Jim Warmington Jr. represents the fourth generation of his family to lead The Warmington Group, whose homebuilding division, Warmington Homes, made a name for itself building classic estate homes for Bing Crosby, Henry Fonda and other legends of the silver screen.
But while Warmington carries on the legacy, the $560 million company itself hasn’t always had such consistency. During the housing boom from 1998 to 2002, Warmington nearly doubled the number of homes it was building in California and Nevada. While the company was enjoying the unprecedented growth, little problems kept creeping up. When Warmington asked the leaders of each of his six divisions to send him the documents they used to make contracts with homebuyers, it became clear that something had to be done.
“We had these six stacks, and every one of them was different,” he says. “Not only were they different, some of the documents were from the 1980s, some were brand-new and recent. Some had been copied so many times that they had that fuzzy, ‘I’ve been copied 20 times’ look to them.”
Warmington showed the whole mess to his in-house risk management counsel, whose professional opinion was, “I can’t even believe we’re having people sign this.”
As Warmington saw it, the sad state of the contracts was just the most egregious example of an ongoing problem. As the company grew, each division had gone off on its own tangent. The informal culture of high ethics and integrity that worked so well when the company was smaller needed an adjustment to work at its new size.
“Everyone thought they were doing the right thing,” Warmington says. “But in reality, we had grown so fast, we had lost control of some of these important things, like the documents.”
At the height of the boom, Warmington set out to fix the developing disconnect between the company’s offices. He wanted to set a cohesive, overarching mission statement of sorts, which once agreed upon, it would get the formal corporate stamp of approval.
Bring everyone together
Just because different offices were doing things differently didn’t mean they were all doing a bad job. In fact, when Warmington was thinking about how to get everyone on the same page, employees in Warmington’s Northern California office were working on a best practices program, and one of the Southern California offices was working on a similar project.
Developing a best practices program was a great idea. The problem was that the offices weren’t working together. Despite having the best of intentions, they were working in silos, without considering that they were part of a larger company. This was the mentality that had caused the company to drift apart as it grew.
Warmington noticed similarities in the two offices’ programs but noticed a few differences, as well. The Northern California office had taken to calling its program “The Warmington Way.”
“They came up with the name,” Warmington says. “People would ask them, ‘Why do you do it this way?’ and they’d say, ‘It’s just the Warmington Way. That’s how we do it.’”
The name stuck. Warmington decided that the leaders of each of the company’s divisions should get together to create one all-encompassing best practices and more program that would be used by the entire company. The Warmington Way became shorthand for how the company does business — an umbrella that covers its mission, vision, values and culture.
The first step was setting up a meeting with all of his department heads. After a day of conversation, Warmington typed up a summary of the meeting and e-mailed it to everyone. He says putting your notes from a meeting in writing is something executives should always do. It will help ensure that your communication gets through clearly.
“Even though you say something, not everyone hears the same thing,” Warmington says. “About one-third of the people said, ‘Well, that’s not what we talked about,’ and two-thirds said, ‘That’s exactly what we talked about.’”
If you’re trying to drive a companywide initiative, everyone needs to be aware of what you’re driving at. Warmington made sure every employee knew about The Warmington Way. At the beginning, employees weren’t sure what it meant or why all the department heads were meeting at the corporate office. But after the first meeting, the department heads were tasked with going back to their offices and gathering input from their own teams. Warmington sent out companywide e-mails to let everyone know what was happening and encouraging all of the employees to talk about their ideas with their bosses.
“I say, ‘Take this out and go out and talk to your field guys; see what they have to say,’” Warmington says. “So they took it out and spent a couple weeks talking to the field people, the salespeople and the office people, really all of their subordinates. Then we got together again.”
Deal with dissension
At the first few Warmington Way meetings, everyone came in totally committed to making the company better. Warmington says the department heads and vice presidents had no reservations and were all really excited about taking the best ideas and practices and consolidating them into a formal companywide philosophy. But there was one issue that quickly rose to the surface as the discussions progressed. Every person at the meeting thought his or her ideas were the best.
“Everyone was fighting for their ideas,” Warmington says. “As soon as we started questioning their ideas and saying, ‘Maybe we’ll go in another direction,’ you started to get a little bit of pushback. But we just kept talking about it and going through it. All the VPs would get together and go through it, and they would talk it through and come up with the best idea.”
Warmington says you should resist the impulse to be too delicate in a discussion like this one, because if you just dance around an issue without confronting it, you may not end up with the best solution for the company. You have to set the tone early if you want a fruitful discussion, he says.
“Even though no one is attacking anyone in a mean way, people take their work very personally, and when someone starts questioning it in a pretty serious way, it can seem like a personal attack unless you’re used to it,” he says.
Make sure your staff members understand that you are not criticizing their ability to do their job, you are just trying to dig down for a deeper understanding of the issue being discussed. Once that understanding is established, you can have a civil discussion about what’s best for the company — without emotions getting in the way.
During the meetings, Warmington would go around the table and let each person defend his or her idea. He asked questions like, “What do you like about your idea?” and “Why is your idea better than his idea?” He says you have to continue to ask questions until you can determine the reasoning behind the action the employee wants to take. Having a group of other executives or department heads involved in the discussion is a good idea, because it gives you more viewpoints and can eventually help you reach a consensus on which ideas would take the company closest to its goals.
Of course, even after all that discussion and after a near consensus is reached, some people will still think their ideas are better.
“At the end of the day, if we got five out of six of the VPs of construction to agree to a certain way, the sixth guy would basically say, ‘I trust all of you guys; you’re all really good at this, and if five of you think this is the best way, then I’m going to go along with it and we’ll try it for six weeks,’” Warmington says. “Because they had gone through the process, they totally bought in to it. Even if they didn’t agree 100 percent, they were willing to give it a shot because they knew it was better than what we’re doing now.
Sift through input
If you just talk to your department heads or your executive team, you’re not getting the whole picture. To get more good ideas, you need to go straight to the source.
After the first few meetings with his department heads, Warmington sent out an e-mail soliciting ideas. It went to all 550 employees the company had at the time.
“We said, ‘Send us your ideas; we’re going to categorize and work through them and start looking at the biggest and the best ideas — the things that would save the company the most money, make things operate better, improve who we are as a company the most,’” Warmington says. “People were really excited about it because they were finally getting contact, and they all had ideas.”
Warmington worked with his vice presidents and departmental leaders to sort through all the ideas. As an added incentive, whoever submitted what was judged to be the best idea got a cash bonus of $1,000. There were about 50 awards total, including several other cash awards and many gift cards.
He says the awards were just another way to get everyone even more invested and involved in the process. Every person who submitted an idea got a response from Warmington, even if the idea didn’t win an award or if it hasn’t been implemented.
Telling someone his or her idea isn’t going to be used can be a tricky test of your management touch. Warmington always uses examples of the ideas the company is actually going to use when he explains why one particular idea won’t be used.
“People would say, ‘Oh, you’re right, that’s really better than my idea. I see why you’re focusing on that,’” he says. “They got it because they could see that even if their idea was good, it took a lot of time to implement for a little reward, while some of these other ones were super easy to implement for a huge reward.”
Another way Warmington handles employee input is leaving the door open to possibly revisit an idea. Just because it may not work for the company at the time doesn’t mean the idea has no value, he says.
“We started with the best ideas, and we just trickled down,” he says. “Then a year later, we got to some of the other ideas, and we’d call them back up and say, ‘Hey, just wanted to let you know we’re working on your idea again. Have you given it any more thought?’ They’d say here are a few more things and some refinements, and we’d talk about it as a group and push it through.”
Warmington says continued patience is necessary when it comes to developing an all-encompassing business plan for your organization. Getting input from everyone is essential, and while progress may be slow, the final product will be one your entire company can stand behind, not simply an edict handed down from the CEO.
It took Warmington four months just to get a basic outline and about a year before the program was finalized and was rolled out across the entire company.
Once it was finished, the results spoke for themselves, as the company once broken into six silos had one set of brochures, one set of writing materials for new employees and one training program, with minor changes for product and location differences.
HOW TO REACH: The Warmington Group, (714) 557-5511 or www.warmingtonhomesca.com
When Tom Kelly took over as president and CEO of Epicor Software Corp. in February 2008, he set out on a fact-finding mission to learn more about the organization.
Kelly knew quite a bit about the business after eight years of service on the company’s board, but he had been isolated from most of the day-to-day work that was done at Epicor’s locations around the world.
He wanted to know the enterprise resource planning software business the way his 3,200 employees did. He wanted to see what the customer saw.
“The essence of Epicor rests as close to customer as possible,” he says. “If you think in terms of communications, you go where your customers are. You start there.”
He headed out and spent the first few months in his new position in front of employees and customers, listening to their ideas and complaints. He asked them what they thought Epicor was doing well and what they thought the company could improve upon. Kelly met with employees in person, over the phone and through video-conferencing — whatever it took to generate a dialogue.
“Initially, I wanted to look the employees in the eye and listen to them tell me what they thought we could accomplish at Epicor,” he says.
One factor in particular was integral to the success of Kelly’s information-gathering travels: keeping an open mind.
“That was my foundation point,” he says. “I didn’t walk in with a game plan of changes or a game plan of what we had to do to bring Epicor to the next level — I walked in with my ears open because I knew there was a lot of transition under way.”
One of the things he quickly discovered was that Epicor’s growth was hurting the company’s long-term potential. What was once a small, agile, $154 million company in 2003 had become a $430 million rapidly growing enterprise through internal growth and acquisitions.
The company’s agility had always been a cornerstone of its growth. Without the ability to accurately interpret data and then rapidly take action in response to market changes, the company’s design and development of enterprise resource planning software may have never happened in the first place.
Kelly’s challenge was not to find ways to move more quickly, it was to find out how to keep Epicor’s agility as the company continued to expand. His objective was to adjust the company to its new size without sacrificing the core things that made Epicor so successful.
“Reinvention doesn’t necessarily mean changing your DNA,” he says. “It means allowing you to participate in a current market just as effectively as you participated in a prior one. We’re reinventing ourselves so we know how to operate in this new size just as effectively as we operated in our prior size.”
Kelly started his quest to keep Epicor agile by making it into a flatter organization and improving communication.
When he took over, the company had just made a major acquisition, and as a result, several executives moved to other roles within the company or left Epicor altogether. He took that opportunity to flatten things out by simply not filling those positions.
With fewer levels of management, communication at Epicor moved swiftly. The switch to a flatter management structure was intended to put Kelly a few steps closer to the company’s customers and bring everyone in the organization a few steps closer together.
“The smoother and more quickly you communicate, the quicker you can make decisions and respond to market opportunities or challenges,” he says.
One of the roles Kelly eliminated was the chief operating officer role. Previously, the functional heads of Epicor’s departments would report to the president and COO — now they report directly to Kelly. He says cutting that extra level of communication helps the company stay agile by speeding up the decision-making process.
“It’s much more real-time; there’s no filtering and no delay on that,” he says.
By eliminating the COO role and essentially taking on that responsibility in addition to his CEO duties, you could imagine that Kelly’s time is in short supply. But he says that there is plenty of time in the day for his constant communications, if you make the most of it.
“Yes, your staff meetings are important; yes, having the team together is important,” he says. “But it’s almost more important that when I’m driving into the office in the morning and it’s early on the West Coast that I’m on the phone to other parts of the company that are already up and about.”
Kelly takes advantage of that commute time for short conversations, used to touch base with his top team members who are scattered across different time zones. Taking advantage of hidden time like that to stay up to speed can help a lot in the long run.
“I listen to them tell me how they are doing in their business, what challenges they have, how they’re doing on their plans or objectives,” he says. “You don’t want to have such formal communication that they feel the only time they talk is the formal setting. You need that same informal constant flow of data: e-mails and those brief phone call catch-ups. Get up to date with how they’re doing.
“It’s the same with my customers. They don’t have to be long, two-hour meetings, but multiple, frequent touch points with customers.”
Successful communication requires that you be a good listener, not just a smooth talker. Kelly allows his employees to freely express their views but cautions that CEOs must listen for more than one thing.
“You can listen to their words, and you can listen to their actions,” he says. “If you do both, it’s pretty hard not to conclude whether somebody is on board or not.”
Kelly looks for the operating plans and tactical plans his team devises and then measures their performance by monitoring how the customers are responding. Basically, he looks to see if his executives’ actions are backing up their words. If they have clearly set objectives, detailed plans and their teams are responding well to them, then they are on the right track.
Set high expectations
With a thinner, leaner management team in place, Kelly needed to get more from the management team he kept around. They would be able to make decisions quicker, which would help the company’s agility, but more pressure would be on fewer people.
“I do have very high expectations,” he says. “I try to put people in place who I think are great people who can do great things.”
Kelly’s great expectations are both a reflection of the faith and pride he has in his team as well as a world-class motivational tool.
“Any individual performs best when they know people are relying on them and people expect them to perform well,” he says. “I think that’s true in anything.
“People tend to live up or live down to the expectations you have for them.
“I’d prefer to have very high expectations, because it’s a lot more enjoyable to live up to high expectations than to live down to lower ones.”
Some people could crack under the weight of such high expectations, but Kelly has faith in the team he’s assembled, so he empowers the team members by listening to them and showing them trust.
“That means you have to make sure that they know that when they’re not with me and they’re off making a decision that I will back them up, and that if the decision is a tough one, that they’ve got my support,” he says.
“If the decision ends up going awry somehow, they won’t feel that they’ve been thrown under the bus. Let them know that they are in this together with us to build this value.”
Part of becoming agile again means pushing decision-making down as low as possible, and that requires teamwork to get the best decisions.
“I encourage my team to work with each other — I try to discourage that stovepipe kind of thinking where somebody sees an issue and it goes directly to me,” Kelly says. “There are times when that is appropriate, but more often than not, it is appropriate for those executives to work with each other to make these decisions first and bring their different views of the world to me.
“If you are not able to accomplish that, you’ve got a lot of bad things that come out of that. You have a team that’s not working effectively together.”
In the end, it all comes back to communication. “What’s important is that we listen — do we listen to one another?” Kelly says. “We need to vigorously debate and challenge one another. Then, we must demonstrate through our actions that we are, in fact, applying the same requirements of ourselves that we would ask anyone else in the company.”
HOW TO REACH: Epicor Software Corp., (949) 585-4000 or www.epicor.com
No matter how bad the economy gets, people will keep drinking. That’s what helps make Winery Exchange Inc., the company Peter Byck co-founded in 1999 with two partners, recession-proof.
“People aren’t going out to restaurants as much, but they still want that nice bottle of wine or some premium vodka they’ll just drink it at home,” says Byck, the company’s president and CEO. “That saves them money, but they still get to enjoy that luxury item. We’re kind of recession-resistant.”
The company has proved that, growing from $4.2 million in 2002 sales to $44 million in 2007, and Byck expects sales for 2008 to top $60 million.
Smart Business spoke with Byck about how you can determine if a new direction is worth your time and why you have to make a decision when something isn’t gaining traction.
Q. How have you dealt with the company’s exponential growth?
We’re a management team that can adapt. We started as a (business-to-business) with four businesses. One was trading bulk wine and grapes online back in the exchange day. We also sold supplies online. We did private-label wine, and we had strategic information for the wine business.
We constantly evaluate what’s happening, so we quickly cut off the things that didn’t work which was the trading of the bulk wine and grapes and the selling of the supplies. They were B-to-B models, and the wine industry is too relationship-driven.
But then we focused on the private-label wine and the strategic information, and we’ve really been focused on that ever since. We’ve expanded; we constantly adapt.
Q. How do you determine which ideas to pursue?
We’re open to all ideas, because I can’t think of everything. You have to evaluate ideas based on what the economics are and how it fits with the overall business model. We’ve created a core engine at this company, which is the ability to rapidly develop these private-label programs from all over the world.
If the idea can augment the engine and we can get a good return for the engine that we’ve built, that’s going to be something we look at closely. It comes down to, ‘Do we get a good ROI from what these ideas are?’
Q. How do you determine whether a new idea is working?
To me, it’s looking at how the customer is behaving. Is (the idea) getting a lot of traction? We’ve got some good ideas that haven’t worked. But we keep at it for a while, and you make that call when you’re not getting traction with the customers, when you’re not getting the growth and you’re not getting the buy-in.
Then, the economics aren’t there if it isn’t working. You are not getting a good return on your investment. If you’re investing a lot and you are not getting the traction, that’s a pretty good indicator that it’s not going to work. We would invest in things where you’re not getting a short-term return but you can see the traction with the customer then you keep at it with the idea that you will get future returns.
Obviously, if it’s screaming right out of the gate, then it is pretty easy. Or if you are getting very little traction from customers, then it’s easier. It’s the ones in the middle that are hard.
Q. How do you decide whether to stick with an idea if it’s performing in the middle?
For example, we’ve moved into beer. It wasn’t really totally profitable out of the gate. We actually struggled at first, but there was definitely continued demand from customers for the products.
Also, we were making progress on making it more efficient, a little step at a time. We still have a ways to go, but you can see the growth, the acceptance from the customers, and there is very little competition in that segment. So we’ve gotten enough good indication that we are continuing to work away at it.
Q. How do you communicate your direction to employees?
I develop a strategy for the year, and I keep going back to the strategy we developed and hit on the points of the strategy and update everyone on where we’re going. Then, I openly share the financials with how we’re doing and what the targets are and how we’re going against that.
A few years ago, our strategy was we wanted to diversify revenue streams more. So, at every company meeting, I would get up and reiterate, ‘Here’s our diversification strategy, this is how we’re going to do it, and here’s how we’re progressing against it.’ Then, you have to champion people who are executing against that single out certain employees who are exceeding expectations and really driving toward the strategy.
HOW TO REACH: Winery Exchange Inc., (877) 946-3793 or www.wineryexchange.com
When opportunity knocks, Alexandre Chemla isn’t afraid to open the door.
And the founder, president and CEO of Altour International recognized that familiar knock when a veteran of the travel industry called looking for a job. Chemla saw great potential in her, but there was a hitch.
“She said, ‘I’d like to manage an agency, but I don’t think we can work together because you don’t have an agency in New Jersey,’” Chemla says. “And I said, ‘Now I have one.’”
If you have a chance to land great people, you can always find a way to fit them in to your plans, Chemla says, as he did by opening a new office to accommodate his potential superstar.
His strategy has helped the travel company generate worldwide 2007 revenue of $535 million — $214 million of that from its six California offices.
Smart Business spoke with Chemla about how to maintain the flexibility of a start-up, even when you have offices all over the world.
Start small, dream big. When I started my business, I had been working for Club Med for 10 years. I learned one thing at Club Med.
The people who were working there, the kind of relationships they have created — I learned that nothing was stronger than a team of people put together. I left with this idea of trying to put together the most professional and the best people that I could find.
It was difficult to start, because I had to go slowly. I had to create a foundation if I wanted my building to stand and stand strong a long time.
Creating the foundation was really trying to analyze what the company was made out of, which for me was very easy because I came out of one major corporation. I wanted to make sure we had our own human resources, our own legal department. I wanted to have the complete panel of a corporation, but, of course, when you do that, you have to start very small.
Find the right fit. Basically, it was for me to find where I would need to have a person, then try to find the person to fit the need that I have.
For example, I try to hire people from the airlines themselves to help me negotiate with the carriers. They will help me understand better than anyone else the airline problems and their willingness to do business.
If you want to be successful, make sure you hire someone who is going to do the job he likes to do. There is nothing worse than someone you put in a business whose job is really not what he or she wants to do, likes to do or feels comfortable doing.
So when we hire people, my first question is, ‘What do you like to do?’ Then, it’s more like trying to find the position based on the person in front of me. So try to find a position to match what the person would like to do instead of the reverse — all along knowing what we need.
Find the opportunity when you find the person. Then when you find the person and you know what this person is looking for, customize around the wishes of this individual.
Stay flexible. Accept that you may change the way you have decided to go and even change direction in midstream. It doesn’t matter what direction you have set, you should be flexible enough, regardless of the size of the company, to change the route at any time.
Stay flexible by dividing the company into multiple, smaller companies and also by having management of the companies handled by people you trust to let them run it the way they want.
By doing that, you are creating flexibility. In general, the flexibility of a company is taken away when the company becomes too big and too bureaucratic. If you can take that away by breaking it up into small offices, then you have the result of the flexibility you are looking for: managing a small corporation but being a big corporation.
Don’t settle for less than the best. We’re looking for perfection. We try not to rely on any third party. It was impossible for us to have a reservation center 365 days a year. It would take a lot of money, lot of people.
So just like every other travel management company, we used a third party, but the problem was the third party didn’t care much. We tried nearly every service that existed.
So we were working extremely hard to provide fantastic service to our clients — and then there would come a time when one of our clients would be stuck in a snowstorm on a Sunday or somewhere in Hong Kong, having a problem. They will call, and the telephone will ring for an hour, and no one will pick up the phone.
That was the best service you could find, and it didn’t get better since then. So I instructed my team to create our own 24-hour center. In the past year, we have received hundreds of compliments. Before, I didn’t even have one of them.
It does cost us about four times the price. But we’re in the business of service. If we don’t know how to provide service to our clients, we should be doing something else. We should go deep-sea fishing, but we should definitely not be in the business of service.
The bigger price we would have had to pay was losing a client.
HOW TO REACH: Altour International, (310) 571-6000 or www.altour.com
Before you can begin a quest, you need a goal, so S. Sam Yadav makes sure his employees at Quest Environmental & Safety Products Inc. have goals to work toward.
“Try to find out what the individual wants out of their career,” he says. “In individual meetings, I ask them personally, ‘What do you want from Quest to help you become the businessperson you want to be?’”
Yadav, founder and president of Quest, has guided the developer of safety solutions to 2007 sales of $11 million and anticipates 2008 sales of between $12.5 million and $13 million.
Smart Business spoke with Yadav about how to keep your employees on the path toward self-improvement and how to determine whether your company should branch out.
Q. How do you get employees involved with the company’s direction?
Try to find out what the individual wants out of their career. I take people to lunch. Today, we’re celebrating a successful third quarter, so we have a cookout. I sit next to people at lunches that we have or one-on-one in groups, and say, ‘Tell me what you experienced this quarter. What was exciting to you? What would you like to see happen this quarter?’
With key individuals whom we’ve pegged for management roles in the future, I spend every three months one-onone with them for three hours going through, ‘What skill sets do you want to work on to help you get to this goal?’ and they’ve done a map out of, ‘In two years, I want to be in this position, in three years, I want to be in this position, [and] in give years ...’ Then I break it down and say, ‘Here are the skills I think you may want to consider.’
Q. Once those goals are set, how do you hold employees accountable?
We talk through it. For sales-people, I tell them you never want to make a sales decision based on commission or what expenses you have coming up.
To get you out of that decision-making process, let’s talk about how you are setting yourself up for financial success personally.
So what I get out of it as a business is you’re going to make a long-term business decision versus a short-term, ‘I need cash’ decision. I tell them, if you want to get to this position, what do you think you need to do financially to get there?
It allows them to feel that they are in control of their future. They also know their own milestones. I used to wait for my manager to say, ‘Good job.’ If they are accountable and they’ve already put it on paper, they know when they have done a good job. It’s just a bonus when their manager congratulates them; they know when they’re on the way to success. That makes them a better businessperson, more confident individual, and they’re setting their own path.
Q. How do you check progress toward everyone’s goals?
Every department reports on their progress every Monday morning against the goals for the quarter and the year. It tells you where we’re going, and it gives you a chance to reiterate your vision. On a regular basis, I have one of our employees do a presentation on one aspect of our business and how our vision has affected that.
Lastly, we have customers come in for best practices. They come in quarterly and talk to our whole group about what Quest is doing right that helps them and why it’s important.
We select people who give feedback. It’s not because they’re our biggest customers but they are people who are going to be honest with us.
Q. How do you handle that feedback?
You have to be able to quantify, ‘Can we do it? Is it within our skill sets to do it; is it within our infrastructure to be able to accomplish it?’
If we can, we start putting a strategy around how we implement it and what do we expect at the finish. Then we find the person who is probably the most passionate about that project and put them in charge of it.
We had a customer request for a product that we had to go design, find the raw materials for, find a manufacturing partner that could make it for us, and make sure that they can meet our quality standards and meet our timetable.
When we took that project on, I was first to say, ‘I don’t think this is within our specifications of ability.’ But we had somebody who was really passionate about doing this project. ... Now, five years later, we have two manufacturing partners who make it for us, and it has become close to 15 percent of our total revenue.
If the upper management doesn’t believe they have the skill sets and nobody steps up, you have to be honest with the customer. You can’t be everything to everybody.
You may lose a customer over that, but I’d rather keep a good record with our customer performance and lose them than have a bad record and never get them back.
HOW TO REACH: Quest Environmental & Safety Products Inc., (317) 594-4500 or www.questsafety.com
If you happened to pass by Ron Marhofer’s farm in Tuscarawas County near Sugar Creek, you might think he was training for American Gladiators. The owner of the seven dealerships and two collision centers that comprise the Ron Marhofer Auto Family has a high ropes course, climbing wall and several rope bridges set up 30 feet off the ground.
However, Marhofer didn’t create this obstacle course adventure to satisfy his inner Boy Scout — he did it to improve his company’s culture.
In 1975, when Ron invested his life savings into the family’s Chevrolet dealership and became the owner, the business was selling about 400 cars per year and had 28 employees. It was easy to monitor how employees were feeling, and Marhofer was able to be on the floor — a real hands-on leader, fixing his employees’ problems and moving on.
By the early 1980s, Marhofer was selling 3,000 cars per year, had 120 employees and was looking to expand into other franchises. He acquired a Hyundai franchise in 1987, and although the launch was successful, the dealership began to go downhill. Morale was low at the new store, and problems weren’t getting resolved the way Marhofer expected.
“I got a rude awakening when I opened that Hyundai store, because I had done a poor job of developing people to run it,” he says.
The manager he had put in charge of the new store was a control freak and wasn’t open to input from anyone else.
“It was almost to that extent that people had to check with him before they went to the bathroom,” he says.
Marhofer couldn’t be in two places at once, yet he needed to save the new Hyundai dealership. If he wanted to continue to grow the company, he needed to find a way to develop leadership and replicate the culture that had been successful in the original Chevrolet store.
Marhofer’s plan was to achieve that goal by creating an atmosphere in which employees communicate and work together at his $158 million organization.
Bring managers closer to workers
Marhofer looked at why the new dealership was failing and also at the paralysis that gripped the employees at his Hyundai store. The decision-making process was getting bogged down because everything was funneled through one manager. Things were taking too long to get done, and if the person at the top wasn’t in touch with the customer, the company’s decisions could be leading it in the wrong direction. From that, he decided he had to eliminate the management hierarchies that enabled a general manager to become a dictator.
He knew his first step was to find a way to open up the decision-making process to everyone. He needed to find a way to get his employees to speak up when they had ideas and a way to make managers like his “control freak” listen to those ideas.
One way Marhofer improved the flow of communications within his company was by taking his employees off-site to his farm for team-based activities. The activities are designed to tackle his team’s communication problems head-on, and the divide between the take-charge bosses and the more reserved employees becomes apparent almost immediately.
After an activity, Marhofer asks the team members to analyze their performance in the challenge. Usually, at that point, some employees will begin saying things like, “I had a good idea but nobody would listen to me.”
Once the teams reach that point, the problem is out in the open. Marhofer tells the teams that if they want to succeed, they will need to improve the way they are communicating. The impatient, take-charge personalities need to slow down and listen to what their co-workers have to say, and the more reserved employees with great ideas need to feel comfortable enough to voice their ideas.
“People become aware of, ‘Hey, I need to speak up in meetings and share my ideas,’ and other people in leadership became aware of, ‘Hey, I need to shut up and listen,’” he says. “Nobody is really confronted with it in a threatening way, but they become aware of it. ... Most people will take it kind of seriously.”
Once your employees are beginning to realize the importance of communicating with each other, the next step is getting the lesson to translate to the workplace. Marhofer asks his employees for examples of specific times when a lack of communication has hindered the company’s business.
“We say, ‘Let’s relate this to work,’” he says. “Does this ever happen at work? Do we ever have a challenge presented to us and we just go off and react to it? We don’t take the time to huddle up and say, ‘OK, how are we going to deal with this?’”
From there, Marhofer asks for examples of ways that the team could have handled one of those situations better. For instance, an employee could have gathered input from his or her co-workers instead of simply making a decision based on his or her own thoughts. Conversely, employees who oppose a plan could have made their reservations become public instead of just rolling their eyes and griping about it later.
Marhofer says off-site activities like the team-building exercises he supervises at his farm can help your employees learn how to overcome the manager-employee divide and improve interoffice communication.
Use flags to build consensus
Marhofer has developed a system to make sure the lessons learned in their off-site activities transfer to the workplace. During the exercises, each employee is given three flags — one red, one yellow and one green.
Marhofer explains that the red flag means you do not support an idea, the yellow flag means that you could be supportive of it with minor modifications, and the green flag means you are 70 percent comfortable and 100 percent committed to implementing the decision.
Whenever a decision is needed, Marhofer asks each member of a team to raise the flag corresponding to their feelings about the issue at hand.
“I can ask, ‘So, what’s everybody think of Joe’s idea?’ and boom — the flags come up,” he says.
So when Marhofer calls a meeting, the employees who will be in attendance get a simple reminder: Bring your flags.
Even if a decision is met with all green flags, it may not be unanimous. Marhofer says it is quite difficult to get even a small group of people to completely agree with a plan. Although everyone has to be on board and fully committed to supporting the final decision, Marhofer says if you waited until your team was 100 percent in agreement, nothing would ever get done.
“If we’re 70 percent comfortable with it, that means it’s a go-forward, because we can always go back and change it,” he says. “But we’ve at least agreed to go forward in the essence of practicality and timeliness. We need to make a decision; we can’t just table everything.”
If Marhofer says, “Flags up,” and he sees a bunch of green flags and one solitary red flag, the dissenting voice gets a chance to be heard. Many times, after that person articulates his or her concerns, several other people will change their vote, swinging over to the dissenting side.
It can be a long process, but that’s the price you pay to ensure complete consensus. When Marhofer opened his first Saturn dealership, he let the team that was going to run the store set the rules. His only guidelines were that the final decisions had to be completely supported and they had to be conducive to creating an environment where customers feel comfortable doing business with the company.
“It took a full day to make a decision on the uniform, because one guy wanted suits and ties and another guy wanted jeans and t-shirts,” he says.
Although the decisions may take awhile to get made, Marhofer says the wait is worth it because you unearth any reservations or concerns before rushing full-steam ahead with a plan that your team may not fully support.
“We don’t have the meeting after the meeting,” he says. “If we do, it’s because somebody lied in the meeting. When you get a decision made, it gets implemented because everybody agreed to it. If they agree and then after the meeting (they have reservations), they become the outcast of the group. People ask, ‘Why did you mis-represent yourself in the meeting?’”
Marhofer says the flag system has helped hold employees accountable for their decisions, which has helped the organization run smoothly in one direction.
For a culture of communication and consensus to work, everyone has to be willing to support the final decision. Marhofer’s system is a different way of doing business, and some people have trouble adapting to it.
“In the initial stages, obviously everybody was very skeptical,” he says. “Things have changed in the last 15 years.
“When I first started, it was more of a dog-eat-dog, ‘my way or the highway’ type of thing,” he says. “Other people had those experiences, and I’m coming in and saying, ‘I want you to make some decisions; I want you to participate in running the company. So if there is something that affects you in your job, I want you to be involved in deciding how that happens.’ Of course, when you say that, their eyeballs are looking at you like you’re from another planet.”
Occasionally, Marhofer has had to deal with “snipers” — people who may have put up a green flag during the decision-making process, but then complain privately about it later. That type of negativity can undercut the entire initiative, he says, but the solution is simple: Call them on it. Make sure the person understands the benefits of the consensus system, and let them know that if they don’t start working with the team, they won’t be on the team much longer.
“That’s not saying you’re wrong; it’s just saying that’s not in alignment with where we want to go,” Marhofer says. “I understand that you’re challenged about letting go, that you’ve got fears that people are going to walk all over you. Let’s talk about that. But at the end of the day, if you’ve got your arms folded and you say, ‘I’m not changing,’ you can’t be here.”
If someone is sniping, you may not always know about it. But chances are someone on your team does. About once a week, Marhofer has “whiteboard meetings,” in which employees can write whatever they want on a whiteboard, and that becomes the meeting’s agenda. These meetings are not driven by management — they are entirely driven by the team.
In the days before Marhofer’s system had become fully entrenched, he met with considerably more resistance. Several times, it got to the point where people wrote their teammate’s names on the whiteboard. As you might expect, the ensuing confrontation wasn’t pretty. It seems harsh, but Marhofer remained steadfast.
“You have to tell people that confrontation is good,” he says. “We’re all trying to be politically correct — we can’t attack the person, but we can attack the behavior.”
If a person feels uncomfortable with his or her actions being a topic of discussion on the agenda, he or she is free to leave the room. However, the person receives a copy of the minutes from that meeting. Every comment is written down in the meeting’s notes, along with the action the team wants you to take to correct your behavior.
“You have a choice,” he says. “If somebody makes you aware of your behavior, you can choose to stay the same or you can choose to take it to heart and make a change.”
HOW TO REACH: Ron Marhofer Auto Family, (800) 731-6704 or www.marhofer.com
After 34 years of operation, the Kennelwood brand was due for a change. Co-owner and Chief Marketing Officer Chris Danforth says that the company was founded as Kennelwood Village, and it had a “village mentality.” At the time, it was one store that did pet boarding and grooming, with some elements of retail. Now, the company, which has grown to 2007 revenue of $9.5 million, has changed its name to Kennelwood Pet Resorts to reflect its new concept: a vacation spot for pets, with plans to expand to new markets.
“We saw an opportunity to change our look and tie it all together,” he says.
Smart Business spoke with Danforth about how to plan a rebranding effort and how to expand without getting in over your head.
Q. What advice would you give a CEO who is considering rebranding?
As we’ve just begun the process and are learning about it, we have been conservative. We want to make sure we’re doing it right. We don’t want to rush in and grab into a market we’re not prepared to be in yet.
You have to do your due diligence and really understand that cities are becoming more and more like each other, but there certainly are some differences. Make sure you understand the differences in the marketplace. If it takes a little longer, that’s better than rushing into it and realizing you missed it or you’re in over your head.
Q. How do you decide where to expand?
The way we’re targeting is looking geographically and making sure there are households with a propensity to spend. We’ve also looked at competition. We know we can open up multiple locations in Chicago, Nashville or wherever, then break down the market and use our partners to research real estate.
That helps make sure we’re in the right areas. Get close proximity to the ZIP codes we want to hit. In St. Louis, we know what ZIP codes we want to hit, but we also know that we might not want to be right in that ZIP code. We could be a stone’s throw away and save some money on leasing or owning land.
We rely on the experts we’ve brought along the way to help us out. The real estate brokers, the construction management company, whatever.
Q. How did you get people on board with the new direction of the brand?
There are two elements to it. There is one in the consumer market, and one is the internal employees. They certainly have strong opinions, and when you’re trying to change something they identify with, it’s hard. It’s just as important to get them on board. So, we try to include them as much as we could on the decision-making process for logos.
For example, we had everyone come in and vote [on several different logos]. We tried to engage them as much as we could in the process.
Our concept has changed over the years. Now, moving forward with the franchise is sort of a resort theme. We wanted to tie everything together. The logo now is a dog in a beach chair.
All the posters and brochures tie heavily into the resort theme and borrow heavily from the travel agency look with destinations and really making the pet stay about them going on a vacation.
Also, we tried to have fun events at the store — not only for the customers but for the employees — to teach them about the history of the company but then introduce the new brand to them, as well. We inform them of the thought process, like why we chose that particular logo.
Communication is vital and has been something we have been trying to do as we implement change in our local market and certainly as we venture into franchising.
It’s been a challenge for us, just making sure the key people not only know what’s going on but why it’s going on, so they can buy in to the idea.
Q. How do you get buy-in on branding ideas from your employees?
I like to be fairly open with what we’re doing and bounce ideas off them. It’s the ideas that matter, and if people take ownership of them, if it’s presented in a certain way, they feel like they helped craft it.
It could just be as simple as floating out a top outline idea and having a sense of the direction you want it to lead, help drive that process but let other people fill in the blanks and let them feel like they are part of the decision-making.
Get employees involved through meetings. Present ideas and have them go back to other people and survey their staff, or just think about it for a while and then get back to people.
Just be honest and lay things on the table. When I’m explaining the direction or explaining a decision or explaining a new concept, I try to give as much background as possible. Try to be open and have dialogue back and forth.
HOW TO REACH: Kennelwood Pet Resorts, (314) 446-1000 or www.kennelwood.com
Paul Touw has a saying at XOJET Inc.: “It’s not the spin that kills you; it’s the lack of recovery.”
The saying refers to the moment an airplane begins an uncontrolled spin toward the ground one of the most dangerous situations a pilot can face. The executive chairman of the fast-growing private jet company uses the saying to prove to his 150 employees that mistakes can be forgiven if you can fix them before it’s too late.
“If something’s not working, even if you were the cause, let us know, and we’ll help you fix it,” Touw says. “That’s more important than getting into the mess in the first place.”
Smart Business spoke with Touw about the challenges of delegation and how creating a “do not do” list can help you delegate.
Q. What are the keys to delegation?
The biggest problem with delegation is (CEOs) having a problem letting go. They often think they can do it better than someone else, and that is generally one of the biggest fallacies of people who lead companies.
You tend to think you’re in a leadership position because you’re better at something than someone else is. That’s not the case. You’re in a leadership position because you’re the best person to lead the company not because you’re the best person who can do every job in the company.
No. 2 is hire great people who can do the specific functional things better than you can. So if you are in a position where you find you’re not delegating, it’s probably because either you think you can do it better than anyone else, or you haven’t hired the right people. It’s one of those two things.
If you think you can do it better than the people you’re delegating to, you haven’t hired the right people. If you have people who can’t accomplish what you’re trying to do, you haven’t hired right in the first place.
Q. How do you decide what to delegate?
Figure out your ‘do not do’ list. Sometimes that’s more important than your ‘do’ list. You have to prioritize your time, and to do that, you have to figure out what things are the most important and what things are the least important.
My role in the company is to set the vision, set the direction and make sure the team is all marching down the same street. To do that, I have to make sure I’m not doing a bunch of things that would distract from that.
Q. How do you decide what things go on the ‘do not do’ list?
You have to force yourself to say, ‘I can’t do everything.’ So the things you cannot do, you have to off-load onto someone else and trust that they can do it. They’re not always going to do it as well as you think you can do it, but you have to let that process work itself out.
You might get an 85 percent product, but that’s better than me spending a small amount of time on it when I don’t have enough time to do that particular thing and getting a 50 percent product.
Q. How do you attract the right employees?
People aren’t just looking for a good job. They’re looking for a variety of things. The traditional military environment is very good for military applications it’s not so good in corporations. But a lot of companies still run their company command and control down.
That doesn’t bode well for attracting a high-performance individual, because they don’t want that kind of environment. They’re looking for a safe environment where they might make a few mistakes here and there, but they won’t get battered over the head for it.
Quite frankly, the great corporations are ones where you do make a few mistakes along the way and you learn from them. So in some respects, we encourage people to tell us what’s not working. We’re not going to turn around and tell you, ‘You dummy, you screwed up.’ We’re going to recognize that you took a path that didn’t work. Now tell us how you’re going to fix it.
Q. How do you create that environment?
There is a lot that goes into the mix of how you make that happen, but there are some simple rules, like people support what they help create. So you have to make sure that your people are part of the creation process. Then, they are much more likely to buy in to that and be a strong advocate of it.
In some of the older styles of management, you had a dictatorial CEO saying, ‘This is how we’re going to do it. Now let’s go execute.’
What’s more important from a leadership standpoint is setting a clear objective. Inspire them to climb that mountain. Then ask them, ‘How do we get there?’ They’re part of the process of climbing the mountain, as opposed to saying, ‘We’re going to climb Everest, and this is how we’re going to do it.’
HOW TO REACH: XOJET Inc. (650) 594-6300 or www.xojet.com
Executive MBA programs are geared toward people who have been working in the business world for around 14 years and have quite a bit of managerial experience, says Carla Hayn, senior associate dean of the Executive & Fully Employed MBA Programs at the UCLA Anderson School of Management.
“Most executives who enter an Executive MBA program are more mature, experienced and about 10 years older (with an average age of 37) than people enrolling in full- or part-time MBA programs,” she says.
Smart Business learned more from Hayn about how to find the right MBA program.
How can an executive determine whether getting an MBA degree is the right choice?
It you are on the brink of being promoted or have already moved into a top management position, an Executive MBA program will definitely enhance your skill set and your ability to succeed in your career. You’ll have opportunities to learn more about the specific areas in which you may need more specialized knowledge (e.g., corporate finance, brand management, supply chains, etc.). You’ll have classmates who are experts in their fields from whom you can learn. You can make use of the array of elective courses to acquire further expertise in your field.
Why are elective offerings an important part of MBA programs?
All Executive MBA programs provide you with the ‘core’ business knowledge in accounting, finance, marketing, economics, etc. However, programs vary widely in the number of electives available to executive students.
At UCLA Anderson, we provide 15 electives each year especially for our executive students in diverse areas such as Mergers & Acquisitions, Venture Capital & Private Equity and Online One-to-One Marketing. Executives can also choose from the wide array of electives offered in our full- and part-time MBA programs. In addition, executive students can travel through our International Study Programs (recent trips include Brazil, China, S. Africa, India) and our exchange programs with partner Executive MBA programs throughout the world. Executives can even earn certificates in finance, marketing, entrepreneurship, sustainability, or international studies, officially recognizing their accomplishments in these areas.
Are there other features that distinguish one Executive MBA program from another?
Absolutely. Among the other important factors to consider in choosing a program is the stature of the faculty. Exactly who will be teaching you? Are they excellent communicators? Is the classroom experience not only challenging but also invigorating? Ask to attend a class and find out for yourself if the students are engaged in the learning process.
UCLA Anderson is known as a leader in experiential learning. The Strategic Management Research Project is a capstone course that synthesizes the knowledge our executive MBA students acquire throughout the program. Five to six students work on consulting teams for a six-month period to solve a multifaceted problem confronting an organization.
All first-rate Executive MBA programs should also stress leadership development to help you develop your own management style, building upon your strengths. Look for a program with experiential workshops, engaging seminars and informative guest speakers.
Additionally, though executive students are quite accomplished, they still benefit from career guidance. A top program should have a knowledgeable career services director who is dedicated to the program and has a proven track record dealing with executives.
Talk to the current executive students and find out how satisfied they are with the various components of their program — the students are an excellent source of information.
Are there other benefits that Executive MBA students should expect from the program?
Beyond relevant knowledge, there are wonderful networking opportunities. Not only will you be sitting in class and working on teams with your classmates, they will be part of your lifelong network. A number of our Executive MBAs have gone into business together. Schools with strong alumni networks like UCLA Anderson’s make sure that you have the opportunity to know past and upcoming executive students, members of the other MBA programs and graduates from all of the schools on campus. UCLA Anderson’s network is very strong with access to more than 37,000 alumni. If someone is moving to Hong Kong, I can easily find a person among the 95 active alumni there who is eager to provide friendly advice and introductions.
Finally, what is the return on investment of the Executive MBA program?
Investing in an MBA degree is one of the most rewarding investments you can make, even when compared to the return during a bull stock market! Most estimates show that the present value of the incremental earning power over an executive career due to an MBA degree is about $500,000. This high return is due to the fact that executives with an MBA degree are usually promoted faster, are considered for a wider array of executive positions, have access to more job opportunities through their increased business and social networks, and have a different view of themselves that prompts them to explore higher and more financially rewarding positions.
A recent survey of graduates of the UCLA Anderson’s Executive MBA Program shows an average salary increase of 158 percent within five years from graduation. While this survey was taken when the economy was stronger, it is not unreasonable to believe that an executive’s salary would double (increase by 100 percent) within five years of graduation.
The knowledge acquired in an Executive MBA program translates to a higher rate of business success, whether you are working for a large public company, a smaller private company, or are self-employed.
Carla Hayn is the senior associate dean of UCLA Anderson, in charge of the Executive & Fully Employed MBA Programs. Reach her at (310) 206-9225 or firstname.lastname@example.org.
Katrina M. Boss has a system to find great employees and keep them.
The human resources manager at Invacare HCS — formerly Bargmann Management LLC — says she’s looked for the magic formula for finding star employees, and the most reliable trait she’s identified is certain internal drive.
To determine if a potential employee has that drive to succeed, the first place you have to look is at the job candidate’s work history.
“Even if they worked at a gas station, if they’ve moved their way up to manager of a gas station, they’re someone who wants to learn more about the processes or wants to develop professionally,” she says.
Once you’ve vetted someone’s work history, the next step is the interview. Boss says that one of the most common things she hears from job candidates is, “I want a company I can grow with.” While it’s true that many employees leave jobs because there was no opportunity for advancement, you have to determine whether that statement is simply lip service.
“We try to dig a little bit deeper and find out why there wasn’t an opportunity,” she says. “Was there not opportunity because they weren’t applying themselves, or was there truly not opportunity? Because in some companies, there isn’t; you hit a brick wall, and that’s as far as it will go.”
But there may have been other reasons an employee wasn’t promoted. To determine whether a candidate took the initiative to grow within his or her previous company, Boss considers three components: attitude, productivity and attendance. She digs to find out an employee’s performance in those three areas, because if the person’s prior employer really did limit upward movement, she knows Invacare HCS offers an environment that will allow them to grow.
“If you give us those three things, opportunities will come your way,” she says.
The three key components continue to be measuring posts for employee success even after someone is hired. Boss keeps tabs on attendance, attitude and production for Invacare HCS’ nearly 100 employees. And while attendance is self-explanatory and productivity can be measured by call volume, as well as length of calls and time between calls, measuring attitude can be more difficult. To do this, Boss looks at how an employee handles stress in his or her job.
This is important because the higher someone moves up in the company, the more important stress management becomes. If you can’t prove that you can handle your current workload, you won’t be given additional responsibilities, Boss says.
“We’ve found a successful formula in making people prove themselves before they get promoted,” she says. “We don’t promote them and hope they do well — we ask them to do well first, then the promotion will come.”
The process begins when the company communicates the standard career path to employees. Boss says it takes at least six months for new employees to learn their job and the company well enough to prepare them for what would happen at the next level. So the company has established a six-month time frame to give employees an idea of when they can start thinking about a promotion.
“After they have been here for six months, that’s when they can apply for that senior-level position,” she says. “We give them those steppingstones.”
By checking measurable metrics before and after you hire, then giving your employees a set timetable for promotion, you can do a better job of keeping your star performers, Boss says.
As Invacare HCS grows, more than 20 of its nearly 100 employees have been promoted from their original posts, says Katrina M. Boss.
However, when an employee receives a promotion, it can create resentment with co-workers, says the company’s human resources manager.
To soften these potentially difficult situations, Boss constantly has candid communications with employees to help them understand why someone else is being promoted and they are not.
“If someone comes to us and says, ‘I want to grow within the company,’ and they’re not meeting one of those three expectations that we set forth, we’re very direct in communications to let them know why they aren’t growing,” she says.
By being direct, you may uncover issues that employees didn’t know about that are holding them back.
“Sometimes those shortcomings are blind spots to people,” Boss says. “Especially if it’s an attitude issue, they may not realize how they’re coming across or how people perceive them. So we have that conversation with them, then they understand it and they’re more aware, because it’s hard to fix the problem that you’re unaware of.”
If an employee has problems with productivity or attendance, Boss presents hard facts that are tough to argue against. But if there are less immediately identifiable issues, such as stress management, a bad attitude or poor people skills, you’ll be helping both your employee and your company by bringing those issues to his or her attention.
HOW TO REACH: Invacare HCS, (330) 645-8200 or www.homecarecollection.com