Erik Cassano

Monday, 26 March 2007 20:00

Spanning the globe

As business has grown and evolved, Richard Bolte Jr. says those two words have almost become synonyms. Managers are consideredleaders, and if a leader isn’t yet a manager, he or she could be one day.

But Bolte says the two terms are not interchangeable. Managers lead based on what is already written in the rule book. Leaders effectchange by revising and rewriting the book itself.

At BDP International Inc., the global logistics firm started by Bolte’s father more than 40 years ago, Bolte made it a priority to transition himself from a manager to a leader upon becoming BDP’s president in 1996. “That’s the most transformational activity that occurred in my entire career,” says Bolte, who also assumed the role of CEO in 2006.

“It’s mainly due to the fact that some of the aspects of becoming a successful leader really cause you to give up and forget about someof the things that made you a success as a manager.”

Bolte says the head of a company needs to be a leader. He or she needs to oversee the company rule book by creating a visionwith clearly defined objectives and spread them to the far corners of the company with strong communication skills.

Without strong leadership, a company risks going stagnant and missing out on opportunities that might help the business grow,and ultimately, survive.

BDP has locations in more than 100 countries, and keeping them on the same page requires relentless communication from thosein the company’s Philadelphia headquarters.

A global family
Many CEOs want their employees to have meaningful, personal working relationships with each other and with management. Themetaphor of “one big family” has been used by CEOs so many times, it has become a cliché of business culture.

Bolte has a unique perspective on the concept because BDP — a company with about $1 billion in annual revenue — actuallyis a family business, passed down from his father to him and his brothers. Bolte says he knows having a business that behaveslike a family is about more than just company picnics and handing out greeting cards during the holidays.

It’s about communication. It’s about forming a communication structure that keeps employees in the know and maintaining itconstantly.

Bolte says it all starts with the leader’s actions. If you are upfront and honest with your employees, others in the company willfollow your example.

“When I became president, that was one of the primary planks by which we decided to run BDP,” he says. “Specifically, we travel around a lot. I think the best way of communicating is when we go to our offices and talk about exactly what we’re up to.”Bolte says there is no substitute for face-to-face communication, so you need to make the time to hit the road and go to a fieldoffice to personally address your employees.

“I’ll say I’m going into a city for a couple of days and I’d like to address the employees maybe for an hour,” he says. “Maybe I’llhave a customer dinner with a supplier, and so on. But I think it’s the highly personal contact that really gives you an understanding of what is going on in the various markets, and it gives employees an opportunity to see your strategy firsthand.”

Bolte says there is more to it than just popping your head into one of your field offices now and again. Take the time to preparea presentation and open up the floor to questions afterward. He says it could be the difference between employees dismissingyour strategy and messages as a series of platitudes, and employees really buying in to what you have to say.

Employees will respond to not just what you say, but how you say it.

“I like to believe I have a passion for what I do,” Bolte says. “When you put yourself in those types of (presentation) situations,you really have the opportunity to demonstrate the passion and commitment you have to running the business. I think those arethe things that leave employees with a much better perception of the leadership of the company than if they sat there and justsaw a video or something.”

The importance of face-to-face communication is something Bolte learned early in his management career.

“As I came up through the ranks, I ran several operations that were outside of company headquarters,” he says. “I always feltlike the people in corporate were up to something. I didn’t know what, but I felt that if I had the opportunity to have a significantrole in the corporate leadership that I was going to do everything possible to communicate our strategy out in the field.”

The culture gap
“There are two things you can never do enough of,” Bolte says. “Train and communicate well.”

That’s especially true when it comes to overseas operations.

Training and communicating become exponentially more difficult when the learning curve includes a trek halfway around theworld to China or Singapore. Not only must you educate new recruits in the ways and means of your company, you are also getting an education in a different culture.

If you want your presence overseas to be a success, Bolte says it is imperative that you learn as much — if not more — abouttheir world as they learn about yours.

“Every culture in which you’ll do business is unique,” he says. “Running a business in China is distinctly different than runninga business in India, especially with regard to the type of human resource challenges.”

Finding Asian employees with a solid English background and technical background is the primary challenge in Asian markets.

In North America and Europe, where language isn’t as much of a barrier and the standard of living is higher, in many cases, theemphasis falls elsewhere.

“Our HR group in a hot-growing market like Shanghai would focus on attracting talented people with good English skills,”Bolte says. “In Europe, where there is a more managed growth rate, it’s more about how you form the right quality of life. Thoseemployees would be more interested in benefits and things like that, so our HR groups in Europe need to concentrate on creating the right sort of atmosphere for our employees.”

Bolte says he makes it a point to get as much background as possible on an overseas market by meeting with the field leadership prior to addressing employees, then weaving what he learns from the managers into his presentation. “I’ll meet with the management in Singapore to find out what is going on there,” he says. “Then I’ll use that to give the presentation a more local feel to show how what we’re doing could impact you and the operation in your country.”

Cultural differences can also come into play when the time comes for employees to ask questions. Not every employee is goingto be willing to stand up in front of his or her peers and solicit m ore information from the head of the company. When that happens, Bolte says you will have to find other ways of answering the questions, including using your field managers as a kind ofintermediary.

“The types of questions really depend on the type of culture,” he says. “I’ve found that in Asia, no matter how open the culture,employees ask very few questions of me, but they might go to their supervisor afterward. In Europe, however, they are very questioning. They’ll ask me about anything.”

Bolte says there are two schools of thought when it comes to staffing an office abroad. Some companies like to bring theircountrymen with them to a foreign land. Some, like BDP, prefer to hire locals.

Bolte says staffing your international offices with local talent and attempting to bridge the culture gap might seemlike more work than simply bringing American workers with you, but U.S. companies that simply staff their worldwide officeswith Americans are missing out on a valuable resource: the insider knowledge that a local worker can bring.

“We’ve watched some European companies not do so well with that strategy,” he says. “Their strategy has been to sendEuropeans to different parts of the world, and we’ve seen them struggle with that. So we had that as a background.”

Bolte says your company might be American, but don’t assume that every employee in every office you might have around theworld needs to operate like they’re based in Anytown, USA.

“Some companies are very American, some are very German, some are very Chinese, but I think if your culture gets toodominating, it can crush and crowd out the voices of folks from a different culture,” he says. “You don’t want to be so dominant that you drown out the voices that you really need in order to develop strategies in different markets.”

The right people
Communication in business is a two-way street. You can do everything in your power to try to get your employees on thesame page with your company vision, but some just aren’t going to buy in.

In that case, Bolte says it’s a bad match of employee and company. It’s unfortunate, but at times unavoidable.

“We’ve had some very talented people come through here, but they either didn’t believe in our culture or didn’t understand it,and as a result of it, they didn’t succeed,” he says.

There is no magic formula for finding the right people that will buy in to and carry out your company’s vision. Bolte says thetried-and-true method of a sit-down interview is usually the best gauge, but even that isn’t an exact science.

Your chances of hitting the nail on the head during the interview process go up along with the number of interview rounds,so Bolte enlists the help of many of BDP’s most experienced managers to conduct many rounds of interviews with applicantsfor higher-level positions.

“After the rounds of interviews, we’ll all put our heads together,” he says. “But to a certain extent, it’s about risk-taking, it’sabout making an assessment. Sometimes, you do have to trust your gut that you are making the right choice. If you do makea mistake, more often than not, it quickly becomes apparent.”

If you make a mistake in evaluating a candidate, he says to acknowledge it quickly and form a plan of action for dealing withit. The longer you let a mistake linger, the worse it’s going to be to fix.

“It’s OK to learn from mistakes,” he says. “Sometimes you make a bad decision, and you hang onto it and hang onto it, you tryto make it work. But you have to acknowledge mistakes quickly and then do something about it.”

HOW TO REACH: BDP International Inc., www.bdpinternational.com

Wednesday, 28 February 2007 19:00

Driving innovation

The average workday is eight hours long. And if you’ve scaled the company mountain up to senior management, chances are you’ve worked pretty hard during those eight hours each day.

George Hamilton has. In 29 years at Dow Automotive, he has worked his way up from a fresh-out-of-college management trainee to president, a role he has filled at the $1.5 billion, Auburn Hills-based segment of Dow Chemical since 2003. But along the way, he’s also learned that what you do during the other 16 hours of the day can be just as important to your company as what you do at the office.

You never stop being the leader of your company, even when you trade in the suit and tie for jeans and jogging shoes at the end of the day. Every trip to the store, every evening walk, every Friday night out at a restaurant can bring you into contact with potential customers, people with problems that can be solved by your company.

Hamilton says it’s not just about talking to people; you can do that from a phone in your office. It’s about living in the world your customers live in, gathering their concerns and ideas, and taking them to back to work with you, where your employees can then transform them into solutions.

“You start to run into people at the supermarket or when you’re out for an evening walk, or you go to a cocktail party at their house where people just talk about what they’re dealing with,” Hamilton says. “I’ve found myself sitting at high school football games. My son is on the football team, and the other kids on the team have parents who work for car companies, and guess what? We start talking about what we do.”

To Hamilton, being a president isn’t just about process management and vision strategies. It’s about finding a problem and then enabling your company to create the solution.

Looking outward
If you want to innovate, Hamilton says to look outward first instead of inward. There is a time and place for ideas to well up from within the company, but being in tune with your customers will give you the best chance to create solutions for them and build loyalty.

“Certainly have the mindset of solutions versus thinking about selling products,” he says. “It causes you to think differently about what makes your customers’ lives better. It all starts with thinking from the customers’ standpoint.”

It is always important to stay in tune with what your customers are dealing with. Away from the office, it might be a chance meeting with another executive. In the office, Hamilton tries to be more proactive.

Dow Automotive brings together cross-sections of customers for daylong meetings to take the pulse of what they are dealing with. The company supplies major automotive manufacturers with sealants, adhesives and plastic components, so the issues their customers are dealing with are often complex.

“We’ll sit and talk about what challenges they are dealing with and what we area working on,” Hamilton says. “We try to find out what would provide the most value if we could come up with a solution.”

He says you should strive to find not just the problem but the story behind the problem. When speaking to a car company, Hamilton and his senior managers want to find out how they assemble their vehicles, what happens to a vehicle after it is sold and what types of service issues their consumers have.

Having that background gives Dow Automotive a better chance of coming up with a solution that will completely address the need of a given customer.

“We knew that two of the biggest issues facing many car companies are increasing the fuel efficiency of their vehicles and improving labor costs,” he says. “We found that with some unique adhesive chemistry, we could reduce the number of mechanical fasteners and spot welds in a vehicle, which reduces their labor costs and reduces weight, which makes a vehicle more fuel-efficient. So a lot of it is understanding what they are trying to do.”

Through repeated contact with customers, you might find that you sit down to solve one problem but end up solving several.

“We might only be dealing with one issue, but as we think about the other solutions it could provide, you might find you are addressing two or three or four needs,” he says.

Enabling employees
Finding out what a customer needs is only the first half of the battle when you are trying to be a solution-driven company. The other half is enabling your employees to find those answers.

For Hamilton, it starts with keeping the company’s strategy simple — simple principles, simple language, even simple to print.

“I am proud to say that our strategy at Dow Automotive is a few bullet points on a piece of paper,” he says. “But the words are very powerful and very well-thought-out with regard to the organization, defining what we are about and what we are not about.”

Hamilton has a couple of favorite strategy-related sayings he uses at Dow Automotive: “One is, ‘We don’t chase cut steel,’ meaning that if a tool has been cut, if a decision has been made, then focus on the future,” he says.

“Another, is ‘We don’t chase competitors’ trucks,’ because that means the job has already been done. When you’re looking for the next innovation, the next solution, you have to frame it that way.”

Innovation is a key part of Hamilton’s strategy, but he says the message won’t mean anything if it isn’t consistently backed up by the actions of upper management.

“As important as the words is continually communicating them,” he says.

Hamilton says you have to back up the vision and strategy you create with daily communication.

“I want to make sure that when I am engaging people and we’re having dialogue, I am asking questions related to technology and innovation, and customers and solutions,” he says.

The final, and perhaps most important, piece is backing up what you have written and said with the proper resources and investment. Ideas won’t become products without financial backing.

“You have to make sure what your employees do is supported,” Hamilton says. “Support comes from making sure the right amount of investment is being made in terms of resources, people and capital.”

Let the people who innovate concentrate on innovating. Let them concentrate on the future of the company, not on the present, by giving them what they need to do their jobs today.

“People in those areas need to have the time to focus innovation and not get pulled into today’s business challenges,” Hamilton says.

Removing roadblocks
As the leader, you want to be accessible to your employees but you don’t want an environment where employees constantly need to talk to you, because that probably means the company is stumbling. “Being accessible is critical,” Hamilton says. “Employees need to know they can access management to get clarification around their issues and opportunities. But if we’re (running the company) well, the traffic to my door actually goes down because people are spending more time working on their ideas.”

Hamilton takes the same approach to listening to employees that he does when he listens to customers: He tries to get the whole story. If there is an internal problem, Hamilton tries to enable his employees and managers to fix it whenever possible.

“I don’t want to be perceived as the only person around here who can remove roadblocks,” he says.

But sometimes, to remove a roadblock that is hindering the innovation process, his direct attention is necessary.

“In some cases, it might be as simple as giving someone counsel,” he says. “In some cases, there might be a member of the team that, for whatever reason, did not support the idea, but the employee made a compelling case to revisit it.”

To help bridge philosophical gaps, Hamilton goes back to another tried-and-true practice: Face-to-face communication.

“In those cases, I’ll bring people together and say, ‘Let’s talk openly and candidly and get all the information on the table and form an idea of why we’re going to move forward, or, if not, to give a good, sound reason for why we are going to stop activity,’” he says. Hamilton sums it up in one word: “Cohesive.”

“To me, cohesive means an environment where people can be candid, can be challenged, can challenge at any level in my organization, including me, but do it in a respectful manner,” he says.

The only way innovative ideas are going to be able to make it past red tape and roadblocks to become solutions is if everyone involved in the process feels enabled to add their input. The person who asks the tough question is, many times, the person who gets everyone else to think about something differently. “It builds on an idea to say, ‘We were going down that path, but someone had the courage to ask that tough question that caused us to think about it differently,” he says. “If you can enhance an idea based on input, you could have a real winner.”

Hamilton says that, to an extent, risk-takers are born, not made. Some people simply have the intestinal fortitude to question an idea when nobody else is doing so. But even the boldest employees need to know that management is going to take what they say seriously, or they will soon clam up as well.

Building an environment where employees are free to add their input and have it seriously considered is a key part of building their confidence in the company. Hamilton says that if those who work for you feel the company is committed to their success, they will feel committed to the success of the company. “I don’t want risk-takers for the sake of risk-takers,” he says. “But if I have people who are really committed to the success of the company and start to believe in their business, they are more inclined to say what is on their mind if they believe it can be better.” Hamilton says it pays to be repetitive when communicating with employees. You simply cannot hammer home enough how much you value your employees and their ideas.

Hamilton takes his message with him when he travels both domestically and abroad. He believes it is one of the most important tools he has to enable customer problems and employee ideas to come together and form solutions that can drive his company forward. “I’ve created the kind of company profile where, if our employees feel their leaders are not hearing them, when I wander around parts of the world, I’ll hear about it,” he says. “Sometimes I do hear about it, and then I’ll come back to part of my leadership team and, if necessary, I’ll give them some more feedback and counsel. “That’s so important, communication. Communicating what we’re all about until we sound like a broken record.”

HOW TO REACH: Dow Automotive, www.automotive.dow.com

Wednesday, 31 January 2007 19:00

High performance

When Earl Hesterberg arrived at Group 1 Automotive Inc. in 2005, the company resembled the United Nations more than a chain of auto dealerships.

Group 1, which operates 101 dealerships primarily located on the East Coast, West Coast and in the South, had 15 operating clusters but none were speaking the same operational language and none were really able to communicate with each other.

The problem resulted from the company’s roll-up strategy, which was quickly building the company’s scale, but the various parts weren’t operating as a cohesive unit.

“We had 15 clusters of dealerships that were all operating autonomously,” says Hesterberg, president and CEO. “That meant we had 15 different ways of doing things. So we needed a mechanism to really integrate the business and operate it with more uniformity.”

Hesterberg cut down on the layers of management by shifting from 15 operating clusters to four regions, each with its own vice president that reports directly to him.

The company’s leaders also implemented new operational software and financial practices, standardized across the entire dealership chain.

“We’ve begun to switch all our dealerships to a standard chart of accounts,” he says. “We didn’t even have them all on the same accounting format. Ford dealerships would use a Ford financial statement, Toyota dealerships use their own, and it was virtually impossible to compare performance across our dealerships on an apples-to-apples basis.”

Getting all 101 dealerships in the $6 billion chain to speak the same language has been instrumental in enabling Houston-based Group 1 to grow into new markets with minimal problems. Acquisitions are rarely easy, and Hesterberg says forming standard practices and driving them across your company is a key first step. But successful integration starts with acquiring a company for the right reasons, communicating who you are to newly acquired employees and finding the synergies to make your investment pay off.

Playing the field
Finding the right acquisition isn’t just a matter of making sure that you can align your practices. In fact, Hesterberg believes in giving his dealerships a great deal of autonomy in how they conduct their day-to-day business, so long as the metrics and technology provide a way to communicate and compare performance.

As important is making sure that an acquisition is going to fill a need your company has.

When Hesterberg and his senior managers are considering a dealership purchase, they look at two things before all else: market growth and brand growth.

“If we go into a new market, we prefer some ability for market growth, meaning a growing population,” he says. “If there is not a very strong indication of market growth, then we really have to be with one of the top brands in the industry, a BMW or a Toyota.”

It’s why Group 1 has concentrated growing in what Hesterberg refers to as the “smile around the U.S.” The vast majority of Group 1’s dealerships are located in 13 states down the East coast, across the Gulf Coast to Texas and Oklahoma, then up the West Coast, all areas with booming populations.

Hesterberg says once Group 1 has carved out a presence in an area, the goal is to begin building scale in that area. Having an isolated dealership or two in a city isn’t really cost-effective; the bang for the advertising buck isn’t good when you are advertising for only one or two locations in a city, and there is always the threat of being squeezed out by competitors who are more entrenched.

Hesterberg says the key to creating longevity in a market is to become one of the biggest fish in the pond.

“We always look at where we can make an acquisition that we can tuck into an existing operation and give us more scale,” he says. “We bought some dealerships in New Hampshire recently, about an hour north of Boston. We would not have gone into New Hampshire as an isolated venture, but we have eight or nine dealerships in Boston to give us a very powerful position in that market. We have management there, administrative help there and media buying power there.”

Once you have decided to pursue an acquisition, it’s important to find people who have local ties to the area and understand the customer base to which you will try to sell, and let them decide how to best market your business. “The dynamics of each market can be a bit different, the dynamics in terms of the demographics, the income, is it a luxury market, an import market,” Hesterberg says. “For example, some East Coast markets have been heavy lease markets, but Texas has historically not been a big lease market.”

Knowing your market and your customer base is critical, especially if you have investors looking for a quick return.

“We pay a significant amount of money for an acquisition,” Hesterberg says. “We need to start to generate a return on that investment immediately. We don’t intend to wait three or four years because that’s not fair to our shareholders, so we can’t afford to have a lot of trial and error as someone learns the market from the ground up.

“So experienced local management is a critical part of the success formula.”

Being the new boss
Another important part of the acquisition success formula is having employees who are on the same page. While having standard technology and practices can help assimilate employees quickly, it takes a great deal of direct communication from the corporate office to really give employees a sense of belonging to their new company.

Hesterberg drives Group 1’s business philosophy down to the dealer level before his company even assumes control.

“Recently, I’ve gone out and had dinner with all the dealer department heads prior to an acquisition deal closing,” he says. “It’s just to answer questions and show them that we’re real, we’re human beings.”

Throughout his business life, Hesterberg says that 90 percent of all problems he’s encountered have been due to a lack of communication from management. It’s why, from the get-go, Group 1’s management and human resources department are on-site, educating and communicating with the employees of a new acquisition.

The first order of business is to put out any rumor-driven brush fires within the employee ranks, before they turn into a raging blaze.

“They’re worried that everything is going to change,” Hesterberg says. “They’re worried about losing their jobs. That’s something we deal with early on, that we intend to work with the people who are here.”

If you’re making an acquisition, you’re probably purchasing it because it was attractive. That fact needs to be communicated to employees if you intend to keep them on board.

“When we purchase a dealership, we’re paying based on their current level of performance,” Hesterberg says. “We don’t want a dealership to go backward, so we generally keep the employee teams very much intact.”

In almost all cases, Group 1 is a larger company purchasing dealerships from a smaller entity, so the company attempts to make its new employees feel at ease by selling them on the positives of working for a large company. “Our HR department does some training early on,” he says. “We frequently find that by being a bigger company, we have benefits that hadn’t been available to some employees before, like a 401(k) plan with a matching employee stock purchase program. So that shows some of the positives of joining our team.”

After addressing the initial concerns of employees, Hesterberg says it is important to begin coaching them in the culture of your company right away.

Within several weeks of taking over, all employees have been trained on Group 1’s employee handbook and workplace harassment prevention, have taken drug tests and gone through background checks. “It sets the tone that you are working for a large organization with morals and values and ethics,” he says.

On the first day of assuming control, Group 1’s management gives employees a toll-free hotline number to report potential workplace problems. Complaints are personally reviewed by Hesterberg and summarized for the company’s audit committee, which meets quarterly.

The hotline is a way for company leaders to keep tabs on what is going on in the field. It is also designed to give employees a sense that corporate management is interested in what is going on in the field and willing to address problems. “If they’re uncomfortable with what’s happening, if they think business is being done improperly or people are being treated unfairly, they can call the number,” he says. “It can be completely anonymous. That way, there is a mechanism for people to communicate if something is bothering them. And it’s outside their normal chain of management. “Most of the time, going through your chain of management works. But sometimes, people perceive management as part of the problem. This gives them a way to report something without fear of retribution.”

Cross-pollination of ideas
Group 1’s leaders try to reach out to the company’s dealerships in multiple ways, especially in the first few months after an acquisition. But in the ensuing months and years, Hesterberg wants dealers to come to him.

Twice a year in person, and at least twice a year over the phone, Hesterberg brings all his dealer general managers together by domestic, import and luxury brands.

The meetings give Hesterberg and his senior managers a chance to find out what is going on in the field. It’s also a chance for general managers to speak to each other, spreading ideas across the organization. “They’ll compare performance data, financial statements and sales reports,” he says. “They’ll share ideas, they’ll compare performance numbers. We’ll also use the opportunity to train them.”

Hesterberg calls the general managers’ meetings Group 1’s main mechanism for sharing ideas. It helps paint a picture for what moves the company should make next.

Hesterberg says there is always strength in numbers when it comes to cultivating and spreading ideas throughout the company. You can’t have everybody speak at once, but the more minds at the discussion table, the better. “We reinforce our corporate values, we share best practices, we learn from each other,” he says. “That’s one of the advantages of having 101 dealerships. We have enough Ford dealerships, we have enough Toyota dealerships, that we can learn from each other.”

Hesterberg says that you shouldn’t expect all of your managers to have the same management style, the same demeanor or interpret every piece of information the same way. What you should expect is that they adhere to the same values and have high ethical standards. That’s the importance of communication. “We can’t expect 101 general managers to have the same personality or management style,” he says. “But we expect them all to represent the values of honesty, integrity and hard work that we have in this organization.”

HOW TO REACH: Group 1 Automotive Inc., www.group1auto.com

Friday, 24 November 2006 19:00

Rewriting the code

It was a message employees and customers might not have wanted to hear, but Bob Beauchamp knew it needed to be said: “Prepare for a storm, and watertighten the ship.”

It was 2002, and BMC Software Inc., a beneficiary of the technology boom of the 1990s, was foundering.

After 32 percent growth from 1999 to 2000, market shifts caused Houston-based BMC, and many other companies that provided technology solutions for corporate customers, to start to bleed money at an alarming rate.

BMC’s revenue started to decline in late 2000, and the backslide continued into 2001. “Our revenue declined 12 percent from 2000 to 2001, and 15 percent from 2001 to 2002,” says Beauchamp, BMC’s president and CEO since 2001. “Any time you’re in a large company that is going through a dramatic revenue decline, it’s almost a life-and-death situation. Statistics would show you that most companies don’t recover from that kind of revenue decline.”

The mainframe utilities and Unix tools markets that BMC had built its foundation on were turning from concrete to quicksand right before Beauchamp’s eyes. Something needed to be done, and fast.

Beauchamp sat down with his senior management and mapped out a plan that would not only save BMC from financial distress, it would identify an entirely new market in the technology solutions industry.

Trimming the fat
Beauchamp says the first order of business was the most basic: BMC had to maintain profitability. It was a tall task considering that the company’s revenue had slipped from $1.7 billion to $1.2 billion in two years.

Maintaining profitability meant, first of all, that BMC’s leaders had to identify what aspects of the business were nonessential and begin pruning them away. “We had to cast a critical eye on the noncore things we were doing, cut expenses and really, really tighten our cost structure,” Beauchamp says.

BMC’s leaders looked across the board and products, programs, people and geography. “We just had too much investment in everything, which is natural during a period of growth,” he says. “Every function of the company, we just had too many people.”

When BMC declined to $1.2 billion in revenue, it had about four times as many employees as when it first achieved $1.2 billion.

The company cut employees by eliminating services and exiting geographies. BMC left the storage management space and pulled out of countries such as Turkey. If a product or geographical connection was losing money or was not received well by customers, it was dropped.

The pruning of the unprofitable portions of BMC stabilized the company.

The next step was to start building in a smarter direction.

Identifying the space
The space in which BMC could operate in was wide open, but Beauchamp says the best course of action is to stick to what you know you can excel at. “We decided we are not going to go off into video games, home PC software and other things we really didn’t know anything about,” he says. “We decided we were going to stay true to the large enterprise customers we already supported.”

The key, he says, was to find a new market within large enterprise software that hadn’t already been exploited.

BMC’s leaders began a research effort that looked at the IT industry inside and out, not only who the industry was serving but how it was serving itself.

Beauchamp says a pattern started to develop. Across other industries, technology firms had developed software to manage, integrate and simplify day-to-day operations for a wide spectrum of businesses. “Companies like SAP and Oracle brought to the table well-defined processes, user interfaces, and most importantly, data integration,” he says. “The application space had gone from thousands of homegrown applications to standardizing on a tightly integrated suite.”

However, what technology firms had provided for other industries, it hadn’t provided for itself. “IT had put shoes on all the other children, but not on its own children,” he says. “The story of the cobbler’s children is a perfect metaphor. IT was still running with tens of thousands of home-grown applications.”

BMC had found a new market. Instead of being forced from its space by shrinking revenue, the company started to create a new demand curve for the space it was already in by providing technology solutions for customers in the technology industry itself. “First, you have to decide where you are going to play,” Beauchamp says. “Then you look at the change factors, what are the points that really drive customer angst. What is costing them money, revenue, expense, embarrassment, pain and brand image problems?”

From there, a company needs to look deeper to the causes of those problems, a major ingredient in deciding how to sell a solution to those customers. BMC hired consultants to help paint a picture of its customers’ revenue growth, market share opportunities and the overall competitive landscape of the industry. “We saw certain markets as being red hot, high-growth markets,” he says. “Within there, then you look for individual products you believe will drive revenue growth. We get very specific on what the customer’s pain points are and how to solve them.”

Winning over employees
Beauchamp says a vision for change is just that: a vision. The only way it can become reality is if the entire company buys in.

At BMC, the process started with an all-company meeting in June 2002. Still in the planning stages, all Beauchamp could tell his employees was that a change was coming. But it was an important initial step in getting everyone to buy in. “We had to change the company, one time, hard, which was to get everybody on board with a new business strategy and new service management,” he says. “It was a multiyear process.”

In that first meeting, Beauchamp told BMC’s employees that a major shift was coming. He didn’t get into details because the concept of BMC’s new market wasn’t at a point where it could be sold to employees.

After a year of work by company leaders, the plan was ready to be unveiled. “We came back and said, ‘Here it is. We’ve done acquisitions, we’ve begun to build them, but don’t stop doing what you’re doing. Just start learning the story,’” he says.

Beauchamp says a year after that, BMC started training its sales force to sell technology solutions to technology companies, producing the first real results of BMC’s rebound.

Getting those first customer wins is crucial because without them, a company cannot totally win over its employees. It’s something Beauchamp says comes with the territory of change. “A certain percentage of employees, when you say something, will say, ‘I believe you, let’s do it,’” he says. “A certain percentage will say, ‘I don’t believe you.’ Then in the middle is a big group that says, ‘I’ll wait and see.’”

No matter how much success a company generates, there will inevitably be employees it cannot keep moving forward. “There will be people that not only don’t believe in what you are doing, they don’t want it to be successful,” Beauchamp says. “They want to prove the old way was the right way. Sometimes, you just have to let them go, but fortunately, that’s not a large number of people.”

For the fence-sitters, results are what matter. The company’s employees must see that what they are working toward is having a positive effect. At BMC, the moment of truth came when sales-people started reporting back from the field. “Once our salespeople stood up and said (the customers) needed this, wanted this and liked this, and that they’re successfully installing it and using it, that they’re endorsing it, the opinions change very rapidly,” he says. “At that point, the skepticism leaves the room.”

The need to have every employee buy in to an idea is not an immediate one. When a major change is conceived, those closest to the top of a company are the ones who need to be on the same page. Lower-rung employees need to be instilled with a sense of trust that the company leaders will do right by them, so that when the time comes for them to jump aboard, more will be willing to do so. “At first, all I needed was the employees to know that we have a plan and hang on,” he says. “I needed them to have faith while a smaller group deployed those early customer wins.”

Balancing old and new
Things at BMC have settled down, and its financials are improving. The company posted revenue of $1.49 billion and net earnings of $102 million in fiscal 2006, compared to revenue of $1.28 billion and a net loss of $184 million in fiscal 2002.

Beauchamp says companies undergoing a full-scale change routinely commit one critical error. “A lot of times, those companies look at what they were doing as all bad, kind of the inertia of the old culture and the inertia of the old business is bad,” he says. “It’s not bad. It’s simply a remnant of what was once very good.”

While undergoing its shift to a new market, BMC did not totally abandon all of its former practices or products. Beauchamp divided the company into two broad areas, named “red” and “green.” Red was the area that dealt with the old practices and products BMC kept on board. Green was responsible for the new market and products.

Good idea, bad color selection. Beauchamp says employees working in the red area felt like they were stationed in a less-critical area of the company, stamping out the same old products, while those in the green area worked on the cutting edge. “They viewed red as a negative color,” he says. “It meant stop, it meant a warning. Green was all up and positive.”

Employees asked Beauchamp to come up with a new name for the red area. Company leaders settled on “gold.” “I asked our employees, ‘If we were in the gold business, which is more important: Gold coming from existing mines, or striking new gold?’” he says. “The answer is that one is not more important than the other. You need the existing mines to pay the bills, but you’d also better be prospecting for new mines.”

In fact, the gold area forms BMC’s backbone. Those working on new products occupy the company’s fringes as part of a system that allows BMC to test new products without putting the company at risk.

The company’s leaders fashioned a system that allows the research and development wing to develop and test new products and services without concern for how it will fit in to the big picture. The new product is kept separate from the larger structure of the company as its own project.

Once an idea has passed the R&D phase, BMC’s sales force takes the product to customers to see how it will be received. If it starts to catch on with customers, then it is rolled out to the larger organization.

Starting each new product as a separate R&D project allows the umbrella organization to remain stable while change is happening in small increments underneath. “We built small organizations designed to move very quickly, then build systems to on-ramp those onto the larger organization,” he says. “Larger organizations are not designed to move as rapidly. You can’t change them quickly without a lot of risk.”

HOW TO REACH: BMC Software Inc., www.bmc.com

Saturday, 28 October 2006 20:00

Local flavor

 Ten years ago, Little Caesars was a marketing force on the national stage. The company flexed its marketing muscle with national TV commercials featuring its cartoon mascot, Little Caesar, and his “Pizza! Pizza!” tagline, one of the most famous in the food service industry.

Historically a takeout chain that focused on maximum value, Little Caesar Enterprises Inc. was even attempting to broach the delivery market, where it would go head-to-head with other pillars of the pizza business.

But then a change occurred, says David Scrivano, a former pizza store manager who has been with Little Caesars since 1999 and president of the Ilitch Holdings-owned company since 2005.

In the late 1990s, the company disappeared from the national spotlight, refocused itself as a value-centered takeout chain and reinvented its marketing strategy.

“In the late ’90s, we decided to move ahead with a marketing strategy where we moved off national air,” Scrivano says. “We decided to move away into local-based advertising.”

While other pizza companies kept pouring their advertising dollars into national campaigns, Detroit-based Little Caesars decided to operate below that radar. It still formulates electronic and print ad campaigns, but those are meant for small, local audiences. Individual franchisees decide which materials they want to use to promote their stores.

It’s a marketing strategy that goes against the bigger-is-better grain of the pizza industry but one that has allowed Little Caesars to appeal to customers on more of a grass-roots level. To Scrivano, Little Caesars’ stores — which number in the thousands nationwide, though the company does not give out specific figures related to its operations or revenue — are the most important part of the company. The store is not only the place where pizza is made and sold, it is the customer interface.

Scrivano says the store managers and franchisees are the people who know their customers the best, so they should be given as much control as possible over how they appeal to customers.

The philosophy of pushing decision-making to the local level has grown beyond just marketing to include the menu, franchise opportunities and even how senior managers are trained.

Local tastes
At Little Caesars — which had an estimated $435 million in sales last year, according to Hoovers.com — Scrivano says corporate management’s job is to keep all stores, both company-owned and franchised, pointed in the same direction. The management teams oversees keeping the customers central, the ingredients uniform and the logo prominently displayed. Beyond that, much of what happens at the stores is in the hands of the store managers and owners.

In addition to placing marketing in their hands, the Little Caesars menu is also full of optional items. Essential items such as pizza and Crazy Bread are mandatory, but a store manager can piece together a large portion of his or her menu based on what is popular in that particular area.

As with the local ad campaigns, Scrivano says it goes back to appealing to customers on their terms, something that is essential for any business in a crowded mass market.

“We believe it is important to offer our franchisees options so they can pick up from the local market,” he says. “Our franchisees know their markets the best.”

Market research and surveys determine what items Little Caesars puts on the optional menu. Through sales figures and store feedback, the company’s research and development wing discovered that optional items such as salads sell well in the Midwest, while barbecue wings sell well in markets such as Kansas City.

Scrivano says the optional menu evolved as an outgrowth of the local-based advertising strategy. It has worked well for the corporate leaders and has been well-received by store managers because of its adaptability.

“The optional menu and local-based marketing campaign allows us to be more flexible and more quickly respond to market changes,” he says. “We can quickly turn around and give our customers what they are asking for.”

Communication matters
Scrivano says giving store managers and owners the latitude to manage their own markets is not an indication that Little Caesars’ management members are laissez-faire leaders. While they do give store managers a lot of freedom, they also expect a lot of feedback.

The company’s leaders rely heavily on communication from the store level to get a picture of how the Little Caesars brand is faring in a given market.

“Each day, I pick up the phone and call franchisees, or they call me,” Scrivano says. “I don’t think many days go by where we don’t talk to franchisees. We are in constant communication.”

Scrivano says he looks at his relationship with store managers and franchisees as collaborative. Input comes into the corporate headquarters from the store level, and problems and solutions are identified at the corporate level and communicated back to the franchisees, who might refine the ideas and suggest something else back to corporate.

Scrivano says it’s that back-and-forth that produces ideas and concepts that benefit an entire company.

“I think it’s extremely important to maintain communication both ways,” he says. “I always want to hear from the people in the field and what their needs are, and that will give me an opportunity to solve any issues that pop up from day to day.”

Scrivano says store owners and managers can also benefit from being exposed to each other. Annually, Little Caesars brings all store managers and franchisees come together for a national business conference, giving store leaders an opportunity to compare their numbers and performance. They find out which stores are bearing the most fruit and which ones are lagging. Allowing store managers and owners a chance to interact on a large scale allows them to push each other to do better.

It also allows a forum for the company to receive store feedback on a large scale. Some of the best ideas that get relayed to the company’s corporate leaders come from large gatherings of store leaders.

“At a business conference earlier this year, a franchisee told me she was having problems understanding our new customer satisfaction survey,” Scrivano says. “She told me she had an idea to train people on the new survey by using the Web. I made a phone call to our corporate headquarters, and now our franchisees can get live training on how to understand the new survey online.”

Training days
Scrivano says the corporate managers of Little Caesars aren’t judged based on whether they can bake a pizza or ring a sale, but that doesn’t mean they shouldn’t know what goes into running a pizza store.

To drive home the store-centered focus of the company, all new corporate managers must go through a one- or two-week training session at a Little Caesars store. During the session, the new managers set aside their dress shirts and ties for aprons and comfortable shoes and participate in every aspect of running the store.

The program was implemented by Scrivano after he became president in January 2005, and he, himself, was a part of the inaugural training class. He says he feels it’s important to not only teach incoming corporate managers the ins and outs of the business but to also foster camaraderie between those in the corporate office and those in the stores.

“It helps us bridge that gap that sometimes exists between the corporate level and the stores,” he says. “Personally, spending eight or 10 or 12 hours in a store revs me up. I love making pizzas and servicing the customers.”

New managers are rotated to various parts of the store over the course of their training period. They spend several shifts at the front counter interacting with customers and making sales, several shifts in the back with the pizza makers and several shifts with the manager learning how a store is run.

“They actually make the dough; they learn how the flour and water and oil are put together,” he says. “They move on and learn how a manager trains his crew. It’s an intense, two-week training session where they learn every aspect of the store.”

Scrivano says the hands-on training in the store environment is an interactive way to teach newcomers about the company. Instead of hearing about how the company does business in a classroom or seminar setting, new hires are thrown straight into the work environment that they will, directly or indirectly, be managing.

“I believe everybody we bring in must understand our business philosophy and understand what our business is,” Scrivano says. “This program allows our new managers to understand what our operating principles are, what our crew is like, what our customers are like, and to understand the core values of our business.”

Scrivano also believes strongly in continuing education. Once managers are educated in how Little Caesars does business, he sends them to seminars and trade shows to help sharpen their awareness of the industry.

“We really try to develop their expertise, then get them to learn and build on that by keeping them up-to-date on current trends within the industry,” he says.

Focus the strategy
Scrivano says that at its core, Little Caesars’ store-based philosophy is driven by a desire to carve a unique niche within the pizza business.

While other chains focus on delivery, which is based on the quickness of the store-to-car-to-doorstep process and counts the front door of the customer’s house as the primary interface, Little Caesars’ leaders wanted to go in a different direction, one that would take the company away from the crowded pizza delivery market and into its own niche.

Scrivano says what Little Caesars excels at is creating value for its customers. He wants Little Caesars to be able to produce a quality product at minimal cost and pass that savings on to the customer.

With that in mind, the company has approached the first decade of the 21st century with a renewed emphasis on low costs and takeout service, and the response has been positive. Scrivano says that every year since 2001, the company has experienced significant same-store sales growth.

“It’s crucially important for success in any organization,” he says. “You must find what works and stick to your guns. It’s not wavering and going on to the next big thing that everyone says will change the way you do business.”

To Scrivano, business is less about silver bullet ideas and more about performing the basics with consistency, day after day.

“I don’t believe in silver bullets,” he says “I believe it’s about mastering 100 things that are related to the core values of your company and focusing on blocking and tackling those basics every single day.

“It’s everything you do up to that which is the everyday managing of your business. Never take your eye off the ball.”

HOW TO REACH: Little Caesar Enterprises Inc., www.littlecaesars.com

Tuesday, 24 October 2006 20:00

Pipeline to success

 James S. Marlen has a growth lesson to teach other CEOs, a lesson he demonstrated with his own company recently: Sometimes, smart growth isn’t growth at all, at least in the short term.

In August, Marlen’s company, Ameron International Corp., sold off its coatings division, the largest section of the company. The sale trimmed the size of the company by nearly a third.

Although the move drastically decreased the size of Ameron, Marlen, who serves as chairman, president and CEO, says he looks at it as a case of getting smaller now to get bigger later.

Marlen says growing in line with your strengths is smart growth, and Ameron’s coatings business was no longer playing to a company strength.

“The reason we sold the coatings business was that it did not fit strategically going forward,” he says. “As a result, growth has become even more important at Ameron.”

While leaders of other companies might focus growth on one area, Marlen says he grows Ameron in many ways: internally and externally, domestically and internationally.

“Ameron is not a monolithic company,” he says. “We’re trying to enter new businesses with good growth potential and we’re also targeting external growth.”

At the strategy’s heart are two basic principles: A growth opportunity cannot stray from the area of expertise, and the growth opportunity must add value and profitability to the company.

Marlen’s strategy for the diversified pipe system manufacturer has helped spur it to the top of its industry. The 3,000-employee company netted consolidated sales of just more than $704 million in 2005, an increase of nearly $99 million over 2004.

Here are some insights into how he keeps Ameron focused on success.

Find growth opportunities
To Marlen, productive growth does one thing before it does anything else: It contributes to a company’s bottom line.

With that in mind, Marlen says smart business leaders carefully pick and choose their growth opportunities, especially with regard to acquisitions.

“You don’t want to have hollow growth,” he says. “You can grow a lot, but unless the margins in that business and industry are good, you need to take a second look.”

But finding a financial match is only the first step. The company must be able to pass rounds of research and analysis before it is accepted as a viable acquisition candidate.

Marlen says Ameron’s researchers analyze an acquisition candidate’s profitability, core competencies, the expertise of its employees and its culture, among other variables, before making a decision.

“We have a culture at Ameron that focuses on results,” he says. “The process is very important, but the results are really what drives the company. When you apply that test to growth, I think you can do very well.”

It’s that bottom-line-driven approach that helps Marlen maintain an emotional distance from any growth opportunity. One of the first things a CEO needs to learn is how not to fall in love with the idea of an acquisition.

Marlen says it’s difficult, but he fights his knee-jerk eagerness by reminding himself of how many businesses throughout history have poured money into a growth opportunity that ultimately failed.

“People tend to become overoptimistic, overenthusiastic and sometimes even take a romantic view of acquisitions,” he says. “In my case, I discipline myself to become emotionally detached from the process.”

Marlen constantly reminds himself of what a complex, pitfall-laden process acquisitions can be, of how difficult it is to maintain the right management structure and integrate two businesses properly. That, he says, helps remind him that he had better be really sure of an acquisition before he leads Ameron down that road.

Marlen says businesses that have succeeded in the past can gain a false sense of invincibility and are ripe for a fall if they don’t remember the principles that led to success in the first place. If you start thinking your business can go out, buy any company and be successful, that’s when something bad can happen.

“Falling in love with an acquisition idea is something that is very easy to do, especially if your financial structure is pretty sound,” he says. “You tend to spend capital without the rigorous analysis that ought to be made.”

In nearly 30 years at General Tire prior to joining Ameron, Marlen says he’s seen both the good and the bad of growth. In his business career, he’s performed about 15 acquisitions.

Marlen says failure, when it happens, is something to be learned from.

“Pain stays with you,” he says. “Business managers have to learn those lessons so they find out how not to arrive there again.”

Apply your expertise
Marlen says a company should be able to jettison a portion of its business that no longer falls in line with its vision, just as Ameron did with its coatings business.

Ameron’s marketers have brainstorming sessions in which the company’s identity and vision are regularly refined based on measuring market trends against Ameron’s core competencies.

In Ameron’s case, the company had developed expertise in the area of fiberglass pipe systems, so finding new ways to implement fiberglass pipe was a next logical step.

In a nutshell, coatings were out, wastewater pipe systems were in.

“You have to find those niches where you have a parallel position,” he says. “You want to stay close to your core competencies. If you start running too far afield with regard to growth, the risk of failure increases exponentially.”

It’s a message Marlen says must start in the CEO’s office.

“Again, you have to look at the fundamentals of your growth strategy,” he says. “It comes back to having emotional discipline and remembering that your businesses have to contribute to the bottom line.”

Communicate with management
If you want to grow effectively, you need a nimble organization. And one of the easiest ways to get that is to cut bureaucracy.

Ameron accomplishes that with a minimal number of executives.

“I’d say our organizational structure is very lean, which allows communication to be that much easier throughout the company,” he says.

Marlen calls his leadership style “interactive,” and he values having a company with a streamlined management hierarchy. Ameron’s top management includes no more than six people, which Marlen says allows him to communicate several levels below him with ease.

He says a flat or lean organizational structure gives a CEO fewer people to gather information from, which consequently helps allow that leader to keep his or her finger on the pulse of every area of the company.

While he tries to maintain phone and e-mail contact on a regular basis, he says he like to use face-to-face communication whenever possible and call meetings.

They are mostly informal check-ins, but once a year, Marlen gathers all of his top executives together for a status report on company growth. The leaders of each wing of Ameron must present to Marlen how that area of the company has progressed in identifying and capitalizing on growth opportunities.

“I ask them to present an executive summary of growth opportunities for the company,” he says. “We go through an analysis of what makes sense, what might work and what might not work. You prioritize them.”

While Marlen likes to meet with his senior managers often, he says he doesn’t like to talk too much.

He says that even though the messages a business leader must communicate are often complex and multifaceted, a CEO must simplify the message as much as possible. Too many words coming from the CEO’s office will cause the message to lose its significance to those hearing it, Marlen says. At Ameron, he tries to hone his messages down to the same simple, basic company concepts such as smart growth and producing value for shareholders.

“The leadership has to give the tone of those few messages you want the organization to focus on,” he says. “But you cannot give too many messages because they’ll lose their weight.”

Creative compensation
Marlen says a business’s ability to grow properly almost always starts in the human resources wing. To grow according to a vision, a company needs employees who fit that vision.

Ameron’s leaders are always on the lookout for employees who consistently bring initiative and energy to the business, and those employees are rewarded in Ameron’s performance-weighted compensation system.

“Track record is the best indicator of who is good and who is great,” he says. “After years of experience, you can begin judging people. But the results speak for themselves. You see the people that have the initiative, judgment and energy to grow businesses.”

Marlen says the best employees are the ones who are interested not only in company growth but also personal growth. They want to expand their careers as the company grows. People like that are motivated twice as much.

“Those people want more responsibility,” he says. “They want to succeed in business and reach the top.”

To keep and motivate those employees, Ameron instituted a performance-based pay system that takes into account how an employee performs on a year-to-year basis.

Employees have target incentives in place above their base salaries, as does about 50 percent of Ameron’s senior management.

Marlen says employees tend to respond more actively when they see the results of their work in their paychecks.

“I would say we have instituted a culture of meritocracy,” Marlen says. “That is a great motivator. If you do well, if your results are good, you will do well personally, and there will be growth opportunities personally.”

Marlen says compensation can never be undervalued. It can mean the difference between keeping and losing the best talent.

“Through my experience, I have found that in order to retain and motivate top talent, you must incentivize them,” he says. “Compensation is very important.”

HOW TO REACH: Ameron International Corp., www.ameron.com

Tuesday, 29 August 2006 20:00

Stan Bentley

 Change. Few words in business are more powerful or more intimidating, and change is one of the inevitable factors that evy business leader will have to deal with, says Stan Bentley, president of Diversified Systems. In his 34 years leading the privately owned, 400-employee printed circuit board manufacturer, he has had to adapt numerous times in an electronics business as notorious for breakneck-speed evolution as it is for its market volatility. Change has taught Bentley that a CEO needs to have the strength to lead change, and the stomach to make the tough decisions that come with it. Smart Business spoke with Bentley about leading change and adapting to it.

Get everyone to buy in.
The way you get your factory side and your office professionals to buy in to change is radically different. When you’re dealing with the factory side, it is reduced to equations and very detailed statements of facts and numbers and quantitative things where people can look at the numbers and make a decision.

When you get to the professional side of the house, you get into qualitative and, in some cases, discretionary items that are open for discussion and debate. In that case, you can’t write as precise an equation of the anticipated result.

Consequently, it’s very difficult to sit down with a set of figures and show what should happen. You have to believe in the process and you have to believe in your tools, and our experience is that professional people don’t do this. As a result, you get a wait-and-see attitude from your professionals, which flies in the face of a team approach.

You must get them to buy into the process of change, which means you must get them to participate in the creation of the process, not hand them the process. So the most basic concept of, ‘Let’s send a team out to handle this problem’ and then have that core group tell a larger group, ‘Here’s what we’re going to do’ seems logical, but it is precisely the wrong approach with a professional work force.

In our case, we take a very small core team that thinks of the task in a global basis. The core group then looks at every step in the process and divides it into a series of very small increments, then involve the professional people in each of those areas, working on various increments while the top-level team tries to tie everything together.

Cut bureaucracy.
Some folks do two very human things when it comes to change. The first is they want to make it all about themselves. They want to take their small piece of the process and turn it into the most important piece of the process.

That, reduced to its essence, is bureaucracy. If each department does that, you have bureaucracy in an eyeblink.

What the company leaders have to do is continually evaluate the output of these departmental teams and look at it against the total objective. If those in the departments have added a process that makes no sense, we must find a way to get them to eliminate that step.

You must also face the very real possibility that there will be casualties during this process, that there will be people who simply cannot deal with this change. They might be very valuable people, but if you cannot get them to understand the need for the change and get them to sacrifice for the greater good, they will either leave the company or you will have to ask them to leave.

Once you start on this process of change, you must be committed to a successful conclusion. It can be hard and incredibly traumatic at times.

Keep communicating.
You must communicate constantly in a time of change. There has to be something that your employees see that convinces them that there is improvement happening, because they don’t always believe it.

The first element of change is chaos. Chaos, to a person who is resistant to change, is proof positive that change is a bad thing. So you have just written a prescription that seems to have no solution.

If chaos is the first and most necessary element of change, and yet a person who is resistant to change would use the chaos as an example of why the change is not good, how can you ever get past that?

It comes back to trust and communication. At the end of the day, those two tools are the things that will win or lose the battle. You must have both.

If there is mistrust, the communication is irrelevant. If the communication is not there, the trust will break down. Those two elements must be there to give you the highest probability of success in a time of change.

Know that you might lose customers.
There might very well be customers who will not make this transition with you. They may have liked it the way it was, but if you do the proper soul-searching, you have to come to the conclusion that if you are correct about the need to change the culture and the market of your company, and you have a customer that does not believe that is important, one of you is wrong.

If it’s you, obviously you’re going to take your company down the tubes. But if it’s your customer that is wrong, they won’t be around. So are you really losing a customer, or simply impacting the timing of losing them?

You have to be very pragmatic about determining where a customer is in their life cycle. If you’ve built the same component for a customer for 10 years and they build a standard product and this product is sold into a very stable industry that hasn’t changed in 10 years, I would contend that product is in the waning years of its life cycle. Projecting the next five years at the same revenue would be very foolish.

We look at where we think customers are in their life cycles, and it helps us determine if we think they’re going to be there as we move and change. We look at things in terms of a global market, and a mature product is probably not dealing with a global market.

You have to throw out a lot of the stuff that most of us were taught 20 or 30 years ago. One of the big terms was customer lifetime values, what the value of a customer will be over the lifetime you have them.

I don’t know if you can make that kind of analysis now, certainly in our business, because the market might change faster than they are able to. We might lose them for no reason within our control. They simply couldn’t adapt and survive in a changing market.

HOW TO REACH: Diversified Systems, www.divsys.com

Friday, 28 July 2006 20:00

Fighting the current

When Pennsylvania was a river of departing jobs, Jonathan Brassington was navigating his company upstream.

Earlier this decade, with many jobs leaving the Keystone State, LiquidHub was one of a small group of companies that created jobs during the post-Sept. 11 economic downturn.

Since its inception in 2001, Brassington’s systems integration and technology consulting business has grown from 35 employees to more than 300, and its sales rose from $2.9 million to about $35 million.

Smart Business spoke with Brassington about how he creates jobs and finds the right talent to fill them.

How do you recruit and retain the best employees?
It’s spread among types of employees. There are a lot of IT services companies who have a percentage (of people) who are full-time employees, and then they might use subcontractors or hourly employees.

One of the things that we felt very early on was that because our focus is on technology solutions, we wanted to hire people full time and train them and indoctrinate them into our methodology, our approach and build a long relationship with them. So we made a conscious decision to hire full-time people.

After that, the first thing was how to build a company culture that would attract talent. We started to define a set of guiding principles on how we go forward to bring in the right talent. We asked ourselves, ‘Why would people work at LiquidHub, and why would they stay here?’

From the perspective of what is attractive and how do we get employees to want to be part of the company culture, we invest a ton of effort in training and put a ton of effort in practice areas.

How do you do that?
It’s very common in a lot of systems integration companies where you have employees out in the field and they never really get to meet each other, they never really get to build a bond with other associates.

We felt it was extremely critical to build a framework where people come into the organization, they have a career path and they feel like they belong to the organization, that they’re not just a part of one of our client teams.

We have a soccer team, we do paintball events, golf league activities. We put a lot of emphasis on that and not just having a transactional relationship with our associates.

We made a distinction early on that we would refer to employees in the organization as associates. We felt ‘associate’ was a more inclusive and entrepreneurial interpretation. We wanted everyone to act as a stakeholder and ambassador of the business.

We have a tagline that says, ‘Our business revolves around you.’ The ‘you’ refers to both our customers and our associates.

How do you make sure you’re hiring the best people?
Find references not listed by the candidate. Find someone whom the candidate worked with previously.

In a two- to three-hour interview, there are a lot of things that you might not pick up. But by talking to people who have worked with an individual for a long period of time, you get a lot more honesty from that kind of a reference.

We like to bring in a candidate multiple times. We try to avoid having only one interview with a candidate. We have them meet key people one day and other key people another day.

We like to see people and meet them over a couple different days, to see if there is an on day and an off day.

How do you empower employees to do good work once you have hired them?
One of our core values is entrepreneurship. We practice a concept of meritocracy, aggressively promoting and rewarding the best ideas regardless of where they come from.

That concept is a big part of our culture. We might form a project team comprised of senior associates all the way up to managing directors. But when you’re at that table, the associate might be the project leader and someone in a more senior position in the organizational model might be reporting to them. We have a difference between your role on the team and where you fit in the organizational model.

We work very hard to make that a part of our culture, to promote ideas and to reward them publicly. If you look at our eight directors, four of them joined the company as associates. So we reward and recognize talent and contributions.

HOW TO REACH: LiquidHub, (484) 654-1400 or www.liquidhub.com

Friday, 28 July 2006 20:00

Randy E. Velarde

 As with a successful quarterback, a successful CEO needs to be able to see the field and anticipate his next move. And to Randy Velarde, president and CEO of The Plaza Group, anticipation means looking months and years ahead. Velarde says success isn’t just measured by what his $130 million petrochemical marketing company reaps now; it’s also measured by what it sows. Over the years, he’s learned that good business relationships built with regular contact are the ones that yield lucrative accounts. Smart Business spoke with Velarde about looking to the future, and the importance of keeping an eye on your goal.

Measure success.
I think of success in two ways —one is the very objective measures of sales volume, sales dollars and, of course, net income. But I measure success in other ways, as well.

As I have been in this business for the last 13 years, I’ve often found some years where we are achieving more of the fundamental successes for the business, such as planting seeds and fertilizing those plants, which bear fruit in years ahead. Those are extremely important measures that we watch, knowing that in the coming years, the seeds we plant will bear fruit.

While you plant the seed by achieving an initial visit to communicate with a prospective account, the reality is you then have to maintain regular contact and provide them with examples of the services you provide. All the while you are not doing business; rather, you are confirming the kinds of activities you initially promised.

It could literally take months, possibly years, before the right confluence of events takes place that you have established yourself, you have maintained that contact, they have seen on a regular basis the services you provide, and they have made a decision to contract with you.

Review your goals.
We have a formal once-a-year process of establishing a business plan that looks at the upcoming year and establishes concise, clear and achievable goals for each of our businesses. We formally audit our results against that plan on a quarterly basis, but we look at it more often than that to see if we need to make adjustments as the year unfolds.

It’s very necessary for any CEO to establish that, and more importantly, to communicate that to employees in its totality so they can provide input and have a clear understanding of what should be accomplished.

We have constant communication with employees. We think that as events unfold in either a positive or negative way, that there should be immediate feedback to those involved. Formally, we get together once every four months and review our plan. We communicate with our employees, but also seek their advice on business.

A leader needs strong communications skills, both in the spoken and written word. It’s very important to keep your organization informed on your strategy, but not in too complex a way (so) that it’s confusing and makes it difficult to establish clear, concise, achievable goals.

If you cannot provide a clear and concise strategy, I think the organization can get off track and involve itself in too many different activities that could cause you to not achieve what you set out to achieve in the first place.

Establish a code of ethics.
A business leader should establish a code of ethics that creates an umbrella for how the company and all of its employees conduct themselves in daily business life.

I try to establish that code of strong ethics here, and following that, I leave the day-to-day business in the good hands of the very good people we have selected to run the company. We have provided them clear goals, provide them overall direction and strategy for the company, and let them go to work.

Recognize opportunities.
(A leader) is a type of person that has that capability to recognize when someone is knocking and to answer the door. It’s been my experience that it takes a particular kind of individual.

With others, frankly, opportunity could be banging the door down, and that person simply doesn’t hear it. But you should use all the tools at your disposal to recognize the knock at the door. It consists of being well-informed and using your contacts, your relationships and the Internet to stay abreast of opportunities that may exist.

Find employees who also recognize opportunities. In an employee, I look for a strong ability to communicate. That’s very important in business. The other is, try to ascertain if they have the special trait for hearing opportunity knock. I try my best to identify if that person has that trait or not.

We have grown in a very limited way. We are able to do our business with a small number of employees. We follow our motto closely: ‘Focus on what you do best, and outsource the rest.’

In our case, we focus on marketing. We outsource advertising, legal and payroll — all sorts of things we determined not to be central to core marketing effort.

Balance your life.
I can’t say there is a standard answer for balancing your life. There are individuals that make life decisions to invest quite heavily in certain aspects of life, such as work.

I don’t think one should go against their desire to do as they wish, but I believe much more in the balanced lifestyle. I make a concerted effort to manage all parts of my life in a way that ensures that I don’t get bogged down in any single one of my activities.

HOW TO REACH: The Plaza Group, www.theplazagrp.com

Saturday, 29 July 2006 08:15

The Morel file

Age: 48

Born: Richmond, Va.

Education:
Bachelor’s degree in engineering, Lafayette College; master’s and Ph.D., Cornell University

First job: Engineer

What is the first lesson a CEO needs to learn?
You don’t have all the answers. Believe me, you don’t.

What is the best business lesson you’ve learned?
Probably from my predecessor, Bill Little. He taught me to always do the right thing. Always do what’s best for your business and for the customer.

What is the one thing you can’t stand as a business leader?
Probably as far as public companies go, it’s the constant short-term focus. You build value in a business over time.

What qualities does a successful business leader need?
You have to be able to listen and develop the softer skills in managing people and identifying talent. You also have to be willing to let people make mistakes and trust people to do the right thing.

It helps employee morale if they see a little bit of humility from the CEO.