As president and CEO of Austen BioInnovation Institute in Akron (ABIA), Dr. Frank Douglas has learned firsthand the impact that successful collaboration can have on turning around economic growth. But he says that just because organizations choose to collaborate, doesn’t mean that they know how to do it successfully.
While ABIA’s mission is simple — to deliver value-added, patient-centered innovation and commercialization — achieving its lofty goal to spin out 40 to 50 companies and create nearly 2,400 jobs in Akron in a 10-year period won’t be. Even with founding members that include prominent Akron institutions such as Akron Children’s Hospital, Akron General Health System, Northeast Ohio Medical University, Summa Health System, The University of Akron and the John S. and James L. Knight Foundation, enticing health-related ventures to the Akron area has required ABIA to build what Douglas calls a “collaborative ecosystem.”
“Namely we have a system that focuses on identifying patient problems, coming up with ideas to solve those problems, and testing those ideas for technical and commercial feasibility,” Douglas says.
What attracts businesses? For one, companies also want to work with organizations that can introduce them to a team of people working together.
“We talk about the strengths, but if the strengths are isolated in each of the institutions, it’s really not a benefit to a business,” Douglas says. “A business doesn’t want to have to hunt around to find expertise and capabilities.”
So the organization spent its first year putting together platforms and funding collaborative projects to bring together scientists and physicians to develop solutions for patient problems.
“A company can easily see how by coming to ABIA they could access experts, and multi-disciplinary experts, not an isolated expert deep in one discipline, but teams of experts that can address their issues,” Douglas says.
Because the problems in patient care are multi-disciplinary, it takes collaborative teams to solve them. So another key to the collaboration has been helping people in various organizations step out of their own paradigms so that they can recognize areas where working together is beneficial. “We have to accept that hospitals will still be competing with each other, but there are areas that are relatively easy to identify where they may not have critical mass, where working together would make them much more competitive or the tide would raise all boats,” Douglas says.
By leveraging the combined strengths in the Akron area to focus on biomaterial solutions for patients, from the nationally ranking polymer biomaterials at the University of Akron to the area’s leading medical institutions, hospitals and medical schools, there have been many opportunities to share resources, insights and expertise.
An example is in learning through simulation. In April, ABIA opened up a 40,000-square-foot facility, which will focus on educating the integrated health care team as well as early responders through team-based, patient-centered simulation programs. Now separate institutions can use the larger, shared simulation center for collaborative innovation.
“To have a large simulation center where they all could collaborate and that could potentially attract people from across Ohio and across the nation is a great opportunity,” Douglas says.
Recently, the prototype system that ABIA created with the University of Akron Research Foundation won the National i6 Innovation Challenge to receive a sizable grant from the U.S. Department of Commerce. Early this year, the organization also launched APTO Orthopaedics, the first medical device company created out of the Institute. So far, Douglas says the progress in Akron and on a national level has been fantastic and motivating.
“Those are just examples of the success this collaborative effort has had,” Douglas says.
“The way I look at it is are we being recognized outside of Akron and Northeast Ohio for the things we’re doing, because if we are, then we are likely to attract companies to come to Akron.”
How to reach: Austen BioInnovation Institute in Akron, (330) 572-7544 or www.abiakron.org
With Synergy Seminars, Austen BioInnovation Institute in Akron brings together problem owners and solution providers every month to collaborate on a different key problem in biomedicine and healthcare. Designated as an Ohio Center of Excellence for Biomedicine and Healthcare, the organization’s ability to bring in experts on these topics is helpful in solving problems faster and for better outcomes, says President and CEO Dr. Frank Douglas.
At the seminars, ABIA will typically have an expert speak for 30-minutes about a particular problem a patient has, giving the background, medicine and the science behind it. Afterward there is a 45-minute session with the audience, sometimes aided with a panel to discuss potential solutions.
“A company came to us with a problem saying that they had heard about the Synergy Seminar and asked if we could hold a closed synergy seminar for them,” Douglas says.
After ABIA hosted a two-and-a-half hour seminar for them, the company was thrilled with the solutions that came out of the collaborative problem-solving.
“They said, ‘We got two solutions that we probably would have gotten but it would have taken us about six months,’” Douglas says. “‘We would have visited different experts and hopefully we would have put it together, but here you have this multi-disciplinary group of scientists, surgeons and nurses and two and half hours later, there we were.’”
Dr. Dominic Bagnoli Jr. has more customers in his waiting rooms than ever, and that’s the problem.
As health care costs rise and unemployment remains high, people nationwide are waiting longer to seek medical care when they think that they have a health issue. The result is that emergency departments staffed by companies like Emergency Medicine Physicians Ltd. are filled with patients.
“Not every patient needs to be in the emergency department,” says Bagnoli, the founder and CEO of the privately owned medicine group, which has hospital partners across the country. “So the question is, ‘How do we provide them a level of care where they get just as good of care but reduce the cost?’”
While there is no question that national spending on health care is not on a sustainable track, Bagnoli says that the healthcare industry has never been swift to embrace change.
“In medicine, we’re typically slow to change because we like to hide behind the art of medicine, hide behind this is the way that is has to be for patient care,” Bagnoli says. “But there are a lot of things that can change and a lot of things that need to change for the health care system to continue to evolve and improve.”
EMP has created a culture where employees and physicians don’t just buy into change, but are excited to lead the transformation. Here’s how Bagnoli inspires the company’s 1,200 employees to buy into EMP’s vision for more efficient health care.
Connect the dots
Bagnoli knows that having talented, passionate employees isn’t enough to drive change if they aren’t inspired by your company’s vision and mission. You need everyone in the organization working toward these common goals.
“It’s a team game,” Bagnoli says. “It’s like any successful team — if everyone is not on the same page, then you’re not going to win.”
That’s why he looks for ways to connect employees at all of levels of the organization to EMP’s vision for delivering patient care, not just the physicians who deal with patients every day.
“We’ve let everyone know that every person in our organization, from the person who answers the phones to the person that helps submit the bills to the person that answers the customer service calls, that what they do every day is not those little things,” Bagnoli says. “What they do is help physicians take care of patients.”
But how do you get someone in a corporate office to feel just as inspired as the person who helps care for a sick patient or helps solve a customer problem face-to-face? One way is to create a culture that feels small, even as you organization grows.
As one of the ten largest emergency medicine groups in the country, EMP has more than 1,200 employees and physician partners today, including 800 doctors and 400 non-physician associates. But Bagnoli says the company’s communication and employee education keeps everyone in the organization thinking about how they as individuals can impact the big-picture vision for improving patient care.
President Dr. David Packo says that the company is known for its high quality, so it lets employees and doctors know whenever the organization is being recognized to keep motivation high. Its award-winning online portal for physicians also gives doctors access to everything from personal productivity statistics and patient satisfaction scores to expense accounts and educational materials for their practice.
“We create opportunities for them to see news reports and data reports from all over the country so that they can review those and start thinking about how they can improve things as well,” Bagnoli says.
Another piece is employee development. In July, Bagnoli says the company has plans to open a new educational center in Canton that will accommodate 250 people for physician training and company meetings. It will also be equipped with the latest technology for streaming and teleconferencing.
By investing in employee growth and development, you show people that they are a valuable part of the vision. When people feel connected that way, they’ll want to take on bigger responsibilities and roles in your organization.
“Our employees like being part of a company that’s growing and learning and teaching and helping people,” Bagnoli says.
“They like the fact that they know that we see almost three million patients a year and what they’re doing here in the company office in Canton is helping a physician in Hawaii or Connecticut take care of a patient, and maybe, save a person’s life. That builds a culture and is a reason why people enjoy working here.”
Give people ownership
Unlike many of its large competitors, which are public companies, EMP is privately held by its physicians and splits its profits with them every month.
Before implementing the profit-sharing program several years ago, the company found that more employees tended to push off work to others, creating silos rather than engagement in the overall success of the organization and its vision.
“What we used to have prior to the institution of the program is employees looking out for their own,” Packo says. “When we would add business, they would look for us to add new employees because they didn’t want the work.”
When people have a financial stake in the success of their organization, they are more engaged in innovation and support changes that can make the company efficient and contribute to its vision for growth.
An example is the growth of the company’s Physician First program, which makes a physician the first point of contact for patients who register at an emergency department. When EMP launched the program at its partnering hospital in Parma, it quickly made a huge difference in improving patient outcomes and wait times. Getting the buy-in from this first group was enough to convince other physician owners who saw the positive results to try it.
“By capturing the minds of a few people who are willing to be early adopters and try a process and then spreading that process through results and publicizing those results, you get people to buy in on a large scale,” Bagnoli says.
As the company implements new programs or operational changes, connecting people to each other in ownership is also beneficial because it helps eliminate silos in operations. That’s because employees and doctors benefit from helping colleagues succeed and getting more involved.
“We ask them to do their jobs to the best of their ability, and when they do, they get rewarded for it,” Packo says.
“Now they want to take care of things themselves and do more so they can win more. So that was a huge piece of being able to grow and keeping expenses down yet growth up.”
As the company grows in size, Bagnoli says the profit sharing is even more important in motivating physicians to be leaders in the organization as the industry continues to evolve.
“We’ll be more successful than everybody else because our physicians will directly benefit from that change,” Bagnoli says.
“Passion can carry you when you’re a small organization. If you believe in what you’re doing and you can inspire other people to follow you, you can lead a small organization fairly easily. But you get to a point once you get to a certain size that if you don’t have good people around you that you trust that you allow to lead, you’re not going to make it.”
Make life easier
Bagnoli says that he’s always looking for opportunities for EMP to partner with health systems, technology companies and service companies in order to develop solutions that make providing quality patient care more efficient.
“We typically look to see if they can provide a better process for us or a better service for our patients,” Bagnoli says.
The company has been involved in two of these significant technology projects in the last three years. In both of these cases, Bagnoli says the company thought long and hard about the value for its employees and physicians who would be learning and using them.
“In general, if you give someone a piece of technology that doesn’t make their lives easier, it’s never going to get used,” Bagnoli says.
“Technology for technology’s sake isn’t always the answer. But we’ve been very careful to develop products that help people do their jobs.”
Often, employees will be worried that new technology or new processes will make their jobs more difficult with extra steps, operational disruptions or functionality issues. So if it will make their jobs easier, they’ll probably be happy to make the change if you show them why and how it will help.
“It’s people,” Packo says. “You realize a lot of companies and the ones that are successful are the ones that grow their people along and empower their people to do what they need to do. That’s been a big piece of what we do.”
Through its partnership with Stat Health Services Inc., the company recently took a huge step by developing a telemedicine program. The technology gives qualifying patients 24-7 access to certified physicians, so they can receive treatment for minor complaints and illnesses through the Internet. As an early investor in the iTriage, it’s also now incorporating technology that allows patients to use their smartphones to identify illnesses and get care information through mobile channels.
“Any way to deliver health care in a less expensive manner, but keeping the quality there is going to be a big win, whether it is by telemedicine or other venues,” Packo says.
The same goes for the new protocols such as Physician First.
“So we’ve created a new process that’s been successful and we’ve implemented it at over half of our hospitals across the country,” Bagnoli says. “It makes a huge difference in the patient experience, improves the quality of care and lowers the risk.”
Improving care delivery and the way that people interface with the health care system empowers the company’s employees and physician-owners to do their jobs better, so patients profit and the company profits. As a result, it remains one of the consistently growing companies in Northeast Ohio.
“We’ve improved the patient experience, we’ve lowered the cost of care, and we think that we’ve improved the outcomes as well,” Bagnoli says.
How to reach: Emergency Medicine Physicians Ltd., www.emp.com
1. Help people see their role in the vision.
2. Give employees a stake in growth.
3. Empower your team with new technologies.
The Bagnoli/Packo File
Dr. Dominic J. Bagnoli Jr., founder and COO
Dr. David Packo, president
Emergency Medicine Physicians Ltd.
Bagnoli – Canton, Ohio
Packo – Toledo, Ohio
Bagnoli – The Ohio State University and Wright State University Boonshoft School of Medicine
Packo – University of Notre Dame undergraduate, The Ohio State University College of Medicine medical school
If you could have dinner with one person you’ve never met, who would it be and why?
Bagnoli – Unfortunately, Steve Jobs has passed, so my second choice would be Bruce Springsteen because he’s the Boss.
What is your favorite part of your job?
Bagnoli – Leading a growing, dynamic business that helps people. Now as CEO, I come in and I don’t exactly know what I’m going to do each day, but I know that there is going to be 50 or 60 problems that I get involved in or projects, and at the end of the day I feel like I’ve contributed and helped the organization grow. Also it goes back to helping the physicians that are out there taking care of patients and making it easier for them to do so.”
Packo – Helping partners to better work life.
What would your friends be surprised to find out about you?
Packo – I boxed in college with some tae kwon do and wanted to cage fight but never did. I still would be interested in MMA (mixed martial arts) if I were younger or if it was around when I was younger.
What would you being doing if you weren’t in health care?
Bagnoli - I’m a college football freak. So if I could do any job I would love to be on college game day televising games on Saturdays and going to the best college football games in the country every weekend. If (ESPN analyst) Kirk Herbstreit ever retires, I want the job.
When Dan Myers and his partners capitalized Bridge Bank N.A. in 2001, it was the largest new bank IPO in the state of California at the time. More impressively, they did it during the most brutal economic downturn in Silicon Valley’s history. Even then, the biggest challenges were still ahead.
“We expected to grow rapidly, and based on experiences at other banks that were also somewhat recognized as high growth models, we understood and appreciated that we would transition rather quickly from a de novo, to a $250 million bank, to a $500 million bank to $1 billion bank, and the infrastructure and risk management challenges inherent in each of those milestones were significant,” says Myers, the founding president and CEO of the San Jose-based company.
In addition to its differentiated business model, which focuses exclusively on business – not on retail, the bank’s strategy involved executing a high-growth business model. From the beginning, the founders were cognizant that the company needed to be able to handle change extremely well if it were going to be successful with this vision.
“We had to be adept at change because regardless of economic environment, the company was going to go through some accelerated phases of growth in an accelerated manor that demanded we be good at change,” Myers says.
To ensure that everyone in the company was proficient at change management, Myers and his team knew they needed to weave it into the culture of the bank itself.
Stay several steps ahead
To handle the continuous change that comes with fast business growth, Myers realized that the bank couldn’t afford to not plan ahead when it came to its strategies, infrastructure and growth goals.
“You have to think ahead, not only a couple of quarters or to the end of whatever fiscal year you’re operating in,” Myers says. “You have to look down the road one to five years, which most banks do on a strategic basis. But their five years we’d be looking at in one to two years.”
Proactively building up your infrastructure prepares your company for fast growth by enabling a smoother transition from one phase of growth to the next. This allows you to focus your attention and resources on the core business, such as finding good clients that fit your target profile, soliciting new business and producing the results for its shareholders, rather than trying to constantly re-adapt a long-term strategy.
“We would never want to be in a position where we’re playing catch-up,” Myers says. “So we’d build infrastructure, we’d build capabilities before we actually needed them. When it came time to execute at that higher level, from an internal cultural management perspective, we would already be there.”
To develop a culture of forward-thinkers, it’s important to talk to employees about what kind of growth you are anticipating so they understand why it is important to create a culture that is accustomed to change.
“A lot of that success was focused on explaining that to the bankers that we had already hired, the founders and making sure that as we brought people in they understood not only were we going to execute a sound bank business plan but we were going to do it in a way that would anticipate this high growth and prepare for it,” Myers says.
Myers and his team also spend a lot of time talking to employees, customers and stakeholders about how the company’s value proposition is being received by clients and the bank’s more active referral sources in the community – that includes professional services groups such as CPAs, attorneys, venture capitalists and investment bankers, in addition to the management of all the companies who bank with Bridge Bank on a direct basis.
Having this dialogue is helpful to stay on top of trends and shifts in thinking among key groups in your industry, allowing you to adapt proactively.
“We took it a level higher and said we want to be even more differentiated in that we’re going to be the only true professional, business bank operating at the community bank level in our region,” Myers says.
“So it’s the constant, ongoing conversation are we offering the value proposition, products, services that are relevant in doing what they’re supposed to do for their clients,” Myers says.
The company recently expanded this effort to include brand analysis, which seeks input from its stakeholders and also from prospects that it didn’t manage to turn into customers.
In today’s tough environment, it isn’t easy to attract new clients and retain them for growth, so it’s critical to be part of the industry conversation if you want to be successful tomorrow.
By planning ahead, the bank has been able adapt quicker than many competitors in times of great change, including through two significant economic downturns.
“It’s making sure that we’re questioning those out in the market and getting feedback to expand our target,” Myers says.
Be clear on strategy
When looking at how to set up Bridge Bank, Myers and the other founders analyzed the structure and organization of other local de novo banks — banks that have been in operation for five years or less. What they figured out was that in California, the average de novo community bank would grow to anywhere from $300 million to $500 million in size in a 10-year period. Yet Bridge Bank planned to grow even faster than that.
“We were intending to be roughly double that in the same amount or a lesser amount of time,” Myers says. “So our time horizons were moved up a little bit with the same challenges imbedded in them.”
To execute this growth efforts, he felt it was even more important that the company set clearly defined goals for the bank and its employees for how they would achieve growth.
“You need to understand your organization, not only what it really is — and that’s a challenge, too — but where you intend it to go,” Myers says.
He says that much of his time goes toward developing a culture and communication system to make sure the growth strategy and vision remain clear for everyone.
“There can be a disconnect that develops over time,” he says. “You simply have to encourage the folks that you rely on to run various aspects of your business to keep you informed in an accurate way so that you can manage accordingly.”
It’s beneficial to have a communication system that provides top level management accurate, honest input and feedback so that your top leadership can best understand the organization as it matures. Because fast growth companies tend to be adding new employees all the time, part of that involves devoting significant time and resources to encouraging open communication within your organization.
In other words, talk to people.
“I know it’s a simple concept, but as you grow very rapidly you have people coming in from different organizations,” Myers says. “You have a constant mix and evolution of culture. You really have to proactively develop lines of communication, methods of communication and provide people with the tools to communicate effectively.”
This helps you avoid falling into what Myers calls the “big bear trap” of pursuing areas that are not consistent with your primary model, a pitfall he’s observed for many banks.
“Over the years, it’s been important to remind our folks from top to bottom in the organization that it’s not only critical to focus on what we said we’re going to do,” he says. “It’s to have the discipline to stay away from things that we know are not complementary, which again is running counter to what most other larger banking organizations have done even in the last 10 years.”
Engage people in decision-making
As the second or third startup for many of its founders, Bridge Bank has had the benefit of an experienced leadership team throughout its growth. Yet from this experience, Myers and his partners have also learned that leaders cannot be the only ones coming up with ideas if they want their company to flourish. It is collaboration at all levels that gives companies the greatest advantage when planning for the future.
“Our best solutions for managing the challenges as the company continues to grow don’t necessarily come from the top,” Myers says. “Some of the best ones come from team building and teamwork at all levels of the company, top to bottom, as they work at their own individual levels on different aspects of those challenges.”
By asking people to play a more active role, you empower them to make decisions so they can take initiative to solve problems and come up with solutions or ideas proactively. Being able to acquire clients and build the bank’s business today relies on this efficiency in decision-making. Therefore, the bank’s culture is built around continuous improvement and finding new ways to grow its value proposition, no matter what the economic climate looks like.
The No. 1 driver of this culture is recognition, both verbal and financial.
“It lets us all continuously look for ways that we can improve everything that we do in a positive, constructive context so that we can execute better, we’ll take better care of our clients and we’ll have better performance not only for our shareholders but then how that comes back to our employees in terms of the ways they benefit with their relationship to the bank, including compensation,” Myers says.
“Although we have an economic recovery under way, it’s tepid at best. Therefore, your growth aspirations are really driven by your competitive positioning and abilities to take business from competitors. The overall growth in the economy isn’t going to float all boats.”
Engaging people in your company’s growth goals is more successful when it comes in the form of enthusiasm rather than censure. When you reward people for bringing ideas to the table about how your company can improve its performance, it helps them engage in innovation as a challenge to do better rather than a disapproval of the way thing are being done.
“Unfortunately in some companies it is a form of criticism,” Myers says. “You can do this better — do it better.
“Going hand-in-hand with the collaboration and teamwork, if they identify a challenge within the company, we encourage them to recommend a solution and a way of dealing with that challenge at their level with decision-making authority. That encourages an efficient resolution of whatever the challenges but also understanding that there’s accountability that goes with that.”
Today, Myers says the bank continues to focus on developing its bankers and its change management culture to stay competitively positioned for high growth.
Through continuous effort to take better care of its clients, the bank not only survived through the worst of the financial downturn but actually had its best years for new client acquisition and issuing new credit commitments. Over the last 10 years it has grown organically to some $1.2 billion in assets in 2011, an increase of $131.3 million from just the year before.
“It’s that core competency of change management that served us well when we launched in worst economic environment in Silicon Valley, which has since been bested by the great recession,” Myers says.
“When the banking industry as a whole was really taking it on the chin from a PR and creditability perspective, we had our best years at bringing new clients in, which I think says something about the validity of our value proposition, how it resonates in the market and how our people have executed in delivering that value proposition so that it’s appreciated for what it is.”
How to reach: Bridge Bank N.A., (408) 423-8500 or www.bridgebank.com
- Stay ahead of the game.
- Set clearly defined goals.
- Use teamwork to make decisions.
The Myers File
Founding president and CEO
Bridge Bank N.A.
Born: Dayton, Ohio
Education: DePauw University, liberal arts. Pacific Coast Banking School, Seattle, Wash.
First job ever: I bailed hay part time.
First job after college: Pacific Valley Bank in San Jose, Calif., as a reconcilement clerk
Who are your heroes in the business world and why?
Entrepreneurs. They have the vision, the can-do-anything attitude, and perseverance that is the basis for new company and new job creation, even in the face of monumental challenges in today’s environment.
What do you do to regroup on a tough day?
Take our golden retriever, Belle, on a long walk. She’s a good listener.
What is your favorite part of your job?
At Bridge Bank, I get to meet and work with so many exceptional and interesting people, including the entrepreneurs, business owners and all of the top tier career professional business bankers that have joined me at Bridge Bank.
As the president of the traveling exhibition company, American Exhibitions Inc., Marcus Corwin knows that creating the “blockbuster” exhibitions that the public wants to see involves creativity and ingenuity. But it also takes a lot of patience and upfront research.
“You don’t get Broadway successes overnight,” says Corwin, who joined the Boca Raton, Fla.-based exhibition company in 2006. “Most of them don’t make it. So how do you create something that people are going to want to see, that they’re going to be excited about, they’re going to be engaged?”
The company must develop new products all the time that it knows will resonate with customers. Corwin says that step one is figure out what fascinates and excites your potential audience — a million-dollar question for any business. This was the goal he had in mind when the organization developed its Mummies of the World exhibition, which focuses on a topic that has fascinated people for centuries.
“When Pepsi or Coca-Cola go to design a new soda, they’ve gone and done some focus groups, they’ve done some development, spent money on marketing,” he says. “And as good as they are, sometimes they get it wrong. So with regard to how do you find a product that you want to bring to market … sometimes we have it in our gut.”
Part of creating a hit with customers is having a sense for what the public wants by doing your homework and knowing who your customer is. By looking at similar exhibits that resonated with consumers, for example, Corwin was able to recognize trends toward subject matter such as human anatomy. The fact that these exhibits were extremely popular with consumers around the world evolved into the concept of mummies.
“Our thought process was what else would be people interested in seeing, because people are always interested in their history and the cultures that came before them,” Corwin says.
From there, it’s finding out how much they like it, what aspects resonate and most importantly whether they will pay and how much they will pay for it.
“We went and we had focus groups here in Florida,” Corwin says. “We had focus groups in Boston, Mass., and we had focus groups in Philadelphia — all which helped us identify the public’s perceptions of mummies and the public’s needs of why they choose an exhibition to come to, why they chose a museum to come to, how they spend their money and what are their trigger points in coming to see an exhibition like mummies.”
With focus groups, it’s important to examine a variety of feedback. Corwin specifically wanted to know which points of interest appealed to the majority of the audience, what price points could turn that interest into business, and which marketing materials were inviting versus frightening.
In the end, the company was able to put together the largest collection of mummies ever assembled in history from Egypt, South America, Asia and Oceania.
“We’ve had over 500,000 people see the exhibit already,” Corwin says. “Over 85 percent of them liked the exhibit a lot and would recommend the exhibit to their friends, family and relatives.”
Corwin says that when you have a product that’s successful, you need to then be asking yourself questions such as “What is our progression of additional product?” and “How do we continue to grow?” so you are always building on success.
Since the company opened the exhibit, it has done exit surveys at every location to determine what drove customers to attend and what they did and didn’t like so they can continue to improve the product. Now that it has built this brand and knows that people like mummies, Corwin says the next venture is to create sequels, such as Mummies II.
“From my company’s viewpoint, it’s almost like being at the helm of an ocean freighter,” Corwin says. “When you’re at the helm of an ocean freighter, you are looking way ahead, because it’s going to take you a period of time to shift the direction and speed of the ship. So I’m looking not one year out, but where am I going to be two, three, four, five years out with our company.”
How to reach: American Exhibitions Inc., (561) 482-2088 or www.americanexhibitions.com
In any kind of strategic planning, budgeting is very important. When you’re putting on a nationwide exhibition for thousands of people, it’s critical to map out your budget as clearly as possible so you can deliver for your partners and customers.
“The budget and forecasting is the premise of why you’re going forward with a project,” says Marcus Corwin, president of the exhibition company American Exhibitions Inc.
This was the greatest difficulty for Corwin and his team as they planned for “Mummies of the World,” especially because the economy is so uncertain.
“Sometimes we’re in a strong economy,” he says. “Sometimes we’re in a weaker economy. You can only make the best effort that you can do, but sometimes with the outcome, you are powerless.”
Once the budget and forecast make sense, being able to execute on that successfully involves a number of factors. One of the most important things to keep in mind is not getting carried away with ideas that haven’t been thoroughly vetted and can end up draining more resources or money than you have available. By making sure you are effectively planning and managing the costs, you can deliver your product at a better cost and profit.
“You have to deliver your product within those parameters,” Corwin says. “We found like typical in all worlds, designers have great ideas. And sometimes those ideas are pie in the sky and you have to be able to make sure that those ideas work, those ideas work within a budget and that the exhibit can be produced within that budget.”
When Punit Shah saw that people were no longer paying premiums for completed real estate development projects in 2008, he knew that his company needed to get out of the construction business.
“We saw where the market was going and we had to take reactive measures to make sure that our future was protected and the future of our employees was protected,” says Shah, the president and COO of Liberty Group of Cos., a Clearwater, Fla.-based real estate company with 400 employees.
To keep the company profitable, Shah has implemented a new business strategy to grow through aggressive acquisition of existing properties.
Smart Business spoke with Shah about the keys in investing in growth through acquisitions.
What is your approach to new acquisitions?
Any acquisition that we’re buying has to have a value-add component to it and have a big upside that we can conservatively rely on to have a long-term gain in.
One thing that really makes us different is our ability to analytically look at every piece of information upfront. That makes it a lot easier for us on the back end, because we know what we’re getting into and we know how to proactively deal with whatever is coming our way.
So it’s something that we think may tie up equity or capital for a really long time and then have minimal returns, we usually pass on that deal, because we want to make the most and highest return that we can on our equity. We also want to make sure that it’s a safe investment, because right now is not the time to be making risky investments. Now is the time to be making investments that you are 100 percent confident in and that you’ve got a reasonable return on the money that you are putting at risk.
We’re not forecasting tremendous numbers with a forward-looking basis. We’re buying what we deem to be profitable as-is right now. As the market improves overall, as the economy improves, as our management team goes in there and adds more professionalism in overall management of the asset, we see that all as value-add opportunity.
What criteria do you use to evaluate investments during due diligence?
The most primary thing is location and demand generators. We want to be conservative and consider all different options, whether if there is a terrorist attack, what that would do to the core business of the hotel, during recessions, what happens during peak periods. So we look for diverse demand generators. We look for location of course. Then we look at the physical plans of the hotel or whatever the asset is. We look at the long-term intrinsic value of the asset itself but also the submarket and the overall region. We want to know if this is something that is going to be sustainable and is there going to be a demand generator for this property 10 years from now. As far as my ranking, it would go in that order.
We’re looking just for the best products that we can find, and we’re filtering out anything that doesn’t meet our core criteria. We’ve been very diligent about establishing that criteria upfront and knowing what we’re pursuing.
What mistakes can you make when pursuing acquisition opportunities?
The biggest thing anyone can do if they’re getting involved in what we’re doing is make sure they spend the time, money and resources on the due diligence. It’s almost turning into the height of the market again on a different scale, because people are just buying things sight unseen, guns blazing and not necessarily knowing what the repercussions are because there are a lot of legal complexities when dealing with distressed assets. I’ve seen a lot of people who are just jumping in all at once without understanding the risks involved with those investments. The other thing is real estate and cash-flowing businesses are still businesses and you have to have great management and employees to make those investments profitable. You can’t just buy an assisted living facility or hotel and expect just because you got a good deal on it, it’s going to turn profitable. It’s not like land. There is an inherent business component to it, and a lot of people fail to realize that when they are looking at these types of deals.
How to reach: Liberty Group of Cos., (727) 866-7999 or www.libertyg.com
In the United States, workers’ compensation insurance is the second biggest cost for employers, representing a $50 billion marketplace nationwide. So when Steve Mariano built a company focused on sales of workers’ comp insurance, he knew that there was opportunity for long-term growth.
“Workers’ comp insurance — it’s not a really sexy area, but it’s been around for a long time,” says Mariano, founder, chairman, president and CEO of Fort Lauderdale-based Patriot National Insurance Group. “It’s kind of like this small brother compared to health insurance.”
But since the credit crisis, it has also become more difficult to compete in this type of insurance business. In the last three years, declining payrolls and cost cutting at many companies has inevitably affected sales for Patriot and other workers’ comp insurance providers.
“It was always a tough business, but it’s gotten a lot tougher these days,” Mariano says.
To grow, Mariano has stayed true to many of the same principles that the company was founded on in 2003, specifically a commitment to finding and developing a team of unparalleled talent.
“That’s probably been the biggest reason why we’ve been successful,” he says. “We’ve been able to attract the talented people and their skill sets and we’ve been able to train the people to do the business, follow the procedures and protocols and leverage technology the way that we at Patriot do it, different than other companies.”
As a result, the organization has had some of its best sales years despite the recession. Here’s how Mariano develops Patriot’s team of 425 employees to excel in the workers’ comp business.
Grow talent in stages
Prior to launching Patriot, Steve Mariano founded two other companies. From experience, he knew that it would be difficult to attract many strong employees with the skills they needed to grow before they got a foothold and developed a reputation in the business. To create a deep bench of talent from the beginning, it’s important to be patient about growth and not bring on people that you don’t truly need yet.
First, develop a core team of people local to your business and who you can trust to get your business off the ground.
“You’ve got to get your business plan up and running with a couple of core people in your management team that you know and have experienced working with them,” Mariano says.
Once you see growth in your business plan after a couple of years, then you have a story to use to attract corporate talent from around the country and from other fields. Bring on a strong core group and grow initial sales and then bring on a strong secondary senior team to continue to grow them.
“With each cycle that the company grows and evolves, you have to balance your ability to sell your product along with your costs,” Mariano says. “This may not be perfectly in tandem — but you can’t have one or two major years of losses coming from the expansion without balancing it out.”
By growing in stages, you can build the infrastructure to support a larger and larger team. That way, you ensure that as you go through hiring cycles that people will see you as a stable employer with a track record of growth. In addition to bringing people from out of town with certain skill sets to the corporate office, the organization has also hired hundreds of employees locally, including about 300 people in the Fort Lauderdale area.
“Once you get to a certain size, it becomes easier to attract talent because, number one, talent starts looking for you,” Mariano says.
By 2006 and 2007, the company’s sales growth put it in the position to hire the senior talent it needed to pull from outside of South Florida. As you add new talent, finding people who are fair and also have good ethics is equally important to finding the right skill sets. You want to hire people who are talented but also people who are ethical and going to fit within the company’s culture, much like a professional sports team.
“You can have the best talent, but if they don’t work together in the same culture, they’re not going to win,” he says. “You’ve got to find the right people that fit within the organization. It’s not just asking who is the best talent, but who is the best talent for our company.”
Mariano says that growing responsibly sometimes means taking it little bit slower than you’d like to make sure that you bring everybody with you. That’s not just in expenses but also growing the culture in a way to make sure it permeates the entire company as you add more and more people.
“Sometimes that just means taking a step back, whether it’s three months, a quarter or two quarters, and focusing back internally on the company and having internal parts of the company like accounting and legal really catch up to the growth of the company,” he says.
But while he tries to be deliberate about growing in stages, Mariano doesn’t place limits on how big the company can become as it continues to scale.
“If you pigeonhole yourself into not thinking of things as big as they can be, you’ll never get there,” he says. “You’ve got to really think about the potential and not sell yourself or your ideas short.”
Invest in training
Employee training is an area that not all business leaders invest in equally, especially in the insurance industry.
“In the insurance business, there is very little training that goes on these days, and I think it’s because of cost overhead and other things,” Mariano says. “Insurance companies don’t have the same type of training programs for young people as they used to.”
Yet training talent is an area that Mariano cites as one of the most critical elements in facilitating Patriot’s sales growth. Fundamentally, the company has had certain departments training on an informal basis for years. An example is the company’s claims management program that started in 2008.
“That type of training and that type of culture that’s been built around our business has allowed us to be successful,” Mariano says.
When you don’t invest in growing people’s skills, they could feel undervalued or feel that they don’t have a long-term future with your company. This can result in higher employee turnover, which in the end, sucks up more time and resources as you hire and train new people.
Retention is a major factor in why Mariano readily invests in employee training that others might find an unnecessary expense. Investing in your people helps your emloyees be more successful, which in turn helps your company be successful by developing and retaining talented employees.
Last year, Mariano introduced Patriot University, the company’s first formal, full-time training program to provide employees with cross-training enhance their core competencies and develop their skills. The company also collaborates with South Florida colleges to put together training opportunities for people who are interested in working for the company and want to learn some skills in advance. This creates a local pipeline of talent so that when the company hires in the future, it has a pool of candidates who already have some key skills.
“We’re proactive now in making sure that we have more than enough talent and with these training programs, making sure that we’ve got the talent and the internal operations ahead of time ready for the next big expansion,” Mariano says.
“There’s no question that we’re going to continue to grow and hire most of our people locally moving forward. That’s only gotten a lot easier.”
Because of its efforts to nurture people up through the ranks of the company, the organization now has one of the best retention rates in its industry.
“If you don’t train people, then you’re not going to keep them,” Mariano says.
“We know if you churn employees, you hire and then fire, hire and fire, it really increases your costs as a company. It’s cheaper to retain them by training them in their job functions and cross-training them in other department skills, so that as one department grows maybe faster than another, we can use their skill sets in different departments.”
In an industry with a lot of big players, Patriot’s entrepreneurial culture is one of the reasons many job seekers are drawn to work there. When you have a culture that allows people to have a more direct impact on your business, you can attract the kind of innovative thinkers that can help you grow.
“We have procedures and protocols too, but we’re always looking for our employees to find a better way to do something and to innovate within their organization and within their departments,” Mariano says.
Having an innovative culture that embraces new ways of doing things tends to attract those with the desire to succeed.
“Talent is looking for a way to put a fingerprint on the company they’re working for,” Mariano says. “If you come to work for a company like us, you can really put a fingerprint in your area and be able to look five, ten years from now and say, ‘I really had something to do with this part of the business plan and help with the building of the company.’”
By not having just standard ways of doing things, Mariano says you make it harder for employees to just come in, check a box or work a 9-to-5 just to pull a paycheck.
“We’re looking for ideas of how to better our company in all areas, from the mail room all the way up to the top financial parts of the company,” Mariano says. “If there is a better procedure and protocol or a way to innovate it to service our customers better or make us a better profit, then I ask for those types of things and very much support that type of thought process.”
As a result, the company has been a leading innovator in its field, specifically when it comes to technology. It was among the first to spearhead the use of iPhones, iPads and mobile technology to video stream information for surveillance. Being able to use the mobile devices and video streaming tools nationwide gives insurance adjusters, investigators and legal teams the ability to help employers evaluate compensation or compensability issues and make faster decisions in fraud cases.
Because fraud makes up about 20 percent of the workers’ comp cost in the United States, these advances make a big difference in helping the company differentiate itself for growth.
“Very few workers’ comp competitors really use that kind of Apple innovation on the front end to be able to be out in the field getting this information,” Mariano says.
“It’s billions of dollars being wasted each year in fraud. If you can just stop a small piece of that going on in your own companies, then that is a big thing.”
As a result, Mariano says that the company is planning its biggest expansion in the last three years. Investing in a culture and training to engage employees has helped it attract new talent as well as capture market share from its larger, but less nimble, competitors. It recently opened up offices in the Los Angeles area as well as major cities including Sacramento and St. Louis, and in 2011, the company added 85 new jobs to downtown Fort Lauderdale.
“So we’ve been an innovator,” Mariano says. “We’ve been able to come in, leverage new technologies and really come into the marketplace with a fresh set of ideas and reduce costs for the employers.”
How to reach: Patriot National Insurance Group, (954) 670-2900 or www.pnigroup.com
1. Be patient in your talent search.
2. Create formal training for employee development.
3. Nurture employees’ engagement in innovation.
The Mariano File
Chairman, founder, president and CEO
Patriot National Insurance Group
Born: New Jersey
Education: Georgia Tech and Ursinus College — graduated with a degree in economics.
What would your friends be surprised to find out about you?
Most people don't know I read a new book just about every week. There is so much information out there, so many experiences to benefit from.
What is one part of your daily routine that you wouldn't change?
My morning workout. Mental and physical shape are linked, and the time I spend every morning at the gym helps me clear my head, set my priorities for the day, and build the energy I need to take on the day's challenges.
What’s the toughest business decision you’ve ever had to make?
At our prior company right after 9/11, the marketplace for insurance really shrank, and I was in a situation where I had to eliminate about 85 to 100 employees just because the business model wasn’t supporting it. To me, any time you have to eliminate a position or you have to fire someone, from a leadership position, you haven’t succeeded. Any time you have to let someone go, that means you either didn’t train them correctly or they weren’t able to deliver what you thought they would be able to deliver. Or in the case when you just have a bad event like 9/11 — you just have no control over it – it’s even harder because as a CEO you have great people sometimes and there’s just nothing you can do about it.
What do you see for future growth in Florida?
I think South Florida and Florida will do a lot better over the next couple of years. I know it’s been very tough for the state in a lot of areas … and I think just given the amount of business that we’re doing with Latin and South America, and just how wonderful a state this is — no state income tax and all of that — there’s a good balance for its growth. We’re really bullish that there’s going to be better times ahead, and we look forward to being part of the community here.
The fact that Tom Strauss sees some major flaws with the national health care system shouldn’t just raise eyebrows for hospitals or the patients in them. As CEO of one of the largest integrated healthcare delivery systems in Ohio — employing 10,000 people and more than 1,000 physicians across seven hospitals — Strauss knows the problem is one that affects every person in the country.
“I think everybody would admit that what we have in health care in this country today is unsustainable,” says Strauss, the president and CEO of Akron, Ohio-based Summa Health System. “When you’re spending $2.5 trillion, 17.6 percent of the GDP on health care and the health premium now for a family has exceeded what a minimum wage worker makes in a year — think of that … it’s going to affect the way that we do business.”
The glaring problems with the current care model have been compounded by the increasing number of people without health insurance, which creates a shrinking base of patients from which hospitals can generate any income — the sick ones.
“We’re really a sick care system, which means when we get paid traditionally in hospitals, it’s only by treating a bunch of sick patients,” Strauss says. “So if a good flu season rolls in … our beds are full and we’re billing a lot of revenue, but we have a lot of sick patients. There’s something wrong with that picture.”
With mounting costs, anticipated reimbursement declines and payment model that rewards based on sickness rather than health, Strauss and his team finally said enough is enough. After spending two years devising a new vision for the organization to evolve and improve the system, Summa Health launched a pilot program for an accountable care organization, called NewHealth Collaborative. In January 2011 it moved 11,000 patients in its SummaCare Medicare plan to the new collaborative.
“Some of these places are holding onto the revenue as long as they can because they believe there is a way to survive that,” Strauss says. “We don’t think there is.
“So with us, it’s what do you do to transform yourself to focus differently to create true value in health care.”
Here’s how Strauss has led the implementation of the accountable care vision across the seven hospitals.
Because Summa Health is one of the first organizations in the community to create a prototype for accountable care organizations, Strauss knows it will be an example for future organizations in the way it implements its vision and strategy. To make sure the shift toward population health management is successful, one of the first steps is putting in place the right tools, processes and infrastructure to support it.
“You’ve got to know where your vision is, where you’re going and what your objectives with the strategy are and then put in place the executing tactical plans to make that happen,” Strauss says.
Strauss says that a key problem with the old system of that care was it could be very fragmented. With different physicians in charge of different services, handing off tasks and having limited knowledge of a patient’s needs, an estimated 30 percent of what is conducted in health care and in hospitals today is unnecessary.
So part of the transformation has been changing the organization’s siloed infrastructure to create multi-disciplinary approach to services, eliminating the overtreatment of patients and saving costs by keeping everyone on the same page, including the patient.
“People like me have to start to prepare ourselves structurally to be able to do these things for population health and population management,” Strauss says.
“What’s nice is it’s easier to do the right care, the appropriate care, and eliminate this 30 percent that’s unnecessary than to not do it. So we’ve made it easier for physicians to do that.”
Frequently inefficiency is the result of lack of communication and knowledge-sharing. So a critical step to becoming more organized and efficient is looking for ways to improve your technology.
“Some organizations are used to living on very high revenues,” Strauss says. “When you realize that eventually that is going to go away, you have to reposition your organization to be able to function at lower rates of reimbursement.”
Strauss says that the organization is investing $80 million in IT over the span of five years. It has already added a new call center so physician’s phones roll over to the 24/7 call center with care nurses during off hours. The system’s Akron City and St. Thomas hospitals also became some of the first in the country to have computerized physician order entry so physicians can access and manage orders through a portal at any time.
The other piece was implementing new evidence-based medicine protocols and procedures in the care delivery process to integrate the 10 service lines for increased efficiency.
By structuring your organization for more effective collaboration, you can align the people on shared goals and your new vision. At the same time, you give people a clearer idea of how their role contributes to the big picture of your mission and vision.
“Those are the kinds of structures that you have to have in place to be able to thrive under this new health care reform move towards population health and population management,” Strauss says. “So it’s more than just technology.”
Be an open book
Once they came up with the model, Strauss and his leadership team presented it to the physicians and the board and held retreats to walk employees through the vision, its benefits and how the transformation would occur.
“I think most physicians understand that the old way of doing things is not very effective,” he says. “The days of fee-for service — the reimbursement is just going to be cut and cut and cut. It will be death by a thousand cuts. They understand they can’t survive the way that it is today, so we have to do something differently.”
With most people on board, the real challenge was making sure the 400 physicians and other employees involved could understand, execute and share the vision. Developing strong partnerships among the hospitals and other care providers requires strong alignment on goals as well as new patient care protocols and procedures. So for Strauss, the key to success has been having the organization be as open as possible with employees about the vision, what it involves and any changes being asked of them.
“It’s creating a vision for the future and getting people to understand what that vision is and then educating the components to engage in that process when it might be different than what they were used to in the past,” Strauss says.
“If you don’t, and they don’t believe in where you are going you will be unsuccessful. So for us, we really took the time and even after it was implemented went back to reinforce the vision of why this is so important.”
By explaining how a new vision complements your organization’s core values, mission and culture, you can get more buy-in by aligning people behind shared goals as well as a shared culture. So aside from instituting training and education programs for employees, Strauss has spent a lot of personal time working to put the vision into a clear framework. His efforts include teaching a class for employees called “The Philosophies of Summa,” speaking at monthly new employee orientations and hosting monthly “Talks with Tom” for several hundred employees with representatives from each department.
“There are no secrets,” Strauss says. “I give them financials. I talk about what’s happening good and bad and ugly, and it’s been very effective. It’s information. It’s listening. It’s being by their side and nurturing them when they are down.
“We believe that the employees that work here are the soul of the firm. Your employees represent your greatest strength or your greatest weakness. So they have a culture that supports them — servant leadership — and it says if I’m not serving that patient I’m going to serve you.”
Strauss says that another goal of the open communication is to reciprocate the attitude and culture he wants to drive in the system, which is one of servant leadership and mutual caring.
“The moment of truth is the first 15 seconds when you come in contact with a patient in need, and it’s how you seize that moment to make the difference to satisfy their needs,” he says.
“If you’re too busy or you’re having a bad day or the Browns lost or the Steelers lost, and you translate that at work to your patient, we will fail as an organization.”
To strengthen the mindset they want all employees to have, Strauss has charged managers to be more active in talking to employees and patients to see what their needs are and helping them carry out the vision for accountable care.
“If you’re engaging your work force to go after a vision, then you need to give them as much information as you can about the reason for that vision,” he says. “That’s one of the pieces that I love to do.
“We’re actually making a concerted effort to do rounding with a purpose. You’re going to see every leader at Summa being out more on the floor talking to patients, talking to employees both on satisfaction and safety.”
But once you give people the information, you then want them to drive its success as much as possible. To help employees feel like they have a stake in that vision so they will drive it with enthusiasm, Summa Health has tied more employee financial incentives to the positive patient outcomes it’s seeking from the new care protocols and procedures.
For example, all employees in the system receive a bonus each year based on the company’s financial performance and levels of patient satisfaction.
“We’ve paid out millions of dollars to the employees,” Strauss says. “This is beyond managers. This is all of the employees. We want them to feel like if they produce, if they work with us, if they exceed the expectations of the patients — that’s the definition of quality — they will benefit, their organization will benefit, and we will be the provider and employer of choice.”
Eventually, seeing the positive results of changes helps employees realize that your vision is a viable one.
As a result of its technological innovation, the NewHealth Collaborative received 2012 certification from the federal government for its ability to meet standards of meaningful use guidelines. Its Akron City and St. Thomas Hospitals will acquire $5.1 million in federal incentives, which will be distributed to the hospitals and its doctors.
“In the old days you would just throw services out there and market those services and try to grow this population of sick patients,” Strauss says. “Now we’re going to get paid on the population’s health.”
Although he’s been with Summa Health for 13 years, Strauss believes that the organization is just starting to scratch the service in the excellence it can achieve by transforming the community’s health. Despite the uncertain future of health care reform, he sees more and more people are now realizing that action needs to be taken to change the industry.
“When you deliver that kind of quality and safety and you see the savings we’re starting to generate, you realize that there’s an answer here,” Strauss says.
How to reach: Summa Health System, (800) 237-8662 or www.summahealth.org
1. Put the structures in place to implement your plan.
2. Help infuse the vision with transparency and an open-door policy.
3. Offer employee incentives to drive results.
The Strauss File
President and CEO
Summa Health System
Education: Duquesne University for undergraduate and graduate schools. B.S. in pharmacy in 1975 and a doctorate of pharmacy in 1978
What do you like most about working in health care?
That you are caring for patients at their most vulnerable time, you can make a difference in every patient’s life and you can make a difference in employees’ lives. We’re the largest employer in five counties, so for us we take that pretty seriously. And improve the health status of the communities, not only once you educate and take care of patients but you can go out into the communities and you can make a difference.
What mistakes can you make in a growing business?
The first thing you’ve got to realize is that you can’t make everybody happy. That’s the hard one, especially for somebody like me who really prefers to have people holding hands singing ‘Kumbaya.’ The other area is trying to micromanage. You cannot in this environment micromanage. You’ve got to empower your people and let them go. They will make mistakes and that’s OK as long as they learn from their mistakes. I would think trying to stay in the old system, trying to stay in the old ways was a mistake that got us starting to transform toward population health and population management.
What’s the best business advice you’ve received?
Love what you do. If you think about the hours we all work, that gets pretty challenging if you don’t love what you do because I probably put in as many hours here as I do at home, unfortunately. So that’s one. Make sure you love what you do, and if you don’t love what you do, go find something you will.
Back in 2003, the telecommunications industry was going through what Timothy Jenks describes as a “downturn and compression,” as large equipment manufacturing companies — his customers — increasingly consolidated and reduced their vendor base to manage costs. The result was that many companies in the telecommunications components industry, which NeoPhotonics Corp. occupied, were being put out of business.
“As a small technology company, clinically a start-up, it was difficult to gain mind share let alone market share at these very large companies as they consolidated their own operations,” says Jenks, the chairman, president and CEO of the San Jose, Calif.-based optical components supplier with approximately 3,000 global employees.
Jenks saw that the company needed to enhance its core value proposition in a way that would resonate with this core customer group and help it win its business. After spending a year looking at M&A opportunities, he and his management team soon found their solution in Photon Technology Co. Limited, China's largest supplier of active optical components at the time.
“It was complementary technology to our core technology and with an established customer base,” Jenks says. “We had both cash and technology and they had certain products, customer base and manufacturing capability. So together we felt that we would have all of the requisite elements to be an important supplier going forward in the industry.”
By acquiring Photon in 2005, the company now had the opportunity to become a global, one-stop shop for optical components, a value proposition that would click with the needs of its customers. But Jenks now had the task of taking the two companies with different languages and different cultures on different continents and creating one new entity consisting of 1,200 employees and more than 100 customers around the world.
Before they could align everyone directionally and operationally, Jenks and his leadership knew that they needed to spend time with the employees in China to initiate a comfort level of understanding between both teams.
“In order to do that with very strong differences in language, culture and location, it took an awful lot of personal time and attention to develop mutual understanding,” Jenks says. “With mutual understanding, we could get alignment. With alignment, we could execute on the goals. With the goals being clear, we could make good progress.”
While Jenks had a number of people on his team and several from China who were bilingual, there were still communication differences and cultural differences that needed to be addressed in the new company.
“You need to be compassionate, taking the time and effort to understand our global brethren and what are issues from their point of view?” Jenks says. “Everyone is not the same but everyone is important.”
In-person communication in the preliminary stages of the merger was helpful for both leaders, who needed to establish a plan for integration. For about a year and half, Jenks travelled to China for one week or more every month to meet with direct reports and develop an approach of how to provide a clear direction to the key managers in the combined company.
“The face to face matters not just because it’s face to face, but because it allows people on both sides of the table to jointly see momentum,” he says. “If they see you once a month or once occasionally, there just isn’t much momentum.”
The benefit of being face to face with employees who are being acquired is also being able to see the realities of how people operate and manage the ins and outs of daily business. Jenks says that in retrospect he would have moved to China during this time, now that he’s seen the value of this personal time.
“Living in each other’s shoes by being together causes you to understand the issues that you’re facing not on too high of a level but much more day to day, hour to hour, the real issues that we’re facing and how can we jointly solve them,” Jenks says. “My experience is when people have the opportunity to face challenges together and find solutions together, that is what defines successful integration.”
Build alignment on new goals
This first phase isn’t about getting everyone to agree, but cultivating a comfort level and understanding between your two companies so you make decisions easier.
“We spent a lot of time and effort to understand each other, but we didn’t make it the biggest priority to gain consensus on decisions,” Jenks says. “It was to gain consensus on understanding, not consensus in decisions. Decisions had to get made and we had to move forward.”
The next step was getting the two companies to act as one global company, with one set of goals, one vision and one mission moving forward. Getting this alignment involved eliminating all of the previous goals from the individual businesses and creating one set of goals for everyone.
“The company in China wanted to operate on the global stage and the company in the U.S. wanted to be successful and deploy its technology globally,” Jenks says. “So putting those two nuanced sets of personal goals into one set of company goals was a challenge.”
After a merger, there may be a tendency for employees from either company to hold on to the old way of doing things. Where problems arise is when people become so attached to their previous goals that they don’t focus their efforts on new business growth.
“We had a company in the U.S. that was used having objectives that were local objectives, and we had a company in China that was used to having objectives that were Chinese objectives,” Jenks says.
So part of the strategy to get buy-in was to do away with any past performance goals that distracted people from the new global strategy. All financial incentives for employees in the future would be tied to global instead of local performance.
“It was to eliminate and remove all of those objectives and any references to them and replace them with goals so that people in China have to help the global result,” Jenks says. “People in the U.S. had to help the global result. Then even though they understood it, if they weren’t willing to embrace it, there wasn’t a role for them.”
Jenks and his team collaborated with the leadership in China to develop the new set of objectives.
“We actually spent a lot of personal time to write goals to be one company, not to be two companies, and to express with our managers our values that we would embrace and how we would operate,” Jenks says. “That included people from East and West in the senior most management to share ideas, share understanding, share goals and execution plans.”
Getting input from both teams is important, because it helps everyone embrace the new goals as their own, adding to the synergies in the combined company. Once your topmost leadership is aligned on the new corporate goals, you can proceed to build alignment throughout the organization.
“The key thing is that we did express a group of values to be one company and to focus on those global goals, which implicitly meant that staying on the fence was not an option,” Jenks says.
Again, talking with your people face to face to share the new strategies and goals is critical in getting everyone on the same page.
“It causes integration to happen faster, and people find energy in integration success that allows you to move to the next chapter together instead of moving to the next chapter staying individually who you used to be,” Jenks says.
Get the right people on board
Jenks knew that inevitably there were people in the U.S. operation that didn’t want to spend time working on business in China as well as people in China who preferred working for a Chinese company. There were some people who had the skills to succeed in the new environment but weren’t interested in the new direction.
“It was difficult for some people who are not necessarily comfortable living in a language that they don’t speak,” Jenks says. “Moreover, it may be uncomfortable for people who are linguistically gifted but then may have a larger burden because of their abilities.”
During a merger, you have to accept that there are people who will embrace the change and people who won’t. To an extent, the employees who won’t will self select.
“Ultimately, strong performers and people that were good at execution were strongly encouraged to come over to the one-company side of the fence,” Jenks says. “If they were unwilling to do that, they left. That was perfectly OK. If these are not the objectives that you want to work on then there’s no reason why you should work on them, but then you shouldn’t work here.”
In the course of this kind of transformation process there will likely be turnover. As long as you are very clear about the new goals and direction, then you can be fairly confident that people who aren’t excited about it probably don’t have a role in your new company anyway.
“We had to look beyond the level of turnover and say we’re operating to a larger goal and the goal was to be successful and competitive on a global basis,” Jenks says. “That was embraced by a large majority of the employees in both locations. So having that dedicated and engaged group of employees was a really important part.”
To further engage and motivate people, make it clear that with the new vision comes new opportunities for those who are willing to put in the work. That could be everything from more career opportunities, travel opportunities or selling opportunities. Jenks made sure that the Chinese company recognized it now had access to the U.S. R&D and technology and let U.S. employees know that they could enjoy larger manufacturing and a better cost structure. He also knew the added capabilities of the combined company would particularly appeal to sales people as they sought out new business.
“Sales people are always interested in a higher, broader, deeper value proposition to offer to their customers,” Jenks says. “So there was a natural affinity in terms of our customer facing efforts, meaning sales people, whether they were from East or West, suddenly had a broader group of products because they had the merger partner’s products. They had a better roadmap of what they might be able to offer in the future and they had a bigger story to promote with a customer.”
The employees who embrace change are the ones who will do what it takes to make it successful. “I think it’s been a great experience for all of the people who have stayed with the company over the last five or six years,” Jenks says.
Since the merger, the company has grown from approximately $35 million to $181 million in revenue for 2010. In 2011, it completed another acquisition to purchase San Francisco-based Santur Corp., a privately-held components manufacturer with approximately 150 employees.
“So the principles used back in 2005 and in some subsequent deals are being applied again to develop as one company moving forward and to work jointly on what our goals and objectives are,” Jenks says.
How to reach: NeoPhotonics Corp., (408) 232-9200 www.neophotonics.com
1. Gain understanding by getting face to face.
2. Build alignment around shared goals.
3. Encourage people to buy in or opt out.
The Jenks File
Chairman, president and CEO
Education: U.S. Naval Academy, B.S., Mechanical Engineering
Massachusetts Institute of Technology, S.M. Nuclear Engineering
Stanford University, Stanford, Calif., MBA
What is one part of your daily routine that you wouldn’t change?
A quiet morning moment for a cup of coffee alone with my wife
What do you to regroup on a tough day?
I like to have a brisk walk with my dog, but unfortunately most tough days don’t offer the opportunity to regroup. That’s why they are tough.
What do you like most about your job?
I like the global aspect of it. I have friends, colleagues, customers and suppliers all over the world and it really makes me feel like I live in a 21st century existence. My friends and family sometimes are astounded by the regularity in which I find myself dealing with other parts of the world, and it’s a fun thing. At the same time, realizing that what we do really makes a difference. The vast majority of the world does not yet have access to online content. There’s a lot left to do.
What’s the best business advice you’ve ever received?
Hire people you’d be willing to work for, because you may. If you’re picky who you work for and you only hire people that you’d be willing to work for, then you end up with good people.
And, build a business with good people. Good people tend to hire good people.
M&A tips for the next time around: One of the lessons that I learned is that if you’re going to spend an effort to try and merge two companies and you’re in a leadership role, the best thing you can do is move there. For example, doing a transaction with (San Francisco-based) Santur, the first thing that I did is I did take an office there.
Vlad Shmunis built his company the old-fashioned way, one customer at a time. Starting with zero users, he’s grown RingCentral Inc. to deliver cloud-based business phone system solutions to more than 200,000 customers across three continents and employs approximately 500 people.
“It’s very clear that there is an amazing amount of demand,” says Shmunis, the founder and CEO of the San Mateo-based company. “It was at the right time, right place. So it’s just trying to hit it on all cylinders.”
To stay ahead of the competition in the business communications industry, Shmunis now looks to invest in areas that grow the business with new customers while also meeting the needs of current ones.
Smart Business spoke with Shmunis about how he invests in RingCentral’s long-term growth.
Invest in top performers.
As we’re growing, the focus is more the sense of the overall vision and culture understanding and making sure that everybody is on the same page. As far as the people we want to hire, how do we incentivize them? How do we keep them excited about what they do?
This is a constant quest. We try to have an A-team in every respect. We have well-accomplished people in the key positions. So that’s taking a lot of my time now and probably will continue for the foreseeable future as the company grows.
The slowing down of the economy did not slow our growth down and did not slow our customers’. The people that work for us have options. So how do we keep them here and productive?
Invest in infrastructure.
People understand that emphasis is on continuing to delight existing customers. So we’re not going to do anything that would jeopardize their well-being and in any way destabilize the service. We do invest a lot into the infrastructure, so we’re definitely putting our money where our mouth is. We’re running our own cloud. We invest a lot in the support systems — software and people most importantly — making sure that you have 24/7 coverage … that people will be woken up in the middle of the night whenever something serious happens.
These are people trusting us with their businesses, and if their phone line goes dead, it’s not a good thing. If things do happen, which is hopefully not a very common occurrence at this point, we have procedures that are well-defined.
Time of response is extremely important. So if there’s an outage, we will immediately post updates to the website to keep them up to speed. We are active in social media so we use Twitter. We use Facebook, our own website, anything we can to make sure that we’re not asleep at the wheel and that we’re still here and the service will be brought up as soon as humanly possible.
Invest in quality.
We make it easy for people to refer people to the service. But really the most important thing is that we’ve invested heavily into a product that will be liked. You can’t pay a person enough to have them recommend something that the person doesn’t like. The product speaks for itself. So we just make sure that it does what it’s supposed to. It does it well. It does it reliably, which is immensely important for our customer base. The rest takes care of itself.
The general position is saying, ‘Look, while we’d really to grow and take over the world and have tens of millions of customers, none of that is going to happen unless we keep our existing customers happy.’ One positive reference may bring you another lead. One negative reference can lose you 10 leads, if not more. Just continue the emphasis on quality of service.
Invest in your vision.
We’re not trying to veer out from our main task, and main task is enterprise-level communications to small businesses. We’re not trying to bring them additional services. We’re not trying to be a generic cloud platform. We’re not trying to become a broadband provider or call center operator or any of those things. Many of our competitors might be going into those tangents under the belief that there is low-hanging fruit there, and maybe there is. But I believe in focusing.
It’s fairly rare to find a world-class football player who is also a world-class baseball player. People have tried. Most of them did not succeed at the other sport after owning one sport. I feel the same thing here. If you want to be really, really good at football, play football. If you want to be really, really good at business communications, do business communications. We’re at the size where if we are to retain our world championship status, we need to work really hard.
How to reach: RingCentral Inc., (888) 528-7464 or www.ringcentral.com
John Kanas and the new owners of BankUnited knew that they had a big task ahead of them. They had just spent $45 million of their own funds to buy a bank that was hemorrhaging money and had cost the Federal Deposit Insurance Corp. nearly $6 billion in losses.
“For maybe a year or more, the company was fighting all of the rumors about its demise,” says Kanas, the chairman, president and CEO of BankUnited, which employs 1,300 people today. “Its earnings were collapsing. People were guessing as to what was going to happen with the company. The morale of the employees was very low… so you can imagine that emotions were running at fever pitch.”
After a lengthy selection process, the bank bid had been awarded to a group of private equity firms led by Kanas, the former head of North Fork Bancorp and a veteran in the banking industry. The group had made it publicly clear that their intention was not to tear the bank apart, but with a new strategy and the right people, rebuild the failing institution. As they entered the bank the day after winning the bid, they were met with a rush of flashbulbs, newspaper reporters and what seemed like a small army of FDIC officials. It was time to get to work.
Communicate the strategy
Kanas and his investor team knew early on that they wanted to transition BankUnited from a wholesale, residential mortgage originator into a commercial bank. When you are undertaking a new strategy, it’s important to quickly let people know where they fit in or don’t fit in to mitigate uncertainty and get started down the new path.
“The first thing we did was immediately seek out those people that we knew we wanted to retain as partners, that we knew could play a very important role in the company in the future under its new structure and assure them that their jobs were safe, that they would in fact be retained and that we would be relying on them to help us in our partnership in the future,” Kanas says.
Months before winning the bid, Kanas’ group had used an extensive due diligence process to gain access to a number of the company’s employees and identify which ones would be helpful in executing their new strategy.
“It was an ongoing process, but we knew the day we walked in who some of those people were,” Kanas says. “So for two or three days, we did nothing but sit down and explain ourselves to those people so that they could buy into our strategy moving forward. I would say the week was largely dedicated to getting people comfortable with who we were and understanding where everyone stood.”
There are also employees who likely aren’t going to be relevant to your strategy. Managing the expectations of these people also needs to be a priority.
“So we very quickly reached out to those people and let them know that there wasn’t going to be a role for them,” Kanas says. “Then we explained to them what our severance policy would be for them, gave them time to adjust their personal lives and made it clear that we intended to move swiftly to do that.”
You need to be very transparent with employees to allay their fears during this initial transition period when tensions are likely to run high.
“It was important to sit down with the people who were left and say, ‘OK, look, this is an unpleasant business — identifying these people and then sort of paring down the ranks,’” Kanas says. “‘We want to do this very quickly but we also want to do it intelligently and not make mistakes. You’re going to have to bear with us for a few weeks.’ And when the process is over … we promised that we would then sit down and let the core of our employees know that we’re done with this. Those of you that have been selected to stay now have a job. Some of you will have a job for one or two years depending on what your function was in the bank and some of you we hope to retain for the rest of your career. We tried to get to those people quickly and let each one of them know where they fit in that spectrum.”
Kanas knew that Florida would be the perfect home to structure a commercial bank that could gear its success toward products and services for midmarket and small businesses. The next step was convincing people to buy in so they could go out and execute that strategy with enthusiasm.
“So first is get the right people on the bus,” Kanas says. “Second is get those people in a room and overcommunicate with them every day. Make it very, very clear what the strategy is and leave no room for misinterpretation that anyone could misunderstand where we were going, how we intended to get there and what we needed from them as a buy-in or commitment if they wanted a commitment back from the company.”
Kanas and many of the investors had successful backgrounds in business, particularly at North Fork, which had grown from $28 million in assets to one of the largest banks in America under Kanas’ leadership. Pointing to this past success, they diligently spent the first couple of months meeting with the retained employees one-on-one, with small groups or even up to 300 employees at a time, to talk about the new model and why it would work. They were also transparent about the fact that they had literally bought in to the turnaround strategy by committing their own money to buy the company.
“So it was important for our new partners and our new employees in Florida to understand that we were very, very serious about this,” Kanas says. “We’d put our family money into this and we intended to work hard along side of them to help them create the vision.”
To get buy-in for your vision, it also helps to give people goal-connected incentives. Offering stock in your company is one way to achieve that short term and long term. From the beginning, Kanas’ investment group was clear about its hopes to take the bank public but also let people know that whoever helped the company achieve that goal would share in its ownership.
“We did take it public earlier this year and we have about 120 people who are equity partners with me in the company who have major roles in the institution,” he says. “So they are not just employees. They’re owners. To the extent that we will be successful in the future, these people will be able to share in that success directly.”
As you move forward, you can then maintain employee buy-in by communicating your company’s progress on the strategy.
“It’s continuing to let people know that the company’s strength is building every day,” Kanas say. “The earnings stream of BankUnited is very strong so its book value is going up every day. So for those people who own part of it with me, the value of their investment is going up every day… and everybody knows that eventually people recognize the intrinsic value of a company over time. So I think that it’s not hard to keep our people encouraged because they’re so proud of the success that they’ve achieved on a quarter to quarter basis.”
Build your talent pool
In the end, the bank let go about 350 people. So in addition to retaining the key employees, the company needed to find and attract new employees who had the skills to execute its new strategy.
“We were looking for people who had extensive experience in the Florida market, who had existing customer relationships that we could attract to the bank and would help lead us to build a commercial bank,” Kanas says. “We said that we were going to start immediately mining the market for that talent.”
One way to attract talent is to share your vision in a way that communicates it simply and memorably.
“We actually coined in that first couple weeks the term ‘building Florida’s bank,’” Kanas says. “We said, ‘We think we can come here and take the skeleton of this company and build Florida’s bank on it, and you can be part of it.’”
To reach a national talent pool, the company also put out an advertisement in The Wall Street Journal and The Miami Herald.
“It said, ‘If you’re an unhappy Florida banker and you’d like a new home, call us. We’ll change your life,’” Kanas says. “We ran that both on the Internet and newspapers for 10 days and we got 7,000 applicants and 3,000 from New York alone and the rest from Florida.”
As they narrowed down the potential candidates, the company also looked for one, a successful track record and two, the right personality.
“We’ve had great success with hiring people outside of the industry, not bankers, who have come from other industries that require the kind of skills that we think are important in banking today, people who can sell, people who are confident in themselves, people who are engaging and like other people and communicate well,” Kanas says. “So we try to find those people and we find it’s much easier to teach them the technical side of banking than it is to try and change their personality.”
After going through half a room full of resumes, the company was able to hire roughly 250 people to come in and help retool the company.
“We knew that there was a level of frustration among people in Florida who were good bankers stuck in institutions that for one reason or another couldn’t go forward,” Kansas says. “Either they were handcuffed by regulators or handcuffed by inadequate capital positions or some combination of both. We invited them to bring their careers to us and it was overwhelmingly accepted.”
Instead of just trying to fill jobs, Kanas looks to hire people who can complement the company’s strategy, and then works them into it.
“We believe very strongly that the key to the success of any large company is embedded in its human talent,” Kanas says. “So unlike other banks that will go build a branch on the corner of Fifth and Main and then a month before it opens put an ad in the newspaper to try and find somebody to go manage it, we don’t do it that way.”
Instead, the growth strategy is to find the best of the best, get their buy-in and continue to build the company with talented people who can grow the business. For example, the company went ahead and hired a group of people in Orlando before it even had a branch in the market, using those employees to open two branches there more than a year later.
“So we build little energy centers all over the state around successful people who can come to understand our strategy, and we will do that anywhere in Florida,” Kanas says.
He says the key to building a strong company is also not trying to do it on a shoestring.
“We didn’t try to find bargain basement employees,” Kanas says. “We found people who were truly distinguished in their field, and we pulled them out of very good jobs at other banks. I guess that’s another way of saying it’s more expensive than you think it’s going to be. It’s more work than you think it’s going to be. But it’s also a lot more rewarding than you think it’s going to be if you succeed.”
Last January, BankUnited went public in one of the largest bank IPOs in U.S. history. Today it is one of the most capitalized banks in the country, with more than 90 branch locations and $11 billion in assets.
“This is a company that has a clear purpose and a laser-like vision that I believe that our employees understand,” Kanas says. “We’re growing organically at a rate that impresses even me. If you take the second quarter growth in loans and annualize it, we’re growing the commercial component of the bank at over 60 percent a year —and in Florida that’s really saying something. … So I guess the only similarity between the old company and this one is the name.”
How to reach: BankUnited, (877) 779-2265 or www.bankunited.com
1) Identify new business strategy and which people support it.
2) Get the buy-in of the people who are staying.
3) Build your talent pool to complement the strategy.
The Kanas File
Chairman, president and CEO
Born: South Hampton, New York
Education: Long Island University
How do you retain good people in this environment?
Because we’ve shared our vision with them and continued to share ad nauseum, we keep them excited about where the company’s going. And, of course, they can look over their shoulder at the tremendous success that we’ve had so far and know that they’re part of it. So there is a high level of enthusiasm and excitement in our bank. And frankly in the banking business today, it’s hard to find a place that’s growing and that breeds a level like this of enthusiasm any place else, certainly any place else in Florida if not the whole country.
Kanas’ turnaround takeaways:
- One of the things is don’t ever underestimate the complexity of the problem and realize that when you’re reshaping a company that’s had a failure, that there are probably a lot of other bad things that you’ll find out six months into it that you didn’t know when you took the first step. So always make the assumption that it’s going to be harder than it looks and be prepared to deal with that.
- These things are always much more work than you think that they’re going to be. For people who are going to take a challenge like this, it’s important to understand that you cannot do this halfway, that this is a total and complete immersion and it’s a total and complete commitment and you have to be committed with every bone in your body and every molecule in your brain to make it a success…Probably most people haven’t been as successful as they thought they would be because sometimes from the outside, a good management team, and I don’t mean me but the team, can make a job look easy, but it’s not.