Lead by example. You have to show people. People follow leaders that are actually doing something.
During the summer, I like having Friday afternoon off to go play golf, so I made a new rule that everybody gets Friday afternoon off. If I left every Friday at noon, I would expect everybody else to do it.
If you want people here at 8 o’clock, you’ve got to be here at 8 o’clock. You want people to work over the weekend, you’ve got to be willing to work over the weekend.
Don’t just tell people to do it. The people that come up here and work on the weekends, if they didn’t see me up here, by about the third weekend they’d go, ‘Well, if it’s not that important to him, why’s it important to blow my weekend?’ Be willing to do it yourself. If you’re not, then you’re just not the leader.
Empower people. I hire smart people and count on them to get the job done. I have what I call the big-boy and big-girl rule. Everybody’s a big boy and big girl when they come to work here.
I hired an executive vice president, and I said, ‘We’ve got a meeting in San Francisco, and he started in ‘What flight are you on? When are you leaving? Who’s going to pick you up? Where do we go when we get there?’ I said, ‘No, no, no, big boy. The meeting is at 3 o’clock in San Francisco. Here’s the address. I assume you can get there.’ Everybody’s a big boy [or] big girl. They can figure it out.
It gives them a freedom to get it done. They feel like they’re in control. Nobody’s dictating to them how to get it done. Just say, ‘Here’s what we need to accomplish,’ and you show them the mountain and hope they get to the top through their own devices.
If I have to go do it, why did I hire them? If I really have to do it, then we have to talk about splitting your salary with me. That gets their attention.
Lead people away from micromanaging. Back off don’t micromanage. Let people do the job you hired them to do.
Everyone here is an intelligent person. If they weren’t, we wouldn’t have hired them, and if they’re not intelligent enough to get the job done, we don’t need them anyway.
We have some people that still are dead set on micromanaging and making sure everybody knows exactly every step they need to do to accomplish a goal. Forget it. Keep working on them because people who are micromanagers, it’s in their DNA.
It’s not something you cure overnight by any stretch. It’s just how they are, so keep reminding them to back off. We don’t do training on micromanaging. You can’t train them. It’s just a style. Hope they pick it up by watching.
Define the vision. Be very clear, concise and specific. You cannot be vague. The vision itself is, by the very nature, vague, but then you have to take the next step.
What does that mean, and what do we have to accomplish to achieve the vision? You have to be extremely specific.
Let them ask as many questions as they want to. I try not to speak to them too long without, ‘Stop me anytime if you have a question, you don’t understand or there’s something that’s not very clear.’
Overcome cultural barriers in international business. The challenge is communicating enough, communicating the right message and in the right form.
When you communicate, don’t make references that people around the whole world have no idea what you’re speaking of. You can’t use references like, ‘We want to get the ball over the goal.’ They don’t quite get that in Beijing. I started talking to people face to face, and they’d look at me like I was from Mars. It gave me a little hint that they don’t have a clue what I’m talking about.
It also changes your jokes. Every time I went to Europe, the employees would say, ‘OK, you’re not in the U.S. anymore. We don’t think the way Americans do.’
You just have to force yourself. When you get to a new country, go along with them. I always have them take me out to dinner and give me a tour. Just keep a smile on your face, and go look at churches. I’ve seen a lot of churches especially old churches.
Own your ideas. I started a company called 800-FLOWERS years ago. I got the phone number, went out and raised a bunch of money.
The guys that I raised the money from decided I was too young to be the CEO. They told me I had to go hire a CEO, so we did. I brought this guy in, and he immediately ran the company into the ground.
If it’s your dream, your vision, you can’t pass that on to somebody else. You cannot translate that. You have to go with your own gut. The guy who cares most about it is the guy whose idea it is, so when somebody comes to me in the company and says, ‘Here’s an idea for a new product,’ I turn around and say, ‘Perfect idea it’s yours. You go make it happen’ because nobody cares more than the person that has the vision and the idea.
You cannot go hire emotion. You can’t hire drive. If it’s your vision, your idea, you have to go do it.
HOW TO REACH: Pegasus Solutions Inc., (214) 234-4000 or www.pegs.com
At this time a few years ago, the industrial economy, like many others, had declined after the Sept. 11 terrorist attacks, so the company was distressed and contemplating how to make ends meet during the downturn.
As Demetriou listened to the debate about the merits of entering the chicken manure recycling business, he couldn’t help but think of what he was doing at his own company, Noveon Inc., which was also in a downturn in the chemical industry. Instead of entering silly markets, he was focusing his management team on cutting costs and restructuring, so he could tell these guys were severely distracted.
“Rather than the management team coming together and focusing on, ‘Let’s cut costs and let’s sell some underperforming assets and let’s restructure in a downturn,’ they got distracted,” Demetriou says. “They started getting creative ideas of, ‘Well the aluminum business isn’t attractive, let’s go into other markets and other businesses,’ and they started exploring really ridiculous initiatives like recycling chicken manure.”
After the sale of Noveon, he and a core team brought Commonwealth and IMCO Recycling Inc. together in 2004 to form Aleris International Inc. Immediately upon doing so, Demetriou, who became chairman and CEO of the combined entities, shut down all the noncore activities, including the chicken manure initiatives, and made his purpose clear.
“We’re an aluminum company, and whether the market is down or positive, this is our long-term business, and we’re going to strengthen it.”
Upon creating a strong focus, the organization heaved a collective sigh of relief.
“The whole organization was like a sponge because everybody was waiting for leadership and focus and clear direction, and when you get that, everybody bands together from the bottom of the organization to the top much better than if everybody’s wondering why the heck the CEO is spending his time in chicken manure,” says Demetriou.
With a refocusing of the company on its core strengths, Demetriou and his team set to grow the organization by creating a top leadership team, clearly stating goals and finding acquisitions that seamlessly integrate into the company.
Creating a top leadership team
To grow Aleris, Demetriou has assembled the best team possible and empowered its members to empower others so that everyone can move the company forward.
Demetriou insists on everyone having a wide span of control. Instead of having just a few senior people, he chooses to have 17 direct reports, each with a similar chain of command below them.
“If I have 17 people reporting to me, then they have to be 17 great people,” Demetriou says. “If not, then I’d need three or four people in between them to cover their gaps. Leadership at the top — true leadership — it’s understanding that it’s not just being financially savvy and technological. It’s being communicative, and empowering and motivating the people.”
Demetriou talks to them regularly and wants them to clearly tell him what they have done to communicate, empower and motivate their team.
“Show me how you not only empower your people but how you motivate the organization — people get excited by working for you,” Demetriou says. “You could be the smartest guy in the world and have the most understanding of the technical aspects of the product or business, but if you demotivate your organization, you’re going to have lousy results.”
Demetriou says if leaders don’t correct problems on their leadership team quickly, it stunts the organization’s growth.
“We’re all human,” he says. “We all care about people. We all want to give second and third chances, but it’s usually when an issue surfaces that a functional or business leader, part of the management team, is not getting the job done. Most of the time, six to nine months later, you still feel the same way, and you’ve lost all that time if you don’t act decisively, and it’s not in their interest or the company’s interest to drag that process on.”
He says that although it’s hard to let people go, doing so gives the company the opportunity to get an executive who better meshes with the organization’s growth goals and vision.
“You want a common vision and culture, and you go create that,” Demetriou says. “The barrier usually is you want to get there, but you don’t make that decisive move to clean out a couple of spots that open up the opportunity to bring in a couple new people and bring that cohesive team together.”
Demetriou looks for senior managers who will complement his current team and who exemplify the characteristics necessary to empower and motivate.
“At the top levels, the critical success factors are accountability, motivation, communication, vision and strategy,” he says. “As you get deeper into the organization ... that’s where you want deep experience and technical capability, but those people, in order to do their jobs correctly and win, have to have at the top level an understanding of what the vision and strategy is.
“They have to be motivated. They have to come to work and be excited. They have to know what type of goals they’re trying to achieve and be held accountable.”
When he’s hiring or consolidating leadership between companies, he listens to what and how a person communicates with him to get a good read on whether that person would be a good fit with Aleris.
“Do they know their numbers, and do they have passion?” Demetriou says. “If they’re motivating me, then I’m thinking, ‘OK, they’re motivating their people.’ If they’re on top of their numbers, they know about accountability. If they’re sitting there and I ask about their numbers, and they really don’t know their numbers, and they’re boring and demotivating or arrogant, it becomes pretty clear.”
With the right leadership team, a culture of growth can be created.
“It’s all around culture when you get to the top level because if you don’t have the right culture, vision and the strategy and accountability in the company, it doesn’t matter how smart all the 9,000 people are in the company,” he says. “Dysfunction, demotivation and a lack of accountability will kill even a structurally sound company because it’s not cohesive.”
It doesn’t do an organization much good to have excellent leadership if those visionaries don’t communicate and work together. When Demetriou formed Aleris, he brought with him a core group of people who had been accustomed to his style, so when he began holding business review meetings, they jumped right in. As new people became part of the team, they got excited about the positive things they heard about in the meetings from the core management team.
The meetings occur every month over the course of two days, with at least an hour dedicated to each facet of the business. Employees and management discuss goals and plans, as well as how the previous month went and the challenges facing them in the upcoming months. It’s not a performance review or a time to hammer people for not making numbers; instead, it’s a positive experience about how to remove barriers and succeed in creating growth.
“It creates an opportunity for sitting around, dialogue, and communicating and integrating,” Demetriou says. “Throughout the year, if everyone is wondering what everybody is doing, it’s very tough to get cultural integration.”
In addition to communication, Demetriou uses these meetings as an opportunity to get buy-in on the company’s goals because he does-n’t close the meetings to any employees. Instead, he encourages anyone to come, and employees outside of Cleveland are encouraged to conference call in.
“A lot of people complain, ‘Oh, there’s a managers-only meeting, and I’m not included,’ so there’s an inclusiveness that, to me, is powerful,” Demetriou says. “When I was lower in the organization earlier in my career, these are meetings I wanted to be in, and now everyone here has the opportunity to do that.”
When people sit in and hear the discussion and thought processes behind decisions, it creates buy-in for changes and plans in the company.
“I’m sitting in the board room, either with people or people on the phone, at all levels, and they hear the questions, and they hear the answers from myself and some of the other people on the management team, and so it makes it a lot easier for everyone to understand and adopt the culture,” Demetriou says.
Beyond simply allowing them to attend the meetings, he solicits employees for their feedback and ideas, and encourages them to speak up during meetings, so it becomes a participatory event as opposed to management wheeling and dealing, with a gallery of onlookers watching the spectacle.
“This is an opportunity to create something special and personally get known, and people complain a lot of times that they don’t have opportunities in companies,” Demetriou says. “Well, here’s an opportunity to show yourself on a monthly basis that you don’t normally get.”
Besides getting buy-in and creating cohesiveness on a management team, monthly meetings also allow the management team to foresee problems and stay on top of them before they fester and permeate throughout the organization.
“In many companies, you can make decisions, but sometimes it takes months for them to surface and then months more for people to march into headquarters and make a big presentation,” Demetriou says. “Here, we like to say that almost every month, we’re on top of the business, and we can surface these issues instantly and make quick decisions. It gets rid of frustration that can develop in the organization from a lack of decisiveness.”
Acquisitions and integration
Both Demetriou’s standards for leaders and monthly meetings merge in the express lane for Aleris’ growth — acquisitions. Four acquisitions in 2005 doubled Aleris’ revenue to $2.4 billion, and the company posted $4.8 billion in revenue for 2006.
When looking to make acquisitions, Demetriou says it’s important to focus on buying complementary companies and then consolidating them. “In all those acquisitions, the primary driver was consolidation, and when I say consolidation, it was the opportunity to gain cost and productivity synergies by getting rid of the redundancies of the two companies that you bring together,” Demetriou says.
When leaders focus first on companies that will add to their core, they’re off in the right direction and have a higher chance of succeeding.
“When you look at most of the stuff you read around businesses, there’s a lot of hype on mergers and acquisitions, but most of them fail,” he says. “We sort of set that right up in front of everybody that we’re going to be a company that bucks that trend, and a lot of that starts with cultural integration and then proving it financially.”
The integration process starts with eliminating redundancies, which typically starts with people. When he ends up with two CEOs, two presidents and so on down the ranks, Demetriou has to look for the qualities he wants so he can effectively evaluate who stays, who can be used in other areas and who has to go.
“Unlike most companies, we don’t necessarily have a bias toward our own people,” Demetriou says. “I don’t want to say that negatively, because obviously we do, but we’re open-minded to say, in some cases, some of the best people may be on the other side.” When Aleris bought one company, its president ended up heading the combined recycling business for Aleris, whose head eventually left. This openness on staffing helps Aleris when it’s competing for a sale.
“That information gets around, and when we make the next acquisition, that’s actually one of the benefits we bring,” Demetriou says.
“We try to convince them to let us buy them instead of somebody else because there’s truly opportunity here for your people. We don’t have a bias, and we want to do the right thing.”
Consolidation and doing an accurate and honest review process are also important in terms of facilities. In one acquisition, Demetriou and his team initially thought that if and when they bought a particular business, they would shut its Virginia facility and integrate it with Aleris’ California and Ohio operations.
But once they did the due diligence, they realized that their own California facility was the weak end, so they bought the company and kept its facility open, closing the California plant instead.
“That sets a culture of, ‘Look at what Aleris is doing,’” Demetriou says. “They’re not just being that 1,000-pound gorilla and going in and shutting everybody down. They’re putting the right pieces together and not having the bias of, ‘We’re the best, and nobody does it like we do.’”
To get into that mentality of losing the sacred cows, Demetriou emphasizes the importance of having solid, up-to-date data, and that if other leaders use accurate data, it makes decisions much easier. He said that once he saw the cold, hard data, shutting down his own facility was much easier to do.
It’s also important for Demetriou to involve his people in integrating a new acquisition into Aleris, and to do this, he forms acquisition teams for each functional area, such as purchasing, manufacturing and administrative.
He assigns someone from within the leadership team as the head of the acquisition team and then forms a group below that person. In addition to these leader’s everyday responsibilities, they are also charged with collectively evaluating opportunities to create synergies with the new company and tracking and measuring progress toward attaining those goals.
If the goal is to create $10 million in synergies, then the team finds ways to create tens of millions in case some parts of the the plan don’t pan out. Demetriou holds the teams accountable for achieving these goals by requiring them to report back to the company during the monthly business review meeting.
“When I think about a lot of the failed big mergers that you read about, for me, what happens is everybody gets excited about the opportunity to do a deal,” Demetriou says. “Everybody works hard to get that deal done. Everybody celebrates the results of the deal, and then everybody moves on to the next one and forgets that most of the work now just starts. That’s what we really have to focus on.
“OK, the deal’s done, but now, for the next two years, we’re going to be obsessed with delivering the synergies, and people are accountable for them, so we don’t lose track while we move on to the next deal.”
His process has paid off. With the initial merger that formed Aleris, his team’s goal was $25 million in synergies after two years. At the two-year point, they had tripled that number. The company is also already above target for all four of the acquisitions it made in 2005.
“Redundancies can be handed to you because of your scale, or you make conscious decisions that I don’t need one plus one to run two here,” Demetriou says. “I just need one plus a half, so let’s get the best one-and-a-half from the combined companies.”
Keeping everyone focused on the future and holding them all together through monthly meetings also helps keep Aleris grounded and prevents it from stumbling into ventures such as recycling chicken manure.
“There’s going to be great periods in the markets, and there’s going to be lousy days where the economy is down or the particular market is suffering for whatever reason,” Demetriou says. “But at the end of the day, over the long term, people need aluminum, and they need everything else, and the only way you’re going to win is to be the best in your class, not by getting excited over the short term about another market that’s doing better.”
His formula of leadership, communication and acquisitions has helped grow the company. When Demetriou formed Aleris in 2004, the two component companies, Commonwealth Industries and IMCO Recycling, each had share prices in the $5 to $7 range, but when he sold it in December (Demetriou remains as chairman and CEO of Aleris), the share price sat at $52.50, creating more than $1 billion in equity.
“What I’ve just shown you is a story that shows that getting more efficient with some scale is a lot more long-term successful than starting small in something you don’t really know, you don’t have the scale, you don’t have the efficiency, you’re not the best because others have been doing it for years, but it sounds sexy because that market is doing well. You have to stay the course.”
HOW TO REACH: Aleris International Inc., (216) 910-3400 or www.aleris.com
Manage growth effectively. I don’t want to be written on my tombstone, ‘He couldn’t manage what he built.’ When I started the company, I was the only corporate employee.
We have scaled up the corporate staff and the support staff to now a staff of nearly three dozen people. We have the ability to grow. We have the ability to manage growth and to scale the organization.
We spent a lot of time trying to anticipate, stay out in front of problems, talk about what the different scenarios are that could happen and try to have a plan for each of those scenarios and try to guide the company down the course that is the most likely one.
Invest in acquisitions. We look to acquire businesses that are underperforming or have not reached their long-term potential in either top-line revenue or bottom-line margin maximization, so we try to find underperforming assets, pay an appropriate price and then invest the necessary human and capital resources to build the business into a more competitive position.
We don’t overpay for acquisitions, so we don’t have to cut corners in the way we operate. It all starts with investing in the business and investing time in the community.
Get involved in the acquisition process. It is important to be personally involved in the diligence process and not outsource it completely to an accounting or law firm.
I have visited every acquisition that we have made, and I have interviewed the managers and spent time in the community before we have signed a purchase agreement to acquire that business. It’s important to see for yourself where the challenges are, where is the opportunity, where’s the weak underbelly, where is investment required immediately and over the long term.
Not only do you need to articulate that to your board and outside investors as to why you’re deploying capital in this particular instance, but you need to be able to, in your own mind, establish the benchmarks for performance of gauging the development of that acquisition over time.
Integrate acquisitions immediately. The first thing we do is attempt to integrate a new acquisition from a financial control financial systems, sales reporting, basically put all of our financial systems and sales and revenue recognition systems in place. I need apples-to-apples financial information if I’m going to benchmark this acquisition against others.
We spend a lot of time and effort at the front making sure the accounting, the billing and the revenue and sales, and all of those tracking systems are on a common platform, a common chart of accounts, so we know the information we’re getting is comparable to the information we get from every other property. That is key. That is also the quickest way to introduce the employees of the new station to our way of doing business.
Make it clear that there’s a new sheriff in town. Leave no doubt that this is a takeover by another company, that things are changing. Many times, we will also bring in a new general manager or market manager that has either been promoted from within or has been trained in our way of doing business, so they can be our eyes and ears as we try to get a good start but also evangelize our business practices throughout the building.
We literally have a five-, six-person acquisition SWAT team that will go in at the time that an acquisition is consummated, train people on our systems, help install, help convert old historic information into our database, so we not only have accurate information going forward, but that it’s compared for the prior period on an apples-to-apples basis. It’s a lot of labor-intensive, people-intensive work, but it eliminates all of the language barriers, if you will, at the time of acquisition because the information flow starts from a common place. And that helps people not only as they’re learning, but if they have a problem as they’re learning, they can call 29 other peers in the company and say, ‘Help me out with this.’
It doesn’t always have to come from the corporate office. It helps them feel a part of the community of the businesses by realizing they’re on the same platform being measured and graded the same way out of the gate.
Give up control. We have diversified our management team and that has removed me from a certain level of involvement, but that is also important for entrepreneurs. They are going to have to give up some level of detail and some level of control if they want to scale a business, and it’s hard but it has to be done if you’re going to be successful.
There was a time when I knew the name of every department head in the company, visited each of the properties several times a year. You just can’t do that anymore.
You have to decide what you want to do, what you want to be. If we want to be a Top 10 broadcast group, I need to revert to what I do best, which is to surface, identify and negotiate good business opportunities, find key management talent to run these businesses and then repeat the process. I have delegated responsibility and authority in operations and finance.
I attempt to stay current with what’s going on, but I can’t micromanage that will stunt our growth. I don’t want to be the bottleneck to decisions being made to opportunities being acted on. Hire good people, give them the guardrails and then send them down the road.
HOW TO REACH: Nexstar Broadcasting Group Inc., (972) 373-8800 or www.nexstar.tv
Strive to learn. You have to be willing to reinvent yourself and make things that were not your core strength and force them onto your plate. I don’t like lima beans, but I’ve got to eat them.
If you come to a point of leadership where you think you hold all the answers, then you’re probably ready to retire because if you have all the answers, then you’re not growing, because the world is changing so quickly. There are things that each of us address daily in business that a year ago weren’t even part of the agenda.
Hire the best. ‘A’ leaders surround themselves with ‘A’ players, and ‘B’ leaders surround themselves with ‘C’ players. A leader has to decide that they’re not afraid to have people that are smarter than them or have talent or skills that are different than them. Get the best talent, and augment your own skills.
If I’m a visionary, intuition leader, I need to have someone standing next to me who has more sense of procedure or is data-driven because then our team is stronger because you get my instinct and vision and their data-driven process that allows us to have the most solid decision.
Put together a team that complements one another and has a lot of diversity. Diversity includes all the things that we think about in diversity — race, religion, gender and sexual orientation — but also diversity in style and performance and the way you come to a job.
Hire performers. You know when an employee is coming to a job, and you know when an employee is coming to something that they feel purposefully driven to do, and it’s a part of what they want to be about. You see that in their performance.
The real difference between ‘A’ players and ‘B’ players may not be a difference of talent, smarts or intelligence, it may be a difference of, ‘Am I in a job that I have passion about? Am I in a job that I have bought in to the vision?’
Look for performance. Look for that little bit more than what was on the job description.
Ask better interview questions. It’s asking really good behavioral-based questions — not what would you do or what do you think, but what have you done? Can you show me? Can you demonstrate?
Even if they don’t have a lot of work experience, they have life experience that they should be able to draw on to answer behavioral-based questions.
Hire achievers. I have to have a sense of excellence — that they are committed to a personal sense of performance excellence. Being average is not part of their vocabulary; they want to achieve. That is important in the team that they have a sense of urgency of we need to get our work done — this has to happen.
They’re committed to doing the best job possible, and they’re committed to doing that best job today, not tomorrow. Those are the things you can’t teach people necessarily. They come to the table with that, and then they have a sense of openness to learning. If they have a sense of openness to learning, then we can do anything.
Let underachievers go. Make sure that people who are not able to perform to the standards of your organization are not part of your organization ongoing. It damages your entire team for them to have to carry people because of a manager’s inability to deal with that difficult task of letting someone go.
A good manager is someone who’s addressed issues often enough that there are no surprises. Somebody shouldn’t be surprised that they’re losing their job. Work with people to help coach them to help them find that this isn’t the right fit for them and help them find the right thing. I regularly say, ‘It’s OK with me if this isn’t a right fit for you, or you don’t like it. Please come to me and let me help you find a new job before you fail.’
It’s easier to help them with a recommendation when you’re both working on getting a job for them somewhere else than it is after you have said to them, ‘You have to go.’ Once you’ve fired them, you’re not a good reference.
Create buy-in. If you’ve hired people that have great talent, it’s your job to get out of the way. I think of my job as the person who removes barriers and brings resources to their initiative that helps us fulfill the mission.
I’m here as a resource as opposed to a micromanager. Empower people by making sure they all have clear expectations of the outcomes you’re seeking.
Communicate it regularly and often. They need to see it in print. It has to be visual. It has to be something that they hear and see. It has to be something that you show in demonstration.
Support your human capital. Companies die because of a lack of innovation and productivity. They die because their human capital has a lack of ability to meet whatever those strategic initiatives are.
Companies die by the actions of people. If you give your human capital the resources that they need to learn and grow, they will be more productive and innovative. Productivity and innovation are the lifeblood of economic growth. None of that happens without a human being.
Ask questions regularly, especially if you’re a fast-growing business. Are these the people for the business today, and do they have the talent? If these are my right people — they’re loyal, they have the values and the work ethic — how do I help them get that extra skill that will push them to the top?
Make the financial investment to get folks up to speed — close the talent gap. Make sure they have the tools, and invest in your work force to help them reach those goals.
HOW TO REACH: Corporate College, (216) 987-5875 or www.corporatecollege.com
Be lean to grow. We run a very lean company. There’s enough gravy in the casserole to please everybody, so we don’t have to break it off and have somebody get the short end of the stick.
We have to make a living. We have to make a profit. If we don’t run it lean ourselves, every franchisor in the country scratches their head and says, ‘OK, well, how do we get more money? We’ve either got to grow more quickly, and that’s not always workable, or I’ve got to work my franchisees out of more money.’
It makes sense to live a little leaner fly coach on airplanes. Split hotel rooms. Not make more than $50,000 on your salary that’s including myself and haven’t since Day 1. Everything we do is frugal and works.
A lot of CEOs out there like to high-step, and they probably got a corner office with a lot of glass and oriental rugs and think they’re hot junk. I don’t play that game. We’re not too hung up on titles around here. We’re more like a law firm a lot of partners that work together every day.
At the end of the day, we want our customers to be raving fans of ours. The bottom line is, if we’re not fair and we’re not lean and we’re not looking at the business the right way, we probably could make more money, but it wouldn’t be as long of a term project and long-lived. It’d be more short-lived, and more people would be unhappy with us.
Buy your buy-in from employees. I didn’t have to give too damn much advice I gave them stock. They have to earn it over a five-year period of time, and once they’re vested, they’re full partners and they’ve got full benefits, but until then, they’ve got profit-sharing and the same percentage.
So many companies these days just pay people pretty well, but I think they’re using them. Unless you make somebody a partner, they’re not truly going to have job security or a future with that company long-term if they ever want to have a beach cottage or do other things or retire at a reasonably early age. I don’t have to say that much. Yes, I’ve strewn out my vision and told them all what I think about fairness and treating people well and running the best company and working your tail off and all the things I talk about, but it gets translated pretty easily, and you don’t have to say it too many times if you own a piece of that company. You just automatically think smartly like that.
If I was just trying to hire a bunch of people, I’d be explaining that every day till I was blue in the face. I just bought my buyin. I bought my people. It works.
Some of them are up at 6:30 and don’t go home till 11 at night. They’re warriors. They get it, and they’re the ones that get the increased amount of stock.
We’ve had to run a few off along the way that are bringing the other guys down. If you’re going to be lazy, and you’re not working your tail off, and you’re not going to work smarter and deliver, then the bottom line is you’re not meant for this company.
You have to pay the piper if it goes down. If this company goes down, I’ve got everything I got tied up into it. It’s a different ballgame, but I’m still willing to share because I want those guys to have the upside.
Everybody’s worked hard, and they deserve to share in the profitability and the ultimate stock of the company one day. I can’t count how many times people e-mail me and thank me, and I say, ‘No, thank you.’ It’s just a great feeling to have everybody in the deal with you, and it wouldn’t feel any better if I made twice as much money and didn’t share it with anybody.
Be blunt. I’m not all that political, and sometimes I may hurt your feelings, but I’ll certainly allow you to hurt my feelings. I’ll fly off the handle and call some idea a moron idea, but I fully expect you to say that to me, and if you don’t, you’re a yes person, and we don’t have yes people around.
We don’t want and encourage those people. We hire honest, hardworking people, but we don’t want yes folks because they’re just brown-nosing fools that aren’t going to get anywhere in life, especially in our company. They work well in another company because the CEO has some big ego.
Sit there and brainstorm, and you get to the damn crust of the problem, and find out exactly all the best ideas. I’ll throw out 10 ideas in a meeting, and eight may be the dumbest ideas ever, but then there’s that one nugget, and you wouldn’t have gotten the one nugget if I had been embarrassed, or we didn’t have some fun with it, or if the CEO yells at somebody and all of a sudden he’s uncomfortable because he can’t go back to me and call me bonehead.
I call people, and they call me, bonehead to my face and behind my back. We’re not full of ourselves. We just know we’re smart enough that people will bet on us, and the rest of it is up to us to work our tail off and hopefully make wise and fair decisions that will benefit everyone. Business is no more complicated than that.
I’ve just gotten to where I am because I work my tail off and was honest with people. If you just absolutely give your word to anybody and never break it, and you do more than you need to do per the contract, you’re going to win.
HOW TO REACH: Raving Brands Inc., www.ravingbrands.com
Have a valuable product. Have something that you’re giving or selling or producing that people want, so a lot of thought has to go into what the customer, environment or culture needs.
A real need is usually basics like food, clothing and shelter, but in this day and age, it’s more because we’re so sophisticated. It’s more the right computer, the right clothes everything that suits you and what you do in life, in your work and every aspect of your life. Think with a wider range of thinking.
It’s not just something simple and that’s it. You got to love it, but you have to do everything else right, too.
Keep learning and keep moving forward by expanding your knowledge of your product, your customer, your home base, whatever it is. I can look at 10,000 sketches that other people have done because I like to see what everybody does out there in the world so I don’t repeat the same thing. My goal is not to do what everyone else does but to try to give a fresh product or a new idea, so you have an instant reason to buy.
Be fair. The larger you get, the more people you have to have. One of the most difficult parts is personnel and handling personnel. People are always the most difficult thing in running a business because of personalities, and being a fair employer is absolutely a must in this world today because if you’re not, you’ll never be a happy person in business because your staff won’t be happy.
People will constantly be arguing, fighting and leaving. It doesn’t make for growth. It’s one of the hardest things to learn.
You have to be a very natural, informed, fair person to run a business, and you have to know your people. That’s why you have to know what they do for work and how they do it, and you have to constantly be on top of that and work with them
My mother was always saying to me, ‘If you don’t do it yourself, don’t ask anybody else to do it because you have to learn to do it first.’ It’s that kind of leadership that I have in my company. Anything anybody can do, I can do
You know how to evaluate other people’s jobs. You can’t certainly see if you’re looking for people to do a certain job if you don’t know anything about how they would do it.
Hire only what you need. When I first started, I did everything myself. I used to make the dresses up, and then after awhile I had to get a sewer because I couldn’t do everything myself.
I would never hire anyone unless I realized it can’t be done by me and everyone else here. I’m not a person who says, ‘I’m going to start a business. I need a secretary, two patternmakers, six assistants, I need this and that.’ That wouldn’t even occur to me. I only hire when I need people and when I’m adding something that nobody could possibly handle unless I have somebody to help.
Hire people who want careers. People who have open minds and don’t come in and say, ‘I have to know how many hours a day I work. I have to know what I get for benefits. I have to know how much insurance I’m going to get, how much vacation time I’ll get, how many raises I can get this year do you give a raise every year? How often will you evaluate me?’
That person really isn’t interested too much, and any job will do as long as they get what they want. It’s what they want, not what the company wants, and in this life, what’s really needed is for people to work as a team workers as well as bosses. You can’t have it the other way around or it gets unbalanced, and in some big companies it happens.
Communicate. Communication is major in running a good business. Be able to speak and think, and do it well enough so people really pay attention to you. Speak the language, and know how to say words and say them well enunciation. It’s great if you have acting qualities. Actors are always great communicators, as a rule.
You also have to be convincing, but it has to come from knowledge. You’re basing it on knowledge and people have to know that this person speaking has some knowledge. If I were going to listen to Ralph Lauren speak about the apparel business, I would be convinced that I was learning something from his communication.
You know, and everybody knows, what good communication skills are. Even your friends think of those you communicate with who excites you? Who interests you? Who do you listen to? Who do you listen to better than other people and why? They’re all common-sense kind of answers.
Have passion. No. 1, you’ve got to love what you’re doing and No. 2, if you don’t have the passion for it, you’ll never be great at what you do.
My feeling is you really have to love whatever it is you’re doing whatever it is you’re making, selling, offering or helping. In general, just do it if you love what you’re doing, and do it for as long as you can do it, and that’s it.
I just can’t wait to get to work in the morning. By the time I get to work, I have 10 things in my head lined up that I have to address immediately.
HOW TO REACH: Jessica McClintock Inc., (800) 711-8718 or www.jessicamcclintock.com
When David Kirk took over RF Monolithics Inc. in 1999, he had to downsize his work force from 600 to 200 to make the company leaner and stronger.
And while he knew it would be hard, he also knew communication would help ease the pain. He held a meeting to tell employees about the cutbacks so that there would be no surprises later, but he also gave them reasons why the cutbacks were necessary if the company were to remain competitive.
During the next two years, Kirk president and CEO of RF Monolithics helped workers find jobs elsewhere. And many were able to find work on their own, because he gave them more than just two weeks’ notice.
Smart Business spoke with Kirk about how he makes tough decisions and leads change in his $54.2 million wireless solutions company.
Q: How do you make tough decisions?
Look at the total picture for the company. If you get too focused on the short-term, meaning a month or a particular quarter, you can get yourself in trouble.
Keep looking further down the road one, two, three years. Take into account a lot of different areas in the company as far as what’s going on with people, facilities, a variety of different things. Benchmark what’s happening in the competitive arena.
You have to make a lot of different decisions, and it’s a process that never ends. Even though we had some good growth 17 percent last fiscal year you can’t sit back. You’re continually having to look at what are the next hurdles ahead of us.
Q: How do you lead change?
It really is putting together a strong, strategic business plan and challenging yourself. We call it being brutally honest with yourselves when you form that plan. The question you really don’t want to ask, you’re kidding yourself. Ask that question and challenge yourself.
Separate it from a regular weekly meeting. Take the time to really think long-term.
Looking at the challenges facing the company, start to formulate the pictures of how it’s actually going to happen. Benchmark and understand how that’s going to happen. Go through an entire process and start to build consensus by doing an analysis understanding what’s going to happen out there.
As the ball begins to roll, people see you’re having success changing the company. It’s a long, steady process. It’s not something you can say, ‘We’re going to change,’ and in three months, you’ve done it. It’s a building process and will continue to be.
The other thing is to openly communicate that business plan to the company and use your employees.
Q: How do you effectively communicate changes and plans to employees?
It’s not, we put a plan together, put it in a binder and put it away on the shelf, and then when we get an internal audit or some regulatory thing say, ‘Well, here’s our strategic plan’ and pull it off the shelf. It is a living document that we’re continually benchmarking and studying.
We communicate that plan a minimum of twice a year to all management and support people in the company. We then create a document from that, called a dashboard, that is given out by functional area. It lets each functional area know how they’re participating and proceeding toward supporting the company’s plan.
The dashboard is updated monthly and posted in their particular department so they could see. Then we hold regular all-hands meetings to communicate what’s going [on], as many as four to five meetings.
We try to avoid giving quarterly meetings. We want to make sure that we don’t just focus quarter by quarter. We want to focus on the bigger picture. Don’t just hold a meeting when there’s a significant event hold it on a more regular, even-keel basis.
Then it’s other things. Hold company picnics. Talk to people and have general conversations. Get to know them and understand them. A lot of good feedback can come from the people.
Q: How do you get feedback?
You build that over time. You can’t just walk out there and make one presentation and someone says, ‘Oh, I have to go talk to him.’ Build that in employee meetings. Go get yourself a cup of coffee. Walk around.
A key thing is to do what you say you’re going to do. We started to look for cost-saving ideas. We started a recognition program, and through that process, we received ideas for half-a-million in cost savings.
If you make suggestions, you get a $10 Blockbuster certificate. If your suggestion gets to the next level, where it’s getting considered and potentially implemented, it was a $50 American Express card.
Give a small reward for that idea generation. We had a committee that studied that suggestion, and following through with that showed them we were committed to trying to save costs. HOW TO
REACH: RF Monolithics Inc., (972) 233-2903 or www.rfm.com
When Joseph D. Sansone founded Pediatric Services of America Inc., he faced the challenge of taking a children’s health care organization public. But by showing Wall Street the value that PSA had and the return that it could garner, he succeeded. Now, as chairman and CEO of Pediatria HealthCare for Kids, which specializes in treating medically fragile children, he and his 50 employees don’t have to answer to Wall Street anymore, but he says even if you’re not running a public company, you always have to answer to someone. Smart Business spoke with Sansone about why a successful company never crosses the goal line and how to create a value-driven culture.
Involve others in decisions. Get everybody’s buy-in let’s hash it out and make sure we’ve looked at every side and angle of what the issue is, and if the decision has to be made, I’ll make it.
Sometimes it’s not with 100 percent consensus, but that’s what you do. At least you get people’s input.
Autocrats, you can get lucky a lot of the times and your personal gut feeling, and some of these guys, it can carry them a long way, and it often does. But as you grow and get more complex as a company, your need for input from various segments becomes more and more important, and making a decision on your own without including all these people is a real danger to an organization.
If you’re running a small corner grocery store, you could get away with it, but if you’re running Whole Foods, I don’t think you can.
Use process for making changes. Decide which segment of the plan is effective and who had the responsibility for that the first time around, and decide whether or not that person needs help or needs replacing or is unaware of the changes. And then you address that piece of it.
If you look at what affects a company, it’s not generally something that hits at the top. It’s all the way down. Sometimes it hits at the base and creeps its way up, so you’ve got to look at the people who have accepted responsibility for the management of those issues and make sure they’re completing their tasks.
Help employees improve skills. Talk it through and ask them to lay out a business plan of their own for their particular task. If you look at every segment of management and every segment of operations in an organization, each one needs to be planned out, and the person that’s doing it needs to come up with the how, why, when and where of how the task is going to be accomplished.
Sit and evaluate that with them. What decisions have been made? Was it a wrong turn people took? How do you get them back on track? It’s a matter of evaluating the plans of action and refining them to meet whatever new challenges come up.
Keep moving forward. Sometimes you’ve crossed the finish line or you’ve made it to the top, but that sounds like you’ve reached the end of the line. Success is, ‘Have we stayed on vision, and have we accomplished those tasks for the near-term that we’ve set out for ourselves, and are we on the track to achieve those longer-term goals?’
We’ve never particularly crossed the goal line because the goal line keeps being further and further out there. You just continue to revise and refine your business to meet the new challenges and stay a living entity.
Embrace change. Gather all the information you can as an individual, and then gather all the information you can as a senior management team, and lay it on the table. It becomes part of the strategic planning.
Use strategic planning as a living document it’s constantly being reshaped. Stay involved in your industry. Stay on top of the changes. Bring in people that are visionary to work with you.
You want people who are able to do the task and are committed, dedicated and they’ve got that spirit behind them that permeates the company. It’s a combination of knowledge and people.
Having those blend together, you’re able to determine which way to go.
Gauge people by actions, not resumes. Until you start working with them and seeing the results of their work, you don’t know, but you can quickly figure it out in the first few months, an understanding of how they completed their tasks. It’s a matter of maintaining an interaction with them.
Don’t just hand them a task, stick them in a cubicle and say, ‘See me next year.’ You’re constantly working with them and making sure they’re accomplishing what you expected them to accomplish.
Create a value-driven culture. You create a culture no matter what happens.
Culture is decor and a feeling of how this company really works. It is a reflection of senior management’s attitudes, enthusiasms and specific goals. When you meet the top people in an organization, you can tell the value of the organization by how they treat their people and view their company.
If our decision was to run this company to make as much cash as we can, and we didn’t care about the quality of the health care we cared about how can we do it the most profitable that’s the kind of culture you’d have, and you’d have a culture that said, ‘We’re going to make this a money machine’ versus a culture that says, ‘Hey, I’m going to hire the best clinicians and top nurses and best therapists, and we’re going to have great care, and by giving great care, people will want us, and we’ll make money that way.’
That’s a different culture altogether. It’s a decision that top management has in setting up the basic goals of the company. Your culture is a reflection of how you achieve those goals and what the importance of goals are.
Balance values and Wall Street. That’s hard, and these days, it’s harder. At the end of the day, you always have bosses.
If it’s not Wall Street, then it’s venture capitalists. If not venture capitalists, then it’s the bank. Somebody holds the purse strings for you.
The balance is it’s a constant communication with your owners [about] where you’re going with the business, how it’s doing, have you met projections, have you met your budgets. That’s what a businessman does.
HOW TO REACH: Pediatria HealthCare for Kids, (770) 414-0055 or www.pediatriakids.com
Don’t blow people off. You have to be responsive to a wide constituency of people, whether they be employees, customers, the press, analysts, bankers. There’s a whole host of people who will want your time, and figuring out a way to be proactive and responsive serves the company best. People want to deal with someone who is decisive. They prefer not to waste their time if something can’t happen. They want to have a relationship with a leader who can make it happen.
If something’s not going to happen, they would prefer to know that and why so they can move on. It’s always very frustrating when you invest a lot of time with someone or a company or entity, and they never had any intention of transacting with you.
Be proactive instead of reactive. Set the agenda. You don’t want to have the agenda set for you. The minute you get into a reactive mode, you’re already behind the 8-ball.
When you’re in a proactive mode, you’re establishing true leadership. People pick up on that. At the end of the day, people want to be associated with winners. They want to be associated with leaders.
If they think your company is just a ‘me too,’ you’re always going to be the Column B compared against the real leader.
Think big. Define the race. The race is more against yourself than anybody else. You can’t define yourself in the shadow of any other company. Define yourself in the company you want to be.
We want to be a significant technology company, and that sounds pretty open-ended, but it’s open for a reason. We don’t know how big this company can be, and we don’t want to limit ourselves.
When you take a look at some of the best vision statements that have ever been made, look at President Kennedy [who said], ‘We’re going to put a man on the moon in 10 years.’ People can rally around something that large, that grandiose, that exciting.
It’s a lot more inspirational to try and do something that is difficult and might mean being a little aggressive and ostentatious.
Keep the right people around. Most of the challenges as you move up through executive leadership come down to selecting the right people, motivating the right people and moving on the wrong people.
If you’re a student of leadership, never stop learning how to more effectively get into people’s skin and help them understand themselves, the company and customers. If you find somebody who’s bright, cares about the company, is passionate about the company, feed that. Provide as much fuel to that person as you possibly can.
Have 20 to 30 percent of your management team move around every one to two years. Get them a different assignment so the thinking is fresh. If you have everybody in the same job year over year, you get stagnated thinking. You don’t have the challenge. You don’t have that new idea focus. Coupled with that, you’re not grooming the next layer of management underneath you, and if they don’t see any opportunity for career progression, they’re going to leave. The lifeblood of our company is that next layer of management.
Be a winner. If a company is winning, they never have a morale problem, but if the company is losing, they do.
It’s weakness to focus on morale for morale’s sake. Focus on how you win. How do you go and set objectives that are stretch objectives and win? People don’t feel good when they do something easy. People feel good when they do something hard and they’re wildly successful.
That is a contagious feeling. You hear about marathon runners, and they get this endorphin high. It’s the same in business. When you have a taste of success in business, you want to surround yourself with people who can help get you back into that promised land.
Use experience to guide decisions. Have a sense of pattern recognition in order to have higher probability of successful decisions.
I remember I wanted this global job, and after I got it I said, ‘What the hell was I thinking? I’m on a plane all the time, and these plane trips aren’t three hours anymore. These trips are 13 hours.’ Work through that phase because sometimes what you think you want is not what you really want because you just don’t know better.
When you don’t have those experiences and you’re learning on the fly, some people learn quickly and can go from Step 6 to Step 10. Some people just can’t get past Step 6, or they just don’t want to get past Step 6.
Everybody has a different way of handling that. Be honorable to yourself and to your leader, and work with them to get out of that particular situation.
Know yourself. Nobody ever comes into my office with a question that’s black and white.
If they come with those questions, I haven’t done a good job with hiring or giving them enough autonomy to execute. The decisions that a CEO should make is going to be navigating through shades of gray.
Get comfortable with the fact that any decision you make is going to make a passionate person upset. Eventually you’re going to make a number of decisions that don’t go their way. The only way you can be comfortable in that environment is you have to have a well-grounded set of values. If you haven’t figured out the kind of leader you are and the value system you’re going to live by, those shades of gray become difficult or inconsistent. If they become difficult, you become indecisive and people won’t seek your counsel. If you become inconsistent, people will believe you to be disingenuous.
Think hard about your value framework. When decisions come across your desk that hit these shades of gray, you’re not going to have all the information, so you’re going to have to make a value call.
HOW TO REACH: Taleo Corp., (888) 836-3669 or www.taleo.com
Balance team and individual decisions. A team approach works best; however, I set aside certain decisions that need to be made by me or by my board of directors.
However, when I do that, I take it to my team, to my executive committee, and explain to them that decision is set aside and why. It makes them part of the day-to-day decisions and the large decisions.
Roll with the big dogs. I have a formula in my head. I give myself two minutes to immediately establish credibility by knowledge and intellect. Immediately jump in with what the purpose of the appointment is and then immediately go into points that are important in the industry. I’ll also go outside the specific agenda to talk about what’s going on in the market.
I immediately put the knowledge out there to establish the credibility, and from an intellectual standpoint, I’m on the same platform as the Wall Street firm. Once that credibility is established, then we’re on track.
Don’t build an ivory tower. Keep your finger on the pulse of the company. Being a CEO, it’s easy to not spend as much time going to see customers. When you do that, anything that your customer base is talking about or issues they have is always second-hand knowledge to you unless you’re there.
I was watching TV and [‘Today Show’ anchor] Anne Curry was on about the national campaign for literacy and the more you know, the smarter you grow. That’s the best advice.
You have to put time aside to spend with your people and to read about what’s going on in the market. You can’t let the ego get to you and get in this ivory tower-type mentality.
Roll up your sleeves and stay with your team. Go and see customers. Get out there and actually experience, and not just read about it in the paper or through reports. Reports are good, but outside of reports, there’s a live pulse going on that you have to keep your finger on.
Be patient. When you’re running a company, you get very passionate about it, and you want results immediately. Not all results can happen immediately.
You can get some immediate gratification, but for the most part, especially long-term decisions, you can’t ask every day how it’s going. You have to put some trust in your people and let it play out.
That comes over time. It’s easy to want to keep control on everything, but you’ll wear yourself out. You can’t do it.
I’ve learned to surround myself, and everyone on my team is company-minded. I’m not afraid to put intelligent people around me that could replace me someday. That’s the smart way to go. Some CEOs fear that they want to be the only person that can run that company, but that’s not a smart model.
You look better and are more effective if you’re surrounded by people who are talented. We have great ideas, we have creativity, and if I’m running the whole thing, then I’m going to stifle those ideas and that creativity.
Establish trust. That comes over time. I’ve been with the firm 14 years now, and I’ve worked up through the ranks, so I’ve been in other positions where people are already comfortable with me.
With trust, it’s just like personal relationships; you have to gain it. You can’t offer it out there and then not follow through. When I say I’m on your side, and your interest and the company’s interest are aligned, over time, it proves to be true.
Any CEO can destroy trust at any point in time. The way to destroy trust is to say one thing and do the other. You have to be consistent with your behavior. You have to be consistent with your message.
That goes into friends. That goes into children. It goes across the board. It’s a good policy to have.
Involve many people when hiring. It’s difficult for us to hire in our specific niche with the skills unless they come from a competitor, so we tend to grow from within.
We hire for a long period of time. If we’re going to put in all the effort to train and to grow, we want them to stay here for a long period of time. In the hire process, we’re going to spend time with that person and ask them questions outside of the norm just to see who that person is, what their personality is and if they’re trainable. What type of environment are you most comfortable with? Is it important to you that you enjoy your job? Is it something outside of just getting a check? We want this job to be a part of their lives.
That’s something that you have to get a feel for, and we’ll generally bring other people into the interview. If my sales manager is hiring, he’ll bring my CFO in to interview with a person or he’ll ask a training manager (to have) lunch with this person. That way we get a different perspective.
Throw new employees in. You learn faster that way. Sitting down and reading a manual is monotonous. Getting out there is exciting. It’s challenging. It keeps them interested.
If you do that on the onset, you’re going to get somebody on line with the company, whereas if you put them in a corner and give them a manual for three weeks, how does that align them? They feel somewhat ignored.
Stick to your guns. I’ve learned to just be me and not take the expectations of others. Be what works for you and what works for your company.
There’s a lot of expectations, and you can let those expectations drive you or you can drive. Once I let those expectations go and just be me, then people fall in line.
HOW TO REACH: Capital Institutional Services Inc., (800) 247-6729 or www.capis.com