“In the 1990s, China was exporting excess oil,” says John Barnes, chairman and CEO of B&R Energy. “In the past two years, however, it has passed Japan in imports, generally, and as an oil importer is second only to the U.S.”
Smart Business asked Barnes about China’s increasing appetite for oil, the current global outlook, and what U.S. consumers should be thinking about.
What does China have to do with the price of oil?
The most obvious answer is that economic growth takes energy, and China’s economy is growing. According to EIA records, China’s real gross domestic product (GDP) is estimated to have grown at 9.9 percent in 2005, down slightly from the 2004 rate of 10.1 percent. Economic forecasts remain strong for China, with real GDP expected to increase 9.9 percent in 2006.
Since most of that growth is low tech, the Chinese need more energy to manufacture more and, in turn, to run an economy that is picking up speed. Look at its size and population. In particular, consider China’s rising middle class isbuying and using more personal vehicles.
Ten years ago, China used less fuel than it produced and was exporting the excess. Now it can’t meet its own demand. As the world’s oil demand catches up with worldwide oil availability, price rationing is inevitable. When prices climb too high, marginal users cut back and, in effect, rebalance supply and demand.
In the end, however, it is a seller’s market and the speculators will continue to drive prices upward as demand exceeds new discovery and production.
Do you believe China’s energy needs will continue to rise or level off?
Let’s look at that conservatively. Say the current need is 2 million barrels of oil a day and annual growth continues at 10 percent. Next year, China will require 2.2 million barrels a day. A year later, demand exceeds 2.4 million. In five years, China needs will be in excess of 3 million barrels of oil a year, 50 percent more than the current intake.
Now think vehicles. North America has 932 cars for every 1,000 people. China has four cars for every 1,000 people. But for every vehicle added per 1,000, China needs 500,000 more barrels of oil.
Finally, factor in the economic growth in India, the U.S., and other reaches of the globe. Clearly, for the foreseeable future, the globe has no excess oil.
But isn’t there more to all this than the price of oil?
Yes, there is a lot more. Steel prices, cement prices, copper prices almost every commodity’s trend is aimed at the heavens. What’s more, the cost of fuel hides myriad other costs; hydrocarbons for plastics become more expensive, and everything that requires shipment by a hydrocarbon-fueled vehicle will simply cost more. Differentials will continue to grow. The price of some consumable goods may drop from time to time, but it won’t be because there is a dip in demand or price of energy.
What can or should U.S. consumers be doing?
First, we must support policies to increase and improve U.S oil production. We must tap known oil fields, where it already takes four to five years from the time we break dirt to when production begins. And we need to have started that yesterday.
Meantime, we need alternative sources to maximize our supply alternatives that make money sense. We also need to look at alternative ways to produce energy. While we explore for oil with what we know today, let’s exploit available technology to research and develop entirely new ways to find more oil.
China is building 30 nuclear generators to expand growth, not to mitigate it, while the U.S. has not brought a new nuclear plant online since May 1996. Only three valid construction permits remain, and construction has been halted on all of them.
All that said, at every turn, we must look for ways to conserve both to save on the cost of fuel and to decrease our need for it. And again, we need to start yesterday.
JOHN BARNES is Chairman and CEO of B&R Energy. Reach him at (214) 445-6808 or john_barnes@BandREnergy.com.
Hire and empower.
First and foremost, I like really intelligent people. Personality is really important, don’t get me wrong, but brains can’t be beat.
Intelligence is really important in business. It isn’t just raw intellectual capability, it’s the ability to understand problems, read other people and juggle 9,000 things.
Hire good people, give them responsibility and then let it go. They know that I won’t throw them under the bus if things go wrong. Everybody handles it differently.
I don’t have the patience or the mindset to spend a lot of time going over financial statements, even though it’s important to do. I’ve learned to hire a really good CFO and trust them and trust what they’re creating and how they handle the statements.
Make family yours and those of your employees a priority.
You can measure success a lot of different ways, but it’s very hard to lead people if you’re not sensitive to the issues that go on in their lives outside the hours they spend with you. You don’t get any of that if you don’t understand your people.
Communicate with them really well. Get to know their families. I have an open-door policy, and I know that sounds a little trite, but I interact with them. I try my best to be a regular guy. I stay away from closed doors.
I’ve seen very few successful executives in any business who are successful in business and unsuccessful in their personal lives. You’re not well-rounded unless you actively participate in your own family’s lives because what are you then? Just another suit.
I grew up with a father who worked very hard, and he always had time for me, and I try to do the same thing with my children. Pay attention to your family. Take care of your children. Be a good spouse. Listen. Get away when you can.
Don’t immerse yourself in (business) because it will burn you out.
Learn to let go.
I tend to develop from within and push a lot of people out of the nest good people that have gone on to other teams or businesses who have been really successful. I may have wanted to keep them, but it’s better for their development to move on.
Don’t be afraid of it. One of the people I worked for early in my career was always upset if they heard anyone talking about employment with another company.
It always seemed funny to me because I see it almost as a compliment. You hate to lose your best people, but from a management perspective, a little change is good sometimes.
Having people move and change isn’t a bad thing, and I’m never offended by people wanting to get ahead who work for me. Sometimes their career path may be blocked by really good people in front of them.
Keep your ego in check.
Great people can be involved in businesses that fail. Lots of things can bring companies down. A lot of times, it’s leadership at the top.
Some of the pitfalls are forgetting the principles that made you successful in the first place. Principles that got them to those situations sometimes go out the door. Ego begins to drive decision-making as opposed to sound business principles. That’s sometimes fatal.
They’re touched by celebrity, and they forget the reasons they were successful in other businesses and do things they would never do don’t empower their people, don’t stick to a plan; get amnesia, we call it. Amnesia can be a real problem ‘Oh, I forgot I was told that.’
Learn to delegate.
It comes over time. Some people can’t do it and don’t like to do it and can still be successful. I never had the time to not do it.
It’s so many little tasks that have to be accomplished to run a successful, $100 million business as large as ours. You can’t do it all yourself, nor should you.
I’m a conductor. I orchestrate, listen and go.
Be honest with yourself and others.
Go with your instincts. Try your best to evaluate and put the bullshit meter on people’s ideas, because there can be a lot of hype. Stay true to yourself and try to be honest.
I have to manage down, and I have to manage up. I have an owner, and I’m only one of any number of businesses he’s involved with. For every issue I have, he has 20, so don’t take him everything that you might. You learn what to inform him of.
You have to have the balls courage is a better term to stand up to your own boss and tell him the truth. Eventually, if you don’t, and you sweep problems under the rug, they come back to haunt you.
If you go in and ‘yes’ the things they’re suggesting all the time, you can get in trouble, and it can be a problem. If you’re delivering news that’s unpopular, you’re better off delivering it than sugarcoating it or worse, ignoring it.
Try to have fun at it. People are attracted to fun. They’re attracted to laughter. They’re attracted to a sense of humor. You get more out of people if you try your best to spend some time with them.
Whether you’re in a CPA firm, or doing what we’re doing, if you’re the CEO and you’re the boss, you want people to relate to you, so you better have some fun doing it or you’re not going to, ultimately, be successful.
HOW TO REACH: The Dallas Stars, www.dallasstars.com
“Weak corporate governance may result in financial reporting that is lacking transparency and clarity, and does not reflect economic reality of a company,” says Konstans. “Having a system of accountability is critically important to the health of a company, even if that company is private and does not have to answer to its shareholders or to the SEC.”
Smart Business spoke with Konstans about the importance of corporate governance to privately-held companies, and a strategy of putting a plan in place.
Could you describe corporate governance?
Corporate governance is the structured system of policies and processes established and maintained by a board of directors to oversee an organization’s strategic activities and resulting performance. The reason for corporate governance is to ensure proper accountability, clarity and openness in a company’s finances, and for the long-term benefit of shareholders.
While corporate governance is required in larger publicly traded companies, why should private companies be concerned about corporate governance?
Private companies are not required by Sarbanes-Oxley (SOX) legislation to have corporate governance in place. The risk of corporate scandals whether in a public or private company can be minimized if a good system of internal controls that corporate governance provides is in place.
Another reason that a private company will want corporate governance is that it may wish to go public at some point in the future. If there is even a chance that the company will go public, it is in the best interest of the business owner or owners to put these corporate governance systems in place now. A company needs to comply with SOX once it is publicly traded.
Does having a corporate governance plan help in other ways?
It is beneficial to companies seeking investors, who will also look for financial information that can be viewed as reliable, transparent and true. Without this high degree of confidence, investors both foreign and domestic will be reluctant to part with their money. Having a corporate governance plan in place certainly enhances the image and reputation of a company, and will make it more attractive to investors. Similarly, in nonprofit companies it is also extremely beneficial in establishing trust with potential donors.
What are some steps a private company should take to put a corporate governance plan in place?
Most private companies have some form of corporate governance already. But business owners should take the following steps to get the right elements in place.
- Create a board of directors. Many privately-held companies may already have a board, but make sure your board is composed primarily of independent outside directors. These directors should be like a portfolio of investments that are varied and balanced. Directors should be leaders from a variety of industries who provide value, contacts, opportunities and plenty of objective advice. A good board is worth its weight in gold.
- Develop policies and procedures. While this sounds like a lot of busy work, the beauty of creating this is that once it is done, everyone knows exactly what the rules are. The board of directors should approve this document and provide oversight in its application.
- Develop efficiencies. Make sure that the company’s physical processes and day-to-day operations are efficient. These processes include: purchasing, vendor receipts, how sales are generated, how the business gets customers, etc.
- Get a good financial accounting system. Get a good accountant that can pull all the financial data together with strong controls that will flag any inconsistencies. Without good accounting, a business owner will never be certain that what is recorded is reliable. Good accounting is an accurate financial expression of the physical process of the business; it should reflect reality. All too often there is a huge gap between what is actually going on in a business and its financial statements.
- Establish a culture of honesty and accountability. Management needs to set the tone of ‘doing the right thing.’ If you set the example of honesty and project an image of caring about your company, customers and employees, pretty soon you’ll have not only a company but a family that believes the same way.
CONSTANTINE KONSTANS is executive director of the Institute for Excellence in Corporate Governance at the University of Texas at Dallas School of Management. Reach him at (972) 883-6345 or firstname.lastname@example.org.
Jennifer Bricker, a principal at Avvantica Consulting LLC, says effective program and project management is essential to making this happen. “The start of a successful project in today’s environment should be focused on the rapid development of a plan that lays out the fastest and most efficient way to reach the end result. It should be defined in easily understood language that any team member can grasp.”
Smart Business spoke to Bricker about key ways companies can implement efficient technology into their work force.
What are the key elements that need to be in place for strong program and project management?
There are three. Executives must understand the end goal. Information about the project must be communicated to the broader work force. And the fundamental tools of program/project management a program management office (PMO), a project plan, and the right team must be in place.
What do you mean by executive understanding of the end goal?
Executive understanding of the end goal must span the entire executive team. The key decision-making team should be able to visualize how the company will look when the project concludes. It should be educated on what will be accomplished, who will be impacted, how long it will take, and what the expected improvement will be when the project is complete.
Education of the executive team must occur again and again throughout the project coupled with ongoing status of accomplishments to date.
The executive education process is not a one-time event. Each and every time that a major status update is provided, it should be done with a quick refresher on the original project goal and path. This is important as day-to-day events come up and some members of the executive team may become focused on a recent issue and want to refocus effort on that issue versus staying on point to the end goal of the project.
Projects of any magnitude should also be continuously communicated to the organization’s board. The board should be educated on the project end goal, and then updated throughout the course of the project.
Why does the entire work force need to receive communication on the project?
In a large-scale process and technology project, the core work force of the company will most likely feel the greatest impact. Workers will be asked to change how they do things; they will be expected to use new technology applications in their day-to-day work processes; and, ideally, they will be engaged to be an active part of implementing the solution.
The communication to the entire employee group should be consistent, concise and continuous. Consistent communication is enhanced when it is conducted by a single source, preferably the PMO/project leader. This helps to ensure that the information provided is accurate and complete.
The three fundamental tools sound like the same tools that have been described in Project Management 101 for many years. What is different or maybe more importantly what needs to be different?
Many of the basic principles of project management are still there, but they need to have been updated in order to be effective.
Program management office provides direction, leadership and oversight to multiple individual projects that must be aligned and coordinated in order to achieve the overall goals of the program. It should consist of two or three key executive level owners of the project. However, in contrast to past generations of PMO function, these executive level owners of the project should be much closer to the project. They should be far more than an executive stamp. They should be prepared to roll up their sleeves and delve into the first layer of detail surrounding key project success factors as well as key issues as they crop up.
Project plans should be structured, simple and action-oriented. Prior decades of project implementation and project management were sometimes impeded by the quest for the ultimate project technique and dogma. Pursuit of the project methodology and ultimate workplan sometimes became a project of its own requiring two or more FTEs to manage the workplan.
The collection of project support tools was sometimes receiving more attention than the end result. A project plan should be grounded in the proven fundamentals of effective project management.
JENNIFER BRICKER is a principal at Avvantica Consulting LLC. Reach her at (214) 379-7920 or email@example.com.
Staubach, chairman and CEO of The Staubach Co., has The Staubach Constitution, a document that spells out his real estate company’s principles and contains that pledge.
He stands behind the pledge to refund fees to clients who believe the company didn’t live up to its promises. It’s rare that he issues a refund, but it does happen, Staubach says, and it’s painful for the company.
For Staubach, though, there’s no other way to prove that your company has integrity than to offer an ironclad guarantee. Staubach says it’s a reminder to employees and to himself to adhere to the values central to his company as outlined in the constitution integrity, respect, teamwork, balance and leadership. Offering the guarantee is one way the company takes the constitution from paper to action.
“We’ve had some disappointments through the years and we’ve had to live up to that guarantee,” Staubach says. “But it’s a way to say that you have integrity and trust and balance, the things that we’re doing. We have to back it up.”
Staubach is, of course, the NFL Hall of Fame quarterback for the Dallas Cowboys who made a household name for himself on the football field and who is now making a name for himself in the real estate field. His company, with revenue of $410 million in fiscal 2006, focuses exclusively on helping real estate users, not owners or developers. He started the company in 1977 and has 60 offices throughout the Americas and about 1,300 employees.
Staubach governs his company by The Staubach Constitution, which he introduced in the early 1990s as the company was experiencing rapid growth, to spell out the principles he’s used to guide the company since its inception. It’s a way of providing guidance to employees on delivering a consistent service and doing it in a way that is consistent with the founder’s beliefs. All employees receive a laminated copy of the constitution in their orientation packets, and copies are posted around the offices.
Staubach says that the guiding principles in the constitution have helped ensure the company’s growth because customers can’t lose. He relies extensively on repeat business, and even if clients have a bad experience, he needs a way to lure them back again. Refunding their fees if they are unhappy encourages them to consider giving the company another try.
“We are defining who we are not just by a bunch of words but the things that we do and how we go about it,” Staubach says. “Whatever we say we’re going to do is what we’re graded on.
“We have a customer, and our main priority is that customer. Being able to get that trust internally, where we are going to do everything we can for that customer, is the challenge that we have. ... That leads into making sure you have access to the resources within the company that can provide the services to the customer. The trust has to be there internally. If we don’t have the trust internally, we can’t transfer it to the customer.”
The Staubach Constitution has three sections: mission, values and operating principles. The core of the document, values, governs how employees of The Staubach Co. function.
The secret to making the values transcend the paper is constantly keeping in touch with the company’s associates. Staubach Co. has a Web site that acts as a suggestion box where employees can post anonymous complaints about violations of the constitution, along with suggestions as to how to better meet the standards set forth in that document.
“We get a lot of suggestions from people,” Staubach says. “They have the ability to bring ideas and thoughts to us. We get better every day by listening to people.”
Any member of the Staubach team who makes a promise to a client is held to it, Staubach says. One way he ensures that his employees are following his principles is by communicating with the clients.
Every client is e-mailed a Client Review survey at the culmination of a deal. The client fills it out, giving feedback on the performance of the employee and the transaction. A copy goes to Staubach himself and to the manager of the office where the transaction occurred. Between 70 and 90 forms are returned each month.
Staubach reads every form and sends an e-mail to the broker involved, whether the review was positive or negative. If it was negative, he asks for the broker’s feedback, then either e-mails or calls the customer to resolve the situation.
And yes, in some cases, a client gets their money back.
“Internally, people know they will be graded and people will look at how they performed, and they want to make sure it’s done right,” Staubach says. “We also never want to get into any sort of serious legal action with a client, which we’ve never done. Our competition wants to say that the guarantee is just a marketing thing, but it’s not.”
Staubach says part of having integrity is doing what’s best for the customer. In some cases, brokers have led clients to less expensive space, lowering their own commission. But it was what was best for the customer - and that’s the right thing to do, Staubach says.
Focusing on what’s right rather than on what is lucrative, keeps the company honest and is ultimately good for business.
Establishing teamwork and respect
Staubach says that teamwork is the one value that guides the other four.
“It all gets embodied in teamwork,” Staubach says. “To respect someone other than yourself is really what teamwork is. ... Team players are people you can trust.”
Technology has been key to helping Staubach employees feel they are part of a team working toward the same goal. The company’s professionals use an online tool called Staubach Connect that allows associates to see each other’s contacts, appointments, records and other information, and to ask questions of team members around the country.
Staubach says he’s impressed with how much his employees use Staubach Connect and how it forges them together as a team.
“I see so many e-mails that go out that people need some help, they’ve had an example or circumstance that could help someone else out, and people really e-mail back,” Staubach says. “That’s unusual in our industry as far as sharing information and trying to help someone else in your organization be successful with their client, and you don’t get any [financial] rewards from it. It’s just trying to do the right thing for someone else.
“Getting that kind of culture is a challenge every day. We are good at it, but we sure could get better at it.”
Another way he fosters teamwork is through a two-day academy every year at which all of the company’s associates come to one central location for training and teambuilding.
Staubach says it’s costly to hold the annual meeting, but it’s important for employees to get to know each other face-to-face. The meeting includes training sessions and panels of customers to give feedback on how the company is performing.
Staubach encourages employees to live rich lives outside of the office. With grown children of his own and a wife of four decades, he makes a point to live what he preaches.
His own life is demanding, but even as his company was growing, he put his children’s activities on his calendar and made it to as many functions as possible. His wife travels with him now sometimes, which also helps send the message to his employees that family time is important.
Employees are encouraged to leave early if they want to attend a child’s soccer game or participate in a volunteer activity.
“If a manager says, ‘You’re spending too much time with Make-A-Wish’ or something similar, that would go against everything we believe,” Staubach says. “We trust our people that if they are given time for the community, they are actually doing it, and they are able to do it and still be effective in their business life, too.”
Though many executives might worry that such leeway might cause employees to take advantage, Staubach says that’s not often the case.
“Very few people are like that,” Staubach says. “If you allow them to have that ability to make sure they have that balance, they will work harder for you and believe in your organization.”
Staubach says leadership has to be consistent, displaying strong and even behavior at work and at home. He strives to embody the tenets of his constitution throughout his own working life, especially when it comes to respect and teamwork, and he says good leaders are respectful to every person they meet.
Staubach’s pet peeve is leaders who lie or are rude. Some people are rude to Staubach’s secretary or lie to her to get through to him, but it doesn’t work, he says, and it isn’t good leadership.
“They don’t treat people very well,” Staubach says. “It happens a lot. I get very disappointed in people who really are leaders and how they treat people who are not important to them.
“You have to incorporate it into their complete life. It should be pretty consistent in every aspect of their life. My leadership style is to say, ‘These are the things I expect of you, and I’m going to try to represent what I expect of you.’ A leader has to have a message that people follow.”
Lest you think that Staubach has too much of a quarterback mentality - it’s all about him - understand that he knows he can’t do any of this alone. His years on sports teams have taught him what teamwork is. After all, even if you’re a star quarterback, someone has to give you the ball.
“I was a pretty decent quarterback, but I sure wouldn’t have been as good as I was if I hadn’t had a lot of great teammates,” he says.
How to reach: The Staubach Co., www.staubach.com
The good news is that opportunities abound and seats can be gained by women, says Diane S. McNulty, Ph.D., associate dean of external affairs for the University of Texas at Dallas School of Management, which will host a three-day residential program on this topic in November. However, she notes, board selection committees nationwide find that seeking qualified women to fill key positions on boards of directors can be a difficult task.
“Outstanding women candidates are out there. However, women leaders need to improve their visibility - and, often, their strategies and skills <\m> to become successful board candidates,” says McNulty.
Smart Business spoke with McNulty on how today’s business women can best improve their visibility and skills to prepare themselves for leadership on corporate boards.
What is the reason that comparatively few women sit on corporate boards?
Studies show that several factors tend to hold women back. In general, women lack significant general management experience. Research reveals that women are often excluded from informal communications networks and male bonding experiences in the workplace. Cultural factors, such as stereotyping, play a role in decisions regarding the adequacy of preparation for females in leadership roles. Perceptions of women’s traditional roles and abilities also contribute to a general corporate environment that stifles the advancement of women to the C-level and thus to the board room.
How does having women on corporate boards improve or enhance the board’s effectiveness?
Current research does not address board effectiveness in regard to female representation. However, women do have certain attributes that could earn them increased recognition as valuable board leaders.
Women tend to hone their social skills better than men. They are able to multi-task and balance responsibilities. Females tend to be better team builders than their male counterparts, and this skill is essential for success in today’s global corporate environment. Women are also the great communicators, and for many communicating and relationship problem-solving seems to come more naturally.
My own research finds that some companies actually seek females for board representation because women are their best customers and boards appreciate the input women can provide on products and services.
How can women improve their visibility to become successful board candidates?
A candidate can take a number of steps to improve her chances for success. First, to get solid board experience, she can serve on nonprofit or advisory boards or boards of private, midsize companies. Along these same lines, she should join professional organizations. Becoming active and volunteering to speak at functions will raise her visibility.
Networking is key! Networking expands the candidate’s spheres of influence outside the corporate walls. She should join business networking organizations, chambers of commerce and other organizations in the community and volunteer for committee work. This helps her develop a broad reputation for doing good work. She should seek other women leaders as mentors. And she should make sure that board members and top management are aware that she is interested in a seat on a board.
What specific skills can a woman improve upon to be more effective on a corporate board?
Fortune 500/1000 companies look for a variety of experiences, including financial expertise and industry-relevant experience at top levels. Women also need to seek outside instruction on analyzing and interpreting financial information, if they are weak in this area.
To get a seat on a board and to improve their knowledge about boards, women need to network more with senior business executives. Additionally, women need to learn as much as they can about the actual operations of boards and what responsibilities and liabilities directors have. It is helpful if they gain a perspective of top management and its views of governance.
All these steps will help develop understanding of what a board does, the members’ responsibilities and goals, legal responsibilities and ‘best practices.’
DIANE SEAY McNULTY, Ph.D., is the associate dean of external affairs for the University of Texas at Dallas School of Management. Reach her at (972) 883-4489 or firstname.lastname@example.org.
“We believe that technology and business leaders can begin to address the implications of a ‘flat world’ for their companies by defining a business vision that includes shared services as a key strategic resource for the company,” says Greg Adkins, vice president for Avvantica Consulting LLC.
Smart Business spoke to Adkins about the opportunity companies have to use shared services to drive significant benefits for themselves.
What are shared services, and what companies and business functions are good candidates?
The overall concept behind a shared services organization is to leverage the functional and technological competencies of one organizational unit to deliver cost-effective, high-value services across an entire company.
Ultimately, all businesses compete on cost and service levels, and shared services can help companies of all sizes begin to leverage existing technologies and capabilities to address these competitive issues.
Typically, companies are good candidates for shared services if they are decentralized or multidivisional. Business functions such as finance, accounting, human resources, customer support, procurement and IT are all potential candidates for shared services. Shared services are not only cost-efficient, which has been the traditional focus, but are also tools for competitive advantage. Companies can use shared services to take strategic advantage of the specific functional and technological competencies they have.
What benefits are there in moving to shared services?
Companies can recognize several significant financial and operational benefits, including economies of scale/cost reduction, standardization of business process and technologies, improved quality and service levels, increased business control, improved management reporting and better corporate governance.
How should a company approach implementing shared services?
Successful shared service implementations begin by developing a comprehensive business vision for the future. Shared services may be the focal point or a piece of a larger overall vision.
Many of the most successful visions have had shared services positioned as a strategic tool or resource, combining the best processes and technologies with the best people to achieve world-class service levels and processing efficiency. This can provide a competitive advantage.
Shared services organizations are often launched as a separate business unit and run as their own entity. They should always be seeking to deliver the highest quality of services while being the lowest cost provider.
The key differences between shared services and traditional centralization is a focus on defined service level agreements (SLAs) and more emphasis on governance. In terms of implementing shared services, companies typically go through three stages of evolution: process/system standardization, centralization, and shared services (adds SLAs and governance to a centralized process).
What best practices have you seen in successful shared service implementations?
Every shared services design and implementation is different. The existing state and the business’s vision of the future drive many of the key decisions in each implementation.
In our experience, several recurring themes have made the transition to shared services more effective and successful. Those themes include a clear, compelling business vision that includes shared services; strong, consistent leadership/executive support; a robust implementation program with a strong project management approach; detailed business cases and project plans; comprehensive and effective communications throughout the company; the constant pursuit of process and technology standardization; and a desire to change the corporate culture to be service oriented.
In terms of operational best practices, successful shared services implementations include comprehensive, detailed SLAs; robust management reporting; and strong shared service governance. We have seen some shared services organizations go as far as issuing their own ‘annual report’ to customers, detailing their business strategy, plans, operations and financial performance.
GREG ADKINS is vice president for Avvantica Consulting LLC. Reach him at (214) 379-7903 or GAdkins@AvvanticaConsulting.com.
The company does subsurface mapping for oil and fuel companies and grows by adding crews of new equipment and about 45 people. With such a hefty price tag for each expansion, this president and CEO has to keep his finances in check and cultivate his 468 employees so they’re ready to step into new positions when clients require more crews.
His leadership skills are paying off. The company added three to four crews in the last year and a half and grew its revenue to $30.9 million last year, a 53.7 percent increase over 2004.
Smart Business spoke with Whitener about how he keeps his employees and finances in check to lead growth.
What most inhibits a company from growing?
When you look at the real problems out there, it’s market conditions and having qualified personnel.
When the market’s good, it’s much easier to be on a growth or a steady pattern. When demand is down, there’s not a lot we can do about it.
Your hope is to keep the very best that you have of the personnel. You have to call on your more experienced and better people to carry more of the load to keep costs down through difficult times.
How do you maintain morale during hard times?
We just buck up and work our way through it and still keep some of the rewards for the personnel that are doing the job, even though it is tough times. You still have to let the employees know that you appreciate what they are doing.
Even though you’re not in a very high money-making mode, what they’re doing is keeping the company going for the time in the future when we have the opportunity to make a good return on the revenue.
How do you financially prepare for growth?
You have to really balance your debt. Hopefully your business is at such a level that internally you’re generating cash and you’re not overextending yourself in the growth mode that shadows either one of these, whether it be the borrowing or using up all your cash to generate the growth.
There’s a fine line there balancing all three of those in order to keep the growth going and keep enough cash to make sure you don’t have any cash problems and do just enough debt if things turn, you can manage that debt.
How do you maintain that balance?
Every time an opportunity becomes available to us, we weigh all three of those. We have to review where we are cashwise, where we are debtwise and whether we want to take on additional debt or if we have enough cash being generated internally to at some point go out and say, ‘OK, six months from now, we anticipate this cash expenditure putting out this new operation and we feel we can do that without taking on additional debt.’
How do you make decisions regarding growth?
Take advantage of the opportunities when they become available. If the business is there, you need to make the decision quickly and take advantage of it.
You want to look at the positive side of it on what opportunities are there for the company? What opportunities are there for the personnel? And what opportunities are there for the investors?
On the other hand, you have to look at if there’s a downturn eight months from now, where will we be? Can we service this debt? What will we do with the personnel? What will we do with the equipment? You have to weigh the pluses and minuses.
How do you get employees to buy into your decisions?
That’s the simpler part. You have your plan laid out, and you present it to them. ‘This is what we’re doing. This is what’s happening. This is when we’re going to do it.’ People have enough faith that they’ve seen it in the past that this is what’s going to happen, so everybody just moves forward.
If you went in there and started asking employees, ‘Well what do you think? What should we do?’ not a lot would get done. As a CEO, you have to formulate the plan for the company, take responsibility for that plan, and go in and get the employees to execute that plan for you.
How does that leadership style help the company grow?
Being able to lead the company in the right direction is critical. A lot of times, even in our market right now where demand is very high, people get complacent and say, ‘I’ve got all that I can handle right now. We’re doing great.’
It takes the CEO to step up and say, ‘Well look, we need to do more. We need to step out here. We need to put another crew out. We’re going to do it by such and such a date, and this is how we’re going to do it.’
Get everybody in the frame of mind that this is what we’re doing and we’re moving forward and keep the company moving.
HOW TO REACH: TGC Industries Inc., www.tgcseismic.com
Portmann, president and CEO of Stream, an inbound call center company offering technical support and customer service, needed to accommodate the growing demands of her client, Sirius Satellite Radio. To do that, she needed to hire several thousand people and have them trained and ready to handle calls on Christmas Day.
Sirius anticipated correctly that many people would receive a Sirius radio and its service as a holiday gift, largely thanks to popular shock jock Howard Stern’s move to the service from traditional broadcast radio beginning in January 2006.
Many of these new customers would pick up the phone immediately to ask questions about how to operate the system, and even though it was Christmas Day, it was important to make sure someone was there to help them.
Portmann had four call centers ready to go and all of the workers lined up; she even hired 18 percent above projections just to make sure Stream had enough people on hand. But she wanted to do something else to encourage people to show up, so she decided to have all of the company’s top management answer calls themselves that day. They trained on the same script as other workers, and she dispersed them among the four call centers.
On Christmas Day, the centers handling the Sirius calls had absentee rates of about 11 percent, which made Portmann ecstatic. Calls were answered, Sirius was happy, and Portmann had proactively solved what could have been a crisis.
And yes, Portmann herself was one of those workers taking calls from gift recipients on Christmas morning. The company even set up a Web camera to show workers in other locations that their president and CEO was working in her cubicle. Portmann says the experience provided a bonus for the executives, as well, giving them great insight into how the company operates from the ground up.
“It was so wonderful because a lot of us had never known what the real job was like and to sit there for eight hours,” Portmann says. “We all work hard, but we don’t sit still for eight hours slammed with volume.”
Action, not reaction
Portmann uses proactive thinking to look at problems, and her solutions to the most pressing issues don’t necessarily focus on what someone else should be doing or who to blame when things go wrong. She prefers to think about what she can do to ensure that a situation turns out the best way possible.
In the case of the Christmas Day dilemma, she thought about potential problems such as a high absentee rate, and then led by example by manning a phone.
That sort of thinking has brought the company phenomenal growth since Portmann became president and CEO of Stream’s predecessor, ECE Holdings, in 2002, and is a big part of what has made Stream a $400 million company today.
Under Portmann, ECE blossomed due in part to a merger with the much-larger Stream in 2004. Portmann’s philosophy on growth is to buy companies that have what her company needs rather than try to build from the ground up. It’s faster and easier to do it that way, Portmann says.
“We had a grand vision at the time,” Portmann says. “(ECE) had four centers in the U.S. and one in Dublin, and that was it. We said, if we’re going to make it, we have to be international and global. We had this vision of what we needed if we could have an open checkbook. We shared that with our equity owner, and lo and behold, Stream comes on the market.”
Running inbound call centers is challenging because of high turnover rates, but Portmann takes a proactive approach to recruiting and retention issues, too. Some jobs require technical knowledge to support a client’s product or service, but hiring the smartest person isn’t always the smartest move.
“The very best techies are sometimes the very worst for our company,” says Portmann. “They hate dumb customers, they hate answering the same questions five times, so we always say, ‘Hire heart and train to technical.’”
She also thinks ahead when it comes to call center employees.
“You have entry level jobs, so you’d better have really good processes,” says Portmann. “When a person comes in and interviews, what I want to do is train her, get her on the phone and milk her and get her productive for as long as possible. We have built models that say we plan for attrition.
“We know that the average tenure in Dallas, Texas, is nine months, so we know that when we get to six months, we’d better start building another class. ... You can’t be nave about it. You have to plan for it and accommodate it.”
Rebuilding the spirit
To build the new Stream, company leaders started by re-energizing the company with a new mission statement, colors and other things designed to give the company its spirit back. The work was done by Portmann and two key executives no consultants involved.
“We literally rebranded, remissioned, reimaged, remessaged the entire company, and we did that within the first 90 days,” Portmann says. “We called it the new Stream, and our whole mantra was, let’s put the spirit back in.”
Portmann’s goals after that were to create new processes to make sure that no matter where in the world a call was answered, it would be handled the same way, mostly in terms of the attitude of the person handling the call. One large client, Portmann says, has calls answered at 12 call centers around the globe, and Stream needs to handle all of those the same way.
“Wherever you go in the globe, if Stream is the one doing the support, it’s the exact same support model, whether it’s India or France or Italy or Spain or Germany or Canada or the U.S.,” Portmann says.
Stream created a list of 18 specific behaviors and practices it wants to see modeled in those who answer phone calls. The company looks for those behaviors during the hiring process but also spends considerable time and energy on ongoing training on those behaviors.
Managers listen in on calls and give feedback to employees, focusing on those traits. Also, Stream requires each of its 24 call centers in 14 countries to spend 15 minutes every week discussing one of the core behaviors the company wants to see in employees, and employees are invited to share experiences as to how they’ve implemented the behavior on the job.
After standardizing the way the company handles calls, Portmann began thinking of ways to differentiate Stream from its competitors. With some 4,500 companies offering tech support services, Portmann wanted a way to draw companies to Stream and help the company grow.
One avenue that’s helping Stream bond to its existing customers and lure new ones is a program Portmann calls “The Voice of the Support Professional.” Once a year, she asks all of the agents in the call centers what feedback they would give to their clients about their products. Those comments are passed back to the client for evaluation.
“It’s so cool,” Portmann says. “The clients now say, ‘When are you going to do the Voice of the Support Professional? We’re going to fly people in for that.’ If you think about it, we talk to their most important constituent every day, and that’s their customer.”
Another strategy is a program called RGM, or Revenue Generation Management. Portmann says it is changing the way her clients are thinking about their tech support operations.
“When you call for help, you come into my store,” Portmann says. “We have programs, at the end of any technical support call or customer service call that cross-sell, upsell or pitch something that might generate revenue. ... It has transformed the call center from an expense to a revenue-generating channel.”
The program also generates revenue for Stream.
“Americans love to buy,” says Portmann. “It works better with the Americans than anyone in the U.K. We’ve done correlation of the data, and customer satisfaction is higher when I ask you to buy something. It’s amazing.”
For the future, Portmann sees chat support growing, even more so than e-mail support, as chat is instantaneous. Right now, chat and e-mail support comprise about 15 percent of the company’s business.
“It’s starting to get its own rhythm,” Portmann says. “We are literally starting to staff chat like we do voice. ... I think there will be continuous movement in chat.”
Portmann’s proactive strategies are working. In 2004, before the merger with Stream, ECE had about 1,500 people employees and $70 million in revenue. Today, Stream projects 2006 revenue of $400 million and 12,000 employees. Portmann anticipates revenue growth of 20 percent a year as the company hones its focus, bonds with clients and uses new tools to bring in new technology-related clients.
Asked for five-year revenue goals, Portmann says that’s too far down the road to project in the technology business. But she’s always looking for growth opportunities, both through new clients and through buying other call centers.
“The additional opportunity for us is expansion into geographic markets and finding better, faster, cheaper ways to do things so that we can eke out higher levels of profitability,” Portmann says.
How to contact: Stream, www.stream.com
If you listen to global-warming advocates, you would think that global warming results primarily from gases spewed into the atmospheres by manufacturers and autos. That is not even remotely true. The fact is that 97 percent of the global warming gases are water vapor. Manmade hydrocarbons (CO2), per federal research reports, compose less than half of 1 percent of global warming gases. Again, regardless of the facts, the controversy rages and businesses are in the middle.
Smart Business spoke with John Barnes about the hydrocarbons and their possible connection to global warming in the context of the effect on U.S. businesses and business’ response to it.
Do you believe that global warming is a byproduct of manmade hydrocarbons?
Global warming may be real, but most of it is a natural phenomenon. And the influence of manmade hydrocarbons as a harmful factor in it is theory, not fact. The data supporting the theory is heavily suspect, and a lot of evidence exists to refute it.
Keep in mind that without some global warming, humans couldn’t survive here. Temperatures would average somewhere below zero. From the historical perspective, consider that, 12,500 years ago, Earth experienced a double-digit increase in global temperatures at a time when no automobiles or manufacturing plants were around to cause it.
What evidence exists to refute the idea of a global warming threat to the planet?
The Earth has more ice right now than 100 years ago. It is true that the thin Artic icecap and a small peninsula in Antarctica are melting, but the Antarctic has 90 percent of the world’s ice and 70 percent of the world’s fresh water. The Antarctic ice cap has, in fact, thickened overall over the past few years.
If you look at the 100-year temperature surveys that global-warning proponents use for evidence, almost all were conducted in or around large cities. Global-warming proponents believe that average temperatures in those cities have risen because of the increase in industrial gases. If they have and variations are small one must factor in that concrete, asphalt and sun-reflecting skyscrapers create more heat than the grass, dirt and trees they displaced. Around smaller cities that have not grown significantly with a lot more concrete, asphalt and skyscrapers, temperatures have not risen.
Evidence for or against the role of manmade hydrocarbons in global warming notwithstanding, the concept has enough momentum to harm U.S. industry.
Harm U.S. industry how?
Potentially and this is significant with carbon taxes. It’s likewise significant that the global warming theory began as a political issue in Europe. Given that the United States has the most productive economy in the world and is the biggest energy user, some Europeans look at global warming as a way to cripple their competitor’s economy and improve their own.
For people outside the United States and some within it, the global warming theory is a pretext for raising taxes massively or requiring permits for energy use so-called carbon taxes or permits for technologically advanced countries. Such taxes or permit requirements don’t exist yet, but the Kyoto Treaty, which the U.S. has thus far refused to ratify, calls for them.
How would the Kyoto Treaty affect U.S. industry if our government were to ratify it?
The treaty is designed to mitigate the effects of global warming by some small fraction of the one half of 1 percent of the global warming effect of CO2 that’s all and raise taxes in multi trillions of dollars. The treaty’s carbon taxes would transfer a massive amount of wealth. That might have a major impact on U.S. businesses, but a small impact on perceived global warming. Meanwhile, large developing nations like China and India would go unaffected by it.
What can U.S. business people do about the possible impact of global warming legislation?
They can always push to revive focus on alternate energy sources and use the alternatives available now.
They can attempt to offset negative media reports. Bad news sells, and global warming is one of media’s major current causes clbre.
Business professionals must look past the media’s stories and know the facts for themselves. Business owners must also monitor governments’ reactions to the issue of global warning, stay current on where legislation may be heading, and work with other business owners to keep the debate centered on balanced facts, not media-driven frenzy.
JOHN BARNES is chairman and CEO of B&R Energy LLC. Reach him at (972) 934-3800 or jbarnes@BandREnergy.com.