Tommy Bagwell has tried to replace himself as CEO several times over the past 10 years. But despite his efforts, today he remains CEO — just as he has been for the past 34 years — of American Proteins Inc., an animal byproduct rendering company.
“I’m right now functioning as a super overly involved chairman of the board or a president who has retained the CEO title, because if I don’t, it seems like every time I’ve decided that I might let go and hire someone at that level, the first thing they do is try to get rid of me,” says Bagwell.
Although some might consider Bagwell too picky in his search for a successor, he wants to ensure that he does right by the company that his father, Leland Bagwell, started in 1949. So today, Bagwell is no longer involved in the day-to-day operations of American Proteins, but he still controls the direction of the company he has helped build since he was 14 years old.
When Bagwell became CEO in 1972 after the death of his father, the company had about $10 million in annual sales and about 50 employees. Today, American Proteins is a $250 million company with 650 employees.
Bagwell credits his success to three key business philosophies.
Hire talent that fits your culture
One of the most important things that Bagwell learned is that you can’t be everything to everyone, and you can’t know every single thing that is going on in the company, no matter how hard you try.
“You can’t know everything, so you better get good people,” says Bagwell. “Then you need to know and learn how to manage them.”
But just because an employee is intelligent and talented doesn’t mean he or she will be a good fit for your organization. Personality and beliefs play a large role in whether a person will succeed.
After hiring a potential new CEO who was qualified for the job but who clashed with the company’s culture, Bagwell now uses personality profiling and stresses the importance to his hiring managers of getting to know a potential employee on a personal level.
“Somewhere about 10 to 12 years ago, I hired someone who was actually running a $1 billion division of another company, and we thought we were going to be a good fit,” Bagwell says. “I really admired the man, but I totally missed it, however. His intellect was fine. His business judgment was good, but the culture didn’t fit at all.
“He came into a family-owned business that you could argue is justifiably too paternalistic, and all of a sudden put out an edict that nobody could have family photographs on their walls or desks.”
What stunned Bagwell the most is that not one of his employees, even the ones who had known him his entire life, told him. And that is when Bagwell knew he had to do more due diligence with his hires.
It wasn’t enough that they have the skills and abilities to do the job; Bagwell needed to find out more about a potential hire as a person. Today, he suggests that if you have contacts who can tell you more about a job candidate, use them.
“I knew the industry quite well that he came from and knew a lot of people,” says Bagwell. “I didn’t talk to some down-the-line managers that had worked under him. It didn’t work out at all. It was a total disaster.”
Now Bagwell gets to know people before he hires them. He invites them to dinner with his family, or takes them fishing, and this, he says, has led to better hiring decisions, because you can learn a lot about people if they cheat on a golf game or are overly competitive.
Communicating is an important skill, whether you are taking part in a negotiation that could affect the company or having a casual conversation with an employee. But communicating isn’t as easy as it seems.
“When you speak, you speak through a filter between your brain and your feelings and your mouth,” says Bagwell. “You’re filtering everything you are going to say and presenting it a certain way. If it’s bad news, you’re presenting bad news and trying to put a little less harsh spin on it. A person receiving, on the other hand, is listening through a filter.”
So although everyone communicates, not everyone communicates well, which can invite huge problems when you are leading a company.
“My position on it, and I’ve told people here time and time and time again, is when I die, I don’t care whether you burn me or bury me, just put up a little plaque that says, ‘The whole darn thing was a misunderstanding,’” says Bagwell. “A good communicator has to recognize that they are on one side of the table, and they’re putting a spin on it. What somebody’s telling you, you’re hearing it somewhat differently than they intended.”
To improve his communication skills, Bagwell makes an effort to look at himself the way the person he is communicating with looks at him. He anticipates questions or concerns they might have and has an answer ready.
“You have to put yourself mentally on the other side of the table, because ... you already know what you want, what you’re trying to do and how everything looks from your side of the table,” says Bagwell. “You have to know and understand how it looks and feels from the other side of the table, and also, you have to think like that person to know how to address their needs and concerns.”
Once you think you understand what the other person is trying to say, repeat it back to them to see if you are both on the same page. And if it is an important conversation, put it in writing, which formalizes the conversation and removes the possibility of he-said she-said down the road.
“I’ve tried to practice that,” says Bagwell. “I’ve actually done it so much that I’ve had people come in and say, ‘Tommy, this is what you were just saying. I just wrote it down that this is what I understood. Would you sign this? I’m getting ready to move on this, and I want to make sure that I’m not going to get in trouble.’ And that flatters me.”
Bagwell also has employees play games in which they have to put themselves in someone else’s shoes, such as a customer’s. Then they have to come up with everything they think that person might say and why. Not only does that lessen the chance of a misunderstanding, but it builds relationships because employees start to realize where that other person is coming from.
Although communicating carefully is important during meetings and negotiations, Bagwell says CEOs also have to be careful while making small talk, because everything they say is closely examined.
“Especially when you’re the boss, avoid, if you can, water cooler management meetings,” says Bagwell. “That’s what I call them. I go down through here and someone hasn’t seen me in three or four days because I travel a lot. I come in, they catch me at the water cooler, and I get lured into making some kind of observation that might just be a minor suggestion.
“And the next thing I know, people are acting on it like we’ve had a board of directors meeting and we’re doing a new initiative. Don’t let people act on water cooler conversations. I’ve seen that lead to huge problems.”
Know when to delegate
Bagwell says he enjoys being the boss and doesn’t like giving up responsibility. But there is no point in hiring good people if you’re not going to let them do their jobs.
The company will be better off in the long-run if the CEO takes a step back and delegates some responsibility.
“I’m so used to being the boss, but I try very hard not to change the behavior of what someone is doing if they’re not my direct report,” Bagwell says.
To keep himself in check, Bagwell tells employees that even if he tells them to do something, they shouldn’t do it unless they check with their direct supervisor first.
He also stresses that an important part of delegation is giving employees ownership of an idea so they buy in to it. One of his favorite quotes is, “There’s no limit to what you can achieve if you don’t mind who gets the credit.”
“If you can bury your ego, you need to make it their idea,” says Bagwell. “If they feel like a big part of this is their idea, they’ll work harder.”
Bagwell also tries to reinforce this idea in his management team.
As the years have passed, Bagwell says he has gotten much better at delegation and doesn’t feel the need to be in the office every moment of every day. But he has never been a CEO who works long hours or brings his work home with him, and he believes that he is a better leader because of that.
“When people overwork and overwork and overwork, they’re going to burn out and they’re not going to be doing a good job,” says Bagwell. “You don’t need to be working 70 hours. If you’re working those hours, you need to be delegating.”
Many people fall in to the trap of thinking that no one can do the job better than they can. But there are lots of talented people out there, and the company won’t fall apart if you don’t do everything yourself.
“If you have to work 70 hours a week, you can hire some help,” Bagwell says. “One monkey doesn’t make the show. There are a lot of fine managers.”
Bagwell says the problem is that people get greedy for money, and it ends up hurting them in the long run, both personally and professionally.
“If I could work 40 hours a week and make half a million, I’d take the half a million,” says Bagwell. “Don’t sacrifice your health, don’t sacrifice your time with your family trying to get those things. If you do, you’re going to be a failure, you’re probably going to die earlier and you’re not going to be doing a good job.”
HOW TO REACH: American Proteins Inc., www.americanproteins.com
Lehne started Sun Coast because the petroleum distributor she was working for closed its Houston office, and she didn’t want to leave her home state. And she knew the petroleum business and was determined to succeed on her own, no matter what her critics said.
“In 1985, the wholesale petroleum business was dominated by men,” says Lehne, president and CEO. “I’m sure I created quite a stir when I started Sun Coast back then, and I doubt very few thought I would be successful. My vision was to do the best I could, to give it 100 percent commitment, and I never permitted the possibility of failure to cloud my thinking.”
Although Lehne faced her share of challenges starting and growing the business, she learned as she went.
“There have been all sorts of challenges over the years,” says Lehne. “In the beginning, it was banking alliances and supplier credit lines the life blood of any starting company. Securing adequate office space, meeting payroll and establishing the many internal functions of finance, accounting, operations, IT, sales credit, dispatch, safety and marketing were all new to me and offered a real challenge.”
Today, Lehne has overcome the challenges of a start-up and says that the keys to her long-term success are based on knowing how and when to delegate, excelling at customer service and communicating honestly and consistently with employees.
Know when to delegate
Lehne says that the most important thing she can do as a leader is simple: Just lead. And to be a good leader, you need to be able to take a step back from the company and look at it as a whole.
“Any leader needs to be able to communicate their vision and earn the respect of their staff,” says Lehne. “They must have control over their operations but be willing to delegate effectively while monitoring the progress of every business unit.”
The majority of Sun Coast’s management team has been with the company for years, many since the very beginning. Lehne says that these key people are a large part of her success, because she tells them her vision and goals for the organization and then trusts them to communicate her message to the employees under them.
“(Delegation) is the single most important factor in achieving success,” says Lehne. “Hiring professional, competent people with the skill sets and the temperament to get the job done and then giving them the authority to make it happen is critical to succeeding in this business.”
Lehne realizes that she can’t do everything herself and that it is in Sun Coast’s best interest for her to oversee everything but let her managers take charge of the daily operations. To ensure managers are competent and loyal, Lehne likes to hire people she knows.
Trusting someone she’s only spoken to a few times in an interview to run her business makes her uneasy. When you know someone outside of work, she says, you are more likely to get a true picture of that person because he or she is not trying to impress you.
But although Lehne has a lot of trust in the members of her management team and places a large amount of responsibility upon them, she says that leaders should never completely remove themselves from any aspect of the business. It is essential to hold employees accountable for what is going on in the company.
“Delegation without accountability ... can lead to disaster,” says Lehne, who holds managers accountable by setting goals for the organization.
If they don’t meet those goals, then they failed that task. By holding managers accountable, they, in turn, hold their employees accountable.
And since it is management’s job to oversee and evaluate employees, she leaves the hiring decisions up to them.
“I am intimately involved in the hiring decisions of our top managers, but for other positions, I leave it up to the discretion of each specific manager, since they are the ones that will ultimately be responsible for the results,” says Lehne.
Service the customer
Lehne says that one of thing that has set Sun Coast apart from the competition is customer service.
“My strategy has always been to figure out what prospects and customers wanted and to provide the products and services faster, cheaper and better than my competitors,” says Lehne. “Customer focus and superior service has been the primary reason for our success.”
Any company can excel at customer service if it is willing to put time and money into doing so. Lehne has put a lot of both into Sun Coast, and it is an investment that has served her well.
“Sun Coast has added the physical and human resources required to take service from ordinary to extraordinary,” says Lehne. “By offering on-time delivery service 24/7/365 and backing it up with an unconditional guarantee ... we have been very successful in attracting new business and retaining our existing accounts, as well.”
A large part of Lehne’s investment in customer service involves hiring enough employees and continuously training them so that they are up-to-date with the technical aspects of Sun Coast and its products, as well as with customer service skills. By having an adequate number of employees, Lehne ensures that her customers are being served around the clock.
“The company runs 24/7,” says Lehne. “Our trucks run 24/7. There are people here in the office 24/7. Salespeople are required to answer their phones 24/7. The same with department heads. So if a customer needs something, that’s all we’re about is delivering the product to the customer and making sure the customer is taken care of. That’s just what we do.”
Sales associates receive extensive, ongoing training to improve their customer service skills and are encouraged to attend educational programs on their own. Also, every employee is educated on what everyone else in the company does, which helps employees better service the customer because they know every aspect of the business.
Keep employees in the loop
Another secret to Lehne’s success is Sun Coast’s culture, which she says evolved over time and is a result of hiring people she knows or referrals from employees and openly communicating with them.
“Sun Coast’s culture is based on the belief that people are the key ingredient in our success,” says Lehne. “Moreover, our culture is based on mutual respect, teamwork and a strong sense of family.”
Lehne views her employees as her extended family, which she says creates a certain level of trust in the organization and creates a culture where people feel comfortable around one another. By having a family-like atmosphere where employees feel respected and appreciated, employees are much more likely to stay with Sun Coast and be motivated to work together to better the organization.
“Happy employees are productive employees, and you can’t force happy; they either are or they aren’t,” says Lehne.
To create and maintain a family-like atmosphere Lehne holds nothing back from her employees and informs them in a constant and consistent manner of what is going on in the company. That lets them know that they are valued and an important part of the company.
“Every company is no more successful than its parts its human resources parts and we understand that basic principle very well,” says Lehne. “Without a well-informed work force, employees will fill in the blanks themselves around the water cooler. This leads to rumor, speculation, misunderstanding and frustration. Communicating effectively and frequently just makes sense.”
To ensure that the communication is doing good, not harm, Lehne sends out a consistent message.
“If I give my staff conflicting signals or signs of weakness, it could have a negative impact on morale and results,” says Lehne. “I need to give a consistent message to all of my management team while establishing guidelines and goals for each one separately, as well.”
And that means making sure that all managers know the overall goals of the organization and how their role fits into it. It is then up to those managers to effectively communicate the goals of the organization to their employees and keep them on the right track.
“Communication must be positive and constructive, because we all make mistakes,” says Lehne. “Our goal is to eliminate costly errors and unproductive activity. And effective communication goes a long way in staying on the right track.”
Lehne makes it a point to stress to employees through verbal and written communication what is happening and to encourage questions and suggestions. She provides motivational seminars on a variety of personal and professional topics, noting that people have lives outside of work. If their personal lives are in order, it is more likely that their professional lives will fall into place, as well.
Finally, Lehne stresses that honesty is essential in building a good culture, as well as in succeeding in business in general. You can grow fast by being dishonest, but success won’t last without the trust and respect of those involved with the business.
“A leader must be able to earn the confidence of customers, employees, suppliers and business partners to really make things operate smoothly,” says Lehne. “I think by being honest and having integrity over the years we have developed that reputation. ... We treat our people right. We take care of our customers. We couldn’t be the size we are today without that.”
HOW TO REACH: Sun Coast Resources, (800) 677-3835 or www.suncoastresources.com
You need to be the same leader that you are in the good times as you are in the bad times. People look at the person they are reporting to and they value consistency in their actions more than anything else.
That’s just respect for the individual and showing integrity no matter how good or bad things get.
Treat employees with love and respect.
The advice my dad gave me was that all human beings, when you boil it all down, they really crave and desire a few things and that is love and respect.
If that can become the foundation of the value system of your business and the way you approach it, then unless you violate those two values, it’s pretty hard to make any mistakes.
Forget about employee buy-in.
You don’t want them to buy in. If you think about that, that means I have to sell them on the idea. And to me, that’s just short-term work.
What we really work hard at is getting people enrolled in what we’re trying to accomplish. It has to be crystal clear in their minds on how they can contribute to the overall vision and mission and the strategy of the business and the significance of their role and what difference it’s going to make.
If they become clear on that, then it becomes an enrollment, which really is more of a voluntary act. They’re doing it because they made the decision, not because I persuaded them or sold them on the idea.
It’s not really semantic. It’s a cultural thing. It comes back to your value system. It’s how you work with people and it’s how you treat your people in good times and bad that gets people enrolled.
Empowerment is a word that gets thrown around quite a bit.
The approach that we take when we look at a position is we look at all the decisions that an individual position is going to be making over the course of their workday. Then you look at who they need to keep in contact with to make those decisions.
Look at all the tasks, all the events and all the issues that an individual faces over the course of a day, a week, a month. If you find out that the majority of the decisions have to come back to another person, say the person up, then you pretty much are in a command and control mode where there is no empowerment.
Empowerment is when you can look at the decisions a person is making and over 50 percent of them they make without even letting anyone know. And probably the next 25 to 30 percent they make and all they do is let the other person know. And generally just a 10 percent or so where they have to go to someone and get their authority.
If you design your work and your position with that kind of freedom, then I think you are going down the right track.
Motivate employees with your vision.
Motivation is communicating. It’s coming up with a business model or a vision for a business that people feel is going to make some type of difference, whatever you are doing. That’s where the inspiration comes from.
Motivating someone there isn’t all that daunting. If they can look at it and say, ‘This is the contribution I am going to make, and this is going to be the outcome,’ and if they like the outcome, then I think that that is self-motivating.
Acquire companies with in-sync cultures.
The first thing we want to look at, particularly because when we buy a company we blend it into our existing business, is will these two cultures fit? Is the service team in this business consistent in the way that we approach our customer base?
If they are adverse, then it’s too disruptive both to the new people coming in and to your existing business.
Remember that assimilation takes time. You learn by all the mistakes you make. One of the things I learned is at first, we were a bit too rigid in trying to convert (acquired companies) to our way of doing things.
We believe, obviously, in the way that we operate. But in the past few years, we have really learned to trust the cultural piece more and do more upfront work on making sure the cultures match. If that’s the case, then give them time to assimilate, because people work and change at different paces.
We’re much less rigid in saying, ‘This is how we do things here.’ We’re much more aware of the emotional effect that an acquisition has. Being aware of that and being in less of a rush to put our stamp on things has made a difference for us in the past few years.
Market new products inside the company.
You have to first market it inside your business before you go outside. And what I mean by that is every one of your co-workers fully understands why you’re doing this, what it is that it does if it’s a service or a product and how it provides value to the customer or the end user.
If everybody in the organization is clear not just your sales and marketing people, but everybody in the organization understands what it is you are trying to accomplish, what the goals are, what the strategies are, then once you go to launch, I think it improves your chances of success by a large percent.
You need to do it face-to-face. This isn’t something that you can send a handbook out on. It has to be physically presented or demonstrated with every one of your people.
HOW TO REACH: Initial Tropical Plants, www.initialplants.com
Plan for the future.
It’s very important to be able to have a clear understanding of where you want to go and to be able to have a clear picture of the future for yourself. It guides you in making decisions every day and helps prevent you from making short-term decisions that may compromise that long-term vision.
Surround yourself with people who are different.
Make sure that from Day One, you have the right team around you. That is something that I thought was very important.
I know my own personal strengths and weaknesses. I did not surround myself with people that were like me. I surrounded myself with people who were completely different from me and had very different skills.
That is the key to success. You have to understand what you do well, where you add value to your company as a leader and make sure you have a team around you that brings a different value to the firm.
Take a stand.
I believe that there are many leaders who just believe that everything should be a vote or popularity. And there are many times that a leader must take an opinion or a position that is not popular and that is a very difficult position. But they have to have the courage to stand behind their convictions and make that decision and stand by it.
I think that’s really important in a leader, especially in a firm like ours, which is fairly egalitarian. There’s a great many that are very consensus driven, and that’s our culture.
But on occasion, a leader needs to step up and make a decision that’s not going to be a consensus decision.
A leader has to be able to put themselves in the position of those that follow of the individuals and the clients that we have outside the company and be able to understand what their issues and concerns are from their perspective before they can craft a strategy or direction.
People call it emotional intelligence. I think that is a very important skill to have when dealing with both individuals within your firm and staff, as well as your clients and customers.
Be sensitive to other cultures.
There is a completely different business culture outside of the U.S. Things we take for granted, like handshakes, are not the same. Negotiation is not conducted the same way.
It’s those norms and cultural differences that you have to learn. People can tell you what to expect, but the only way to really master it is to actually go there, be involved, make a few mistakes do some things that are probably not the most appropriate response at the time, but you learn from it.
It doesn’t take long, but you have to do it. There’s no way around it.
Know what you want.
The key things in our acquisitions are understanding the clear motivation that we have for acquiring a firm or merging with a company, and the motivation they have for being acquired or merging with us. It’s very important to make sure that that is openly discussed and in agreement.
We are very much a people business. So there are no assets we can assume in an acquisition and just assume that they’ll perform. We have to have buy-in by the individuals that are going to become a part of our organization.
The most important thing is to get their buy-in and to have them understand and articulate what is the benefit of being a part of our company and what our expectations are for them. There is really nothing else that gets close to those two issues.
It’s a fairly long process. It’s very much relationship-building and it starts from the very beginning of our discussions with them about a merger. We spend a great deal of time with facilitators in many cases and a great deal of face time one-on-one.
If you think about it, you are really building a relationship over a period of time. It takes time. It takes interaction. It takes informal dinners together.
You’re really building friends. You’re building connections and bonds. It takes months. It’s not something you do in one meeting or two meetings. It will take six months at a minimum to really build that relationship and that trust before we think the merger can work.
Know your financials.
There is a certain amount of business acumen that you must have. You have to be able to understand the blood of a company is its financial measures and metrics.
You have to have an understanding of those. You don’t have to be an expert, but you certainly must understand how they work and the implications for being healthy financially.
Many corporations or companies are too cautious. They’ll live within the status quo and won’t take a risk. We do like to take risks calculated, of course.
We’re very careful about them, but without them you won’t be able to sustain the organization. That’s something we believed in and something most companies need to conscientiously do change the status quo by taking some risks.
We always say to ourselves, ‘If it’s a good idea, what’s the worst that can happen?’ And if we can live with the worst, then we’ll take the risk. I think that’s a good credo to live by - in your personal life, as well as your company’s life.
HOW TO REACH: SmithGroup, www.smithgroup.com
Bachelor of science degree, Kent State University; MBA, Ashland University
I started right out of college at Lauren Manufacturing. I was actually working as a sales engineer in a new product line that we were developing.
What is the biggest business challenge you’ve faced, and how did you overcome it?
The biggest business challenge was starting Edgetech. We basically started that business from a concept and grew it into what it is today.
There are just so many challenges and opportunities in that entire process. The overriding challenge was building something from a concept to a viable business. Start-ups are not easy. It’s difficult and painstaking work.
What is the most important business lesson you’ve learned?
Ninety-nine plus percent of your people that work in your business come to work every day wanting to do a good job. If they’re not doing a good job, there’s probably something in the management process or in the process itself that needs to be corrected.
It’s not the people. The people want to be valuable. They want to leave at the end of the day feeling as though they are successfully participating in the business.
Whom do you admire most in business and why?
My admiration for Mr. (Dale Lauren) Foland is probably second to none. As the founder of the business, his ability to give so much to everybody, his ability to not micromanage, his ability to allow others to make mistake after mistake when he was the one at the end of the day [who] was the loser of the dollars that went behind many of those decisions.
For him to be so supportive and continue to build a strong team and continue to allow people to make mistakes and grow has been phenomenal.
Although Hallberg was up against publicly traded corporate giants, his faith in his business model never wavered and his company, MemberHealth, experienced a growth rate of 9,354 percent between 2000 and 2004.
Hallberg’s business model is based on a concept he calls transparency. Transparency removes the confusion associated with prescription drug benefits and allows the consumer to build and maintain a relationship with their pharmacist.
“PBMs have figured out ways, essentially, to make money without looking like they’re making money, which of course is the opposite of transparency,” Hallberg says. “... There developed a number of ways for PBMs to generate revenues without charging the client for that administrative cost. One of the ways is through rebates. Another way is through arbitrage, where they charge the plan one rate, but pay the retail pharmacy a smaller rate. We don’t do any of that. We are both the insurance company, and we are the PBM.”
Despite the fact that many PBMs favor certain drug manufacturers in order to make more money, Hallberg says that if you don’t have consumers’ interests at heart, then your business won’t really be a success.
“If you take care of the beneficiary, then everything else will follow,” Hallberg says.
At the end of 2005, Welsh, Carson, Anderson & Stowe acquired a major interest in MemberHealth, which will allow the company to continue to grow at a rapid pace. Despite the acquisition, Hallberg says the company will still operate under full transparency with consumers’ best interests in mind. Today, Hallberg’s dream of creating a leading PBM has come true, as MemberHealth ranked third out of 10 national plans in enrollments in the Medicare Part D arena.
How to reach: MemberHealth, (440) 248-8448 or www.mhrx.com
“It was the smallest business I had ever touched, but unique and interesting in that it was a start-up,” Koehler says.
During Koehler’s fours years with the company, which is best known for its computerized cooking unit the SelfCooking Center RATIONAL Canada’s revenue grew more than 1,000 percent to reach $11 million. That success earned Koehler a promotion to president of the company’s $21 million counterpart, RATIONAL USA.
RATIONAL USA’s revenue has increased from $13 million to more than $21 million over the last two years, and Koehler plans to continue that growth by challenging his employees to be entrepreneurial.
“My approach is really to make people into entrepreneurs and give them ownership of their business and challenge them in that way to think first and then act,” Koehler says.
Smart Business spoke with Koehler about the challenges of growth and how he motivates and retains employees.
What challenges come with being president of a fast-growing company?
The biggest challenge is finding enough great people, because growth and the company and its result is directly tied to having enough great people with the right attitude that want to win together.
Also staying focused on the process. Sometimes when you grow fast, you can get off on tangents, so make sure you stay tied to your core values, your core objectives and the processes that you defined as a way to get there.
As you grow, you add complexity to your business. Complexity can be a killer in a business, but if you continue to challenge yourself to come back to the core process as opposed to, let’s say, departments what is it that we are ultimately trying to achieve as an output, and what are the inputs? then we have a process. Whereas if we just look at objectives, then we’re managing numbers, we’re not managing how we do it.
What are the most important qualities you look for in an employee?
Always passion and attitude in people. You can train other skill sets. We would like people to be computer-literate in this day and age, but you can train almost anything.
You can’t train passion. You can’t train attitude. You have to find people that want to win, that are tenacious, that are resourceful, that don’t readily accept ‘no’ as an answer.
Once you have those people, how do you retain them?
They have to see opportunity. In a growth company, there are constantly new opportunities because as you grow and evolve, your structure changes and you add management positions or supervisory positions. People who are here see that as an opportunity to further their own development.
We communicate in a very transparent way, with charts showing results both at a team level or an individual level throughout the business, and we’re open with those numbers even to the operating costs and the profitability of the business. We put a profit-sharing plan in place that will afford them the opportunity to earn up to an extra month of salary on top of their personalized bonus.
We have personal objectives and everybody is tied into those in the same way. If you have a sales assistant who works here at headquarters with somebody who is out in the field, the sales assistant’s bonus compensation is tied to the field consultant’s.
We really want to have a team that’s tied together that wins together and loses together. We all have to strive together in this entrepreneurial environment to achieve the same goals.
How do you encourage employees to be entrepreneurial?
We asked (regional sales managers) to build up a cost budget for 2006 and gave them a framework of things to choose from with an activity plan. So it was their plan to develop with some top-down guidance on the expectations, but then they could fill in what it is they thought they needed to do to get there.
Plus, we furnish them with a mini (profit and loss statement), so its like a mini-business unit, so they can see the direct result of sales, margins, costs they incurred for that month. They’re a small business owner at that point in time.
It’s fun to see people develop and understand their business better and take control of it and be motivated to want to do it, as opposed to being managed to do tasks.
HOW TO REACH: RATIONAL USA, www.rationalusa.com
When he founded the company in 1997, many Web companies didn’t stay in business long and didn’t provide customers with a total package, he says. There were companies that provided businesses with a visually pleasing Web site and those who provided customers with a functional, easy-to-use Web site, but none who really did both, according to Karcher.
“My goal was to bring those two together into one company so that businesses didn’t have to choose between look and feel, or functionality,” says Karcher. “I just thought they should be able to get both in the same spot.”
Karcher also thought he would employ just a handful of people and only serve businesses in Northeast Ohio, but The Karcher Group has grown way beyond that, employing 25 people, gaining national exposure and catering to Fortune 500 companies.
Part of the company’s success it has experienced annual sales growth of 20 percent to 50 percent each year since its inception comes from its ability to adapt and evolve with the IT industry, as well as its strong commitment to customer service. In 2005, the company came up with innovative products to cater to small businesses that want to limit the cost of their Web sites or that don’t need anything elaborate.
To provide all clients with better customer service, the Karcher implemented an online client portal where clients can view their Web sites during development and post questions or comments. The Karcher Group also created a new position designed to be a liaison among the sales staff, production staff, clients and company as a whole.
These strides have brought national attention to the firm, including a visit from CNN, which aired a segment about growth in the Canton area. Karcher recognizes that the area has played a large role in his company’s growth, and he makes it a point to give back to the community through organizations including the Stark Community Foundation, Keep Akron Beautiful and Habitat for Humanity.
“The community is what has gotten us to where we are,” says Karcher. “We’ve been given a lot, so we feel it is our responsibility to give a lot back.”
HOW TO REACH: The Karcher Group, www.thekarchergroup.com
Thirteen years ago, that work ethic took him to Campbell & Co., Michigan’s largest marketing and communications firm, where he was named president three years later. Under his leadership, Campbell & Co. was named one of the 101 Best and Brightest Places to Work for in Southeastern Michigan for the past four years. And now that Campbell & Co. has merged with Los Angeles-based Pacific Communications Group, Scheinberg is one of three managing partners who lead the resulting company, PCGCampbell.
Smart Business spoke with Scheinberg about how he sets a good example and rewards employees, and why it is important to delegate.
Surround yourself with good people. Choose your partners very carefully. If you are in an organization in which you have a partnership, choose those people at least as carefully as you would a spouse.
Beyond that, I think it’s very important to surround yourself with people who are smarter than you. Be amidst people who stimulate you and have stimulating thoughts and ideas and a lot of drive. A lot happens from there.
I find a lot of my day-to-day objective is to do everything I can to remove the obstacles that are in their way that are keeping them from doing their job, enjoying their job and being able to do great things. Once you have those great people around you, clear the path for them.
Set a good example. I’m a believer in leading by example. I like to think that as a CEO, I am in there pitching as much as everybody in ways that I hope set a good example. We’re very big on celebrating success and taking the time before we move onto to the next thing to make sure that everybody feels the right measures of pride in the things that we do here.
It’s very important to be honest and straightforward all the time. If you say you’re going to do something, do it. I don’t care if it’s small or large, but if you make a commitment, don’t forget about it. Don’t think others won’t notice if you don’t do it.
Reward people. I like to say ‘thank you’ a lot and genuinely mean it, not let it just be words but let people know how much I and the organization appreciate when a job is done well or somebody goes out of their way to do something.
You have to reward people fairly, and you have to do it with some frequency. Find ways it can be non-monetary or monetary to reward people on an ongoing basis, at the moment of something great having happened.
At every monthly staff meeting, we will read letters that come in, e-mails that come in0 from clients who are really over the moon on something we’ve done. We like to read those, but then we also like to take it a step further.
When we have a program that really speaks to who we are and what we do, we ask the people who were the creators and deliverers of that work to get up in front of the company at the staff meeting and tell them what they did and what was it about it that made it successful. That really lets people express their sense of pride in the job well done in front of their colleagues.
We also have a process that allows managers at all levels to make achievement awards to people. It can be a gift certificate. We’re moving so fast all the time there’s always the temptation and the risk that we’re on to the next thing before we take that breath and kind of look at each other and say, ‘Hey, that was really something special.’
Show you’re human. It’s important for people in leadership positions not to be afraid to say, ‘I don’t know the answer’ to something. There are plenty of times I don’t know, but that doesn’t mean I then won’t go and find out and get back to them.
But there is no glory in trying to pretend to know something when you don’t. Don’t be afraid to show that you are not infallible, that you make mistakes, that you misstep occasionally. We all do.
Ask questions. There are lots of times that ... I don’t know everything that is going on. I try to be curious. Listen to the answers.
There’s a lot to learn, and I learn a lot from people in this organization when they take the time to talk to me and I take the time to listen.
Delegate work. A lot of (leaders) have progressed up the ladder by virtue of doing a lot and doing it ourselves, so when it comes to a point when you really need to know how to delegate and what to push off your desk and on to someone else’s, that can be a tough thing to do, because it’s sort of going against the grain of what got you to where you are.
And some of us also tend to be a bit of control freaks, so we like to touch everything. But delegation and the ability to delegate is a very important to skill.
HOW TO REACH: PCGCampbell, (313) 336-9000 or www.pcgcampbell.com
As president and CFO of Aflac Inc., not only does he have to compete with other insurance companies for customers, he has to compete for employees, as well. To overcome that challenge, Cloninger and chairman and CEO Dan Amos have made it a point to be very self-critical.
“We try to find weaknesses in what we are doing, looking at ourselves as if we were the competitor and trying to address what it is that Aflac is doing that a competitor could come in and try to do differently,” says Cloninger.
And that means taking a proactive approach to ensure that they are providing the best products and services for their policyholders. Members of management regularly performs a SWOT (strategies, weaknesses, opponents and threats) analysis of the company, in which they evaluate existing products, experiment with new products and look for ways to tap into new markets.
From those regular analyses came a two-part plan to continue to grow the $14 billion supplemental insurance company expand Aflac’s product line and grow its distribution system of independent sales associates and insurance brokers.
Innovation drives growth
Aflac has gained new customers in part by coming out with new products and by tweaking existing ones. Aflac’s executive team decides which products to add by speaking with field agents who regularly communicate with customers.
“We talk to our agents in the U.S. field force about what customers are asking for that we don’t presently have in our portfolio,” says Cloninger. “We have a representative group that we bring in to headquarters twice a year to talk to us about product ideas.”
Cloninger puts the advisory council together based on recommendations from state sales offices and tries to include agents of all levels within Aflac’s sales force. These agents ask customers what additional products they would like Aflac to offer and ask noncustomers what would convince them to purchase Aflac products. The council gives input about a new product multiple times over the course of that product’s development.
Because agents work on commission, they are always motivated to come up with new products that might be big sellers. Both dental and vision insurance products came from the advisory council.
Dental insurance, which was added about four years ago, was instantly popular with Aflac’s customers and made up 7.4 percent of new sales in 2005. Vision insurance was introduced in the middle of 2005 and made up 2.2 percent of new sales for the remaining half of the year.
Cloninger watches the competition to see what it is doing, but innovation usually occurs through those conversations with agents and by looking critically at every aspect of Aflac. Most Aflac products are updated about every three years to ensure that the company remains a market leader.
“We look at new things that are being done to treat major illnesses like cancer and make sure that our products fit the latest health care delivery system,” says Cloninger. “We’ve added benefits to our cancer policies over the years to do things like pay for experimental treatments, pay for treatments by recognized national cancer centers.”
Cloninger also has to manage product pricing.
“We try to price all of our products on a so-called level premium basis, where we don’t have to go back and ask for premium rate increases as many supplemental insurance companies do,” says Cloninger. “We want to sell a product that is priced so that the customer will have the same premium over the life of the contract. We do that for all of our products, except Medicare supplement products that have government-mandated increases in benefits every year.”
Cloninger also came up with an idea several years ago to help save customers money when they switch jobs. With Americans frequently changing jobs, he feared those customers might drop Aflac coverage rather than continuing to pay premiums which would now also include the portion the employer had previously been paying while waiting for coverage to begin at a new job.
“When a person leaves one payroll account, if they sign up with another payroll account and do the same Aflac product within a two- or three-month period, we’ll waive the premiums due during the period that they were not associated with an employer,” Cloninger says.
Today Aflac has 90 percent name recognition, but it wasn’t always that way. For example, in the mid-’90s, it didn’t have a large presence in densely populated New York and California.
“We took on an initiative to make sure that we invested in growing our distribution network in those states,” says Cloninger. “At the time, California wasn’t even in the top 10 of our producing states. Now California is the No. 1 state in terms of new premiums written. New York has grown similarly.”
To build market share in those key states, Aflac used television advertising starring a mischievous duck. The idea for the Aflac Duck, created by the Kaplan Thaler Group, arose when employees were having a difficult time pronouncing Aflac and someone noted that the name sounded like a duck’s quack.
The duck commercials helped lead the company to unprecedented growth for the next three years, as Aflac grew by 28 percent in 2000, 29 percent in 2001 and 17 percent in 2002, almost doubling sales in that three-year span.
Building the right infrastructure
Now that Aflac had tremendous brand recognition, it was growing so quickly that its sales infrastructure could not support all of its new customers and employees. The company’s infrastructure had to change, and new agents were needed to sell Aflac products to continue the growth.
In the past, one sales coordinator was in charge of an entire state. That person managed regional and district coordinators, who were responsible for certain subsets of the state’s population. Cloninger says that the optimal number of regional and district coordinators is five to seven, but after the introduction of the Aflac Duck, that grew to as many as 14 in some states too many for one state sales coordinator to handle.
The company couldn’t react to new clients as quickly as it wanted to and wasn’t able to expand into new markets. The solution was to divide a state into two or three organizations, with a state sales coordinator in charge of each organization. That change helped Aflac cope with its fast growth and allowed it to expand into untapped markets. In 2000, there were about 56 state organizations. Today, there are 97.
Aflac has 4,800 employees at its Columbus headquarters and more than 60,000 people in the United States who are licensed to sell insurance for Aflac, but it always needs more qualified salespeople. To find them, Cloninger relies on what he calls circles of influence.
“We encourage our sales management team to look at new people they meet and think about whether or not those people would fit an Aflac sales position well,” says Cloninger. “Personal recruiting is the most effective way of assessing whether or not someone has the energy, drive and personality to succeed in representing us as an independent agent.”
Employees are encouraged to talk to people, even while waiting for a table at a restaurant. Sales experience isn’t necessary; in fact, Cloninger says that people without experience often make the best agents.
“People like school teachers, nurses and firefighters, people who service the public and understand the day-to-day issues that people have financially, can relate to our products,” says Cloninger. “Another category of people that are very effective with us are the people that have experienced the benefits of owning Aflac products, either through personal illness or accident.”
Agents have incentives to recruit new agents they can advance their own careers by building a sales organization underneath them. If agents recruit new agents, they receive additional compensation based on the business produced by those agents.
Although it is up to the district sales coordinators to train new agents, Cloninger wants training to be uniform across the organization. In the past year, experienced agents were brought into headquarters with the goal of creating a uniform training curriculum essential because it helps ensure that a uniform message is communicated to customers.
Those agents came up with an academically based program in which new agents must study and learn about Aflac products and their benefits, then go into the marketplace and apply what they’ve learned. New agents are taught how to identify the most likely consumers of Aflac and how to approach them and explain how Aflac would benefit their organizations.
Once Aflac has attracted and trained new employees, it must then work on retaining them by creating a good work environment.
“We have stayed committed to Columbus, Ga.,” says Cloninger. “We are well-known in the community. We have another well-known company or two in the community who also treat their employees well. ... It’s kind of like we’re competing for the same body of employees. We need to make sure our employees are happy so they’ll stay with us instead of going across the street and working for someone else.”
In fact, Aflac honors its employees with a whole week of appreciation, featuring food, a concert, a baseball game, drawings and employee recognition. Last year, Aflac celebrated its 50th anniversary, and all employees with at least 25 years of service were surprised with a weeklong Caribbean cruise for them and a guest.
Aflac also recognizes that employees have a life outside of work, so it developed a program called Lunch and Learn to address personal development topics such as financial planning and tips for first-time home buyers. A speaker comes in during the lunch hour, and everyone is invited.
Aflac was named by Fortune as one of 2006’s 100 Best Companies To Work For for the eighth consecutive year and one of Fortune’s 2006 America’s Most Admired Companies for the fifth consecutive year.
Although Cloninger and the rest of management continue to look at Aflac with a critical eye, it has become a company that many wish to emulate. Its revenue increased 8.1 percent from 2004 to 2005, it insures more than 40 million people worldwide and Cloninger says it is on track to increase new sales between 8 percent and 12 percent in 2006.
“I’ve never seen a company that’s done as well year in and year out as Aflac,” says Cloninger. “I’m proud to have spent the bulk of my career being associated with it.”
HOW TO REACH: Aflac Inc., www.aflac.com