening and the money stops coming in, it’s pretty clear you need to do something different.
For us, it was focus on our customers and what it was that they were looking for. Our challenge was we are a service industry that is depending on people to buy homes whether it is a good economy or a bad economy and regardless of what the general perception of what real estate was. We have to figure out what it is exactly that they want to buy. For us, it went back to our customers and trying to figure out exactly what it was that they were looking for. What we found was very much about price. Financing didn’t have much to do with it. We’ve had some very creative financing and some great programs but that didn’t really work. What it boiled down to was that buyers just wanted the price adjustment.
What tips can you give other leaders to better know what their customers are looking for?
We are fortunate to have a lot of buyers coming in on a regular basis, so we have a lot of contact with our customers. I don’t know if that’s always the case, but if you have the opportunity to get in front of your customers, that is the best possible source of information. If you don’t, I don’t know for all businesses how they get in touch with their customers, but for us, we are in front of the customer every single day.
We are dealing with people who are looking for a home. There was a time when the market was super heated and people were looking for real estate to invest in, not so much as a home. As the market turned, that sort of changed almost overnight. You started to see people who were just looking for a place to live and they were looking for a home. They weren’t looking for an investment that was going to be worth 5 percent the following year.
What else did you do to get through?
We have a lot of people working with us who are hardworking agents. A lot of brokerages rely on what they call a 90/10 rule, where basically they have 10 percent of agents supplying 90 percent of their income. We kind of go the opposite way. Most of the people that work for us are producers, so we haven’t had to waste a lot of time dealing with agents that are new and really don’t know what they are doing and need a lot of direction. We have had a selective quality. The benefit to our company is we have quality agents, and as we’ve evolved, they have continued to do business.
It’s knowing how business operates and how I can work harder and apply myself within my industry to make money. That’s been my advantage. I don’t know if I would have any specific advice unless it was speaking about a specific industry other than to say if you know your industry and you know how it works, just working harder at it and being diligent as you can be, ultimately, you will be successful. We actually thrived in one of the worst economic downturns in recent economic history by just kind of buckling down and working very hard. It’s just the nuts and bolts of and business, I suppose.
How to reach: DOMA Properties, (562) 481-3800 or http://www.domaproperties.com/
When Fred Nance was a young associate at Squire, Sanders & Dempsey LLP, he saw the chairman of the firm actively working — but not solely on client cases.
“I saw that the chairman of the firm was involved not only with the bar association but was involved with supporting the schools and development efforts, and I recognized that he wasn’t negotiating a deal,” Nance says. “When he wasn’t trying a lawsuit or he wasn’t attending a client meeting, he was out there trying to make the Cleveland community a better place. I started watching that and wondering what that was all about. I eventually saw that it’s about leadership, and it is about making the tide rise for everyone. It helps the organization that dedicates those resources to it, but it also just makes the community a better place to live, which is part of giving back.”
Seeing that at an early age has clearly encouraged Nance to not only work hard within the firm but to also give generously of his time throughout the community.
“The same skill set that made me successful as a trial lawyer or within my career as I was developing also ended up becoming leadership traits that I was able to utilize in different contexts — by different contexts I mean outside the firm in civic organizations.”
While he’s the regional managing partner for the law firm, he also serves on the boards of the Cleveland Clinic, the Cleveland Museum of Art, the Cleveland Foundation and the Greater Cleveland Partnership. He was recently named general counsel for the Cleveland Browns, and if you name nearly any major initiative in town — from the medical mart to the casino crusade — he’s likely had his hand in that, as well. But no matter which organization’s hat he wears at any particular moment, he’s learned that for any of these entities — for-profit or nonprofit — to succeed, you have to have strong leadership with a strong vision.
“All of these things happen because of leadership — people with vision, people who can first of all have the vision and then motivate others to see it and bring resources to bear it, to make it happen,” Nance says. “That’s what leadership is all about.”
Create a vision
Some people in town are afraid to think big when it comes to creating a vision.
So when Mayor Frank Jackson came to Nance and other local leaders and told them he wanted the city to contend to host the 2008 Republican National Convention, everyone thought he was nuts.
“He said, ‘Yeah, I want the Republican National Convention here. I want your businesses to put in the resources. I want you to loan the executives, and we’re going to go after this,’” Nance says. “We thought, ‘Are you kidding?’ He galvanized the business community to do it.”
But it took his vision to get people excited. Initially, Nance and other leaders thought there was no way Cleveland could contend because there wouldn’t be enough hotel rooms compared to larger cities. But that’s where the out-of-the-box thinking comes into play. In reality, the criterion was a certain number of rooms within a one-hour drive of the location. This puts Akron, Lorain and the rest of the region into play.
“We have plenty of hotel rooms,” he says. “We said to ourselves, why is the criteria one hour? Because, then again, in front of our face, something most of us take for granted that in 90 percent of the cities in America, because of the gridlock and because of how bad the traffic patterns are, it takes you an hour to get in 20 miles outside of the city.”
But you have to take the blinders off and be able to recognize these kinds of things and create a vision. While Cleveland lost to Minneapolis in its bid, it energized leaders across the city and got them thinking about greater possibilities and what united the region, and that’s the first step to creating a vision for your own organization.
“I think that many organizations have sometimes suffered from getting into a rut of always doing things the same way and people inside the organization saying, ‘Well, we’re not going to do that because we’ve never done it that way before,’” he says. “While there’s a certain distinctive behavior that causes people to do that, what leadership is about is getting people to break out of those ruts and sometimes take a risk and do things differently. There might be a higher objective or a better way of achieving the goal, and I think, particularly in today’s economy, the ability to influence or inspire people to do things differently ... (and) encourage people to be innovative and to think of a new way of doing things before others do, is what distinguishes many businesses.”
Get your mind in the right place to be able to think of a grand vision.
“It’s the mindset of whether to go after it, whether to take a risk and do things differently and have a business culture where you reward risk-taking and where you have leadership that’s going to be responsive to trying to do things differently as opposed to, ‘Go away, don’t bother me with that crazy stuff, we’ve never done that before,’” Nance says. “I think companies that are on the cutting edge of moving into the new economy have that type of culture where that sort of risk-taking ... is rewarded with additional resources to pursue it and rewarded with individual recognition.”
When you’re thinking big, put the pen to paper and actually create a formal vision.
For example, when the Greater Cleveland Partnership formed, it was the merger of Cleveland Tomorrow, the Greater Cleveland Growth Association and the Greater Cleveland Roundtable. While these organizations had all worked separately, they all had similar goals in making Cleveland better. Now they needed to create a unified vision.
“One of the things we did was we had the constituent groups that were eventually merged come together and identify common interests — what is it that we are trying to accomplish,” Nance says.
They also looked at the past.
“What had worked and what hadn’t worked?” he says. “Why did it make sense to come together and look at some of the mechanical things? How do we meld these organizations together?
“The way you identify those objectives are to look at your past,” Nance says. “What has been successful? What hasn’t been successful? And you don’t necessarily keep doing what was successful or not do what wasn’t, but you look at that and take into account the future. How are things unfolding or what is going to be the direction or the emphasis in the economy or the industry going forward — and then try to position yourself to be a leader and to be successful based upon how things are developing.”
You also have to take into account two other factors in creating your vision.
“There’s the internal — What does my company need to accomplish? — and then there’s the (external) — What should we accomplish in the region?” he says. “Hopefully you figure out a way to make the two dovetail.”
And lastly, you have to think of others and not of yourself in creating your vision.
“There needs to be in leadership and in creating a vision an element of selflessness, meaning you have to believe in the
vision enough that the mission, the institution, is more important than the interest of the individual,” Nance says. “And I have seen this again and again, particularly in some of the volatility of companies and firms going out of business and failing in these turbulent times. In order to be successful and thrive, you have to have a culture where the vision is articulated in a way that everybody understands that the goal of the collective institution is more important than the interest of the individual.
“If you don’t run your organization that way, when times get tough and you face serious challenges, you’re going to be a lot less stable than if you’re in an organization where everyone believes that, no matter what, we have to make sure that the interest of the institution is above the interest of the individuals. It is the differentiator between those that survive difficult challenges and those that don’t.”
In the case of the Greater Cleveland Partnership, it decided that the common vision was to move the region forward on an economic-development basis so it could participate in the new economy, attract talent and resources, and get the region’s young folks to stay here after they graduated.
Nance says, “Ultimately, it was the recognition of a common desire or common need to take all of these marvelous resources that we have that were in different places and put them together and get everyone to understand that creating the opportunity for economic development here meant that we had to have a strategic plan that required a planning process.”
Get buy-in for the vision
When Nance goes to court, it’s often the culmination of several years worth of work and preparation involving not just himself but young associates, legal assistants and specialists, as well.
“The person who stayed up late at night copying the documents in the duplicating room needs to understand what role they are playing in achieving that overall objective so they take pride and they’re motivated and they get up every day and come to work and think, ‘I’m part of a bigger whole,’” Nance says.
Everyone needs to be linked to that bigger whole in some sort of way.
“I know that it seems kind of hokey to talk about mission statements, but unless organizations have a clear, articulated set of objectives and a stated dedication of leadership to moving the organization forward, then it’s hard to get people to recognize what it is that you’re trying to accomplish,” Nance says. “Once you have a clear set of objectives, you have a mission statement, you have a collective goal, then you integrate into that your understanding of human nature — what it is that turns people on, what it is that motivates them to get behind a particular set of objectives — and you figure out a way how to integrate everyone in the organization at all levels and understanding whatever their job is and whatever they’re doing is furthering the final objectives.”
At Squire, Sanders & Dempsey, the ultimate goal is to provide excellent client service.
“Excellent client service can only occur when everybody at every level of the organization understands that objective and buys in to it, is recognized for their participation and particularly for excellence and success, and is pulled into your organization,” he says. “If you can motivate people at every level by sharing a clearly identified objective and mission, it makes it that much easier to get the best out of people because we’re basically all the same — all of us need motivation to do the best we can do and indeed sometimes under stressful situations to go above and beyond what we think we’re capable of doing.”
There are a couple of ways that he makes sure this happens in the firm.
“You’re more likely to do that, A, if you have been integrated into the organization in a way that you understand the part you’re playing, but B, if you have strong leadership,” he says. “It’s again just human nature that people are more willing to push themselves beyond what they believe they’re capable of doing if they believe there’s someone in a leadership position who’s doing that and who is selfless, who is dedicated to the institutional interests, and who is going to do whatever they can to make your organization successful. I think that’s true in for-profits and nonprofits and all different large organizations because it’s a function of human nature.”
Nance says that the ability to intertwine your employees’ goals and needs with those of the company is an integral key to successful leadership.
“There is a certain level of technical proficiency that is necessary to advance in your career that is required of everyone,” he says. “To people that advance beyond that or who move into leadership positions, often are those that have people skills and emotional intelligence where they have not just the ability to communicate with others but the ability to empathize with others, to see things through the eyes of others and to be able to relate to others’ objectives and goals and weave them into the institutional objectives and goals.”
Doing all of this comes down to communicating your vision effectively.
“The more clearly you can articulate the vision, you can hopefully inspire others to first see it, and then again, it’s figuring out how to let others see how they can play a meaningful part, meaning, not everybody can be involved in every project,” he says.
You may roll your eyes at reading another person talk about the value of communication, but don’t underestimate its value in getting people on board with your vision.
“(Communication) may be an overused word but one that is very, very important because … oftentimes, employees feel disconnected — they’re punching that time clock, can’t wait to get out and go home, and need the paycheck,” Nance says. “Well, that’s one way of doing business, but if you are able to figure out what is important to your employees, ... most people are going to buy in, most people are going to want to play their part.”
But there’s more to communication than simply having a town-hall meeting or sending an e-mail.
“Communication isn’t just telling people what to do,” he says. “Communication includes listening. Communication includes receiving feedback and being able to explain what it is the company or the organization is trying to do in view of what people’s needs, what people’s desires are — what people would like to see done in the community.
“[If] you listen to people and provide them with a vehicle that lets them help in the way they want to help, you’re more likely to get buy-in.”
The more you’re able to do this, the more you’ll be able to work toward your vision.
“With respect to your business, yourself, your industry or your firm, listening to people as to how you can do things better within the profession is one of the best ways to drive some of this innovation that everybody is looking for today,” he says. “Again, you can have a institutional mindset where, ‘We’ve done things in a certain way, we’re always going to do them that way, and if you start to question it, you’re a troublemaker,’ or you can have an environment where, ‘If anybody sees a better way of doing this, not only do we want you, we’re going to recognize it, and if it works, we’re going to reward you, we’re going to do things like that to help move us forward, and we want you to understand that w
e want to know if you think there’s a better way of doing things,’ is clearly the corporate culture and the collaborative culture of the future.
“If you extend yourself that way as opposed to thinking that your business culture ought to be to make sure that everybody does what they’re told and only when they’re told, in today’s economy, your business is going to be that much more successful and that much sooner.”
And you can’t use your business’ size as an excuse to not do these things.
“I don’t think it really matters the size of the company because however big the company is, the company, the firm, we all interface in either supplying goods or services at a very defined level, and there are always ways to do it better, and oftentimes, the people who are doing the work to make it happen, understand efficiency perhaps better than a person sitting in an office somewhere looking at numbers on a pieces of paper,” Nance says. “You have a culture that encourages people to speak up and promote innovation, those are the companies that are on the cutting edge these days, and that is an attribute that is rewarded. Again, ultimately, it’s self-interest, but it takes vision recognizing doing things differently and accepting input from people at all levels is part of what it takes to be innovative, and oh by the way, it also creates a positive business culture — a corporate culture that begins to develop upon itself. It can become a competitive situation always trying to come up with new ideas.”
HOW TO REACH: Squire, Sanders & Dempsey LLP, (216) 479-8500 or www.ssd.com
Rick O’Dell wants quality at Saia Inc.
It’s not a revolutionary desire as president and CEO of the trucking company [Nasdaq: SAIA], and it’s probably not something that would get his shareholders overly excited in that simplest of phrasing. But, when you define quality as meeting customers’ needs and working to solve their problems, then it becomes far more important in anyone’s mind.
“Some people would tell you that quality costs more, and to some extent, that’s right, but sometimes you can be more efficient when you can do it right the first time,” O’Dell says.
A lot goes into a freight shipment, and one small mistake along the line can cost you money. If freight is damaged, it could require a reship. If it’s late, that may result in a fine from the shipper. A mistake in the warehouse might result in a missed shipment or one that’s not as streamlined as it could be.
It’s all part of the reality in running a $849 million trucking company.
“To the extent that you can take those defects out, not only can you make the customer happy but you’re also more efficient,” he says. “When our on-time service is at high levels and the phone doesn’t ring in customer service and I don’t have to spend time explaining why their freight is not already delivered — there’s a price for having quality, and there’s a price for poor quality too — it’s called rework.”
To be as efficient as possible to maximize revenue, O’Dell focuses on knowing what customers think, adapting his business to meet their needs and working to resolve their problems when they come up.
Know what customers think
The only way you’re going to be able to meet customers’ expectations is to know what’s going on inside their head. O’Dell uses both customer satisfaction surveys, where he gauges his own customers, and competitive surveys, where he gauges how Saia ranks compared to the competition in the eyes of both his customers and potential customers.
“One benefit you have from survey data is not only have we used the surveys to figure out how to improve our own performance, but sometimes, through a survey, you may find out that there is a competitor that has a perceived weakness amongst their customer base, so sometimes we use that for tactical selling against the competitor,” he says. “You do the research to figure out your benchmarking, where you stand, what you need to do, but sometimes you find opportunities to utilize it for different purposes.”
For example, if you do a competitive survey and find out that XYZ Co. has a problem with cargo claims, you can then ask a potential customer who identifies its carrier as XYZ Co. if it has problems with this area. You can segue into how you can address that issue better.
When forming a survey, be strategic.
“You have to make sure you’re getting the critical information but the survey can’t be too burdensome,” O’Dell says. “You have to really look through and say what are you trying to get to and how quickly can you make the survey.”
Don’t slant the participant toward the answer you want. For example, if O’Dell is doing a competitive survey, he may not mention his company as the one conducting it or even ask about Saia specifically.
“Like in this area, who’s the best carrier; you leave it open-ended and see how many times your carrier and the competitors show up,” he says.
He also uses focus groups to find out what customers think. Sometimes he invites customers in based on feedback from sales reps, but he also does blind focus groups.
“We don’t even tell them who the company is, and a lot of times, we’ll pay a small fee to get them to come, and sometimes you get a third-party to facilitate the focus meeting, and you either tape it or sit behind the glass wall,” he says.
Having participants not know who’s sponsoring the group helps achieve honest feedback.
For example, when Saia expanded into the Northwest a few years ago, there were smaller competitors that he discounted as true competition.
“Even some of the salespeople had told us before, ‘We have to consider those people competitors,’ and we would just kind of say, ‘No, that’s not the case,’” O’Dell says. “We were looking more at FedEx and Con-way and some of the largest people out there are our competitors, and [customers] said, ‘No, you have to consider these other people, too.’ The customers set us straight.”
After he’s done initial surveys and focus groups, he can use that data to drill deeper in other surveys.
“You try to focus your questions around those items they’ve already told you are most important,” O’Dell says.
The more you do these surveys, the more you’ll learn about your reputation in the market.
“You can see if your brand is strengthening, and you can see, too, if a competitor’s brand is strengthening,” he says. “Why might that be happening? Your research drives if you need to do some additional work or not. If it’s trending pretty well, maybe you don’t need to make a lot of changes. But if you see something that looks out of order or unusual, you need to figure out why that is and what you might need to do differently.”
Adjust to meet customer needs
Once he knows what customers are really looking for and thinking, then O’Dell makes changes to better meet their needs and expectations.
For example, in the situation of Saia’s Northwest expansion, the feedback caused him to re-evaluate his coverage area because, for some customers, it was important for him to go into the remote areas and not give that freight away to another company.
“Sometimes you have to accept that they’re a specialist and maybe they want to be the one that goes up the mountain and delivers that freight. There are certain markets that there are only a handful of smaller players that go up there, but you also have to look at it and say, ‘Well, they go there, does Con-way go there direct? Does FedEx go there direct?’
“You have to look at the marketplace itself and see if you’re putting yourself at a competitive disadvantage by not providing that particular service.”
But you also have to be careful in listening to clients.
“Sometimes the handful of customers may lead you in the wrong direction, too,” he says. “You have to go through a validation.”
For example, sometimes customers may tell him that they don’t care if it’s not Saia going up the mountain to make that tough delivery, and everything is rosy until something goes wrong.
“It all sounds good that it doesn’t really matter, but part of your product offering and your service is really exception management and problem resolution, and when there’s a handoff, you don’t really control it anymore,” O’Dell says. “You don’t have the access to the same type of information to handle a customer’s inquiry or question. When people tell you something, you have to validate it through your experience or some other method.”
That’s where the surveys and focus groups can come into play again. Typically, once a year, O&#
x2019;Dell polls salespeople to see what they can do better and get that kind of feedback.
“Sometimes when you look at rolling out a new product or pricing offering, we’ll pull a group of people together from operations and sales that have different experiences and backgrounds or things from different companies and run it by that group to see what kind of feedback they have or if they have experience from a different company to say what they think the customers will feel about it,” he says.
Sometimes you have to change regardless of whether you want to or not, but O’Dell says to look at it as an opportunity.
For example, one of his major customers, Wal-Mart, instituted a new policy: Before, Saia was able to deliver things early and Wal-Mart would store it, but now, everyone gets a window — if it arrives early or late, then the carrier would get fined. He now has to hold those shipments for longer periods of time.
“Sometimes you get an event that will impact a large portion of your customers and can enhance your product offering, and then you can take that and go offer it to others,” he says. “When you see things like that, it’s how you adapt to that. We may not necessarily get paid more for doing that, but we can get more business and, over time, you may get paid more. … Things like that, if you’re monitoring what’s going on in the marketplace and how you need to adapt to that, can provide some opportunities.”
Know how to solve problems
Despite his best service attempts, O’Dell knows that sometimes his team will mess up. He starts with establishing a defect management system — metrics that will help determine when this happens — but he breaks it down to small details.
For example, instead of simply looking at whether a shipment was on time or not, he breaks it down further, such as, was it not loaded, was it loaded but not moved on time, did it arrive on time but not moved across the dock, etc.
“You really have to look at your customers and say, ‘What are they looking for?’ and then make sure you build the metrics in there and take your defect management system down to as little details as possible so you have accountability and can improve those key drivers,” he says. “Periodically, that has to be re-evaluated to see if there are ways to improve it or if there are better processes or if our priorities change. You have to be adaptable to that.”
With metrics in place, it’s easier to communicate with both customers and employees about the problems that come up.
So if O’Dell looks at his defect management report and sees four shipments that failed on someone’s shift, he can address that with the employee to help him or her improve.
“You deal with that, and you tell them why, and you review it with them and what other tools they could have used to make a better decision,” he says. “That’s ongoing.”
But he also has to address the problem with the customer.
“First of all, obviously, you have to be open and honest with them and acknowledge what the issue is,” he says.
Then he has a team create a corrective action plan that outlines what the company will do in the future to eliminate more problems.
One of the keys to resolving customer problems is to know what they are and how to handle them. At one company, the person making the shipping decisions may be the vice president, while at another, it could be a warehouse worker. Know who you’re dealing with and what perspective that person is coming from. You also have to handle the situation how you would handle it — not how someone else would.
“Part of it is you have to be yourself,” O’Dell says. “People see through that if you’re not being sincere. You have to get to know the person and figure out how to read them. You have to know yourself, too, and what your strengths are. If you’re like me, you’re a finance person and you’re not the best jokester probably and you have to be a straight man and know that other people may have a way to make fun of the situation and come out of it that way. But you have to figure out what your set of weapons are.”
And while you want to listen and work to resolve their issue, sometimes you also have to point out the facts — if he handles 1,400 shipments a year for them and only three are wrong, that’s a good track record.
“It doesn’t help that one person that one day, but just because you made a mistake on one shipment or had a breakdown or whatever the case may be, it doesn’t mean you’re a bad service provider,” he says. “Sometimes you have to stand up for yourself and show people the data that reminds people of that because they get caught up on the problem they have with one shipment. So while you want to be sympathetic and understanding, sometimes you have to stand up for yourself, as well.”
Knowing when to do this, though, comes back to knowing your customers and their needs.
“Part of it, too, you have to know that some customers will take that, and other customers are going to be offended,” O’Dell says. “Some people probably just want you to be quiet and listen to them, and come back the next day. That’s one thing about salespeople and customer service people: You have to be a bit of a chameleon and figure out what’s the way to handle this situation for this person or customer.”
HOW TO REACH: Saia Inc., (800) 765-7242 or www.saia.com
In 1995, when Barry Karlin acquired the initial facility that became CRC Health Corp., he did so with a passion to grow the organization and help people heal.
Over the past 15 years, he has grown the company which provides specialized behavioral health care treatments to patients, ranging from alcoholism and drug addiction to eating disorders and weight management issues through a variety of ways, from adding new programs and treatment tracks to simply increasing the number of patients treated. However, acquisitions have also played a key role in its growth. He’s done more than 20 acquisitions at CRC, and he now has more than 140 facilities across the country, which collectively generated $429.6 million in net revenue last year.
“We’ve slowed down dramatically the last couple of years, but we did an acquisition about two years ago,” the co-founder, chairman and CEO says. “We’re now back on the acquisition path right now. Acquisitions have always been a separate element of our growth path, and that will again be the case.”
With that kind of acquisition path, he knows exactly how to successfully complete one.
“When we do acquisitions, we’re looking for great people, a strong referral base and a good reputation,” Karlin says. “Then we add value around that.”
In order to make the best acquisitions, he does his due diligence, communicates the integration plan up front and tolerates cultural differences between facilities.Do your due diligence
Karlin says the first step in an acquisition process is to learn everything about what you are considering buying.
“Look at all the different facets of the organization,” he says. “You’ve got to analyze the clinical side does the organization provide good treatment, are they accredited, what is their history of accreditation? … You’ve got to dive deep into the marketing. How do they market? Do they market through salespeople, through the Internet, what’s their referral base? Do a deep dive into operations. On a day-to-day basis … understand their operation detail.”
But it’s not just about the business side. You also have to look at the people because you’re buying a management team, a referral base and a reputation, so do they run the place well? If Karlin doesn’t like the people in the organization, he won’t buy the company.
“Do they have a strong management team?” he says. “What are their holes, strengths and weaknesses? What about the financial side of the equation? What’s the growth potential?”
He also has to make sure that the company is a cultural fit, which is easier said than done.
“Everyone is going to say they have good values, and, of course, it’s easier to write down good values, but the trick is writing down values is one thing, but the question is, ‘Do you live those values?’” Karlin says. “Are those values reflected in everything you say and do on a day-by-day basis?”
So if one of your values is excellence, Karlin then wants to know if you are an excellent facility and how you strive toward excellence.
“I’ll ask the management team, if that’s one of your values, can you give me specific examples of how you actually try to be an excellent organization?” he says. “Give me some examples of how the value of excellence translates into specific things you do in the intake and admissions function or give me an example of how excellence translates into, let’s say, the maintenance function. Can they answer that question? … If they have examples, that’s a terrific sign to me. That’s an indicator that they are doing something to try to translate that value into daily activities.”
After looking at all of these elements, then you can have the right information to make an intelligent decision. If you don’t have experience doing these things, then Karlin suggests enlisting help.
“If you are a smaller company and you don’t have experience in doing acquisitions, you’d be well-served to bring in consultants who are,” he says. “You want to bring in accountants, lawyers, forensics experts.”
In addition to knowing what you’re buying, you have to have a good reason for buying. The why part often trips people up when it comes to acquisitions. Karlin has some tips for determining good and bad reasons for making deals.
“A good reason is, first of all, it offers significant growth potential above and beyond what you would otherwise have to the extent that it offers growth potential in an arena in which you don’t have that potential, it, of course, translates to strong financials,” he says.
Another good reason is if the acquisition would fill a big gap in your product offering. Or perhaps you need to diversify your product offerings more, and the acquisition would accomplish that goal. In all of these cases, they have to also make economic sense.
But on the other side, there are bad reasons for acquisitions, too.
“It’s incompatible culturally, it has a very different philosophy culturally, but hey, this is not too far from you, in the same state, you have some connections there, and you have the opportunity to buy it, and you buy it,” he says. “But there is no operational synergy or clinical synergy or financial synergy, but you’re buying it so you can have another one. That’s just your ego playing out.
“Another bad reason for buying it is because you’ve convinced yourself that you can save a ton of money and you really don’t prove that out ‘I now have two facilities, so I can cut my cost structure.’ You don’t prove it out, but you convince yourself you can do it, right? That’s not a good reason.”Communicate the blueprint
Even after Karlin has done all of his research and made sure that there’s a cultural fit, he then outlines all of the post-acquisition details about how he wants to improve the business before the deal is done.
“When you do your due diligence, a big part of that is developing a blueprint for what you’re going to do after the close, and it’s a great idea to do that in advance of the close so that everyone is on board … [and] everyone already knows what the plan is going forward so there’s no big surprises,” he says. “The worst thing you can do is go blasting in there after the close and implement all kinds of changes, which people don’t like. It’s guaranteed, of course, to hurt morale and antagonize people. It’s much better to be straightforward, upfront, open, honest in advance. … If they’re discussed in advance and there’s an openness about it, people almost always buy in.”
He sits down with the founder or owner and talks about the program’s strengths, weaknesses and how he’s going to work with the acquired party to improve the program.
“No matter how confident either party is that it’s going to work out fine, you want to have a very detailed discussion and talk about expectations post-close,” he says. “That’s the best thing you can do. And do not rationalize to yourself that it’s going to work out OK.”
In addition to detailing the changes to the company after the acquisition, you also want to do the same for the owner or leader’s role, too.
“Go through all expectations that you have for the founder after the dea l is done, and if you’re completely straightforward about that, a couple things will happen, and you’ll learn a great deal from their reaction,” he says. “They will learn a great deal from you because they’re now facing reality about what this thing actually means.”
The reaction can be mixed, but it will help you determine the best way forward. Sometimes the founder will decide he or she doesn’t want to work for a large organization so the founder decides that he will help you with the transition and then he’s done. Sometimes the founder gets nervous and questions whether he or she should do the deal because that person doesn’t want to lose control.
“They might just kill the deal,” he says. “You take some chance that you won’t get to buy what your heart is set on, but you’re much better off that way because if you go forward with the deal, things will go south, you’ll have a difficult time because that founder isn’t ready to make the change.”
Lastly, assuming the founder or owner understands everything and wants to stay on board, you also have to protect yourself and your larger company.
“It’s also important to have a mechanism agreed upon regarding the founder’s role and what would happen if things don’t work out,” Karlin says. “For example, if things don’t work out, you ultimately have to have the right to separate from the founder. If the founder doesn’t work out, you can’t have a situation where the founder has a right to stay on indefinitely or for an infinite period of time, so there has to be a mechanism whereby you have the right to separate from the founder.”Tolerate cultural differences
If your doctor tells you that you need to have an appendectomy, you’d likely ask him or her to refer a surgeon, and you would likely call that recommended surgeon. Upon talking to that surgeon, you learn that you could have your surgery at one of two hospitals. Hospital A is a little further from your home and you hear that the care there is OK but not great. Hospital B is closer to your home, and you hear that the care there is great, so you choose Hospital B to have your surgery at.
“Not for one second do you say to yourself, ‘Who’s the giant corporation headquartered in New York that actually owns Hospital B?’” Karlin says “That didn’t even occur to you. All you thought about is the quality of care. You were focused on the quality of treatment by the surgeon, and does this hospital provide good quality care?”
Because that’s typically the focus for most patients when deciding upon a health care facility, Karlin doesn’t look to make everything the same as the larger CRC organization after he does an acquisition.
“The important thing is don’t go in there and say, ‘Everything you learned, I want you to forget about we’re going to show you the right way to do things,’ because all you’ll do is you will destroy the very thing you paid for in the first place,” he says.
Instead, he says that CRC is accepting and embracing of cultural differences between facilities.
“What we don’t do is try to force every organization to have the same culture as the parent organization,” Karlin says. “We have honesty as an overall corporate culture, but we have a very high tolerance for nuances in culture, and that’s been crucial for us in acquisitions because people like to sell to us because they know that we’re not going to go blasting in there and try to shift the culture in a fundamental way. If the culture is completely different than ours and is incompatible, then we won’t buy in the first place.”
For example, Karlin says that some smaller facilities have more of a laissez-faire approach to things because that’s how the founders have been. In that situation, he would need to shift the culture a little bit to be more focused on accountability and responsibility, so he’ll put in place mechanisms for assuring true accountability in the staff. Another example is switching financial systems because all of the CRC facilities need to be on the same system.
On the other hand, perhaps a facility has a clinical approach that none of the other CRC facilities has taken, so it’s somewhat different, but it has proven effective. As long as it’s scientifically proven and meets his quality standards, he’s inclined to not mess with changing it.
“We might say, ‘Hey, it’s working, it’s helping people, we can see the outcomes, let’s leave it alone,’” he says. “Why change that? Why coerce them into changing what they do clinically that’s working well for their patients? There’s an example of an area that we have high tolerance. Now, if they’re doing some witch-doctor things, that’s different, but we wouldn’t buy them in the first place.”
Another example of tolerating differences comes in the name of the facility. While most leaders are quick to change the name of the acquired organization, Karlin takes the opposite approach and leaves the name as-is.
“I’m a huge believer in legacy,” he says. “ … Legacy is the quality; it’s the essence of the facility. You see, most facilities were founded by individuals, right? Not giant corporations. … The very essence of that facility is vested in the founders and has a lot to do with the culture.”
Instead, he takes a multibranding approach, so when you walk into the facility, in large letters on the wall, you’ll see the primary name of that business. But then in smaller letters underneath the original name, it will say, “A member of the CRC Health Group.” Karlin likens it to a car customer purchasing a Lexus.
“The brand you’re buying is Lexus, but you also know it’s ultimately owned by Toyota, so you get the benefit of both,” he says. “Same with us. The brand is the facility, which I preserve, but ultimately, there is a company called CRC behind that, which assures continuity and stability and assures that there are plenty of resources to make certain that that facility does things right.”
How to reach: CRC Health Group Inc., (877) 637-6237 or www.crchealth.com
Change actually didn’t shock the system at ICI Paints.
The company, probably best known for its Glidden paints, had been through several changes in recent years. First, Erik Bouts came in as the new CEO in late 2007. Shortly after that, AkzoNobel bought ICI and created a new entity, AkzoNobel Paints LLC. For most people in the company, the changes were just the most recent ones in a long line of changing leadership and direction.
“If you go back 10, 20 years, I think there has been many changes here in leadership, in strategy, in direction, in what to do, what not to do, so I found an organization that was very skeptical of leadership in general ‘This will pass by also. OK, new guy’s coming in, new owners, we have seen it, we have heard it, and we just keep doing what we always have been doing,’” Bouts says. “I think that was a big challenge we had in leadership to go through that attitude, and it’s a big organization, so it’s not the two-minute egg, as we say. It requires a lot of energy from everybody to get the ship sailing in the right direction.”
With several thousand U.S. employees who bring in a significant portion of the $1.35 billion in revenue generated by the North American decorative paints division of AkzoNobel, it would certainly be a challenge to get people on the ship, but it was far more complex than just getting people to trust a new direction.
“First of all, you have to understand what the strategy of the new owners is,” he says. “Yes, we run the Glidden business here in the United States, but at the same time, you’re part of a global company now, with global goals, global objectives and having to deliver the expectations of the shareholders, and that takes awhile to carve out all of those new objectives. It’s more than just putting two companies together one and one you have to create synergies, and you have to set new goals for that combined company.”
But there was still another element to that challenge at least within the country.
“The paint market has been in a strong decline since its peak in 2006, 2007,” Bouts says. “The market has come down about 30 percent, and Glidden was not the stronger player in the U.S. market. Especially for the smaller-tier players in this market, being faced with such a market decline, such an economic crisis, it puts an additional challenge on the company.”
With three big challenges facing him, Bouts knew that to get through the acquisition successfully, he needed to know where he was going, he needed to create a plan to get there, and he needed to effectively communicate during the various stages of the changes.Know where you’re going
The first thing Bouts did was look toward the horizon to figure out where he wanted the company to go.
“It all starts, in my view, with envisioning the future,” he says. “What is it that you want to be? It sounds like an open door, but that’s not so easy to formulate. It’s back to the journey you start somewhere, and you want to go to an endpoint, but you have to define the endpoint. If you don’t know where you want to go, you can’t map out what you have to do to get there.”
This was a little bit of a challenge for Bouts because he had to figure out how his division would fit into the overall global organization.
“I have my own ideas, and if you’re not careful, you start to believe your own BS, your own visions, and you think you know it all,” he says. “My experience is I don’t know anything. … The higher you get in the organization, the less you know, and you have to realize that. The true knowledge, the true know-how, the true capabilities in an organization are way deeper than in the boardroom.”
Instead of relying on his judgment, Bouts involves three key constituencies.
“Listen to your customers, to your employees, to your suppliers it’s key,” he says.
With Glidden being one of the oldest paint companies in the country and with thousands of employees, there’s a ton of experience about how to make and sell paint. The same is true of the customer base. Through a variety of outlets big box retailers, such as Home Depot, as well as company-owned stores and 4,000 independent retailers they all have an opinion because their profits depend on the overall success of Glidden, as well. And the same goes for the suppliers.
But with all of these constituencies having their own interests, you have to be able to clearly listen to what they say.
“The ability to listen for what people really want to say is important,” he says. “You need to have the ability to read between the lines. It’s not always what people directly say to you it’s what they intend to say. It’s a skill. It’s an art.”
For example, if someone comes to Bouts and says that Glidden is a great brand, but he or she doesn’t think it’s growing fast enough, what Bouts thinks that person is really saying is that the company needs to invest more in the brand and spend more money on advertising and product innovations and new pricing strategies.
“They will never come to me and say, ‘Well, I need you to up your advertising investment from X to three-X,’” he says. “No, they will say it in much more political, neutral terms that they’re looking for stronger growth or a more dominant brand.”
Or his suppliers may say that they have A, B, C and D as raw materials for the company, and what that really translates to is that Bouts could be innovating more than he currently is.
A final example is your employees, who may tell you that they’re not exactly sure what’s going on in the company.
“Basically they’re saying, ‘We have no clue what you’re talking about,’” he says. “Back to being humble and listening people are not always upfront. … That’s why it’s so important that you have the ability to listen to what people are really trying to say because they’re always a little nervous talking to the leadership team or the CEO.”
Once you read between the lines of what people are saying from all sides, then you can put together a clear endpoint to help start your change.
“If you combine all of those insights from employees, suppliers and customers, certainly you get a lot of input in carving out that picture for the future,” Bouts says. “If you combine that with analytics what is happening in the market, we have many statistics on demand, supply and competitor dynamics and you put a little bit of fantasy and dreaming to that, suddenly, I think you get a few options of what that future could be, and that’s an interesting piece of change process, the envisioning part.”Create a road map
Once Bouts knew where AkzoNobel was going, then he had to figure out that path to actually reach that point and where the stops along the way would be.
“Once you have that vision, that’s nice, but to make it simple in journey terms, [if] we’re (traveling) from Cleveland to New York and know we want to be in New York, there are many ways to get from Cleveland to New York,” he says. “…We know where we want to be, and you start to map out the road to that endpoint, and that road map is about new products, it’s about new customers, it’s about new market segments, and it’s about all the moving parts of the business that have a role to play to get to the endpoint.”
But doing this can’t be a solo project, so Bouts enlists the people he has to help him with this process.
“It’s deploying the vision and challenging people to come up with the necessary steps or stops to get there,” he says. “It’s almost a bottoms-up approach. … As the CEO, you’re more the director of the orchestra, but you’re not telling every player how to play his or her instrument. It’s making sure that it happens in a concerted way that companies are moving in the same direction, but I’m not going to tell the head of R&D what kinds of products need to be developed, or I’m not going to tell the manufacturing leader how to make products or telling the Depot leader how to sell products to Depot. You trust your teams. Trust is an important factor. Trust here goes hand in hand with competency in the change process.”
Another key to developing that road map is to combine the practical reality with a little fantastical dreaming.
“It’s how every human being should operate,” Bouts says. “It’s a little bit of yin and yang. You have the conceptual world, and you have an emotional side to it.”
Include the right people to make sure that this happens effectively.
“In every setting, some of your teammates tend to be more rational and some of your teammates tend to be more creative/emotional, and it’s the job of every leader to have a balance of both schools of thought be represented.”
But even with a road map established, you’re likely to stop along the way, and Bouts knew there were certain goals that would need to be met for AkzoNobel to change successfully.
“You don’t go from Cleveland to New York in one whole [trip],” Bouts says. “You have a few stops in between. Every company would call that milestones, which you have to define those milestones very clearly and put clear metrics around it and hold people accountable.”
Effectively doing that means being specific about what you want and what you expect of people.
“You have to hold people accountable,” he says. “If I’m not specific to [the communications director] about internal communications about what I want and when I want it, it remains open-ended and nothing gets done.”
To avoid that, Bouts has the whole strategy process divided into about 50 milestones, which is divided into six strategy pillars.
“We’re monitoring the progress in each of these six strategy pillars on a monthly basis,” he says. “On a weekly basis almost but the monthly basis is the more formal part of it where you have all the measurements being reported out.”
Figure out what’s most important for you to achieve in order to successfully move forward in your change.
“You set financial, market and process metrics,” Bouts says. “… The financial metrics, that’s easy. That’s definitely the key items of the P&L it’s revenue, it’s EBITDA, it’s operating costs depending on which part of the business we’re talking about, and typically those metrics are companywide. You have your market ambitions. By the end of the day, we survive as a company because customers buy our products, so you have to set market share goals, distribution goals, brand awareness goals, typically metrics that are associated with the demand side of the organization.
“To deliver on financial and market metrics, you need a competent organization. You need to know what you’re doing as an organization, and we call that process metrics.”
That comes down to striving for functional excellence in areas of the business and it’s what distinguishes a more primitive organization from an advanced, world-class one.
Then lastly, on top of all those metrics, you have to have people metrics, as well.
“It’s not robots doing the business,” Bouts says. “People design the processes, they work with processes, they make products, they sell products, so it’s important that you build that competent organization, and just saying that you want to have a competitive organization is not going to get you there, so you have to define people metrics.”
For something like training, you would need to determine metrics to measure against your goal.
“You have to make sure that everybody goes through that curriculum, so you have to set a goal there and say, ‘80 percent of your employees have to go through training curriculum A, B, C or D by the end of the year.’”
A lot of times leaders think that these people metrics are the responsibility of HR, but Bouts says you have to take responsibility for it yourself.
“HR is a facilitator of many of the people processes, but it’s the leadership team that owns the development of the organization and the development of people,” he says.Communicate at every stage
Once you have a road map, share it with everyone.
“I can have in my mind how I get from Cleveland to New York, but we employ thousands and thousands of employees,” Bouts says. “If they don’t get it, if they don’t understand what we want to achieve, it’s all useless.”
This was quite the paradigm shift for the company.
“I think in the old day, strategy was done in boardrooms it was secret, big binders about scenarios and [they] were all being put in a cupboard and nobody was reading it,” Bouts says.
Instead of taking this approach, he broke it all open and shared the strategy with all the key stakeholders customers, employees and suppliers.
“There’s a certain risk to it, you know,” he says. “Of course, company strategy is confidential there’s some competitor sensitivity in there, but by the end of the day, having a totally informed and engaged company understanding where it’s going is by far better than not sharing it all.”
One of the biggest keys to effectively communicating your new path is to be mindful of who you’re talking to.
“It’s telling the same story in 10 different ways actually,” Bouts says. “… It all depends on who you’re talking to and how much time you have. Typically, you don’t have hours to communicate people have maybe an attention span of 10 minutes, so if you’re not able to explain your vision and strategy in 10 minutes, you have an issue.”
Tailor your message to the specific audience you’re facing.
“Typically, the groups you’re talking to, they’re seldomly mixed,” he says. “If you talk to analysts, you won’t have employees and customers. If you talk to customers, there won’t be an analyst in that meeting. If you talk to employees, there won’t be suppliers or customers in there. Your audience, in most cases, is pretty focused and pretty single-minded.”
And because you’ll know in advance who you’ll be speaking to, it’s crucial to actually take the time to make that message most relevant to that particular audience.
“Preparation is important,” Bouts says. “You have to understand who you’re talking to, what they want to hear and how you bring over that message.”
After Bouts communicates his message to any given group, he follows up with a closing-the-loop survey.
“How did you perceive the presentation?” he asks. “Did it convey the right message? Did you get the information you were looking for?”
And lastly, he says that during this process you have to communicate often.
“Keep it short,” he says. “Do it frequently. A one-off communication doesn’t make sense. It’s a journey. It has to build. Five minutes every month is more meaningful than an hour presentation once a year.”
While it’s important to communicate the initial journey, Bouts says it’s even more critical to maintain honesty with everyone as you move along that road.
“[Have] a brutally honest communication to the company where do we stand?” he says. “It’s all great to have big strategy plans and visions about the future. Are we going there and milestones, but you have to be fair too. If you’re off track and behind, you need to share the two with employees because if you’re behind, it means you have to plan for corrective action and people have to understand that, and sometimes that’s difficult, especially in economic harsh times.
“It’s always easy to share success stories, and as we say in Europe, ‘With a tailwind, everybody is a good sailor.’ The fact of the matter is, the economy is still facing a lot of headwinds. Maybe it’s turning the corner a little bit, but in my view, the economy might be out of intensive care, but it’s still in the hospital. It’s not safe yet.”
But that’s not what people want to hear, and that’s why it becomes difficult to communicate as you move forward, but if you want to lead change successfully, it’s just part of the package.
“You have to be brutally honest and deliver both good news and bad news to the company, and that’s a challenge in and of itself,” Bouts says.
The key to overcoming that challenge is to not just look at the data that you’re monitoring.
“There is so much data available that you have to use it,” he says. “You have to absorb it. You have to digest it. There’s so much information, especially in this day and age, you know exactly how the company is performing. That’s not difficult. It’s more acknowledging what the real performance is.”
If you don’t do this, you’re going to have a hard time moving forward and improving the company as you try to change.
“You can’t move the company in a kind of dream world, where everybody thinks things are hunky dory,” Bouts says. “The truth is much less rosy. Otherwise you’re being dishonest with your people. You’re misleading them, you’re driving the wrong behavior, you’re driving the wrong actions. If you’re not performing as you should be, everybody has to understand where that performance lack is and what we have to do to close the gap. That’s, at the end of the day, what you want to achieve that you perform as a company. It’s like in every sport, you have to know where you stand, otherwise there’s no improvement possible or no change possible.”
As Bouts went through this process over the last two years, he noticed AkzoNobel changing and overcoming its challenges.
“It’s a major change process,” he says. “This was not a simple change. I’m happy with the progress the company is making. I think there is a lot of appreciation of where we’re heading to. It is meaningful to most people I talk to. They support the direction. And as a result, I think we have a more positive climate here a more engaged company.”
And as he moves forward, Bouts recognizes that no matter how much progress you make on your journey, you never really arrive.
“Are we there yet?” he says. “No. It’s a long, long journey, but the company is moving in the right direction. We’re moving all together, meeting many milestones. Again, it’s we’re moving toward the endpoint. I don’t take an endpoint too literally. Once we’re there, probably, we’ll define a new endpoint, and a new endpoint and a new endpoint. It’s an ongoing journey, but for the next two to three years, we have a clear endpoint in mind.”
How to reach: AkzoNobel Paints LLC, (440) 297-8000 or www.akzonobel.com
Brian A. Rott nearly had tears in his eyes at what he saw as he toured available office spaces for his expanding businesses, Cart Mart Inc. and Superior Onsite Service Inc.
“The desk was left with his dried up coffee ring on the desk. … Post-Its still on the walls. Photographs stapled to cubicles,” he says. “It’s like they just closed down. Companies that they would advertise on TV and family-run businesses. Done. It’s just heartbreaking.”
As president and CEO of the golf car company and the golf car service company, he navigated his 48 combined employees through 2009 without a single layoff. In fact, he acquired his largest competitor in the area last year, resulting in his need for new office space, and he added a 401(k) matching program to show how committed he was to them.
“I just figured if I’m going to invest in anything, I’m going to invest in the employee base and keep people motivated,” he says.
Smart Business spoke with Rott about how to run your business effectively during a downturn.
Build trust with customers. If you maintain good relationships with your customers and especially your suppliers, then your business can sustain a downturn regardless of the economics.
We have great relationships with our suppliers, and we pay them on time regardless of how much we’d like to hold off another two weeks. In turn, we get our equipment and supplies fast and get maybe better service because they’re thrilled that we’re strong. Look at who are your best customers, and you take care of them even more so during the downturn. It just works.
You have to run an honest organization and not panic like so many people do or have done. The key is to always deliver what you say you’re going to deliver when you say you’re going to deliver it. Never let them down. That’s business 101, and always take care of your customers. Our customers could be a private golfer that has one little golf car that we sold them for $1,000 all the way to the National Football League, who might be renting 500 golf cars to run the Superbowl, and they each have a legitimate need at any given time. That little old lady who bought the $1,000 golf car could be stuck on the course, and she needs help. You have to be able to provide the service. You can never tell people you’re too busy. No matter how big or how small, you’ve got to take care of them. Reliability in today’s market is everything for most companies. I’d pay more, and you’d probably pay a little more, to know you’ll get the job done right. Have you ever worked on your house and called the plumber, and he’s four hours late and he doesn’t show up at all and he doesn’t call? We try to look at the obvious Business 101-type things and just be there.
Resolve conflicts with customers. You certainly never want to lose business, but in the same breath, you have to maintain a level of business ethics, and you have to be able to have a line that is drawn. Ten out of 10 times you just have to be honest with the customer, but nine out of 10 times, you’ll resolve it. Maybe one time you won’t. No matter what, you’ll never make everybody happy, but if you try to make them happy, you’ll survive.
I hate to say it, but I’ve had to fire two considerably sizeable customers because of nonpayment. There’s a level of respect that you’re supposed to have with your suppliers. I’m a customer and they’re a supplier, and we’ve worked many long hours trying to help somebody, or we’ve done a service call or built them a customer application and because of our good nature and our trusting relationships, we’re not getting paid. We’ll put people on special pay terms, yet we’re not getting paid. When you get to a point where your customers are starting to be unfair with us, we’ve fired some customers.
Share problems with other leaders. People should join an organization like Vistage or whatever may be in their area. Joining a support group like Vistage to get advice and insight and support from other CEOs is an absolute huge necessity for a lot of companies in this business climate. I’d recommend that people go out and search for a group that they can bounce ideas off and learn best practices and so forth. You’d be surprised how much confidence you can get back into your own course of business by meeting with other owners in a scenario like Vistage where you can really be yourself and learn about your weaknesses and strengths and the best ways to navigate this business climate.
I personally joined Vistage … and it’s changed my business and the way I do business as a whole. Having peer groups allows you to get specialized ongoing support for the normal issues that bother us, and it could be the littlest things and just having the opportunity to meet with our business peers. It teaches us that we’re not alone and shows us that there are others like us in the same position.
My grandfather, he’s 90 years old, so you can imagine he’s very set in his ways. For the first 30 years of business, he didn’t listen to anybody. It was his decisions, and he was driving the boat ‘How dare you tell me what to do.’ I spent the first 10 years of my career here trying to get him to consider to put up a Web site ‘Who’s going to go on the Internet?’ Going into a peer group has been tremendously advantageous to me of learning what’s out there. … This is the kind of stuff we work through every day. We all have to sort of get back to the drawing board in running businesses nowadays and those are important places you can get resources.
“My life was really an endless travel from one recruitment to another,” he says. “I traveled all across the world. I did all of the recruitment of the company well into 2006. The reason I did that was I wanted to make sure that the people joining initially, those were the people I would know really well, the people that I knew would be the future managers and the role models and carrying on the culture and the company values as the company was growing. I think that has been an extremely invaluable investment, and I could see that clearly as the company was growing.”
While a lot of new businesses may focus solely on the business plan and meeting financial targets, Lyseggen instead chose to focus primarily on the people side of his business, which delivers business solutions based on search engine technology, cloud computing and biometrics.
“One of the things I’ve always been thinking about in growing our company is management,” the CEO says. “Growth has been linked closely to our ability to attract, train and develop managers. With management, you also create infrastructure to build an organization.”
In order to successfully grow Meltwater, Lyseggen had to hire, coach and train the right people — and sometimes had to make hard decisions, too.
Hire the right people
Without great people, your business isn’t going to flourish, which is why Lyseggen took such an active role in this process early on.
The first thing he looked for were people who really embraced the world around them.
“That can be very different from you in personality,” he says. “That can be very different from you in terms of skill sets — that is all very valuable. [But] it helps to embrace the world in a somewhat similar fashion — that you have the same perspective on life and the world. Some people can be very negative or positive, to use a very simple differentiator, but if you look at the world in a somewhat similar fashion and you’re striving for somewhat similar objectives in life, then it’s much easier to work together and much easier to create an aligned approach and an overall aligned strategy.”
He also looks for people who care about others.
“If the person has an interest in other people, then that person is caring for that person and interest naturally develops and relationships naturally develop, and you get the manager that builds teams and structures, and … they create a much stronger organization than if you had a manager that only wants to get to the targets and isn’t particularly interested in people,” Lyseggen says.
To get these kinds of people, he had to carefully listen during the interviews.
“If you’re listening to what that person says, how they describe people they interact with both in the interview process but also in that person’s life, how they value what perspectives of people that come into their life, people they’re working with, how they describe friends, family, [then] you quickly get a feel for whether that person has a feel for people or not,” he says.
Ask the right probing questions that will help you get to the heart of these issues in the interview process.
“Encourage people to talk about things that they’re proud of, that they did that was an accomplishment, and who they would share that with and why was that so important and significant for them,” he says. “Another question I really like is what is the biggest challenge of your experience, perhaps a major setback that really shook you, and it was really a, perhaps, fall for yourself. Have that person describe that, and get a sense for how that person described the situation himself or herself and for other people involved is often very insightful.”
Then the last question you have to ask is actually directed toward yourself.
“At the end of the day, is this a person I would like to go out and have a beer with or is this a person I would like to invite home for dinner or stuff like that,” Lyseggen says. “Is there a fundamental personal chemistry? If there is that, then there is a good basis for a good, strong professional relationship, as well. At least it’s much easier if you have that chemistry. All the other things come easier and faster. When I say I ask myself, it’s not only myself but it’s as much the team as well that I use to recruit.”
Coach and train
When Lyseggen went to his children’s school to hear a teacher speak, he was surprised to hear her say that teaching children to read and write was easy because all they need is two things.
“One, they need to feel loved, and two, confidence grows from a sense of accomplishment and mastery,” he says. “I thought that was so profound and universal, and that is one of the things I try to live by in coaching, as well. That applies to people at all levels and all ages. People need to feel safe and loved somehow and have confidence to continually grow as they feel the sense of accomplishment and master of the topic at hand.”
This starts by spending time with people.
“First, I think the most valuable thing you can give anyone is your time,” Lyseggen says. “There is nothing as precious as your own time. Sometimes you don’t need to know what to say to a person; you just need to sit down and listen to that person and give that person attention. That person will know you care and are willing to take up your time. Even if you don’t have anything insightful to say or answers or solutions to the problem they have, it’s the fact that you were there and gave them your time. That actually goes a long way.”
Then you also have to be honest with people.
“One of the most effective ways to really show that you care about people is to be honest and tell them about their weaknesses and their shortcomings when you see those,” he says. “People really take a real liking to that when it’s done in a respectful way and it’s done on a foundation of trust and integrity.
“People get to hear things that perhaps a lot of people are thinking, and it can be down to their personality or the way they do things, things that people in general wouldn’t comment on because it would be awkward. But if you are able to share that with them in a friendly, loving and caring way, I think that really helps people improve and grow and it also shows that you care and that you’re looking after them and looking after their best interest.”
You also have to know when to have that conversation.
“You should be cautious — be very careful and not do it too early,” Lyseggen says. “Only do it when you feel really comfortable that there is a mutual trust established. The situation is you give somebody … honest feedback, and sometimes honest feedback can hurt. Even as glowing and caring as you can be, it can still hurt. The most damaging thing is if it’s not based on a trustful foundation, so you can never do that unless there is a fundamental trust present.”
When you can have that honest conversation, you open up the door for improvement in your people.
“It starts with the person saying, ‘That’s an area that I feel lots of confidence in,’ or, ‘I think that is one of my weaknesses; I think I can perhaps do it, but I don’t have the confidence to do it,’” he says. “The first step is a
dmitting that that is an area that they don’t have confidence in or that is an area that feels wonderful. Admit it, and then you have to embrace it. Once they admit it and are able to talk about it, then you can work on that.”
You have to ask them probing questions to find out how to help them develop that area.
“What are the situations that you feel more confident?” he says to ask. “What are the ingredients that you’re looking for that will help you feel strong in that area? What situations do we need to expose you to so you can get the training to get the mastery to accomplish this? … Just talk about it. Then you can actually deal with it.”
Once you talk about the problem and the possible solutions, then move forward.
“Basically, you create a plan,” Lyseggen says. “Often what is the case is the person actually actively pursues or seeks situations where their experiences are more exposed. Often, if you have a weakness and you want to hide it and you want to not deal with it, you avoid situations where your weaknesses are exposed, but if you are able to talk about it and get a commitment and decide you want to turn it around, then you’re in a mode where you try to find situations where you are exposed to it.”
He says to follow up on that plan formally each quarter, but you can informally check in with that person on a monthly basis just to see how they’re progressing.
He says, “On paper, it can seem simple, and on paper, it can seem like a good thing, but it needs to be followed up on and executed and scrutinized on to deliver the results you’re looking for.”
Make the tough choices
Even after doing all of these things, Lyseggen has come to realize that not everyone he hires actually works out, and that’s the last piece of building the right team in your organization.
“That is something you should feel very sad about, but I also think that is part of building the company,” Lyseggen says. “If you build the company, there are people who join the company that it’s not the right place for them, so you have those experiences, as well, which is part of being a manager.”
This is especially heartbreaking for him because it often destroys relationships that started out well, but just like the other aspects of finding and coaching talent, there is a right way to go about it.
“Part of it is to really be honest — to be honest and to be sincere,” he says. “There is a difference between criticism of that person as a human being and criticism of that person in terms of what they do.
“There should be a clear distinction between the two. … You can create that love and create very personal strong feelings. As long as you’re able to distinguish between the person and the actual work produced by that person, and you can do that in a loving, caring way and honest, then in my experience things are working out well.”
It’s also critical that you act quickly in making these decisions.
“Do not to wait too long because if you wait too long, things can entangle and it becomes an irritation to both parties, and both parties enter the dialogue irritated with the other person and frustrated, and that irritation and frustration then can color the conversation,” he says. “If irritation and frustration is colored with disappointment, (then) it is, of course, not positive for the outcome. If you let the process go too far, I’ve seen that frustration and irritation can color the conversation and create that hard situation.”
So when’s the right time to let somebody go? It varies based on every person, position and company, but Lyseggen has a general rule of thumb.
“If you start to talk about that person too often, and when you talk about that person, it’s typically not in a positive way, it’s more about problems, if that happens too often, then that’s a good indication that you have to act on it,” he says. “It’s probably good for both parties, as well, because it’s not in that person’s interest to be in that position where their skills and potential aren’t fully appreciated or it’s not a good match with what the company needs, and then it’s better for that person to move on to a different company where they can blossom and really reach their full potential.”
By focusing on recruiting and coaching people as well as making the tough people decisions, Lyseggen has seen his business grow from nothing to 700 people across 50 offices and $100 million in revenue last year.
“That’s all done organically and with home-grown management,” he says. “When I think of what we’ve done, that is something that I’m very proud of and [it] is the most rewarding thing.”
How to reach: Meltwater Group, (415) 829-5900 or www.meltwater.com
When the word came out in late October 2008 that The PNC Financial Services Group Inc. would purchase National City Bank, the rumblings from devoted employees and disgruntled Clevelanders could be heard all the way to PNC’s headquarters in Pittsburgh.
Investors believed the $5.2 billion purchase price was below National City’s market value. Employees questioned if they would have jobs after the merger was completed and their pride was dashed as they mourned the loss of one of the oldest local companies and one of the country’s largest banks.
Despite the initial shock to the system, it didn’t change the fact that by the end of the year, National City would become part of PNC, and like it or not, everyone had to get on board, and it was Paul Clark’s job to do so as the Northern Ohio regional president.
“As we moved into January of 2009 as part of PNC, the engagement of the team of employees here was incredible simply incredible,” Clark says. “ … It was an exciting time for us. There was a lot of energy and a lot of enthusiasm that continues today.”
He was able to do that because he had built an effective team environment already, one that he likens to the Cleveland Cavaliers, who can still have fun even during the toughest situations. Like during a time in January when LeBron James got clobbered to the ground and headed to the line to try to win the game. But while this was going on, you also saw Delonte West and Mo Williams, both injured, hamming it up on the sidelines before James hit the game-winning shots.
“You’ve got Mo Williams and Delonte West on the sideline having a lot of fun at the most difficult time of the game, right?” Paul Clark says. “That says something about the chemistry of that team, and that’s really good. I think an important part of having an effective team is just keeping the environment light keeping it fun so that people can bring their whole self to work every day.”
Clark created that environment, which eventually helped him lead employees through the merger, by bringing people together, communicating effectively, and trusting and overcoming mistakes. And he started with himself.
“You have to bring a certain level of energy to whatever it is you’re doing, even if you don’t have it,” he says. “Even if your energy tank is empty, you have to find some reserve somewhere to create the energy that everyone is looking for and would create that environment and bring their whole selves to work every day, and there has to be a consistency to it. You have to keep doing the same stuff over and over, even if it becomes a bit of a grind from time to time. That’s the nature of being a leader.”Bring people together
One of the reasons Clark could lead people through the change was because he had already united them as a company, so he then just had to unite them around the new cause.
“When you’re engaged with a group of people, a group of leaders, and you have to lead through change, you have to keep the bigger picture in mind,” Clark says.
You have to remind people why they’re here.
“If they know what their goals are, if they know how we’re going to measure them, how we’re going to pay them, boy, you can engage a team really quickly if you just do those things time and time again,” Clark says.
But it’s not enough to unite people around the cause mentally, you also have to physically bring people together to create opportunities for success.
“I think my tips for how other leaders might create that type of environment is be enormously inclusive,” Clark says. “You’ve got to get away from the same five or six people that you work directly with every day. You have to bring in a large group of people.”
Several times a month, Clark has big group meetings with employees and it’s a chance to let people know what’s going on and recognize people. For example, earlier this year, one of his employees was the No. 1 performer in 2009 for the Western PNC markets, which is a huge deal in the organization.
“To use a baseball analogy, she was 30 games in first place ahead of the second place team,” Clark says. “She really had a great, great year.”
So they talked her up in one of these meetings and sent e-mails out asking people to congratulate her, and soon after, the e-mails started flying around Cleveland recognizing her and sharing in her success.
“When you bring these big groups together, it’s an opportunity to celebrate success,” he says. “If anyone can’t have fun celebrating success, they really have to think about their priorities.”
He also has recognition breakfasts for groups of employees, where they can talk about what they and their co-workers have done to help customers. The meetings not only inspire employees, but they also bring together people who may not work together regularly or know each other that well.
He also arranges small lunch meetings with certain employees that have no purpose other than to introduce employees to each other. For example, he may arrange a lunch with four employees who don’t know each other because they can help each other make the company better if they get to know each other.
“We set up some meetings for people who don’t work together every day so they can be together and get to know one another and build that trust and build that personal relationship that makes them more effective when they work as a team,” Clark says.
Another way he brings people together is by bridging product developers with salespeople.
“You’ve got to bring them together so you can have a sharing of what the product’s all about and have a sharing of what features that product has that would benefit the customer and, ultimately, how to sell it,” he says. “If you spend a couple hours doing that and there’s 20 people in the room and you get 20 to 40 additional sales that you would not have had otherwise, that’s a great two hours coming together, and it’s that simple.”
Clark also has what they call “Impact” meetings with 20 to 45 leaders in the company every other Thursday. The whole purpose of these meetings is helping people see how what they do can impact someone else to make them successful.
“How can I do something that will impact you and make you successful because we have this thing around here where we only win as a team when every individual wins, so we have to help each other win,” Clark says.
If you have a meeting like that, then you have to have some structure to it.
“Try to have an agenda that hits all the important points and everyone understands that they should contribute if they have something to contribute, and if they don’t, just listening is an important contribution,” he says. “It’s fast-paced. It’s like a scene out of a ‘West Wing’ episode fast-paced, fun environment.”
He tries to keep those meetings to just an hour.
“After an hour, people are really busy, so if you’re going to bring them together, you’ve got to bring them together, and they’ve got to leave thinking, ‘I got a lot out of that,’’ he says. “We try to pack a lot into an hour or so. … If you sched ule it right and everyone’s respectful, you can get a lot done in that hour.”Communicate effectively
Nearly every leader will tell you that you have to communicate and listen to be a successful leader, and Clark agrees, but he also says it’s more than that.
“Those are great characteristics of leading through change, but I just go a little bit further in describing that,” he says. “What really works is face to face looking each other in the eye and talking. That’s what makes a difference. If you can do that rather than make a phone call, do that. Talk face to face. If you can, make a phone call rather than e-mail. Use the e-mails as a last resort for communicating. At that point, it gets personal and it gets real, and have an adult conversation about what it is we want to accomplish. When you do that in a room full of people, that’s when you really engage a team of people and get power in the team.”
When you’re communicating, you need to be transparent and use the correct language.
“People should expect and people deserve just candid communication,” Clark says. “The example that I often use is often people will say, ‘We need you to do this,’ but I think what’s more candid and hits it home right is to say, ‘We expect you to do this.’ That’s clear, and that’s the type of transparent communication I think this requires for a leader to develop a team so that team can lead an organization through change.”
The other key to communication is recognizing the difference between information and data.
“It’s the leader’s privilege to be able to take a lot of data and create an information story from it so you can communicate that in a transparent way to make a team more effective,” he says.
One of the biggest mistakes he says he’s made in the past is just throwing a lot of data out there and assuming that people will just put it together the same way that he did.
“Boy, is that a huge mistake,” Clark says. “So you learn from it. People put data together the way they do it for themselves, and everybody does it differently. I think the leader’s privilege is to take that data and create an information story that leads the team in a certain direction.”
You’re not looking for people to interpret it the same way that you did but rather for them to understand your point of view.
“You have to put it together in a way that you can communicate, ‘Here’s the data that I’ve used to come to this conclusion what do you all think?’” he says. “More often than not, the team that we have is incredibly bright people that are a lot brighter than me, and that’s one of the things that you have to do is set up teams that are better than you, and they’ll come back and say, ‘What about this, or what about that, and here’s what’s really going on.’ That provides the rich discussion that makes the team effective.”
But as the saying goes, communication is a two-way street, so when you’re talking to people, it’s also important that you listen extremely well.
“It’s really hard to be a listener,” Clark says. “I always think I’ve done a good job of listening in a meeting if I’m absolutely whipped afterward and haven’t said much. The act of active listening should be tiring. You should put a lot of energy into not saying anything and listening. The trick is to not be judgmental. The trick is simply to listen and listen and ask clarifying questions and keep listening, and then respond after you’ve had some time to think. If you’re always listening to someone and you’re trying to formulate a response, I don’t think it’s going to be as good a communication effort as it could be.”
Most of Clark’s career he’s been a relationship manager trying to understand clients’ needs, and a lot of his take on listening was learned from those experiences.
“Every time I thought I had something to sell them, and if I was listening to them, all I could think about was what I could sell them; I never sold them anything,” he says. “But when I would kind of just go there with an open mind and a sense of really trying to understand their needs, then over a period of time, as I listened to them and understood their needs, I could solve their problems for them, and I was selling all sorts of stuff. You’ve got to be in a mindset where you’re just really conscious of the other person’s needs and listening strongly.”
If you’re not actively listening to both customers and employees, you’re not going to get very far.
“You will only go far with that if you provide value to the team, and the only way you’re going to provide value to the team is if you really understand what their needs are,” Clark says. “So if you’re talking to someone and trying to engage them and trying to help lead the team through change, it’s all around listening to what’s important to them and then responding to that, and then making sure that as you respond to that, you do it in a way that’s clear.”
You may think you have to have an elaborate communication process set up, but it’s really much simpler than that.
“We try to make this stuff a bit complicated at times, but you just have to ask somebody, ‘What’s important to you?’” he says.
For example, nearly every company has employee reviews, but for it to be most effective, you should ask how that employee prefers to receive that review.
“Some people like to get that in a meeting, some people like to get that in a piece of paper that they can read and think about, some people like to get that over a lunch,” he says. “Everybody has a different way in which they like to talk about issues that are of a real importance to them, so you’re never going to know what that is unless you just ask them, ‘What’s important to you, and how would you like to receive important information?’
“You just have to keep asking questions, so you really understand the individual, and then that’s how the team comes together. If everybody does that and everybody has real clear accountability as a team member to do that, then the communication around the team is just exponentially powerful.”Trust people and overcome mistakes
Think about your life. Most likely, you’ve made more good decisions than bad ones. You probably have a family, a home, a successful career. You run your life. And here’s the kicker: Your employees run theirs and probably just as good as you run yours, if not better.
“If you think about people at work, they come to work after they’ve left their home, so at home, they run their lives like adults,” Clark says. ‘They’ve had successful lives. No matter what their status, no matter what their family situation, no matter what it is, they’re running their life really well, and they’re managing a lot of different things in a very adult way, in a way that works for them, so they bring that to the workplace, and I think that’s really important for leaders to just acknowledge that the people they work with are adults who run their lives really well because the stuff we do here is, arguably, less important than running your life really well.”
Once you can come to terms with that, then you can trust your employees more easily, which also builds a great work environment.
“Let people make decisions,” he says . “They make great decisions every day of their life, so when they’re in the work environment, set up an environment where lots of people can come together to make great decisions and have the types of discussions that foster decision-making. People come to work because they do want to be part of a success, something that’s bigger than themselves. Everyone wants to know that their work is meaningful, and that it’s significant. That’s how we derive richness as people.”
When you let people make decisions themselves, though, they won’t always make them the way you’d like or, for that matter, correctly.
“You have to recognize that people are fallible,” he says. “We’re just people. We make mistakes.”
When people make mistakes, help them better understand what happened and what they could do better.
“You don’t encourage them to make mistakes, but you encourage them to make decisions and learn from the decisions,” Clark says. “When you talk about creating teams that lead an organization through change, learning is a huge part of that and just recognizing that you’re getting better.”
Don’t call someone out in a group setting when the person makes a mistake.
“Do it in a one-on-one setting where you can be candid where you don’t shed light on the person who made the mistake,” he says. “If you can, do it in a quiet setting and just ask questions and learn.”
And don’t lecture the person instead have a dialogue.
“It’s just asking, ‘What could I have done better? What could I have done differently? What did I miss? What information should I have had that I didn’t? What information should I have valued more highly that would have gotten me to a different answer?’”
Clark once knew someone who started a new job a few years ago, and when he started that new job, he asked his manager what success would look like if he had a good year.
“All his manager said was, ‘If you make 1,000 decisions and you get 501 of them right, that’s going to be success,’” Clark says. “You have to learn, so you have to set up an environment where people can learn.”
How to reach: The PNC Financial Services Group Inc., (216) 222-2000 or www.pnc.com
When Neil Gass and his team decided to set a new direction for Sunbrook Franchising Inc., they knew it wasn’t a quick process, so they spent nearly six months evaluating what they wanted to accomplish.
They decided they wanted to open or have in development 60 new centers over the next five years. Then he broke it down and decided that in order to achieve his goal that he would need to open 12 centers this year.
“You start with your longer-range objectives where do I want to be in five years?” says the CEO of the 160-person child care franchising company. “You hear this in the business publications from everybody, and it’s an often repeated story, but where do I want to be in five years, and then back it up in smaller increments. Now I have to look at what does it take to get these 12 months accomplished?”
But he also recognized that he couldn’t achieve this alone.
Smart Business spoke with Gass about how to bring in the right people to help achieve growth goals.
Recognize your weaknesses. We began as a family business. We know what we’re doing as far as building, developing and operating successful child care centers. We began to realize, as we geared up for this growth, that we did not have the expertise in the actual area of franchising. We’ve been doing it for a while and getting by and been moderately successful, but to move to the next level, you have to have someone on board who knows the industry and knows the business and knows the business of franchising.
It goes back to it’s time to re-evaluate the way you do business and what your goals and objectives are. The market has changed. It’s a new economy. There are different lending environments and some new buyer behaviors and patterns these days. The world has changed or is in the process of changing very rapidly and you go back and you look at what you want to be and how you want to get there.
Hire people who fit with you. It’s critical to have, when you’re gearing up for active growth, the right people in place. You want to know what experiences they’ve had some key decisions they’ve made that could have gone either way and why did they choose this way versus that way.
I’m happy to continue to grow at a slower pace as long as we’re bringing in the right people to enhance our organization and enhance our missions and philosophies, so one of the things we wanted to know is, ‘How committed are you to active growth, how many sales do you want to make, and what are your key decision factors in making sales?’ If they’re just looking for a warm body with a fat wallet, that may or may not fit with your organization’s goals. It certainly didn’t with us, so what are the key decisions for you in your process? What kind of experience do you have managing systems and developing and revamping?
It almost comes down to the more personal beliefs and philosophies than the hard experience. We can teach people how to operate child care, how to franchise, how to sell, build, develop and grow a child care system. What I can’t teach people is how to have good work ethics, good interpersonal skills, good communication skills and the right philosophy.
Those would be my two big points: Re-evaluate what you’re doing and how you’re doing it, and then find the right people to fill those gaps.
Get outside help. Bring in some business consultants. Any small business trying to grow, it’s nice to have an outside perspective on where you are and where you should be. In that, you can often identify gaps or holes that need to be filled, and some of those will be in terms of leadership and experience that the company would benefit from bringing in from the outside.
It depends on where you start from, of course. We started as a family-based business. One of the first things we did was bring in a family business consultant. For us, it was knowing that we had family business issues, and how can we identify and really address those correctly, and that was bringing in a family business expert.
Beyond the family business expert, there’s a multitude of experts. There’s a whole industry that’s grown up around providing advice and consulting now. Anyone can benefit from some form of a business coach to just provide a fresh perspective. You get stuck in your day-to-day routines of doing what you do, in the way that you do it, and that leads to stagnation and failure to recognize new opportunities, ... so anybody from a third-party perspective sheds a whole new light on where new opportunities exist.
Hire consultants like you would employees. Ideally you want someone who has worked in a similar or related business or industry. ... Then you want to look for some success how have the businesses that this consultant has coached fared after the work was done? Did they go on and were they able to implement the strategies and ideas given?
Oftentimes, we would work through referrals through networking contacts, both within and (outside of) the industry. We would look for folks, ‘Have you worked with this company or individual before?’
There’s no replacing good old face time interviewing. Sit down with this person prior to engaging them and find out what their philosophies are and what their experience is. Does that fit with your philosophies and objectives? You don’t want to bring in a yes-man to further the ways you’ve been working. But definitely somebody who has a similar philosophy of growth and they understand the growth cycle that your company is in and hopefully has been there before to help guide others through the same waters.
We’re more interested in quality over quantity. If I had brought in a franchise expert who was purely growth, purely show me the numbers, that would not be a good fit with our company. That’s part of the process of weeding through the available candidates to find the right match for us.
Clint McDonnough doesn’t recall ever having an internship himself. In fact, when he joined Ernst & Young LLP then Ernst & Ernst you simply got your four-year degree and started working right after graduation.
But the Dallas office managing partner acknowledges that things are a little different these days at the accounting and financial services firm. Now, students must go through a five-year program, and internships are nearly required to get in with the firm. While things have changed, it’s definitely for the better.
“The process is much different than when I got hired, …” McDonnough says. “Nowadays, probably about 95 percent of the people we hire have had an internship with us and have had the opportunity to see us up close and personal on a day-to-day basis.”
And that means that he and his 1,400 people have also had the chance to see them, so when they go to hire full-time employees, they have a better picture of a candidate than just what’s on a piece of pretty resume paper.
“It’s one of the best things that we’ve come up with,” McDonnough says. “It takes the guesswork out of hiring so when you make a full-time offer, you’ve had experience with the campus activities, the interview process, the in-office interview you’ve had them for eight weeks of full-time employment basically. You’ve had an extended period of time to get to know and work with them, so it really takes the guesswork out of the recruiting process for us, and it takes the guesswork out of that student’s mind of whether this is a good place for (him or her) to work.”
Creating a strong internship program entails getting on campus to build relationships with professors and students, and then offering students a meaningful work experience.Get on campus
If you want to have the best interns, then you have to have solid relationships with local colleges and universities, and to do that, you have to invest both people and time.
“It starts with making certain that you have our folks who spend time on campus getting to know the students as well as making sure that the students have the opportunity to get to know us and what we stand for,” McDonnough says.
When he’s sending people out to campuses, it’s not just simply something he asks an employee to add into the schedule. Instead, because it’s an important role, assign it as a full-time position. In most cases, a partner serves in the role of campus coordinator along with a team of client-serving professionals, and that team is augmented by full-time professional recruiters on staff. All of these team members and recruiters have had experience working with clients throughout their careers at the firm, so they know what it takes to be successful in E&Y’s culture.
Typically, it’s one partner per campus, although if schools are small, a campus leader may have two schools that he or she oversees, and the company often tries to match alumni up with their respective alma maters, so they already have an idea of the school.
“We like to have long-term consistency in our key campus leaders,” he says. “We’d have someone who has spent many years on that campus so they know the campus, and more importantly, they know the professors, so they’d have the rapport with those professors to know what type of person a specific student would be, and then have a dialogue and discussion around, ‘Do you think that person would be successful in the type of culture that we have?’”
Campus leaders should be focused on building relationships with faculty and staff.
“Spending time with them on campus is key,” he says. “Making certain that they have access to our thought leadership that we provide, that they can use in their classrooms or their lectures is also a critical part.”
Acknowledge the importance of the role those professors play.
“I think it’s just being respectful of the role that they play, and it’s a critical role in the development of the key people who will be a key part of our future, …” he says. “When you go on campus, make certain you understand and are being respectful of the role that those professors are playing in the development of those students that will be your future is something that we need to do and still need to do when we reach out to them. Sometimes there’s a view that we take them for granted, and we never, never want to do that.”
Your recruiters also need to know the students. E&Y’s staff first does this through having social hours on campus two to four times during an academic year.
“One thing that we don’t do is we don’t have alcohol on any of our recruiting visits,” McDonnough says. “That’s not part of the social time. We believe that the social time is really business time, where we get to have meaningful interaction with the students, be able to properly evaluate that student’s social skills and interpersonal skills and use that as another piece of information that we utilize in evaluating that student along with their abilities that they’ve demonstrated in their classroom.”
During these socials, recruiters are looking for students who have qualities that could make them successful at the firm.
“It’s the ability to carry on a conversation, eye contact, feeling comfortable in a discussion and willing to participate in a discussion,” McDonnough says. “Those kinds of things that we can identify that are consistent with somebody who could be comfortable in dealing with people. We are a technical business, but no doubt about it, that technical business is done by people, so it’s important that you have the ability to interact with folks both in our company at Ernst & Young and our clients.”
Look at their intelligence and awareness to find the right fit.
“You also get a sense for just the whole general business knowledge,” he says. “Are they able to demonstrate that they have a good knack for what’s happening in the business community, what’s happening in the economy? That kind of discussion is part of a dialogue that our people have with the students during those activities.”
The next step after the socials is on-campus interviews with the standout students, conducted by the recruiting team.
“That interview, in a lot of cases, is a validation of what we had known,” he says. “In a lot of cases, because we know the students so well, it’s us making sure we know what they want to accomplish in both their internship and where they want to go on a full-time basis. That includes, what city are you looking at? What kind of service line are you interested in doing? What kind of industry are you interested in, if you want to focus on an industry? That’s the kind of dialogue that’s happening in the interview process.”
This provides them with another opportunity to see how that student will handle him or herself, only this time in a one-on-one situation.
After campus interviews, the individual campus teams meet, and they’ll come back and meet with the other schools’ teams to compare notes between campuses.
“Then, depending on our hiring needs from an office perspective, we then go back and decide who to make offers to to come into the office,” McDonno ugh says. “By and large, if you get an offer to come into the office, again, given the amount of history we have had with these students, we will offer an internship after their office visit.”
The number of interns varies based on the work needed, but this year, 90 bright-eyed interns started. Going through this entire process helps reduce the possibility of surprises when they actually get working.
“Because of the amount of due diligence that our campus coordinators do, both in the pre-interview process, talking with professors, getting to know these students on campus, we have a really good idea,” he says. “You combine that with how well they’re doing in their studies, we have a really good idea of who we would like to bring in before we even go into the interview process, so we do a lot of homework.”Provide a meaningful experience
A lot of people think of fetching coffee and spending hours standing at the copier when the word internship comes up, but McDonnough cautions that you can’t have this if you want to have a successful internship program.
“What you wouldn’t want to have happen is somebody to come full time and be surprised by the culture, the workload, the work requirements the work,” he says. “You just want to avoid that, so it’s really important that they get a real experience during their internships, and that includes work demands, deadline demands, etc., that would be a normal course when they start with us. It would not be a good use of their time to make coffee and copies. That would be a wasted experience for an intern.”
So if you don’t want to waste your interns’ experience, how do you set up a meaningful one?
“A key of a successful internship program is making sure that they have opportunities to work on clients,” McDonnough says.
To do that, E&Y elects to have its internship program not during its slower summer months when most college students intern but during the first couple of months of the year or the busy season.
Now doing this also goes back to having successful relationships with the college campuses who will work with both students and the firm to make this happen.
“It’s really because of the accommodations with the schools here in Texas,” McDonnough says. “It’s critical that you get the schools that you’re recruiting at to agree to that kind of time frame for the internships.”
If you don’t have interns when you’re busiest, then you run the risk of them not having enough work to do and not learning.
“Yes, it’s a great opportunity to know the firm and to know you, and you get some sense of what it means to go to work every day and what kind of firm you’re going to be working for, but it’s not as true of an experience of what the work life will be like the rest of the year,” he says.
Once interns start, they go through orientation for approximately three days, which is led by either a staff volunteer or someone from the recruiting team. That orientation is followed by more technical training, and just a couple of weeks into an eight-week internship, they’re ready to start in the field.
“Try to get them different experiences with different people,” McDonnough says. “We like for them to work on a couple different engagements in a couple different industry groups. When they move within the engagements, we try to get them to work with different people. It’s important because it gives us a couple different touch points on how they’re doing not just one touch point and secondly, it gives them an opportunity to experience different leadership styles.
“The leadership style we develop is based on the experiences that we all had in working for other people. This is just an opportunity for them to see some different leadership styles and personalities and grow in their personal development.”
Each engagement could involve as few as three people or as many as 15 or 20 people, so the interns have the opportunity to work with many people.
In addition to the engagements, each intern is paired up with a counselor or buddy during his or her time at the firm.
“That’s important so they have another reach-out point of someone that they know and have a chance to dialogue with,” he says.
Lastly, they also have a contact in HR, who is involved in running the overall program. This gives them at least three points of contact internally during their experience, but it also gives you the chance to have several points of evaluation.
“For every engagement they work on, they’ll get feedback from the person that’s above them on their performance and what they can do well and what they can do better,” he says.
Most of the people who intern at E&Y are juniors and will receive a full-time job offer at the end of their eight weeks, contingent on them maintaining their grades through the last two years of their five-year program.
“We’ll do an evaluation before they leave based on the feedback they had on their engagements, but because of the amount of work that we do before we bring somebody in in making sure we believe they’re a good fit, we’re seldom surprised if someone doesn’t live up to the performance standards of the firm.”
This process allows the student to focus on school, knowing he or she has a job upon graduation, and it takes the guesswork out of E&Y’s hiring. It’s also made E&Y a standout employer.
“One of the things that is a good indication of how well we’ve done in the recruiting process … is that we have been now ranked in the top three in Business Week’s list of best U.S. employers for new college graduates,” McDonnough says. “The list came out in September 2009, so it made us feel good, and it validated all the hard work that I have just talked about, about the importance of spending time on campus and finding those opportunities.”
How to reach: Ernst & Young LLP, (214) 969-8000, (214) 979-1700, (817) 335-1900 or www.ey.com