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Kevin Modany brought ITT Educational Services through a crisis without abandoning his mission Featured

8:00pm EDT August 26, 2010

Kevin Modany has a mission at ITT Educational Services Inc. His job is to increase access to high-quality, post-secondary education so that more people across the United States can learn a job skill or trade and become a more valuable member of society.

It’s a noble duty, but it’s only one part of his job. Because ITT is a publicly traded company, Modany also has a fiduciary responsibility to make sure shareholders see a return on their investment.

As the economy began to tank in late 2008, Modany found these two priorities to be in direct conflict with each other at the 9,800-employee educational institute.

“The credit markets basically froze up,” says Modany, the chairman, president and CEO at ITT. “As a result, our students’ access to private financing was virtually eliminated. So that created a real challenge for our organization. It’s not immediately clear what you do to address that situation when there isn’t financing available for your students.”

Modany had two choices, each of which carried its own set of problems.

“One of the alternatives was, ‘OK, if you can’t get financing, you can’t come to school,’” Modany says. “That’s not consistent with our mission. Another alternative was to use our own balance sheet to provide financing for our students.”

This second choice would allow more students to continue receiving an education. But it also had the potential to irritate some investors who had invested their hard-earned money in the $1.32 billion company and were counting on a good financial return.

“That’s not the most optimal solution if you’re purely looking at it from a financial perspective,” Modany says. “We’re not in the business of providing financing. But our mission is to increase access. So we were left with the choices of either abandoning the mission and having a more favorable financial result on the balance sheet or sticking with the mission and maybe the balance sheet is hampered somewhat.”

Modany was confident that his organization was strong enough to find a solution that would make both students and shareholders happy.

“There should be alignment of the mission and that ultimate goal,” Modany says. “Sometimes you have to sacrifice optimal results, but it shouldn’t put you in a position where you have to sacrifice survivability.”

Focus on the problem

So what do you do when faced with an impossible situation? You could start by not feeling sorry for yourself and stop looking at it as an impossible situation.

“There’s never a situation where you can have no impact,” Modany says. “You have to believe that. What are your choices?”

You can either find an area where you can effect some level of change or sit around and wait for whatever is going to happen to happen. The second option is not likely to get you too far.

“As a leader, you can’t allow that to occur,” Modany says. “You can’t say, ‘Well, guys, I guess there’s nothing we can do.’ Is that a leader? If it is, I don’t want to follow that guy.

“Leaders plan. Leaders are organized. Leaders understand what is important and they lay out a plan. That doesn’t mean a plan doesn’t change because it does. We all deal with changes in our expectations. But you can’t get from Point A to Point B if you don’t have a plan.”

Modany began by identifying the most appropriate resources to deal with the most urgent priority facing ITT: student financing.

“We have a group of people that deal with student financing and financial-aid-related matters,” Modany says. “So there was a natural selection of a couple individuals to take on that responsibility.”

Find your experts who are closest to the problem you’re dealing with and get them engaged in coming up with a solution. Get them away from worrying about any issues that can be put on hold.

“When you run into an issue, you’re able to say, ‘OK, here’s an issue. Here’s how we’re going to address it. These couple of people are going to be on it,’” Modany says. “We’ll look at the goals and objectives and make a modification to the extent that it’s appropriate for those people and their individual plan. Everyone else, you need to stay focused on your goals, your objectives and your priorities.”

Every job has a different set of competencies and you need to analyze an individual’s skill set to get that job done.

“You need to go through the competency checklist and say, ‘This person in this position has to be able to do A, B, C, D, E, F and G.’ When you’re evaluating or interviewing them, you make sure they can do those things,” he says.

The all-hands-on-deck mentality is rarely effective for dealing with problems, even urgent ones.

“When you go up and tell the pilot to come out and work on the wing, what do you think is going to happen to the plane?” Modany says. “You can’t keep it up in the air if you pull everybody off their duty. I need the pilots to stay. I need one of the (flight attendants) to stay and take care of the passengers. At the same time, I need to take a few people and have them go out and work on the wing while we keep the plane flying. Otherwise, it just can’t be done.”

When you’re talking to people working to solve your problem, keep the conversations focused on whatever aspect of the problem that person is dealing with.

“All we’re talking about is the things they are supposed to do and deliver on and looking to see where we’re at against our plan for each of these critical objectives and goals,” Modany says. “That keeps everybody focused.”

Lead the charge

The burden was on Modany to find a solution that would enable students to continue their education without hurting shareholder value.

“It was incumbent upon us to create alternative financing opportunities for our students so they could continue to have access to education,” Modany says.

When you sign up to be the CEO, you sign up to solve the problems that your company faces. You need to remain front and center throughout that effort.

“If anybody is under the impression that, as a CEO, once it’s all laid out, you just say, ‘Hey guys, go make it happen. Call me if you need me,’ you’re not going to get the result that you want,” Modany says. “The job takes a lot of work and effort. You have to be focused on the results. You have to use your plan. You have to help coach and mentor. You have to make suggestions and take actions when you need to. If I’m not engaged, I can’t help you do that.”

Modany says it’s a mistake to let your staff members create their own plans for how to solve a problem.

“Leadership is your ability to transfer the ownership of your idea as a leader to the individuals who are going to be responsible for executing it, such that they feel as if that idea is theirs,” Modany says. “If you have 20 people and everybody creates their own plan, how the heck am I going to be able to consolidate that into one individual plan that actually achieves the objectives of the organization? You can’t get there.”

Instead, you’re creating the plans and working with your people to take ownership of the plan.

“I have to sit down with you and say, ‘Look, you are responsible for this part of the business,’” Modany says. “Then I would say, ‘How should we measure our success?’ And you might say, ‘How about A, B and C?’ If I thought that was the right idea and that’s what I had, as the leader, I would say, ‘Wow, I love what you have here. Let’s go with that.’”

If your employee has an idea that you don’t think is the right way to go, you start asking questions and making suggestions.

“I’m responsible for making up the plan,” Modany says. “As the leader, I have to do that. But I have to get you to buy in to it. Otherwise, you’re not going to execute it. You’re not going to execute my plan. Very few people do that. There are employees out there who will say, ‘Look, tell me what you want me to do and I’ll go do it.’ Those are great guys to have around. But other people, you really need to get them to buy in to it.”

The key for you is to lead the effort in a collaborative tone and not as a dictator who is just barking out orders.

“Most people, if you sit down with them and say, ‘This is what we think makes sense. These are the initiatives and we want to take these actions to achieve these goals and I’ll help coach you through it as we go through the process,’ they’ll say, ‘Wow, this is helpful. There is no confusion as to how I’m going to be evaluated. As long as I put the ball in the hole, I’m in good shape,’” Modany says.

Examine your data

If the data had shown Modany that ITT wasn’t capable of footing the bill for student education, he would have had to come up with another option to get the company through the recession. It’s why he needed to keep a close watch on everyone’s progress in addressing the student financing problem.

“You set up a process to ensure that you regularly sit down with those individuals and you review on a frequency that makes sense,” Modany says. “It might be weekly. It might be monthly or it might be biweekly. You review with them. Where are you at? What is the number? What is it versus the target? What actions are you taking? What’s working? What’s not working?”

When you’re working to solve a problem, you need to have checkpoints along the way to see how you’re doing.

“We all need to know where we’re going and we need to have the directions to get there and then we need to make sure we’re checking those directions frequently so that we don’t get off track,” Modany says.

Make sure your people are clear about what the final result looks like and understand that this outcome is how they will be judged.

“I’m going to help you, coach you, train you and mentor you, and make sure you have the resources you need,” Modany says. “But at the end of the day, you have to get the job done. It’s going to be based upon the scoreboard that I hand you. That sheet has those goals and objectives. They all link together and they all come up together and there’s one document at the end with five or six organizational goals or objectives that we all want to achieve that we are defining as success.”

It shouldn’t take a crisis for you to clearly identify your expectations for your employees.

“A lot of it starts in the interview,” Modany says. “Before I hire you, I have to let you know what’s expected, what our culture is, how we operate and how we measure ourselves. Getting overly complicated is not very helpful for our employees. It doesn’t help them achieve their objectives and it just makes things overly complicated for the organization as a whole.”

By taking a clear and focused approach and helping his people to understand exactly what he expected, ITT was able to weather the storm. Shareholders saw their earnings per share increase from $5.18 in 2008 to $8.01 in 2009.

“We had an interim solution we put in place and then the team went to work on the objective of a long-term solution and we were able to come up with a longer-term solution that fits our needs,” Modany says.

Students also came out in good shape, as evidenced by an increase in enrollment from 65,620 in March 2009 to 84,555 in March 2010.

“The rest of the organization stayed focused on students and employers and we’ve had very solid, very good operating results while at the same time working through a mission-critical issue that could have been a big distraction but wasn’t,” Modany says.

How to reach: ITT Educational Services Inc., (800) 488-8324 or http://www.ittesi.com/