Nearly four years ago, when Tom Salpietra joined EYE Lighting International of North America Inc. as its president and COO, a woman approached him interested in operational development at the company.
Since Salpietra was a new leader, it was expected that he would make changes within the company to improve EYE Lighting International while keeping the best things about the company intact.
“Everybody is going to have things wrong, but if you preserve what’s right, that’s where the secret is in organizational development and implementing change,” Salpietra says. “If you screw up the things that are right, that’s where you go wrong.”
Salpietra worked with her to develop questions to interview the employees about what they liked at the company. Since this was an appreciative inquiry the study only focused on what the employees thought was sacred about EYE Lighting International, not about what needed to be fixed.
The study found that every employee was extremely engaged in the company and its business.
“This was how we developed the four basic principles around the customer,” Salpietra says. “We made the customer the center of the business and did process improvement to all the things that we do on a day-in and day-out basis.”
EYE Lighting International is a nearly $100 million U.S. division of Iwasaki Electric of Japan. The company designs and manufactures high performance lamps, luminaries and lighting-related products that serve major commercial, retail, industrial, utility and specialty application lighting markets in North and South America.
Since Salpietra’s arrival at EYE Lighting, he has been focusing on efforts to develop new technology and to keep the organization’s sights on the next big thing in the lighting industry all while maintaining employee engagement levels.
Progress your company
EYE Lighting International’s unique competitive advantage is how the company doses the arc tube of its lighting products (dosing refers to the mix of metals inside the arc tube). The market is currently producing a lot of high intensity discharge (HID) lighting but soon the market will move to LED lighting. While LED works in certain applications, it is expensive, and there are still kinks to work out in other applications where it’s not ready for prime time.
“We’re trying to shift the company from just making HID lamps to offering broader solutions in our market segment,” Salpietra says. “We’re not going to stray from our core competency, which is dosing the arc tube and making unique types of lamps. The challenge we have is if we don’t move in that direction, our years and decades of existence will start to decline.”
As a management team, EYE Lighting knew that the company didn’t have to change too much to succeed, but if it didn’t start changing and moving in a certain direction, it wouldn’t be in that same kind of comfort zone it has been three, six or 10 years from now.
“We’ve taken it very seriously that what we do today will impact the company years down the road,” Salpietra says.
With the lighting industry making a slow transition into LED, Salpietra and his team had to look for opportunities that better suited EYE Lighting’s general lighting purposes until LED is ready for the applications where the company would primarily use it.
“The merging of the two traditional technologies into ceramic metal halide gave us the ability to continue to do what we do, which is making lamps,” Salpietra says. “If that technology wasn’t there, we’d be lost and everybody would be rushing to do LED more quickly.”
What EYE Lighting has been able to do is make the regular technology much more efficient and deliver white light, which creates good color rendering and color temperatures to be able to see both in the day time and at night.
“It’s been proven that white light versus a yellow light or a blue light make a big difference in being able to see,” he says. “If you can make your light create the spectrum that matches the way the human eye wants to see the spectrum and discern it, you’ve just enhanced the way you do it.”
On top of developing new technology to enhance the company’s core offerings, EYE Lighting has been looking for broader applications to its technology and has its sights on potential partnerships that could benefit the company.
“When we do our strategic planning, we look heavily at our core competencies and what we think we can do with new technologies,” he says. “Part of every good company’s strategy has to be looking at the M&A side of things as well; you want to grow organically, but what should you do to augment that growth with outside skills and services?”
Salpietra and his team are keeping their options open for potential strategic alliances, mergers, joint ventures or buying a company outright.
“In order to grow and thrive and create jobs and create value for our customers, shareholders and employees, we’ve got to look at the overall business and determine what we can be looking at to expand our business beyond what we do day-in and day-out,” he says.
A big move that EYE Lighting made in November 2012 was the acquisition of Aphos Lighting LLC, which expedited EYE Lighting’s move into LED. The products acquired are LED-based luminaires that carry with them 14 different design patents for their optical, mechanical and thermal management performance. EYE Lighting will maintain the Aphos name for this new line that will expand its business by introducing LED luminaires to municipalities, utilities and industrial customers.
“As we’ve looked in the general lighting market space, we ask ourselves what’s our core competence and where do we want to go. We get involved in a lot of unique things that stem from our core technology.”
The other areas in which EYE Lighting participates, in addition to the general lighting market, are institutional, educational and hobby markets.
“Because we dose that arc tube differently than anybody else in the world, we’re able to recreate some spectral distributions of light,” he says. “Not just the color of light, but the intensity and what light rays are being emitted from the lamp.”
Due to this ability, EYE Lighting can make lamps that enhance plant growth, as well as lamps that can simulate solar power for use by companies or universities doing solar tests. The company also makes solar aging equipment for businesses such as Sherwin-Williams, Behr paint, automotive companies that make windshield wipers, roofing companies, and anything that’s outdoor-oriented.
“Those types of companies want to test in a lab whether or not they’re going to get a 30-year warranty, but they don’t want to test for 30 years,” Salpietra says. “The equipment nowadays has you test six to nine months to be able to project a 20- or 30-year lifespan.
“We make a machine which is called a super UV. You can put samples in the machine and within three weeks we can equate 10 to 15 years. We can also put more than just UV rays on it; we can also put water on it and chill it.”
These types of broader offerings are due to the highly engaged employees that EYE Lighting has been able to keep around the business over the years.
Keep employees engaged
With a Japanese parent company, EYE Lighting puts a lot of focus on lean manufacturing and kaizen events, and 130 employees are quick to recommend how to better the business.
“What is unique about us is that every employee on the factory floor changes positions at least once a day,” Salpietra says. “Everybody is highly cross-trained and capable of performing at least two different jobs.”
Some employees remain in the same department and move upstream in the process versus downstream. Others will go from one department that transforms the raw material, and then they go to the end of the line to do packaging.
“It allows us a tremendous amount of flexibility,” he says. “The employees love it because they don’t get bored in their daily job. Ergonomically it’s good for them because they’re not doing the same repetitive task day-in and day-out when they come here. It helps keep them alert and safe, especially when they know different jobs and how to behave around different pieces of equipment.”
One thing missing from EYE Lighting that most other manufacturers utilize is a suggestion box. Salpietra says his employees will come forward with ideas on their own, making a suggestion box unnecessary.
“Everything emanates from the floor,” he says. “When the employees change jobs by going upstream or to another department, they see the product of their work or the beginning of what comes to them to pass on to somebody else. So they inherently get together to have a kaizen event over a particular issue.”
To aid in employee’s abilities to help the company further its growth and development, Salpietra and his team implemented four core principles: customer-centric, process improvement, financial focus and talent development.
“We did this rather simplistically to make sure that it was easy for everyone to recite and keep it close to them day-in and day-out,” Salpietra says. “We keep our customer at the center of our business. We deal with process improvement, which is part of our DNA as a Japanese-owned division.
“And everyone in every organization wants to improve and enhance the skill set of employees, so we push our people to get out of their comfort zone.”
Develop your talent
To keep EYE Lighting employees on their feet and thinking about different aspects of the business, Salpietra made talent development a big part of the organization’s core principles.
“We added talent development because that captures what we do on the factory side that we want to do throughout the whole organization, which is work out of your comfort zone,” Salpietra says. “You’re going to become more knowledgeable and more valuable for yourself.”
To allow your employees to grow and develop, you have to be willing to give them the tools and resources to do so.
“You need to have an open-door policy,” he says. “The leadership, especially new leadership, has to develop two things primarily — trust as a leader and then respect comes. Then you can develop the feeling of hope. If the employees see that there’s hope in things and they become a part of that, it will help engage them.”
That engagement will also help when your company has to make a tough decision or make a change in direction.
“It’s very important that you get a lot of group interaction so that when you go to make a decision or implement a change, everybody is onboard with that,” he says. “If you engage your people and say, ‘Here’s what we’re going to do. We’re going to move in this direction and we’re going to need your help. We do not know all the answers.’
“They love to hear that because they will have questions and suggestions for the company. As much as you engage your employees, they will become engaged on their own. All of a sudden ideas and suggestions will start surfacing.”
How to reach: EYE Lighting International of North America Inc., (440) 350-7000 or www.eyelighting.com
Keep yourself in tune with your industry and where it’s going next.
Always think about ways to broaden core offerings.
Develop talent and keep employees engaged in the business.
Steve Phillips doesn’t understand why customers in today’s world wouldn’t want help from a salesperson. But he’s not so stubborn that he refuses to believe it is true.
“My son keeps talking about stranger danger, that customers don’t want to be approached by salespeople anymore,” says Phillips, president and CEO at Phillips Furniture Co. and six Ashley Furniture HomeStores in the greater St. Louis area.
“As a leader in my position, this is where I’m going to have to rely on these young people to make decisions that will put us in a great position for younger customers.”
Phillips Furniture is a family-run business that launched in 1937. Phillips doesn’t see things the way his father did. His son, Michael, the company’s vice president of advertising and merchandising, doesn’t always agree with his father’s point of view.
But it’s their ability to respect each other’s differences and then reach a consensus on how to operate the business in today’s world that allows the company to succeed.
“I’m hearing what they want, and I’m OK with what they want,” Phillips says of the younger generations that are becoming a larger part of both his customer and employee bases. “It’s just foreign to me. But as a leader, I have to be willing to let them try things that I’m not familiar with.”
Phillips says it’s not always easy to move away from behaviors that you’ve grown up with and used to achieve success. And he doesn’t always believe it’s necessary to shift away from something that has become a proven success. But if it is necessary to change, doing so beats the alternative every time.
“It is tough,” Phillips says. “But it’s tougher if you fail. If I keep dictating policy and how we’re going to do things based on how we did it in the past, I know we will die and that’s not good. So I just really trust these young people, and I trust the organization. If we truly have the customers’ best interest at heart, we’re going to do what they want, not what we want.”
It’s that idea of constantly seeking a better way to please customers that drives Phillips and his 330 employees.
Set a foundation
Perhaps one of the reasons Phillips is more agreeable to accepting new ideas is that he has been reluctant to follow the crowd when it comes to furniture salesmanship.
“The furniture business has not had the greatest reputation for integrity,” Phillips says. “A lot of people give false high prices and fake savings, and I didn’t want to do business that way. We have one price on a piece of furniture.”
The problem for Phillips is that many employees who have worked in the industry for a number of years were trained to take the misleading approach.
“There was a very specific way we wanted to do things that was not normal in the furniture business,” Phillips says. “That’s why we don’t necessarily want people who have been in the furniture business because we don’t know what their training background is.”
The solution for Phillips was to create a training program that new employees must go through before they are allowed to speak to a customer.
“So everything that we do structurally and integritywise is ingrained before they talk to their first customer,” Phillips says. “As a matter of fact, we probably don’t spend enough time talking about product. It’s more about how we do things. We have leadership round tables every month also. We have our leaders come in and we just go through what’s important to our customers.”
The goal is to have a sales team that doesn’t just talk a good game when it comes to pleasing the customer, but they can actually show how they’re going to do it.
“They have to role-play to show us, not just tell us, but show us they know how to service customers the way we want them to,” Phillips says.
That’s the end result. The steps for getting to that point where employees have the ability to display those skills must be dutifully followed if training is going to work.
“You can’t train or correct anything until you can measure it,” Phillips says. “We know how many pieces per hour some of our furniture assemblers can do and what the standard is. We know how many pieces per hour one man can unload on a truck. You can’t manage and train until you know what the issue is, which is only done through measurement.”
Once you have that data to work off of, you’ve got to put what you want to do in writing and then make sure you do it.
“If it’s not in writing, it’s not real,” Phillips says. “So everything is in writing, and you just go over it step by step. They can’t be promoted until somebody observes and there is a physical check-off that this is what they can do.”
If you don’t believe you have time to conduct training with an already cramped schedule, you’ve got to find a way to make it work.
“Training has to be a priority,” Phillips says. “If you get caught in the treadmill of doing business all the time, you’ll never get off the treadmill and start training. If you train and make it part of your culture and your business religion, you don’t think about it as being a disruption of your normal process. It is your normal process.”
Take a visible role
Many leaders will talk about how important a training program is, but then they personally move on to other things and leave the team to figure out the best way to make it work.
Phillips says you have to do more than that as CEO.
“Every training class we have for salespeople, I’m the first presenter,” Phillips says. “I take the first hour or so and tell them about the company and what we stand for.”
The company’s COO tackles the next segment and then training responsibility shifts to Phillips’ brother, Matt, who heads up training at Phillips Furniture.
“What we want these people to see is that everybody at the top also believes in everything we do,” Phillips says. “The fact that we spend so much time with them, we certainly hope that’s what they believe.”
As a way to encourage leaders to want to take part in the training process, Phillips suggests rewards for leaders whose direct reports receive promotions.
“A lot of leaders withhold knowledge or training for fear of somebody rising above them,” Phillips says. “Our managers are rewarded for having someone promoted from beneath them. We love store managers who want their assistant managers or their team leaders to be promoted. They don’t feel threatened by it.”
Focus on core values
The other piece of the puzzle for Phillips is core values. While he is open to changing training methods and operational policy, he leaves no wiggle room on his commitment to the company’s core values.
“No matter what processes or changes you make in your business, you can still hold tightly to your core values,” Phillips says. “That’s the one thing I will never negotiate — how does it look with our core values. You have to keep that out there in front.”
Arriving at the three core values that define Phillips Furniture was no easy chore. Phillips and a team of more than a dozen leaders left the company’s headquarters and headed to a remote cabin in the Ozarks. Once they arrived, it took three days to finish their work.
“There were a lot of great ideas,” Phillips says. “I just didn’t want a lot of them. We could have had 10 great core values, but I wanted to be able to sink our teeth into three or four. Once you get past three or four, they start becoming a little redundant. These were three that nobody could ever argue with.”
The three core values they decided on were “integrity above all else, honesty in all we do and service to others first.”
“If you can get your entire organization to buy in to those three things, you have a much easier time finding great leaders because leaders want to buy into something greater than a dollar,” Phillips says.
Some companies consider “making a profit” a core value and Phillips says he understands, even if he doesn’t agree with it.
“We think that’s the result of doing the first three,” Phillips says. “So we wanted the core values to produce the results that we were looking for.”
Phillips says his company wants to make a buck as much as anyone. But by focusing on other things, such as the customer experience, employee readiness and job satisfaction and giving back to the community through charitable efforts, everybody comes out ahead.
“It’s imperative that a company stand for more than a dollar,” Phillips says. ?
How to reach: Phillips Furniture, (314) 966-0047 or www.phillipsfurniture.com or Ashley Furniture HomeStore, (314) 845-3084
The Phillips File
President and CEO
Phillips Furniture Co. and Ashley Furniture HomeStores/St. Louis
Born: Dayton, Ohio
Education: I went to the University of Missouri for three years. I got married when I was 20, and I got tired of being broke, so I quit school and took a job.
What was your very first job?
Raising vegetables and selling them door-to-door. I’m an avid gardener, and I still am to this day. My first full-time job was in the furniture store while I was going to school at Mizzou.
What got you into gardening?
My dad had an extra lot next to the store. I always wanted to be a farmer my whole life, and now I do own two farms. There is something really neat about getting your hands in the soil. He gave me this plot of ground, and I had a wagon. I would load it with vegetables I grew and picked and I would take them door to door to our neighbors. I didn’t have prices. I always said pay me what you think they are worth and I got taken advantage of quite a bit. So I learned not to do that the next year.
Who has been the most influential person in your life?
It would have to be my mother and my father. From a business point of view, it would have to be my father. He was the most patient and kindest man you ever met. I never saw him raise his voice ever. I don’t know that I got those traits from him, but I’ve always admired those traits. My mother had six kids and she’s a phenomenal woman.
Don’t be afraid to change.
Make the time to do training.
Don’t choose too many core values.
Edward Kennedy is an experienced chief executive with a successful track record of creating value at companies in the communications equipment industry. So it’s no surprise that his ascent within Tollgrade Communications Inc., a more than $50 million, 120-employee provider of network assurance solutions for the utility and telecommunication industries, was a quick one.
Kennedy was named to the board of directors in June 2009 to help the company from a strategic standpoint. He became chairman of the board in March 2010, and just three months later, he became Tollgrade’s president and CEO. In his more than two years in the role, he has helped Tollgrade grow in several ways.
“Our customer base is the who’s who of telecom players, both here in the United States and Europe — AT&T, Verizon, Quest, Frontier, British Telephone and more,” Kennedy says. “We have a very strong footprint — roughly about 250 million lines under test — 140 million in the U.S. and 110 million in Europe.
“Because of all that, we have over the years, developed some very, very sophisticated software that allows us to maintain this leadership role in testing.”
Beyond Tollgrade’s core service of testing telephone lines, Kennedy has helped the company break into the smart-grid business with a product called LightHouse.
“As utilities globally look at how to become more efficient with their distribution of electricity and also how they manage different types of electricity generation, such as renewables and how that comes into the network, the ability to monitor your network becomes key and that’s what we do with our smart-grid product,” Kennedy says. “That’s a high-growth area for us.”
While Tollgrade’s core business and its new smart-grid business are similar technologies, they are vastly different businesses, and trying to grow a new business while maintaining the other has been Kennedy’s biggest challenge.
Here is how Kennedy is balancing Tollgrade Communications’ growth of a new business while maintaining its core service to take the company to the next level.
Create investment opportunities
Along with the challenge Kennedy has of balancing a new growth opportunity and an existing business, he also needed to find ways to invest more in the future of the company.
“One of the things we did back in May 2011 is we went off of the NASDAQ and went from being public to being private,” Kennedy says. “The motivation to do that was we saw the requirement to make larger investments in new products and larger investments in increased infrastructure inside the company.”
As a public company, you’re measured on a very tight set of parameters. All of those metrics don’t lend themselves when you want to do an investment for the future.
“In a public company it’s kind of a catch 22 — you don’t really have enough money to invest the way you want to grow the business, but if you don’t invest, the business won’t grow the way you need it to maintain increasing stock price,” he says.
Tollgrade decided it needed to look around and see what it could do to unlock some of the investment dollars. The best way for the company to do that was to go private. The company was then bought by a large private equity firm out of California called Golden Gate Capital, a $12 billion fund that invests in all sorts of technology companies.
“With that we are allowed the flexibility to make investments the way we need to grow the business,” Kennedy says. “It allows us to invest for the future, which these days is pretty challenging. Keeping one step ahead of the competition, but also having the next generation of products is going to be key to keeping your business vital.”
Strike a balance
Tollgrade’s ticket to keeping the business vital is through the growth of its LightHouse product in the smart-grid area.
“The smart-grid area has the largest potential for growth and is the one that is the most challenging because we are in so many different areas and applications,” Kennedy says. “The utility environment itself is in a period of change and the requirements for electricity are ever increasing.”
Utilities are looking at how to better manage their grid, which opens up a huge opportunity because the power grid has been the same for many decades.
“Now what’s happening is the issue of different types of power generation where it’s not just nuclear plants, coal plants, hydro plants; it’s also wind farms, cellular rays and things like that,” he says. “There’s a whole new set of demands that have to be addressed and that’s what we are going after.”
While Tollgrade is investing heavily in the smart grid and is one of the market leaders in the sensing and monitoring of that for the utility group, its telecommunications business is also still vibrant and growing. Kennedy has to make sure that Tollgrade is successful at striking a balance between both the new business and the existing business.
“Having multiple business lines in very different market areas is challenging and where it becomes challenging is you want to make sure you put enough investment in the new products to grow it, but you’ve got to make sure you’re not hurting the overall profitability of the business by investing too much,” he says.
Where companies get in trouble or get offline is they don’t sit and think about what the metrics are for success along the process.
“Everybody says, ‘I want to grow this from zero to $100 million in sales,’” he says. “But what are the major steps along the way and what are the definable milestones that you can figure out whether you’re making progress toward that? If you’re not making the progress you thought … what are the issues preventing you from hitting the milestones?
“Having that kind of environment where you’re analyzing in real-time how your business is doing makes people gloss over a little bit because they’re so busy trying to grow the business. As a CEO your primary role is to step back and think on a more strategic and global basis to understand how the company is doing.”
If you’re not keeping tabs on how all your business segments are performing, it is very easy to lose track of one or more of them.
“The core business can’t be seen as an orphan or a stepchild because all the fun and excitement is in the new products,” Kennedy says. “People have to realize that maintaining and growing the existing business is as important, or sometimes even more important, than the new initiatives because the new initiatives aren’t paying for anything if they are still in the investment mode.”
When focusing on a new business, you have to put together some milestones to get to a certain amount of revenue in a certain amount of time and highlight what needs to happen in order to get there.
“As you move forward with your plan, you need to compare that to what’s actually happening and have a feedback loop to understand if you were too aggressive or not,” Kennedy says. “You have to constantly improve your model to better predict how you’re doing moving forward.”
There is a different set of metrics that you put on a new product or a new business area because you have to take increased risks that you wouldn’t take in your existing business because you no longer need to.
“Sometimes these risks work out and sometimes they don’t,” he says. “Failure isn’t not achieving a goal. Failure is not trying hard enough to achieve the goal.
“You focus in on your core strengths and what you know and what you don’t know and by having a very clear conversation with the team that’s running the new business, you can have a view of what progress is and how you measure it and figure out if it’s doing what you think it’s doing.”
The biggest key to having successful growth of a new or existing business is the people who drive the company every day.
“It is crucial to have very motivated and smart people under you that get it,” Kennedy says. “You have to give them an environment where they want to go out and grow the business and they’re rewarded for growing the business and success is seen as management of risks and rewards versus making sure that they stay in their comfort zone.” ?
How to reach: Tollgrade Communications Inc., (724) 720-1400 or www.tollgrade.com
- Create opportunities that enable investments for the future.
- Strike a balance in how you grow a new and existing business segment.
- Set goals and create milestones to measure growth.
The Kennedy File
President and CEO
Tollgrade Communications Inc.
Education: Has a B.S. in electrical engineering from Virginia Tech
What was your very first job and what did you learn from that experience?
My first job was cutting lawns around my neighborhood. I’ve always been kind of a high-energy-driven kind of guy. I learned that you have to work hard to get ahead.
What is the best business advice you’ve ever received?
Be tenacious and thoughtful and think about what you want to do and then be relentless to get it.
What are you most excited about for the future of Tollgrade?
I’m excited about the fact that we have a huge installed base in the telecommunications side that we can continue to grow and help our customers globally to provide better service for their customers. On the smart grid side there is a huge opportunity to help the whole energy marketplace in a better and more efficient delivery of electricity. That’s going to be a major social trend and a major business trend and we can be a pretty significant player in that.
If you could speak with someone from the past or present, with whom would you want to speak with?
I would like to sit and talk to Winston Churchill. He was a man who faced incredible situations and had the weight of a lot on his shoulders, and it would have been interesting to see in his time what he was thinking.
If you had the chance to do something dangerous one time, without consequence, what would you do?
If I couldn’t get hurt, I would want to try flying around in one of those squirrel suits. As long as I land safely, that would be fun to do.
As a 20-year veteran of the insurance industry, Charlie Rosson has seen his fair share of financial uncertainty, economic downturns and business struggles. So when he was promoted to CEO of Woodruff-Sawyer & Co. on Jan. 1, 2008, Rosson recognized rather quickly that his tenure was going to coincide with all three.
“Right from the start, like everybody, we were thrown a pretty difficult set of circumstances to deal with,” says Rosson, CEO of the San Francisco-based insurance services firm. “So many businesses were impacted in terms of their sales and access to capital and their business overall. The recession impacted our clients directly, and we were challenged to respond to that by coming up with more aggressive programs for them to quickly save them money and to help a lot of them through survival mode.”
Although clients were losing revenue and facing serious financial struggles of their own, the firm still needed to find ways to keep business profitable. But many clients could also no longer afford the firm’s services and products at the same rates or prices as in the past.
Like most professional service firms, Woodruff-Sawyer needed to find ways to keep clients’ businesses afloat but also avoid losing their business.
“Obviously, we had to become more efficient in the way that we do business, and we had to recognize in a lot of cases our clients weren’t willing or didn’t have the wherewithal to pay the same type of fees or commissions that they might have before the difficult time,” Rosson says.
“The way we would structure an insurance program before the financial crisis or before things got really difficult obviously wasn’t implacable anymore. So we had to kind of come to terms and help them with declining values and property, shrinking payrolls and overall downturn.”
Finding creative ways to deliver the same types of programs for clients more affordably wouldn’t be simple, especially because each client’s business was so different.
Rosson knew that the firm needed to work much more closely with clients to figure out win-win solutions.
“We had to negotiate greatly reduced premiums for them and come up with coverages that met their needs but were at a price point that they could afford,” he says.
So as Rosson and his team began talking with clients about their changing risks and opportunities, they also asked each client for a list of must-haves.
“We really had to dig in and find out what are the things our clients truly value and what things are sort of “nice to haves” that they didn’t value as much, and frankly, weren’t willing to pay for,” Rosson says.
“We’re fortunate that the clients we serve we have a great relationship with and normally have a pretty deep dialogue with them and attempt to fully understand their business,” he says. “So we can go in and talk about the services we deliver, how they’re delivered and how the team is structured, then drill into what things are important to them. Then we ask them honest questions about what things they can live without.”
Knowing your customer’s “deal breakers” can help you pinpoint the exact value that you add for them, allowing you to identify and recommend business solutions that are cost-effective but that still meet that customer’s needs.
“What clients are looking for is value, and in our case, it’s quality of advice,” Rosson says. “It’s how do we help our clients become more successful? And oftentimes when we partner up with them and really understand their business, we can help them execute a strategy that maybe they wouldn’t be able to execute without us.”
You may see opportunities to meet the future needs of your customers as trends emerge of where their businesses are moving and as new technologies come along. For example, the recession spurred the firm’s investment in technology to help address client issues.
“The current generation of buyers has already adopted technology as a core part of the way they do business, and that curve is only going to get steeper as newer generations come into the workforce and become leaders of companies,” Rosson says. “They’re going to expect that they can interact with service providers and professionals through some sort of technology medium. They’re not going to expect the traditional back and forth model that’s defined our industry for quite a while.”
Trim the excess
Once you identify your clients’ pain points and priorities, you can begin looking for ways to serve their needs more efficiently.
Rosson realized that although Woodruff-Sawyer continued to deliver valuable services and advice for clients, the firm could save time and cost by streamlining its approach — as could its clients.
“We had to get much more efficient in terms of the way we structured our teams, and we had to use technology in ways that we hadn’t before, in terms of delivering things through the Web that may have been done before either face-to-face or through some other lower-tech way to deliver service and advice,” he says. “So we are using technology in different ways, and we’re just more careful in terms of how we assign resources to client teams.”
Rosson restructured the company’s practice teams to put the focus on having the right people in the right roles, instead of just more bodies, to cut down on unnecessary costs.
“Don’t get swept away by how much revenue you think somebody can generate or how dazzling somebody is,” Rosson says. “Really do your homework and find out what that person is all about. Are they really a fit for the organization? Do they really have the client’s best interests at heart? Can they collaborate well with others? Those are really important things.”
Another way Rosson saw to improve efficiency was integrating technologies that could make communication more user-friendly for clients. Most of the technologies Woodruff-Sawyer has deployed are collaborative, meaning they enable communication between clients and associates outside of the traditional email and face-to-face meetings. In addition to saving its clients cost and time, many changes have streamlined the firm’s processes overall.
For example, the firm now issues all of its certificates online and deployed a portal called Passport, which permits document sharing and collaboration with clients over the Web to expedite projects.
Since seeing the positive impacts, Rosson has continued to pursue a direction that involves technological innovation. Recently, the firm launched an online portal for small businesses called, BizInsure, hired a chief information officer and has made investments in online business to ramp up its overall technology component.
“I’m absolutely convinced that emerging technology is going to have a disruptive impact on our business,” he says. “And I believe it’s going to be in a positive way, and we’ll be right there to capitalize on it. The way that we’re going to interact with our clients in the future is going to be different that our traditional model.”
Enable a responsive culture
Of course, it’s difficult to devise efficient and cost-effective solutions for clients if you don’t empower employees to be creative and test their ideas. Businesses that run their organizations with a heavy-handed, top-down leadership structure can easily stifle the kind of creative, engaged culture it takes to provide the most value to clients, Rosson says.
“To be a top-tier professional services firm, by definition, you want to have professionals — and you need to treat them that way,” he says. “The way to treat them that way is to respect what they do and be there if they need advice and guidance. You have to have a certain amount of structure, but listening and not being overly prescriptive or top-down in our approach has really paid dividends.”
Rosson avoids a command and control culture at Woodruff-Sawyer by furthering the firm’s corporate vision to remain an independent brokerage firm. Being a 100 percent ESOP firm gives the company a flexible infrastructure where top people feel empowered to make decisions and operate with more freedom, he says. With no shareholders, employees are able to focus on the client and do things for clients that might be difficult under a different leadership structure.
“We’re able to do things for clients in terms of being flexible and the people who are working with clients have a lot more authority to get things done for them, deploy resources and make decisions that our competitors who might have a different ownership system can’t,” Rosson says.
“Our independence is a key part of our competitive advantage and a big part of our culture.”
The independent structure has also helped the firm attract talented employees who value autonomy and the ability to be responsible to a client’s needs. And for companies that can’t do an ESOP, leadership comes into play even more. As a CEO it’s important to set the tone for your direct reports and other employees by showing that you trust their decision-making abilities.
“I truly believe that we have the best people in the industry,” Rosson says. “These are people who have arrived at a place professionally. They don’t need me to look over their shoulder or a leader to second-guess what they are doing.”
Rosson says in the future, the firm will continue to be prudent and watching the bottom line while making investments in technology and internal perpetuation to keep the firm independent. By successfully delivering insurance services in an efficient and user-friendly way for clients, the firm has not only retained clients, it’s also been extremely successful in adding new business.
“The vast majority of our growth is organic growth through just going out and telling our story,” Rosson says. “With a lot of our competitors, and the large ones, it can be very difficult or very expensive to access very sophisticated resources. What we do is deliver those same resources or the same level of advice — or even better — but do it in a way that’s less expensive and much more user-friendly.”
As a result, Woodruff-Sawyer has grown its revenue approximately 40 percent since 2007, generating approximately $70 million in revenue in 2011.
“Like so many businesses, the downturn forced us to work smarter and more efficiently and embrace technology,” Rosson says. “As the economy has slowly improved and our clients’ businesses has improved, we’ve found that we’ve been able to leverage our technology and we haven’t had to increase our costs at the same rate that maybe we would have. So we’re actually seeing that our business is healthier now, after the downturn, than it was before.” ?
How to reach: Woodruff-Sawyer & Co.,
(415) 391-2141 or www.wsandco.com
Ask customers where your business provides the most value.
Utilize technology to cut down on time and cost in customer interactions.
Empower employees to help clients by avoiding a top-down culture.
The Rosson File
Woodruff-Sawyer & Co.
Born: San Jose, Calif.
Education: B.A. in history from UCLA
On growth: If you’ve got a very strong core business — I’m so bullish on the insurance business — you don’t need to take on too much debt or be overly grandiose in your expansion plans. Expansion and acquisitions all should be driven around acquiring people who fit into the organization, really bring something to the table and add to your organization rather than just executing a geographic growth strategy or putting pins in the map. All of your expansion should be for the right reasons, with the right people with client in mind, rather than trying to fill out (geographically) with different offices all over the place.
What is your favorite part of the business?
The best part of the business is getting out and meeting with clients and prospects. That’s why most of us got into this business and what really drives the passion for it. A lot of our relationships with clients go back 10, 15 and 30 years even. That’s the most fun part of it. I think it’s also really gratifying to successfully run the business and see the impact that you can have on employees’ lives.
What would you be doing if not for your current job?
Teaching English in Argentina
What one part of your daily routine would you never change?
Interacting with our clients and prospective clients
How do you regroup on a tough day?
I try to exercise every day.
What do you for fun?
Cooking, traveling, reading, coaching kids’ sports
Niloufar Molavi is now facing a challenge that she hadn’t seen in her years with PricewaterhouseCoopers LLP — acquiring and retaining talent for the accounting firm in the light of fierce competition. The complicating factor is that thanks to a heavy presence of energy companies, young talent in the Houston area is in high demand and supplies are low.
Molavi, Houston market managing partner for PwC, is realizing that you have to pull out all the stops to have an edge over the competition.
It’s no secret that PricewaterhouseCoopers over the years has developed comprehensive internship and management development programs that attract desirable young talent. Molavi is betting on those programs to make a difference.
“The average age of our workforce is 27 — so that will give you a sense of how much we rely on and focus on young talent such as college interns,” Molavi says.
“The students like to have an experience while they are in college, and they really don’t know what to expect ultimately when they come out of school, so we just give them that glimpse,” she says.
But more importantly, the interns will get to know PwC, which hopefully will lead to their choice of PwC for employment.
“It has been a great tool for us to not only recruit but they will see what it is like before they have to make a decision that will have an impact on their long-term careers,” Molavi says.
Here is how Molavi uses internship and management programs at the Houston location of PricewaterhouseCoopers to help fill the 1,069 seats at the table and keep those seats occupied.
Look and listen
The practice of finding and hiring qualified job candidates has grown more sophisticated for most companies in recent years. Such was the case of PwC some years ago when it started its internship program, now a well-entrenched fixture.
With the competition to secure talented individuals, it is essential to look for the skills that clients are demanding.
“It’s important to sit back and make sure that you have identified not only the technical skills in people you hire but, more importantly, the soft skills or the intangible skills that you are looking for in people,” Molavi says. “Identify what those are, and recognize over time those change — just because we know today what we are looking for may change over time. We live in an ever-changing environment, and you need to revisit that as often as you can to ensure that those intangibles haven’t changed.”
Once you sound out your clients, you’ll have a better opportunity to know what will best match their needs.
“The most important thing is listening,” Molavi says. “Spend a lot of time with your clients to make sure that you are listening to their issues, issues that are important to them, issues that they are dealing with, challenges and opportunities that are at the forefront of their minds.”
There are several key qualities that should be “must haves” on the intangible resume of an internship seeker.
“Adaptability — someone who’s willing to come in and adapt to new opportunities and a new environment,” Molavi says. “It’s someone who comes with flexibility of different ways of doing things.”
Equally as important is the attitude that learning is a dynamic procedure that lasts an entire career.
“Another important element is the ability and the desire to continue to relearn; when you are in an environment that’s changing all the time, you need to be comfortable that you are always learning, and it doesn’t really matter what level in the organization you’re at,” Molavi says.
If the desire to learn is kept burning, it can help establish a long-term interest in a particular field. The possibilities of advancement are many.
“Even as a leader, you can continue to have opportunities to learn new things every day,” she says. “For me, that’s exciting. That’s really what’s kept me in the industry and at PwC.”
Find the right fit
It’s been said that in the military as well as other sectors, the age group of 18 to the mid-20s make the best soldiers or workers if properly trained. And those who are even more well-trained do even better.
While the business world can’t really compare its stresses to those of the military, the advantages of young recruits are unmistakable — and similar in both fields.
“Our clients are always interested in our talent because we bring in the young; we help develop them,” Molavi says. “Our talent gets to see a lot of different opportunities and things and they learn pretty quickly on the job because of the exposure they get to our clients. So they are in high demand in the market. And we know that; that has been something we’ve been dealing with for years.”
With a focus on young talent, new entry-level candidates coming right off the college campus, it’s critical to look at their abilities and what they’ve learned on campus and their technical skills.
“First of all, try to find the right fit for the organization,” Molavi says. “At that entry level, spend quite a bit of time not only in the interview process on campus but spend time with those individuals over a two- or three-week period to get to know them and build that relationship — and then offer the best ones an internship.”
A typical internship lasts 10 to 12 weeks. It’s an opportunity to get to know the interns and see how they can work in the environment — and is a great opportunity for them as well to see what opportunities they may have.
“Look at a lot of those intangible qualities in individuals,” Molavi says. “Teamwork is huge for us. We work in teams. We do not do anything alone. So watching the interns work in teams and how they perform is important. Relationships are very important, both within our organization as well as with our clients, and watching how they develop those relationships and their abilities to learn in that area is essential.”
An internship is also a type of probationary period. It’s time to spot any red flags.
“I have had at least one person who interned with us, and at the end of the internship, she and I sat down together — she realized that accounting wasn’t for her and had never really been her passion,” Molavi says. “She had made certain decisions to go into the accounting field, and although she did a great job, she decided that her passion was somewhere else.”
Remember that interns are still students. Most will still have another year of college to finish.
“Internships happen generally right after their junior year for most individuals, so we don’t expect them to come in and know everything,” Molavi says. “We are not testing them on the technical knowledge that they are bringing to the table on day one, but you want to really look for those qualities for a good fit. Then put them on jobs that you would as brand-new associates so they get to experience what it’s like when they join as a full-time hire.”
One of the more important steps any organization needs to consider when you bring in interns is if you will have the opportunities for them to learn and develop in that short period of time.
“If they come in and they are not getting those opportunities, then it is going to be difficult,” Molavi says. “I think any business needs to look at how it is structured and what opportunities it can offer to an intern.
“I know that many of my clients even use internships to give students a sneak peek of an industry by bringing them in over a summer period and rotating them through various parts of their organization.”
Focus on the basics
It’s a serious undertaking for an organization to operate an effective internship program. But it doesn’t have to be expensive. PricewaterhouseCoopers’ program, while a significant commitment for the company, looks at it more as on-the-job training.
“On-the-job learning and development is really important,” Molavi says. “We do that quite a bit, and it’s easy too. I mean it doesn’t cost you a lot of money; you’ve just got to make sure that you are paying attention to it.
“You take the opportunity as you would a project — you stop and make sure that your team understands what you’re doing, why you are doing it, why it is important to your client, what they are going to learn from it so that it doesn’t just become a task; rather, it becomes a learning opportunity.”
As you develop your training programs over the months and years, design as much on-the-job training into it as possible, and it will help pay dividends.
“When we look at our training programs, about 70 percent of it is actually on-the-job training — every day on projects, at clients, real-time feedback and learning,” Molavi says.
PwC’s program has evolved over time to its current configuration: Each intern is mentored by three colleagues.
“One, they will have a buddy,” Molavi says. “They will have an associate who is closer to age and in experience to them, someone they can go to from day one with any questions they may have. They could be administrative, technical or industry questions. The buddy is someone with whom they can engage on a day-to-day basis.”
In addition to a buddy, each intern has a mentor who is a manager/coach.
“The manager ensures that they are getting the experiences, the exposure, the developmental opportunities,” she says. “The managers are responsible for their assignments during that period and help the interns through that.”
The last is a mentor who will nurture what are often called soft skills.
“The interns also get a relationship partner so they will actually have a mentor who will be engaging with them and spending the time to talk about opportunities in the profession, and more importantly for our interns, the opportunities at PwC that they will have in the long term,” Molavi says.
“The program involves quite a bit of investment but again it has become a very important source for our full-time hiring, and we believe the investment ultimately pays off both for us and the recruits.”
Another aspect of an internship program is shadowing. Interns are given the opportunity to shadow a partner for one day to get a glimpse into a day of a partner’s life.
“Because they see us in bits and pieces, the interns probably don’t really realize everything in which a partner may be involved,” she says.
“One of my interns a couple of years ago had the opportunity to shadow me,” Molavi says. “She had a fantastic experience. It just happened to be one of those days where I was doing a lot of different things. We started off the day when I was actually in a coaching session with one of my ‘coachees,’ and moved on to an interview that I was doing that day with a publication. She got to sit in on that.
“We went to lunch with a client. We had a client meeting that she attended with me. Then we came back and dealt with some of my internal roles.
“She was just amazed at what I touch in one day and saw things that she would be very interested in down the road. So hopefully those kinds of looks give the interns a little bit more in terms of what a day could be as they go through a shadowing process.”
Develop new leaders
If your organization has made it a practice to have an internship program, it needs an employee advancement plan to get the most advantage of the intern program.
Tapping outside talent for management posts is not an easy process today, and it is beneficial to promote from within, not only to recognize that individual but to prepare in case a manager should leave. Talent that started as interns is an excellent source for management positions because of the familiarity with the company and work records that show advancement through the ranks.
For example, PwC uses a global leadership development program called Genesis Park for employees who are approaching some nine years of experience — a senior manager or director. This is a 10-week residential program for about 50 people, three times a year, which moves around the globe.
“You bring in individuals from around the world so every one of these 10-week residential programs is very global and very diverse,” Molavi says. “You are bringing people together who have never worked with each other — to work with each other.
“It takes individuals through what I call real-life experiences. This is not a situation where they’re going to role-play. It gives them the opportunities to work on real projects for either a particular territory, PwC territory or a global issue that our global leadership is dealing with.
“They’ll have the opportunity to work on that project and come back with solutions and thoughts. So they are really learning and having that experience of working with individuals they didn’t know before, bringing different talents together, putting their minds together and driving innovation to come up with solutions.”
Programs such as Genesis Park allow employees to not only continue to develop professionally but personally, as well, with leadership skills.
“My coachee who went through came back out in some ways a different person,” Molavi says. “The most important change that I noticed was the self-confidence that she gained from being part of that team and part of that opportunity, and knowing that, she exhibited an attitude, ‘Wow, I did this, and I was able to have a very different experience, and it felt good, and I learned a lot.’”
How to reach: PricewaterhouseCoopers, www.pwc.com or (713) 356-4000
The Molavi File
Houston market managing partner
Born: Tehran, Iran
Education: University of Texas at Austin, with both my bachelor’s in business administration and master’s in accounting
What was your first job?
My very first job that I got paid for was working during summer school at Houston Memorial High School, and I helped the staff in the office, running a lot of different errands.
What has been the best business advice you ever received?
To be willing to take risks. In terms of my career development, this has been the best advice that anyone could give me — the fact that someone took the time to sit me down and talk about the fact that unless you take risks, you’re not going to learn, you’re not going to develop, you’re not going to see new opportunities. You need to step out of your comfort zone and do it often.
When you become complacent and you’re getting comfortable with something, it’s time to do something different. So that is something that has certainly stuck with me. My sponsors early on pushed me and gave me those opportunities, opened those doors for me to step out of my comfort zone and do different things. It certainly has been very important to me, and I have seen it help me in my career and in the advice that I give others.
Who do you admire in the business world?
There are a lot of individuals who have accomplished great things, so maybe the way I would put it is not so much the individuals but those people who going back to what I was taught who had been authentic. They are not trying to be someone who they’re not. They are authentic leaders. They have at times put their necks out there and done something different that was not conventional, taking the risk, and then been successful at it.
Those are the people that I look to, those individuals who aren’t always going to be sitting at the top of organizations. They’re not necessarily going to be the CEOs but individuals who have had significant impact on success with an organization, for-profit or nonprofit as well.
What is your definition of business success?
For me, I think it is really simple: if you think about the success and the legacy that is behind, to be able to have clients who would say, ‘Well, she was our business partner and she was able to help us achieve our business goals.’ Being a tax practitioner, it is important to make sure that we are helping our clients achieve their goals. I think that would be to me a great legacy to leave behind if I could look back at the number of partners I have personally made so that they could be successful.
It was 2008, times were tough, and Ruscilli Construction Co. Inc. saw that many contractors were submitting rock-bottom bids just trying to keep their heads above water. While it may have been tempting to follow suit, the family-owned company refused to throw away what four generations had built into a total construction resource. It was a calculated risk.
“There was a lot less work out there to go after, and as a result, we witnessed a lot of our competitors change their approach to the business and their culture,” says Lou Ruscilli. “They were doing this in an attempt to survive.”
Before 2008, the business of Ruscilli Construction was hitting record highs as far as the volume and the number of projects. Then it appeared the plug had been pulled.
“In our industry, just like a lot of other industries then, we all took a lot of things for granted,” he says. “I hate to say that the phone would ring, and you would pick it up — don’t pass up the opportunity. We were always providing fantastic customer service. But how that was communicated down to the project level and how we evaluated our project teams, as it relates to how that experience was for the client, I don’t know if we were drilling down quite that far.”
The company, operated by Jack Ruscilli, chairman, his son Lou, CEO, and his nephew Tony, president, took a frank look at its culture, saw what needed to be done and is now actually back to pre-recession levels in terms of volume.
“We feel that our company is busier than the majority of our competitors,” Lou Ruscilli says. “The work that we have is good work and with very good clients. In 2012, we were in five states. In 2013, we will be in at least 10 states. Our increased workload has allowed us to attract very talented professionals from all over the nation.”
Here’s how drilling down farther brought substantial benefits for the 72-employee company, which tallied $100 million in revenue for 2012.
Find the right route
Once a recession hits and business drops off, a business has to act — and fast if it wants to cut its losses. But the knee-jerk reflex action may not be for everybody.
“Our competitors tried to keep the same number of people, the same number of volume and just go after just about everything,” says Tony Ruscilli. “It became more of a conflicting relationship than a team relationship. That wasn’t the approach we wanted to take.”
“We made a very conscious decision at that point not to change the way we did business but rather to find new ways to bring value to our clients,” Lou Ruscilli says.
If a company has been around for some time, looking at its history may give a clue about how the current problem could be handled. Take for example when Ruscilli Construction drew up its core values in response to some concerns during the 1980s when the company saw a big growth spurt.
“We probably had hired about 100 people,” Jack Ruscilli says. “I remember sitting at a table with the managers, a lot of people I didn’t personally hire. I saw a leaking culture, and I didn’t like it.”
This was an opportunity to lay down the company’s core values, what is called The Ruscilli Way. The values include safety, integrity and honesty, but more importantly, they are what the company stands for.
“We had some people who didn’t have the same values that we did,” says Jack Ruscilli. “They came from other companies, and we weren’t doing things in unison. But today, The Ruscilli Way is used when we are hiring someone. It is discussed with them to make sure we are up front, that they understand how we intend to do business.”
Customer satisfaction would be something that was openly discussed throughout the company and constantly reinforced.
“You have to go out and challenge your associates to enhance your clients’ experience, primarily through better communication and responsiveness,” Lou Ruscilli says.
To do that, one of the most effective methods is to create a sense of ownership.
“That meant our project managers, our project engineers, superintendents and field labor had to take ownership as if they were owners of the company and were responsible for how the clients would be treated,” Tony Ruscilli says. “Go the extra mile; do whatever it takes.”
Focus and communicate
Communication in any form motivates people. That’s an accepted observation inside and outside the business world. The key to using it effectively to achieve your goal is narrowing your focus to find the most effective forms of communication.
Once Ruscilli Construction realized its best route out of the recession was through a refocus on its core values, it was a simple but extensive task.
“It really started with communicating with our associates — sitting down with them, taking them to lunch and really making sure that they understand our definition of client satisfaction and that they understand our definition of responsiveness,” says Lou Ruscilli. “And the folks who didn’t understand it, well, they pretty much are gone.”
To achieve that understanding, a key point to make is that it is a win-win situation.
“It is much easier to manage and be a part of the team that is a team working together for the same goal,” Tony Ruscilli says. “We are all working toward the same end, and it is more of a team atmosphere than it is an adversarial relationship. So for them, it’s an easy buy-in, an easy way to say, ‘Hey, this is the way I always want to be a part of any project or any team.’”
There is one point to remember about customer satisfaction versus making money — profit isn’t everything.
“Stress to your associates so they all understand and appreciate that profit isn’t the No. 1 driver around,” Lou Ruscilli says. “It is customer satisfaction. It is relationships. You satisfy those two criteria, and at the end of the day, the profit will come — even more so, in the form of repeat clients.”Ruscilli Construction didn’t panic as the recession roared and now has pre-downturn volume levels to show for it
A new emphasis on core values, as it were, can repair broken links in the chain of success.
“As we started building the volume again, we just have had a wonderful selection of other new hires that have come to work for this company because of the fact that it’s really a revitalized company and it’s progressing and doing more and more business,” says Jack Ruscilli.
Happy customers mean more business. One of the best tools to determine customer satisfaction is a client survey. Ruscilli Construction makes note of accolades or beefs about its managers and associates with surveys throughout the entire project. If there is something that is a problem, it can be addressed at the time.
“All throughout the project we give them a chance to say, ‘Hey, I don’t like this, or should we consider this?’ says Jack Ruscilli. “The objective is that when we are done, we have a perfectly happy client. And if there is something that comes up wrong, it is addressed, and it is taken care of immediately so there is no excuse for us or the client not to have a great project.”
If your company is serious about improving its perception among clients, you should be able to accept criticism given in a survey or by other means.
“I can remember one engineer saying, ‘You mean you would actually put yourself up to that kind of scrutiny?’” Jack Ruscilli says. “And we said yes! You want that. You cannot improve if you don’t know what you are doing wrong. You want to nip problems in the bud, and that’s what we to do on the job site, every step of the process.”
The results of the refocus on Ruscilli core values have been beyond expectations.
“It has been amazing,” Jack Ruscilli says. “I have had some of our associates even say that it has affected them at home; they are taking a different look at how they are acting and how they are treating people.”
To carry that one step further, re-examine the prospective clients.
“Now we are looking for those same values in our clients,” Lou Ruscilli says. “We are more selective today than we probably have ever been with these types of projects that we pursue the clients who we want to.”
Keep in mind that relationships build over time, and can be lost in a second.
“With any organization, when you engage with your client, you are making at some level some sort of investment in that relationship,” Lou Ruscilli says. “What we have learned over the years is that the folks you have interacting with that client need to really understand what their expectations are and how they are going to be evaluated. You need to be caring for those same requirements, those same beliefs, to your clients or to the people you are working with. If they are not going to appreciate the investment you are making, it is probably not the right arrangement.” ?
How to reach: Ruscilli Construction, (614) 876-9484 or www.ruscilli.com
The Ruscilli File
Jack Ruscilli, chairman
Lou Ruscilli, CEO
Tony Ruscilli, president
Born: All are from Columbus.
Tony: I went to Michigan State University and received a degree in business.
Lou: I went to Clemson University and earned a degree in construction management.
Jack: I went to Findlay University and graduated with a degree in marketing.
First job: All worked for the company as teenagers. Jack started at 12, Lou at 14, and Tony at 15. Jack: We all had experience in the field. There probably wasn’t anything that I asked somebody to do that I probably hadn’t done myself.
What was the best business advice you received?
Jack: Mine is probably from my grandfather, Louis Ruscilli Sr. Years ago he would see me as a young man struggling with a big decision, and I can always remember him in his common way saying, ‘Hey, you do the best you can. You be honest. And don’t worry about it. Quit worrying about these things.’ In his way, he was saying do what you can do and back off. One of the things I remember my father always saying is, ‘Little profit is no loss.’ I remember when he first said it. I thought what is the big deal about that? What he was really saying was, ‘Don’t be greedy. Treat the customer right and ask for a fair profit and everything will work out.’
Lou: When I first got in the business, I would get nervous a lot. We were going into a meeting with a client, or we had an important meeting coming up and my father would always say to me, ‘Just be yourself. At the end of the day, just be yourself and everything will work out.’
Tony: My dad, Bob Ruscilli, was vice president, and he kind of oversaw all the guys in the field, So having worked with him for many summers as a kid growing up, I saw that he was willing to get in and do whatever he needed to do to make things happen. If it meant getting in the trenches, he would get in the trenches. So as my uncle alluded to earlier, the one thing he taught me was, ‘Don’t ask somebody to do something that you are not willing to do yourself.’ I’ve lived by that pretty much all through growing up and watching him.
What’s the secret of a family business success?
Jack: I think it is straightforward honesty. We all tend to be pretty blunt, myself and Lou in particular; Tony sometimes is the mediator. But we put it out on the table and walk away, and we are still family.
Tony: I would say one of my Uncle Jack’s strongest attributes is he embraces family and finds ways to bring us all together as a group.
Lou: I would just reinforce what both my father and my uncle said. It is about communication, and it is about, at the end of the day, we are family. We all have to look out for each other’s interests and that’s what we do. There are no divided lines in this. We are going to succeed as a team or we will fail if we are all individuals.
Six years ago, Jim Treliving started to see troubling signals in his business. The restaurant franchising boom that had been rolling since the end of the 2001 recession was starting to slow because money was getting tight and financing for franchisees was drying up. Thus, the robust growth that Treliving’s company, Boston’s Restaurant & Sports Bar, had enjoyed for the previous half-dozen years was starting to slacken. c
“The main challenge I’ve had to deal with these last few years has been with the financial portion of our business,” says Treliving, whose company today operates 400 franchises in the United States, Canada and Mexico and generates systemwide sales of more than $1 billion. “The financing situation has really changed a lot since 2006 or so. Up until then, the franchisees we dealt with had lots of avenues to get financing for their business.”
The easy-money trend in restaurant franchising started to tail off in 2006 and 2007, and then it began dropping at an even faster rate in 2008 during the most recent recession.
“The financing really dried up,” he says.
Treliving started as a franchisee with Canada-based Boston Pizza in British Columbia in 1968 and eventually bought out the entire Boston’s restaurant chain in 1983.
“This has really affected just about everybody in most small-business market sectors. Small-business growth in the United States has really been negatively impacted by the inability to find sources of financing.”
Nowhere has that trend been felt more acutely than in the restaurant-chain business.
“It has taken a toll on us, especially when it comes to trying to attract new franchisees into the business,” Treliving says. “New franchisees generally need to have a down payment of 20 to 35 percent of the cash available to go into business. Nowadays, even [potential franchisees] who do have that amount on hand are having trouble getting banks and other financial institutions to do any kind of work with them in the sense of taking a chance on them.”
Today’s persistently low interest rates make it hard on those who want to start businesses because finance companies are less inclined to take chances on small businesses when their potential returns are so low.
“Most of the banks we’ve talked to in the U.S. — even though they’re in a situation where their balance sheets are OK — they’re not lending money for small businesses,” Treliving says. “And it’s not just the banks; it’s all types of financial institutions. Obviously, any type of lender is going to require a return on its money, and if you’re buying the money at a bank at 2 percent and you’re lending it out at 3 or 4 or even 5 percent, you’re not going to make a lot of money on it. That’s why they’re not taking many chances on people who want to start small businesses.
“It’s funny; these days a lot of people in this business are saying, ‘The good thing is we’ve got these low interest rates — and the bad thing is we’ve got these low interest rates.’ It’s really a tough problem.”
Give partners slack
The financing problems that Boston’s and other small and midsized restaurant companies have been facing isn’t limited to just attracting new franchisees. It’s also affecting the ability of the company’s existing franchisees that want to expand their businesses by opening new restaurants within their territories.
“A lot of our franchisees bought territorial pieces,” Treliving says. “We entered into agreements with them back when we sold them their first store that they would open a certain number of additional restaurants in their territory over a certain period of years. We mutually agreed, and an important part of that agreement was that we had to make sure that they’re on solid financial footing before moving to the next level.
“Unfortunately we’ve had a fair amount of franchisees that, even though they have a good solid track record, when they’ve reached the date when they’re supposed to build that next store in their territory, they couldn’t get the financing they needed to do it.”
Boston’s approach in these situations has generally been to give its existing franchisees more time to strengthen their market footing so they would eventually be able to obtain financing to build the additional stores in their territories.
“The plan was that they agreed to build a certain number of stores in their territory in a certain period of time, and if they didn’t — if they failed to do that — then they would lose their territory, and they would lose the money they had paid in upfront fees to hold their territory,” Treliving says.
“We began to see with many of them that we’d have to wait a little while, until the money [for financing] started to loosen up again. We saw that we would need to reset those dates so our franchisees would have more time to build those new stores and not lose their territories. We basically had to rectify the dates so we wouldn’t go offside with our franchisees.”
“So this financing situation has really slowed down the growth of everybody — not just new franchisees, but old franchisees as well.”
Find other sources
Even though the lending picture hasn’t been good from traditional sources of financing for restaurant franchises — i.e., banks and large finance companies such as GE Capital and others — Boston’s and other restaurant chains have had a degree of success finding financing for some of their franchisees via nontraditional sources such as private equity firms.
“A lot of people are going out and finding independent money on the side,” Treliving says. “So we started looking as well for some of these new sources that would deal with us. For many years, we had been dealing with a couple of major companies for financing, but now one of them had pulled out of the business completely, and the other one had quit lending new money for restaurant franchises.
“So we had to look for other avenues, whether it was banks or individuals or private equity that had been sitting on the sidelines and were now saying, you know, ‘Maybe we should jump into this business.’”
With some legwork, Boston’s was able to uncover some of these smaller, off-the-beaten-path financing sources. In so doing, the company was able to keep growing, albeit at a slower pace, even during the four-year downturn when traditional financing was very tight for the restaurant business.
“We had to go and look for some of those individuals and private firms,” Treliving says. “Most of them are regional. People are more likely to lend money to nearby sources, wherever they happen to be, because they can drive by and see the property, so they know where the money’s being spent and how it’s being spent. If you look at 90 percent of the restaurant chains around the country, everybody was going through the same thing. They were knocking on doors everywhere.”
Do it yourself
Lending from the traditional sources has started to loosen up a bit over the past year, but Boston’s has decided it isn’t going to rely so heavily on those traditional sources anymore. The company has decided to take a big step forward and create its own financing division to help its franchisees grow.
“We’re putting a package together right now to do that,” Treliving says. “We’re well on our way to develop our own financing. The first thing we’re going to do is go and help our existing franchisees that want to expand but can’t get the capital they need to do it. We’ll be willing to lend them money, because we’ve seen what they’ve been capable of doing over the last five or 10 years. They’ll be our first customers.
“The next ones will be potential new franchisees that we think have a great opportunity to get into the business now. We’ve been starting to receive a fair amount of inquiries about this, now that things have started to loosen up a little bit financewise.”
Asked what he has learned and what advice he would give other executives facing similar problems with tight lending inhibiting their growth, Treliving says he suggests that you choose your dance partners very carefully.
“I’ve talked to other CEOs in various businesses, and it’s really all about quality now — the quality of who you’re going to do business with,” he says. “The quality of franchisees you’re getting is what you should be looking at now — the strength of the person going in. It’s not just simply about grabbing anybody that’s got a warm body and going into business with them anymore.”
Treliving says that containing costs and reinvesting in quality service are more important now than ever, and not just in the restaurant-chain sector or the food-service sector but in all service-oriented businesses.
“You really need to be watching your costs right now,” he says. “It’s an absolute necessity. And your service has to be absolutely top-notch all the way through your operation. You can’t get away with anything less than that. If you’re willing to do these things, this can really be a great time to get into a business and have success with it.”
How to reach: Boston’s Restaurant & Sports Bar, (972) 484-9022 or www.bostonsgourmet.com
The Treliving File
Chairman and CEO
Boston’s Restaurant & Sports Bar
Born: Virden, Manitoba
What was your first job, and what business lessons did you learn from it that you use today?
I delivered groceries for a family that owned a small grocery store, and I think the biggest thing I learned was persistence — the stick-with-it sort of thing. The place where I delivered groceries — it was very important that they be delivered on time. You had to come there clean and ready to go to work. And you had to provide great service. That was extremely important, the service aspect of it — being on time and getting the groceries out to people right away. Those things stuck in my mind when I went into the restaurant business.
Do you have a main business philosophy that you use to guide you?
I believe very much in dealing with people on a face-to-face basis. And I want to do business with people that I can have fun with — people that enjoy the same things I do.
What trait do you think is most important for a business executive to have in order to be a successful leader?
You have to have honesty and integrity. You have to be honest with your people, and honest with the franchisees you’re dealing with. Of course it’s inevitable that you’re going to have problems with your franchisees from time to time. But you sit down and discuss it with them so that you understand their side and they understand your side. And then you both make a decision on what you’re going to do, and you go forward with it together, as a team.
What’s the best advice anyone ever gave you?
My dad gave me a couple of good pieces of advice a long time ago: Always leave a little something on the table for somebody else, and always work hard and do the things that you want to do, that you enjoy doing.
Most people know Cinnabon by its mini-bakeries in malls and airports where you can grab a cinnamon roll while hustling from one place to another. And for its first two decades of existence, that’s essentially what Cinnabon was — a fast-growing chain of franchised kiosks in high-traffic venues known for the cream cheese/butter/sugar-frosted treats.
But in the last few years Cinnabon has expanded its brand and its identity by selling new products through new channels. And that’s where it has become very complicated for Cole to manage all those products and distribution channels to make sure Cinnabon’s growing brand continues to function as a seamless, integrated whole.
“That’s definitely the key challenge I’ve faced — being successful at global multichannel brand management,” says Cole, who took the reins at Cinnabon after a 15-year stint with Hooters of America, where she served as vice president.
“The Cinnabon brand is not one-dimensional; it doesn’t play in just one channel or segment. And because we are truly a multichannel business, leading that brand across all those channels and making sure that the channels integrate with each other and feed the brand is by far the most important thing I do.”
Cinnabon — which has more than 900 franchises in 48 countries and is approaching $1 billion in annual consumer sales — has fed its growth in recent years by creating and marketing new products primarily through two new conduits: consumer packaged goods in grocery stores and licensed products sold via other outlets such as fast-food restaurants.
“Our main channel has always been and remains immediate-consumption food service — our franchise bakeries, our company’s face as most consumers would know it,” Cole says. “But we’re seeing significant growth in our newer channels, which are basically grocery retail — our consumer packaged goods division — and food-service licensing, where we develop products for other immediate-consumption restaurant locations.”
Getting those products and distribution channels to mesh well and feed off each other is Cole’s constant and never-ending quest.
Protect the brand
As any company expands its product offerings and increases the number of conduits through which people can obtain them, the complications of doing business multiply, usually a lot more quickly and dauntingly than anyone expects. Cole has learned this lesson firsthand at Cinnabon, and she has tackled the challenge head-on.
“There are inherent complexities when your brand or your products as consumers know them don’t live in just one space — when there’s no longer just one place that they can get them or just one way that they can get access to them,” Cole says.
Safeguarding and augmenting the value of the company’s brand is a key driving factor, and the most crucial consideration Cinnabon’s leadership team weighs is determining which new business opportunities to take on and which ones to let pass.
“My No. 1 leadership focus is to make sure the brand is protected and enhanced — at all times, by every initiative we undertake,” Cole says. “It’s all about the brand. It’s about managing the brand, leading the brand, making sure that any new initiatives are accretive to brand value.
“The essence of this approach is that inherent in any good brand there is equity. The brand carries with it a value that has been built over time, typically through its original channel — in our case, our franchise bakeries. And that equity must always be carefully protected and taken care of, first and foremost.”
Cole cites the recent introduction of Cinnabon’s International Delight Coffee Creamer, which is now available in grocery stores and other retail outlets around the U.S., as an illustrative example of the way the company creates a new business channel to enhance the value of its brand. Cinnabon’s leadership team first determined that expanding the company’s presence in the market for coffee-related products would be a good fit for Cinnabon.
“It’s a matter of understanding where your branded products have equity and where that value can readily translate into a new area,” Cole says. “For us, we feel that we own quality indulgence. It’s who we are. When people think of our brand, they think of over-the-top indulgence — warm aromas, warm flavors, warm textures. And when you’re crystal-clear about what attributes you own, that allows you to then extend those attributes into other products.
“We knew we wanted to be in the coffee family of products, because that’s all about warmth and comfort, and it goes well with cinnamon rolls and our flavors and our other products.”
Once Cinnabon’s executive team members decided they wanted to expand the company’s footprint in the coffee sector, they sought a suitable partner to help their company create and market a new retail coffee-related product.
“When we look for a group to partner with in any channel, we always look for best-in-class,” Cole says. “We do this because we have a premium brand — it may be a snack brand, but it’s a premium snack brand — so we feel we always need to be with premium partners that have brand awareness at least equal to ours. Two companies that have fit that type of requirement for us in the past are Kellogg’s and Pillsbury, to cite a couple of examples. In the coffee creamer space, we decided International Delight was the best fit.”
So Cinnabon teamed up with International Delight, whose coffee creamer products are distributed by WhiteWave Foods, and the companies together created a cinnamon-flavored coffee creamer that met their respective quality standards and their goals for introducing the jointly marketed, co-branded product.
“We had to be heavily involved in the R&D, because the flavors and the aroma have to be just right,” Cole says. “We can’t afford to have a product out there in the market that has a picture of our cinnamon roll on the label — a product that we’re that heavily invested in — and, you know, have it taste like Red Hots. The quality has to meet our standards. That’s hugely important to us. It would be too easy to just go and throw your name on things.”
Cinnabon’s R&D department and licensing group worked with International Delight to tweak and refine the cinnamon flavor of the creamer to ensure that it would meet Cinnabon’s customer’s expectations.
“The end result is this amazing, disturbingly delicious coffee creamer,” Cole says. “And, you know, that’s the bar that we always have to meet. When you open the bottle and smell it or when you pour it in your coffee and taste it, you have to have one of those eyes-roll-back-in-your-head moments. Like, ‘Wow, this is so good it’s almost inappropriate.’ That’s what we go for. And we won’t stop — we won’t release a product — until we get to that point.”
Cinnabon has had similar success partnering with other companies to license new products, including Pillsbury and Kellogg’s, as well as Burger King, through which it markets the Minibon, a smaller version of its signature cinnamon roll, and Taco Bell, through which it has licensed Taco Bell Cinnabon Delights — doughnut-hole-like balls filled with sweet cream cheese frosting and dusted with cinnamon and sugar.
Cinnabon has enjoyed success in recent years with these multichannel brand initiatives — new products introduced, financial growth, growth in the number of distribution points, synergies with the channels reinvesting in one another in varying combinations. Cole attributes the company’s recipe for success to a number of ingredients, chief among them the Cinnabon leadership team’s clear understanding of the company’s identity and its strengths and weaknesses.
“If there’s one piece of advice I would offer above all others, it’s that you’ve got to have clarity on the core of your brand and what makes it unique,” Cole says. “If you miss that, you’ll make mistakes, and it will be difficult to correct them later. You have to really get down to your core DNA. If you’re going to expand your brand into different channels beyond the channel you started in and where you had your early successes, you have to make sure you clearly understand what you’re about and what you’re not about.”
In the end, successfully managing a brand with multiple products marketed via multiple channels is a matter of constantly asking yourself whether each new opportunity is right for your company and, most importantly, being able to articulate convincingly why it is or isn’t a good fit.
“When tweaking your business model to grow in new ways, you, as the leader, have to keep your compass set on doing the right things for the right reasons,” Cole says. “That sounds simple, but it’s not. You can’t let yourself get distracted by tomorrow’s opportunities. You have to continually ask, ‘What are the right things to do for the brand?’ and ‘What are the right reasons for doing those things?’ — and make sure everyone is aligned around that. That’s how you keep the business pure; it’s how you keep integrity around the business and keep people’s hearts and minds focused on building the brand over time.”
How to reach: Cinnabon Inc., (888) 288-7655 or www.cinnabon.com
The Cole File
Born: Jacksonville, Fla.
Education: MBA, Georgia State University
What business leadership lessons did you learn during the time you were studying to get your MBA?
When I was getting my MBA, we were in the processing of selling my previous company, Hooters. So it was like getting two graduate degrees at once. I would go to class and learn a new financial modeling system, and then go and meet with investors and analysts and apply what I had learned.
What was your first job, and what business lessons did you learn from it?
I sold clothes in a mall when I was 15. I learned a lot about connecting with people in that job, and partnering — working with customers shoulder-to-shoulder instead of nose-to-nose.
Do you have a business philosophy that you use to guide you?
Do the right things for the right reasons. And, at all costs, do what you can to avoid being swayed away from that philosophy. Having someone at the top who’s always asking the question ‘Is this the right thing for the right reasons?’ can really help a company avoid risk and build a powerful culture.
What trait do you think is most important for an executive to have in order to be a successful leader?
I would say adaptability is No. 1. And then I think there’s this other intangible, and I don’t know if there’s a single word for it. It’s a combination of traits that results in a leader being able to make others believe.
What’s the best advice anyone ever gave you?
Be thoughtfully bold. That speaks to respecting others and understanding your environment, but being willing to speak up and take chances. That advice came from a mentor that I had in the industry.
It took three tries over the span of five years to make the merger of Radiancy and PhotoMedex a reality. So when the merger was finalized in 2011, Dolev Rafaeli was determined to make all aspects of it a success.
Rafaeli had been the CEO of Radiancy and was assuming the CEO’s position in the combined company — a manufacturer of medical treatments for skin conditions and other skin-related consumer products, which would carry the PhotoMedex Inc. name.
In terms of their history and DNA, the two companies had starkly different backgrounds. Radiancy, the larger of the two companies, was privately held, focused on consumer sales and had developed a presence in the international marketplace.
PhotoMedex was a public company, sold mostly to other businesses and was heavily focused on domestic sales.
From 30,000 feet, the companies were complementary parts, bringing different areas of strength to the table. The merger was a puzzle-piece fit. But at ground level, things were a little more complicated for Rafaeli and his management team.
“The biggest challenge, and the reason it took us five years to make it happen, was what you would call an HR challenge,” Rafaeli says. “Usually, when you look at mergers and acquisitions, everybody can understand the very objective analysis of numbers and the very subjective analysis of how things might look if we merge the two companies. The biggest challenge was, how do you get two teams engaged when at least part of the two teams thinks they don’t have a future in the company?”
Rafaeli had to combine two cultures from two different backgrounds, and once he had everybody on board, he had to set the stage for the company’s continued success or any momentum gained during the merger process would be lost.
In any large-scale change, alignment starts at the top. Nobody in the company will adopt the changes if he or she sees any type of negative or mixed reaction from those in charge. To that end, the management teams at Radiancy and PhotoMedex began the process of finding points of consensus nearly five years before the merger took place.
“We actually had known each other since 2007, so there wasn’t too much change in the transition for the management teams,” Rafaeli says. “We put together a project team that was running the two companies as if we were merged, about eight months before the merger happened. We were making decisions and considering things together, and we built our plan to make changes both before and after the merger.”
As the larger company, Radiancy had the majority of the resources that would be needed during the merger process, but since the combined company would be publicly traded and carry the PhotoMedex name, PhotoMedex served as the basic template by which the new company would be constructed. It was a matter, in many cases, of the combined leadership team creating operational alignment by building more efficiencies into the previously existing PhotoMedex processes.
“A lot of it happened before the merger was even consummated, so for example, we took apart all of the logistics philosophies in the old PhotoMedex but reassembled them based on the old PhotoMedex while using Radiancy’s resources,” Rafaeli says. “Since Radiancy was bigger, we had better costing to do things, resulting in a savings post-merger. We did the same thing with our insurance platforms, payment processing platforms, and with our PR and advertising companies.”
With an aligned leadership team creating aligned strategies, systems and processes, it became much easier for Rafaeli to bring the rest of the company’s workforce on board with the merger. An important first step was letting the company at-large know that no layoffs were planned as part of the merger.
“The scale and geographic diversity really required that nobody leave,” Rafaeli says. “We needed to keep all the finance teams that both companies had pre-merger. Each side had to learn what the other was doing and develop a way to combine the systems. We had to become SOX-compliant and handle a very coherent reporting system.”
In some areas of the company, the best solution was a combined one, implementing practices from both pre-merger companies. But in other areas, Rafaeli and his team decided to take an either/or approach to implementing best practices, aligning the company with one standard or the other.
“The operations team in both previous companies had two complementary sets of knowledge, and we had to merge the two of them in a way that took advantage of all the areas of strength,” Rafaeli says. “What happened was, we had the quality manager of the old PhotoMedex oversee the quality system of the combined company. The supply chain manager of Radiancy took over material supply for the whole company, because Radiancy was doing it more efficiently.”
It is crucial that you paint an accurate and complete picture of your vision for the post-merger company and that you do it early in the process. If you are going to create buy-in and subsequently create complete alignment throughout all levels of your organization, everyone has to know where they fit and what will be asked of them.
“We have very talented and experienced people, and we wanted all of them to stay and be engaged in the process of the merger and remain engaged post-merger,” Rafaeli says. “The important part there is keeping them engaged throughout the process of the merger.”
Announce your arrival
Even if you’re keeping the identity and product lines from both companies, as the relaunched PhotoMedex did, it won’t be business as usual for your customers. They’ll see a new company with a future in flux, which is why you need to connect with your customers and paint the same clear, accurate and candid picture that you did for your employees.
One of the ways Rafaeli and his team sought to announce the arrival of the new PhotoMedex and affirm the company’s identity to outsiders was through its marketing efforts.
“It was a very interesting process,” he says. “We took two companies — one that has the knowledge of how to advertise, and the other with knowledge of the business. One of our main business lines is in the area of psoriasis treatment, and the PhotoMedex people knew a lot about psoriasis and psoriasis treatment. They knew about the view in the market, the conditions of the marketplace, how physicians view it and the market’s view of that.
Through a unified effort leveraging the areas of expertise that now existed in the combined PhotoMedex, the company’s advertising specialists developed an advertising strategy based on the selling points of the company’s products.
“We had work sessions where we drilled down on the information,” Rafaeli says. “Because of what we sell, we deal with a lot of FDA regulations, so we have to be very regulatory-conscious in the way we advertise. Our quality and regulatory affairs manager oversees a lot of that.”
Advertising — especially in a time of change — is a risky proposition. You really don’t know how the market is going to receive the change until you see some reaction. You don’t really know what is going to appeal to customers. If you had a high trust factor between consumers and your product or service, you have no real way of knowing if that trust factor will survive a transformational change like a merger.
It’s a fact of business life that has been in the front of Rafaeli’s mind as he has watched PhotoMedex roll out its new advertising campaigns over the past year-plus. All you can do as a business leader is stick your neck out, observe the results, gather data and make adjustments.
“Because we’re so involved in advertising, we get questions about advertising from other businesspeople on almost a weekly basis,” Rafaeli says. “We tell them that they have to be very careful and diligent, because advertising can be a very, very risky business. You can go out and spend money, get no results and have no idea why you didn’t get results. You don’t know if it’s because you failed to choose the right targets or the right price point or some other factor.”
Early in the process, Rafaeli and his team decided to focus on a straightforward and positive approach to advertising. PhotoMedex ads can vary greatly in how the message is conveyed, depending on media and geography, but the clarity regarding the product and the company behind it are constant themes.
It’s an approach that has helped galvanize PhotoMedex’s marketing strategy and has helped to make the merger an overall success. The company generated $110 million in sales for the first half of 2012, with full-year projections of more than $230 million.
“Consumers can be exposed to hundreds of different types of ads every day, and many of them are either negative or misleading. They can try to tear down what the competition does, or promise results that they can’t deliver.
“But what I think is truly effective in an ad campaign is a straightforward approach that doesn’t create unrealistic expectations. And what an effective ad campaign really means is that when the need arises, you will trust our company. You will pick up the phone or go on the computer, and you will look for us.”
How to reach: PhotoMedex Inc., (215) 619-3600 or www.photomedex.com
The Rafaeli file
Dolev Rafaeli, CEO, PhotoMedex Inc.
Born: Haifa, Israel
Education: Bachelor’s degree in industrial engineering and master’s degree in operations management, the Technion — Israel Institute of Technology; Ph.D. in business management, Century University
More from Rafaeli on the advertising strategy of PhotoMedex: Our advertisements might look a little different, perhaps even awkward, to some people. We have an advertisement in a number of magazines where we show a woman shaving her face with a blade.
The reason we do that is, one of the products we sell is called no!no! hair removal, and we saw that one of the key drives for buying the product was female facial hair. There is not really any other solution to that besides a hair removal product. A woman isn’t going to put a razor blade to her face. And when we were testing this, we knew the reason we had bought and sold over 3 million units. We knew why people needed it, but we didn’t know how to convey the message.
We went about doing this very carefully, having clinical ads and physicians talking about it, and it didn’t work. So we decided to try something that might be perceived as awkward, having a woman shave her face. We put that on, and six months later, in a number of major magazines, you see our ad.
When it came to psoriasis, the key discussion also became, ‘What do we show? Do we show people with psoriasis? Or do we go to the other extreme, like ads for erectile dysfunction medications in the U.S.?’ Obviously, they’re not going to show anything like that in a literal sense. They show couples on the beach having fun and so forth.
We tested it in certain ways, and we ended up not showing the psoriasis treatment at all. People who have psoriasis know what they have. They don’t need to see it. People who don’t have and who will never have psoriasis don’t care to see damaged skin.
Align your management team.
Roll it out to the rest of the company.
Advertise with a direct message.
Smoothie budgets were drying up everywhere, and Frank Easterbrook was one of the first to realize it.
The owner and CEO of Juice It Up! — a chain of juice and smoothie bars, franchised by LLJ Franchise LLC — watched throughout the recession as the discretionary spending of consumers slowed to a trickle. With less money to cover bills and groceries, many households could no longer afford trips to the ice cream parlor or smoothie shop. It didn’t take long before Juice It Up! felt the pinch.
“As people lost their jobs, they stopped purchasing discretionary products, like things that were considered treats,” Easterbrook says. “Items like smoothies were just not being purchased at the level they were prior to the recession.”
The downward spiral only picked up steam throughout 2009 and into 2010. Cash dried up, forcing about half of Juice It Up’s locations to close. What was once a chain of 180 stores had dwindled to 90 by last year.
“My company was on many of those store leases as a guarantor,” Easterbrook says. “So in many cases, I became the last resort for the landlord, and I had to negotiate millions of dollars’ worth of lease settlements to get through the recession. It was something we never could have anticipated.”
The company has emerged from the recession intact and is attempting to re-enter growth mode, but the effects of the recession remain. Easterbrook’s skills as a leader were put through a severe test over the past four years. He and his staff had to find new and creative ways to market their products, boost morale for all 1,200 corporate and franchise employees, and protect the corporate culture that he and his leadership team had worked so hard to build and maintain.
Take initial steps
As revenue started to dry up, Easterbrook took some steps to try to solidify the company’s financial outlook — most significantly, he suspended some franchisee royalty payments to the company, and he negotiated rent reductions with commercial landlords, saving money for about 85 percent of the remaining Juice It Up! franchise locations.
But perhaps the most critical action taken by Easterbrook and his team involved advertising. Saving money in the form of reduced expenses gave franchisees some relief, but no retail entity survives without a steady supply of consumer dollars. Despite the steep uphill battle in front of them, Easterbrook and his franchisees had to lure customers in the door and get them to buy the product.
“Though we reduced royalty payments, we kept the advertising payments and fees coming in, because we felt we had to advertise heavily if we were going to get through this tough time,” Easterbrook says.
“Simply put, we had to have the means to let people know that we are still here. So we added to the advertising cash pool, and advertised using methods such as billboards and local television ads. We wanted to maximize the reach into our communities, to maintain our presence with consumers.”
Easterbrook gives his franchisees some degree of control over their advertising approach via a local store marketing, or LSM, program. The program allows franchise owners to tailor local advertising to their market.
“We have a lot of templates there for franchisees to use, where they can incorporate their own name and local information into the advertising template, then take that to the printer,” Easterbrook says. “It includes items such as coupons that they can distribute, posters to hang in the store and some other materials. We do try to give them a great deal of freedom with what they can use and materials they can create.
“But the freedom only comes after we’ve looked at the material and reviewed it, and decided that it fits the look and feel we want to see in our stores. The control we exercise is strategic-level control, but the specific implementation is up to the franchisee.”
Giving your field associates a reasonable amount of control over the marketing of your brand is important, because they know the customers the best. You do want the message to remain consistent with your brand and values, but you need to allow some flexibility regarding how your brand is related to potential consumers in a given geography.
“You need to understand who your core customer is, and focus your advertising on reaching that customer,” Easterbrook says. “But it is an awfully broad question, because each product can have its own demographic. Previously, I had worked in the food industry for Mars and Nestlé, two big companies that do a lot of advertising and spend a lot of money. We worked hard to understand who our customers are and to identify the most effective ways of reaching those customers.”
Throughout his career, Easterbrook has focused on an advertising strategy that creates multiple touch points with consumers. It’s something he brought with him when he came to Juice It Up!, and he continued to develop that strategy as the recession created an even more pronounced need for the company to appeal to consumers.
“In some cases, your strategy might consist of media coverage like radio and television, and other times, you might find it more useful to go the print route with coupons and Valpak mailers,” Easterbrook says.
“One area where we found some traction was bus stops, which kind of goes hand-in-hand with advertising on billboards. In most areas, the public bus stops have small shelters, so people can wait under a roof if it’s raining. Inside those shelters, there are places for paper advertisements, and we started advertising in there. It’s about finding a lot of methods to connect your brand to consumers.”
Illustrate your vision
During a crisis as severe as the recent recession, you’d be excused by most for going into survival mode, eschewing any large-scale plans in favor of merely reacting to whatever the economic climate throws at you.
That might help your company weather the storm from a financial perspective, but it won’t do anything to salvage team morale or reinforce your culture. In those areas, you still need to show your people that you have a vision — not just for getting out of the crisis but for prospering once you’re on the road to recovery.
At Juice It Up!, Easterbrook wanted to reinforce a message of stability throughout his franchise network. He wanted his franchisees to know that the tools and infrastructure for future growth were still in place and that the company planned to expand when the climate was right.
But for the duration of the recession, and despite the fact that Juice It Up! was losing franchises, he wanted his remaining franchisees to know that the corporate entity was stable and still capable of supporting its franchise network with whatever resources deemed necessary.
“As this recession started to cover us like a blanket, they just needed to know that we were going to be there,” Easterbrook says. “So we had a series of meetings, some in a face-to-face setting, and I found those to be very important.
“As the leader of the company, you need to be visible. You need to demonstrate your interest and concern for them and their businesses. Some of our franchisees have effectively invested their life savings in the company, in their stores, so I needed to assure them that we were going to be there, and we’re going to get through the recession together.”
Easterbrook used the meetings, and other communication opportunities, not only to reinforce his vision and promote a feeling of stability but to also maintain a dialogue aimed at developing a constructive relationship between the leaders at the corporate level and franchise operators. Strong interpersonal bonds form the basis for the working relationships that can help your company endure a crisis with its culture intact.
“Relationships are really critical to withstanding the kind of thing that we went through,” he says. “It becomes a function of establishing your core values and communicating those core values and maintaining a very high level of professional and personal integrity. If you are a person of high values and you practice and communicate those values and you live those values and you combine that all with honesty and integrity, people know you’re genuine.”
External marketing and internal communication produce the combined effect of reaching all three of the constituencies that Easterbrook needed to reach: consumers, franchisees and corporate associates. With all three constituencies engaged and aware of Easterbrook’s plans to bring Juice It Up! through the recession, the company was able to endure the crisis and is now emerging with a focus on the future.
“Our core values that we follow are quality, responsibility, mutuality, efficiency and freedom,” Easterbrook says. “We feel that each one of those impacts one of the three stakeholders that we have, which really leads to us establishing the way we operate. We strive to provide value for the money that our consumers spend with us and to assist franchisees in maximizing their investment. All of the programs we have and the communication we do is aimed at achieving both of those objectives.”
How to reach: Juice It Up!, (949) 475-0146 or www.juiceitup.com
The Easterbrook file
Frank Easterbrook, owner and CEO, Juice It Up!
History: I started as a small investor in Juice It Up! when the company was founded in 1995. The company had 25 stores by 1999, and in 2001, I bought out all the shareholders and focused on becoming a franchisor. We had grown the company to 180 stores in 2008, just before the recession hit.
What is the best business lesson you have learned?
Accept failure. Treat it as a lesson. When you open a store that doesn’t survive, you don’t look for someone to blame. You look to discover the lessons that you need to learn, and you debrief everybody on those lessons. You learn the things you did right and the things you did wrong. When you have a problem, don’t avoid it. Face the problem, make a decision and learn from the consequences.
What traits or skills are essential for a leader?
You have to be a person of values and integrity. If you have that, you will be someone that people will respect and listen to, so those are very important traits to have.
What is your definition of success?
Everybody has a different definition. Mine would be continual improvement. If you are better tomorrow that you were today, you will naturally become more successful. Things can’t stay the same. They’re either improving or declining, so if you want to survive as a business, they have to improve. As the head, you have to identify those areas for improvement.
Diversify your marketing strategy.
Understand your customers.
Refine your messages.