Twenty years ago, Bert Jacobs and his younger brother, John, were looking for ways they could avoid getting typical jobs. Jacobs and his brother never agreed with the standard path for someone coming out of college. In fact, at that time, Jacobs was delivering pizzas and teaching people how to ski to earn a living. The brothers were looking for a unique path to live life how they wanted to live it.
“We wondered if we could create something that fit us better,” Bert Jacobs says.
That fit was The Life is good Co., an apparel and accessories company that spreads the power of optimism in its products and through its nonprofit organization, The Life is Good Playmakers.
Fast-forward to today and Life is good has 260 employees and saw 2012 revenue north of $100 million. Not bad for two brothers who wanted to maintain the fun in their lives.
Jacobs serves as CEO, or chief executive optimist, while his brother John serves as chief creative optimist. The two started their company 19 years ago aided by a drawing of a smiling character named Jake, who has become more than just a logo on the T-shirts but a symbol of optimism and the driving force behind the company and its inspiring message.
“Jake is our hero here at Life is good, and we like to say that Jake has superpowers,” Jacobs says. “Those superpowers guide our decisions.”
Simplicity, gratitude and humor are just a few of the 10 superpowers in total that help shape how the company does business. In recent years, the Jacobs brothers have had to do some self-evaluation as leaders and plan more strategically to understand where to go next with their company and its message.
“We’re 19 years in business and we’re really less about being a clothing company and more about the clothing being a vehicle for an important message,” Jacobs says.
Here’s how Jacobs has overcome the growing pains of leading a small private company into a larger corporation.
Find your direction
Since early in Life is good’s existence, the company’s inspirational message has been both a strength and a challenge for Bert and John Jacobs.
“Our message is so clean and simple that it applies to a tremendous array of different things,” Jacobs says. “So we have a lot of choices, which is a great place to be for a business, but it can also keep you up at night thinking about what we should do and shouldn’t do.”
Jacobs remembers one instance when the company was just above $1 million and he got a call from a large liquor company wanting to purchase more than $6 million worth of T-shirts from Life is good.
“We could have had 600 percent growth, and it was really, really tempting, but it really didn’t have anything to do with the reason why we liked the brand, started the brand or the vision of the brand,” he says.
“There has always been that pressure, and when you’re given an opportunity to go and hit the gas, it’s real tempting to do it.”
That call was the late ’90s, but in recent years, Jacobs says it’s too dissimilar.
“There are always people bringing ideas and opportunities, and I think we have to look and say, ‘How do those opportunities line up with our mission? How do they line up with our vision and with what we’re trying to do with our lives?’” he says.
Knowing what move to make next is one of the biggest challenges in any business. The way to attack that challenge and consider it an asset is to know who you are and act like it.
“That’s how we define branding internally at Life is good,” he says. “The mission of our company is simple — to spread the power of optimism. If we’re going to make a business decision that drives revenue, that’s great. But if it drives revenue and it doesn’t spread the power of optimism, it’s not so great.”
These business decisions come back to the company’s inspirational leader — Jake and his superpowers.
“These superpowers have to start showing up in the deals we do,” Jacobs says. “A big driver of these decisions is knowing our brand. We had good gut instincts back in the early days. Today, we can really line it up against criteria, and it’s pretty easy to take a look and see whether it’s a fit or not.”
Decisions regarding company direction take a great deal of focus. You must consider all that is at stake and who will be impacted by the decisions.
“You need to get away from the details of the business and ask what you want to do with your life,” Jacobs says. “If someone is trying to make a decision about their business and they’re not looking at how that’s going to serve their life, then they’re not going to make the right decision, in my opinion.”
Once you answer that, you have to look at who the stakeholders are of the business and what they want to do.
“You have to start with the highest priorities and who owns that organization and what are they trying to do and where do they want it to be,” he says. “A big part of that is including your customer base in those stakeholders, because a business can’t continue, it can’t thrive, and it can’t grow or do new things without your customers. Then make a decision based on that.”
Regardless of what decision you ultimately make, you have to ensure that you go through a process to understand why you’re making that decision.
“There have been times with this business that we didn’t go through that process, and those are the times that it stings you,” Jacobs says. “We’re lucky that none of those times we did things that sank the ship and we can still live our dream. But if you don’t watch those things, you can lose your dream.”
Just as understanding the company’s direction in recent years has been a challenge, so too has having to let go of some of the leadership responsibility both Jacobs and his brother have had in the past.
“Like many small businesses — the people who started the business play a very critical role,” Bert Jacobs says. “You can sort of kid yourself at some point that nobody can do something better than you can.”
The Jacobs brothers began reading about the struggles that companies go through and the mistakes that leaders make. One thing they saw over and over was that leaders have a tendency to place blame on others for issues in the company, but they’re afraid to have a self-evaluation.
“That was a big step for us,” Bert Jacobs says. “What we did was we created a task force at Life is good and we asked them to critique my brother and I and our other four partners. It was sobering. They were really honest and really candid. There were many areas where we weren’t doing a great job.
“The task force and the criticisms forced us to put some structure in place to reorganize the whole company and align on all our major strategies.”
Going through that evaluation opened doors and enabled autonomy to Life is good and its top management and general managers of its different business units.
“When we clearly paint the vision of where we want to go and we get out of the way, they’re not as good as us, they’re better,” Jacobs says. “That decision has been a real revelation and a breakthrough that a lot of small business owners sometimes never make or make too late.”
For Jacobs, realizing that taking an extra day skiing up in Maine isn’t a bad thing every once in a while has helped him and the business grow.
“The business might be better off without me on a given day,” he says. “Maybe by being around we can get in the way of things. Instead, if we put people in place and we trust the job that they can do, then unexpected things can happen.
“I can point to spots through the years where we probably could have grown stronger, faster and smarter if we did a little less. When something is your baby, you hold it white-knuckled sometimes, and I think we have gotten over that and we’re enabling more things to start happening.” ?
How to reach: The Life is good Co., (617) 266-4160 or www.lifeisgood.com
When Jean-Paul Ebanga looks up at the sky, he thinks about the more than 3 million people who fly every day on airplanes powered by CFM International engines. In fact, every 2.4 seconds an airplane departs under the power of a CFM engine.
“That means our role today is far beyond delivering engines to the industry; it is also making sure people are traveling in a very safe way at a decent price,” says Ebanga, president and CEO of CFM International, a $15 billion aircraft engine manufacturer that is a joint venture between GE here in the U.S. and Snecma in France.
CFM — which gets its name from a combination of the two parent companies’ commercial engine designations, GE’s CF6 and Snecma’s M56 — combines the resources, engineering expertise and product support of these two engine manufacturers to build engines for narrow body aircrafts.
“Today, in the air transport industry, the narrow-body segment is the main segment of the industry,” Ebanga says. “Looking forward for the next 20 years, there will be a need for roughly 30,000 new airplanes; two-thirds of those will be narrow-body airplanes and CFM is currently leading this market segment.”
If being the industry leader in engine manufacturing wasn’t enough of a challenge, Ebanga also has the challenge of leading a joint venture company where compromise and collaboration is the key to success.
“If you are taking two parent companies with two different cultures and you try to blend them, this will generate some difficulties,” Ebanga says. “But the net result, because you have to find compromise, because you have to work between different cultures, will be more sound ideas and a much more efficient organization.”
Here’s how Ebanga utilizes both GE’s and Snecma’s resources to keep CFM the industry leader in narrow-body aircraft engine manufacturing.
Compromise and collaborate
While a majority of companies are focused on streamlining themselves, CFM has to take a different approach to its business. Its joint venture means CFM has to work to find compromise above all else in order to properly function at its best.
“The problem with the JV is because you have two different constituents, you have to make compromise,” Ebanga says. “There is no one voice saying this is the way and the rest of the team just follows without asking questions. In terms of leadership, it requires some things to be a little bit different than normal leadership.”
The existence of this additional challenge makes this kind of partnership too difficult for some leaders and companies. But Ebanga sees the glass as half-full.
“If you are able to find the sweet spot between the two company cultures and then work around these difficulties, you enable a new space of opportunities and strengths,” he says. “This is the essence of joint venture success.”
CFM has been known for a long time by its superb engine family, CFM56. Now the company is looking to release its next generation of engines called LEAP, for which compromise and collaboration will be key to its success.
“This new product will be designed based upon a very detailed and comprehensive market survey,” he says. “We spend more than three years asking the customer what they are looking for in the next 20 years and understanding in a granular way how the dynamics of the market can evolve, and then we define the product, which is the answer and the solution to that.”
When you have two companies, the reading of the market dynamics will be different because each company has a different way of operating and a different culture, so they will analyze all the signals in a different way.
“Maybe the solution has some things shared, but the two won’t be exactly the same,” Ebanga says. “The whole key is how you bridge the two approaches. How can GE or how Snecma can make the necessary compromise to accept that the other guys also have a great idea and how can you work together to bridge ideas that make a great product.”
The trick is being able to step back from what you believe is the ultimate answer and being able to compromise with other ideas from another company that also thinks they have an ultimate answer.
“By bridging the two, you find out that some of what’s behind the idea of the other company you didn’t think about at first and vice versa,” Ebanga says. “At the end, the product you are putting on the market is far better than the one you could have done alone.”
Both GE and Snecma own their own technology. Snecma works on the front and back of the engine, while GE works on the middle of the engine. For LEAP, they both have been developing technologies for their respective parts of the engine, but the companies don’t unilaterally say, ‘Here’s our part of the engine.’ The other company has to accept and agree with the technology based on analysis. There are checks and balances that go into the process.
“Based on the other company’s remarks, you can improve your own part,” he says. “Snecma might make some comments about the core, which is the responsibility of GE and taking into account these remarks GE will improve its own part of the engine and vice versa. It’s a mutual cross-pollination.”
The level of compromise and collaboration that CFM has developed has been built up during more than 30 years and is now a major part of the joint venture’s culture.
“In our case, the different GE and Snecma leaders, over time, understood that CFM’s success is more important than their own success,” Ebanga says. “That is to say that if I’m trying to optimize my own interests rather than CFM’s interests, at the end of the day, I would lose the game.”
CFM and GE have been very successful at carrying out this approach even though the leaders have changed.
“One way to do that is we manage young leaders in the challenges of working in this strategic partnership environment,” he says. “If you are growing leaders in this environment, eventually when they are in the top spot, they will have the framework to deal with what makes up the success of this JV.”
A joint venture takes an investment in both people and process in order to make it work.
“In a strategic partnership, it is like being a couple — you could fall in love day one and it’s great for a couple of weeks, but if you are not investing in the relationship … it won’t be a great love story,” he says.
Plan for the future
One of the main challenges CFM has is that in the ’70s it was just a start-up company. Now it has become the leader of the aircraft engine industry, and in order to remain in that position, Ebanga and the company must be forward-thinking.
CFM has several matters it needs to focus on for the future of the company. No. 1 is executing on current commitments.
“This is a big deal because we are currently developing a new engine family called LEAP, and the start of this new program has been very successful,” Ebanga says. “We are the sole power plant for the next generation of Boeing 737 MAX aircraft, one of the two engine makers of the Airbus A320 aircraft, and we are the sole power plant of the new Chinese COMAC C919 aircraft.”
Beyond making LEAP the next engine of preference, CFM also has to ensure that whatever changes the market goes through in a decade or two from now the company will be able to adapt and reinvent itself to stay in the leading position.
“When you are in this top-dog phase, it’s difficult,” he says. “It’s about working on a short-term basis and, at the same time, articulating a strategy to change the way we are running to make sure we will still have the appropriate fit 10 years from now.”
Planning for what the future has in store is not an easy task. You need to address the situation in a very humble way.
“You are already overwhelmed by the shop-time challenges and to find time and perspective to think about the long-term is rather difficult,” Ebanga says. “Being humble helps you to engage in this journey. Along the way, you will have a lot of reasons to give up for a while and stick with the short-term. I think this is a recipe for failure. You need to stay humble on one end but also stay engaged and not let things go away.”
You also need to understand your market but not in the way you understand your market for your short-term objective.
“When you are looking at the market on a short-term basis, it is to make sure you have the appropriate marketing and value proposition to get yourself up and make your numbers,” he says. “When you are looking at the long-term perspective, it’s really the ability to elaborate scenarios about the change in your industry.” ?
How to reach: CFM International, (513) 563-4180 or www.cfmaeroengines.com
Drive compromise and collaboration for best results.
Be able to reinvent your business to adapt to your market.
Develop plans for how the future of your market may unfold.
The Ebanga File
President and CEO
Born: Paris, France
Education: Graduated from École Nationale Supérieure d'Électricité et de Mécanique (ENSEM), France with a degree in engineering
What was your very first job, and what did you take away from that experience?
I was the leader of the photo club in high school. A lesson I learned from that time is that you can have some great ideas and be very fast in your head, but you have to have the ability to bring people up to speed. This is a great example of how a real organization works.
What got you into aviation?
It was the beauty and the exceptional achievement that this industry is all about. When I was in high school, I had two dreams—the first one was to be an architect and the second was to be an engineer to design great things. To imagine that I could generate some great things to enable this kind of achievement was absolutely fascinating for me. So I chose the engineering path and it still gives me great satisfaction. An aircraft engine is an absolutely amazing piece of technology, but also a piece of art.
Who is someone that you admire in business?
My first thought was the leaders and initial creators of Intel. Not only was this company able to start from nothing as CFM did and became the leading company in the microchip/microprocessor business. Initially they were the leader in the memory business and then they reached a point where they had to reinvent themselves. The reason Intel is the great company they are today is because they were able to reinvent themselves in the absolutely right way. So I admire this generation of Intel leaders.
Accountants can do much more than prepare your taxes. Stephen W. Christian, managing director at Kreischer Miller, offers some ways to work with your accountant to increase profits and grow your business.
Q: Can your accountant add value and help you increase your profitability?
A. Do you consider your accounting fees to be overhead or an investment? One stereotype of an accountant — bean counter, scorekeeper, tax preparer — deserves its connection with minimal value overhead. But the right accountant takes the historical numbers and information available and helps you navigate a path to increased profitability and a return on your investment.
Accounting firms add value in many ways, but one that C-suite executives are reaping the most benefit from revolves around determining and accessing the right information with which to make timely, informed decisions. Think of all the information embedded in a company’s systems — production statistics, time and productivity information, supplier and customer data, margin analyses, etc. Your accounting firm can assist you in harnessing it.
First, determine the information that would put you in the best position to make decisions and monitor activities. What are the key performance indicators? Your accountant can assist you in determining the appropriate indicators. You can then develop the type of dashboard report you would like to review.
Your accounting and technology teams can assist in automatically populating the dashboard reports. You will be able to review critical information on a daily, weekly or monthly basis from any smartphone, tablet or computer. Stop wasting time with the incredible amount of useless information available to all of us. Work with your accountant to focus on utilizing only the relevant data, putting you on a path toward timely, better decisions that lead to improved profitability.
Stephen W. Christian is a managing director at Kreischer Miller. Reach him at (215) 441-4600 or firstname.lastname@example.org.
It could be a deal. It could be a business strategy. It could even be a house. Whatever the project, Joe Nettemeyer is all about making it bigger, better and more successful.
“I had a boss tell me once that I was not a person that he would put into a business to sustain it,” says Nettemeyer, CEO of Valin Corp. “He’d always put me into something that he wanted to build because I couldn’t help but start trying to re-engineer anything I wanted to get my hands on. Building something is an ongoing challenge, but the results give you a huge amount of satisfaction.”
A builder was exactly what Valin Corp. needed when Nettemeyer joined the industrial solutions business in 2001. Despite years of great success in the semiconductor capital equipment business, Valin has been a fast casualty of the computer-chip industry downturn. With a whopping 90 percent of its revenue coming from chip manufacturing, the company’s revenue plummeted by two-thirds in six months.
“Everything crashed, equipment owners crashed, and we went from being a $75 million business to a $25 million business in about 120 days,” Nettemeyer says. “We didn’t lose market share; it’s just that the slides of the market opportunity dramatically contracted.”
As Valin’s new CEO, Nettemeyer realized the 38-year-old chip manufacturer had two options: Continue in the same direction and fall apart or rebuild as a much more diverse business. Here’s how he transformed the floundering company into one of the nation’s fastest-growing businesses.
Shake off complacency
With such a large percentage of Valin’s income tied to shrinking revenue streams, Nettemeyer looked for ways to create new sources of income — and quickly. Acquisitions would allow the company to efficiently diversify its portfolio and grow new business lines.
“When I came in, I realized that we had such a great dependency on too few accounts,” Nettemeyer says. “It was such a huge risk. We had to move into acquisitions. So right in the midst of that turmoil I went out and started borrowing money and buying businesses.”
Not everyone was as excited as Nettemeyer about diversification.
“Experimentation brings rewards and risks that make people uncomfortable,” Nettemeyer says.
“It was challenging for people because they were in a comfort zone. They’d done extraordinarily well for 20 years doing what they were doing, and we were pushing them outside of it.”
In the past, Valin focused on small diameter process management, working with quarter-inch or half-inch tubing. Suddenly, the company was working with up to 60-inch pipe.
Recognizing that he was asking people to make some big changes, Nettemeyer made sure that he and the leadership team were transparent and thorough when they laid out the acquisition strategy to employees.
“I walked the management team through a plan, and we talked about how we could integrate these different technologies and provide solutions versus just selling parts and pieces,” he says.
“There was a lot of communication. I selected all the individuals that I felt were key leaders and we had monthly leadership meetings. We reviewed where we were at, and we had an open book approach to financials. We were measuring the initiatives that we were undertaking. Through that 24-month real crucial period, we were giving monthly feedback.”
Employees appreciated the fact that Nettemeyer didn’t sugarcoat the changes.
“I wasn’t going to pretend that this would all pass,” he says. “There was a core group that really came together and embraced what we had to do.”
At that point, employees who still wanted to take a “wait and see” approach to the market — including two members of Nettemeyer’s leadership team — were asked to go their separate ways.
“I think it’s my responsibility to the company to leave it a better company than it was when I came here,” he says. “That means we’ve got to get out in front. That gives you some heartache and pain. It gives you sleepless nights and scary moments. You have to celebrate the successes, but you also have to say, ‘That was really a dumb idea — let’s stop it.’
“I had to replace some of the management team because they wanted to sit and wait. They thought that the semiconductor industry was going to continue what it always did — it was only in a short-term contraction. Well, that contraction lasted for three years.”
Soon after making Valin’s first acquisition in October 2001, Nettemeyer began buying businesses and product streams that were within the company’s technical bandwidth and that could provide it a competitive advantage. Some acquisitions were a natural expansion of things that the company already did, such as safety devices. Others helped flesh out Valin’s expertise to transform it from a parts provider into a resource for customers.
“We have to find new ways to do things because if you’re going to stand pat, you’re going to get slowly sliced up in the marketplace,” Nettemeyer says. “The biggest struggle we face is the fight against the complacency you get with maintaining the status quo.
“Every year in our planning process, we say, ‘Is this the way that people are going to want to do business with us 10 years from now?’ When you ask that question, everybody says no, and then the next question is, ‘Well, what should we be doing about it?’”
Valin has completed 28 acquisitions since Nettemeyer joined the company 12 years ago, building on technology, and moving more aggressively into light manufacturing, medical devices and service lines. Instead of chip manufacturing, Valin’s biggest markets are now energy, oil and gas. The diversification strategy has allowed the San Jose, Calif.-based company to more than double its size and value over the last five years.
One of the reasons that Valin has been able to integrate so many new businesses so effectively is by having a clearly defined integration process that provides ongoing support.
“The smallest business we’ve bought had $500,000 in revenue,” Nettemeyer says. “The largest we’ve bought had $25 million in revenue. I’d say we spend most of our time buying businesses in the $3 million to $20 million range. We just have to make sure that we take them on at a pace that’s digestible.”
Valin’s integration process goes like this: After purchasing a business, the company converts the business’s IT systems in one weekend. Next, Nettemeyer brings in a team for one week to teach employees how to navigate and enter information into its ERP system. After the tech teams leave, an expert is assigned to stay and work with the business over the following months.
“You teach people, but they forget how to do that and how to make connections,” Nettemeyer says. “We have an embedded expert there for 60 days because we find that’s about how long it takes to get people comfortable with it.
“Then after that we have a call desk that they can call at any time, and they continue to have technical support. It’s getting them integrated into our system quickly that gives us good control over our assets, inventory receivables and cash flow. We’re excellent at doing that.”
Invest in education
While contracting revenue forced Valin to shrink its employee base to 45 employees in 2001, acquisitions enabled it to transition into a variety of new markets. By 2011, chip manufacturing — previously the company’s bread and butter — accounted for just 25 percent of the company’s $150 million revenue. This growth also meant Nettemeyer could begin hiring again, adding employees to expand the company’s businesses across the country.
However, there were some challenges stemming from Valin’s diverse and growing footprint.
On one hand, Nettemeyer and his team — like many manufacturing companies in the U.S. — have had to deal with a dwindling talent pool, specifically, the lack of highly qualified engineering talent in the market. Taking advantage of new business opportunities requires a well-trained work force with the sophisticated skills.
To attract and retain talented people, Nettemeyer has worked to create fellowships with IBM, Texas A&M School of Engineering and The Ohio State University to open opportunities for employees at Valin. Each year, for example, the company sends two promising managers to participate in the Texas A&M School of Engineering master’s program in industrial distribution so that they can learn critical skills to drive the business forward.
“Part of our educational effort is we’re monetizing education and teaching engineers how they can run their facilities more efficiently and prevent downtimes — a huge expense,” Nettemeyer says. “They are more likely to be thought leaders, and you get thought leadership through education.”
Investing in education, both formal and informal, also helps you provide a framework that enables employees to come together and be successful. Having employees aligned behind common goals and a common vision has been critical in a culture that gives Valin a competitive advantage.
“If I have five presenters going around trying to teach something, they are all going to teach it differently,” Nettemeyer says. “We wanted to get uniformity in the message. We wanted to make sure that we’re highlighting the things that we think are important.
“If you don’t do that, people on their own will spend their time managing their own basket and not managing to the goals and objectives that we have to achieve.”
Today, Nettemeyer and his leadership team spend much more time visiting with managers to talk about their priorities and responsibilities as owners. Being a 100 percent ESOP business, it’s important for Valin to have a consistent message about what ownership is and the responsibilities owner have to suppliers, shareholders and customers. Three years ago, the company also hired a doctorate in education employee to develop online training modules that give Valin’s 240 employees in nine states and 15 locations a common process and common approach to management and establishing priorities.
“The education component is critically important for us,” Nettemeyer says. “You buy different companies, and they all have their different approach. Everybody thinks that their way is better. What we have to strive for is being consistent. Being consistent means that people have to have a repeatable positive experience when they interact with our company, and we see training as a huge part of that.” ?
How to reach: Valin Corp., (800) 774-5630 or
The Nettemeyer File
Born: St. Louis
Education: St. Louis University
What is one part of your daily routine that you wouldn’t change?
I get up at 6 a.m. every morning and read for about an hour and a half, usually something that pertains to work. I have a responsibility to the organization as CEO to stay current with contemporary business. Most of the material I read is focused on economics, insights on how to make better decisions and improve the business or how to sustain our business for the long term.
What do you do to regroup on a tough day?
After a tough day, I like to go home and have dinner with wife of 36 years, talk about our family — four children and three grandchildren — because they are the cornerstone of my life.
What is the toughest business decision you made recently?
I’m making tough business decisions every day, whether it’s the decision to make an acquisition or walk away from an opportunity. These decisions are the challenge of a healthy struggle. If you think it’s easy, you are missing something.
What do you like most about your job?
We’re pushing the envelope. Organizationally, we’ve committed ourselves to being students of our industry … I find that intellectual stimulation to be really gratifying.
How do you find good people?
I remember Ross Perot when he wrote his book, he said, ‘Eagles don’t flock together. You have to go find them one at a time.’ You have to find the people, and you’ve got to have people that have passion and commitment and want to accomplish bigger things. They want to be part of something that they have major accomplishments … you have to be looking all the time for people with that profile.
When Paul Davis joined Coinstar Inc. in 2008, the leading provider of automated retail solutions had recently acquired 18 different businesses and was at an inflection point, capable of moving in several directions. The Bellevue, Wash.-based company had gone from a single line of business — coin counting — to five lines — money transfer, electronic payment services, Redbox DVD rental, entertainment and coin counting.
Davis had the task of reining in these different businesses that the company had acquired and deciding where to go next.
“One of the first things I did when I joined the company was a deep dive to understand and get alignment throughout the organization about what our core was,” says Davis, CEO of Coinstar Inc.
As a result of that deep dive, Davis landed on the automated resale platform as the company’s core, which two of Coinstar’s businesses — Redbox and coin counting — were focused on. Davis and his team then did an analysis of the remaining 17 businesses, which revealed that they weren’t the right fit.
“Of those 18 companies that were acquired, we sold off 17 in the first two years, so it was a major reshift,” Davis says. “We ended up with our two core businesses today, which are our coin-counting business and Redbox.”
With a much clearer focus on the company’s future direction, Davis was able to play to the strengths of Coinstar. His execution on the strategy to grow the coin-counting business and Redbox earned Davis a No. 4 ranking on the Fortune 500 list for technology visionaries in 2012.
Here’s how Davis evaluated the company and placed Coinstar on a path that would leverage its strengths.
Find your direction
Coinstar, a more than $2 billion, 2,700-employee company had primarily been growing through acquisitions before Davis became the CEO in 2008. By divesting the majority of those acquisitions, Davis shifted the focus of the company and its growth strategy to a more organic one.
The company was a clear leader in the DVD rental space, not No. 1 at the time, but it had the clear potential to get there, and in coin counting, it had more than an 80 percent share of the market.
“In these other businesses, they really didn’t leverage what we knew,” Davis says. “Money transfer had very little to nothing to do with kiosks. E-pay had very little to do with kiosks. In the business that they called entertainment, it was a fairly antiquated business that was capital-intensive and we weren’t seeing any growth.”
When Coinstar focused on Redbox and its coin-counting business, it found that all of its money and all of its growth were coming from those two businesses. The other businesses were drains on the bottom line.
“They were prohibiting us from doubling down on those growth sectors and realizing our potential,” he says. “It meant that we had to get rid of these other businesses that had not been integrated.”
Davis’ biggest key to finding Coinstar’s next direction was asking what the “core” of Coinstar was and how the company could leverage that.
“I see a lot of companies, and we were the same way, doing a lot of things that were outside of the core,” he says. “If you think in concentric circles, once you’ve identified the core, we were two, three and four jumps out in terms of concentric circles.
“What ends up happening is it creates a culture where you’re not winning, you’re not in the leadership position, and you start to potentially lose some credibility with your retail partners because you’re not coming to the table as the true leader.”
In Coinstar’s two core businesses, the company was the clear leader and Davis saw great opportunities if the company could leverage that, take advantage and grow that circle.
“The first thing we needed to do was gain alignment around the fact that we thought there was decades of growth in this (automated retail) space,” Davis says. “We did a lot of analysis and saw that there were all these macro-trends around consumers not having time available. Time-starved consumers are comfortable with technology and they love to control their own destiny.”
Coinstar also found that its retail partners could greatly benefit as well.
“We concluded that this was a great space for us to be in and there was a lot of growth potential,” Davis says. “We thought of the category as the intersection between brick and mortar and e-commerce.”
Grow and innovate
To build on the opportunity in that space, Davis and his team started their new strategy by focusing on Redbox, because it was a business with immense opportunity. Coinstar had a joint venture with McDonald’s on the Redbox business, so its first step was to buy out the rest of the company.
“We doubled down on Redbox,” Davis says. “At the same time, we said, ‘We’ve got to shift the focus of the company from all the growth through acquisition and instead focus more on organic growth.’”
Coinstar started a new ventures team and put leadership in place to start vetting ideas. The company got ideas from venture capital firms, private equity firms, idea contests, whiteboard contests and an inventor’s network.
“We started getting ideas from all sorts of different pockets and corners of the country,” he says. “Once we saw ideas and thought this had some real potential, this team that we put in place started vetting them.”
Today, Coinstar has eight new ventures on top of both its coin-counting and Redbox businesses. Six are organic and two are strategic investments.
“We looked around as we focused on this automated retail space and there really weren’t a lot of people doing things in there that would be companies we would acquire, so we needed to create the category on our own, and we’ve had quite a bit of success at doing that,” Davis says. “The seeds are at various stages — some are in their infancy with just a few kiosks and others we have multiples of hundreds.”
The company follows a very similar launching process for each of its new businesses.
“We go out and vet it and we look at the size of the category and see if we think that there’s ways or an opportunity for a new solution that’s more convenient and leverages what we know,” he says. “Then we go out and hire someone with deep domain expertise and give them a bucket of money that we tightly control and we put a clock on them to go out and prove the concept.”
The new ventures start with one kiosk and are compared to Redbox and Coinstar in their infancy before being allowed to grow.
“As they clear the hurdles, they get permission and more money to go from three kiosks to 30, 30 to 300 and 300 to 3,000,” Davis says.
The process Coinstar has made so successful is a result of having an innovative culture that breeds creativity.
“You have to be pretty disciplined about creating a culture of innovation,” Davis says. “We really encourage people to try stuff. The way we have managed innovation internally is we think really big. We start small, and once we land on an idea, we scale quickly. But if you fail, you fail cheaply. That’s what we have tried to do over and over again.”
Under Davis’ leadership, Coinstar has grown tremendously. The company has more than 42,000 Redbox kiosks and 20,000 Coinstar kiosks. Redbox recently celebrated its 10-year anniversary.
“Our market share now is 10 points over the next closest competitor in the physical space,” Davis says. “That business at the end of 2007 was about a $500 million business, and we are projected to be over $2 billion for 2012.”
The company’s success in its two main businesses and its new ventures stems from maintaining an innovative, hardworking environment.
“There’s a certain paranoia we have inside the company and a need to constantly innovate and stay focused to deliver,” Davis says. “That’s the mindset that we’ve adopted across the company.” ?
How to reach: Coinstar Inc., (425) 943-8000 or www.coinstar.com
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.
It’s no secret that some companies struggle with creating an effective presence on social media. Navigating the tightrope between overt sales messaging and empty musings is tricky; turn your fans and followers off, and they’ll abandon your page as fast as they can click “unlike.” Inadvertently create a controversy, and, well, the consequences can be ugly (not to mention cached forever, thanks to Google).
The simple fact that most social media is “free” does not mean that we, as business leaders, don’t need to invest in a strategy. While we all know what not to do, it’s much more difficult to create a road map for what will drive engagement across social media.
At Petplan, we integrate our company culture and brand values into our social media activities at every opportunity.
But we don’t just talk about ourselves — we share stories of our fans and family members and invite our community to join in the conversation. We don’t just give news updates; we create destinations that are rich with exclusive content that is truly useful to our community members.
With social media, the driving force behind our approach, as it is with everything else we do, is our core value: Pets come first.
Our approach seems to be working, both in terms of driving incremental traffic to our company and also in raising our profile in traditional media. Two months after creating our Pinterest presence, Social Media Delivered, a social media consulting organization, included Petplan on its list of top 20 companies globally using the site.
Content is king
Content is the currency of social media, so you need to make sure that every tweet, post and pin has value. What makes it worthwhile? If the information you are sharing enables your audience to act on your shared values, it’s worth posting.
For Petplan, that means delivering content that helps people provide the very best for their four-legged family members. It matters to them, and it matters to us — this synergy drives engagement and earns us those ever-important likes, retweets, shares and pins.
Don’t copy, complement
Many businesses make the mistake of putting exactly the same content on all of their social media channels, but this one-size-fits-all approach simply doesn’t work.
Each social media site has a distinct character and a unique audience who favors it; if you’re not playing to the medium, chances are you’re missing the message. Share industry and personnel news on LinkedIn, tweet breaking news and updates, post interesting photos and calls to action on Facebook, and pin your most engaging images related to trending topics on Pinterest.
Think of each channel as another facet of your business’s personality and tailor your content to that.
If you want to harness the power of social media, you need to make it easy for your audience to share — and easy for the content to be attributed to you. Optimize all your communication channels to include both “share” and “follow” buttons. Make sure your retweet widgets include your Twitter handle.
Use websites like sharethis.com to integrate social media into the content you produce. It will make your customer experience more meaningful and your social media standing more robust.
A solid social media strategy takes planning, time and a lot of attention, but if you invest the resources in building an effective presence, you’ll capture new customers, fans, friends and influencers.
Whatever you do, don’t forget the most important piece of the social media puzzle: analytics. Gaining quantifiable data gives you insight into social sharing behavior that will tell you what you’re doing right (and wrong!), reveal where improvements can be made and keep you on the path to becoming a brand powerhouse in the future.
Natasha Ashton is the co-CEO and co-founder of Petplan pet insurance and its quarterly glossy pet health magazine, Fetch! — both headquartered in Philadelphia. Originally from the U.K., she holds an MBA from the University of Pennsylvania Wharton School of Business. She can be reached at email@example.com.
I was recently having lunch with a private company CEO and the topic of private equity came up. When asked if he had ever considered seeking a private equity partner to fund and support his planned growth initiatives, his answer was expectedly, “No, we don’t want to sell the business yet. We want to focus on growing the business.”
While I can certainly appreciate his perspective, that opinion is consistent among many business owners and leaders. Namely, that private equity is primarily a liquidity mechanism, not a preferred tool to fund and support company growth. Moreover, many business leaders often see their growth plans as incompatible with private equity, which they associate with high leverage and limited financial flexibility.
This perspective of incompatibility was also on display during the recent presidential election. Private equity firms were broadly characterized as opportunistic value extractors, rather than enablers of company growth and job creation.
While the purpose of this article isn’t to defend private equity (there certainly are some firms worthy of this negative characterization), significant evidence exists to suggest that, in general, private-equity-backed companies experience proportionally greater growth. This is particularly true for small-to-medium-sized businesses.
Private capital a key to growth
According to studies performed by GrowthEconomy.org between 1995 and 2009, U.S. private-capital-backed business grew jobs by 81.5 percent and revenue by 132.8 percent, compared to 11.7 percent and 28.0 percent, respectively, for all other companies.
In California, over the same period, the story was even more favorable to private equity. Private-capital-backed businesses grew jobs and revenues by 123.1 percent and 155.2 percent respectively, compared to 11.3 percent and 26.4 percent for all other California businesses.
While each situation is unique, there are many reasons why private-equity-backed companies experience greater growth.
Access to capital
With the continued tightness in the credit market for small-to-medium-sized businesses, private equity can be a source of capital to support growth initiatives.
Additionally, private equity firms often have preferred relationships with lenders, giving businesses more access to attractive and flexible debt financing where appropriate. With greater access to capital, companies can more quickly, nimbly and opportunistically implement growth initiatives.
Strategic guidance and ongoing operational support
A private equity partner can provide much-needed strategic and operational resources to support the company’s growth initiatives and ongoing operations. This often leads to more thorough and refined growth strategies, as well as more effective plan execution and implementation.
Private equity firms often have large networks of industry experts and experienced operators that they can bring to bear to support company growth and operations.
Increased capacity for acquisitions
Private-equity-backed companies are significantly more acquisitive than other private businesses. Acquisitions can be an attractive source of growth, allowing companies to increase their customer footprint, expand geographically, create greater scale and enhance capabilities in a relatively short time frame.
However, successfully identifying, executing and integrating acquisitions can be very difficult. Many business leaders don’t have the time or experience to effectively pursue acquisitions. Private equity firms generally have expertise executing acquisition strategies and can be valuable partners in supporting companies as they identify, negotiate, execute and integrate acquisitions.
Private equity can be a compatible and effective tool to support and achieve company growth — not simply a mechanism to achieve liquidity. While private equity is not appropriate in every situation, and not all private equity firms are growth-oriented, business owners and leaders should carefully consider a private equity partnership when evaluating their ongoing growth initiatives and funding options.
Josh Harmsen is a principal at Solis Capital Partners (www.soliscapital.com) a private equity firm in Newport Beach, Calif. Solis focuses on disciplined investment in lower middle-market companies. Harmsen was previously with Morgan Stanley & Co. and holds an MBA from Harvard Business School.
Twenty years ago, McKinley Inc. was a company with 450 employees. Ten years ago, the company, which specializes in real estate investment and management, had a single operating platform for all of its businesses.
That was then, this is now.
Today, Ann Arbor-based McKinley has more than 1,400 employees and six different divisions contributing to its $273 million annual revenue figure.
It’s a long way of saying that growth has been a fact of life for CEO Albert M. Berriz. That’s a good problem to have, but it still comes with a series of challenges that must be met and overcome if Berriz is to have a financially and culturally healthy company on his hands for years to come.
“There are a couple of basic disciplines that we are very methodical about,” Berriz says. “One is we maintain a very flat organization. I believe that the distance from where I am sitting to where our customers are sitting is really no more than two heartbeats. I have six divisional CEOs who report to me, and they are flat with the people in the field, who are our customers.
“The second thing is, the six individuals who run each of the businesses have a lot of autonomy. They really get a lot of freedom to run their businesses as their own.”
For Berriz, managing growth is about managing the distance between people. Though he oversees a company with assets in 25 states, he wants as few levels and geographical barriers as possible to exist between management and field employees, between management and customers and between peer-level employees in the field.
But to maintain that type of connectivity, Berriz has needed to constantly work on strengthening his company’s cultural values and refining his communication strategy.
“Anything we do is really not top-down; it’s really integrated throughout the organization and is customer-driven,” Berriz says. “Everything we do needs to be driven by our responsiveness to our customers.”
Promote your core values
Though Berriz gives his division heads a high level of autonomy regarding how they manage, he still requires them to hire, make decisions and lead based on McKinley’s core values and core purpose, which is posted on the company’s website: “To enrich the quality of life in our communities.”
Berriz wants his executives to lead with their own leadership styles, but he has learned that a company will not be able to grow and adapt effectively without every employee’s compass arrow pointing in a common direction. That fact only becomes more critical as your company continues to expand and add people.
“While I’ve basically given them liberty to run their businesses, and I’m not a micromanager, we do still have a commonality regarding what the core values are and what the core purpose is,” Berriz says. “Even though each member of my team might be hiring differently, their standards are the same and the core values that they’re hiring for are the same.
“That is how you continually promote your core values throughout the organization. Even though we’ve grown to 1,400 people, when we do employee surveys, it’s not uncommon for 90 percent of our employees to have a full understanding of what our core values and core purpose are.”
When McKinley’s management talks about those values to the company’s employees, they use individual examples whenever possible. Berriz says if you can put a face on the behavior you want emulated, it has a much better chance of taking root and becoming something that your company embraces as it grows.
“It has to be something that is done throughout the organization, as opposed to top-down,” Berriz says. “If you look at our core values and the things that signify our core values, we helped to reinforce them by talking about individual people in the organization. We didn’t just write it on the wall. We actually took examples of great people in the organization and used those examples to help fashion our values.
“Say we have an employee named Jeff, and we want to have Jeff as our positive example. We ask what makes Jeff a great person in the organization. That is how we got our core values. We didn’t do it backwards, just by coming up with things and writing them on the wall. You take a look at your seasoned people in the field, people who are successful and embody certain positive characteristics, and say ‘That is how we want our people to be.’”
Hire with a purpose
If your culture is both formed and driven by your people, you need to hire managers and employees who embody the traits and principles you want to emphasize. Technical skills can be taught, but values, ethics, adaptability and a willingness to put the customer first are, in most cases, a product of personality before training.
Identifying and hiring the best possible management team members is a crucial first step. If they are on board with your cultural principles, they’ll hire like-minded people as part of their teams, and those people can, in turn, attract more of the same — a factor that can work to your advantage in a big way if you are eyeing a period of aggressive growth.
“Great people attract great people, and that’s huge, because you can’t have an organization like ours with mediocre people,” Berriz says. “And once you have great people, they expect to retain the great people they’ve hired.
“I think one of the biggest reasons people leave or stay with an organization is their boss. The six CEOs I have serving under me all have very high standards, so they serve as the litmus test. They are going to be the ones who expel mediocre people and attract great people.”
Berriz says you should never forget that any given person’s impression of the company, its mission, its values, its growth plans, and his or her relevance to accomplishing it all is predicated largely on the boss-employee relationship. It’s why each person at every level of your organization needs to strive to embody and lead by your company’s values.
“Associates can know the name of a company, they may understand what a company does, they may know their job,” Berriz says. “But at the end of the day, the real relationship is with their boss.
“If it’s a sour one, their view of the company and what the company does will be sour. If it’s a good relationship, their view of the company is a good one. That’s why people stay with or leave a company because of their boss. It’s rarely because of other issues.”
Berriz takes that philosophy a step further, trying to promote a positive relationship between upper management and all McKinley’s employees in the field. He sets the tone himself by setting up multiple channels for communication and dialogue focused on the company’s present and future growth plans.
“There is a difference between autonomy and not having a common culture,” he says. “One of my most important responsibilities is attracting and retaining great people, and I need to do that culturally — not just with my six CEOs, but I have to do it right down through the organization.”
Berriz describes himself as an “old-fashioned guy” when it comes to communication. He prefers in-person interaction whenever possible, but given the number of people McKinley employs and the size of the company’s geographical footprint, it’s impossible to maintain a consistent level of personal contact with every associate in every corner of the company.
Berriz has needed to find other ways to engage his people. One of the primary ways he’s attempted to bridge the gap is by embracing social media as a communication tool.
“For instance, if you go to my Facebook page now, you will see news about what is happening in the company,” Berriz says. “I’m making four or five posts today to Facebook, and my Facebook page is tied to our company website, as is Twitter. So if you are a team member and you want to stay in touch, you can go to my Facebook page. If I didn’t put that effort out there, if I didn’t utilize those social media platforms, I don’t think my communication would be as effective.”
Berriz has recognized that a large percentage of his workforce is composed of those who came of age in the era of the Internet. Younger employees have lived their entire professional lives in an environment that includes high connectivity through electronic media.
If you are going to connect the company’s purpose to younger workers and maintain a dialogue with them, you need to consider the value of Facebook, Twitter, blogs and other electronic media platforms in your communication strategy.
“A big portion of our population at McKinley is in the 18-to-35-year-old category,” he says. “That means social media and how we are communicating in real time can be very powerful in terms of developing and maintaining a common culture. I travel around, but there is no way that I can touch every person in the company through traveling. You have to make other efforts, otherwise you’ll be out of touch.”
How to reach: McKinley Inc., (734) 769-8520 or www.mckinley.com
The Berriz file
Albert M. Berriz, CEO, McKinley Inc.
History: I was born in Havana, Cuba. My family moved to the U.S. in 1959, when I was three years old, as a result of the revolution in Cuba. I grew up in Miami, where I graduated from the University of Miami with a degree in architecture and engineering. I later received an MBA from Northwestern University.
What divisions do your CEOs oversee?
We have five real estate divisions — two commercial and three residential — and one division that covers acquisitions, finance, partnerships and new ventures. Five of them are based out of the Ann Arbor office, but they are never here. They are always out in the field. We have one individual covering the Carolinas, Texas, Nevada and Arizona; we have one individual who does Florida, Michigan, Indiana, Illinois; and another one who has a third overlaid geographically.
For me, nowadays, it doesn't really matter where they live. I have one CEO who works down in Florida and actually keeps an apartment down there, which is great because that person stays closer to our people and closer to our customers.
What are the keys to staying in touch with your direct reports?
It is all personal. I am on the phone with a few of them every day, or talking in person once every couple of weeks. I am very connected with those people. I am not a micromanager, it is not my style, but we have an understanding and expectation of what the results need to be and what the culture needs to be. But after that, it is really up them to lead in their own style.
What are those conversations like?
It is very high-level. We have a very transparent organization, so you are either on or you’re off. We have dashboards here that are always available in real time, so I am always aware of good or bad developments. So the results part is easy, and the culture part is easy too, because I have a good sense of what is happening in the organization.
We have a well-run organization, so I am mostly focused on the future, where we are headed in 12 months, in five years and 10 years, as opposed to the problems of today. If there is an occasional problem today, I will deal with it, but to be candid, the problems are infrequent, so they are seldom an issue.
Define your company’s purpose.
Hire people to fit that purpose.
Utilize multiple avenues of communication.
With St. Patrick’s Day quickly approaching, I started to ponder the idea of luck and if it plays a role in our business lives.
Over the years, I have had so many people tell me how lucky I am after hearing about the ups and downs of 30-plus years as an entrepreneur. At times, I’m not sure how to feel about the comment, so I usually just smile and say, “Thank you, I know that I am a blessed man.”
We’ve all heard the great quote from Thomas Jefferson, who said, “I’m a great believer in luck, and I find the harder I work, the more I have of it.”
My twist on Jefferson’s wise words would read something like this: “The more we plan our future, the more likely our future will look like how we planned it.”
As business leaders, I believe our role is to plan and implement a preferred future for the business and its employees, customers, suppliers, stakeholders, etc. Though planning for the next year, five years and beyond is part of a leader’s strategic process, there have been occasions where luck became an important part of making a connection or a deal possible.
I remember a time when luck seemingly played an important part in Molly Maid’s survival. I was sitting at a picnic table on a sunny Michigan afternoon in 1989 when I “happened” to meet Lynn Drayton, the former president and COO of Compuware. Before that spring Sunday, I had never met or heard of Lynn before nor could I have predicted how important that meeting would be.
It’s been 24 years since Lynn and I met, and he was the right person at exactly the right time to help me restore prosperity to our troubled company. After sharing the story of Molly Maid’s challenges, we formulated a plan to buy back the company, restore standards for providing great service and re-engage the franchise owners’ trust in the system. As my business partner, mentor and best friend, Lynn’s wisdom, counsel and capital investment was integral to Molly Maid stabilizing and rebuilding.
While long hours, hands-on leadership and open communication are critical parts of growing successful companies, great timing and the ability to remain open to new solutions have certainly been a part of my story as well. Looking back at the day at the picnic table, it’s difficult to imagine any solution other than meeting Lynn and arriving at our “planned preferred future.”
Another part of our history involved adding a second brand to our holdings. By researching the need for home services, we knew there was a demand for a professional home repair and maintenance franchise. By searching trademark records, we discovered David LaValle, the founder of Mr. Handyman.
While the plan to find a partner was intentional, the timing of reaching out to David was serendipitous. If we had reached out to him a year earlier, he would not have been ready to grow. If we had waited too long, another company would surely have captured the opportunity. Perhaps David LaValle’s Irish background had something to do with it or our persuasive request to purchase his concept and grow it with a proven method was too attractive to turn down.
Either way, that partnership created a need for a multiconcept franchisor now known as Service Brands International. The foundation of these two companies paved the way for additional jobs, business ownership opportunities and reliable services to consumers to be possible.
I am a lucky and blessed man to have met such people who have been integral parts of my world, and it started at a picnic table, doing nothing more than watching the world go by.
As you work hard and plan your preferred future, I wish the best of luck to you too!
David McKinnon is the co-founder and chairman of Ann Arbor, Mich.-based Service Brands International, an umbrella organization that oversees home services brands, including Molly Maid, Mr. Handyman and ProTect Painters. To contact McKinnon, send him an email at firstname.lastname@example.org.