Robyn Davis Sekula

Wednesday, 26 March 2008 20:00

Strength in numbers

Ten years ago, Doug Hawthorne had to create a culture from scratch.

He had just presided over the creation of Texas Health Resources Inc. from 13 hospitals from three different organizations — Fort Worth-based Harris Methodist Health System, Dallas-based Presbyterian Healthcare Resources and Arlington Memorial Hospital.

The three organizations came together to create a large, faith-based, nonprofit health care system, and, as the CEO, Hawthorne’s challenge was to get the thousands of employees of this new system thinking about a common mission and goals.

“Initially, our effort, and mine particularly as the chief executive officer, was to help create a new culture,” Hawthorne says. “That certainly was the most significant initial challenge for me. In the past five years, once we made that turn of beginning to understand the importance of the consolidation, the challenge has been to sustain and build on that culture to improve our performance. ... Culture will trump anything else we do if we don’t have it.”

By relying on a strategy of getting everyone involved, fighting to retain top talent and striving to do more, Hawthorne now has the organization’s 18,000 employees all working together toward common goals. Here’s how he did it.

Get everyone involved

Creating the culture that would be embraced by all employees meant that the process would have to involve people from each of the organizations that made up Texas Health Resources, which had fiscal 2006 net operating revenue of $2.3 billion.

“Our first desire when we came together was to acknowledge and appreciate what each organization brought,” Hawthorne says. “Rather than just toss it out, let’s acknowledge this history, but, at the same time, let’s talk about what it means to be a new company.”

Hawthorne brought teams of leaders from all three systems together to talk about how they each performed certain tasks and asked each group to choose the best solutions. In some cases, the group might choose an entirely new approach none had tried before, and he gave them the freedom to make those choices. Those groups, called COPICs, which stands for clinical and operational performance improvement councils, still meet regularly today. Each group had leaders from similar areas across the 13 hospitals.

“It began to create within the organization more of a creative approach to things, rather than just relying on the old way,” Hawthorne says. “That was moving the culture into the new realm.”

Each team prepared its own agenda of critical issues. “It was their responsibility to discuss and find a common response, and then to execute that across the organization so that we would create a standard of practice, so that whenever you entered one of our hospitals, you would see a common outcome,” Hawthorne says. “Now, that’s been a real challenge, as you can imagine. People do have a tendency to hold on to their pride of ownership. How do you break that up if there is no accountability? We tried to create accountability by developing strategic plans that call for specific outcomes at certain periods of time. The only way those outcomes can be achieved is if everybody is focused on that achievement.”

One example was creating a payroll system. Human resources and finance managers met and created a common payroll system, paychecks and benefit plans among all of the hospitals.

“What we became was one employer,” Hawthorne says. The COPIC teams presented their major recommendations to the System Performance Council, a group made up of the health care system’s leadership, which evaluates major decisions, offers feedback and approval.

“My belief is that those who are doing the work provide the best solution to the issues around that work,” Hawthorne says. “It may not necessarily always be the solution I may have selected, but if they do it collectively and find it to be the best outcome, then I think we’ve done it in the right way. If they’ve done it unselfishly and if they’ve done it in an unbiased way, if they truly have looked at it from the standpoint what’s best for the system versus what’s best for my individual entity, then we do get the best outcome.

“On occasion, they will step back after a period of time, which they have the opportunity to do, and say maybe we didn’t make the right decision. But that’s part of it, too. I think that kind of decision-making down deep in the organization gives us more empowered leaders and, ultimately, better outcomes.”

Hawthorne says clear communication on the organization’s guiding principles kept the teams on message. Employees know not to make decisions or suggestions that violate those principles. For example, among those guiding principles is the health care system’s faith-based structure, which includes chapels on hospital property and chaplains on staff. Another guiding principle is creating and holding green space around the hospitals because Hawthorne says that patients who can see trees and greenery from their windows enjoy the view, and it may aid in their healing.

“On occasion, we have had some of the engineering groups or COPICs decide that they have wanted to put in more driveways or parking lots or eliminate some of the green space around new buildings,” Hawthorne says. “Those I have had to take a position on. The other issue where we have things that are nonnegotiable are around our faith-based values — the fact that we are a faith-based system and the fact that we will have pastoral care programs in our hospitals and chapels in our hospitals. It’s one of those things that on occasion, we have people who may want to modify that or change that, and those are things that get vetoed.”

Keep top leaders

Since the new organization was established, Hawthorne has worked hard to prevent turnover, particularly in high-level leadership positions. Stability is important in maintaining the culture of an organization. The same leaders repeating the same message help get the message through to employees

He says for many CEOs, it gets boring to repeat the values and mission of an organization, and it’s hard to keep repeating it. But that’s crucial to an organization’s employees truly embracing it. If the leaders talk it and live it, employees will follow suit.

“You almost get tired ad naseum of saying the same thing, over and over and over again, about the mission and the vision and the values of the organization, wherever you are,” Hawthorne says. “But if the CEO and the leadership of the organization have been consistent in their focus on the mission of the organization, of where it wants to go with decisions and has a set of values that really are without exception followed, then people know where their limits are. It clearly helps us as we put before them new directions that are aggressive and will take significant effort. If they know they are supported and that they know that there is consistency in the leadership of the foundation statements of the organization, they will work for you to get things accomplished.”

Several of the top key executives have been with Texas Health Resources since its beginning, which has helped maintain the culture that the company started with and build on it going forward. To do that, Hawthorne says to think about what people want in a job. High-level executives want to grow, learn and create personal accomplishments, and good CEOs let that happen. Good compensation is part of the package, but for most people, it’s much more than that.

“You create an environment where they have an opportunity to match their personal goals and aspirations with the goals and aspirations of the organization,” Hawthorne says. “If those are not aligned, then people move on. You let people lead, to make mistakes, learn from those mistakes, but then give them an opportunity to use their skills and their knowledge certainly in a focused way to achieve what we’re after. The importance is that you have clarity in the way that you want the organization to go. People don’t do well with ambiguity.”

Strive to do more

The mission and values for the health care system aren’t static. As Hawthorne sees it, those elements should change and grow with the organization.

Within the last few years, Hawthorne says he felt it was time for a checkup. He wanted to inspire employees and the organization’s leadership to new heights, so he embarked upon a new project: creating a promise statement.

Hawthorne says there was no specific measure that told him it was time to do it. He thought the organization was strong, but that it had more capacity to give. He felt that the organization was plateauing in some areas, and that in today’s world, that’s moving backward.

Hawthorne says good CEOs have to rely on gut feelings at times.

“That’s an observation place a CEO has, the ability to look out over an organization,” he says. “When I characterize my role here, it is built around relationships, and the relationships are multiple. Part of that is to monitor, to be constantly observing the tenor of the organization. My sense was that we were making great progress on an incremental basis year on year in our relatively short life, but it was time to take transformational movement for the organization. But in order to take big steps, and do hard, sweaty work, we needed to be sure we had something that was clear across the organization and bound us together.

“The mission and vision did that early on in our life, and they were the foundation for us. We needed something that we could deal with a little more day-to-day in the fine points of what they do. We needed something that was so much of a commitment that we hold it so dear, that no one wants to break the promise.”

Hawthorne brought together about 400 staff members to create the promise statement, which emphasizes individual care of staff members for each other so that they can then, in turn, provide good care to patients. The organization took it a step further with nine promise standards that expand upon how the promise statement works.

Staff members have collected stories from within that are shared at meetings and in internal educational materials that give testimonial accounts of how employees have felt cared for on the job.

“It truly is something that is top of mind as we go through our day,” Hawthorne says.

Also, the organization began to address the promise in its hiring practices to make sure the company is hiring the right people. Texas Health Resources recently created a series of scenarios and questions that centered around the promise. Those scenarios and questions are incorporated into the interview.

“We can begin to assure ourselves that the people who work here already have a sense of what we’re after, from a sense of caring for one another and, ultimately, caring for others,” he says.

Hawthorne is continuing to move the organization forward by changing the way THR plans. He has introduced a 10-year plan that begins this year, which is a new model. Previously, three-year plans were the norm.

“It’s aggressive,” Hawthorne says. “It gives people a sense of longevity, that we are really here for the long term. It creates an opportunity for an aspiration. It sets a pathway and expectation and gives people a level of comfort that we have a direction.”

HOW TO REACH: Texas Health Resources Inc., www.texashealth.org

Wednesday, 26 December 2007 19:00

Stepping up

Mark C. Layton says growth is both a blessing and a challenge. Layton’s toughest task as senior partner, chairman and CEO of PFSweb Inc., has been preparing the company for growth.

It’s difficult because you can’t always tell when it’s coming, especially in a service-related business that relies on large-scale contracts with major corporations. PFSweb handles outsourced technology and back-office functions for companies and has capitalized on the global trend toward outsourcing. The company went public in 1999 and had $423 million in 2006 revenue, up from $97 million in 2002.

The large companies PFSweb has as clients don’t make decisions quickly, and the investment that PFSweb has to make to serve a new client is capital intensive. When business comes in, it’s time to ramp up, staff up and meet that challenge. Then comes another plateau, and you can’t necessarily see when it will be time to step up again.

Layton says PFSweb tried marketing its way out of the stair-step model, buying more advertising and hiring more salespeople. But that didn’t work. Ultimately, the company had to find another way to accelerate growth, and that turned out to be two things: making an acquisition to broaden the company’s market and getting and keeping the right people.

“What we had to do was sit back and focus on our core strengths, what we did well as a business, and find ways to fill in those gaps on that stairways model I was talking about, like deploying our assets in other market areas,” Layton says.

Aquiring a broader reach

Because PFSweb was primarily concentrated in large contracts with major companies, Layton and his team looked for a company to acquire that handled the other end of the spectrum: consumer products. If done right, it would bring in a steadier stream of income, with more natural peaks, such as before and during the holiday season. Layton examined several businesses that sold consumer products and eventually bought a business called eCost.com, an online store and Web site for consumers that sells computers and other technology equipment. ECost was in a profitable market segment, consumer technology, but was not performing well.

Layton took a good look at its business and thought that the things that eCost lacked were PFSweb’s strengths. ECost had struggled to deliver products customers wanted on time and had its own technology problems, including down times when its own computers weren’t working. Both of those issues were something Layton felt PFSweb could solve, so in February 2006, PFSweb bought eCost.

“We thought we’d end up with a business in a fast-growing industry that was meaningful and sizable and would make a contribution to us and something we could use to expand into other categories,” Layton says. “Many of the problems they had were our strengths, so it was a good fit for us from that standpoint.”

Also, eCost was the right size for PFSweb to acquire because it wouldn’t stretch PFSweb’s financial or physical resources too thin. It has turned out to be a good move.

“This was a business we acquired that was in quite a bit of financial difficulty, so we gave it a lifeline to survive,” Layton says. “Now, we’re beginning to see the fruits of that labor, and that business is growing, and it’s doing exactly what we hoped it would do, which is to smooth out the growth cycle for us, and be a complement to the service business.”

Acquisitions can be difficult to judge. Layton says anyone in the midst of an acquisition needs to be honest with his or her fellow employees and the company’s shareholders about the problems of the business you’re acquiring and how long it will take you to turn the business around.

“Just don’t try to be overly optimistic,” Layton says. “Be conservative in terms of the time and cost to get it done. Too many companies do a deal and say, ‘We know we’ll have to close these three plants,’ but they’ve underestimated the time, the difficulty and the cost to get that completed, and they come back eight months later and have to deliver disappointing news to stakeholders because of the cost and time involved. Take a good look and be honest about the risk assessment.”

But on the other side, don’t abandon an acquisition just out of fear. Acquisitions are risky, but if done right, they are worth it.

“They are a necessary evil,” Layton says. “I have a client and former business partner of mine who came up with the phrase, ‘Profit is a reward for risk.’ If you don’t take risks, you won’t be successful. It’s important that you understand what the risks are, and you do it in an honest manner. It shouldn’t mean that just because you’ve identified all of the risks in front of you that you walk away from every deal you have. If you did that, you’d never do an acquisition.”

Getting buy-in

Layton says that, ultimately, it’s what happens after the acquisition that makes or breaks a deal. The acquiring company has to help its newly acquired staff fit in to the new company, and it’s something that should never be ignored.

“Culture integration is probably one of the most difficult aspects of any acquisition, and it’s often the most underestimated or just ignored,” Layton says. “If you walk into an acquisition, in my opinion, and immediately eliminate the leaders or the leaders resign after the acquisition, your ability to integrate their culture is substantially diminished. The impact on morale without the leadership of an acquired company buying in to the vision and helping to build morale and integrate the culture is very difficult. So we embraced the leaders of that business. They embraced the overall business plan. Both of the guys there and the level of management below them are still involved today.”

That doesn’t mean, though, that no one loses a job after an acquisition. Layton says that’s almost inevitable, but be careful about how you handle it. Communicate well with everyone, including your own company’s staff, to make sure everyone understands why the jobs are ending.

“You have to manage those correctly and make sure that the people still on board understand why these things are necessary and where you are trying to go with it and aren’t viewing the acquirer as a hatchet company,” Layton says.

Layton says PFSweb would like to do another acquisition, but the company has set milestones that need to be passed before the company does another one. Allowing time to prove that you can successfully buy and turn around a troubled company is a valuable selling tool, both for investors and for the prospective company you want to acquire.

“We need to allow a little bit more time to complete the turnaround and get eCost back to profitability,” Layton says. “It’s a business that’s now hovering near break even, which is a stark contrast to where it was a few years ago in terms of its losses, and it’s growing again.”

Buy-in starts with information and with integrity. Employees have to be able to trust what you’re telling them, so above all, share what you know and tell the truth.

“Most often, it’s sitting with groups of employees and sympathizing or empathizing with the pain they have in the business today,” Layton says. “I don’t have the resources, I don’t have the people, or we haven’t had the cash, and talk about how it is going to be better, or why it’s not going to be better. ... Once they are bought in to the vision of what that’s going to do for the company and for them as individuals, it’s amazing what people will do.”

Layton says communication during the execution of the plan is crucial. If you are going to have to deviate substantially from what you promised employees, tell them that you are and why, including any surprises that came along or other difficulties. Keep the communication coming, and include the staff of your original company in those communications.

“You can’t forget about the people who are making the sun shine while you are out there chasing the rain away from the new division,” Layton says.

The right people

One aspect of PFSweb that Layton says has been key to the company’s success has been its management team, many of which have been with the company 15 years or more. Layton says PFSweb has been able to achieve this by communicating openly and honestly with each other and by behaving with integrity.

“It starts with an atmosphere of trust,” Layton says. “We have a lot of respect for one another. We all bring different skill sets together. We have learned to be able to debate and speak honestly and fight professionally without it impacting professional relationships between us. ... Don’t get me wrong. We’ve all had our rough roads and times when we get mad at each other and stomp away, but we come back the next day when calmer minds prevail.”

Also, executives make a point not to spend a lot of time together outside of work. Each fosters his or her own personal life, which allows each of them time to get away from the office and work, and keeps it from becoming what Layton refers to as a “soap opera.”

One small change that helps senior managers feel more deeply invested in PFSweb’s success is giving each the title of partner. Layton says it’s also customer-service-friendly, as someone with the title partner is assigned to customers on the company’s service side. That way, if customers have a problem with how their account is being handled, they can call the partner for help and talk to someone high up in the organization who can fix their problem.

“We try to mold our organization to have an exterior-facing capability of being a client services organization,” Layton says. “The second thing is, I need my management team to be bought in to our strategy, and I want them to look at themselves as a partner in the business.”

Layton looks forward to and thinks about the company’s future leaders. The company hires eight to 12 recent college graduates on an annual basis, looking for self-confidence, but not arrogance, and a solid education, especially in finance. Layton pays special attention to how the graduates communicate in e-mail. He wants to see professional communication via e-mail, and Layton has the human resources department at PFSweb send the candidate an e-mail following the interview just to see his or her response.

“We do so much communication by e-mail, and a lot of people are not sensitive to how their e-mail comes across to somebody else,” Layton says. “We like to see how they write an e-mail. We watch to see if people take the time to be courteous, and do they take the time to make sure the right kind of emotion is being communicated?”

Then, PFSweb trains the new hires to become tomorrow’s executives, putting them through the paces in every aspect of the business through a six-month training program.

“We ask them to pack boxes in our distribution center,” Layton says. “We put them on the phone and have them answer calls, we have them work in our technology area, and in finance, they work in accounts receivable and collect money. We try to give them an entire picture of what our business looks like. With that training and their professional education, we’ve found that to be a very successful formula for growing executives in our business.”

With the right business model in place and with the right team, Layton believes PFSweb is poised for continued growth. He looks forward to seeing what the future brings to the company.

“We’re at an important and exciting part of our evolution,” Layton says. “We’ve got a good, fast-growing business on the eCost side and a solid service business that has elevated itself to become one of the better players in the world in the business process outsourcing service business. I’m hopeful that the next few years will finally give us the kind of returns we thought we would have been able to earn a long time ago.”

HOW TO REACH: PFSweb Inc., (972) 881-2900 or www.PFSweb.com

Sunday, 25 November 2007 19:00

Dollars and sense

Business, says Texas Capital Bank President and CEO George F. Jones Jr., is about relationships.

People do business with people they like, people they trust. Sure, cost is an issue, but ultimately, especially in complicated financial decisions, business leaders need a trusted adviser to help them.

“They need a trusted adviser to the business,” Jones says. “We provide a trusted adviser relationship. That builds customer relationships for a long time. We’ve chosen to stick to that philosophy and create those relationships.”

The bank caters exclusively to those privately held, small-to-middle market businesses that need somewhere around $2 million to $20 million in capital and to private clients, who are upper income people needing individual attention.

Jones and his team have built Texas Capital from the ground up through their model that, more than anything, the relationships the bank builds with its customers are what fuel growth. To that end, he’s hired the very best bankers he can find, calling them relationship managers, and has recruited away from much larger banks people who excel at creating that hand-in-hand relationship with businesses and wealthy individuals in the bank’s private client division.

It’s not about a branch and drive-through on every corner. It’s about building one-on-one relationships. It’s a model that generated revenue of $259 million in 2006.

Jones maintains that if you focus on one or two things and do them very well, your business will prosper, and his bank is living proof of that.

Hiring the right people

Building relationships often starts with having something in common with the person you are trying to relate to. A good starting point is a consistent local connection.

Jones started Texas Capital in 1998 with five partners. Jones, a native of Dallas himself, knew full well that much of his bank’s success was riding on the ability of its bankers to attract businesses and private clients to the bank.

Jones says it’s particularly important to keep the key contacts with customers consistent. With larger organizations, he noticed a lot of turnover, and that frustrates customers who are looking to build a long-term relationship. No one wants to refresh a new banker on his or her company history every six months.

So Jones seeks to recruit bankers who are already excelling. He doesn’t wait for someone to apply. And he doesn’t look far. In most cases, people like to do business with, and bond best with, those who are from their same geographic region. He thinks this is particularly true in Texas.

“Texans like to do business with Texans,” Jones says. “These customers down here don’t relate as well to people from other markets. We’re in five markets in Texas. I would no more send a Dallas banker to our San Antonio location than a man to the moon. Every one of our locations, we recruit within those cities because all of those bankers have relationships within that city. It just doesn’t work to recruit from outside.”

Jones puts everyone in charge of recruiting, particularly those in management. He and other senior managers even ask other businesspeople who have built a relationship with their bank which bankers are doing a good job for them, and sometimes, they’ll look into that person, contact him or her and hire that person if they like what they see.

Relationship managers who already work at Texas Capital are asked to provide names of competitors or friends who do a good job, too.

“Good relationship managers hang out with other good relationship managers,” Jones says. “We incent our relationship managers for providing excellent relationship managers, if they are hired. It can be in the thousands of dollars. A good relationship manager over two or three years can make you so much more money than that. If you had to pay a recruiter, you’d have to pay something like a third of their salary. It’s the cheapest recruiting there is. Plus, you’ve got (the endorsement of) someone who works for you, and you’ve got a better shot at that person being successful.”

Texas Capital hires someone whenever the bank finds someone who is a good fit, and when Texas Capital has an opening, it waits patiently for the right person. It’s better to have employees working harder to make up for an opening than it is to hire the wrong person.

“We know the marketplace,” Jones says. “We know our competitors, and we are talking to people all the time. ... We don’t wait until we need one. People don’t just become available when you need someone. For good people, you have to strike while the iron is hot. If we find five good ones, we’ll hire five. If we find 10, we hire 10. If we find two, we hire two.”

On some occasions, Jones and other senior managers talk to a potential relationship manager for two or three years before they convince the person to join Texas Capital. He says that’s just good recruiting.

“You stay in touch, you continue to talk, you never sever that communication with those people,” Jones says.

Pay plays a part in the recruiting effort, but for most relationship managers, that’s not the sole reason they’re considering changing jobs.

“Typically, these are people who might be frustrated where they are,” Jones says. “They might be in a bureaucratic situation. Most of the people you want are more interested in how they can serve their customer. If they can’t feel they can serve their customer in a timely and effective way, they’ll find somewhere that they can.”

One key part of the compensation package is equity. If the relationship managers perform well, they’re offered equity in Texas Capital Bank, which gives them the chance to be a part owner of the company. Jones says that’s important to help build the entrepreneurial spirit of the bank, another key to growth.

Building an entrepreneurial culture

The most important characteristic Jones looks for in relationship managers, who he regards as the bank’s sales force, is an entrepreneurial spirit. Jones wants to hire relationships managers who want to build their own book of business, and thus, help grow Texas Capital. So he asks new relationship managers to put together a detailed business plan for how they plan to build their own portfolio of business.

“We want them to tell us what they can do with a good entrepreneurial corporate culture behind them, what do they think they can do,” Jones says. “We work with them on a fairly detailed plan. We hold them to it. That’s their road map for the next several years. They have to know they can produce. If they will sign off on that basis, we have a good shot at achieving that plan.”

Relationship managers who successfully build their book of clients can go out and recruit more people to work under them.

“These people want to feel like they are building their own business within our business,” Jones says. “That’s how we create a career path for a number of these relationship managers. When they get to a certain level, we let them go out and recruit people to work for them.”

They are also asked to do something really different than what’s the norm these days: Jones wants them out of their offices, talking with customers, meeting them in person.

“You have to have high-touch service,” Jones says. “You have to understand their needs and execute. You walk down the halls of our offices, and you won’t see many people there. Most people are out with our customers or calling on prospects. I don’t want them in their offices typing e-mails. I want them out seeing people. I want them out recruiting new customers. I want them to be seen in the marketplace.”

Jones thinks the personal relationship built between the bank and its customer is what helps the bank survive tough times.

“Anybody can make them a loan,” Jones says. “Our money is all the same color. It’s our delivery system that’s so important. That relates to high touch. That relates to the trusted adviser role. The more we know about the customer, the more we’re able to help advise them.”

That’s advice that works for any sales relationship, Jones says. “You want your extensions, your relationship managers, your sales personnel to create a relationship with that customer,” Jones says. “When the chips are down, that’s the difference between keeping a customer or not. I know we’re not the cheapest guy in town. I know some of our customers can go to other financial institutions and get a better rate. I don’t think they can get a better relationship.”

Growth comes naturally

While many businesses have grown by acquisition, Jones considers that to be an imperfect method of growth. Texas Capital hasn’t acquired any other financial institutions, instead preferring to build the offices it wants.

“Acquisitions today are extremely expensive in our business,” Jones says. “They are dilutive. It’s very difficult to earn past it. We believe our shareholders are better served if we can organically grow our assets without diluting our tangible capital.”

Acquisitions can also drag a business away from its key focus, something that Jones doesn’t want to do.

“You get loans you don’t necessarily want,” Jones says. “You get relationships you don’t necessarily want. And you get people you don’t necessarily want.”

Texas Capital has 10 locations throughout Texas. The bank chooses locations by the demographics, looking at where businesses are typically located and where potential private clients live before opening an office. Since the relationship managers typically go to the customers, Jones says that’s about the right number, even though it bucks current banking trends.

“That’s very little for a bank our size,” Jones says. “We’ve been able to address our customer needs with the branching network we have.”

Jones sees the future of Texas Capital as vibrant. While the bank has been consistently successful, there’s lots of room for growth.

“We don’t have any more than five percent in any one of our markets,” Jones says. “Somebody else has 95 percent. We have lots of room to grow our business, to attack our competitors, and fortunately, we have big, robust growth markets. The Texas economy is as healthy as any today.”

HOW TO REACH: Texas Capital Bank, (214) 932-6600 or www.texascapitalbank.com

Friday, 26 October 2007 20:00

Power up

Change is difficult. Just ask Sandra Meyer, president of Duke Energy Ohio and Duke Energy Kentucky, who knows firsthand what it’s like to be with a company through big changes.

Meyer was at the corporate headquarters of Duke Energy Corp. in Charlotte, N.C., when company leaders asked her to move to Cincinnati to help merge Cinergy, the $5 billion energy company with about 2,500 employees, into the Duke fold in April 2006.

Everyone, including customers and employees, had to adjust to the company’s new name and to having a corporate headquarters in North Carolina instead of Cincinnati. Meyer would have to assimilate herself to a new city and business community to keep the company thought of as a good corporate citizen — something that was extremely important for Duke’s growth.

“One of the biggest challenges was that we lost corporate headquarters here,” Meyer says. “For community leaders, we had to give them confidence that we were still going to be active in the community and a key contributor to the community.”

But the toughest part of Meyer’s new job was convincing consumers that the rate hikes instituted shortly after the Duke merger had nothing to do with the merger.

Key to managing all the changes Meyer was tasked with has been communication and participation. Meyer has made herself a visible leader of the company, believing that the best executives are the ones that reach out into the community.

The power of communication

Meyer says communication needs to be consistent, clear and frequent, whether it’s with customers or employees. For large groups of people, including employees, written communication works well and gives employees something to refer back to if they want to revisit the message.

“When you have a large employee base, sometimes that’s the only way to reach everybody with a consistent message,” Meyer says. “It’s a way of ensuring all recipients hear the same message. Having a point of reference is good, particularly when you’re talking about initiatives that are important, to use those guidelines as a reference on whether or not their actions are consistent with the message.”

The objective of communication, Meyer says, is to help the audience anticipate and plan for change.

“With all audiences, the objective should be no surprises,”

Meyer says. “Getting out in front of issues is important for both customers and employees so they know what to expect. For customers, we like to provide choices as much as we can, recognizing that not everyone has the same needs.”

For Meyer, one of her early challenges was getting customers to accept the company’s rate increases. Her strategy started with a proactive communication program to help local leaders understand why the rate hikes were needed.

She focused on Duke’s largest customers, the industrial and business users. She saw that as her No. 1 priority, going to many speaking engagements within her first six weeks on the job. She also visited with the editorial boards of newspapers in the Cincinnati area.

All of that communication had one goal: to make sure those in positions of authority were giving correct information to consumers, large and small.

“We wanted to give them the background and prepare them to answer questions that may come in their direction,” Meyer says.

Also, Duke communicated with customers through bill inserts and messages on its Web site to help explain the rate changes. The company also sent separate letters to customers to make sure it didn’t miss anyone.

“I think what helps the most is when you have a proactive communication plan to educate others,” Meyer says.

Communicating the cost drivers and the timing was key to getting customers to accept price increases.

“They may not like it, but they have time to plan around it. ... Some of them have long-term contracts (with their own customers) so they may not have the opportunity to factor in price increases without a lot of lead time.”

The goal of both the business and consumer initiatives is for consumers to believe they are getting a lot for their money.

“What we look at is the value proposition,” Meyer says. “Focus on the value messages. Once it’s been implemented and you’ve gotten through the initial change, you have to move on. You deliver good, reliable service and have positive interactions, and that will win back customers.”

To make sure customers are well-served, Duke implemented a companywide training program called the Desired Customer Experience. During that training, the company focuses on the qualities it wishes to have its employees portray. The list was given to employees as laminated wallet cards to give them something to refer to. The list was: Listen respectfully, offer choices whenever possible, keep customers informed, respond promptly and keep your commitments.

The company also set up a dedicated hot line for employees to call when a friend, neighbor or any customer has a problem and needs help, and that internal phone number is listed on the wallet card, too.

“We gave people a resource,” Meyer says. “It works quite well.”

Buy-in from employees

Managing changes in an organization requires employees to buy in to what the new leadership is doing. For Meyer, she first had to replace some key people on her management team before she could start on the buy-in.

Before Meyer started in the job, Duke had offered a buyout package to reduce its work force by about 15 percent companywide. Three people in Ohio/Kentucky management positions accepted the buyout, so Meyer had to hire three direct reports.

She likes to have each candidate for a job interviewed by four different people within the organization, each of whom is assigned a different area of the candidate’s skills to assess. A candidate’s track record tells a lot of what you need to know about a person’s business acumen; interviews are more about cultural fit, she says.

“If they are not going to fit well, you can’t fix that,” Meyer says.

Meyer typically interviews a person twice before hiring. The second interview is typically more relaxed and has a social element to it, Meyer says, to allow her to get to know the candidate more personally, and allow the candidate to get a feel for the company, and the city they’d live in, if they live out of town.

Meyer says there are two key questions to measuring whether someone is a team player: Tell me about how you solved problems in the past, and tell me about a time when you failed. Both situations help Meyer get a handle on how collaborative a candidate is. Meyer doesn’t hire anyone who comes across as arrogant.

“I look for someone who is respectful of all people in an organization,” Meyer says.

After the staff was hired, Meyer sought to get everyone working together as soon as possible and to get people to buy in to the new directives for the organization.

“We all pulled together pretty quickly,” Meyer says. “I like to work in teams. Communication is the key. We tried to keep everyone updated on what was going on and provide opportunities for people to give input so that they feel part of the plan.”

Within her first month on the job, Meyer pulled all of the company’s managers together in a one-day leadership conference to set goals for the year. About 150 managers were invited to attend the conference.

“That really helped get everybody on the same page,” Meyer says.

A second, follow-up meeting with the most senior managers, about 30 people, was held six months later. Meyer has held the same types of meetings this year, too.

To help the company’s overall employment base get to know the new key executives, Meyer and other company leaders had open forums with employees. The executives talked about the company’s goals and objectives, and then answered questions from employees.

“The results of that were posted on our portal, so whether or not an employee attended, they could have access to that information,” Meyer says.

She also instituted an employee appreciation day that has become an annual event for the company. Duke provided two free tickets for a particular Cincinnati Reds game for each employee, which she says went a long way toward building morale.

“That was very well received,” Meyer says. “We wanted to be sure that the employees here, even though we lost our corporate face, felt that there was a belonging to the community.”

Activities that reward employees for hard work help the company thrive.

“If your employees are not supportive of the company, that is certainly going to bring it down,” Meyer says. “We like our employees to serve as ambassadors of Duke. Having an employee talk ill of the company keeps the company from being successful.”

Another key activity to getting employee buy-in since Meyer arrived has been creating a leadership program for Duke employees called the Leadership Development Network. It’s a voluntary organization that employees can join. The volunteers designed their own program, which meets monthly and has about 250 members. The group mostly invites speakers to present on leadership-related topics, and guest speakers have been from within the company and local community leaders, including the mayor of Cincinnati.

“We have a very healthy and motivated group of folks engaged in that,” Meyer says. “It has enabled a lot of our executives to meet employees they normally wouldn’t run into day to day.”

Just operating the network has been a good development activity for employees.

“It’s run by the employees themselves, so part of the objective is to give them roles within that organization that can give them hands-on development of skills that they may not be able to develop on the job,” Meyer says.

Meyer cautions anyone who wants to develop a similar program to make sure what they want to do is feasible and not too time-intensive.

“Executives can’t always attend as often as you’d like if it meets too frequently,” Meyer says. “Once you’re up and going, what we’re looking at is major events quarterly.”

Giving back

Meyer has made a key part of her job being involved in area chambers of commerce and other economic development organizations. The thinking is, if the area grows, Duke’s business will grow along with it.

“Our business objectives and their business objectives are very well aligned,” Meyer says. “Certainly a focus for us is economic development, given the fact that we have a confined territory. A chamber obviously is a conduit to the business community and to economic development, as well.”

Making good on community commitments was important to Duke’s standing in the area. “Anything that was committed, we continued with,” Meyer says.

But for the future, Meyer and her team developed core areas of focus that will allow the company to make the biggest impact with the company’s charitable budget. The company will focus on environment and energy efficiency, economic development, and community vitality. Duke created a brochure that shows how much money was designated for each of these causes and where it was spent.

“We provided that to the nonprofit agencies in our territory so that they will have a good sense of how we can match our objectives with their objectives,” Meyer says.

Duke has a companywide Global Service Event in April and May that encourages hands-on volunteerism. The company’s employees provided the sweat equity for 150 projects throughout the Duke territory in Kentucky and Ohio. Meyer herself went to the site of an elementary school to assist with an improvement effort there.

Her parting comments about that project sum up her best advice about managing a company and her philosophy that has led Duke to its prominence in the local communities it serves: “Never ask someone to do something you aren’t willing to do yourself,” Meyer says. “Lead by example.”

HOW TO REACH: Duke Energy Corp., (513) 421-9500, www.duke-energy.com

Thursday, 27 September 2007 20:00

10 steps forward

If you ask Lynn Blodgett what the secret to growth is, he’ll tell you it’s an entrepreneurial culture.

 

Blodgett, president and CEO of Affiliated Computer Services Inc., has been with the company for 11 years, and in that time, he’s watched revenue grow from $650 million in 1996 to $5.8 billion for fiscal 2007, and he credits that success to an entrepreneurial spirit.

“The company has always done very well at maintaining a truly entrepreneurial culture,” Blodgett says. “It’s this idea of giving people responsibility and giving them authority and holding them accountable, and then expecting a lot. ... ACS is an entrepreneurial, results-oriented and ‘high reward for high results’ company. It lets you bring in people who think the same way.”

ACS handles primarily business process outsourcing, including human resources paperwork, medical claims and other similar back-office tasks, along with information technology outsourcing, and the company employs some 58,000 people around the globe.

Being an entrepreneur himself, Blodgett says much of the entrepreneurial spirit boils down to gut feeling. He looks for people who have that same solid judgment who can help lead ACS to continued growth. He plans to lead ACS to $10 billion in run-rate revenue by 2010. [Run rate is multiplying the current quarter’s revenue by four to determine an estimated annual revenue.]

“To be successful at ACS, you have to be able to judge, based on the facts available and not overdo it,” Blodgett says. “We have a saying, ‘If we go 10 steps forward, and three steps back, we’re still seven ahead.’ That encourages risk. It’s not so scary to say, ‘I don’t have every ounce of data here. I could spend another six months looking at this, but my gut says this.’ As long as people know that they can make 10 steps forward and three back and still be ahead, it encourages people to be more risk-oriented, which is a key to entrepreneurialism.”

The company’s entrepreneurial culture hinges on three key things. First is the way ACS pays people, which rewards productivity. Second is keeping the company open to new ideas and culling the best ideas from its employees. Third is acquiring other companies, which gives the company the growth it seeks and also brings a fresh crop of free-thinking entrepreneurs to keep the company innovating in new ways.

“I’m constantly amazed at the things that people can do if you motivate them correctly,” Blodgett says. “Making people feel like they have ownership of what they’re doing is a big part of the entrepreneurial culture.”

Paying for performance

Blodgett says pay isn’t the most important factor in determining job satisfaction for most employees, but it is a strong one. The right pay — and paying appropriately for performance — encourages people to continue stretching, reaching and challenging themselves.

“The money part has to be right, or most people will not reach their apex,” Blodgett says. “They won’t do as well as they could do if you don’t have the pay part properly aligned.”

ACS pays its top 500 employees below market rates for salaries but gives bonuses that are above the standard in the industry. Bonuses are based on how their unit does, whether or not they are meeting their individual goals and how the company performs overall. Blodgett adopts this method for those in top-tier management positions.

“These are people who are running profit and loss centers or people who are supporting those who run profit and loss centers,” Blodgett says.

For production-level employees, ACS is fanatical about measuring productivity through software programs and compensates people directly for what they really do, versus what they are expected to do.

Blodgett says strong performers who work fast and well make more money; less productive workers tend to leave the company. Folks who Google away the day generally don’t last. Blodgett declined to be specific about how the employees are paid because he considers it proprietary and one of the company’s key secrets to keeping its employees.

“The principle of this idea is know how to measure what people do, and if they are more effective at what they do, reward them for their performance,” he says.

Cultivating great ideas

Beyond productivity, great ideas are another thing that ACS rewards, and Blodgett makes a point of trying to gather up all of the ideas he can from employees.

He strives to keep ACS humble enough to recognize other good practices, instead of stubbornly clinging to the things it’s always done.

For example, when ACS acquired Unibase, ACS leaders looked at some of the practices Unibase had and adopted them. Tracking production-level employees and rewarding them for good work is one of those things that ACS adopted from Unibase.

“The culture continues to get better because we’re open to adopting and incorporating things we see in individuals from the outside or from companies we acquire,” Blodgett says.

The company also has “Spot” awards, which are given by the ACS Continuous Optimization Initiative, which is the company’s cost-saving effort. Employees can submit an idea, with any corresponding documentation, and if it is implemented, the employee gets a portion of the savings for the company.

“We have paid out through that program hundreds of thousands of dollars this year,” Blodgett says. “It’s not just lip service. When people come up with something and it helps us, we don’t want to be piggish about it.”

ACS senior leadership gets e-mails virtually every day that tell them about an employee who suggested an idea, what the idea was, and congratulating and recognizing the employee for his or her contribution to the company. That recognition is helpful in ensuring that more suggestions come in.

“We make it a big deal and say it really helps us,” Blodgett says. ACS also has a leadership conference call with its most senior 1,000 employees once a month. One element of that leadership call is asking those 1,000 people to answer 10 direct questions about a very specific issue in the company. A second element is allowing time for employees to give solutions and input for solving some of the company’s problems, all tied to the main issue.

“Today, we conducted an online survey, and we collected from 1,000 people, 10 answers to 10 direct questions,” Blodgett says. “Then we took questions and answers from people. We were able to see what people were thinking at that time.”

The results of that leadership call and corresponding survey are used as the basis for the quarterly training call, in which ACS provides training to that same group of 1,000 and shares some of the solutions provided by its own employees.

“You have to open up the channel to talk,” Blodgett says. “It’s them talking and you listening, and sometimes you talking. It’s not all just, ‘Tell us all of your great ideas.’ There has to be a balance of listening and talking.”

When it comes time to executing new programs and ideas, Blodgett says managers are made to understand that the company is open to ideas that help the company operate more efficiently and grow. He tries to strike a balance between making the employee feel he or she is responsible for the success of the idea and making sure he or she understands that sometimes, not everything works. He’s OK with failure, so long as the process was followed.

“If the company says this is a great idea, and it’s worth us taking a shot at it, and it’s done and done appropriately, and people are informed, and it’s not some Wild, Wild West thing where someone is violating our approval process, we won’t go and fire people if it doesn’t work,” Blodgett says. “That’s not our culture. If someone does something dishonest, we will fire people. But we can’t encourage people to take risk and then terminate them because it didn’t work.”

Acquiring knowledge

ACS regularly acquires other companies and often gains valuable staff through those acquisitions. Blodgett particularly likes to keep on board those who started the company that ACS is acquiring because they are entrepreneurs, and they think in innovative ways.

Blodgett himself joined ACS as part of the Unibase acquisition. For those without a business start-up background, Blodgett looks at a person’s employment track record. He looks for someone who has been able to successfully grow a business.

“Growth is very important to us,” Blodgett says.

Those who are not entrepreneurial in spirit can have a place at ACS. The members of the audit team, for example, are not entrepreneurial, nor should they be. In some positions, skill level is more important.

Blodgett says ACS examines companies closely before making a buyout. He and other senior managers spend lots of time with the company and its leaders. ACS also tries to take emotion out of the process by looking at as much data about the company as possible.

“What it really comes down to is the company spends the time necessary with a company before we acquire them,” Blodgett says. “We are rabid about our diligence process. We don’t get deal fever and forget to do our homework.”

An entrepreneurial culture is how ACS came to be what it is today and continuing to nurture that spirit will be what brings ACS to continued growth and success. Blodgett says continuing to look for opportunities and growing the company’s own team will be keys to getting to $10 billion in revenue by 2010.

“A great entrepreneur knows how to do all of that,” Blodgett says. “They know how to get people onto their team. They know how to get unbelievable results. A great entrepreneur knows how to get great results out of their team. ACS’ entrepreneurial culture will be the fuel that will drive the ACS ship.”

HOW TO REACH: www.acs-inc.com 

Thursday, 26 July 2007 20:00

Open architecture

Peter Beck was intimately familiar with the company his grandfather founded when he took the helm in 1991.

The Beck Group, a general contracting firm, had a strong reputation and had done great work to build the team concept of working well with clients. But it had problems — some big ones. Beck, who had worked at the company since 1978, knew the company needed to change, and fast.

“There were years when we lost money,” says Beck, managing director and CEO.

So Beck gathered up the company’s 15 senior leaders for a retreat, getting as far away from the daily problems of the office as possible, so the team could really see the big picture.

“We spent a lot of time talking at that meeting about where business was, who our customers were, our type of product and how to rethink our business model, and how we were going to have to do things differently,” Beck says.

At that retreat, Beck and his fellow leaders began to identify the problems. The company needed to diversify its customer base, as 80 percent of its work had come from developers who, because of a downturn in the economy, were no longer sending the volume of work the company needed.

They determined the company’s management style was too hierarchical, making it difficult to tap into suggestions and innovative ideas from the entire spectrum of employees.

Beck says it didn’t match his leadership style, either. “My style has historically been much more believing in diversity of thought and sharing responsibility and holding people accountable, and recognizing that at the end of the day, if there is a controversial decision, that decision needs to be made, and typically by me, but not before listening to what everyone thinks,” Beck says.

Another looming problem was that several of the company’s construction jobs were taking up much of the company’s time, money and energy. Some jobs were even wrapped up in litigation.

The company also wasn’t as sophisticated as it could be in its use of technology, sometimes working up estimates for large-scale jobs on one sheet or even on the back of an envelope.

So Beck and other company leaders began to figure out how to change the company to make it one that could capture the business it needed to survive.

Handling litigation

The litigation that The Beck Group was involved in was draining the company’s resources and sapping its morale, Beck says, so he wanted to tackle that first. Beck and other senior managers assigned one person in the company to work on resolving each specific case, working with attorneys and others involved to figure out what the central issues were and how they could be solved, and an emphasis was placed on doing so quickly.

Beck says litigation is draining, both in terms of resources and money, and should be avoided at almost any cost. Rather than going to court, he suggests finding other ways to satisfy a customer who isn’t happy and to fix the problems.

Litigation damages a company’s reputation and burns customers, and The Beck Group needed repeat business to survive.

“You have to step up and take your medicine like everyone else and not get crossways with a customer,” Beck says. “Since then, we’ve had little litigation.”

Increased and more frequent communication between the company and its clients and instituting a Total Quality Management program have helped the company avoid further litigation. TQM came to The Beck Group after a customer introduced it to the firm’s senior management. That helped the company identify potential problems early on, staving off litigation or other costly problems.

The company also instituted a customer rating program in which every client is invited to rate the company in several categories after a job is complete. It tracks the ratings by office and by manager. If company leaders see a score in the 70s or lower, someone from the organization works with the customer and with the manager to figure out what went wrong and how to do better next time. Beck says that the company’s average score was 91 percent last year.

Changing hierarchy

Creating an organization that was open to change meant suggestions had to start from the top down. Beck changed all 12 of the senior management positions to managing director titles and gave each an ownership stake in the company. Clients always want to deal with an owner, and that allows them to do so. The ownership distribution also is crucial to the company’s succession planning.

In the ownership change, The Beck Group purposely avoided a plan that compensated employees based on how well their particular division was doing because Beck wants each of them to think about the good of the company overall, rather than just the success of their own divisions, and to also help each other when need be.

“It reinforces the willingness of people to share resources,” Beck says. “Good people are intrinsically competitive to start with, if for no other reason than for their self-esteem. ... You are better off having a team that is devoted to mutual success, which requires a little bit more consensus and less top-down. ... I remember one year we sourced more work for our Dallas office from Atlanta than we did from Dallas. That’s the kind of activity we strive for.”

The company has continued to develop its leadership by requiring every employee who receives a paycheck to take 40 hours of training annually through its Beck University. It provides internal and external classes in both technical skills and soft skills. Beyond some required classes, employees are encouraged to take classes in a variety of disciplines.

“We consider all of that equally important,” Beck says. “Our future very much rests in their hands.”

Diversification

Beck also knew the company needed to diversify, both in terms of the kinds of clients it had and in the types of services it offered. Developers had long been the company’s bread and butter, providing some 80 percent of the company’s work in the late 1980s. But that work dried up in the early 1990s as developers faced a downturn in the economy and changes in tax laws that made their work more difficult.

“Success begets failure sometimes,” Beck says. “You get so good at doing one thing that you don’t look to do anything else.”

The company needed to find a new source of income. It had offices throughout the country, and each was given the freedom to pursue the work that was abundant in its own territory. In Florida, there were plenty of opportunities for building elementary, middle and high schools, so in that state, The Beck Group went after that business. The company also pursued corporate business and became less afraid to tackle unusual projects, such as building the Texas Motor Speedway in Fort Worth.

The Beck Group had long been a general contractor and wanted to add architectural services. At first, the company tried to hire architects, and that simply didn’t work because the architects felt isolated in the large company. The company also tried to partner with an architecture firm for some projects, which wasn’t successful either.

In 1999, The Beck Group merged with an architecture firm in Dallas. Paying close attention to the firm’s culture made that merger work as The Beck Group’s executives extensively studied how the architecture firm operated before going forward with the merger.

“We were remarkably alike, culturally,” Beck says. “But there were a couple of areas in which we were very different. So we set up teams from both firms to identify ways to overcome those differences. We worked hard on the social aspects of the merger.”

Beck chose to create a special studio in which people from both firms worked together for about three years to get to know each other. Ultimately, the firm was brought into The Beck Group’s offices entirely, but that time together helped the new employees integrate more easily and, ultimately, produce better, stronger work.

Creating technology

Beck and other senior management also wanted to find ways to upgrade the company’s technology, at least partially, to help the company provide more accurate cost estimates for projects.

“I remember distinctly that we had a pretty good argument at a leadership meeting between those who felt we could pretty accurately project the cost of a building on the back of an envelope,” Beck says. “They really strongly believed that. Some others of us said no way. It may sound like we do. We did it for many years, but we weren’t nearly as accurate as we’d like to think we were.”

That discussion prompted Beck to look at other types of companies and their operations, and to look at how others, even in vastly different industries, created cost estimates for projects. Beck looked specifically at car manufacturers and discovered that creating a prototype for a car is very similar to creating a building. He also saw other things he liked.

“They were integrated across key disciplines, like design, engineering and manufacturing,” Beck says. “They were also teaming with suppliers in ways they had not done before. ... A number of us looked at a number of technologies out there, here and in Europe. ... We acquired a license to a program we thought was applicable, and they sold the technology, and the applications people came and joined us.”

Beck developed the technology his own firm needed, and now, through a separate division, is licensing it and selling it to other general contractors and architecture firms. He expects to see a return on the company’s investment through selling the software it developed and by producing better estimates and models for its clients.

“It’s allowed us to model at a high level, to be able to design, engineer and price projects at a very early stage and with a much higher degree of accuracy than we could ever do on paper or even with a computer,” Beck says.

The initiatives Beck and his team put in place have helped the company grow to $750 million in revenue in 2006, but the work isn’t completely done.

As Beck sees it, The Beck Group is still on its journey. Though the company is profitable and has accomplished many of its big goals, there is still work to be done. Keeping an eye out for the latest innovations and how to implement them within the company are keys to continuing the company’s good work.

“We are still on a journey that will take many years to realize some of the benefits we’re seeking,” Beck says. “One of our key strategies is to marry our customers. That customer that you know the best is going to be the one who is most likely to innovate with you. No customer wants to innovate with someone new.”

HOW TO REACH: The Beck Group, (214) 303-6200 or www.beckgroup.com

Wednesday, 28 February 2007 19:00

Exhibiting growth

Don Freeman’s company started to feel the effects

of an economic downturn back in 2000, and the

events of Sept. 11, 2001, only exacerbated the

problem.

Freeman, CEO of Dallas-based Freeman, had to re-evaluate everything the company did. Its bread-and-butter in

2001 was producing trade shows and creating exhibits for

firms renting booth space at events, but the terrorist

attacks forced the company to re-examine everything.

Revenue dropped between 7 and 8 percent the next year,

and there were no signs the market would recover any

time soon.

“It really got our attention,” Freeman says. “We had to

get serious about our budget costs and keeping costs

down.”

Freeman knew the company needed to cut costs and

rebrand itself if it were going to survive in a rapidly changing market.

Cutting costs

The first objective was to make sure the company stayed

profitable, so Freeman turned to his employees to help

him make budget cuts. He formed focus groups, both at

the corporate level and in individual offices across the

country, to brainstorm what cuts could be made.

He gave much of the responsibility of meeting departmental budgets to the department heads, telling them they

were in charge of meeting a new budget with lower spending projections, and they could figure out how to make

cuts.

Employees were quick to spot waste, and Freeman

found himself agreeing with nearly every change they

wanted to make. Much of the waste was a result of the

company’s headier times, when revenue was flush, an

easy mistake for any company to make.

“We had gotten loose on a lot of things,” Freeman says.

“We had car allowances, but we had also given people gas

cards. So, not only were they getting the car allowances,

which was supposed to take care of their fuel, but people

were using those to buy gas for things other than business

reasons. We had to go back and look at a lot of those

things where we had gotten loose. They were cutbacks,

but things we should have been doing anyway.

“We also made people a lot more conscious of their

entertainment expenses for clients. We cut back on

Christmas presents that we had traditionally done for

clients.”

Because the company has an Employee Stock

Ownership Plan, it was easier to get employees to hunt for

ways to meet the budget. If the company prospers, so do

its employees, creating a reward for honesty.

“People are pretty conscious about that,” Freeman says.

“There is a bit of peer pressure among our people.”

Freeman found other savings after examining the marketing budget. He evaluated sponsorship and advertising

opportunities by what the company got out of them. Did

Freeman get a new client by sponsoring a particular show?

Did any new business come from the advertising it had

done in the past? If the answer was no, then Freeman wasn’t likely to do those things again.

Staff also needed to be reduced, and Freeman left many

of those decisions up to the department heads and branch

managers. It was the only layoff in the company’s history,

and while it was painful, it was necessary to move forward.

He set a deadline for the layoffs to occur and made sure

they happened by that date.

“I left it up to them,” Freeman says. “I told

them, ‘You have to get down to this number. You have to make the decision as to

how you are going to get there.’”

Freeman says he learned an important

lesson during this time: Job cuts are better

than salary cuts. He discovered this

because employees in one Freeman field

office all took pay cuts rather than eliminating anyone’s job because they didn’t

want to lose anyone.

But months after that decision, the staff

of that office felt discouraged and unhappy

that they were being paid less than before

and began to resent the decision.

“People were not happy with the fact that

they were making less money,” Freeman

says. “Initially, it was all for one and one for

all. Then people began looking at their

withholding statements and realized, ‘Hey,

I made less money this year than I did the

year before.’ It’s just better to keep the people we have happy.”

Cost-cutting has to start at the top.

Freeman looked at what he was costing

the company and made cuts there as well

to help the company meet its budget and

set the example.

“There were some memberships in a

health club, for instance, that the company

for years and years and years had paid, and

I thought, this just isn’t necessary,” Freeman

says. “If I want to go to the health club, it

ought to be my responsibility. There are little things that I think I’ve always done.

“If we have a party at my house and we

need some tables and chairs out there, I

have them write an invoice and I pay the

cost. I don’t just tell them to run out there

with a truck and deliver some tables. It’s a

philosophy I’ve always had.”

Rebranding

After cutting costs and trimming staff,

Freeman needed a way to grow again, and

it started with trying to find ways to capture different kinds of business. Freeman

wanted the company to have a more

diverse array of services and a wider variety of clients.

Top management went through a strategic planning session to set a new course.

“I always felt like you do your budgets

from year to year and try to do better,”

Freeman says. “But we went through a

strategic planning session and we realized

we (could do more work) for the corporate

market, sales meetings, shareholder meetings, usergroups and things of that nature.

We felt like there was a tremendous

growth opportunity in that area. So we decided to pursue that area more aggressively.”

To position the company to attract new

corporate business, Freeman had to reexamine its customer service. As Freeman

saw it, the company’s best prospects for

more corporate business were the many

exhibitors from trade shows —- people

who knew the company’s name and might

have a need for its services.

Freeman executives commissioned a survey of 15,000 exhibitors from a wide variety of trade shows held all over the country

to give them feedback about the perceptions of the company.

The survey told them that some companies had a negative view of Freeman, mostly because it was the sole company the

vendor could rent certain things, such as

chairs, tables and electrical hookups, from

at an event. Freeman compares the idea to

buying a hot dog at a baseball park: There

is one vendor to buy from, and whether or

not it’s warranted, the perception is that

the hot dog is overpriced.

The idea, then, is to make sure exhibitors

believe they are getting exceptional value

and great service from his company at

trade shows.

“People tend to accept prices if they are

getting good service and people are friendly and they feel that their business is appreciated,” Freeman says. “I don’t think any of

our people got to the point that they

weren’t friendly, but we did have service

errors that were not acceptable. We were

able to track when we had service errors at

a show site back at the corporate office,

and we could tell at a particular event if we

had a lot of people going back to the service desk saying, ‘We’re missing a chair,

we’re missing a table,’ that sort of thing.

“We started measuring those and getting

feedback from people.”

To serve as a reminder of the company’s

new customer-focused attitude, Freeman

also introduced a customer service slogan

to help employees remember their mission:

“Do it right, first time, every time.” He also

reintroduced the idea of an inventory check

for every booth the night before a show

starts, and every day during the show.

“It was just basics I thought we had

always done,” Freeman says. “I guess we

got away from some of those things. It was

that type of thing more than any brand new

ideas like putting candy on the service

desk.

“That’s nice, but I think people would

rather have their chairs in their booth

rather than a piece of candy.”

Freeman brought in a new head of corporate sales and more salespeople to help get

the word out about the company’s services.

“We’ve had great success,” Freeman says.

“We’ve had some tremendous increases in

revenue in that corporate account area.”

Another change was to change the company’s name. Since its inception in 1927, it

had been called Freeman Decorating Co.

Freeman hired a consulting firm to study

how the name should change and what it

should be.

That firm started by interviewing

Freeman’s staff, getting to know the culture and how the company operated. The

consultants recommended doing away

with the various logos for different

Freeman divisions or branches, as some

were taking the initiative to create a new

logo or theme for different offices.

“We were confusing people more than

identifying what we did,” Freeman says.

The result was a rebranding of the company simply as “Freeman” to broaden its

appeal and allow it to market beyond decorating booths for trade shows. The

change was made official in 2003 and made

definitive with a new Web site and marketing materials, and by executives visiting

every Freeman office to explain the

changes.

All the strategic changes have paid off. The

company has 350,000 clients and produces

3,800 expositions each year and 102 of the

200 largest trade shows in the United States.

It has 70 offices in 41 North American cities

and 3,800 full-time employees.

Revenue for fiscal 2006 was $1.17 billion, a

13 percent increase over fiscal year 2005.

“I think we’re considered the premier

exhibition service company in North

America, without a doubt,” Freeman says.

“We are more and more getting an image

and reputation of being a creative company. It’s interesting how even trade associations and professional associations are

more brand-conscious. Every business is in

a competitive situation today. ... Even nonprofits are becoming much more conscious of branding their organization and

their events.

“That’s where we really shine. Our experience with the corporate market is much

more brand-sensitive. ... Our ability to

respond with that brand awareness and

being able to create events that enhance that

brand awareness, that’s what sets us apart.”

HOW TO REACH: Freeman, (800) 453-9228 or

www.freemanco.com

Tuesday, 19 September 2006 20:00

Up to par

 History, says ClubCorp president and CEO John Beckert, is both a blessing and a curse.

In its nearly half-century of history, ClubCorp has established its brand name as an industry leader. Its properties are household names and landmarks, including Pinehurst Country Club, Firestone Country Club and The Homestead resort.

But that history also can be a curse. For companies with 50 years of history, there’s five decades of “But we’ve always done it this way” excuses and broad blinders that block clear vision of problems.

When Beckert came on board in 2002, membership at its clubs was dropping, and revenue was slipping. It was clear that something needed to be done, but what, exactly, was up for debate.

“Everyone understood that things weren’t going well,” Beckert says. “The trends weren’t good. The condition of the clubs no one was pleased with. ... We spent all of our time deciding what we were going to do to react to the problem.”

ClubCorp is a 49-year-old company that both owns and manages different types of clubs, including business, golf and country clubs, as well as resorts. When Beckert joined the company, it owned or operated 210 properties. Today, ClubCorp owns or operates 166 properties.

While the number of clubs ClubCorp owns or operates has decreased, its revenue has steadily increased, from $991 million in 2002 to slightly more than $1 billion in 2005. The clubs have a combined 180,000 members and 18,000 employees.

Like many businesses, ClubCorp struggled after the terrorist attacks of Sept. 11. The economic recession after the attacks forced many Americans to re-evaluate not only their budgets but also their travel plans, and therein Beckert saw opportunity.

If clubs were welcoming and safe, they’d be an extension of home for members, but with amenities such as golf and pools that many had come to enjoy on vacations. That was a tall order for the company at that time, as some clubs needed updating and others had suffered from deferred maintenance.

Beckert’s mission was to sort through the clubs, deciding which to sell and which to keep. And since the company was cutting the number of clubs, it also needed to reduce employment levels at its home office.

Beckert was also tasked with renovating the clubs that were left to create a warm, welcoming environment that would bring members back year after year.

Evaluating the company
With a hefty to-do list, Beckert started by assessing some of the company’s clubs first-hand.

Seeing the clubs gave him a feel for what renovations needed to be done and an opportunity to meet with a club’s managers. If he were going to change the company, he’d need the managers’ buy-in, and it would be easier to get their support if he got to know them and their needs.

“I would sit down with the company’s top managers, and with a notepad, and introduce myself and give a little background on the company and then just listen,” Beckert says. “Through that process of listening, I was able to quickly get a handle on where the priorities and the needs were. The first week, I was here for five days, and two of those five days I spent touring clubs in Dallas. It was very different from what had been the norm and had been the culture.”

Managers were unflinching in their advice for Beckert and their critiques of the company. One manager said he could either answer every e-mail from the corporate office quickly, or he could be out visiting with members and making sales calls — but he couldn’t do both.

Beckert knew the right answer was visiting with customers and making sales calls, both of which would help grow the company.

“There were certainly a couple of recurring themes, that they needed better communication, they needed more capital to improve their clubs,” Beckert says. “It was interesting. They kept saying, ‘There has been this big push from the home office to grow the company [through acquiring clubs], but we think the biggest growth opportunity is to reinvest in what we have and make it better and let me grow my membership,’ which ultimately became the primary plan for the next three or four years.”

Beckert agreed with the managers. He wanted to see ClubCorp reinvest in its own clubs by addressing maintenance issues on buildings and golf courses. Clubs and courses had to be well-maintained and welcoming to bring members back year after year.

Members paying dues were the most important revenue stream, and ClubCorp had to protect it. Deferred maintenance was no longer an option.

“What had changed dramatically was that the competition had changed,” Beckert says.

There was simply more of it.

“If we were not reinvesting and maintaining our properties, golf courses and dining rooms, we weren’t going to be competitive,” he says. “We would not be successful.”

Beckert still visits a club at least once a week and encourages his staff in Dallas to do likewise. Rather than ordering in lunch to eat at their desks, Beckert encourages senior managers to eat at one of ClubCorp’s Dallas clubs, which takes roughly 20 more minutes out of the day than eating at their desks. doing so keeps the company’s finger on the pulse of the clubs.

“Every time you think things are going really well, you are sitting in the office too much,” Beckert says. “You see some really good things, you see some employees doing phenomenal things, but you also see carpet that is more worn than you thought it was.”

Home office help
To give club managers the support they needed to grow the clubs, Beckert changed much about the way the home office operated. No one from the home office may send out a mass e-mail to all clubs without approval from Beckert or another top-level manager, which keeps the amount of e-mail down.

Beckert also started communicating directly with club management in regular e-mail updates, roughly every month, and with a quarterly conference call, informing them of financial performance and ongoing projects. Beckert even changed the name of the corporate office to “home office” to make it seem friendlier and more helpful.

And to help him keep tabs on interactions between home office and club employees, club managers receive an evaluation form every quarter and are asked for their feedback on interactions they’ve had with home office employees. About 85 percent of surveys are completed and returned, and if a negative comment is received, home office managers call the club to discuss it.

“My vision for this is that someday the lines of communication become so open and so frequent that you don’t need to do this,” Beckert says. “I don’t think we are any different than any reasonably large organization that it’s easy for people in the field feel like that the home office is more of an obstacle than a level of support.”

Slimming down
To raise capital for those all-important improvements, ClubCorp sold some clubs, and among Beckert’s biggest tasks was deciding which to sell and which to keep.

Most public golf courses, with few exceptions, were sold, as that simply didn’t fit the strategy. ClubCorp kept only those that were exceptionally profitable or in good regions for the company.

Then Beckert began evaluating the remaining clubs, examining each club’s bottom line, and its potential, before making a decision.

“We weren’t overly focused on whether it was producing positive cash flow today or not,” Beckert says. “Was it in a position to maintain or get better, and if it wasn’t, why wasn’t it? If it wasn’t trending to do better, if we spent capital, such as reinvesting in the golf course or rebuilding the club house, could that happen?

“A lot of it had to do with the local market we were in or our geographic presence.”

Getting employees to go along with his plans wasn’t always easy, Beckert says, especially with the job cuts, which were painful for the company. Beckert says constant communication is the key to helping employees accept drastic changes. About one-third of the staff in the home office was let go, which made the company more profitable.

Getting buy-in from employees is preferable, but sometimes, employees cannot be convinced.

“Ultimately, if they didn’t buy in, they left,” Beckert says. “That’s not my M.O., and it’s not something I’m proud of or overly focused on, but I spent a lot of time listening and a lot of time communicating. I simply said, ‘Thanks for the input. Here’s what we’re going to do. If you don’t like it or don’t understand it, come back and talk to me about it.’

“I did a lot of talking. Then, it was, ‘If you don’t like it, leave. If you can’t buy in to it, you ought to move on.’ If you do a good job of that, then I think most people will self-select out and choose to leave.”

Beckert’s advice for anyone going through difficult changes is to pull the trigger quickly. Make decisions and execute so you can realize the benefits sooner.

“In retrospect, some of the tougher decisions, especially around some of the people or organizations and some of our divisions, had we done it sooner, we would have gotten the benefit of the change sooner and a more stabilizing impact on the partners,” Beckert says.

The next step in the organization’s growth will come with a partnership. ClubCorp’s board of directors announced in May it had engaged Goldman Sachs to advise it on a strategy going forward, which could include a sale.

Beckert would like to see ClubCorp realize a great benefit from the sale: a new owner willing to take more risks, which could include more properties and more capital investments. That, in turn, would offer members of ClubCorp clubs more options when they travel, as they can buy an upgraded membership that allows them to visit other clubs.

Beckert sees that as possibly being a key growth mechanism for the company.

“We may well find a new owner and a new partner who is interested in taking more risks,” Beckert says. “When one has all of one’s wealth in one investment, it would be prudent not to be taking a lot of risks. If we have a new owner that has many kinds of investments in many companies in many segments of industry, they will be much more inclined to take risks.

“A new owner could bring with them expanded offerings that would make the clubs even more attractive.”

How to reach: ClubCorp, www.clubcorp.com

Tuesday, 25 April 2006 05:30

The Karol file

Born: Boston

Education: University of Pennsylvania, bachelor of science degree, economics, 1980

What is the biggest business challenge you’ve faced?
Throughout my career, I’ve always gone to companies that were somewhat adrift and tried to find a way to give them a purpose, make them profitable and not run out of money. Most of my career, I’ve been able to do that, but it’s not always easy

Bankers and other people don’t have a lot of patience. I would say doing that and getting the employees excited to work there and focused on a worthwhile strategy is a big challenge.

What is the most important business lesson you’ve learned?
Treat everybody with respect and get people to want to do business with you, whether it’s your employees, vendors or customers. You do that by creating a win-win. Treat the employees fairly. You have to provide profit opportunities for customers.

Everybody has to get a fair return for their investment with you. You cannot win at someone else’s expense.

What’s the best work advice you’ve ever been given?
You’ve got to go to bat for people. If you want people to be honest with you, they have to feel safe in doing that. They have to know that if they make a mistake, that you will stand up for them.

What do you read to keep current?
I try to look for good ideas everywhere. That’s what business is all about. At the same time, I don’t believe in chasing fads. You’re always looking for something that might provide clarity.

Wednesday, 22 March 2006 11:55

The Mason file

Born: Pittsburgh

Education: Bachelor of science degree, consumer-related studies, Penn State

What has been your biggest business challenge?
The biggest challenge I’ve ever faced was just coming into Tuesday Morning in a new market and picking up and moving to Dallas and coming into a new organization with all new people, where I had not grown up in the organization. There were pressures on the business. I had to work with everyone and get the team together and get it pointed in the right direction.

What’s the most important business lesson you’ve learned?
You have to keep your eye on the prize and understand what your goals are and stay focused on what those goals are.

What business-related material have you read recently?
I love periodicals. I keep a raft of trade papers and business books. I’m a skimmer rather than a true reader. I just finished ‘Freakonomics’ (by Steven D. Levitt and Stephen J. Dubner). I thought it was fantastic.

Economics is at the root of just about everything. It can be highly misinterpreted. You really have to pay attention to what statistics are telling you and not overinterpret but understand what the numbers are saying.

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