If you are looking for the employees of Kroff Inc., you might find them racing go karts or setting up an ambush to blast Co-Owner and President Fred Potthoff with paintballs. You also might find them creating innovative solutions that lead to profitable new divisions within the company.
For Potthoff, the extracurricular activities are an important part of how innovation gets done at Kroff, a $40 million company that provides water treatment chemicals and solutions to industry.
“We do a lot of things as a company to get closer to the employees,” says Potthoff. “There is a lot of interaction between [senior management] and everyone else in the company.”
Besides the obvious enjoyment of shooting co-workers with exploding paint pellets or putting your boss into the wall on turn four, the outings help everyone get to know their co-workers and managers a little better. This familiarity also helps break down the barriers when it comes to presenting new ideas. If a lower level employee has what he or she thinks is an innovative idea, it’s more likely to be shared if there’s an established comfort level with the people that will be looking at it.
Even the presentation of potentially monumental ideas comes in a somewhat informal setting – the standard managers’ meeting. Because the sales reps are comfortable with their managers, the usual process is the sales reps share their ideas with their manager, who in turn, presents it at the managers’ meeting.
The results of this process are impressive: Six differentcompanies have been created at Kroff, and the idea for each one came from an entrepreneurial employee.
“It starts with hiring the right people,” says Potthoff. “You let them come up with good ideas and then sometimes you take a risk financially.”
When Potthoff is looking at finding his next entrepreneurial employee, there are two key things he focuses on: competence and motivation.
“Motivation is the most important, and has about a 70 or 80 percent chance of predicting success, but also is the most difficult to determine,” he says. “You can make sure someone has the right degree and look at who they worked for and who they were trained by, and that’s one indicator of success. But if someone has that drive, they will work to get close to the customer to come up with something innovative. It’s a behavioral thing. You have to dig into their past and look at projects they were involved in that were successful.”
Once you have entrepreneurial people, you need to do your part to make things happen.
“The first thing is to put ego aside,” says Potthoff. “One of the things that used to drive me crazy at other organizations is that there was too much top-down management. Some senior manager decided the company needed to be in market X, would fill out the forms and make the call, but no one would actually come out to the field to see if it was a good idea or if we could make it work. If you are hiring talented people, you have to listen to them.
“Secondly, you have to be willing to take action and some risks. It’s one thing to listen to great ideas, but if you don’t act, employees will say, ‘Why bother?’ You have to be willing to act on something when there looks to be an opportunity.”
With risk, comes reward – for everyone
Innovation is a balancing act of risk and reward. The bigger the risk, the bigger the reward. Fred Potthoff, co-owner and president of Kroff Inc. says that it’s necessary to take risks in the market to be successful.
Thanks to Kroff’s culture that’s focused on making everyone an entrepreneur, there are a lot of good ideas that come from the employees who are closest to the market.
An employee takes a bit of reputation risk whenever he or she brings an idea forward, so there needs to be a reward for successful ideas. At Kroff, if someone comes up with a great idea, the company will form a new division around that idea and the person who brought it up gets to be in charge – essentially an instant promotion to general manager.
If you have hired entrepreneurial types, they’ll work hard at the lower levels to find that next great idea for you, knowing that they too will be rewarded with more responsibility. Combine that with an incentive-driven pay plan, and you have a recipe for a company where management benefits from a constant flow of revenue-generating proposals from ultra-motivated people that know the markets the best.
How to reach: Kroff Inc., www.kroff.com or (800) 466-3066
If you are sending your senior executives out into the parking lot to look for coins to help you meet this week’s payroll, your financial woes may be beyond repair. But for everyone else, there are a lot of ways that you could be working with your accounting firm to benefit your business.
The first step is to get beyond thinking of your accountant as someone who just helps you with taxes. Most accounting firms now offer a wide range of financial advisory services that, when properly utilized, can help you do anything from manage your cash flow better to meet the challenges of health care reform. But what might really grab your attention is that your firm can help you come out of the recession in sound financial condition, ready to take advantage of any opportunities that present themselves.
“Although the recession forced many companies to explore cost-saving and efficiency opportunities, in some instances, those companies may have simply deferred maintenance and now realize there are opportunities to invest and further elevate their operational efficiency and effectiveness,” says Steve Howe, Americas area managing partner, Ernst & Young. “They’ll be seeking resources that have proven experience in identifying and executing on these opportunities. Accounting firms will offer experiences and best practices to draw upon, having met similar challenges with other clients or market sectors.”
Even something as simple as getting all of your reporting done on time can mean the difference between success or failure. Why? Because your lenders want to know what’s going on.
“I think it puts them in the best possible light they can be in with their big creditors,” says Roger Hendren, Dallas office managing partner, McGladrey. “Along with that, an accounting firm can coach its clients to make sure they have the right financing in place in terms of length of debt agreement, the covenants that regulate the agreement so they’re positioned as well as they can be and they can have the right access to the credit they need so that when the recession goes away, they can take advantage of what should be a big upturn.”
When was the last time you took a look at your cost structure? Two years ago when the economy fell apart? It’s time to look at it again. A good firm can also help you create a more cost-efficient supply chain and identify costs that are not critical or essential to your core mission.
“The best way to advise the business is to understand the business,” says Randy Myeroff, president and CEO of Cleveland-based Cohen & Co. “You have to know what makes it tick; you have to know what the owners are trying to accomplish. You have to have some kind of base where people are trying to get to in order to be helpful.”
You might be happy sitting in the status quo, standing pat until it looks safe to come out again. But your competition is already on the move, so you better start talking to your accounting firm to find out what your options are for the future.
“Looking forward, based on the last 90 days, our business has really been ramping up, and I see it a lot more over the next 18 months and part of it is tax-related,” Hendren says. “There’s kind of a pent-up demand for acquisitions, which will require us to be more hands-on and active.”
CEOs are sensing the worst is over and are looking to make some strategic moves while prices are at historic lows.
“We’re hearing from many of our clients the desire to reposition their companies through varying merger and acquisition transactions,” Howe says. “This includes everything from carving out noncore businesses to growing through transactions. Many are looking for ways to leverage opportunities to expand their product lines and markets as well as their geographic reach.”
When you have a solid relationship with your accounting firm, it understands your business and you get a better idea of how it can help you with something other than your tax return. In fact, many firms have seen growth in areas that in years past, weren’t associated with accounting firms at all.
“Our experience has been that in some of our competency areas specifically strategy and operations, technology integration and human capital consulting our clients are using us more,” says Blaine Nelson, managing partner for North Texas, Arkansas and Oklahoma for Deloitte LLP. “In fact, those practices have been growing even during these tough economic times. In some areas of tax services mostly in the international, multistate or transfer pricing arenas we’re finding an increase in demand for our competencies, and many companies have been looking for more consulting around enterprise risk management, as well.”Finding a new partner
If you ask your current accounting partner about something other than taxes and his or her eyes glaze over or if he or she doesn’t bother to return your calls in a timely manner, it may be time to start a new relationship.
“You should change any time you think there’s a mismatch,” Myeroff says. “Even though there is overlap, firms are in business to do different things. There’s a market that doesn’t need an advocate but just needs us to get stuff done for them at an affordable price. There are larger firms that talk about being advocates and advisers, but if you dig deeper, there are people in those firms who are good, but the firm’s strategy or overall model might be based on something else.”
Just like you might always be looking to find a better deal on office supplies, you need to be open to the idea of upgrading your accounting firm. But be careful about how you go about it.
“Since business itself is a dynamic activity and change is constant, companies should always be open to either improving or upgrading their relationships,” Nelson says. “Whether they’re considering upgrading, changing or improving the relationships they have either with a new accounting firm that can offer a greater depth and breadth of services or a new law firm, banker or insurance provider, companies should always be examining the benefits of increasing the variety of competencies that new providers can bring them.”
The other thing to take into consideration is the timing of any move you make.
“The real strong advice to anybody who is thinking about switching: Do it early in your year,” Hendren says. “You don’t want to wait until November or December, because you need to make sure the firm has enough time to get up to speed, get your work scheduled, understand your needs, and you don’t want to rush into all of that between Thanksgiving and Christmas.”
Make sure all fee arrangements are clear and understood by both parties at the beginning of the relationship, and decide how much contact you are comfortable with. Do you prefer a formal quarterly meeting or informal contact several times a week? Work out the details in advance and don’t base your decision on price alone.
“I would caution companies to look out for the ‘too good to be true’ deal of low fees that is tempting short term but is not based on an in-depth knowledge of the company and its true risks and value drivers,” Howe says.
Some of the inspiration for Umberto Fedeli’s many contributions to the community came from a letter someone once sent him.
The letter said, “In life, the secret to happiness is to love, and the essence of love is to serve.”
Fedeli has taken that message to heart and works to give back to his community both on a personal level and in his position as president and CEO of The Fedeli Group, one of the largest privately held insurance brokerage firms in Ohio.
The reasons for getting involved aren’t nearly as important as the end results.
“Regardless of whether you are doing something with a more charitable agenda or something with more of a public relations and community involvement agenda, it’s OK to do both,” Fedeli says. “If you want credit from God, then that’s charitable. If you want credit from the community for being a good corporate citizen, that’s not necessarily bad, you just have to understand your purpose.”
You need to understand why you are getting involved, and you have to believe in the cause and that you can make a difference. Fedeli says lending leadership support to local organizations is as important as giving financial support.
“The better the leadership, the more success the entity will have,” he says. “CEOs have the organization skills, the credibility and the status within the community to talk to other CEOs or entrepreneurs. So often, those at the charity level do not have those relationships or access to those people.”
By providing leadership, you can help the organization make the contacts it needs to be more efficient and maximize the effect it has on the community.
“I really believe every company should be involved with some level of community or charitable participation,” Fedeli says. “How involved they are or at what level is up to them to decide. If every business in the state got involved, the compounding and exponential effect of that would be incredible. People get involved by seeing others getting involved.
“If everyone got involved, the world would be a better place.”
HOW TO REACH: The Fedeli Group, www.thefedeligroup.com
What started as a phone call and lunch for Michael Horvitz has culminated in a $258 million construction project at the Cleveland Museum of Art.
“I always loved the museum and considered it a great museum and one of Greater Cleveland’s real world-class assets,” Horvitz says.
His relationship with the institution changed in 1992 when he was appointed to the museum’s board after having lunch with the board president. By 1996, Horvitz was elected president, and in 2001, he was elected to the newly created position of chairman. He’s provided financial and intellectual leadership and helped keep the museum on course during its ongoing $258 million renovation and expansion project.
“Michael Horvitz has played an instrumental indeed, one could say indispensable role in shaping the course of the Cleveland Museum of Art over the past decade and more,” says Timothy Rub, the museum’s director. “As president and then chairman of the board of trustees, he has been deeply involved in all of the key decisions that have been made during what can be described, without exaggeration, as one of the most critically important periods in the history of this institution.
“Throughout this process, he has been a thoughtful and passionate advocate both for change whenever and wherever this was needed and for the ongoing commitment to excellence that has created the international reputation that the Cleveland Museum of Art enjoys today.”
Horvitz shrugs off any praise for his community service because he sees it as his civic duty.
“I came to the museum not so much from a love of art though I do love it but from a sense of civic importance,” Horvitz says.
“No matter where you live, each of us has a responsibility to help the community that has given us the opportunities we all have had. We all have an obligation to improve the social and cultural life of the community in any way you can. There are always people more fortunate than you and less fortunate than you, but we all have an obligation.”
Giving back to the community isn’t a one-sided affair. The contributor gets something out of it, too.
“It’s very satisfying,” Horvitz says. “What you get out of it depends on what you put in to it. I think writing a big check can be satisfying in a certain way and has some ego gratification, but getting involved and spending time and effort to help them succeed is a different level of satisfaction.”
Horvitz says the the way to begin is to get involved with something you believe in.
“The starting point is to find something that you are passionate about or think you might become passionate about,” he says. “Do something you feel you can make a difference in. There is no shortage of great causes and organizations, and they all need people.”
One way to start is to get an organization’s annual report, find out who’s on the board of directors and start making contacts to find out how you can help.
While financial support is always welcome, many organizations are short on either leadership or those who have connections within the community to get things done.
“A lot really need the guidance the CEO or businessperson can give them,” Horvitz says. “You do have to have a slightly different mind-set when you work for a nonprofit. It’s easy for a businessperson to try to evaluate something on whether it makes money, but nonprofits are more mission-driven than profit-driven.
“You have to think about the mission and how to organize things.”
Horvitz, who is Of Counsel with the law firm of Jones Day, says the organizational skills CEOs bring are critical to nonprofits, and time has to be made for giving back to the community.
“I understand the pressure today’s CEOs are under,” he says. “There is huge pressure to make the business perform, to make it responsive to the needs of shareholders and the corporation. Clearly, that’s their first priority, but some CEOs fall into the trap of almost using those pressures as an excuse for not getting involved in their own community.
“We all have an obligation to do something. There’s room in everybody’s schedule for nonprofits. The pressure of business is great, and it can easily make you put your civic responsibilities aside. Don’t let that happen.”
Fred Krum, airport director for Akron-Canton Airport, makes the transformation sound easy.
“It really starts with having a vision, assembling the right team of people to do it, then executing,” Krum says.
His vision was to position the airport as the second airport in the region. The vision wasn’t written down, turned into a plaque and hung on the wall. Instead, it became a mantra of sorts.
“I like to describe it as an attitude and an outlook,” Krum says. “It is verbally communicated, and we believe in it. We communicate it every chance we get, whether it is internally or externally.
“I’ve always believed in the power of a good idea. If an idea is sound, and you keep pounding away, bingo, you will attract people to it.”
One of the major turning points in getting people to buy into his vision was when AirTran Airways started flying out of the airport. Fares to places such as New York that were hundreds of dollars less than what people were used to seeing drove passenger traffic, making people into believers and building momentum.
“Momentum in any business is critical,” Krum says. “It makes doing the next thing that much easier. It doesn’t keep rolling along by itself. There are always speed bumps, and you have to make that next lunge.
“It makes the next step easier, but you will eventually plateau. Then it’s just as hard as it ever was.”
For the Akron-Canton Airport, Sept. 11 was one of those speed bumps. To power through those difficult times, Krum says a CEO has to always be a believer.
“I’m not paid to give up,” he says. “What fun would that be? Just because a job gets hard doesn’t mean you give up. My job is to believe you can do it, even though all conventional wisdom says you can’t.”
Krum also had to encourage risk-taking to get people to help move the organization forward with new ideas.
“People fear failure,” he says. “I got rid of the fear. I taught them that if they fail, I’m the one that will be the fall guy. No one will be left hanging out there on their own.
“It’s totally worthless to blame anyone when something goes wrong. You have to develop a risk-taker mentality. The only guarantees are if you do nothing, you will get nothing. Every project, whether it is capital facilities or whatever, has people looking for guarantees. If you don’t do it, it won’t happen. If you do it, you at least have a chance. If you are not making some mistakes, you are not doing enough risk-taking.”
Krum says that with competition so fierce, you always have to look for ways to stay ahead. He says they do it at the airport by constantly working with the airlines to come up with creative ways to keep and grow services.
“It’s what I call solving the problem at the next level,” he says. “It’s looking ahead. What are the problems in a given market? For us, the airlines’ problem is our problem. I think more than any other airport in the country, we are the marketing arm of the airlines. If we do not have good airlines with good service and low fares, people are not going to come from Avon Lake just to have a Subway sandwich in the airport.
“We work on solving not just our problems but their problems. That’s the area where we are as good as anybody and we really work on those relationships.”
Krum says having a clear idea of what you want to accomplish and staying with it is the key to long-term success.
“It all comes back to a basic premise and pounding away on it and not stopping,” he says. “If you believe it’s a good idea, then keep pounding away. People that fail are making things too complex.”
HOW TO REACH: Akron-Canton Airport, www.akroncantonairport.com
Steven Demetriou, chairman and CEO of Aleris International, is changing that.
Aleris International is a manufacturer of rolled aluminum products, and a global leader in aluminum recycling and the production of specification alloy. Aleris is also a leading recycler of zinc and a manufacturer of value-added zinc products that include zinc oxide, zinc dust and zinc metal.
The company, located in Beachwood, was formed from a 2004 merger between Commonwealth and IMCO. Demetriou wants the company to have a philosophy based on high performance, motivation and recognition.
Aleris went from a net loss of $14.9 million in 2004 to a net income of $74.3 million last year.
The company’s progress has been the result of Demetriou’s focus on developing a strong management team coupled with a dedicated, highly capable global work force committed to the company’s core values. These values include emphasizing data-driven decision-making, solving today’s problems today and the relentless pursuit of productivity improvement.
While growth has been a major focus in 2005, Demetriou has also emphasized a company-wide implementation of Six Sigma designed to drive data-rich analysis of company operations while transforming the work environment and culture so that improvements are sustainable.
The company’s accomplishments in 2005 not only generated immediate benefits, they strengthened the company’s potential for further growth and sustainable earnings. Aleris is already on the move. In the first quarter of 2006, the company announced its intent to acquire the $1.8 billion business of Corus Group, a UK-based global metals company, which would increase Aleris’ revenue to around $5 billion and give it approximately 8,800 employees.
How to reach: Aleris International, (216) 910-3400 or www.aleris.com
Originally intended for use in schools, response technology gives students the ability to immediately respond to questions posed by the teacher and for the teacher to see the results. Broderick saw application beyond schools, but also knew the technology needed to be made affordable.
His vision was to develop and market group response products that would positively affect education and productivity in significant and measurable ways.
The company used several unique approaches to make this vision a reality:
- Compatibility with existing software. The company’s software integrates with Microsoft PowerPoint, so while competitors offer stand-alone proprietary software, Turning Technologies’ software adds an easy-to-use toolbar right into Power Point that enables interactive communication with a class or audience. This eliminates a learning curve, allowing users to be up and running in minutes with minimal instruction.
- Better hardware. Turning Technologies’ hardware replaces bulky, delicate and expensive keypad devices with a simple yet durable device that is the shape and weight of a credit card-sized calculator. Range and communication speed were also increased.
- Better affordability. The company also broke the affordability barrier. The current list price on the K-12 classroom system for 32 students is $1,483. Before Turning Technologies’ system, a competitive system sold for $8,000 to $10,000.
Turning Technologies’ unique approach and mass-market pricing has allowed it to access new channels of distribution. Large educational publishers, technology companies and other distributors have begun distributing the product. Its business is nationwide and is starting to be international as well, with revenue from Canada, Mexico, UK, France, Belgium, Australia, New Zealand and the Middle East.
How to reach: Turning Technologies, (330) 746-3015 or www.turningtechnologies.com
It can be hard to establish, hard to maintain and sometimes even hard to define.
But not for John Kahl.
The CEO of Henkel Consumer Adhesives Inc., a division of Dsseldorf, Germany-based Henkel Group, knows his company culture, understands how it ties into the success of the organization and spends a lot of time nurturing it. In fact, the culture has grown beyond the walls of the company and starts a mile from its Avon headquarters.
At a nondescript four-way stop where Chester and Nagel roads intersect, the eastern part of Chester Road becomes Just Imagine Drive. Down that road, you’ll find a few small businesses, some old houses and, eventually, Henkel’s facility. It’s the only road that leads to the company, and Kahl wanted employees to start thinking differently before they even got to work.
“32150 Just Imagine Drive sounds a whole lot different than 32150 Chester Road,” says Kahl. “Our culture starts with turning down the road and changing the outlook of the person coming down the road and wondering what they are going to find here.”
What they’ll find is a company filled with employees who have as much knowledge about Henkel’s day-to-day business as some chief operating officers. They’ll find a Henkel cheer to close the regular Thursday meeting and employees who are called partners.
It’s all about putting them in a mindset to be empowered to make a difference at the company, which makes tape, adhesives and home products. Kahl wants his employees to be the growth engine that drives the company forward.
“Our culture is the underlying fabric of the whole business,” says Kahl. “It’s what we think defines the organization and makes us different than the rest of the world.”
The culture is so different that Kahl says some people think it’s more like a cult a label he is quick to avoid.
“A cult is a strong word and not something I would want associated with our business,” says Kahl. “It tends to have a negative connotation. But the fact that people realize that we are a very close-knit group and as much a family as a business, I think that is a positive.”
There’s a large rock near the entrance to Henkel’s facility that displays the statement, “People make the difference.” That statement is core to everything the company does. By creating a culture where employees are happy, informed and empowered, Henkel can react faster and be more innovative than the competition.
“If we have the right people, then we can win this game through our cultural norm, not strictly on products and prices and the hard sciences of business,” says Kahl. “We’re talking about the soft side of it. We think it can make a big difference from that perspective.”
Walk through the halls of Henkel, and you are greeted by smiles and hellos with enough enthusiasm that you’ll feel like a close friend who’s been away too long.
“I’ve had customers and visitors say that there is something about this place that you feel when you walk in the door,” says Kahl. “One lady left the company for various reasons but came back within a year. She said nobody smiled or said good morning at her new company. Here, first thing in the door, people are smiling at you and saying good morning. You are part of the team. It’s really a family.”
Kahl spent extra money to create a nicely landscaped area for the employees to enjoy, including a patio in the back of the building that is mostly surrounded by woods. Deer and wild turkeys are regular visitors to the grounds.
In a pleasant environment, people tend to be happier and work becomes less stressful, Kahl says.
“It creates an environment of, ‘I want to get up and come to work. I’m doing something here that’s meaningful, I like who I work with and I’m not dragging ass to get over here,’” he says. “For some people (at other companies), they don’t enjoy their jobs. They put in their 8 to 5 or 9 to 5 and they’re out.
“We have people who are substantially more dedicated to us our business because they like what they are doing and who they are doing it with. They feel that there is a purpose way beyond making money.”
Kahl generates that purpose in his employees by sharing detailed information about the company.
The traditional business culture is one of secrecy, in which employees know little, if anything, about the business. If information is shared, it’s very broad-based numbers with little context and even less understanding as to how each employee affects that number.
Kahl wants to make sure everyone knows as much as they need and want to know.
“I would say we probably overdo it on some communication, but I would rather do that than not have enough of it,” says Kahl, who took over as CEO from his father, Jack, in 2000. “This goes way back to early in the founding of the business in the ’70s, when most business owners were telling my father and the management team that it’s their company and play it close to the vest. Don’t tell the employees what’s going on with the profits because if you are making more money, people will want more money.”
Both Kahls subscribe to a philosophy that came from Sam Walton: Tell people what you want to do and why, and you’ll get so much more out of the world than if you were keeping it all to yourself.
A regular Thursday morning meeting was instituted to make sure people know what is going on. It’s an hour-and-a-half of talking about what the company is doing, what’s happening with customers, the progress of new product development, delivery issues and community events.
“If you’re a salesman and you are traveling here and there and say you are responsible for Ace Hardware, when you come to the Thursday morning meeting, you get exposed to what’s going on in marketing,” says Kahl. “You get exposed not only to the products for Ace Hardware but also exposed to what’s happening in our stationery business or our housewares business.
“You are going to hear about what’s going on in the world of freight and how freight costs went ballistic with the cost of gas. You are going to hear how this time of year shipping containers are sparse because there are more goods coming in from China than there are containers to bring them in.
“These are all things you learn as an individual in this company that most likely you wouldn’t be exposed to in another organization because there isn’t a forum to do so.”
Anybody can attend the meetings, which run from 7:30 to 9 a.m.
“When I look out, I’ll see maybe 90 people,” says Kahl. “I see members of customer service. I see some brand new faces and finance and salespeople and some who have just started who have taken it upon themselves to come and learn because they realize to move faster, knowing more about the business will help them achieve more and make the best decisions.”
Kahl acknowledges there are risks with sharing such detailed information with everyone.
“We’re sharing strategy and handing out issues both pro and con about customers and products,” he says. “If we have a problem, we’re letting everyone know. A traditional company would say, ‘Don’t you dare let them know we’re struggling in this area with this customer or that supplier because people will get frightened.’ So we talk a lot about that inside the company. You have the luxury of knowing what’s going on in the business, but you also have to deal with the difficulties.”
Communication is emphasized at every level and in as many ways as practical. An e-mail newsletter keeps everyone informed about new developments and accomplishments, and a printed newsletter has a different theme with each issue. For example, the December issue focused on philanthropy and corporate giving and how Henkel benefits from its charitable programs.
Kahl also has a Monday morning meeting with his operating team to talk about data from the previous week.
“We get the team together and discuss what is going well and not so well,” says Kahl. “Who is going to do what and when? We chose Monday because it gives us the whole week to get things done rather than on Thursday or Friday, where if you don’t get through it, it spills into the weekend and loses its intensity.
“We come back on Thursday (with the employees) with a little broader picture where we are more communicating direction and not so much nuts and bolts.”
Besides the written and verbal communications, there is also a year-end event called Duck Challenge Day.
“We get a lot of notoriety from this because there’s always some crazy challenge associated with it,” says Kahl.
How crazy? If the company hits its goals for the year, you might find Kahl wearing a dress made from the company’s Duck Tape brand of duct tape, or you might find him face-first in a tub of 125 gallons of hair gel. The stunts are all part of breaking down barriers between management and employees.
“It humanizes us as individuals and shows that we like to have fun like everyone else and can make a little fun of ourselves as well,” says Kahl.
“The idea of the event is to recognize and reward people for the previous year’s achievements and lay out next year’s goals. We can do that in a staged business way where we put on our suits and communicate what we did and here are the goals, or we can do it in a fun way, in a unique and memorable fashion, and make it an entertainment event.
“It helps people remember it to a certain degree, builds tremendous team spirit and, most importantly, it humanizes myself and every member of the management team to the point where there are no barriers between myself and the guy who runs a piece of machinery on the factory floor.”
All the fun and focus on team spirit has a purpose. With a work force that relates to management and fully understands the business, Henkel can react quicker and make decisions that are based on the organization’s broader goals.
“It helps us because these individuals are now educated to make better decisions,” says Kahl. “They understand the decisions are within a framework and they won’t make a decision over here and not know that it will have an impact over there in some way. Or when they make a decision, they know there needs to be a communication to other teammates.
“I think it creates a more well-rounded, almost general-manager type of individual rather than having individuals as a silo in a department.”
Besides being given access to the business information in general, new employees are taught how that information applies to each area of the company so they better understand the context.
“When you come in here as a new hire, in the first 90 days, there is a passport program you have to go through,” says Kahl. “You basically have to meet people in every department of the company finance, IT, sales, marketing, operations and legal. It helps you get an understanding of the business. You have 90 days to go around and meet with them and understand how they do their job and how it connects.”
The company is in the process of instituting a similar program for managers.
“People get the information and understand it and have done an unbelievable job in their environment driving their customer or product category and know the impact they have on other people, but they have not had the formal training necessary for managing other people,” says Kahl.
Henkel is using the same passport concept to create checkpoints that deal with management issues such as performance reviews, constructive criticism, interviewing and hiring. It will use both internal resources, such as mentorship programs, and external programs, such as Dale Carnegie leadership training.
“People make the difference, and this is one way through our company that we can help them do better,” says Kahl. “As companies get larger, I think one of the things you see happening is things get formalized. When we started, everybody knew everybody else and knew what everybody was doing.
“Now there’s 650 of us, and as you develop that group of people, you have to have a lot more structure, processes and procedures in order to make sure you are doing the right things around training and making sure we are helping people make the best decisions by giving them the information needed.”
The goal of all this empowerment is for the employees to make a difference by allowing the company to react faster than the competition and do it in a manner that is consistent with the organization’s goals.
“We are not in an environment where everyone is asking permission or waiting for authorization,” says Kahl. “People realize that they know what we are trying to do ... and have a broad perspective of the business. They can make a decision. They can accept the risk factor and don’t have to constantly wait on two, three or four people at the top of the company to pull the trigger.
“So we created a tremendous amount of empowerment, and I know that word gets overused quite a bit, but if you went out and talked to the troops out here, they will tell you they feel authorized and empowered to run their business. They are the CEOs of their department or product category or of their customers and they can make decisions.”
Empowered employees can make the organization nimble, but you still have to guard against mistakes of inexperience or someone failing to act.
“There is a giant sense of accountability that comes with being empowered,” says Kahl. “If you are going to be accountable and rewarded for making more good decisions than poor decisions, then you want to know what’s going on, and that’s why we tell people as much as we do.
“It’s trust, but verify. We have a tremendous information technology system that can measure just about anything and everything that we want, so the reporting I get every Monday morning gives me a view of the business and quickly brings problems to the forefront. If someone has made a poor decision or no decision, you can generally see that. It’s not Big Brother looking over your shoulder per se, but we put in good controls.”
The technology allows Kahl to push the decision-making down closer to the customer without losing control of the organization.
“We put in the necessary system for measurement, put in the necessary communication tools and we started to let go of the reigns,” says Kahl. “That’s kind of how it works with new hires now. The experienced folks are riding on their own, doing their thing. The new folks have to go through a learning curve, and they may come up the learning curve over a year or so before we turn them loose.
“Even if it’s a fairly senior person we bring in, we want to make sure they are not overwhelmed. They have got all this quality and quantity and plethora of information providing them help to do their job better. We want to make sure they grasp and understand it before we turn them loose.
“That goes along at a pace that a lot of companies struggle with, and I think one of the things we’re renowned for is our pace. People say, ‘We call you because we know we’ll get a response before sundown, while some other guys take a week or 10 days to get it done.’”
An important part of Henkel’s growth is based on creating innovative products, or adding innovative twists to existing ones.
But encouraging employee innovation in a company means accepting risks and accepting failure.
“Failure isn’t a bad thing,” says Kahl. “Failure is a learning opportunity. I’m not interested in making the same mistake over and over again, but we don’t fire the first guy that makes a mistake. That’s not the way we operate.
“Otherwise, people would be afraid to act on ideas, and we’d be right back to having three or four guys make all the decisions, which makes us slow, lethargic and bureaucratic. We don’t want that. I’d rather have some mistakes of aggression than sin by being slow. The world won’t permit it. It’s moving too fast.”
With the culture Kahl has created, employees are reacting quickly to opportunities and making decisions based on the goals of the organization. Everything the company does ultimately hinges on its culture.
“The culture is the underriding bedrock of what we built the rest on,” says Kahl. “Any talk about growth or innovation builds off that bedrock. Our culture throughout doesn’t change.”
Henkel Consumer Adhesives last reported sales of $286 million in 2002. Kahl says the company no longer reveals sales numbers separately from Henkel Group, but says his goal is to generate $1 billion in sales for the parent unit and that he is currently more than halfway there. If he’s to get there, he knows it will be the people that will make the difference.
“I tell our people our strategy is going to change, our tactics are going to change, our products are going to change and even some of our people are going to change over time. It’s inevitable,” says Kahl. “What isn’t changing and hasn’t changed since we’ve formed the company are these core values and this cultural bedrock about how we want to go about doing business.”
How to reach: www.henkelca.com
Dustan McCoy, chairman and CEO, Brunswick Corp.
“The first thing we need to do is take the complexity out of their business in unbelievable amounts.”
Dustan McCoy, chairman and CEO, Brunswick Corp.
“It can be really intimidating to operate a boat. If you get into a certain size boat and hit the marina slip or dock, a 10-ton boat can do a lot of damage.”
Dustan McCoy, chairman and CEO, Brunswick Corp.
If you’ve ever been around boats, you know that they can be a lot of fun. If you’ve ever owned a boat, you also know that they require a lot of effort and money to maintain.
For many people, the hassle, effort and cost associated with boating ends up not being worth the limited time they spend on the water, so they leave the recreational activity behind.
Dustan McCoy wants to put a stop to that.
“We need to give the consumer a product and experience in using the product that they have never had in this industry,” says McCoy, chairman and CEO of Brunswick Corp. “Our products are fundamentally, across the industry, of lower quality than consumers expect in expensive durables like boats.”
The problems are many. Boats are assembled as more of a collection of available parts rather than as an engineered product, making it difficult to offer warranties and consistent service. Dealers are selling competing brands out of the same showroom and are often left to track down service issues with the parts manufacturers rather than with the boat manufacturer. The end result is frustrated customers and a high churn rate for the industry.
McCoy has a plan to solve all these problems and place Brunswick squarely at the top of the marine industry. It involves rethinking the way everything is done in the industry. It means building a product oriented to what the consumer wants in a way that dealers can more easily maintain, and it means changing the whole manufacturer-dealer relationship.
It means reinventing an industry. Here’s how McCoy is going to do it.
Maneuvering into position
Brunswick is well-known in the bowling and billiards industry, but its marine division accounted for about 88 percent of its $5.2 billion in sales in 2004. Marine brands such as Sea Ray, Bayliner, Mercury and Boston Whaler were already in hand, but there were gaps in the portfolio.
“The first decision we made was we needed a full suite of brands and products leading brands and products so we could go to any dealer anywhere in the U.S., Europe, Asia or South America and say that we can provide you, as a single OEM (original equipment manufacturer), the best brands and best products to meet any consumer need in the market.”
The company made acquisitions to fill gaps in product and price point to reach this goal. In 2004, for example, it bought Crestliner, Lund and Lowe aluminum boat companies to provide Brunswick the ability to offer products in all major aluminum boat segments. It also acquired the Sea Pro, Sea Boss and Palmetto saltwater fishing boat brands, which gives Brunswick an array of products in the offshore saltwater fishing category.
“We now have 19 boat brands,” says McCoy. “Today, we can provide any dealer a boat, from a 10-foot aluminum boat you would put on top of your car to a 100-foot yacht that you could take a king or queen on.”
The company also picked up companies that will help it build better products. For example, it acquired the remaining 30 percent of Navman NZ Limited, which will help Brunswick fully integrate electronics and global positioning systems into its products. It’s this integration that’s key to winning both consumers and dealers.
“We have begun to make a fully integrated, sophisticated vessel,” says McCoy. “Every piece works in support of another. In the past, we didn’t engineer systems on the boat. Great auto and aircraft manufacturers, they engineer whole systems.”
Brunswick is moving away from building a boat from the parts available on the market to engineering every system so the products are of better quality.
“When you do that, you significantly increase the level of quality and usability of the product,” says McCoy.
By acquiring key electronics suppliers and focusing on systems engineering, Brunswick can start integrating the entire electronics system on a boat, allowing different components to communicate. A larger cruising boat, for instance, might have a stereo, DVD and two televisions. In the past, this would have meant four separate remote controls.
“If you reduce that to one controller, as well as allowing the user to use the television in the master suite to look at a chart system, check on the instruments, watch TV or get on the Internet, then you are getting to the point of delivering the same level of performance as they would expect in something they pay a lot of money for,” says McCoy.
Using systems engineering to improve quality also allows Brunswick to start offering an end-to-end warranty, which helps entice consumers to buy a Brunswick product. It also gives it more control over its parts system, because it is specifying every part rather than relying on what’s currently available on the market.
“It allows the dealer to go online and find any part for any boat, and they can actually order it and know that it will fix the boat that they have,” says McCoy. “If we then begin to give same- or next-day service, we have now created an entirely different customer experience.
“If you are doing great systems engineering, everything in the boat is built in an integrated fashion and everything is spec’d and designed properly, then what you have really done is created a platform from which wonderful designs flow. Once the fundamentals are down, it creates the ability and the time to take the thing to the next level.”
The dealer experience
Brunswick is a manufacturer. Consumers buy boats from boat dealers, which is a fragmented part of the industry providing varying levels of customer service. Part of the problem is the way the entire industry is set up.
“If you look at most boat dealers, they are relatively low-volume activities,” says McCoy. “They generally carry several brands, and the brands they carry are not from the same OEM. They are dealing with maybe four or five OEMs. Now think about the different models they have from each, which are not integrated. They can’t go online to one source and order parts.
“Seven warranty claims means dealing with seven different manufacturers, and even if they are on a computer system, it means going to seven different sites or portals. You begin to see the horrible complexity they have to live with.”
It’s a complexity that McCoy that Brunswick is aiming to eliminate.
“The first thing we need to do is take the complexity out of their business in unbelievable amounts,” says McCoy.
The integrated-products initiative means a specific part number from Brunswick that Brunswick will stock and distribute, eliminating the guesswork on repairs. A distribution system has been put in place to deliver the parts either the same or next day to help the dealer put the customer back on the water as soon as possible, increasing satisfaction with both the dealer and the product.
In return, McCoy wants dealers to change the way they sell products.
“We believe dealers should be exclusive in the brands they sell,” says McCoy. “It makes their life easier, and through a reduction in complexity, they become more profitable.”
That’s where the brand portfolio comes into play. Brunswick can now go to a dealer and offer it an array of products similar to or better than any combination of products or price points it may already be offering.
Dealers will be given protected areas so they are not competing against the same brands and will be offered longer-term dealer agreements so they can earn certifications in Brunswick’s sales and service programs. Currently, most dealers operate on one-year agreements with their OEMs and always have the fear of losing a brand. McCoy wants to eliminate that fear by rewarding dealers with better agreements.
“In order for us to really help the dealer, there has to be a whole suite of other products and services we bring to the dealer to make them more profitable,” says McCoy. “It means financial services for the dealers, which varies from the ability to borrow money so they can buy boats for us or ensure consumers can get the retail financing, extended warranties or the insurance they need to complete the purchase.”
To make sure these services are available, Brunswick acquired Marine Innovations, a provider of extended warranties for boaters, and continued its promotion of Brunswick Acceptance Co., a joint venture that provides wholesale financing to its marine dealers.
Even with the right brands and a level of services not offered by anyone else, changing the dealer-manufacturer relationship across the industry is a slow process.
“A dealer and his or her sales rep from a brand may have been together for decades,” says McCoy. “They may have had an association with a brand for decades.”
Convincing dealers to make the change means telling them what Brunswick is doing and delivering on promises.
“I don’t think we’ll have a problem attracting the best and brightest dealers,” says McCoy. “We’ll describe what we’re doing, and as more of them see the execution and understand the transformation that will occur and that we will be the leader, we have been finding that they contact us.”
McCoy also wants to change the way consumers perceive the boating industry.
“We need to help dealers enhance consumers’ experience in learning to use the product,” says McCoy. “It can be really intimidating to operate a boat. If you get into a certain size boat and hit the marina slip or dock, a 10-ton boat can do a lot of damage. If you are out on Lake Michigan, you might go out and not see land for three hours. There’s some intimidation that goes with that.
“Unless you help them learn to use the navigation and charting systems, they can feel lost. We need to help people through that. We need to help people understand what type of boat to buy from someone they can trust and that they will know it will work. Boating is not an activity like driving, where everyone is out doing it. We need great dealers who can provide that sense of community, warmth and comfort to permit people to get into the activity.”
It will take the effort of the entire boating industry to fully achieve this. That’s why Brunswick is supporting industry efforts to promote boating.
“It’s another way to reach consumers in a nonbranded way that will bring consumers into boating,” says McCoy. “They will not all come to us, but it’s important, and the industry needs to be doing it.
“We need to be growing the public’s perception and understanding of boating so we can grow the industry at faster rates. My children and I, our best days have been spent together on a boat. Wonderful things happen on the water. Families actually talk to one another. There’s a lot of camaraderie. There’s teaching and communication going on throughout the family. As difficult as it is to boat, that’s why it does so well. Those that become part of it become captivated by it and never want to leave it.”
HOW TO REACH: www.brunswick.com
The restaurant industry, like the retail industry in general, has huge turnover rates in staff, but AppleAmerican has found ways to reduce that.
The industry turnover average is 125 percent; at AppleAmerican, it’s 63 percent.
“Our company was founded with family ideals, and I think what probably separates us from the rest is our culture,” says Melissa Joyce, senior HR specialist at AppleAmerican.
“We have something called a gold card that is the size of a credit card. It has our mission and vision on it, and also has a statement of how we treat our customers. Everyone has to carry one. It really drives everything we do.”
The card reinforces the values the company wants to emphasize, not only with customers but also with vendors and other employees. If something occurs that violates the tenets, employees can pull out the card and challenge a manager that things aren’t being done by the rules of corporation.
“It builds cohesiveness in our groups,” says Joyce. “It really reinforces what we are.”
The rules also focus on the commitment to community.
AppleAmerican’s restaurants are constantly raising money for local charities that many of its employees benefit from or support on their own.
Managers are recruited locally and aren’t assigned to a restaurant that’s more than 45 minute from his or her home.
This commitment to solid fundamentals and the communities in which it operates has helped AppleAmerican attract and retain the talent it needs to succeed and grow.
“We want managers in the business to be from the community and involved in the community and be a part of the whole thing,” says Joyce. “We don’t bring in sharpshooters from Boston to come in and run a restaurant in Northeast Ohio. We want to grow our talent internally.
“We work on building our reputation wherever we go and really partner with the community. It goes beyond just the food on the table.”
HOW TO REACH: AppleAmerican, http://www.appleamerican.com