Warren Buffett recently said, “The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” Yet, in most companies pricing receives scant attention.
Data from the Professional Pricing Society indicates that less than 5 percent of Fortune 500 companies have a full-time function exclusively dedicated to pricing. Research from McKinsey & Co. shows that less than 15 percent of companies do any systematic research on this subject. Similarly, only about 9 percent of all AACS-accredited business schools offer courses that emphasize pricing significantly.
Despite this, numerous consulting studies suggest that pricing affects profitability both substantially and immediately. Small variations in price can influence profitability by as much as 20 percent or 50 percent in both directions. Are you paying enough attention to your pricing strategy? Who is managing pricing and value in your firm?
Over the past three years, my dissertation work has focused on better understanding how firms manage their pricing strategies. First, we interviewed 44 managers — from CEOs and CFOs to heads of business units and professionals — in 15 U.S.-based industrial companies. These varied in size from a few hundred to thousands of employees, and notably, differed dramatically in pricing capabilities.
In conducting this research, we identified common features of companies that have deployed pricing approaches as a key profit driver. Most important was that in successful companies, top management was attentive to two areas of their pricing function: the development and practice of skill in price orientation (or price setting) and price realization (or price getting). Armed with these qualitative findings, we asked more than 8,000 CEOs, presidents, and business owners around the world a series of questions relating to pricing. The findings revealed some interesting myths and facts.
Of the 100 points of attention allocated between cost-cutting, price-management and growth strategies, pricing received only 16 percent. Most attention, as expected, focused on cost-cutting, at 55 percent. While these top leaders indicated that pricing was strategically important, they paid little attention to it.
A commonly held belief that emerged from the research is that pricing is expensive, requires tremendous resources and is only for large firms. Au contraire! There are several steps in the pricing maturity progression model. But to get started, you can follow some of the simple steps:
Create a pricing council that meets every month just to discuss price trends, competitive pressure and new-product pricing prior to launch. Invite your marketing, sales and finance leaders and champion the process. Cost = $0.
Buy several copies of the best pricing book and give it to your staff to read. Then meet to discuss what you learn, what you can quickly adopt in your firm, and what the gaps are. Cost = $200 (depending on number of employees).
Send your marketing managers to a pricing conference held twice a year by the Professional Pricing Society. There you will learn from the best, meet top pricing professionals and get lots of insights. Cost = $2,000.
Take your best costing or financial analyst and give him or her responsibility to apply the basic techniques you will have learned in the book and at the conference. Cost = $0 incremental (part of your fixed cost).
Join our Western PA Professional Pricing Group on LinkedIn. This group gathers pricing and marketing professionals from the region. We meet twice a year, share best practices, and have fun. Cost = $45 in gas and food.
There you have it. You are at Level one of the pricing-maturity process. You have spent $2,245 in total to get started. We at Ardex, stand between level three and level four of this maturity model. Complexity and cost increase with each level. What you want to do is to find the level that suits you, your industry and your goals. Of the 15 firms we studied in 2010, 11 did not have a pricing function and did not manage pricing with intention. A staggering fact.
Stephan Liozu is President & CEO of Ardex America Inc. (www.ardex.com), an innovative and high-performance building-materials company located in Pittsburgh, Pa. He is also a PhD candidate in Management at Case Western Reserve University and can be reached at firstname.lastname@example.org.
Most of what we hear on the news is how the world is going downhill — and quickly. Economic chaos, terrorist and pandemic threats, political stagnation, budget deficits and global warming are only a few of the issues constantly bombarding us.
Fortunately for me, these doomsayers are in direct contrast to the people I work with every day. It’s my privilege to live in the Bay Area, home to Silicon Valley, and work closely with CEOs who believe that they can make a difference in the world — sometimes even create a whole new future.
I suppose that’s why I find the book “Abundance: The Future is Better than You Think” so inspiring. Written by Peter Diamandis, chairman of the X Prize Foundation and a key figure in the development of the personal spaceflight industry, it describes the forces that are transforming our world and the trends that will enable us to address the most challenging issues facing our planet.
Here are a few of Diamandis’ examples that demonstrate how we can innovatively address the massive challenges facing us:
Dean Kamen, the famous inventor of the Segway, portable infusion pumps and kidney dialysis machines, got interested in water and invented the “Slingshot,” a device that can purify 250 gallons of water per day using the same energy as a hair dryer. The power source is a Stirling engine that can run on most anything (even cow dung) and is designed to operate for five years in remote villages without maintenance. Kamen believes it can reduce costs by 90 percent.
Winston Churchill said it was absurd to grow a whole chicken simply to eat its breast and wings. In the 1990s, NASA developed a way to grow meat from stem cells to feed astronauts on long space flights. Although it will take another decade to perfect the process, cultured meat has the promise to provide the protein we need, eliminate farm animal cruelty and restore the 30 percent of Earth’s surface currently used to raise livestock.
Billions are being invested in developing the capability to produce and distribute clean, renewable, safe and low-cost energy. In addition to exciting developments in solar, biofuels and storage, the potential for next-generation nuclear plants is enormous.
Bill Gates and others have invested in TerraPower, a company that is developing a traveling wave reactor (TWR) described as the “world’s most simplified passive fast breeder reactor.” A TWR can’t melt down and can run safely for 50 years without human intervention.
Learning will be different in the 21st century. With the ability to find information on anything at any time on the Internet, we must develop the ability to ask the right questions. Creativity, critical thinking, collaboration and problem solving skills will be most valued. Although we need to restructure our education systems, the opportunity for personalized learning programs has never been better.
Medical researchers are pushing the cost of diagnosing disease to almost nothing. mChip, developed by scientists at Columbia University, has already demonetized and dematerialized the HIV testing process. Using a microfluidic optical chip smaller than a credit card, a single drop of blood can be read in 15 minutes at a cost of under $1.
The potential to make low cost, simple and accurate diagnoses for a wide range of diseases via mobile devices has enormous ramifications for improving health.
The Arab Spring of 2011 proved the power of today’s communications technologies. One activist reported that they “use Facebook to schedule the protests, Twitter to coordinate, and YouTube to tell the world.”
Freedom is a powerful and irresistible force for change, and technology is making it happen.
Paul Witkay is the founder and CEO of the Alliance of Chief Executives. Based in Northern California, the Alliance of CEOs is a strategically valuable and innovative organization for CEOs. Witkay can be contacted at email@example.com.
If you ask Travis Mlakar what the problem is with being in the paper industry today, he would joke that it’s people asking him if he is Dunder Mifflin from the TV show, “The Office.” While Mlakar hopes his company wasn’t the model for the show, he does want to strive to do something the show has accomplished, which is to make paper more appealing.
Mlakar will be the first to admit that he is in charge of a product that is both boring and bland. However, that boring product is a necessary one and although it lacks the rock star product status, paper has been the lifeblood of Mlakar’s family business, The Millcraft Paper Co., for 92 years.
“It’s white paper,” says Mlakar, president. “It’s about as boring and bland as you could possibly get, so we’ve had to find other ways of differentiating the product.”
That product differentiation, among other initiatives, would come in handy when the recession hit home for Millcraft Paper, a $150 million independent distributor and converter of commercial printing paper. The company went from experiencing record performances one month to a 15 percent drop in revenue the next. The business of paper was no longer boring or bland.
“In October 2008, we had the single largest month in company history, and in November 2008, we literally lost about 15 percent of our business overnight,” Mlakar says. “The world just came to a screeching halt. We’ve had to redefine who we are and the value that we bring and how we run our businesses after 2008 and 2009. Coming out of that, we realized internally we had to find a way as a business to take corporate responsibility and corporate sustainability to the next level.”
Millcraft’s footprint of operation is the Midwest in cities like Cleveland, Detroit, Buffalo, Pittsburgh and Indianapolis. The company realized it had to find way to become more efficient and stronger while also finding ways of giving back to the communities it works in to help those economies grow.
“It’s not the booming metropolises of the world,” Mlakar says. “We have spent a lot of time over the last few years really focusing on the communities in which we work. What we are trying to do is make better decisions ourselves as well as educate our customers about the impact their buying decisions have beyond price, because there is a lot more to it.”
Evaluate the business
When your business experiences a change from month to month as Millcraft did, it wakes you up. Mlakar and his team had to begin to identify ways to deal with the new economic and business environments.
“We obviously have had to drive efficiencies through our organizations,” Mlakar says. “Unfortunately, we went through massive headcount reductions, which are never fun. We also looked at how our organizations can do a better job of supporting each other. While we have 13 locations, the real question was what were we doing that was redundant in those 13 locations and how could we do a better job of all collaborating with each other to better support each other and do more with less?”
While the recession caused businesses a great deal of pain, it did provide a window of opportunity to those willing to put in the effort to truly improve their companies.
“The benefit of 2008 and 2009 was it blew everything up and you finally had a backdrop to question everything and you could get people to understand why you were attacking some of the sacred cows in your industry or in your business,” he says. “Necessity is the mother of all invention and I think that the necessity of changing your business and finding a way to be more efficient after the Great Recession really afforded people the opportunity to look at things differently.”
For Millcraft, one of the areas of business that had always been done one way was inventory management. There were old paradigms and it was time the company took a second look at those operations.
“When the downturn happened, we brought a new group of people together who were able to bring a fresh perspective to how we managed inventory and we were able to take our turns on our inventory from six times a year to 10 to 12 times a year,” Mlakar says. “They’ve done a fantastic job of just breaking the old paradigms that were there and really asking questions, ‘Why do we do this? Why do we do it this way? Why can’t we do it this way?”
Millcraft asked those same kinds of questions in customer service across its 13 locations. That effort has had a monumental impact and has allowed those locations to act as one rather than 13.
“We have competitors who have chosen to drive efficiencies by centralizing things and literally going to a centralized customer service department that they may have moved out of the area to another location,” Mlakar says. “What we’ve done is we’ve used technology to bring our organization closer together so that we are coordinating everything versus centralizing it. Right now our customers can pick up the phone in Cincinnati and if all of our customer service reps are on the phone, instead of going on hold, somebody in Columbus will answer the call or somebody in Cleveland or somebody in Detroit, to make sure that we’re not dropping the ball. That’s what we have focused on and we really looked at every aspect of our business to say, ‘How can we do a better job of utilizing what we have more effectively and efficiently?’”
Taking a step back and evaluating your entire business, seeing things differently and also questioning old processes and procedures is a great way to find better ways of doing things. However, the solutions don’t have to be up to you alone.
“You don’t have to have all the answers,” he says. “We have a wonderful group of people and what we’ve found to be most effective is to sit people down and ask them to describe their day and walk through all the different roles and responsibilities that they have. What do they feel is efficient or inefficient? If you can do it in a venue where you’re listening to what they’re saying, you’re bringing people together so that they can hear what they’re doing versus somebody else versus somebody else and then they start to draw parallels and say, ‘Wait a minute, I can do that and this person can do that, or what happens if we were all able to work together this way or that way?’ I find that some of the best business ideas that we’ve had certainly weren’t mine, they came from the people within our organization. I think if you can listen and facilitate you can get a lot further along than if you try and craft the answer.”
Communicate the changes
When you are asking employees for their feedback and input to identify areas of the business that can be improved, you have to make sure you communicate your decisions and actions based on that input.
“You have to be honest with people and say, ‘Here’s what you said, here’s what I heard, here’s what we took away from it or here are the decisions that we’ve made as a result,’” Mlakar says. “Sometimes you have to be honest with people and say, ‘Listen, I heard you say this, but I don’t agree and here are my reasons why.’ I think the key is you’ve got to educate people about the decisions that you’re making and more importantly, why are you making them. People may not like the decision, they may not agree with it, but the key is do they understand why we’re making it.”
During times of uncertainty and change, communication is the No. 1 tool for a business leader. When the recession first hit in 2008, it was unclear why business was declining and Mlakar had to communicate to understand why changes were happening.
“In November when we first saw the fall off in business, we didn’t understand why,” he says. “November was bad, December was bad and it wasn’t until January that other people in our industry began talking about the fall-off that had happened. So for 60 to 90 days, we were feeling a little lonely and it wasn’t until everyone started coming out saying, ‘Oh yeah, we’ve seen the same decline. We’ve seen this and we’ve seen that.’ Misery loves company and that certainly helped to understand that it wasn’t something that we were doing independently of the industry, and it wasn’t necessarily the decisions that we were making, but that it was a broader systemic issue.”
Once it was understood that it was a systemic issue it was quickly realized that everything that the company had been doing before had to be thrown out the window. You had to play by all different rules because no one had ever seen anything like this before.
“It just comes down to the fact that you’ve got to be honest,” he says. “You’ve got to be able to look people in the whites of the eyes and say, ‘Listen, it might be my job to be president, but that doesn’t mean I have all the answers. The reality is here’s what’s happening, here’s what we’re going to do or try to do to solve it.’ With respect to the people in our business and the people in this industry and a lot of industries, 2008 and 2009 was unprecedented. Nobody had any experience. Anytime there is a radical change in a business, often times it is uncharted waters and I don’t think there is anything wrong with telling people, ‘We’re in uncharted waters and we’re going to do our best, but we don’t have all the answers.’ You’ve just got to be honest and humble. If you come across like you have all the answers sooner or later people are going to see right through that.”
When the environment changes as drastically as it did, you can’t look for answers by staying within your company or even your industry. You have to get ideas and help from other industries where things can translate over.
“Everybody during that time was talking with friends on the side and asking, ‘What’s going on with your business and your industry?’” Mlakar says. “Whether it was casual conversations or talking with friends or just being open to ideas and things that were happening somewhere else, the benefit of a catastrophe like we went through is that you become much more open to ideas and potential solutions. I found myself listening to friends that are in the medical industry about what are they doing and trying to find a way of how could I apply that to our business.”
Whether you’re in tough times or not, it’s very important to develop a network of people that you regularly talk to that are outside of your industry.
“Too often people in business and in leadership positions inhale their own exhaust and they either sit in a room full of people that tell them what they want to hear, or they sit in a room full of people in their industry, in which case the only ideas you have are the ones that are going to perpetuate what’s currently happening,” he says. “You have to go outside and find things that are totally new and different to your particular industry. Find somebody that is in a totally different industry and look for those creative ideas.”
Millcraft focused on two parts of the business: assets/working capital employed in the business, and expenses.
“With both assets and working capital it really comes down to efficiency and analytics and how do you run your business more efficiently and where is there waste you can do without,” he says. “We’ve continued to do that and as our business is now growing again and we are in much better times, we’re finding that the work that we did two or three years ago is beginning to help us exponentially now. It’s the same thing on the expense side. That’s resulted in lower expenses, but more importantly, it’s also opened up the ability for us to grow more cost effectively.”
Once Millcraft had hit its low and was starting to grow again, the company found ways to continue that growth through a focus on its local communities.
“Lots of companies looked outside of their current territory or geographic area to open up new opportunities,” he says. “While we have diversified the products that we sell and the things that we can offer to our customers, we really focused more and more on the cities and the markets that we were already in. When other people said Cleveland doesn’t have the growth potential and we’re going to look elsewhere for revenues, we really said, ‘This is home. We’ve got to make this work and we’ve got to find a way to improve what we’re doing here in Cleveland and Buffalo and Pittsburgh and everywhere else.’”
Mlakar and Millcraft turned toward buying locally and supporting other companies in those same locations.
“We align ourselves with organizations that call home the same place that we call home,” he says. “We all have to realize that the decisions that we make every day go far beyond what we pay for a product. The only way that we’re going to support our communities is to make sure that the dollars that we have to invest on a daily basis as businesses stay in our local communities. Go the extra mile to find a local supplier. Go the extra mile to find out how you can do something that’s going to support somebody that’s going to keep the money here. The reality is that there is a huge downstream effect from your business decisions. When our customers, who tend to be local businesses, do business with Millcraft, those dollars, in turn, are going back into the community once again.”
Along with remaining loyal to local companies, Millcraft asked its customers and clients how it could add value to its products and services.
“We listened and we went to our customers and said, ‘Here’s the situation, we’d like to grow, and we’re not going to grow in other areas of the country, we need to grow with you. What is it that you buy? What is it that we can offer you as products or services? How else could we be of value?’” he says. “We listened to our customers and they said, ‘Well, we currently are buying this and we’re buying that and we’re doing this and it would really help us if you were doing that.’ So we really reengineered our business from our customers backwards. Once again, we didn’t try or attempt to think that we had the answers. Don’t focus on the products, focus on the customers. What you’ve got to do is redefine your organization’s strategy away from ‘Here’s what I have to sell,’ to more of ‘What is it that you need?’”
In conjunction with the company’s philosophy of remaining local and supporting the community, Millcraft started the “Buy and Give” program.
We have developed programs that are designed to give back to the community,” Mlakar says. “The thought behind it is pretty simple. We’re paper, it’s a commodity item, it’s something that nobody thinks about and it’s a supply item that every business has to buy. What we’ve done is we’ve taken that and we have teamed up with two organizations; the Cleveland Clinic Children’s Hospital being one and the United Way of Greater Cleveland being the other. We’ve developed a program to say for every carton of paper that we sell, we are donating back a dollar to the Cleveland Clinic or the United Way of Greater Cleveland to help support those organizations. What we want to do is find a way where we can turn a business decision into a much more efficient business decision by helping organizations and helping our communities and that’s what it is about.”
HOW TO REACH: The Millcraft Paper Co., (216) 441-5500 or www.millcraft.com
- Make the effort to evaluate where you can improve your business.
- Be honest and communicate every chance you get with employees.
- Look outside your industry for solutions to problems within your business.
Pittsburgh’s health care landscape has been anything but boring, and for Robert Rogalski, that statement holds very true. The health care lawyer turned health system CEO has been surrounded by industry change and talk of mergers and acquisitions ever since returning to the area in 2009.
Rogalski’s entrance into the CEO role at Excela Health was rather nontraditional. The former counsel for University of Pittsburgh Medical Center and West Penn Allegheny Health System was asked to join the board of directors at Excela, a 4,800-employee, $500 million health system. Just a few months later, he stepped in as interim CEO and took the job permanently in 2010.
Five years earlier, Excela had undergone a merger of four hospitals — Latrobe, Westmoreland, Fricke, and Mercy Jeanette. Mercy Jeanette has since closed, but the other three remain open, and it has been up to Rogalski to continue the long process of unifying those cultures into one.
“We had difficulty fitting together the cultures of Latrobe Hospital and Westmoreland Hospital and I think the biggest challenge is trying to find common ground to build upon to develop a common culture for the new entity,” Rogalski says. “Like any merger there tends to be a little bit of push and pull in terms of which culture is going to succeed in a merger.”
Unlike many mergers or acquisitions where the incoming company adapts to the culture of the acquiring business, Rogalski and Excela didn’t want to force one particular culture upon the new entity and instead are looking to form a culture made up of best practices.
“What we found here is that there was a sense of lost in terms of the culture and what we’ve attempted to do through a series of planning exercises is we’ve tried to define a new culture for the system rather than adopt one culture or the other,” Rogalski says.
Here is how Rogalski has helped bring together three systems and form a common culture for future success.
Evaluate the culture
With Rogalski at the helm and a new board also in place, the first task at hand was to get together and evaluate the type of culture they wanted to set up for the new entity.
“As a board exercise, we sat down and tried to establish the culture that we would like to see,” Rogalski says. “When we studied it and spent time at the board establishing it, it really came down to a lot of fundamentals that included patient convenience, quality of care, and patient experience. At the center of it was, ‘How do you design systems that are the most patient-friendly?’
“A lot of times what you run into in our industry is systems that have been established for provider convenience, whether that’s physician convenience or nursing convenience or otherwise, sometimes aren’t established on the platforms that they should be.”
Rogalski and his team spent a great deal of time evaluating how patient-friendly Excela was and whether it was maximizing the patient experience and where the gaps were.
“We were trying to lead both cultures to that end and to get a lot of the decision-making focused on our basic pillars,” he says. “We then needed to wire our culture into our hiring decisions, retention issues and awarding of employee promotions based on how well they adhere to those values. Those are the things we are working on now.”
Another focal point that had to be addressed was the fact that these hospitals used to be competitors and now they were on the same team. Excela had to make sure processes didn’t involve competition.
“I think historical competition that existed between these two hospitals had fostered some level of mistrust,” Rogalski says. “When you’ve competed with someone for a while and then all of a sudden you’re put on the same team, unless you eliminate the competition between the two entities, there is always going to be some type of element there that isn’t necessarily constructive.
“We did have to look at where some of our practices were allocated, and we’re doing that analysis now. We had to look at where they wanted certain services to be rendered and that type of decision-making was very good and helpful in terms of being able to eliminate intramural competition in the future.”
The historical competition of the hospitals was another reason that Excela wanted to blend cultures rather than choose one in particular.
“In certain circumstances you can be more prescriptive about the culture,” he says. “But even in those situations I think the blending of cultures is important. One of the things we wanted to hold on to were the valuable attributes of both organizations. Both were hospitals that were very successful in the past, so making one culture subservient to another wasn’t the right prescription for our situation.
“The right prescription for us was trying to define what we wanted to grow into and invite both organizations to matriculate to a new culture.”
When evaluating such an in-depth process with many different things to consider in every decision, it is helpful to form a plan to follow and have people that will help you achieve it.
“You have to have a template with your mission and your vision and your values system that’s listed,” Rogalski says. “I think you have to spend a lot of time in strategic planning in terms of evaluating the value system for your organization. Once you have that definition developed, I think the key is doing the gap analysis. Go through on a unit-by-unit basis and see where you think the shortcomings are.
“You also have to evaluate each of your leaders and that takes a long, long time. You have to attract the type of people to your institution who have some innate attributes to be selfless and attributes designed to put their own convenience to the backburner.”
Communicate your plans
Rogalski’s predecessors made some very good decisions in regard to the merger, but they were difficult decisions that involved rearranging of services. What Rogalski had to do was to take charge of communicating the new plans moving forward.
“With the reshuffling of some of the services, there was some sense of loss,” he says. “Among the things that I had to deal with when I got in the chair was some dissatisfaction among community members and others about those types of decisions. So we had to try to get everyone to agree that those decisions made a lot of sense, and we tried to explain the reasons why they made sense.”
Communication has been Rogalski’s biggest focus in recent months. Meeting with community leaders and explaining why certain decisions are being made has been a key effort.
“What gets people into trouble a lot of times isn’t necessarily the ultimate decision, but the way it’s communicated,” he says. “There needs to be communication before decisions are implemented. We’re certainly not perfect at this even as we sit here today. In the interest of time we have pushed some things through where we could have communicated better.
“When you’re dealing with a merger you have to spend a lot of time matching up your mission, vision and values. Try to evaluate your culture and make sure that if you have gaps between the two entities that you try to close those down from an early time period.”
Communicating to get buy-in for Excela’s new culture was the next step in the process, and it presented some difficulties.
“As a not-for-profit hospital we have some obligation to the community, but ultimately to make the organization operate efficiently, you have to make certain decisions,” Rogalski says. “You hope to, as leaders, get enough consensus built around a decision so that people agree it’s important to do.
“We built some collaborative structures in place for our physician leadership. We’d established a number of leadership committees, so we are involving the physicians in strategic discussions and more importantly, we are getting feedback from the physicians, which help us guide our decision-making process. We also have a very active and engaged board who helps push us on our decision-making as well.”
Even when buy-in for a decision is gained and that new direction is implemented, certain decisions are going to impact people differently.
“Ultimately, once the decision is made, I don’t think you can harbor dissent at that point in time; people either agree and get on board with it, or you just have to get past it,” Rogalski says. “If that means they’re no longer going to be employed by the organization then that’s fine … we’ll just pursue our interests at that point in time. You can’t satisfy everybody.”
In a process that’s as critical to the organization’s overall success as a new culture, you have to make sure your employees have input on how things should operate.
“The communication is important, but even more so, if you have a strong core of physician leaders who take the time to become educated on why it’s important for a health system to run efficiently, how they should run efficiently and who can assist you in telling their colleagues why it’s important to put their individual convenience to the side for the benefit of the system is critical,” he says.
“We have to prove to them and build trust and it takes a little bit of time for us to do that. We’re trying to develop a level of engagement where we get feedback from the employees and try and respond to their concerns and explain why we’re undertaking certain decisions.”
Don’t get discouraged
In a process where every decision has a big impact on the organization, it is easy to become discouraged or for employee morale to drop. You have to stay positive and do what’s necessary to keep morale up.
“The most difficult part is we’ve been required to make decisions that are difficult and politically difficult,” Rogalski says. “When you make those types of decisions, it’s very difficult to get buy-in for what you’re trying to build from a cultural standpoint.
“When you make decisions like that that are difficult for any community and difficult for any workforce, it takes a while for the employees to develop trust in the organization. How’s it going to be different? How’s my daily life going to be? Those sorts of things make it more difficult for us to build morale.”
Getting morale where it needs to be to buy in to a cultural transformation is one of the biggest challenges for a CEO to face; you just have to continue to build trust.
“Employees are smart,” Rogalski says. “They’re not going to listen to what you say; they’re going to watch the actions. I think communication is important, but it’s only as important if you follow through on what you say you’re going to do. They’re going to want to see you live your values and set the example for your values through working hard and trying to be selfless. If they see you doing that, they’ll be more likely to agree that these values are something that you’re serious about and that you think are important for the organization because it’s the right thing to do.”
Boosting morale in a transition such as this is vital and it helps to celebrate the little victories and recognize the employees who get you there. You also have to realize that culture is an on-going process.
“We’ve tried to take all this on with some humility in terms of our understanding that there has got to be a better way to do things,” he says. “We never approach our successes as though we’ve reached the end point, but we do celebrate our successes. You have to celebrate the success of the people who bring you the results.
“Ultimately, I don’t admit patients, I don’t care for patients, and I wouldn’t have the slightest ability to do either thing, so we need the nursing staff, physicians, and the other employees to develop our successes for us and when they do that they’re the ones that deserve the credit for it. The biggest takeaway is knowing that you’re never really finished with a task like that.”
HOW TO REACH: Excela Health, (877) 771-1234 or www.excelahealth.org
- Understand what kind of culture your organization needs.
- Communicate the changes that will make the culture work.
- Don’t let the process discourage you and try to keep morale high.
The Rogalski File
Born: Kittanning, Pa.
Education: Graduated from Saint Vincent College of Latrobe and received a juris doctorate from the University of Pittsburgh School of Law
What was your very first job, and what did you learn from that experience?
One of my first jobs after graduating college was as a newspaper reporter. It taught me that there is enormous power in public perception.
What is the best business advice you’ve ever received?
It came from my mentor Jim Cooper. Jim was the CEO at Medcenter One. He used to say that it’s not necessarily the decisions that you make that will be your doing or undoing; it’s how you communicate them.
If you weren’t the CEO of Excela, what’s a job you’ve always wanted to do?
If I wasn’t the CEO of Excela, I’ve always enjoyed being in health care, so I wouldn’t mind being back practicing health care law.
What are you looking forward to in the health care industry?
I’m excited about the transformation that we’re doing in health care in terms of trying to control costs and create as efficient a system as possible. We’re using a lot of the lean tools and that part is exciting to me.
Who are leaders that you admire?
The biographies of the presidents have always been interesting to me. I have a lot of admiration for Harry Truman. I was impressed with him and the decisions he had to make in some of the darkest hours of World War II and the beginning of the Cold War. I think he was thrust into a very difficult situation and acquitted himself about as well as anybody could be expected to.
Over the past 18 to 24 months, Gary Heiman has had to overcome obstacles and challenges from seemingly every angle of the textile industry. The president and CEO of Standard Textile Co. Inc. has had to face fluctuations in raw materials cost, capacity and quality challenges, and the pressures of operating across the globe. It has taken a resilient leadership and company to maintain the kind of professionalism needed to not let those challenges get the better of the business.
Standard Textile Co. Inc. is a 4,200-employee global provider of total solutions in the industrial textiles and apparel markets that saw 2010 revenue of $750 million. Heiman has moved the company into new areas of business and has built up the company’s reputation.
“There are several areas of strength that we have as an organization,” Heiman says. “No. 1 would be our global supply chain. No. 2 is innovation and creativity, which is something that flows throughout the veins of everybody in our company. We’re trying to improve upon every process as well as product in order to be more efficient and effective both for our customers and for us.”
Heiman, who has been in his current role for 20 years, has prided himself on continuing to build a culture of excellent people, professionalism, trust and values, which has been the main solution to overcoming business challenges.
“If you don’t have the key building blocks of your organization in place and you come upon a period which presents real challenges, is a real crisis and you’re not ready for it – and you don’t have the organization that’s ready for it, it’s pretty tough to get through it,” Heiman says. “It’s tough to get through it as an organization that has all of the attributes and is ready and has worked together as a team in difficult situations in the past. If you don’t have that, it’s a tough situation.”
Here’s how Heiman and Standard Textile have maneuvered through the many obstacles in the textile industry.
Evaluate the challenges
As a manufacturer of linens and apparel, one of the most critical elements of Standard Textile’s business is raw materials such as cotton. The price and availability of raw materials have a ripple effect on business.
“There have been really violent swings in the costs of raw materials over the last 18 months-plus,” Heiman says. “You take those raw materials like cotton and oil, which would affect energy and electricity, freight and transportation, and they also affect all of our synthetic raw materials. We’ve also had to deal with raw material capacities and quality consistency throughout the supply chain. With all of that, we’ve always wanted to maintain, and needed to maintain, financial stability, which many other suppliers either couldn’t or didn’t.”
The price of cotton during this time fluctuated from $0.70 a pound to $2.40 a pound. Heiman and his team were committed to make the raw materials available and not make any change in them so there would be no alteration in quality, consistency, on-time delivery, or service levels.
“As part of that, it’s probably been the toughest period in balancing our work-in-process and finished goods inventory levels and to forecast,” he says. “Our customers expect on-time delivery and product consistency, but they either won’t or can’t give us realistic forecasts. We basically have to guess at that and make sure we have enough product and take into consideration that there will be shortages in markets that we’ve just come through. We need to be the company that can make up for those shortages.”
On top of those challenges, the company also has dealt with political and economic volatility as a global company.
“If you just take the U.S. and China relationship and the politics involved there and having plants in the United States, North America, and China, we’ve had to deal with those political issues which have affected us,” he says. “If you think about the fact that we have 24 manufacturing plants in 13 countries and we sell to over 60 countries today, currency exchange rates have been a real, real challenge for us over that period. We’ve really had to have our finger on the pulse all around the world almost on a daily basis in order to manage all these things.”
To combat the consistent uncertainties and challenges that the industry presents, Heiman and his team have one annual and three quarterly strategic supply chain meetings that they conduct all over the world.
“In our last meeting we actually had 275 initiatives for lowering our cost and dealing with the challenges,” he says. “Of those 275 initiatives, 100 were accepted. We as a company are really committed to a lean continuous improvement process. As part of that, we’re always out there looking at new countries, new nations and new places where our next plant will be and the plant after that because it’s a continuous process. We have an aggressive and vigorous process that we follow in these supply chain meetings. Everything is put on the table. Anybody can bring up anything and there are no silos and that’s the only way that we are going to truly achieve continuous improvement.”
Build a professional culture
Adopting a culture of continuous improvement and building a company that is prepared for the challenges and obstacles that an industry can throw at you is a tough task, but a necessary one.
“There really are no easy answers,” Heiman says. “I’ve been CEO here for 20 years and I’m the third one. Our company is 72 years old and we’ve built up a culture of excellent people, professionalism, trust, and a whole system of values and respect, and it’s very hard to say to another CEO who hasn’t built this up over a period of decades to just do this, this and this. The one thing that we do and we find we can’t do enough of is communicate.”
The company is always communicating what is being done, why things are being done, and the results that are being achieved through those efforts.
“You can’t communicate enough and you can’t get the message across enough,” he says. “We also engage in continuous research so that the messages that we’re communicating to both our customers and our associates are things that have been researched. We show them charts and trends, and our customers have learned to trust what we tell them.”
Standard Textile’s global capabilities and presence allow the company to know what’s occurring in the market worldwide and gives customers a better understanding of their business in return.
“Because we’re diversified around the world, we know what’s happening in China, Europe, the Middle East, and what’s happening in North America and South America,” he says. “We can bring all of that together and they’ve gained a lot of trust over these many decades about what we tell them because they know that we know what we’re talking about.”
That trust is not just built up over a period of time, but due to a history of getting the right information and helping customers make sound decisions.
“You have to build an organization of excellence in every respect,” Heiman says. “You need an organization that has the best professionals in marketing, in sales, in both process and product innovation, in supply chain, in finance, and really every aspect of the organization. Your job as CEO is to find the best people and the best associates for all of those key areas. For the next level down, it’s their job to find the best people under them so that the organization becomes continuously strengthened.”
Building this kind of organization relies heavily on the CEO being able to identify where the company is going and what it needs to become in order to flourish.
“The primary role of the CEO is to No. 1, communicate a clear vision to all associates and to all of the customers that are around the company,” he says. “No. 2 is people and being responsible for interviewing and having the final decision-making on the key people in the organization. A CEO wants people that buy in to the vision, into the strategy, into the values and into the culture.
“In addition, it’s putting together the strategy and the values that you want to have in your organization and the culture. That’s something that takes years to build and it’s something that has to be continuously reinforced and you need to communicate the message about what your values are and about the culture of the organization at every possible opportunity. You have to demonstrate it yourself, you have to speak about it, and you have to live it.”
Be innovative and diverse
Having a clearly defined vision, strategy and culture for employees to operate in allows them to be creative and innovative at a diverse company.
“You have to make a commitment to total organizational innovation, both product and process innovation,” Heiman says. “You’ve got to look at global diversification, both in raw materials and in manufacturing. If you have global customers who want to have global standards, you need to create a company that can service these customers around the world with the exact same standards and specifications in quality wherever they might be.”
To achieve that you need one culture and one set of values and those should be built around your customers and around your associates.
“Whether it’s local or global, every part of the company has to share and compare what their challenges are, what their opportunities are, and what their risk and exposure is in order to come together around best practices which they can then use as part of the company,” he says. “That type of training and continuous training is essential for creating a strong organization.”
One of the biggest success factors for Standard Textile has been its global supply chain which has allowed the company to be diverse and to innovate.
“In today’s world, you almost have to have a globally diversified supply chain,” he says. “The best and safest way to manage that supply chain is if you own your own supply chain. You’ve got to get out and you’ve got to travel the world and meet other suppliers because you’re going to have to use them. If you’re intending to work only through agents and just stay in the United States and not get out, you’re going to miss the bigger picture. It’s really important for a CEO to understand the bigger picture of what’s happening around the world.”
These continuous efforts to build a stronger, better company have led to industry-leading innovations in product development and cost.
“If you take a towel, you understand that 99 percent of people that dry themselves with towels will use the middle 50 or 60 percent of the towel,” Heiman says. “Because they want to improve the product, we’ll put more weight in the 60 percent of the center of the towel and reduce the weight on the 20 percent of the two sides. Or we’ll keep the weight used in that 60 percent in the middle and lower the weight on the 20 percent on each side, so you can actually reduce the weight of your product and therefore reduce the cost of your product.”
The company has also introduced technologies such as Centium Core Technology which is a patented weaving technology in the core of the product.
“The guest or patient or whoever is lying on the bed is effectively lying on cotton, but in the core of the product there is a synthetic product which actually weighs less. The specific gravity of the synthetic fiber weighs less, but the overall fabric will have over 200 percent more durability.
“Because the core weighs less it will dry faster and cut your energy costs and overall laundering costs. We’re developing products that last significantly longer and we’re creating products that process in a less expensive way.”
While Standard Textile has seen numerous challenges during the course of the past two years, the company has been able to roll with the changes and has come out of it as a stronger organization.
“Throughout this period we’ve gotten bigger because of the increase in pricing, but we’ve also gained about 19 percent in unit growth because we have taken market share from others that couldn’t supply or were supplying sub-par product,” Heiman says. “We’re bigger, stronger, and more recognized for having a truly professional team of people.
“We’ve gained the trust of our customers and we’ve come through it in a strong financial situation. We also have the trust and full confidence of our associates because they’ve seen where other companies have gone under or are struggling to survive. We’re flourishing in this environment.”
HOW TO REACH: Standard Textile Co. Inc., www.standardtextile.com
The Heiman File
President and CEO
Standard Textile Co. Inc.
Education: Received degrees in history and engineering from Washington University
What was your very first job and what did you take away from it?
As a teenager I worked at everything from mowing lawns to being a lifeguard to installing window unit air conditioners. The things that I took away from those jobs were being responsible, working hard, and trying to find better ways to do whatever I was doing more efficiently and effectively so my customer would be satisfied.
Whom do you admire in business?
I admire Jack Welch because of the issues that he dealt with regarding innovation, people, marketing, and sales on a global basis. Those were the things that I was dealing with.
What is your favorite thing about the textile industry?
The textile industry has been described as being a traditional industry, but there is nothing about it today that is traditional. All of the machinery that we use, all of the processes that we use are all high-tech, robotic and computerized. So whether you are in this business or another business, you are being challenged in the same ways. You’re being challenged in marketing, sales and manufacturing. So whether I’m producing a chip for a computer or a surgical gown, you still have the same types of challenges and same types of tools that you would use in getting to the best possible product. I really enjoy that part of the business which is built around innovation and creating new product that will better serve the customer in every way possible.
If you weren’t a CEO, what is something you would want to do?
I would like to be involved in innovation and product and process development of some type. Creativity and innovation is something that I really enjoy and really thrive on.
When Punit Shah saw that people were no longer paying premiums for completed real estate development projects in 2008, he knew that his company needed to get out of the construction business.
“We saw where the market was going and we had to take reactive measures to make sure that our future was protected and the future of our employees was protected,” says Shah, the president and COO of Liberty Group of Cos., a Clearwater, Fla.-based real estate company with 400 employees.
To keep the company profitable, Shah has implemented a new business strategy to grow through aggressive acquisition of existing properties.
Smart Business spoke with Shah about the keys in investing in growth through acquisitions.
What is your approach to new acquisitions?
Any acquisition that we’re buying has to have a value-add component to it and have a big upside that we can conservatively rely on to have a long-term gain in.
One thing that really makes us different is our ability to analytically look at every piece of information upfront. That makes it a lot easier for us on the back end, because we know what we’re getting into and we know how to proactively deal with whatever is coming our way.
So it’s something that we think may tie up equity or capital for a really long time and then have minimal returns, we usually pass on that deal, because we want to make the most and highest return that we can on our equity. We also want to make sure that it’s a safe investment, because right now is not the time to be making risky investments. Now is the time to be making investments that you are 100 percent confident in and that you’ve got a reasonable return on the money that you are putting at risk.
We’re not forecasting tremendous numbers with a forward-looking basis. We’re buying what we deem to be profitable as-is right now. As the market improves overall, as the economy improves, as our management team goes in there and adds more professionalism in overall management of the asset, we see that all as value-add opportunity.
What criteria do you use to evaluate investments during due diligence?
The most primary thing is location and demand generators. We want to be conservative and consider all different options, whether if there is a terrorist attack, what that would do to the core business of the hotel, during recessions, what happens during peak periods. So we look for diverse demand generators. We look for location of course. Then we look at the physical plans of the hotel or whatever the asset is. We look at the long-term intrinsic value of the asset itself but also the submarket and the overall region. We want to know if this is something that is going to be sustainable and is there going to be a demand generator for this property 10 years from now. As far as my ranking, it would go in that order.
We’re looking just for the best products that we can find, and we’re filtering out anything that doesn’t meet our core criteria. We’ve been very diligent about establishing that criteria upfront and knowing what we’re pursuing.
What mistakes can you make when pursuing acquisition opportunities?
The biggest thing anyone can do if they’re getting involved in what we’re doing is make sure they spend the time, money and resources on the due diligence. It’s almost turning into the height of the market again on a different scale, because people are just buying things sight unseen, guns blazing and not necessarily knowing what the repercussions are because there are a lot of legal complexities when dealing with distressed assets. I’ve seen a lot of people who are just jumping in all at once without understanding the risks involved with those investments. The other thing is real estate and cash-flowing businesses are still businesses and you have to have great management and employees to make those investments profitable. You can’t just buy an assisted living facility or hotel and expect just because you got a good deal on it, it’s going to turn profitable. It’s not like land. There is an inherent business component to it, and a lot of people fail to realize that when they are looking at these types of deals.
How to reach: Liberty Group of Cos., (727) 866-7999 or www.libertyg.com
Believe it or not, one of the most overlooked characteristics of leadership is the ability to draw and motivate followers. But without followers, you aren’t really “leading” are you? In business leadership, this skill translates into the ability to get your employees to “buy in” to the mission and goal of your company or department.
Outside of the workplace, your employees are all very different individuals, each with their own set of life goals and often goals of other organizations with which they are affiliated. So how do you motivate them to concentrate on your company’s goal for the time that they are at work?
You could demand that they do so, but this kind of top-down brute force only goes so far — and usually results in employees faking devotion to the company’s cause for fear of losing their jobs.
The better option is to genuinely love and appreciate your staff. That sincerity will shine through, and in return, your employees will want to help you achieve your goals.
So if you are interested in real ways to motivate employees to buy in to your vision, implement the following actions.
1. Go heavy on the accolades.
A simple “well done” goes so much further than you would think. Deep down, everybody wants to be recognized for their hard work. If you don’t take the time to give voice to your appreciation, it can rot away at your employees’ motivation and overall happiness at work.
Make recognition of a job well done part of your company’s culture. At staff meetings, open up the floor to team members so they can brag about other members of the team or inform the team about an action that another member took that would normally go unnoticed. Even if you think you are good about this, look to improve. Don’t be afraid to lay it on thick!
2. Be an open book.
You would probably be shocked to hear what your employees think your schedule looks like. If they don’t know what you are up to, they are more likely to assume you are on the golf course than off at a three-day conference trying to soak up all the information you need to lead the company to success. That’s just the way it is.
Take pains to avoid being closed off from your employees. Be open. Be available. Be friendly. Let them know what you are working on. The more your employees know you, and like you, the more likely they are to invest in your vision and actually desire to see it come to fruition.
3. Offer perks.
Perks are not the same as rewards. Rewards are prizes that your employees can receive for a job well done. These are important, and you should have them available in the form of company-wide and department-wide games, etc. But perks are something that employees get simply for being a part of your team, and they are that much more effective at building motivation and loyalty.
When somebody is rewarded for effort, they feel accomplished and acknowledged. But when someone is offered a reward simply for being a part of the team, they feel gratitude and team spirit. I offer my employees free exercise classes and recently installed a cafe in our company headquarters. These are perks that my employees can enjoy just for being part of the team, and it helps build overall happiness and motivation to achieve company goals.
Give this a whirl in your company and watch as the culture surrounding your company’s vision shifts in a very positive direction.
Joy Gendusa is the owner and CEO of direct mail marketing firm PostcardMania. Joy began PostcardMania in 1998, with nothing but a phone and a computer, never taking a dime of investment capital. Since then, PostcardMania has expanded to offer its clients more services including website and landing page design and development, e-mail marketing and full marketing evaluations — all while continuing to educate clients with free marketing advice. Contact her at www.postcardmania.com.
In the United States, workers’ compensation insurance is the second biggest cost for employers, representing a $50 billion marketplace nationwide. So when Steve Mariano built a company focused on sales of workers’ comp insurance, he knew that there was opportunity for long-term growth.
“Workers’ comp insurance — it’s not a really sexy area, but it’s been around for a long time,” says Mariano, founder, chairman, president and CEO of Fort Lauderdale-based Patriot National Insurance Group. “It’s kind of like this small brother compared to health insurance.”
But since the credit crisis, it has also become more difficult to compete in this type of insurance business. In the last three years, declining payrolls and cost cutting at many companies has inevitably affected sales for Patriot and other workers’ comp insurance providers.
“It was always a tough business, but it’s gotten a lot tougher these days,” Mariano says.
To grow, Mariano has stayed true to many of the same principles that the company was founded on in 2003, specifically a commitment to finding and developing a team of unparalleled talent.
“That’s probably been the biggest reason why we’ve been successful,” he says. “We’ve been able to attract the talented people and their skill sets and we’ve been able to train the people to do the business, follow the procedures and protocols and leverage technology the way that we at Patriot do it, different than other companies.”
As a result, the organization has had some of its best sales years despite the recession. Here’s how Mariano develops Patriot’s team of 425 employees to excel in the workers’ comp business.
Grow talent in stages
Prior to launching Patriot, Steve Mariano founded two other companies. From experience, he knew that it would be difficult to attract many strong employees with the skills they needed to grow before they got a foothold and developed a reputation in the business. To create a deep bench of talent from the beginning, it’s important to be patient about growth and not bring on people that you don’t truly need yet.
First, develop a core team of people local to your business and who you can trust to get your business off the ground.
“You’ve got to get your business plan up and running with a couple of core people in your management team that you know and have experienced working with them,” Mariano says.
Once you see growth in your business plan after a couple of years, then you have a story to use to attract corporate talent from around the country and from other fields. Bring on a strong core group and grow initial sales and then bring on a strong secondary senior team to continue to grow them.
“With each cycle that the company grows and evolves, you have to balance your ability to sell your product along with your costs,” Mariano says. “This may not be perfectly in tandem — but you can’t have one or two major years of losses coming from the expansion without balancing it out.”
By growing in stages, you can build the infrastructure to support a larger and larger team. That way, you ensure that as you go through hiring cycles that people will see you as a stable employer with a track record of growth. In addition to bringing people from out of town with certain skill sets to the corporate office, the organization has also hired hundreds of employees locally, including about 300 people in the Fort Lauderdale area.
“Once you get to a certain size, it becomes easier to attract talent because, number one, talent starts looking for you,” Mariano says.
By 2006 and 2007, the company’s sales growth put it in the position to hire the senior talent it needed to pull from outside of South Florida. As you add new talent, finding people who are fair and also have good ethics is equally important to finding the right skill sets. You want to hire people who are talented but also people who are ethical and going to fit within the company’s culture, much like a professional sports team.
“You can have the best talent, but if they don’t work together in the same culture, they’re not going to win,” he says. “You’ve got to find the right people that fit within the organization. It’s not just asking who is the best talent, but who is the best talent for our company.”
Mariano says that growing responsibly sometimes means taking it little bit slower than you’d like to make sure that you bring everybody with you. That’s not just in expenses but also growing the culture in a way to make sure it permeates the entire company as you add more and more people.
“Sometimes that just means taking a step back, whether it’s three months, a quarter or two quarters, and focusing back internally on the company and having internal parts of the company like accounting and legal really catch up to the growth of the company,” he says.
But while he tries to be deliberate about growing in stages, Mariano doesn’t place limits on how big the company can become as it continues to scale.
“If you pigeonhole yourself into not thinking of things as big as they can be, you’ll never get there,” he says. “You’ve got to really think about the potential and not sell yourself or your ideas short.”
Invest in training
Employee training is an area that not all business leaders invest in equally, especially in the insurance industry.
“In the insurance business, there is very little training that goes on these days, and I think it’s because of cost overhead and other things,” Mariano says. “Insurance companies don’t have the same type of training programs for young people as they used to.”
Yet training talent is an area that Mariano cites as one of the most critical elements in facilitating Patriot’s sales growth. Fundamentally, the company has had certain departments training on an informal basis for years. An example is the company’s claims management program that started in 2008.
“That type of training and that type of culture that’s been built around our business has allowed us to be successful,” Mariano says.
When you don’t invest in growing people’s skills, they could feel undervalued or feel that they don’t have a long-term future with your company. This can result in higher employee turnover, which in the end, sucks up more time and resources as you hire and train new people.
Retention is a major factor in why Mariano readily invests in employee training that others might find an unnecessary expense. Investing in your people helps your emloyees be more successful, which in turn helps your company be successful by developing and retaining talented employees.
Last year, Mariano introduced Patriot University, the company’s first formal, full-time training program to provide employees with cross-training enhance their core competencies and develop their skills. The company also collaborates with South Florida colleges to put together training opportunities for people who are interested in working for the company and want to learn some skills in advance. This creates a local pipeline of talent so that when the company hires in the future, it has a pool of candidates who already have some key skills.
“We’re proactive now in making sure that we have more than enough talent and with these training programs, making sure that we’ve got the talent and the internal operations ahead of time ready for the next big expansion,” Mariano says.
“There’s no question that we’re going to continue to grow and hire most of our people locally moving forward. That’s only gotten a lot easier.”
Because of its efforts to nurture people up through the ranks of the company, the organization now has one of the best retention rates in its industry.
“If you don’t train people, then you’re not going to keep them,” Mariano says.
“We know if you churn employees, you hire and then fire, hire and fire, it really increases your costs as a company. It’s cheaper to retain them by training them in their job functions and cross-training them in other department skills, so that as one department grows maybe faster than another, we can use their skill sets in different departments.”
In an industry with a lot of big players, Patriot’s entrepreneurial culture is one of the reasons many job seekers are drawn to work there. When you have a culture that allows people to have a more direct impact on your business, you can attract the kind of innovative thinkers that can help you grow.
“We have procedures and protocols too, but we’re always looking for our employees to find a better way to do something and to innovate within their organization and within their departments,” Mariano says.
Having an innovative culture that embraces new ways of doing things tends to attract those with the desire to succeed.
“Talent is looking for a way to put a fingerprint on the company they’re working for,” Mariano says. “If you come to work for a company like us, you can really put a fingerprint in your area and be able to look five, ten years from now and say, ‘I really had something to do with this part of the business plan and help with the building of the company.’”
By not having just standard ways of doing things, Mariano says you make it harder for employees to just come in, check a box or work a 9-to-5 just to pull a paycheck.
“We’re looking for ideas of how to better our company in all areas, from the mail room all the way up to the top financial parts of the company,” Mariano says. “If there is a better procedure and protocol or a way to innovate it to service our customers better or make us a better profit, then I ask for those types of things and very much support that type of thought process.”
As a result, the company has been a leading innovator in its field, specifically when it comes to technology. It was among the first to spearhead the use of iPhones, iPads and mobile technology to video stream information for surveillance. Being able to use the mobile devices and video streaming tools nationwide gives insurance adjusters, investigators and legal teams the ability to help employers evaluate compensation or compensability issues and make faster decisions in fraud cases.
Because fraud makes up about 20 percent of the workers’ comp cost in the United States, these advances make a big difference in helping the company differentiate itself for growth.
“Very few workers’ comp competitors really use that kind of Apple innovation on the front end to be able to be out in the field getting this information,” Mariano says.
“It’s billions of dollars being wasted each year in fraud. If you can just stop a small piece of that going on in your own companies, then that is a big thing.”
As a result, Mariano says that the company is planning its biggest expansion in the last three years. Investing in a culture and training to engage employees has helped it attract new talent as well as capture market share from its larger, but less nimble, competitors. It recently opened up offices in the Los Angeles area as well as major cities including Sacramento and St. Louis, and in 2011, the company added 85 new jobs to downtown Fort Lauderdale.
“So we’ve been an innovator,” Mariano says. “We’ve been able to come in, leverage new technologies and really come into the marketplace with a fresh set of ideas and reduce costs for the employers.”
How to reach: Patriot National Insurance Group, (954) 670-2900 or www.pnigroup.com
1. Be patient in your talent search.
2. Create formal training for employee development.
3. Nurture employees’ engagement in innovation.
The Mariano File
Chairman, founder, president and CEO
Patriot National Insurance Group
Born: New Jersey
Education: Georgia Tech and Ursinus College — graduated with a degree in economics.
What would your friends be surprised to find out about you?
Most people don't know I read a new book just about every week. There is so much information out there, so many experiences to benefit from.
What is one part of your daily routine that you wouldn't change?
My morning workout. Mental and physical shape are linked, and the time I spend every morning at the gym helps me clear my head, set my priorities for the day, and build the energy I need to take on the day's challenges.
What’s the toughest business decision you’ve ever had to make?
At our prior company right after 9/11, the marketplace for insurance really shrank, and I was in a situation where I had to eliminate about 85 to 100 employees just because the business model wasn’t supporting it. To me, any time you have to eliminate a position or you have to fire someone, from a leadership position, you haven’t succeeded. Any time you have to let someone go, that means you either didn’t train them correctly or they weren’t able to deliver what you thought they would be able to deliver. Or in the case when you just have a bad event like 9/11 — you just have no control over it – it’s even harder because as a CEO you have great people sometimes and there’s just nothing you can do about it.
What do you see for future growth in Florida?
I think South Florida and Florida will do a lot better over the next couple of years. I know it’s been very tough for the state in a lot of areas … and I think just given the amount of business that we’re doing with Latin and South America, and just how wonderful a state this is — no state income tax and all of that — there’s a good balance for its growth. We’re really bullish that there’s going to be better times ahead, and we look forward to being part of the community here.
During a recent client engagement, we were discussing the need for a “burning platform” in order for the necessary organizational changes to grab the attention and get the buy-in of the employees. At one point, a Dialect colleague reminded the group that we need to consider what the burning platforms should be. This was a helpful reminder of what we all know to be true, but often don’t apply: People have different fundamental motivations — especially in their work.
While a senior leadership team may be motivated to significant change by the board or key shareholders in a public company applying pressure to boost earnings, the second-shift worker fixing the broken pump at 11 p.m. on a Thursday night may not be as concerned about that pressure. Tapping into the satisfaction of doing more excellent work or the pride of a higher quality end product to your customers may be the best way to light a fire for change in the heart of that employee.
In his books on change, John Kotter, a professor emeritus at Harvard Business School, has put creating a sense of urgency as priority No. 1 in leading change. Whether one calls it a “sense of urgency” or a “burning platform,” it is important to remember that for any given change effort, there isn’t just one — there need to be several. Not only must there be several storylines of the need for change, these storylines also need to be rolled out in ways that are different for various stakeholder groups and individuals.
Take one of Kotter’s examples from his book, “The Heart of Change.” Recognizing the need to drive down purchasing costs by $1 billion over five years, one organizational leader knew that the first step toward the necessary changes was to get management to see the opportunity. After assessing the magnitude of the problem with one item (gloves used in the company’s factories), leaders were gathered into a boardroom and shown the 424 different types of gloves that the company was buying through its purchasing department.
Seeing that similar gloves purchased by the same factory could cost either $3.22 or $10.55 left these leaders speechless. Presenting the issue in concrete terms — 424 variants of essentially the same thing piled onto a board room table and being purchased with widely variant prices — was all the leaders needed to see to convince them that change was essential.
This illustrates an important principle: When addressing the “why” of change, it’s often insufficient to say costs are too high, show a bar graph, and say, ‘Let’s go cut costs.’ Showing people concrete examples of how the problem that needs to be addressed or the opportunity that needs to be seized connects to their role needs to be one of the storylines. Not everyone will need that particular storyline, but many will.
Here are some other principles that need to be observed or considered in your large-scale, organizational change initiatives. These principles can be applied to both groups and individuals:
- Who has the credibility to introduce the changes and the reasons for them?
- What kind of information do they usually find helpful?
- Big-picture rationale
- Details of implementation
- Effect on metrics (financial and non-financial)
- Effect on customers
- Effect on employees
- When do they need/want to be informed of the changes?
- Have they been given enough time to process the changes?
- Have you, as leaders, given thoughtful attention to their analysis of the short- and long-term implications of the changes?
While there is much more to managing change than the principles we’ve outlined here, we believe that these are essential considerations to getting your change initiatives off to a good start.
Andy Kanefield is the founder of Dialect Inc. and co-author of “Uncommon Sense: One CEO’s Tale of Getting in Sync.” Dialect helps organizations improve alignment and translation of organizational identity. To explore how to get greater alignment behind systemic organizational changes, you may reach Andy at (314) 863-4400 or firstname.lastname@example.org.
If you run a technology business or a company involved in engineering, medical devices, pharmaceuticals or financial servies, the city of Allen has you in its sights.
“We’ve really been going after the technology companies,” says Dan Bowman, interim executive director of the Allan Economic Development Corp. “We’re a natural extension of the telecom corridor north of Dallas, so we find that a lot of the work force in this area is attracted here because of the educational opportunities. Our school district is ranked very highly, and we tend to attract families that are engineering- and technology-oriented.
“Also, we have a lot of medical device and defense-related companies. We’ve been going after pharmaceutical companies and businesses in the financial services sector, as well as information technology and software engineers.”
Asked what factors a company should weigh if it’s considering moving to North Texas, Bowman cited the area’s high-quality work force, its competitive real estate prices and Texas’s healthy economy.
“As you look at Allen, we have a little over three and a half million people in a 30-mile radius that can commute here, and a lot of them have skill sets that fit the types of companies we’re targeting,” Bowman says. “We have a highly educated work force. You’re not going to have to worry about whether you can attract the talent, because they’re already here.
“If you’re comparing us to the rest of the U.S., a lot of jobs are being created in the Dallas-Fort Worth area. Texas in general has had a robust economy. We weren’t impacted by the mortgage crisis the way other areas were. We were the last into the recession and the first out of it.”
The aspect that most sets Allen apart for firms looking to relocate is the speed with which the city can move a company through the zoning-permitting process.
“We look at the zoning, permitting and construction process almost like the private sector does,” he says. “Government has a tendency to take a long time; there’s a lot of red tape. But when we bring in economic development projects, we fast-track them. The city puts together task forces that include the planning director and the department heads, and they’ll work weekends, evenings — as long as it takes to get the job done.”
Two recent examples of this fast-tracking were Cisco Systems and Cabela’s.
“Three and a half weeks was how long it took Cisco Systems to get the zoning for their data center a couple years ago,” Bowman says. “That’s from when they submitted their paperwork to when they got the zoning. That’s unheard of. And for our new Cabela store, it took just a little over four weeks.
“We realize time is money. We don’t sit on permits. We make sure they move forward.”
HOW TO REACH: Allen Economic Development Corp., (972) 727-0250 or www.allentx.com
Population: 84,246 (2010 Census)
Land area: 27.1 square miles
Government system: Council-manager
Mayor: Stephen Terrell
City manager: Peter H. Vargas
Phone: (214) 509-4100