When Dave Hitz co-founded NetApp Inc. in 1992, he went through the typical growing pains of a start-up. But when he grew to about 50 employees in size, things started getting really crazy. Revenue and head count were doubling each year, and he found himself buying a Polaroid camera and running around taking photos of every employee, writing their names on them and hanging them on the board because nobody knew each other.
These new challenges clued him in that a new era was emerging at his storage and data management solutions company.
“You start to see you’re doing things like that, and it should raise alarm bells in your head of, ‘Is this the early sign of a new era, and if it is, what might that mean?’” Hitz says.
Just like with a country’s history, companies have eras, as well.
“I would define an era as when the strategic issues are completely different from the things you focus on during the period before or after,” Hitz says.
Sometimes those eras are very clearly defined, and sometimes they tend to blur together, but Hitz says you have to recognize when eras are changing.
“If you can predict a future era, that would be awesome,” he says. “I’m not even sure it’s possible in general to predict future eras, but the next best thing to predicting one is to get an early hint that your era might be changing.”
Hitz has been through a few eras at NetApp start-up, crazy growth, tech crash, building back up to pre-tech-crash numbers and, most recently, the recession. Similarly, your company may be facing a new era right now. Hitz has survived it all, and last fiscal year, NetApp did $3.3 billion, but it’s taken tenacity and adaptability to weather the ups and downs of all the eras he has encountered. No matter the era, you have to always be looking for new opportunities and creating a new vision to ensure that your business will be around 10 years from now.
Look for new opportunities
When NetApp hit the tech crash, obviously people freaked out across the industry and went into safe mode.
“A lot of people look at a downturn and they say, ‘That’s the time to dig in. Whatever you’re doing, hunker down, and do it a little more efficiently,’” Hitz says. “I think that can be a big mistake. A downturn of the magnitude that we’re seeing now and certainly for tech companies, the dot-com crash, it’s almost certainly a new era. Whatever the key strategic stuff you were doing before, that has to be different.”
NetApp’s vice chairman, Tom Mendoza, always told Hitz that customers only open their wallets when they’re in pain, so while you may look out at the market and say people aren’t going to spend money right now, also remember that they’re in pain, so you have to find their pain and then show them how you can ease it.
“Downturns create a lot of new pain,” Hitz says. “A whole bunch of customers who whatever they were doing before, it’s not working anymore, and all of that pain they have is now opportunity.”
You need to talk to both your current customers and people you’d like to see as customers in the future.
“Hang out with them,” he says. “They’ll tell you. The interesting thing about customers is customers often will tell you what they wish you would do, and when they do that, I think they’re often wrong.”
He acknowledges that you’re supposed to say that the customer is never wrong, but sometimes customers aren’t quite sure what they need.
“They’re not necessarily the expert on how your product works or how your service should work, but dig behind the thing they tell you to do, and say, ‘I’d like to understand more. What’s the problem you’re trying to solve when you ask me to do X, Y, Z?’”
For example, when meeting with one customer who wanted NetApp to create a new feature for them, Hitz’s team dug deeper and discovered that the solution to the customer’s problem could be found in another product they already made. Had they not pushed, they would have wasted time and development efforts creating a whole new product.
On top of actively listening and probing deeper, you also have to learn to be persistent.
During the dot-com boom, about 70 percent of NetApp’s customers were Internet and technology companies, which made NetApp’s senior leadership very nervous. They wanted to find customers in other industries, so they kept calling up companies on Wall Street and explaining the cool features they offered and how they could do things less expensively than their current providers. They got laughed at. Things were good, and they had money, so they didn’t care about cool features or cheap costs. Enter the tech crash, and then things changed.
“After the crash, everybody we talked to said, ‘Oh my God! You can solve the problem for cheaper? Oh my God! You have features that let me do it a different way!’” Hitz says. “Suddenly a zone of customers that we had locked out of ended up being our key target.”
Now clients may not be willing to spend as much money as they were before, but they still have to run their businesses, so look for ways you can help them do that more efficiently and cost effectively.
“If you can help them do that in a different way, that can be a great opportunity,” he says.
As NetApp started to grow by capitalizing on new industries, the face of the company changed. When it reached the $1 billion mark the second time, only 30 percent of its business was in the technology and Internet fields, and it had expanded into all of those areas it previously wanted to be in. Instead of being a tech-heavy company, now it sells primarily to Fortune 1,000 companies.
“It’s tough in the downturn, because you don’t necessarily have the opportunity to do as much new investment as you want,” Hitz says. “You’re probably cutting it back, but what do you have in your portfolio of business that allows you to solve all the new problems that have just emerged out there?”
He says to spend time brainstorming and focusing efforts around that question in order to move forward during this hard time.
“It doesn’t feel like that’s the right thing to be doing, but at least spend some time saying, ‘Is there a group of people that suddenly have some pain that’s just what we know how to solve that never would have considered us before?’” he says. “It could be an opportunity for transformation.”
Create a new vision
After Hitz grew NetApp back up to $1 billion in revenue after it dropped during the tech crash, he was suddenly faced with a new challenge. When the company was doubling, he obviously just doubled the previous year’s numbers to create the new goal. When he was coming out of the tech crash, his goal was simply to get back to where he was before. This was uncharted water since he had never been above this mark.
“For the first time, I was very confused because for the first time, I didn’t have a good idea what our mission was,” he says.
He was so confused that he drew inspiration from literature to create a vision for NetApp. At the time, Hitz was reading Robert Heinlein’s “Future History” series, a story about what 500 years from now looks like and what happened in between to get there.
While Hitz didn’t go that far forward, he looked out a few years and saw NetApp at $3 billion in revenue, so he took a past-tense approach to determine how he would have gotten there in order to develop a new vision.
“Vision is describing as well as you can what the future should look like, but doing it in the, ‘How did we get there? What steps happened?’” Hitz says. “Talk to people from all different departments about what would have needed to work.”
Hitz did internal interviews and talked to every person in the CEO’s suite because a chief financial officer will have a different view than the chief operating officer. He walked people through his era concept and asked them to think about past eras. In defining an era, don’t be shortsighted.
“Think back as far as your company goes and just ask, ‘What are these big eras?’ not six-month things, but typically two, three, five years kind of things,” Hitz says. “That gets your head a little bit in a better space, and you get more of the right time scale. Thinking of long periods in the past can help your head explore longer periods in the future.”
He also asked them to think about key drivers in past eras and key drivers for future eras.
“Our CEO once gave me advice on strategic planning,” Hitz says. “He says the goal of every strategy should be to gain market share, and therefore, every strategy should begin with a market analysis. Who else are you competing with? What other products are there? That’s the starting point.”
He also asked them to picture who their customers were and what they needed. What products and services do we know how to develop or what do we need to do different? How will they reach those customers, and how do they like to buy? Do we need offices in India or do we need better HR systems here to support who we hire?
He used all of this input to help develop steps to reach that $3 billion mark, but there was another element to creating a vision that is important to him, and that’s to take a positive approach, despite any problems you face. Although he founded the company, Hitz stayed a programmer evangelist until it hit about 1,000 people and was asked to run all of engineering, which was about 250 people. Upon doing so, he realized that when he complained, people ran around trying to fix the things he complained about.
“My first lesson from that is if I’m going to whine, I should whine as accurately as possible because if I don’t whine accurately, they’re likely to fix the wrong thing,” he says. “So I’m trying to do management by whining accurately, which perhaps isn’t the most inspiring way a boss could be.”
Through this management strategy he had an epiphany though.
“Whining is the evil twin of vision,” Hitz says. “When you’re trying to whine accurately, you’re describing as carefully as you can how you wish the world was not. The whole point of vision is to describe as accurately as you can how you wish the world would become. If only you can flip it around from a whine of all the things that you don’t like into a vision of the way things would be different. It’s almost the same stuff, but I can tell you that the vision version is a lot more inspiring than the whining version.”
For example, take the proverbial glass half-full versus half-empty concept. Most would say you’re either positive or negative when looking at that glass, but Hitz takes a different approach. He sees the glass and says it’s twice as large as it needs to be to hold the contents, so how can he better make the glass.
“You flip it from, ‘Jeez, that glass is too big who designed it too big’ to, ‘Wow, we could save some glass if we made it smaller,’” he says. “It’s just expressing yourself a different way.”
How to reach: NetApp Inc., (408) 822-6000 or www.netapp.com
Every customer, every employee, every day.
That simple six-word phrase has proven quite successful for Pete Sinisgalli over the years.
“I’ve generally always believed that wherever I’ve worked,” Sinisgalli says. “It’s a rather straightforward formula. … You have to emphasize different parts of that depending on the specific business, but focusing on customers ruthlessly and focusing on employees passionately will always lead to a good outcome.”
This mantra helped him succeed at Dun & Bradstreet Corp., CheckFree Corp. and also NewRoads Inc. before arriving in the executive suite at Manhattan Associates Inc. in 2004. When he arrived, Manhattan had done $196.8 million in revenue the previous year and things were going well for the supply chain optimization provider.
So what do you do when you’ve already got a good thing going on? Sinisgalli wanted to keep growing and make it even better.
“The key challenge has been how do we continue to grow the company and drive improvements in customer satisfaction,” the president and CEO says.
He looked out at the good organization he already had and knew that his every customer, every employee, every day approach to business would also lead to success at Manhattan, so he decided to focus his efforts on taking care of customers and creating a great place for employees to work.
“It’s overly childish my ‘every customer, every employee, every day’ phrase, but I think if you do that and make incremental progress every day, if you look back a year later, it will look a lot more impressive,” Sinisgalli says.
Focus on customers
When it comes to focusing on every customer, Sinisgalli says it all comes down to one thing: frequent contact.
“We have a number of different prospective opportunities to touch our customers,” Sinisgalli says. “It’s important you take advantage of those opportunities. Too often, companies will suggest that the only time they hear from a company is when they’re sending them a bill. You certainly want to avoid that. … The more frequent and the more open the environment for customer feedback, the better.”
You need to have multiple ways to get feedback, and you can start with customer calls. Whenever customers call for help, make sure they not only have their question answered, but that they also rank their experience. Manhattan sends customers who interacted with the company in some way a link to an online survey where they rate the experience on a scale of 1 to 5 in a few keys areas, such as timeliness, quality and professionalism.
“That instant feedback is very valuable,” he says. “It gives you a firsthand feel for what customers think, and if there is an issue, before it becomes a big issue, you have an opportunity to respond to it.”
If the ranking is less than a 4, then a manager follows up with that customer by calling so he or she can better understand the situation and what needed to happen to improve the customer’s experience.
“The management will penetrate to better understand what didn’t go as well as the customer would have liked under ideal circumstances and then work with the people who provided the support to improve that going forward,” Sinisgalli says.
Last year, Manhattan averaged a 4.6 on these calls, so Sinisgalli is satisfied in his team’s ability to solve customer problems.
Besides taking customer calls, he also has found product councils as a way to get feedback from customers to help dictate the direction Manhattan should go.
“Developing a product council that has real power is a good way to encourage your customers to come forward with their thoughts,” he says.
Manhattan has a small council of about 12 customers for each of its products.
“Any more than that, it’s too hard, and any less than that, you don’t have enough input, but with a dozen on each council, it works out well,” Sinisgalli says.
Each smaller council has a president, and those council presidents — about 20 in all — participate in larger, overall product council meetings three to four times a year.
Lastly, provide a large-scale event for your customers to meet with you each year. Manhattan has an annual meeting with its customers. The last one brought 1,000 people to Orlando to gain more insight into the marketplace and get detailed information about Manhattan’s solutions and products. They have a couple of larger sessions for everyone and then smaller breakout sessions organized by products so people can ask questions and provide thoughts about how the products can better meet their needs. These sessions also help them gauge how prevalent issues are.
“Is this one customer request or were the majority of people in the audience making a similar request?” Sinisgalli says. “It’s a pretty easy way to assess the majority needs of the customer base in these meetings.”
The user conference is also helpful because when customers get around other people that they’re not necessarily doing business with, they’re more willing to speak up and bounce feedback off of each other.
“The most important thing to do is provide an environment that customers are comfortable sharing direct feedback,” Sinisgalli says. “A customer conference is a great mechanism when you have a dozen or more customers using the same product sitting around the table, they’ll tend to get more and more comfortable and feed off each other with suggestions of where to help move our products, so create that environment.”
Focus on employees
If you want to be successful on the people side of the business, you have to start by looking at your hiring process.
“You’ve got to hire correctly,” Sinisgalli says. “When you’re out going on campus or hiring people for midlevel roles, you have to do it with a profile in mind that’s consistent with your culture.”
Sinisgalli looks for someone who’s not only talented but also customer-focused, and he asks a lot of questions to see if candidates have both traits.
“If it’s a college student, it’s a little harder,” he says. “It’s somebody who’s not had work experience before, but then you can ask them questions about what they do in their spare time, how they spend their summer breaks, how engaged they are in outside educational activities, to get a sense for how they prioritize, how they spend their energy.”
If someone has work experience already, it’s a little easier to drive down into his or her core.
“Ask them about what things they were successful at, what wasn’t successful, and then penetrate those areas, and it will come across pretty quickly if they’re focused on customer success or focused on something else,” he says.
Sinisgalli says it’s also crucial to discover whether someone is more focused on personal success or company success.
“Most people are pretty polished and sophisticated,” Sinisgalli says. “It would not come across blatantly. You’d have to ferret that out. … It’s hard to fake more than five or six questions. You penetrate any one line of questioning, and you ultimately get to the core of any person you’re speaking with.”
Lastly, he typically does at least three to five interviews each time he’s hiring someone and also mixes up the location.
“Find more opportunities for the person to behave as they would normally behave,” he says. “Do an office interview, perhaps a lunch interview, a dinner interview, a sporting event. Go to a baseball game or play a round of golf. It’s a good opportunity to better penetrate someone’s true culture.”
Once you have the right people on board, then you have to focus on them.
“Having the right development programs in place is critically important,” he says.
Manhattan has technical training and general manager training, but it also has more elite programs to really hone the cream of the crop. Through the Manhattan Academy, the best of the best spend a week with Sinisgalli and other senior executives in a mini MBA program.
With about 2,200 employees though, it can be hard to figure out whom to invest time and money into, so Sinisgalli relies on his direct reports to help him. Through the semiannual review process, leaders identify team members that have exceptional potential.
“We define that as the ability to do their current job extremely well and the ability to move at least two levels further than where they are today,” he says. “Identify those folks that have exceptional capacity.”
To objectively identify people, he has a matrix with four quadrants on it. One axis is the ability to execute in the current role and the other axis is potential. Ideally, employees want to be in the upper right quadrant. If someone falls into that golden quadrant, then Sinisgalli puts more efforts toward training and developing him or her and ensures his or her compensation plan is strong to keep that person interested in growing with Manhattan.
Lastly, you have to make sure you stay attuned to your employees’ needs and desires.
“Keep an eye out to what’s important to the employees,” Sinisgalli says. “If you’re doing the things that make the employees feel good about working in your company, they’ll do great work.”
For example, if employees are interested in working in China, India, France or another Manhattan location abroad, Sinisgalli makes it happen. If people are interested in working in another department, he gives them the opportunity to try it, and if it doesn’t work out, they can go back to their former role.
“We prioritize that by the top, top folks get the first crack at those transfers, but we try to make that available to anyone who’s in our business,” he says. “It’s one way to expand their knowledge but also keep them excited about working here.”
If you really want to know how your employees feel and what they need though, you have to make them comfortable speaking to you.
For example, about twice a month, Sinisgalli has breakfast with 10 randomly selected associates. He provides doughnuts, juice and coffee and talks for about 15 minutes about the status of the company, and then he opens it up for questions and dialogue. He learns a lot about where he needs to focus his efforts just by listening to their thoughts and ideas.
Another way he connects with employees is by having casual events. During football season, they had a barbecue in the parking deck and encouraged employees to wear their favorite college gear. Sinisgalli sported his Cornell University apparel while grilling burgers and hot dogs and enjoying conversations with employees.
“Create that open environment, and talk to the folks in a relaxed way that will make them comfortable raising ideas and concerns,” he says.
The combination of doing all of these things helps create a strong company culture that encourages your employees to grow with you.
By combining his every employee efforts with his every customer efforts, Sinisgalli has succeeded in taking what was already a good company at $196.8 million when he arrived and growing it to $337 million the past two years. But despite the company’s success, he’ll continue his every customer, every employee, every day approach to ensure Manhattan continues to thrive.
“By making incremental progress on driving up customer satisfaction and making this a better place for employees to work, I believe it will continue to allow us to become an even better company than we are today,” he says.
How to reach: Manhattan Associates Inc., (770) 955-7070 or www.manh.com
About three years ago, Bonnie Curtis faced the challenge of merging Gillette with Procter & Gamble — no easy task considering that both companies had very different ways of doing things and both were very proud of how they did them.
“We usually integrate everything and say, ‘Do it the Procter way,’” says the vice president for Procter & Gamble Product Supply. “In this case, they had some stuff that was pretty good. The question was, how do we take the Gillette stuff that was really good and bring in to the Procter?”
To start, she created an integration team of 20 people — 10 from each side. This team was in charge of finding the middle ground. For example, in one situation, the team was tasked to cut millions from one area’s budget. She knew that neither side could do it alone, so it forced them to work together to create one way of doing things. It was heated at times, with one team member even petitioning Curtis to fire a woman on the other side. In the end, the team found common ground, the woman was actually promoted and the petitioner wrote a glowing note complimenting her on her work.
“That was telling for me,” she says. “We started in this extremely combative position and look at where we got by giving them a common goal that was stretching but deliverable.”
Even after the merger though, people were working 12- to 14-hour days, and Curtis knew that wasn’t right. They needed to become better information factories.
“We need to take information in, process it, and get it out,” Curtis says. “Just like you would in a factory with products, and getting that thing humming so we’re not reinventing the wheel, so we’re not fighting fires … so we can spend our time on improvements.”
She charged everyone to get back 60 minutes in his or her day so the employee could focus on the new work and also be home for dinner with his or her family.
“I don’t want to hear about HR or how someone’s screwing up your time,” Curtis says. “I want you to think about how are you screwing up your time?”
She had one-on-one meetings with her direct reports and asked them how they were doing on this. They sent out quarterly surveys asking people how many minutes they had gotten back. She also spearheaded the campaign by doing deliberate things to help them create more efficient meetings. She took the tables out of the conference rooms and banned computers, BlackBerrys and PowerPoint presentations in meetings.
“The meetings are shorter,” she says. “People are engaged.”
Because people didn’t need two weeks to create an elaborate presentation anymore, meetings could be set much earlier, and people weren’t sleep-deprived from making slides all night.
Now, if she walks by a meeting and sees glazed eyes, she knows someone isn’t doing something right.
“Either you have the wrong people in the meeting or you’re running a really boring meeting — fix it,” she says. “We don’t have time to sit in meetings zoned out.”
She also worked to create a safe environment so that people on the Gillette side or people lower in the organization felt they could speak up in meetings. To do that, you have to show that you’re willing to listen to people. For example, someone four levels below Curtis came to her and explained that when she moved a meeting, it didn’t just affect her and the people who had to be there. Instead it cascaded down, forcing others in the organization to change meetings and commitments, and it actually affected about 100 people. Curtis was floored.
“I said, ‘Holy cow!’” Curtis says. “I went over to my assistant and said, ‘We’re done.’ We’re going to fix things, and if something changes, I’m just not going to the other meeting. That guy had the guts to tell me that. It didn’t even occur to me how much disruption that was causing.”
The key is to do some introspection.
“If I’m classist, it’s going to show up in all of my behaviors,” Curtis says. “I need to think about who I am, what’s my positional power. What’s it look like? What does it mean to me? When I ask for feedback, do I really mean it or am I doing it because somebody told me to do it? The first part is introspection on my part about what culture do I want and what am I doing to help drive it.”
How to reach: Proctor & Gamble Product Supply, www.pg.com
Charles Lipman admits that he has limited skill sets when it comes to technical products. And that’s not an easy admission to make, given that his company, DiversiTech Inc., manufactures air conditioning condenser pads and supplies other technical components for the heating, ventilating, air conditioning and refrigeration industry.
But Lipman has found ways to overcome this weakness and has grown DiversiTech to annual revenue of about $150 million by trusting his 350 employees and knowing when they can help him with something he’s not as knowledgeable about.
“It’s, one, confidence in your capabilities and that of your people,” the president says. “Second is being unafraid of risk, and third, it’s understanding that every decision you make can be wrong and [having] a commitment to review and adjust.”
Smart Business spoke with Lipman about how to grow your company by trusting in people and being unafraid to take risks.
Don’t fear risk. It’s confidence in your people. Of course, you have to have the people to be confident in. That’s important. You can’t have confidence and have it be misplaced.
[You know that] by the results. They have to be placed in situations where they have options, and they have to illustrate the right choices.
You can gauge that even in the simplest of actions — someone who spends enormous amounts of time in critical situations and burns the midnight oil, as they say, is a person with energy and passion, and that matters. A person that will come to you and tell you that the situation is bad. That’s the person you want on board because you don’t have to wonder about it.
If you have people who have demonstrated their abilities to get stuff done and deal with difficult areas, then you shouldn’t be afraid of going into another one.
I have confidence in people because they’re here, first. Second, the review process is proportionate to the amount of trust and the amount of risk. If the risk is great and the trust is modest, then one would have to review fairly frequently. On the other hand, if the risk is low, then the review would be a very long period in between.
It’s very important to have metrics on anything you do. Even if it’s wild speculation, it’s important to put that speculation in writing and have a measurement of where you expect to be and when you expect to be there and milestones to that objective.
Involve people in decisions. You ask them the questions leading up to the ultimate question — what are we doing well, what are we not doing so well, do we have the resources we need to achieve the objective, what will we do if the results are no better in a period of time, what are the options, what option would you choose, what’s the reason?
I prefer not asking one question, and that’s, ‘What should we do?’ Then they don’t tell me what else they’re thinking about.
Many times, one of their other options is one that they really prefer but think you will not and therefore don’t present it.
Let people make mistakes; let them lose money from time to time. You can be wrong, and they can have a success with respect to an idea that you consider worthless, and second is the fact that they know they have your confidence that could cause them to come out with other ideas, some of which might be the game-changers, and they won’t do that if you’re going to be hypercritical of their ideas and not give them the freedom to implement them.
But there are exceptions. The two exceptions are it’s ethically inappropriate, and the risk is too great. That’s not a metric decision. It’s more of taking a look at what could go wrong and how much damage that event would cause. If that event would cause a catastrophic problem for the company, it’s unlikely that we should go forward in any circumstances.
Live your values. A leader has to articulate the values, and he has to do it on a consistent basis. Those values rarely should change. They should be constants. Refer to them at a time of decision-making, and make sure you live up to them, as well. If you don’t live up to them, anything else you do won’t matter.
It’s internal — how do you make decisions, how do you do the right things, how do you want people to deal with people and deal with situations. People use words all the time, but unless you think them through, they don’t have the full meaning that they could. Words like integrity. What does that really mean? If you give it some thought, that’s helpful. It can be as simple as working out what’s the right thing to do and then go from there to decide what we should do. Always keep in mind what the high road is — always know that.
Look forward. You have to have the attitude that you’re not too interested in history — you’re more interested in going forward.
No one likes to change. The only people who like to change are people who like to change others. It’s something that we all have a problem with, and very few of us acknowledge it.
Be persistent in terms of demanding it and rewarding those who do. Rewards are almost always monetary. People are paid based upon their results and the results of the company, and we tell them that.
HOW TO REACH: DiversiTech Inc., (678) 542-3600 or www.diversitech.com
Five years ago, Ken Baggett stood before Reznick Group PC’s partners and unveiled a goal to become the 10th-largest accounting firm with 10 offices over the next 10 years a huge stretch for a company that was, at the time, a $70 million regional player.
“I’ll never forget, one of my partners said, ‘You’ve lost your mind,’” Baggett says. “I knew buy-in was not there yet.”
Over the next year, this CEO and managing principal worked to get that buy-in. And when Baggett presented the following year, the firm had progressed so much that he recast his 10-year projections. This time, that doubting partner asked if Baggett was being a bit conservative. Today, the firm has reached that initial goal of 10 offices, and in 2007, it posted revenue of $230 million.
“It takes a little time when you have a stretch goal to get people to believe you, and you have to continue to preach it until they do,” he says.
Smart Business spoke with Baggett about how to get buy-in for massive goals.
Use your leaders. I don’t always formulate the plan myself. Sometimes it comes from others who say, ‘What do you think about this?’ and we’ll sit down and bat it around.
First, you have to get a small group. You will not get buy-in to something by doing it large scale. Get that smaller group, and let them go out. Be strategic in who you pick.
You have to pick people who will be recognized as leaders already. They’re already go-to people. You say, ‘Gosh, they’re the busiest people,’ but they will still rise to the occasion.
Share history and trends. This was a mistake that I made. I had done the analysis of the history, but I didn’t share that with the partners because you assume everyone knows your history.
When that guy stands up and says, ‘You’ve lost your mind,’ I said, ‘There’s something missing here.’ I re-presented the strategic plan and said, ‘Guys, if we grow at the same 15 percent pace that we have the last 12 years, we will exceed this goal.’ Then people went, ‘Oh, OK. You’re not out to lunch.’
Study your history. There’s a reason we all study history, and it isn’t to tell nice stories it’s so we can either predict that future or try to not replicate the mistakes.
Now, if history isn’t in your favor, think another methodology. Maybe it’s the rest of the industry. The industry has grown, let’s assume, from an average of 10 percent over the last 10 years. We’ve grown at 6 we can certainly be better than average.
If everyone’s averaged 10, don’t play to be average. Therefore, you look around the room and you say, ‘Everyone else has been able to do this. What has hindered us from that?’
Use the industry, No. 1, and then benchmark against other peer group people. Don’t benchmark the guy who’s doing 7 benchmark against the guy who’s doing 15.
Recognize where people stand. In any organization, there’s going to be 20 percent that’s going to jump on the bandwagon and be a cheerleader with you. There’s going to be 60 percent going, ‘Let me wait and see what he does or what happens.’
Then there’s 20 percent that are naysayers. Neutralize the naysayers. Absolutely spend time with your cheerleaders make sure they truly understand what it’s going to take. Let them, along with you, infiltrate that other 60 percent that’s waiting and seeing. It’s like any execution you have to break it down into smaller parts.
Neutralize naysayers. It’s one-on-one. I had to sit down with them and say, ‘Why do you believe that?’ ‘Well, it’s talent.’ ‘Well, part of our plan is to bring in high-level talent in these areas of growth.’ You had to go down a one on one. That was one part of it.
One part was I had to go to a couple people and say, ‘I understand that you’re not buying it, and I appreciate that you’re not buying in to it and that you have a kind of negative personality. All I ask you to do is to not speak in an open meeting negatively against it. If I am proven wrong, I promise you I will give you the floor to talk about how badly I predicted what we could do.’
I have a wonderful group of partners, and those who were uncertain stayed quiet.
I knew I needed their involvement in certain things. I’d say, ‘I understand that you don’t really buy in to it, but this is an area you’re in, and I really need you to do this,’ so I gave them a major task.
If you’re the guard on the football team, and every day you have to go out for blocking assignments, you may not like it, but at the end of the day, if you block well, something good might happen.
Capitalize on cheerleaders. You have to cultivate that 20 percent and say, ‘Here’s what we’re looking for. Let’s think that through,’ and they became part of the solution. They were part of the process. Spend time with them and understand what their desires are.
If you’ve got six parts you’re trying to accomplish, it’s very seldom that one person is going to be involved in all six parts. You have to look at their strengths.
Once you get someone in the right direction, stay out of their way. Let them lead. Just because you’re CEO or managing partner or whatever the title might be, part of that is knowing when to get in there and get involved and knowing when to leave it alone and let smart people run with it. It’s trial and error.
HOW TO REACH: Reznick Group PC, (404) 847-9447 or www.reznickgroup.com
While LeBron James is a superstar in the Cleveland Cavaliers’ organization, everyone can think of a standout employee in their own business. The question is, as a manager, how do you coach and work with this player to make him or her better?
Cleveland Cavaliers General Manager Danny Ferry offered his advice at an event benefiting the Ronald McDonald House about how to coach your best to be better.
“My thought of how we coach the best is, for example with LeBron, being honest with him — whether he had a good game or bad game — being compassionate and trying to do things right, night in and night out,” Ferry says.
Ferry was a standout player at Duke University and went on to play in the NBA for the Cavaliers and the San Antonio Spurs, so he approaches the concept of coaching the best from a player’s view instead of a coach’s.
“At one point, I was the best player on my team, and that was when I was in college and high school,” Ferry says. “I didn’t want to be treated any differently than anyone else.”
It’s important to treat your standout just like the others on the team, and that message should also be communicated to that person.
“This was something that (Duke University Basketball Head Coach Mike Krzyzewski) talked about a lot to me, and this is something that (Cavaliers Head Coach Mike Brown) talked to LeBron [about] — ‘You’re going to have to allow me to be hard on you, and you have to allow me to coach you because everybody else is looking,’” Ferry says. “You have to have that level of trust and communication with your star player and say, ‘I’m going to get on you, and I’m not always going to be right, but it’s important for our culture and important for our team to see that I’m willing to jump your butt more than anybody else.’”
Doing this shows the rest of your employees that you recognize the top performer isn’t perfect. For example, during Cavs film sessions, Ferry says that while the staff uses all of the players’ mistakes, James’ are on there more than anyone else’s.
“In some ways, you have got to put us on your shoulders in the film room, too, and we’re going to learn from your mistakes, as well,” Ferry says.
It’s also crucial that you don’t elevate a bad apple to stardom. “Ultimately, your superstar has to have character for it to really work,” Ferry says. “That person having solid character is hugely important to the potential success for the whole organization.
With solid character, the rest of your organization will try to emulate that behavior.
While it’s important to build up your best person, you also have to be careful of depending on them too much, which is something that, like all managers, Brown has had to work at with his team.
“It’s hard because [James] is such a good player,” Ferry says. “We want to say, ‘Hey, here’s the ball, OK?’ and he can make things happen, but staying with it and putting him more on the back end has been one of Mike’s focuses, and the offense has moved better.”
On top of that, Ferry says the team has done better this past year at playing well when James is out than it has in the past, which wouldn’t have happened if Brown focused only on James.
“It’s a balance, and Mike Brown has to have the credibility to say, ‘Hey, I’m putting us in the best position to win,’” Ferry says.
As the leader, it’s important to utilize your best people to leverage the team, but it’s also important to explain why your star was or wasn’t placed on a project. Doing this fosters trust and builds stronger communication between manager and employee, and
Ferry says Brown does this with his players.
“He’s very honest and open upfront, ‘This is going on, this is going on — I’m going to play you, but this is what I expect, or I’m not going to play you because of these issues,’” Ferry says. “If you communicate afterward, it makes it more challenging because there isn’t as much trust.”
Balancing all of this with everything else you have to worry about as a manager can seem tough, but Ferry boils it down to the fundamentals.
“Whatever it is, you have to win people over with honesty, caring and character, and you have to be consistent — and doing those things consistently.” <
HOW TO REACH: Cleveland Cavaliers, www.nba.com/cavaliers
When TFS Financial Corp., the holding company for Third Federal Savings & Loan Association of Cleveland, had a magician perform as part of its 70th anniversary celebration this year, the performer pulled Marc Stefanski aside and asked this chairman, president and CEO if he could speak with him. While he wasn’t sure what the magician was about to say, Stefanski obliged.
“You and this organization get it,” the man told him. “I’ve done hundreds of these things annually, and nobody gets it. The CEO, a lot of times, doesn’t show up, the people who contract me to come in are in marketing or PR, and they don’t even bother to show up. It’s never the directors or top management there or directly involved. If they do show up, it’s a token appearance, and they go on to something else that’s more important.”
What followed touched Stefanski even more.
“You’re directly involved,” the magician said. “You give things away. You tell people how much you care about them. You can’t imagine what I’ve seen out there. You can’t imagine how far it goes. This is just amazing to see and watch and be a part of.”
What the magician saw was a culture70 years in the making, based on values that Stefanski’s parents believed in when they started the company.
“It comes from the top down,” Stefanski says. “If the leader is focused on one thing but tells all the associates to do something a different way to create this culture out there, it will never happen. The leader has to be visible, has to live the values, has to be the keeper of the values.”
And that’s exactly what Stefanski does. Each year, you’ll see him up on stage with other associates playing in a company rock band in front of employees. This past summer, he paid a visit to a Euclid branch to meet a 103-year-old customer who wanted to meet him because she thought he seemed like a nice guy.
By reinforcing the values in different facets throughout the years, Stefanski has-been able to not only earn the respect of his employees, but that respect has translated into the company having $10.28 billion in total assets and $538 million in interest income last year, up from $8.42 billion and$414 million in 2003 respectively. The key to creating a culture and team that “gets it,” as the magician put it, is first establishing values, communicating those to the organization and having people who embody them. You also need to commit to those same people and involve them along the way.
“My strategy has always been putting people first and strategy second,” he says. “I’ve always believed that if we can do that ... we can be very successful because this is people business. This is not about money. It’s about people and taking care of their money and putting people first.”
Establish your values
You have to make sure that you first identify what is important to your organization. For Third Federal, the four most important values are love, trust, respect and a commitment to excellence.
While some may say that love, trust and respect are soft and don’t belong in a business setting, Stefanski would suggest otherwise.
“The bottom line is, it comes down to relationships,” he says. “How good of father were you? How good of a mother were you? How good of a son or daughter were you? Friend were you? Associate were you working the job?
“That’s the single most important thing. Nobody is going to care how much money you made at the end. Nobody’s going to care what kind of job title you held. Nobody’s going to care how many touch-downs did you make. They’re going to say, ‘What kind of person was he?’”
While the softer values are important in creating a nurturing culture, you then have to balance those to make sure you can still compete.
“Commitment to excellence is actually our balance to all the softer values,” he says. “Without a commitment to excellence, you can’t have No. 1 or No. 2 market share. You can’t be the best you can be or accomplish the goals you want to accomplish.”
Some people may feel that the commitment to excellence is the most important value of the four, but you have to take a look at the bigger picture of your organization.
“I compare making money for a corporation like a human being breathing air,” Stefanski says. “A human being needs to breathe air, but that isn’t your sole existence to breathe air. It’s the same thing for a corporation. A corporation needs to make money, but its purpose isn’t necessarily to make money.”
You also have to realize that while you decide on something, everyone may not fall in line. You just have to be willing to take steps to reaching where you want to go and continuously reinforce it.
“It takes total discipline to those values,” he says. “Values end up being the foundation for the culture.”
Communicate the values
Fifteen years ago, Stefanski was shocked into a new initiative. He was leading senior leadership team associates through a year of meetings focusing on the company. Atone point, he reminded everyone that everything they’re talking about or doing is based on the company’s values. Upon saying that, a man who had been with Third Federal for 30 years raised his hand and asked what the values were.
“I was shocked,” Stefanski says. “I learned from that incident about 15 years ago that you can’t emphasize and talk about the value system enough.”
Ever since that revelation, Stefanski has been on a mission to make sure that the values are known and practiced throughout his organization in various ways. He immediately changed his leadership approach.
“We bounced around from different books and philosophies and business approaches,” he says. “We did a lot of things and never really equated it back to our values.”
Stefanski felt like he hit a brick wall, and he realized he needed to emphasize the values more in everything he did.
“Anything and everything we present, we have to go back to our value system and show how it links back to that,” he says.
Stefanski has also made values a centerpiece of conversation with his executives to ensure they keep getting the word out. He holds off-site meetings with his top10 management people about once a quarter, and at these meetings, they talk about how they can improve the company and the communication of the values. He says he realized that it wasn’t anything he could do quickly and that he would have to work on it over time.
“The Japanese have a great way of going about it — a little bit at a time, constant improvement and all of a sudden you’re king of the hill,” Stefanski says.
In doing so, you have to be consistent.“ Once you’ve found the words that you want to use and the values of it, it’s important to keep the message consistent,” he says.
Now whenever he talks, he’s mentioning the values, including in videos that are made for the company.
“It ends up being almost a replay, but you’d be shocked and surprised how many people are saying, ‘Oh, that’s new and different. I’ve never heard that before,’” he says. “The message can’t be said enough by the top person, by the CEO or the chairman of the board.”
This repetition is important though. “Talk about those all day long because people forget,” he says. “People forget. If leaders are focused on shareholders, for example, or building the company’s worth in the stock market, that will show up, and everyone in the organization won’t be able to create that culture of togetherness or teamwork on their own. It just won’t happen.”
Hold people accountable
Even if your company has values, they won’t thrive if you don’t have the right people in your organization. Stefanski says there are four types of people out there. First are the A-players.
“Those are people who understand and get the values, and they’re good producers,” he says. “They’re hard workers. They understand their job. They accomplish a lot.”
Then there are those that are the B-players, who have the values but aren’t as good at their job. These are people you can work with.
“Give them more training,” Stefanski says. “Give them more support, give them more love, give them whatever to be more successful.”
At the very bottom are the D-players. “The D-players don’t have the values, and they don’t understand what’s going on,” Stefanski says. “They’re easy to not have work here.”
But in between the B’s and D’s are the C’s, which are a bit trickier because they don’t have the values but are really good at theirjobs.
“The folks that are C-players, they can’t last in the organization because they’re just running over people to get their work done,” Stefanski says. “They’re running over people maybe to feather their own cap.”
When it comes to your C-players who are good at the job, you have to sit them down and talk to them. For example, Stefanski has had to sit down with even some of his top-level people before.
“It’s not unusual for us to sit down with someone and say, ‘Look, you’ve accomplished a lot, but on the other hand, you didn’t do it with a whole lot of respect, or you took all the credit, and you shouldn’t have taken all the credit. That’s not how we operate here,’” he says.
Many times, they’ll try to point out their accomplishments some more, but Stefanski will go on to explain that he’s more concerned with people having genuine concern for their fellow co-workers and treating each other with respect than he is with the results themselves.
“We’re talking about the trust that’s built up,” he says. “You can’t build up trust if you’re taking all the credit. You can’t build up respect if you’re taking all the credit. It just doesn’t happen. Those people either they try and they can change, or they can’t, and most of them can’t.”
When you have a situation like that with a C-player, give them a chance to change.
“If their behavior doesn’t change and their attitude toward an associate doesn’t change and they’re still trying to hog all the credit and they say, ‘OK, I can do that,’ and they go back and do the same thing they were always doing, it becomes obvious,” Stefanski says.
He says, again, this is why it’s so important for leaders to live the values so they’re not being hypocritical when reviewing an employee against the values. He’s learned this firsthand with his five kids.
“Boy, I can tell them things till I’m blue in the face, but if I do something a certain way, then they’re doing it,” he says. “People will do what you do, not what you say.”
Commit to your employees
Stefanski once saw a bumper sticker that read, “Love is commitment.” With love as one of Third Federal’s values, Stefanski points out that love isn’t what most people think it is.
“Love can be a lot of things, but without commitment, you don’t have anything,” he says. “Ask anyone who’s been married along time.”
Stefanski’s commitment runs so deep that he doesn’t partake in extracurricular activities like sitting on boards, spending time on the golf course or belonging to a country club. Instead, he spends time with his family and encourages his employees to leave at5 o’clock so they can do the same.
“It’s total commitment to my family and this organization, in that order,” he says.
Even within his commitment to Third Federal, there’s also the rank and file to think about.
“You need to put people first, strategy second,” he says. “In this case, I’m even suggesting that you put your associate first, you put your customers first, and the shareholders follow after.”
While a lot of companies tend to focus on bringing results to their shareholders — whomever that may be, depending if it’s a public or private company — Stefanski recognizes the importance of focusing on his employees.
“I think we’ve seen many examples along the way where the companies and industries have put shareholders first and investment back into the company second,” he says. “Most of those companies are either out of business or currently have financial trouble or you name it — there are major, major issues.”
For example, he says to look at the American automakers. In the 1960s and’70s, they gave a lot of their money back to their shareholders and didn’t reinvest back in their plants.
“They didn’t reinvest back in their people,” Stefanski says. “The result today is that the Japanese are winning the war because they’re going to outsell GM.”
Instead of taking a short-term approach and padding his shareholders’ wallets, Stefanski looks toward the future.
“There’s not a shareholder that would agree with that, but again, if you don’t have a business, how can you give back to the shareholder?” he says. “If the shareholder is in it for the short term, this isn’t a good place to invest money because we’re in it for the long term.”
When it comes to how much stock and other bonuses employees receive, Stefanski rewards the most-tenured employees as opposed to the highest-ranking ones.
“All the consultants said, ‘You can’t do this,’ but we said, ‘Who has built this company?’” he says. “Who deserves those perks and deserves the recognition? These folks have a much more difficult job than I do.”
Rewarding tenure has kept Third Federal’s turnover around 7 percent in an industry where 20 percent or more is common and helps ensure employees will stick around for the long haul.
“We’re building a company to last,” Stefanski says. “In order to last, you have to develop this culture that’s almost cult-like in that it’s radically different than most organizations. It’s easy for Wall Street to
slice and dice up many organizations because they all look the same. A company like ours is a foreign object to them — the reason being we’re in it for the long term, not the quarter-to-quarter thing. We’re in it for 50 quarters down the road.”
Trust your people
One day Stefanski had an idea to weed out smoking on the Third Federal campus. Unlike some companies, he wasn’t trying to fire people who smoked, but he wanted to work to discourage it. Instead of creating a plan himself, he had others figure it out.
“I said, ‘We should be able to do this,’” he says. “That was my input, and what they came up with, I thought it was brilliant.”
His employees came up with an incentive program where if one succeeded in quitting, he or she would receive $1,000. Additionally, employees have also helped develop wellness and green initiatives across the organization.
“The bottom line is we accomplish a lot because we get people involved, and we get people involved in the early stages, not just in execution,” Stefanski says. “We want people to be part of the creative part and come up with a meaningful program.”
He says it’s important that as a leader, you keep your opinions to yourself when employees are developing ideas.
“It’s certainly a team effort, and my input is minimal,” he says. “My job is to basically create the vision and be the keeper of the values and grease the skids along the way if someone runs into a stone wall and make sure they can be successful on the job and the program can be successful but not that I should get credit or I should be the leader and get in every picture. I love to have the associates a part of it.”
He says that if accomplishing huge results is important to you, then you need to have a team working on things instead of yourself.
“If you run a race and if you race one person four times around the track or you race four people as a team, the team will win 100percent of the time,” Stefanski says. “More synergy can be created if you put a team together to brainstorm the how to implement these kinds of things around the organization.”
While some may not see the benefit of a values-based leadership style and culture, there are clear reasons for Third Federal.
“If you keep doing this stuff, it can be very beneficial, and it can work,” Stefanski says. “We treat our associates well, and we have fun at work, but the expectations are that they’re going to treat the customer well. I think that if people feel good about themselves, and they have a career, and they feel good about their family ... that pays dividends 10 times over. People are much nicer to customers, and they’re more engaged with the customer, and people appreciate that. There is method to the madness. We’re not just giving the bank away. We want people to be happy on the job so they’re happy treating customer the way they want to be treated.”
And so far, Stefanski feels like he and his people are doing a good job it.
“We’re creating a foundation for the next generation of Stefanskis with the hope that they’re smart enough to realize this isn’t too bad and to look back and realize that what was created was a good thing,” Stefanski says. “I hope, and I think, my parents and all the founding people are looking down on us now and saying, ‘I think you did a good job.’”
HOW TO REACH: TFS Financial Corp., (800) 844-7333 or www.thirdfederal.com
“The change was really two things,” Branch says. “One was to deliver one Deloitte — how we go to market. The other was to really take advantage of our size. There are a lot of things you can do in the marketplace as the Goliath. ... The change was to get us focused but also to get us acting like we had capabilities that our competitors did not.”
With any major change — even if you’re not part of a $9.85 billion professional services firm like Branch’s — you’ll need to follow certain principles to ensure success. He says leaders have to do three crucial things: Define the reality, paint the vision and provide hope. After doing these things, he already has seen changes in his firm.
“The talk and the thinking that we’re seeing now throughout the firm around delivering one Deloitte to the marketplace is really inspirational,” he says.
Branch is proud at how quickly he’s seen his 1,500 people adopt that mentality and communicate more across functions to better serve clients.
“You can hear it in the break rooms,” he says. “You can hear it as they talk to our partners. You can hear them thinking about it when they’re organizing their plans around serving our customer. ... We’re starting to see the fruits of our labors and the actions in how we’re actually going to market and how we’re serving our clients reflects a one Deloitte way of doing business.”
To successfully lead your own change, here’s how to do those three crucial things.
In any change process, you first have to explain the status quo to the people in your organization.
“The leader has to first define reality,” Branch says. “Defining reality is important to understand what the current situation is and defining a reason for change.”
He says this must be done on two separate levels. “It occurs at the institutional level where you look at the marketplace and the overall factors causing change, but you also have to define a reality for all individuals involved because change is personal,” he says.
In order to clearly see what reality your company is facing, you have to be honest.
“Unbiased objectivity is really important to defining reality,” he says. “Not a slanted view, not a view that is for any other purpose than to paint the facts so that everyone can start on a level playing field.”
Objectivity is best found in facts. “Oftentimes, facts are hard to come by,” Branch says. “Sometimes data is hard to come by ... but having facts and having a fact-based analysis is really important to define reality. That takes some research.”
In defining Deloitte’s reality, he looked at what the company was capable of delivering against the market and competitors and what he considered to be important to achieving success. One change associated with that was to build Deloitte’s international work. He saw that a lot of the work in Atlanta was either coming in from or affecting other countries, and if it was that heavily focused now, he could only imagine what it would look like in five years.
“One of the things about change is, the changes that are most successful are those that are marketplace-driven,” Branch says.” Having a burning platform is really important in order to make sure the change happens and that you get all of the enrollment and buy-in of an employee base.”
While you may have facts and be able to clearly present those facts to people, you also have to make that reality personal.
“One of the things that I’ve learned is that all politics is local,” Branch says. “Well, for an individual, all change is personal. The reality of change and the effects of the current situation on an individual is important also to consider.”
To best do that, he suggests having someone who can easily relate to your employees communicate that reality.
“Defining the reality for the individual has to be done at a level relevant for that person ... in a place that is closest to him or her,” he says. “That is the supervisor or team of individuals comprised at that level to gather the facts around what’s going on, what needs to change and what impact the change will have on the individuals.”
Create the vision
After you’ve defined the reality of the situation for your people, you next have to show them where you’re going.
“The second thing a leader is responsible for doing is delivering a vision around what the future state will be and the benefits and what life will be like or what the situation will be after the change occurs,” Branch says.
Creating the vision, like defining the reality, is grounded in what the market is doing.
“It’s fact-based, and it’s based on the business imperative,” he says.
“There is a data element to it. There’s a factual element and a research element of understanding the facts of things that a reoccurring around you. It’s sensing where the market is going, and it’s putting all the data together to create some assumptions —some hypotheses — of what’s going to be important in three, four, five years.”
Once you have an idea of the future, you have to make it actionable.
“Put that together in terms of ‘What do we have to do at 9 o’clock on Monday morning to build those capabilities and change the organization to be effective in that marketplace,’” Branch says. “That’s the important piece.”
He suggests creating a road map for the change you’re implementing.
“Along that road map, there are different streams of work that relate to different pieces of the organization or processes or technology that have to change,” he says. “You have the requisite milestones of things that are expected to be done at a certain period in time.”
Having a road map with milestones allows everyone to have a common tool to track the progress, and then you have to create subcategories for the road maps.
For example, Branch says if there is a plan related to technology, that will probably have several subcomponents because there may be many systems or applications associated with technology.
“Break down the overall road map of going from current state to future state into actionable work streams with benchmarks or milestones to know that you’re getting there actually,” Branch says. “That’s how change processes are deployed effectively in an organization.”
When setting those benchmarks, you have to take into account your organization’s capabilities to change.
“The philosophy on how you set those as to how aggressive you want to be, how much you claim that you want to have accomplished in a set period of time, all of that is related to the entity’s capability to change — that is how quickly the ability for a company to change but also how aggressive or substantial the change imperative actually is,” Branch says.
While a written vision with benchmarks is important, the vision lies in more than apiece of paper.
“When I say vision, it’s not just describing it in a document,” Branch says. “It’s for the leader to be personally identified with the future state. That is delivering the vision. Most effective leaders are those that can be readily identified with a future state, and we see it all the time in business where senior executives are identified with changes that are effected in their organizations.”
After you’ve defined reality and created the vision, you still have to help your people believe they can get there.
“Third, and probably the most important one, an important thing a leader can do is provide hope and the inspirations for all of the people involved in the change to believe that success will happen and it will be a good thing,” Branch says. “Providing hope is a very important thing for a leader to do, and I assure you you’re not going to find that in any of the textbooks around change management.”
There are two elements crucial to providing hope in your organization.
“The first is showing up,” he says. “A big part of providing hope is to show up personally in a change process.”
He says that being visible and accessible is the single most important thing in the change process from the leadership perspective because it provides inspiration.
“People associate change initiatives —again all change is personal — with the leaders personally,” Branch says. “If Brad doesn’t show up, then it’s considered to be either not important or not supported — a whole variety of negative reactions can occur if the leader doesn’t show up. Being visible is the single most important thing.”
But even if you show up, you have to be there mentally — not just physically.
“Stay connected,” he says. “Talk to people, talk to partners, talk to staff. Listen to everyone, but just be available. You’ll be surprised what you’ll pick up. It’s just amazing the great things you learn from your people.”
Branch will often ask about how the change is going, what they see, what changes have they noticed, and is it easier for them to be effective or do their work. He says to then listen specifically for feedback and opinions about what’s going on.
“The most important part of good listening is not talking,” Branch says. “I don’t mean that flippantly, but listen to what people say in a nonjudgmental fashion so they feel empowered and open to talk.”
This helps them not be nervous about talking to you as a senior person in the organization. Then you have to take that feedback to heart.
“If you’re soliciting opinions, it’s important to really listen to those opinions and use those opinions around what the final judgment is going to be,” he says. “It has to be genuine.”
While you may not be able to incorporate all their feedback, if they’ve been heard, it goes a long way in providing hope and creating buy-in.
“If the opinions are valued, part of the outcome, even though they may not agree with the outcome, as long as they’ve been heard and considered, that tends to work pretty well,” he says.
The other element of providing hope is providing support even when things get rough.
“Not all change happens perfectly,” Branch says. “Change is hard for a reason — it is difficult. Providing hope is providing support in the face of adversity so when things don’t go well or there are setbacks, to continue to have confidence in the team, in the people, in the change process.”
To do that, you have redefine your reality. “You’ll define reality throughout the process,” he says. “Keeping a view of delivering the vision — you do that constantly.”
This will build trust and help people get through the process successfully.
“Change isn’t a destination,” Branch says. “It’s a process. Halfway through the change process, if the destination changes, that’s OK, and you would expect that as you learn more and as you become more competent on the marketplace.”
HOW TO REACH: Deloitte LLP, (404) 220-1500 orwww.deloitte.com
Throughout his career, Bill Donges has grown accustomed to managing change.
“I’ve been a professional change agent,” Donges says. “I’ve moved from company to company. What you find is you have some current culture, some condition of the company ... and it wants to come to some new place. Sometimes, they know exactly where that is, and sometimes, they don’t, but you have to go through this transition.”
The problem with change is that it’s not easy to implement.
“There will be a lot of skeptics,” he says. “They’ll ask a lot of questions, and a lot of change initiatives simply don’t work because the people have resisted those changes and the uncertainty that the changes have caused. My rule of thumb on that is you have to lead your way through a change — you can’t manage it.
“You have to be out in front. It’s change leadership, not change management. You have to be out there making it happen. It’s work to do that. You will get people pushing back. You’ll see the culture not wanting to go to a new place. You have to take it there.”
His latest assignment has been the transformation of Lane Co., an Atlanta-based real estate management and construction firm. Since joining the firm as CEO in the spring of 2005, Donges has moved the company from being just a local player into a $220 million company operating throughout Georgia, North Carolina, Florida, the Mid-Atlantic and Texas. He has also increased the number of new construction units from 352 in 2006 to 1,329 last year. He did it by focusing on communication, setting goals and winning over employees who resisted the changes.
“It has a lot to do with your attitude and how you go into it,” Donges says. “It can look like a very tough battle, but you have to be into it and get a thrill of the battle. You know it can be difficult, but if you know what the end is, you can work through it. Just look for the positive in it. It’s the only way to do it.”
Communicate the changes
When you want to change something in your organization, you first have to let people know what’s going on.
“First and foremost, you have to communicate what you’re planning, what this new change initiative is, and you have to be very straightforward,” he says. “I watch people all the time. You get rhetoric, and the words don’t match up exactly in the people’s minds with what’s going on.
“They just communicate, ‘These are some of the goals and objectives,’ and they do it in a way that doesn’t include data.”
Providing data to your employees helps them understand the reasoning behind the change and helps them buy in.
“The communication isn’t just verbal,” Donges says. “It’s also data and performance information about productivity or customer satisfaction or financial performance. ... It’s not just happy talk. It’s not just having picnics and wearing buttons and having a lot of pep rallies.”
If you don’t provide the reasoning behind the changes, employees will get nervous and start to question their jobs and the company, affecting your ability to ultimately get changes implemented.
“People are wanting to hear the truth,” Donges says. “And they want to know, to the extent that you can share with them, what the problem is — we lost a major client, our quality numbers dropped, our productivity dropped. A lot of times managers or leaders hedge. They don’t really tell them the truth, and you have to face the truth.”
Even if you’re honest with people, they still may not understand or see the benefit of the change, so you also have to show them why they should change.
“They’re very skeptical when you start proposing these changes because most of them have been through change initiatives and might or might not feel positive about where you’re going,” Donges says. “If you feel you have got to go to this new place, you have to present it as an opportunity or you have to present it as a crisis.”
Lastly, explain big changes in person. Rolling out major company initiatives over the Web isn’t going to cut it. For example, when one of Donges’ leaders sent out a scathing e-mail to 20 people in the company saying that the sales department wasn’t doing its job, Donges had to address that person and explain that communicating via e-mail wasn’t effective.
“I’m just amazed that we’ve evolved to a new level of communication,” Donges says. “Talk to [employees.] People get fired and change initiatives are announced and get rolled out over e-mail overnight, and nobody’s communicated anything to the people.”
When you’re leading a change initiative, you need to recognize that people will start to lose their momentum, so you have to keep them engaged in the process.
“When you’re trying to move people from one state to another, you have to create a sense of urgency,” Donges says. “You’re trying to move the company to a new place. Over time, people get fatigued, and they lose that passion.”
You have to create methodologies to keep the sense of urgency in place to keep people moving forward.
“Create precise, short-term goals, so that if they hit those goals, they see that we’re moving to this new place.”
For instance, when Donges arrived at Lane, the company had more than 100 accidents the first year he was there. He wanted to lower that number, so every board, department head and location meeting started by addressing safety.
“You have to get people’s attention,” he says. “Every single orientation, that’s the first thing that I talk about — safety.”
But establishing goals isn’t enough. You have to break that goal down and understand the smaller components.
“You can sit down and say, ‘I’m supposed to be in construction; I’m supposed to hit the goals of quality and cost and time,’ so that on the surface is very simple to do,” Donges says. “How you get the data and how accurate it is and how relevant it is to those three goals is important.”
For example, if Donges says he wants to be the highest quality builder in the country, he has to look at how that’s measured. Is it by the number of client complaints? The number of violations he receives from inspectors? Or his own quality-assurance process?
“It’s not easy to get there,” he says. “Sometimes, your initial understanding of what those goals are like doesn’t translate into an immediate data point. You have to understand what it means, and sometimes, you have to try some, measure them and see if they’re relevant.”
When testing your metrics, look for employee feedback. “That comes out when you start having your meetings with people and they say, ‘Why are we measuring how many nails we used last week? It doesn’t make sense,’” Donges says.
After you get feedback, then you can better hone what you’re measuring.
“You find yourself refining these to a place where you really get it,” he says. “You get the metrics right over time because it actually bares itself out because it shows that what you did is relevant to that word — quality.”
By tracking the data and promoting safety, Donges was able to reduce the number of annual accidents from around 100 to 30, and even the severity of the accidents has lowered. Beyond numbers, now when he talks to employees, they’re talking about safety, too, because they’ve seen how much he’s reinforced it.
“You could see now that safety was now a state of mind,” he says. “It wasn’t a rule or requirement. It was something they believed in, and you can look at the data and see how the metrics are working out for you.”
Deal with resistance
With any change, there’s going to be resistance, and Donges welcomes it.
“Not everybody on your team is going to support you,” he says. “The easy ones to pick off are the ones that are absolutely overt about it, and they tell you they don’t think it’s the right thing. I celebrate those people. I absolutely see it as a positive when I see people resisting. I encourage them to openly talk about it, and I encourage them to state their reasons. That leads to some good communications.”
The biggest challenge is dealing with those who aren’t so vocal because you won’t necessarily know who they are.
“The ones that are difficult are the ones that are going covert on you,” Donges says.
Sometimes, you won’t know they’re resisting until someone flat out tells you.
“You just have to know you’re going to have that,” he says. “Don’t try to subvert it. Just move forward. I encourage as much of the openness about the negativity because it forces more communication, which ultimately leads to people coming over to your side.”
When you’re trying to get someone on your side, present it as a chance for them to make a difference.
“You can look at the change as a crisis ... or you can look at it and say, ‘This is a tremendous opportunity — let’s roll up our sleeves and get control of what we can take advantage of here and find the opportunity for the company or division,’” Donges says. “You have to get a mindset that that’s what you’re doing and become passionate about it.”
Donges also warns that you have to accept the fact that not everyone will come to your side; however, if that resister leads a division or department, then you have to replace him or her.
“Put a new leader in — a change agent who’s going to affect that — otherwise, you’ll never make any progress if the leadership doesn’t believe it,” he says.
If you’re unsure of whether someone is buying in or not, then look around and really observe.
“You get feedback,” Donges says. “You get feedback from the performance of the division of the company. You get feedback from people who are leaving. You get turnover issues starting to develop. You get feedback from either their sales or their customer satisfaction numbers.
“Usually, it’s the data that exposes them, but what kills them is you see that people are not participating or being part of the change initiative. It stands out like a sore thumb, but you have to see that. The data already validates what you probably already know and what you’re hearing back from people.”
This is particularly important for certain initiatives. For instance, one change Donges made was to Lane’s technology system.
“If you look at the big scope of what you’re trying to achieve, you have to have certain people on board,” he says. “If you’re going to change your technology platform, you better have your CIO on board. If he’s not, your initiative is going to fail. You better understand — is he one of those who’s resisting this?”
If he is, you have to determine if it’s because he disagrees or if it’s because he doesn’t understand it.
“If there’s just resistance because he doesn’t understand, then that goes back to adding clarity everywhere you can in the communications process about why you’re doing this, what are the goals, what are the costs associated with the change, what’s going to happen to people, to computers, what are the issues that have to be dealt with, and just bring them out.”
HOW TO REACH: Lane Co., (404) 459-6100 or www.lanecompany.com
When A. Malachi “Mal” Mixon III started with Invacare Corp. in 1980, the company had about $19 million in sales the previous year. He used to ask his 300 employees what kind of company they were, and they used to say a wheel-chair company. Slowly, though, Invacare redefined itself into a home medical equipment company, which allowed it to get into even more products. This led Invacare from being simply a U.S. company to expanding internationally. Last year, the company, now with 6,000 associates, hit $1.6 billion in net sales throughout 80 countries. Mixon accredits it all to one thing: innovation.
“These are conscious decisions that we’ve made that have made us totally different and innovative relative to our competitors,” the chairman and CEO says.
Innovation has also helped the company take its product development time from two years down to about 13 months. It also used to deliver custom products in four weeks, and now it takes five days.
“Some people think innovation is only something you apply to a product,” Mixon says. “Without exception, no matter what the functional area is, there are innovative possibilities, so you really need everyone in your company to think about how to do things better.”
One of the keys to getting your people thinking of innovation is to get rid of the sacred cows and allow people to challenge the way things are done. He says that how you handle yourself in meetings and the body language you give off are critical in this endeavor.
“It’s a matter of your culture and whether, if you challenge the boss, if you get your head cut off or are encouraged to speak up,” Mixon says. “There’s a difference in insulting someone or being rude or saying, ‘You’re stupid,’ versus a legitimate challenge to the way of doing it.”
Another key to driving innovation in your business is to focus on your customer.
“If you really focus around the customer and what they want and what they want to achieve rather than the product you want to sell them, you’ll find that you’ll be more innovative because you’re trying to help that customer be more successful, and if they’re more successful because of you, then they’ll reward you with a purchase,” he says.
For example, Invacare has been a leader in lobbying in Washington for change to reimbursement for home medical products. Recently, it was successful in getting legislation passed by Congress to change the way reimbursements occur, and Invacare’s customers have poured in the e-mails and letters thanking the company because many of them are small customers that don’t have the size, power or money to carry out a lobbying program.
Lastly, you have to look for ideas and changes that are really going to move the needle. At Invacare, Mixon and his team look at ideas and classify them in three categories — maintenance, innovative or disruptive. Maintenance ideas are just that — smaller things that need to be done to make basic improvements. Then there are innovative ideas that make things better, but the biggest ideas are the disruptive ones.
“Beyond innovative is disruptive,” Mixon says. “It changes the whole way something is done in an industry.”
He notes that examples of disruptive ideas are cell phones, jet aircraft, color TV and computers because they have completely changed the way people live, work, travel and do business. At Invacare, the team came up with a way to make oxygen in your home instead of having it delivered in tanks, which was a disruptive idea for the industry. So instead of trying to just push innovation, look for those disruptive ideas that can propel your company into new territory as a leader.
“If I change something and make it a lot better, that’s innovative, but that’s not a breakthrough, and it’s not a change agent that really causes you to change the way you’re doing things,” Mixon says. “You have limited engineering dollars, so who gets the money? You look at what impact it will have on your business, your sales, your margins, and there’s always a risk.”
While innovation also leads to change in an organization, it’s important to not get caught up in the fear associated with change.
“The inevitability is organizations either go forward or backward,” Mixon says. “There’s no treading water, so you have to look at yourself over a period of time and say, ‘Am I growing and succeeding and making good returns for my investors?’ Sometimes, a lot of little innovations add up to big success.”
HOW TO REACH: Invacare Corp., (440) 329-6000 or www.invacare.com