When A.D. Frazier was asked to join Danka Business Systems PLCby some of his friends who served on the company’s board of directors, it sounded like a great opportunity for him. “When you do thissort of thing and help things turn around or fix things that are brokenfor a living and have a chance to do it again, it is a fascinating opportunity,” says Frazier, chairman and CEO of the office imaging systemssupplier. When Frazier joined the company in March 2006, it was having its fair share of difficulties. It had lost money for several quarters,had debt that needed to be paid down and had a business model thatwas focused on the wrong end of the balance sheet.
Though revenue was growing, losses were deepening. A previousmanagement team had made an ill-fated acquisition of EastmanKodak’s global copier business using a lot of debt to finance the deal.The acquired business was sinking at the time of the deal and continued to decline afterward, dragging Danka down with it.
“Our sales process was focused on revenue and moving and sellingcopiers and was not focused on bottom-line profitability,” Fraziersays. “It was important to them that growth and revenue was a measure of success. Whether that was taking their eye off the ball orwhether that was what they set out to do, and they thought the profits would follow, I presume the latter, they didn’t.”
Frazier looked at the numbers and realized he needed to change thephilosophy of how the company operated. The previous managementteam focused more on revenue and growth, while Frazier shifted thefocus to profitability, even if it meant reducing revenue.
He refers to a big revenue number that isn’t transferring into profitas “empty calories.”
“It’s just like when you are on a diet and you are eating somethingthat doesn’t give you anything but calories,” he says. “That’s whatdieters call things they shouldn’t eat.”
Frazier concluded that to get the company back on track, he wasgoing to have to create a new vision for the company that was focusedon profits, change the culture to execute that vision and pay down thedebt load that was holding the company back.
Listen to your employees
In his first few months at Danka, Frazier developed a vision aroundwhat the company was capable of, and he broke it down into three different parts: Make every customer a reference, reduce the opportunity for errors and meet established targets.
Along with using his own experience, Frazier developed the visionthrough working with the people at the company. By talking to theleadership and the employees, he was able to create buy-in for thevision.
“It’s amazing how much you can find out if you just ask people whatis going on,” he says.
By listening to people, Frazier found he didn’t run into too manyresisters when he was forming his plan.
“I went on the road,” he says. “I think I had over 25 town-hall meetings all over the country with our people and listened to what they hadto say and told them what we were trying to get done. They generallywere pulling on the same oar as I am. They seemed to be pretty willing to do what I asked them to do.”
Frazier says he doesn’t have any secret formula to why he didn’t faceany resisters when talking about some of the ideas he wanted toimplement. He simply told them he was there to help the company andfocused on doing so.
“I told them when I came here that I really didn’t need to work, andI was here to help them be successful,” he says. “The only interest Ihad is to help them be successful. I’m not trying to get in here to makea quick buck and get out, and they are left holding the bag. I don’t havean out package and would have refused it, if it would have beenoffered.”
He took a pay cut in May to back up his claim.
Even if some employees would have resisted, Frazier says forcingsomeone down a path they don’t want to go is an unwise move foreveryone involved.
“I never felt like I had to force anybody to any conclusion,” he says.“We’d lay out the facts. ‘This is what we are thinking about doing.’ Ifthey bought in, they bought in. I didn’t have to browbeat them. If yourideas aren’t worthy, then people shouldn’t follow them. If they areworthy, then you don’t have to beat them into submission in order toget them adopted.”
Frazier says it’s important to get buy-in on your vision and to makesure that vision is consistent.
“I’ve been around managing some part of business for almost 40years,” he says. “But the thing I’ve learned over this period of time ismost managers who get fired, get fired from within. They are firedbecause their people lost confidence in them or didn’t have confidence in them. They behaved in a fashion inconsistent with what theysaid.”
Frazier says employees are expecting their leadership to presentthem with thoughts, themes, ideas, plans and initiatives that resonatewith them personally.
Leaders also need to find out what their employees are capable ofdoing individually, and what the company is capable of as a whole.
“You can almost guarantee certain failure unless you shape yourplans around what the company can do,” he says. “You can make allthe promises to the street or to the board or to the shareholders youwant to, but you’ll fail because the people you got can’t deliver.”
Once again, Frazier took a simple action to find out what the company’s employees were capable of doing.
“I went around and asked,” he says. “I listened to them, read theirbody language, listened to the words they said, had meetings aftermeetings after meetings with the key staff and key direct reports andothers who had a lot to say about the things they thought had notworked so well in the past.
“It sounds so hard. But, for goodness sake, if you just check your egoat the door, and start by hearing what somebody else has to say andsee what you can learn from that, then it doesn’t take long to separatethe fly poop from the pepper.”
Frazier says from there, you must take demonstrative actions basedon what you’ve heard.
“That is what is frequently referred to as walking the walk as well astalking the talk,” he says.
Build a supportive culture
Frazier says the company’s culture was in desperate shapebecause of the mixed messages being given by management.
“There were too many senior people at the head office givingorders, and sometimes the orders conflicted one with the other sopeople weren’t sure whether to shoot gophers or rattlesnakes,” hesays.
One way Frazier gave clarity and improved the culture wasrenaming the head office in St. Petersburg the “field supportoffice.”
“They are working here to support the people out in the field,” hesays. “The fact that their office is in St. Petersburg gives them nohigher knowledge about the business. In fact, they probably haveless high knowledge about the business than the people closer tothe customers. So, just as a small thing, I said, ‘Your job is to helpthe people out in the field be successful. If you don’t have a jobdoing that, then get one because that is the only kind of jobs wehave here.’”
Besides reorienting the attitude of the corporate office, Frazieralso changed the culture by recognizing people who made animpact at the company.
“What I did ask the board for and got was the authority t o giveaway stock,” he says. “I wanted to be able to give stock awards onthe spot to anyone I felt went above and beyond the call of duty attheir job. We’ve given close to 100 of those awards in the past year,and people seem to react very positively toward them.
“It’s not much. It’s only 125 shares. The stock is only worth abuck so we are not talking about a great deal of money. I thoughtit symbolized the right values because the employees are workingfor the shareholder, and I wanted them to be a shareholder. Also, Iwanted them to have an interest in stock evaluation and have asense that they had a dog in the fight when it comes to running thisplace.”
He says putting the culture back on track by giving employees aclear direction and recognizing them helps keep the company in astable position.
“As long as you stay in touch with your people and do what yousay you are going to do, things tend to stay on a pretty even keel,”he says. “The minute you start saying one thing and doing another,you get into real trouble and probably should.”
Know your assets
Besides redirecting Danka’s people, Frazier also had to deal withthe company’s financial problems.
In order to pay off debt, Frazier had to organize a process for selling Danka’s profitable European business.
“You have to pay your money when it comes due,” he says. “It’snot a choice. So, the question is, where are you going to pay it?Either you earn it and pay it back out of earnings or you sell something and pay it back.”
The company went back and started talking to the people whoexpressed an interest in the European division as a whole or thosewho wanted to buy parts of it. As it turns out, there was a lot ofinterest in people buying parts of it, but in the end, Ricoh EuropeB.V. ended up purchasing it as a whole in early 2007.
“It was the only thing left that we had to sell,” he says. “I didn’twant to sell it. I didn’t have any choice but to sell it because it wasthe only asset that people were interested in buying.”
The move has dramatically changed the scale of the company.Before the sale, Danka had slightly more than $1 billion in revenue. Now it’s about $450 million, and the employee head countwent from 4,000 to 2,000. But the move allowed the company topay off and refinance its debt, dropping the debt burden from$254 million to $120 million, and reducing interest expenses from$29 million to $13 million annually. The company also reduced itsnet loss from $85 million in 2006 to $29 million in 2007.
Frazier says coming to terms with having to sell a profitable portion of the company wasn’t just a matter of doing it. It was a matter of looking to the future and deciding what was best for thecompany down the line.
“Nothing is simple,” he says. “In retrospect, sometimes things looksimple that, in the course of undertaking them, weren’t simple at all.The need to sell something was either sell something in the UnitedStates or sell something in Europe. We had a better-developed business system in Europe with more clearly established market positions and a better structure. So, I thought it would have been easierto sell, and it was, than in the U.S. where we had to rebuild the structure, put new leadership in a number of places and hire a bunch ofpeople.
“So, we had more work to do on this one; although, I felt likefrom my standpoint, the U.S. business had greater long-termpotential. So, if we fixed it, it would be good to keep it as opposedto fixing it and selling it.”
HOW TO REACH: Danka Business Systems PLC, (727) 622-2100 or www.danka.com