When Dr. Paul Klotman took over in 2010 as president and CEO of Baylor College of Medicine, the school had been losing up to $70 million a year — for the previous five to six years. The financial books were not a pretty sight.
A previous conflict had developed between Baylor and one of its hospital affiliates and a different pathway was chosen for the two. Unfortunately, it cost Baylor about $40 million a year.
“It was not huge in size as part of a $1.5 billion revenue stream, but it was a fair amount,” Klotman says. “We had a new financial challenge that presented itself, and because we were in the process of building some facilities right before the housing market burst, we had a significant problem with debt service and negative cash flows.”
But Klotman was ready to jump into the challenge for which he had been hired. He was no stranger to turnarounds. He had been involved in a major financial about-face at the Mount Sinai School of Medicine in New York as the chair of the Samuel Bronfman Department of Medicine. He moved the department to a top-tier academic program by expanding the faculty practice, increasing basic and clinical research revenue and focusing on the educational mission.
“I felt very comfortable in what had to be done,” Klotman says. “Taking the job was actually easy, because Baylor is such a fabulous organization and all the fundamentals were extremely solid. It was just an issue of dealing with the budgetary deficit and turning around the institution’s financial operational deficit.
“I had been at a Veterans Administration hospital, I was a federal employee at the National Institutes of Health for years as a scientist, I was at Duke University in the private sector, and I was at Mount Sinai in a very competitive clinical world, so it helped to have those experiences. I have to say as difficult as the situation was, there was very little that surprised me.”
Klotman set out on a path to initiate new processes to let the faculty do its own thing by following some traditional business principles — such as managing its budgets.
“It’s not rocket science, but it is surprising that it is not that common in academic organizations to worry about your margin, your expenses and making sure you’re maximizing your revenue,” he says.
“When I first came in, we focused on doing just that. We created zero-based budgeting that was all mission-based. In a very short time, within two years, we went from a $70 million deficit on an annual basis to where we are basically cash positive.”
It wasn’t just a matter of spreadsheets and figures. A change in culture from varying processes to one with solid business principles is an unsettling process, and is indeed sometimes not undertaken because it is so disquieting.
“I think one of the hardest parts is gaining leadership’s support of converting to the business sentiments,” Klotman says. “All of the leaders were supportive. All of them were willing to give it a shot. We would never have turned it around as quickly as we had if it weren’t for the leadership of the chairs, the senate directors and the faculty.”
Here are Klotman’s keys to stem the bleeding at Baylor and engage the leadership in new types of financial management.
Face the situation
One of the things that a crisis does is that it gets every employee’s attention. Once the stark news is delivered, the workforce should be able to know and understand the financial realities.
“The crisis allowed us to change the budget process at a time when it otherwise might not have been very accepted,” Klotman says.
Unfortunately, keeping the status quo is not an option. There is going to be change.
“When the boat has to go in one direction you’ve got to have everyone rowing in the same direction,” he says.
Some organizations may call in a consulting firm to dissect the financial and management processes and it can be beneficial. In other cases, the analysis by an outside group is just that – an outsider’s look at internal problems.
“Before I arrived, a consulting firm had been there, and I would say the faculty and leadership were probably not as responsive to the consultancy, because the consultants didn’t have any of the same experiences,” Klotman says. “You could see the cultural rift. When I first arrived and saw the interaction with the consulting group, which actually did a fine job in getting us in the right direction, you could see the disconnect between faculty and leadership and the consulting group, because they did not speak the same language.”
The most important action to take as the first step in the cultural makeover is to be transparent in all the processes.
“Show the data,” Klotman says. “If you show them the information, there are not a lot of arguments that you can have about your situation. If you’re not transparent about it, it’s very easy to blame everybody else. But if you just are transparent with the data, it’s simple to establish accountability.”
But transparency is something that is very hard to get if your data is disorganized. If it lacks uniformity and completeness, it is crucial to get the data in order.
“Getting transparency may be complicated, because there may be a lot of dollar movement from one bucket to another bucket,” he says. “Part of it is where you assign expenses to the right unit — making sure that you are allocating expenses correctly, and that you are attributing revenues to the right sources. Otherwise you can’t make good decisions.
“Part of our first year was cleaning up that kind of data — and we still have issues with it today.”
The better and more accurate the data is, the better you will be able to manage your financial situation. It may take a year to get the data to the point so that you can provide accurate information about your mission – so accurate utilization of data is needed about billing and collections, efficiency processes, revenue, expenses, space density, etc.
“There are hundreds of metrics that you can do,” Klotman says. “Once we collated all the data, we were able to create a report that all the leaders get. Have your financial people help them interpret that, then get together quarterly and review it together. It’s something we call Numbers Day.”
Holding a Numbers Day is an effective way to review your mission-based budget. Any department or division of a business should earn its operational budget based on its performance the year before.
“Everybody gets to see all the data, including where everyone sits financially so it’s completely transparent,” Klotman says. “If there are disagreements about the data, discuss it. It’s an iterative process so they can ask questions about it; you can make sure that it’s accurate.
“But the main thing is that it provides the leaders with management tools so they can then break it down by department or mission base, look at their own business unit and see how they can improve it.”
This is an obvious key factor in driving improvements. If you measure processes and performances and show your managers, they will have the tool to improve matters.
“If you do it in a way that everyone sees the data, then it is hard to really argue with,” Klotman says. “That’s why it’s an iterative process. You need to have that public forum where people can discuss it.
“It also helps to unify everyone with the understanding, ‘Well, these are the things that are important to executive leadership because they are measuring them.’”
Most of the leaders should be happy to have the data. Initially there may be some arguing about its validity. Ultimately, it provides them with management tools — and it also helps C-level executives understand who can manage, because some of them use the data very well and improve their operations and others just won’t get it.
“You can see that in the long run you may have a certain number of leaders that probably have to be replaced,” Klotman says. “The point is that you are giving them tools to use. There should be no one who really objects to the data.”
Communicate and get feedback
You’ve heard it over and over. Communication is critical for success in any organization and even more so in large ones. The most effective approach lies in the old adages that one size does not fit all and the more, the better.
“You will need to focus on your internal communications to reach more people,” Klotman said. “We had certain levels of publications before, but we created a whole new set of ways to communicate internally from hard copy to Web-based publications.”
He also used town hall meetings where he regularly met with groups and held small staff meetings.
Despite all those things, you still may have issues with communication because each form of communication only hits a certain population.
“We will have a town hall meeting where we are thrilled because 200 people show up,” he says. “Well, we have 7,500 employees. So we have to find multiple ways to constantly say the same thing and get the message out. Of all the things that you will face, I think communication remains one of the biggest challenges.”
In addition to finding other communication routes, you can create feedback committees to represent departments or specialties.
“You can do this through input committees; we have those that represent clinicians, researchers and even students,” Klotman says. “We combine in a council so we can get feedback from the various constituencies and that helps inform us of the kinds of communications that we have to give back to them.
“One of the great things that our director of communications has been able to get members to do is to come with both positive and negative statements about the institution so it never turns into just a complaining session.”
This is extremely helpful in figuring out the things your organization does well in addition to the things you do poorly.
“You’ll get both the benefit of knowing you should continue to do certain things because they are working, and you’ll learn what things aren’t working well so you can begin to focus on them,” Klotman says.
“But you can’t fix things unless you get feedback about the problems, and if you look at the most highly functioning organizations, they almost always have a very robust feedback system where line employees, people on the ground and the rest, can send feedback to you about problems.
“We’ve received individual complaints from staff across our organization where I would say that 95 percent of the time we immediately fixed the problem,” he says. “We’ve had things like the glare in a window where all we had to do was install a shade.
“These are the things that if you create a culture where people feel that they can give you feedback, then you can actually improve things much more dramatically than if everyone was waiting around for a CEO to fix a broken lock.
“You want people to actually give you legitimate feedback about things that are broken and the processes that don’t work, as long as they understand there are some things that you can fix and some things you really can’t.”
Your employees should understand there is no risk in reporting a problem, that there’s no punishment for saying something is broken.
“My favorite example is the aircraft carriers of the world that function with 19-year-olds in the most dangerous, high-risk places where they have almost no accidents,” Klotman says. “We are in health care and education, and every day, we screw up about 100 things, so we ought to be able to do something better. Part of the difference is the culture in the aircraft carrier: everybody reports a problem.”
Give merit rewards
While a new management system and better ways to communicate will go far in helping an organization begin to turn around, a rewards system will help it even further. With the new data available, metrics can be established to ensure that goals are being met.
“You take your leaders and based on their ability to manage their margin and the mission values that you have, allow them to pick a few metrics that they think are important in their own particular area so they can earn bonuses based on that,” Klotman says.
You can implement this as far down the labor ladder as you want, the lower, the better.
“Once again, this is to get them in line with upper management,” he says. “That way it’s a self-correcting ship. Middle management is really important in great companies, and you need middle management to be active managers to make sure they are going in the direction that you want.”
Give your employees 10 things that you want to have happen, and say, “You pick your four, and we will measure you on those.”
“There is one collective goal: The organization as a whole has to be on a positive margin for you to bonus the leaders,” Klotman says. “People earn their budgets and they earn their salaries. If you’re on margin, and if the departments are on margin, then there will be bonuses available based on producing results that are a combination of ones the CEO picked and ones they have picked.
“As I mentioned before, one of the keys is having things that you can measure. Make sure that you create metrics that can show whether you are getting better or you aren’t.”
How to reach: Baylor College of Medicine, (713) 798-4951 or www.bcm.edu
Paul Klotman, M.D.
President and CEO
Baylor College of Medicine
The Klotman file
Born: I was born and raised in Cleveland, Ohio. My father’s from Cleveland. My mother was born and raised in Galveston, Texas. I went to Western Reserve Academy in Hudson, Ohio.
Education: University of Michigan. I studied zoology and entomology. I went to medical school at Indiana University. You may wonder, I followed my parents — and got in-state tuition wherever I went. I also trained at Duke University Medical Center.
What was your first job?
I was folding pants as a 16-year-old in downtown Detroit. It was a very popular African-American suit store. I also was a day camp counselor there during the 1960s’ race riots. I was right there, and it was actually a wonderful experience. They never touched my car — I was providing a service to the community.
Who do you admire most in the business world?
There are a couple of people that I think are really interesting. One is Tom Kaplan, who I met in New York and who founded Panthera Corp. He’s probably the biggest leader in the gold movement. I’ve gotten to know him personally, and he is just a really remarkable person. The other person that I admire greatly is Norbert Bischofberger, who is the number two person at Gilead Sciences Inc. Of all the people I’ve met, he’s one of the few people who just cares about understanding everything he can to make a difference to help people.
What was the best business advice you’ve ever received?
I know it seems silly but the importance of cash. The CFO at my old organization was really, really talented, and had a huge role in turning around the old hospital focusing on the details of your cash position.
What is your definition of business success?
I view my role in every place I’ve been as a steward of the program, and I think your success is if you leave the place better than when you came. That’s not a measure of personal success; it’s not a measure for a for-profit company but for a not-for-profit organization. I think there is a level of stewardship that is greater than in other areas, and I think that your responsibility is to improve the institution.
When he launched the electronic recycling business e-Cycle, Christopher Irion was confronted with how to continue triple-digit growth while building a best-in-class culture for the company. Seven years later, that’s still his major challenge.
“I feel blessed that we can grow over 100 percent per year, but as opportunistic as growth is, it's also a big challenge for us.”
Irion realized that the solution was to find the right infrastructure.
“One part is getting a management structure in place to support growth,” says Irion, CEO. “As an example, when we had one account manager who reported up to me, it worked fine. But now we have 85 employees, so we have more supervisors. So putting the right management structure in place to allow for growth was key.”
Smart Business talked with Irion about finding the passion and the right people to overcome growing pains.
Q. What are some of the steps in managing growth? How far do you look ahead?
A. From a managing standpoint, you need to look six to 12 months out in addressing growth issues. So knowing that you may have triple digit-growth again next year, you know that based upon that, you are going to be getting — in our instance — more than 20,000 to 30,000 phones on a daily basis. You need to start putting the infrastructure, the people, the processes in place today in order to not get bogged down knowing what is coming ahead.
Q. So you add more supervisors and processes to deal with growth, but how do you find employees who can deal with it too?
A. You have to constantly recruit. In the interviewing process, the way you look at it is you are not interviewing a prospective employee. It's a 50-50 equation. They are interviewing you as much as you are interviewing them. So when you sit down and recruit employees, you are not looking at it like it is just a decision to bring them onboard. You communicate this as you tell them that to be a good cultural fit, you want them to ask you just as many interviewing questions about what you do and why they should come work for you as you ask of them why you would want to bring them onboard.
So with that, you determine that for any employee-employer relationship to work out well, expectations need to be set and prospective employees need to understand what your goals are and what your culture is, and this is the type of place that is a mutual fit for both parties.
Q. Is there an essential attribute that a company founder needs to have when building a company?
A. When you are first starting a company, you're not sure if it's even going to get off the ground, or you may be working until 2 a.m. every night, because there's only one or two of you who are even at the company. And you're wondering a year down the road whether you can make payroll or not, or how you're even going to find your first client.
It's that passion and that love you have for what you do that is going to get you through the founding of the company. When you are sitting in front of your first prospective client, they are going to see that passion in your heart and in your eyes, and you're probably going to win them over, because if you are as passionate about what you're trying to accomplish, then that passion is not only going to spill over to your clients, but it is going to help you recruit people to join your company and share with that passion you are trying to accomplish.
When you hire someone, the training is all around who you are, what you do and what your belief system is — what are your core values of the company. First and foremost — and every company says this but I don't essentially think it's true all the time — always do what's in your client’s best interests and build that within your culture.
How to reach: e-Cycle, (877) 215-5255 or www.e-cycle.com
Ron Calhoun was planning to discuss plans for his company’s 100th birthday back in 2006 when the discussion with the board of directors took on a more serious note. After the birthday plans were nailed down, it was time to talk about the future ownership of the wholesale distributor of residential building supplies and HVAC equipment.
The second generations of three families owned the company that was founded in 1907, but no third generation descendants had an active role in the business.
“We were looking to dilute the stock down to the third generation,” says Calhoun, president and COO of Palmer-Donavin Manufacturing Co.
That was not the best scenario for continuation of the company — it made it too likely that the company would dissolve.
Palmer-Donavin was doing well enough. Revenue for 2011 was $163 million, down a bit from a high of $174 million previously, and better than 2010’s $147 million. About 230 are employed company-wide.
Calhoun got to thinking and remarked on how much his predecessor, Bob Woodward Sr., put an employee focus on the company during his 60 years with the company.
“The culture of our company is very much an employee-oriented culture that he developed through his policies and compassion for the business and people,” he says.
“We talked about where a company goes. Do you go to a private equity firm? Do you go to a strategic buyer, and then what happens to the company, what happens to the management and the people?
“I think from our ownership and board perspective, they wanted to maintain the integrity of the company and the people, and felt an obligation to management and the people to see that the company could go forward.”
The proposal that was the best fit was an employee stock ownership plan. It would be a way to give back to the people who helped build the company. After talking to a number of people in the industry who had taken their companies in an ESOP direction, it was time to decide.
The leadership settled on the ESOP as a succession plan for Palmer-Donavin. The company was sold in 2007 to the ESOP and went from being 100 percent shareholder-owned to 100 percent ESOP-owned private company.
“It’s been interesting along the way, and because of our past, I think we transitioned into it very well, and we got everyone’s goals aligned,” Calhoun says. “We have been very successful since.”
But just because the papers had been signed doesn’t mean the work is over. Here’s how Calhoun faced the challenges ahead of him.
Make the ESOP fit
From the perspective of a company’s vendors and customers, the transition to an ESOP is virtually invisible. But from the board of directors and managerial areas, it is quite a bit different.
ESOPs are rarely used to rescue a company in financial trouble but are most often used to provide a market for the shares of departing owners of companies, to reward and motivate employees or to take advantage of loan incentives to acquire new assets in pretax dollars. ESOPs, in nearly every case, are a contribution to the employee, not an employee purchase.
In preparation for the transition, company owners usually will need to hire an attorney and an investment banker to appraise the company, set a value on its shares, put together a share allocation schedule and arrange financing if needed.
Once the Palmer-Donavin board of directors voted to go the ESOP route, one of the next steps was to hire a trustee who would represent the employee-owners when voting.
“She represents the ESOP employee owners,” Calhoun says. “She votes their stock and is completely independent of the board, so she provides a true independence in the association of the employee owners of the company.”
When selecting a trustee, it is a matter of hiring a pro. Through the process of interviewing, you should be able to find a professional trustee to meet your needs. Then take him or her through a meet-and-greet process.
“You should go around with your trustee and your chairman of the board to employee meetings to tell them about the changes that are coming — and that the decision was made to sell the company,” Calhoun says.
An administrative committee should be formed that is responsible for the management of the ESOP and the shares. They will work closely with the trustee and keep the trustee informed of business concerns. They work together as far as share redemptions and things of that nature and any reporting that is necessary.
Most important of all, the trustee votes for the shareholders and attends the annual meeting of the board of trustees. This is one of the major points employees will need to know.
“The trustee votes on matters on behalf of the employees; for instance, the trustee would vote for the election of directors representing the employees,” Calhoun says. “The trustee votes if there is a decision to sell a majority of the assets of the company or a major event.”
The Department of Labor and the Internal Revenue Service require an annual valuation of the shares and the trustee hires a third-party evaluation team to perform this duty.
The most common method to allocate the shares to employees is in proportion to their compensation, although different formulas may be used, such as years of service or a combination of the two.
Another question to be answered is when the employee becomes vested in his or her shares.
“What we did — that the trustee and our attorney said we should not do but we felt that going through this transition we should — is that we gave pre-ESOP vesting to all employees so the vesting period on the ESOP is six years,” Calhoun says. “They recommended that we take that and have every employee start over at the time we implemented the ESOP, and we just didn’t feel good about that, and we allowed them their previous time with company to vest. So if they were with us six or more years, their ESOP shares vested at 100 percent when they received them.”
The company leadership wanted to continue the tradition of being an employee-friendly organization.
“The culture of our company has been an employee-oriented one,” he says. “Bob Woodard had what we called an appreciation plan. If the company was profitable, all of a sudden all of the employees would get an extra week’s pay or a bonus would show up in their paycheck, and they didn’t know when it was coming. It was just kind of random.
“Now with the ESOP contribution, shares get distributed every year. It is really kind of based on the same thing — shared distribution is based on each individual’s income level but done on a regular basis.”
Educate the employees
One of the largest benefits of an ESOP is the ownership culture and the pride that the employees take in being employee-owners. While some employees will feel the honor right away or early in the transition process, others may be doubtful of the benefits and will need time and attention to work it all out.
“The challenge for the company is how you educate the employees to understand what the ESOP is,” Calhoun says. “It is a very difficult concept for everyone to grasp, so we spent a lot of time on it.”
One useful tool is a communications committee that will take on the assignment to tell employees on a regular basis what is happening with the company and the ESOP.
“We publish what we call The Owners’ Manual every quarter,” Calhoun says. “It talks about the different aspects of the business and different educational pieces that we put in there to help the employees understand better what’s going on with the company, what’s going on with their investment in the ESOP and the business strategy.”
The first message to be communicated is that the biggest advantage of an ESOP is that it will offer employees the chance to create the ownership culture of everyone in the organization.
A communication tool that Calhoun found helpful was to set up a company intranet site to encourage questions from employees about the ESOP. These are posted on the site with a response, usually from the human resources department or someone else in the organization that has more expertise in an area.
“I think there were a lot of people who were very nervous about it, that were skeptical. But I think hopefully those concerns have been satisfied over time,” Calhoun says.
“It’s a learning process. As far as each year when we have to go through like the redemption of stocks for people leaving, those types of things get a little cumbersome and you want to make sure that you do that through the right process. It’s very regulated.”
When employees leave the company, they receive their stock, which the company has to buy back from them at its fair market value.
Efforts to spread the word about the ESOP should be frequent and creative.
“You can do different things such as lunch with the CFO, to small individual meetings, to having an ESOP committee, which is made up of employees from all the different areas and sections of the business,” Calhoun says. “They meet at least on a quarterly basis. They are charged with doing some things to bring an awareness, and ownership awareness among the employees. They have come up with some different types of games and things that can be used at company picnics or all-employee meetings that help communicate the message.”
Increase your company value
For a company going through a recession, having an ESOP adds a whole new dimension and a new tool to operate the business.
“Our business went down from a high of $174 million before the downturn to $147 million, and during that time we had 320 employees; we are down today to 233,” Calhoun says. “Many of those changes were just through attrition, but we did have everyone look at their departments and evaluate what are the tasks that we need to do, and what can we do to improve ourselves and where we have redundancies to try to cut out that duplication.
“I think through managing through that type of a downturn in our business — everybody focused extremely well in that and agreed to take on more than their share to keep the ship going forward. It was a pretty seamless transition through that, and we were able to maintain our profitability through those times.”
In the long term, ESOPs provide a convenient way to which bonuses can be tied. A rewards-for-profit plan focused on return on assets encourages employees to meet goals and rewards them when the goal is achieved.
“A rewards-for-profit plan replaces the typical profit-sharing plan,” Calhoun says. “Initially, employees had been able to see the company value grow because of debt repayments. Now it’s just like when you own a house, you build up equity by paying off the mortgage. Well, our mortgage is paid off, so we now have to increase the value of the house. We’ve got to see how we can grow our top line revenue and our bottom line profits in a sustainable way that will increase our value.”
How it works is an ROA or a profit objective is set by the board, based on abilities. It runs on a continuous 12-month basis and is paid quarterly to the employees.
“Then based on a formula, whether you are at 100 percent of the goal or 125 percent of the goal, the employee gets one week’s pay. If you are at 90 percent, it’s 90 percent of one week’s pay. If you are at 150 percent, it’s 150 percent of one week’s pay. It’s been very effective.”
How to reach: Palmer-Donavin Manufacturing Co., (614) 486-9657 or www.palmerdonavin.com
president and COO
Palmer-Donavin Manufacturing Co.
The Calhoun file
Born: West Lafayette, Ohio, just east of Coshocton
Education: Ohio University. I got a bachelor’s degree in business administration from the College of Business.
What was your first job?
For my very first job out of college, I was a bartender at Maumee River Yacht Club. I was able to network that into a sales representative position for the National Gypsum Co., selling drywall in the Columbus market.
What was the most important business advice you ever received?
My mentor and former company president Bob Woodward kept saying it’s the people who make the company and the company is nothing without the people. I think that’s so true. Also, without integrity and honesty, you have nothing. You have to have integrity and character in everything you do.
Who do you admire in business?
Outside of Bob Woodward, I think one person I admire most is probably John McConnell of Worthington Industries. Actually, my father retired from Worthington Industries. He had always been an hourly factory worker all his life and went through working on union organizations and went through strikes and closing of facilities. He got a job later in life with Worthington and retired there. He always respected Mr. McConnell. The policies and programs the company had for all their employees created quite a loyalty among the employees and allowed my father to retire. He is 85 today and is and doing well — I think it’s the culture that is built within an organization. I recently was fortunate enough to talk to one of the board members and get some insight as to how they did some things.
What is your definition of business success?
Business success is creating a vision that people can trust and fulfilling that vision where everyone prospers.
Doug Brown beams with pride when he compares his company, Fusion Alliance Inc., to the industry statistics for delivering successful information technology.
“Statistically, 70 percent of IT projects fail or never go live,” he says. “In the last two years, we have been a successful 98 percent on time and on budget.
“Ninety-eight percent is obviously off the charts in the abilities of IT solution providers,” he says.
While Brown, founder and CEO, is understandably proud that his company has been the top one in its segment since 2000 in Indianapolis, he knows it took a lot of solution-based work.
“It takes connecting the right people and having a good internal process to take business opportunities through the process of solution visioning to the technical aspects of the solution and then to the solution builder,” he says.
Smart Business spoke with Brown to find out how to deliver successful solutions.
Q. What is the role of leadership in achieving a 98 percent success rate as you did?
I believe that effective leadership has the ability to see problems or challenges before they become a serious issue. The leaders are able to identify the root cause of a problem versus the symptoms.
They also are able to proactively define what needs to happen to deal with a problem. Businesses face challenges every day. The ones that identify them early and are effective in driving the necessary change to deal with them proactively are the ones that succeed long term.
Q. What are some of the other keys to successful solutions?
It’s really the combination of people, process and the right systems and tools.
You have to get very good at life cycle management, scoping projects and having requirements designed and constructed all the way through quality assurance.
But a major key is people with the right experience. You should identify risk early, and you have to be very good at managing and mitigating risks based on experience and good process. That’s the key: really good, experienced people along with really good process and quality reviews through the life cycle of a project. Then make sure that you are identifying credible risk, and you’re mitigating that risk. You will need a pretty exhaustive checklist to go through, before you even bid on projects, to assess risk. Put that in your proposal: ‘Here are the risk areas we see with the project, even going into it.’ So create customer awareness early.
Q. What approaches should you follow to ensure that good, experienced people get the job done?
Have a clear vision for the organization and a business plan with clear and measurable objectives and goals.
Have roles and responsibilities of leadership and the employees clearly defined.
Company leadership should have a servant-leadership management style.
Executives should demonstrate that employees are truly empowered to execute the plan. The role of executives should be to mentor and guide employees in the empowerment model.
Living your core values every day and creating a culture of integrity, ambition and a desire to serve your customers is foundational to long-term success. Challenge your employees to always be asking how they can create value for your customers, the organization, their peers and their career.
Finally, employ good people. Good people follow good people. The brightest talent enjoys working with other talented professionals on interesting projects. They like to deliver solutions that have an impact on customers and preferably society as a whole.
Q. You said businesses face challenges every day. How does this impact the ability to drive a company?
I think it is critical to the best of the organization to carry around the vision and then driving that through a business frame that’s very metric-driven ? people know what we’re measuring and what we are trying to achieve. That is a key to driving an organization.
Another point is to live your core values every day ? a culture of integrity, ambition and desire to serve your customers. A lot of companies say that but the staff must see it when you live it versus when you don’t, so I think when they see that consistently, that you’re living those things every day, that’s what really gets them to buy in to the culture.
How to reach: Fusion Alliance, (317) 955-1300 or www.fusionalliance.com
Dick Giromini had never seen the likes of it ? a drop in business that would bring just about any company to its knees.
Giromini, president and CEO of Wabash National Corp., was in shock as he and other executives in the transportation equipment industry saw the recent economic downturn cause nearly an 80 percent drop from the peak in 2006 to the sinking operating levels in 2009.
His challenge was one of survival. In the first quarter of 2009, Wabash National sales dropped by more than half from the same period in 2008. The manufacturer of flatbed trailers, dry freight vans and refrigerated vans wanted to avoid what other companies ended up facing ? a restructuring filing.
“We were burning cash. It was really trying to find a way and a means to carry the company through the toughest period it ever faced,” Giromini says.
All the traditional cost optimization moves were made, including consolidation of plant operations and idling of work locations. Unfortunately, some 40 percent of the salaried work force and nearly 70 percent of hourly employees were laid off.
A shared-sacrifice approach was taken with the remaining workers: senior executives took 17.5 percent pay cuts; all the rest of the salaried workers took 15 percent; and hourly workers took a 5 percent pay cut.
“However, the drop in volume required us to do even more,” Giromini says.
What he did next ? to keep the company operating and indeed to rebound ? was to secure a private equity cash infusion of $35 million.
“We met with many potential investors and went through an assessment process. A number of them made investment proposals, we selected one and then went forward.
“The process took several months. It was nip and tuck as we continued to manage cash availability to be able to continue to pay suppliers, and I give a lot of credit to them with their extended payment terms as being part of the solution that helped us get through this.”
It was the final touch that saved the company, and after 14 months of astute management and economic recovery, Wabash National was free of its commitment to the private equity firm, and was back to being a public company. Many laid-off workers returned to work.
Here’s how Giromini took the steps to douse the fire that was burning Wabash National’s cash and injected fresh air into the $1 billion company.
Get the data and be decisive
When faced with financial challenges, you cannot afford to stall or appear uncertain of what to do.
“One of the most important things I learned early in my career was to be decisive,” Giromini says. “You can’t be afraid to make the decisions. You have to collect as much information as you can, but there is an element of gut-feel that has to come into this and also knowing that you’ve got to move.”
Taking a long period of time, for instance to wait and see what the market will do or the fear of acting lest it be a mistake, can be detrimental.
“I had one boss who would use the expression, ‘paralysis through analysis,’” he says. “That’s the one thing you have to avoid in business. You have to be able to collect as much information as possible, but you have to do it in an expeditious fashion. Then you’ve got to go.
“Never be afraid to make decisions, because you’re probably making far more decisions than the fellow who is afraid to make them since he may think he is batting 80 percent on decisions, but only makes 10 decisions. You make 100 decisions, bat 50 percent and you make 50 good decisions in that light.
“That’s the way I’ve always tried to operate, and I think leaders need to be decisive and act fast when faced with that kind of challenge.”
You’ve got to trust your judgment on that, and take the actions and move forward. That is critical to your success. Employees have to see that you are in charge and have a plan to execute.
“They have to buy in, they have to understand the burning platform that exists, the need for quick action, the need to buy in, and so I think it is very important to keep them informed about the process to assure that the support is there to be able to implement the actions necessary,” Giromini says.
Get a grip on fear and rumors
If you have a good relationship with employees when an economic downturn starts, consider yourself fortunate. If you communicate well with them, it probably will increase your chances of getting the buy-in needed to help turn around the situation. However, it may make the human side of employee cutback decisions more miserable for you.
That’s not a case for building only superficial relationships between management and labor so you can avoid some pain during financial straits. In the least, you have to take stock of your emotions and communicate to your work force that you are doing all you can do to survive the situation and to lessen fears.
“Fear is in the hallways, in the office, and in the aisles of the plants,” Giromini says.
“Those were tough, tenuous times. The work force and the community all understood when they didn’t see trailers in the lot waiting for customer pickup. That’s not a good sign, and when they didn’t see cars in the parking lot and saw all but one shift and not even that on Fridays, that’s not the normal way our business operated.”
When facing a dire situation, company employees may resort to drawing conclusions of their own and starting rumors. Management should expect that this is probable and should have a game plan to deal with them.
“Your senior management needs to go out and make sure that the message was received,” he says. “You’ll need to get in front of the work force to deliver a message, and you have to make certain that the communications are frequent and to the point so you can minimize as many of those rumors as best as you can.”
You’re never going to get them all. But you have to do the best you can to reduce them.
“My role was to be out there to continually reassure the work force, both the salary and hourly work force, that we were doing everything that we could and that we were going to get through this thing ? and to stick with us and see it through,” Giromini says.
“When I was able to communicate the actions that we had to take, they also understood that that we were doing it on a basis of who could deal with it the best. The executives and salaried workers took the bigger cuts, and we tried to preserve as much of hourly workers’ earning power as we could.”
One advantage that will be in your favor is if your corporate offices are connected to your main manufacturing operations. This will help break down the barriers that can prevent the flow of communication, and barriers in general.
“We don’t have any exclusive executive cafeteria, or any of those types of things,” Giromini says. “We don’t have reserved parking for executives. So I park where everybody else parks, and it’s first-come, first-served. I dine where everyone else dines. Our folks tell me, they know me by first name, they understand and trust when I tell them what the situation is.”
Meanwhile, during a downturn, your management team will be gaining experience that only comes once in a great while. It will make them a lot more knowledgeable, a lot more capable, and they also will go forward with confidence that no matter what any economy throws at them in the future, they are going to know how to deal with it.
“I’m really proud of them,” Giromini says. “It’s made them all better leaders as a result of having gone through the experience they went through in 2009.
“I like to tell them that they added tools to their toolbox that others who may be in the industry for 40 years and never have the chance to have those tools added. What we hope is that we never have to utilize some of those tools ever again. But they’re there.”
This is also time to build strong, healthy relationships with your suppliers as you do with your customers. You will accomplish long-range benefits if you view your suppliers as partners.
“You are only successful in this if you have strong relationships with your suppliers,” Giromini says. “They are only successful if you succeed also, so believe in reaching out. Have a high level of engagement with your suppliers. Start regular webcam teleconferences with them on a monthly basis so that they know what’s going on in your business. Also invite all of your major suppliers in for an annual supplier conference.
“We’ve enhanced the engagement with suppliers as the years have evolved but I think having an episode like we all faced in 2009 ? and many of our suppliers faced a very similar challenges that we faced ? I think it always does bring you closer. I think any time you face that kind of a challenge, it’s just going to make partners truly realize who their real partners are.”
Diversify and develop
While your company is trying to keep its head above water during an economic slowdown, remember you have to be ready for the finish line. Many companies learned the hard way when a customer that accounted for a large part of its business went under. It’s time to keep a focus on diversifying and developing.
“Never lose sight on diversification efforts for your business,” Giromini says. “Stay focused on finding ways to diversify from a sole dependence upon an industry to leveraging both the physical assets and the intellectual assets you have as an organization into other areas.”
Once you establish your survival game plan, it’s an opportunity to go revisit your core values, especially that of developing solutions for customers, to strengthen your position when the recovery picks up steam.
For instance, Wabash National formed a products group for its Duraplate composite panels. Rather than being used only in trailers, the panels are used in the manufacture of all PODS storage containers.
“Developing solutions is based on working with customers, identifying what their needs are,” Giromini says. “That’s the value you bring to the customers in the area of innovation; working with them and saying, ‘What are the problems that you have? What are the things that could make you more cost-effective, make you more productive, could help enhance your bottom line, relative to your product?’
Then you go back and your engineers work with your customers to develop solutions to those problems.
“Now with the recovery picking up steam and hopefully with the work we’ve done and the diversification efforts in our business, we’ll continue to grow and actually be able to have record levels as we go through the cycle over the next three to five years,” Giromini says.
How to reach: Wabash National Corp., (765) 771-5310 or www.wabashnational.com
The Giromini File
Born: Syracuse, N.Y.
Education: I have a bachelor of science degree in mechanical and industrial engineering and a master of science in industrial management, both from Clarkson University, in Potsdam, N.Y
What was your first job?
There are three or four that all could’ve been clearly characterized as my first job: babysitting, mowing lawns, shoveling snow or my paper route. I did all of those. Interestingly, as I think about it, I was in high demand, and I know now why because I only charged 25 cents an hour. I don’t think I was very smart as a salesman, but I could sure bring in the volume.
Whom do you admire in the business world?
Rather than focusing on a single person, I tend to think about what attributes that I admire. I really do admire those individuals who are able to lead their companies to outperform what the norm may be for their industry ? finding ways to be creative, innovative and having a business model that provides for long-term sustainability of their business but that has flexibility to allow them to adapt and adjust to the ever-changing business and economic environment that they face.
When we look at that, we look at the sustainable models of year-over-year improvement ? those are the businesses, and there are many of those. I think it’s unfair to single out a person because industries are so different.
On a more personal basis, the person that I certainly respect and admire is my dad who really is the one who taught me those basics that live with you forever. He said no matter what job you ever accept, for whatever pay you’ve accepted, you do that job to the best of your ability because that’s what you’ve agreed to. That’s a contract that you have entered into.
I’ve always believed that, and I kind of think it follows along with ‘your word is your bond.’ So that was the way we were raised, and he always taught us just good solid, core values of relationships and doing business that I never thought would translate into how I would act or perform years later.
What was the best business advice you ever received?
I had a boss when I was just a young graduate out of college who was talking about decision-making. He said, ‘You never want to be afraid to make a decision.’ His point was not to shoot for a 50 percent success rate but to make good decisions. The only way you can do that is to make a decision in the first place. So I’ve always remembered that throughout the years.
What is your definition of business success?
It goes in line with the attributes that I admire. I would like to look back and say that we were able to build a business model that was sustainable, we were able to build one that was flexible, we were able to adapt to whatever the operating environment this economy would throw at us ? it’s a global economy now. There are challenges continually that you have to be aware of and you have to be able to adapt to. That’s how I would view success, as being able to have that model that is sustainable, that means you are able to create jobs, sustain jobs, provide for families and be recognized as good corporate citizens that support the communities that you operate within.
Donna Fisher had written about networking already and wasn’t necessarily looking to write another book about it –— until Jerry Teplitz asked her to collaborate with him on an element of networking that had never been written about before.
The result was “Switched-on Networking: Balance your Brain for Networking Success,” a 253-page book that shows how to do Brain Gym exercises and movements combined with Fisher’s networking strategies to have a positive impact on your business success.
“In this book with Dr. Teplitz and the Brain Gym processes, he’s able to demonstrate very specific processes to assist people to switch their brain regarding any aspect of networking that’s been challenging, uncomfortable, difficult or awkward for them,” Fisher says. “So it does give a whole new element to it.”
Q. What is different about the approach you and Teplitz describe?
The idea is about balancing the right and left hemispheres of the brain so you are working with the whole brain. Then you’re not just working logically or just working creatively with all aspects of the brain. The Switched-On part applies to the fact that we basically switch off that part of the brain that relates to some negative networking experience that we have.
So let’s say that we have a negative networking experience, or let’s say we really bought in to the idea that our parents told us not to talk to strangers. That’s in our brain, and that part of our brain possibly will override wise choices for common sense where we are in an environment to network, and it’s appropriate to meet someone new. The idea is to switch off that part of the brain that is causing us to relate to that past negative experience and switch it so that we become able to make wise, positive choices based on current information.
Q. Would people who are already familiar with networking find the techniques helpful?
I think it can be helpful to people at any level of networking. I just have this philosophy that we always have the opportunity to grow, learn and expand. We are learning more and more about the brain, how the brain works and how we can utilize that so the data is new information for a lot of people — for people who have been networking to be able to now apply that is a whole new thing.
Basically, the first half of the book is the brain optimization information. The second half is the networking skills information with the brain processes applied to each situation. For instance, one area is on how to approach people and how to have conversation. If people had difficulty in that area then they are told which brain process will help them best in switching that to a positive. So they are able to go through the process and the great thing is that people can say, ‘I’m already good at that, that’s not an issue for me,’ or then they can say, ‘Oh yeah, that shows up sometimes as an issue. I think about calling someone and then I talk myself out of it, or I think about going over to say hi to someone and then I avoid doing that, or I know it’s important to follow up right after I meet someone but I procrastinate.’ So they can see for themselves what are the areas that if this was switched for you, your networking would become easier, natural, effective and efficient.
Q. What is the major component that drives successful networking?
My thing all along, even before this book, has been to share information about networking so that people can have more fun with it. When they have more fun doing something, they are going to do more of it. Then they are going to get more value from it, and so are the people around them. Networking is not necessarily about meeting people. It’s very easy to meet a lot of people. But the thing is, are you connecting with people? So instead of thinking about meeting people, think about are you connecting with people, and what would have you connect with people more.
How to reach: Donna Fisher, (713) 789-2484 or www.DonnaFisher.com
Randy Velarde was uncomfortable a few years ago with what he was seeing in his financial reports. The president of The Plaza Group, a petrochemical marketing firm he founded in 1994, was used to seeing double-digit growth.
The company had hit a plateau in terms of moving forward in sales and volume, and he realized something had to be done.
While it was happening during the recent economic downturn, that alone did not account for the disappointing growth. Besides, Houston wasn’t hurt much when the housing bubble burst. The Greater Houston Partnership reported that the downturn in the city was short and shallow, and the region began recouping its job losses sooner than most.
So what was going on?
Velarde knew that the company had a very strong foundation. After all, 15 years of impressive growth didn’t happen by chance. It was time for an in-depth look. Velarde, some of his key managers and the board of directors decided to spend a couple of days off-site studying the James Collins and Jerry Porras book entitled, “Built to Last: Successful Habits of Visionary Companies” as their guide.
What they came up with were five statements that had been the company’s core values, and would still be, but with new emphasis.
“We spent a great deal of time going through ideas and arriving at what are the five core values of our organization,” Velarde says. “The idea is that as you move forward, because the core values have clearly been a part of your past success, do your best to continue to live by those core values that have brought you such great success.”
Since that time, sales growth has resumed the trajectory that The Plaza Group was used to in its early years, with more than 35 percent growth over the last four years. Sales for 2011 were $273 million, 38 percent over 2010 revenue.
“I couldn't be more proud of our entire organization embracing, living and breathing our core values,” Velarde says.
Here’s how he and his team went about defining the company’s core values, taught employees to embrace them and created a feedback system that ensures the core values are a top priority.
Getting to the core
The term foundation is a key one when a company considers its core values. Those values not include operation procedures, business strategies or even cultural norms. They do include those basic tenets that are so fundamental that they survive the most strenuous challenges from any source. So analyzing your foundation will give you insight into areas such as how you treat people, how you make decisions and how you value honesty and integrity.
For The Plaza Group, with its 15 years of operation behind it, this was the solution it needed.
“I think there is a maturation process for any business,” Velarde says. “I think after 15 years, this was the correct tonic for where we were. If you are just starting out, I don't know if it would be. Everybody conducts themselves with their own set of core values individually. But that may not be the most important element, depending on where you are at in business. It may be a case where you need capital instead.”
He ruled out a need for capital and focused on what had been driving success. The process of defining your core values is simple, yet it takes considerable time to get it right. Where it can become time-consuming is when you weed out what values you have had that brought you success — from those values you hope you could possess.
“It really is a very long process because Collins and Porras walk you through arriving at your core values and want you to make sure that they’re not those values you wish you had,” Velarde says. “It’s about spending the time necessary to make sure you determine those values that are a part of your DNA and have been a part of your DNA — and again not what you wish you were but what are those core values.”
If the analysis is on the right track, you will be able to focus your microscope on what’s inside your DNA.
“It’s one of those moments when you realize what are those things you want best to live by, of course, knowing that at some point in time you may make a mistake — we’re all human — but you want to ensure that your entire organization understands what is your DNA,” Velarde says. “It's not just a plaque you put up on the wall.”
Velarde and his group settled on five as a good number for the values.
“I think we wanted to arrive at a number that was not too big that the whole organization would say, ‘Wow, that's an awful lot.’ You didn't want one but you didn’t want 10. By picking five I think we were very comfortable.”
When the team was finished with its assignment, it had found five realistic and embraceable core values for the company: to be honest and forthright, to treat people with respect, courtesy and professionalism, to provide exceptional service to customers and suppliers, to be opportunistic, and to be financially responsible.
Each value should be reviewed as to its history and importance to the organization. This effort calls for insight and introspection.
Velarde notes that it was clear to the team that the company has never been in a corporate lawsuit with suppliers or customers, that fact sunk home the idea of being honest and forthright.
“That's what I would call a good accomplishment given our litigious society,” he says. “I think it speaks to honesty and forthright. What does that mean? Well, there have been conflicts, there have been matters in which one party feels one way and the other the other, but there is a way to manage that and be successful. I've never been in a room with people with black robes on.”
If exceptional customer service isn’t the top of your list, it should be. Treat every customer as a platinum-level customer.
“They are your very best customer,” Velarde says. “There is no distinction, there's no screen that comes up when the phone call comes in showing they're a platinum color or a silver color or a gold color. Treat every one of your customers with the highest level of service that the company can offer.
“For every one of these core values, we spent a lot of time wordsmithing it,” he says. “The quality of being nimble was something that was at least proposed. I think we all agreed that opportunistic was a little more specific. But it does include an element of nimbleness: being able to move swiftly, more quickly than competitors because of your size and your lack of overwhelming bureaucracy.”
Leading by example is a process
Getting employees to follow core values that have been a part of your company doesn’t seem like a difficult task. However, it’s not just something like hanging framed copies of your core values on the walls.
“I think leading by example is the best way, and it’s a process,” Velarde says. “It not only includes me but our managers and our board of directors. Employees will observe the commitment and embrace these values at each level, which I think is very positive in terms of establishing their own level of conduct.”
Each core value can be demonstrated by an example. One incident that happens with some frequency in business transactions is a dispute over an invoice. A short case history of the event, when told to employees, will demonstrate how a core value led to a satisfactory and successful outcome.
“I have many examples of where a supplier has undercharged us,” Velarde says. “If you kind of said, ‘Well, they will never know; we’ll pay the lower price and make more profit,’ that’s not following the core value of being honest and forthright.”
By following the core value and informing the supplier of the error, it is leading by example, and goes far in developing a deeper relationship with the supplier.
“Your team should say, ‘You know what? We are advising you of an error, that we owe $100,000 more than invoiced,’ and I can tell you that there is nothing more impressive to a supplier. They’ll say, ‘Wow!’ In big companies, a lot of things go unnoticed, maybe for a very long time or even forever. But now you’ll be noticed.
“Every time you call back to your core values is essential to your company’s personality and your company’s culture.”
With management focused on calling back to the company core values by setting examples, the focus will cascade down through the organization and each core value becomes strengthened as part of the company culture.
Check adherence to values
In a competitive market, feedback is often seen as some of the most critical data you can obtain to help you succeed. Monitoring how well your employees are performing is an important part of your operation, and a logical place to start is with a team from the heart of the company.
Once Velarde had the five core values in his toolbox and management was all squared away on its role to lead by example, a core values team was formed to observe the pulse of the organization.
“My key managers begin every meeting with a question: Are we abiding by our core values?” he says. “And I have my own core values team I meet with about every 60 to 75 days to make sure that we’re doing well with our core values.”
A team made of four members of folks in the trenches, as Velarde calls them, is composed of representatives of the customer service, supply chain and accounting department and the commercial team.
“You want to make sure you have a finger on that pulse,” he says. “In some companies, managers may just tell you what you may want to hear. I want to make sure that this is a part of every level of the organization.”
The core values team concerns itself with both positive and negative feedback, lauding the cases where a core value was followed with a successful outcome and expressing concern over potential violations of core values.
“Are you living by them?” Velarde asks. “Where have there been mistakes? Yes, there is a mistake here and there, but is there a trend? Maybe there is a violation — you know, where the organization or an individual may not have been in concert with your core values, and that’s OK; mistakes are made.
“But what you want to do is nip in the bud anything that may resemble a trend. There's no harm in a mistake; we are all human. We’re not perfect, but make sure there is no bad seed growing within the organization, violating your honesty, your financial responsibilities.”
Some issues can be resolved by just going to your manager to expose an issue. For larger issues, you can establish a formal corrective action process. There are multitudes of ways that can be used, depending on the situation.
Matters such as the earlier mentioned invoice error are brought up by the team to show an example of a core value guiding employees to successfully handle a sensitive error.
“If you do every one of those core values correctly, success is at the end of the road,” Velarde says. “The kind of growth we have experienced has been in conjunction with our entire organization embracing our core values.”
How to reach: The Plaza Group, (713) 266-0707 or www.theplazagrp.com
The Velarde file
Born: Albuquerque, N.M.
Education: University of New Mexico, with a bachelor of science degree in chemical engineering; master of business administration degree from Baldwin-Wallace College. I was with Shell Chemical at the time, and I had been transferred to Cleveland.
What was your first job?
I was sanding and stripping furniture for my godfather, who was in the refinishing business. I recall that vividly; talk about hard work. I think I was a teen. It was a great experience, though. Hard, hard work. At that time, my godfather had a great team that enjoyed the camaraderie, and it impressed me.
Whom do you admire in business?
I must say that Andrew Liveris has done a terrific job with Dow Chemical Co. as chairman, president and CEO. He’s been a great example of a leader who has been through some challenges and has absolutely navigated his way very well through those challenges. He’s done a remarkable job of steering the ship so it is well-positioned.
What is the best business advice you ever received?
My first boss at Dow Chemical Co. was a very strategic thinker. He impressed upon me the value of the detail that one could go through to manage a sales territory. There was a great deal of strategic thought that went into it. His strategic thinking example has stayed with me. I learned something very important from him.
What is your definition of business success?
I have found that the greatest satisfaction in leading a business is getting the buy-in from the team, your team, and that strategy is not only your business strategy but also your core values. With that buy-in, knowing that if everybody does their job, excellent results are almost inevitable. The success happens to be the end result of such a strategy executed and the embracement of core values by your organization. The results don’t lie, and following a very strong strategy with an incredible team that embraces your core values leads to those results.
Mike Figliuolo was tired of leadership constructs that resulted in cookie-cutter leaders. Using his idea that a leader must follow a philosophy that is truly his or hers, he began to teach others how to state their leadership values using maxims.
“Write down, on one sheet, 15 to 20 emotionally powerful statements or reminders of personal events that will serve to guide your behaviors on a daily basis,” says Figliuolo, managing director of thoughtLeaders LLC. “Your maxims will become your leadership conscience. They will help you make difficult decisions.”
To reach even more would-be leaders, he has written “One Piece of Paper: The Simple Approach to Powerful, Personal Leadership.”
Why do you feel the leadership maxim approach is effective?
What is different about the book is that it looks at leaders holistically, and it looks at four aspects of leadership to make sure you are well-rounded and you have integrity: leading yourself, leading the thinking, leading your people and leading a balanced life.
For many years, the standard was to pattern yourself after your boss. If extroverted new leaders try to model themselves after introverted predecessors, is it a train wreck waiting to happen?
Often. Leaders are going to have a different set of experiences that defines them and their philosophy. There’s really power in saying, ‘You can go ahead and be you.’ And that’s what authenticity is about. It’s being real and basing it on your experience.
One of your maxims is, ‘What would Nana [his grandmother] do?’ Give an example how that came into play.
Once, while in the military, I bartered through a gray market to replace a missing tool. I ignored, ‘What would Nana say?’ I might have learned better ways to resolve my situation. The only redeeming aspect is it regularly reinforces my belief in the strength of my maxims to help me make the right decisions regardless of the circumstances.
In the second case, I noticed a client’s error in a contract that would have paid me substantially more than was agreed. I asked myself, ‘What would Nana say?’ I told the client about the error. The long-term value of doing what Nana would say was far greater than the short-term benefit of some extra cash.
When choosing your maxims, how do you know if they are going to be workable?
There’s a little test of a maxim in each chapter that forces you to go back and say, ‘Is this maxim a solid one?’ If it doesn’t evoke that emotional, visceral reaction in you or you look at it and say, ‘That’s really not me,’ then you are on the wrong path because this whole method is all about saying who you really are. Getting back on track is so easy because, inherently, everybody already has all the answers. All the book does is give you a method to pull them out and articulate them.
What is the real benefit in writing down personal maxims?
If you want to really unlock your potential as a leader, you have to just share who you are. People don’t follow a title; they are going to follow an individual. It’s actually a good thing to be you. So if you want to be effective as a leader and build that trust with your team, they need to know who you are. Stop pretending … stop using words like synergy, leverage and optimize, and for crying out loud, tell your story!
How to reach: thoughtLeaders LLC, (804) 241-9757 or www.thoughtleadersllc.com
When Ken Kemerer looks at the 80 percent revenue growth SilMix Ohio has achieved since 2001 when it was purchased by Wacker Chemical Corp., he gives a lot of credit to getting involved in industry associations.
Not that it was the only factor ? a rebranding effort three years ago was also part of the mix ? but being an active member of industry groups was a must.
“That’s where the networking is huge,” says Kemerer, director of SilMix Ohio, a manufacturer of custom silicone compounds. “We have added 50 customers since 2009, and we truly believe this branding and networking has resulted in the new customers.”
To get going with industry group networking, you need to research the organizations through universities, libraries or the Internet.
“In the rubber industry for instance, the American Chemical Society is an umbrella group that has a rubber division and a subset for regional and local groups,” Kemerer says. “You want to support financially and technically through manpower and participation all those groups. We support basically all those groups in North America now.”
In terms of support, it means more than paying membership fees.
“You can sponsor their websites, sponsor their fundraising, their golf outings and donate to their scholarship funds,” he says. “The regional groups have technical meetings. You can give technical presentations at their meetings. The technical service is important because other companies may not have an expert on site and you can provide that technical side of the industry.”
The fact that you are at a regional conference giving a presentation and answering questions about your specialty goes far in establishing your brand.
“It’s all about the networking in getting the name out, so that if people are not familiar with your specialty, and they have questions, yours will be the first name they think of,” Kemerer says.
One thing that obviously helps the initiative is encouragement from company ownership.
“Our owner is a corporate citizen, which means we have a responsibility to the industry,” he says.
This attitude should underlie your involvement in the industry groups ? you are not just giving a presentation as a sales pitch for your company.
“The industry groups had been the only place to get knowledge unless you hired somebody who had been trained by somebody else,” Kemerer says. “As the Internet has come along, and online training, they have changed, so the industry groups are really providing networking opportunities on a high level. It’s almost more of an awareness than technical training. These opportunities are out there.”
With your interaction in the industry groups, you are advancing your knowledge throughout the sector.
“There are not that many technical experts out there if you are in a niche,” he says. “Yes, it’s self-serving when you present, you may get your name known as somebody who has the answers, but it is not just about that. It’s also about corporate citizenship.
“There are many opportunities to present new and innovative things if you can in particular areas such as the medical field. That’s on the cutting edge as is helping customers in the industry become aware of new ways to do things or new developments.”
One other fact to keep in mind while attending or presenting at a conference is that your competition may be present, and while it is wise to guard what may be trade secrets, with care, you can still deliver an effective presentation. Don’t use it as a soapbox to show your differentiation.
“We do see competitors, but we see them more on a regional level,” Kemerer says. “We all have the same general purpose products. Some competitors may also be your customers ? so you want to keep good relationships, a good working knowledge and make sure you don’t cross any of them.”
How to reach: SilMix Ohio, a division of Wacker Chemical Corp., (330) 628-5017 or www.wacker.com/silmix
Formula for rebranding
If your company can’t decide where your rebranding should start, do what Ken Kemerer did at SilMix Ohio: look to your “Pillars of Success.”
“We identified our ‘Pillars of Success,’ that’s what we call them ? our customer service, our technical service and our flexibility, and we made them our focus,” says, Kemerer, director of the custom silicone compound manufacturer.
With that simplified mission statement, it gives you a basis to build a branding and marketing effort that will represent your company well.
“We built three different advertising ? let's say modules ? based on those,” he says.
“Identify your pillars of success, and then customize your advertising both visually and verbally along those lines so you can publish it in different media ? magazine, newsletter and website. Have a variety of pictures, so they don't get stale. Use text that describes each pillar of success.”
Then to help support the industry groups, use the same collateral to expand your brand to that outlet as well.
“It worked out real well for us for the past three years, and now it is a good time to have a new angle and still build off the same things ? and more as video opens new opportunities,” Kemerer says.
Tom Dailey had been CEO at 2Checkout.com Inc. only a short time when he realized the company, no longer in start-up phase, was settling down and becoming larger ? and it needed to join the big leagues where formal accounting and strategic planning were mandatory.
“The company’s performance was flattening out, quite frankly,” he says. “We were having some challenges with revenues and expense management.
“Sometimes that is an awkward period in companies’ developments because they are moving from an environment where decisions were made quickly and things weren’t very well-documented. You could sort of do things on the fly and go forth into an environment that is more formalized because you are getting bigger and more money is passing through your hands. At times, that’s a little bit of a challenge for various companies, and that’s definitely where we were.”
Previously, Dailey was in charge of a large organization of more than 2,000 people with a large call center ? and knew the challenges involved in changing a company’s processes.
Working through the challenges took a vision, and more importantly, connecting with employees so they know that they play a part in making the vision a reality.
Adding to the situation was that 2 checkout.com employees just didn’t feel like management was communicating enough with them.
“Today, it’s not enough to articulate the vision and ask people to follow,” Dailey says. “People have to understand why a company is going in a certain direction and more importantly, people want to understand what role they play in the big picture of achieving a vision. It’s not just enough to say, ‘March this way.’ You have to say, ‘March this way; here’s why we’re going this way, and here’s the key role you play.’
“So one of the things that I think is you cannot over communicate to people; it’s literally impossible to over communicate,” he says.
So Dailey reached into his CEO bag and pulled out some tools that helped the company achieve 20 percent growth per year to reach $325 million in revenue.
Here’s how he led the Internet payment processing company to become a stronger company in a tough economic environment using a clear mission statement, effective communication techniques and by encouraging the workforce to take on the mission.
Clarify your mission first
In order to lead people, you have to communicate constantly. Many business executives are proponents of the principle that the best way to motivate employees is to communicate with them, and Dailey was one of them. The first step he took was to work on the message to communicate.
“Nearly three years ago when I joined the company, we had this very verbose, long paragraph of a mission statement that had been developed by committee. It included every buzzword that you could imagine and was posted on every conference room wall,”
Dailey says. “If I walked around the building and asked anybody without looking at a sign to tell me what the mission statement is, very few individuals in the company would have been able to answer correctly. Even if they could have, it wasn’t really meaningful. It was just the buzzword mission statement.”
In other words, it was full of clichés like “think out of the box,” “maximize employee engagement” and “to drive value-added processes in a profit-maximizing system.”
Dailey would have no part of it, and wanted to reduce the mission statement into a single line.
To do so involves taking the simplest definition of your company’s purpose and formulating it so that it can be remembered and applied. It may take some time, and in Dailey’s case, his team worked on it close to a year.
“We wanted to make sure we got it right. We kept coming up with different iterations of it,” he says. “Finally, we had a moment of clarity that said, ‘Let’s get rid of all these. Let’s get rid of every word in the mission statement that isn’t core to what we do.’
“That’s when we ended up going from a mission statement that was some nebulous paragraph down to a mission statement that was one sentence.”
Getting to the point where clarity is achieved often crystallizes everyone around the mission.
“We are an Internet payment processing company, so our new mission statement says, ‘We help sellers sell more.’ And that’s it,” Dailey says. “That’s our whole mission statement. Just the mere fact of us clarifying that, and articulating it to everyone, I can tell you that everybody in this company can recite our mission statement now.”
The clarity of such a simple statement makes it easy to remember and easy to apply against any improvement, revision or project to see if it is in line with the mission statement.
“When we did our recent budgeting and planning process, the mission statement was our litmus test for everything we did ? every expense, every project, every strategy,” Dailey says. “We threw them up against that mission statement and asked, ‘Does that help us get closer to helping sellers sell more?’”
Little by little, the test separated the items that would support the mission statement from those that didn’t ? a method that was another of Dailey’s principles.
“I don’t think progress is always achieving big things; a lot of small wins along the way can move you forward as well,” he says.
Use multiple delivery methods
When you get in a room together with your employees and everybody understands the vision and has a stake in the game, you get much more passionate discussion among people about what you are trying to do, because they suddenly want to do things in the most efficient way.
To obtain that understanding requires communicating effectively ? and that may mean using several delivery methods.
“One of the things I’ve learned over time is that not everybody responds to communication in the same way,” Dailey says. “Not everybody learns the same way, and not everybody processes data the same way. Some people you can send them an e-mail and they will go off, read that on their own, digest the data and that will be meaningful for them. Other people need to see it graphically. Still other people are going to respond much better to a meeting or an individual conversation.”
To reach the largest number of employees, you should employ a number of media. You may want to institute all-employee meetings, e-mail communication and an internal newsletter that pops up every morning when an employee logs on to his or her computer that includes snippets of what’s going on during the day. You can’t just use one channel, because one channel is not going to be meaningful to every individual.
“That was a tricky lesson for me because we tend to think that what works for me is going to work for others,” Dailey says. “I’ve learned over the years that it’s not true. There are a lot of different ways of thinking and processing data. You’ve got to understand that if you are going to try to get through to everybody, you’re going to have to employ a number of different methods.”
The next steps involve the attempts to carry out the vision and monitor the progress.
One of the ways you’ll know if you have been successful with your message is when everyone in the company can articulate the vision.
“You can do some fun things where you walk around the building, and just ask somebody randomly, ‘Hey, what’s the mission statement?’ If they answer correctly, you can give them a gift card or something like that,” Dailey says. “When people understand the vision, when they are engaged in it, then you know you’ve really gotten through to them.”
Be aware, however, that there’s a difference between inspiring people to achieve the vision and intimidating them to do so.
“You can lead by intimidation or you can lead by inspiration,” he says. “I find that over the long run, inspiration is far more effective than intimidation.
That gets back to the whole buy-in for the vision.
“I think you have to empower your employees to achieve the vision,” Dailey says. “So many companies are scared to empower the employees who actually deliver on the promise to the customers, because they are afraid the employee could do something wrong.
“You may embrace that ? part of empowering people to satisfy customers is that occasionally somebody will do something that might be different from what you would otherwise have thought it would be. But along the way, you are going to have satisfied more customers than you might have otherwise done.”
Keep the momentum going
If you want to satisfy customers and stay true to your mission statement, you have to keep your communication avenues to employees capable of growth and revision. Once you have spent a lot of time and effort to clarify your mission statement and your employees begin to embrace it, you need to exert the same effort to make sure it thrives in your company. That means introducing new avenues to reach new levels of engagement.
“The people who are closest to the processes are typically the ones who are best equipped to tell us better ways of doing things,” Dailey says. “So make it a safe environment for people to understand that you welcome input and that you don’t necessarily consider yourself to have all the answers. Create venues, whether they are the round-table type of thing or a suggestion program.
“That’s all just part of empowering people to help make improvements in the company. It will make your job easier because, you know what? You don’t have all the answers. Welcome other people’s ideas. People come up with great ideas.”
A round-table meeting is an opportune time to solicit some off-the-wall suggestions. Ask
employees if they had a magic wand and could change one thing about the business ? anything ? what would that one thing be?
“You will be amazed at the input that you will get back,” Dailey says. “Sometimes there are really good ideas and sometimes there are only very small things. But I think people appreciate the opportunity to participate in that way.
“Once, I came in on the third shift and one of the employees said, ‘I really wish the second shift would not leave dirty dishes in the break room sink, because I feel like I have to clean them.’ That was a small thing in the grand scheme of things but it was a big matter to that person, because she felt she had to clean up the break room because of the second shift. It was a very easy thing to fix. It’s not always the big stuff that causes people to be more satisfied.
“If you can eliminate some small hassle in a person’s life, sometimes that goes a longer way than something you might perceive is a bigger deal.”
While this method is sort of an informal one for employees to make suggestions, you should also offer a formal method.
Employees can submit a written suggestion, and it could go to an innovation committee that reviews it and then decides whether or not it can be implemented. However, you have to have an established feedback loop because people don’t want to feel like their suggestion went into a black hole.
“You have to come back to them and say, ‘You know what, we looked at your suggestion and we’re going to adopt it,’ or, ‘We looked at your suggestion, and we considered it but we can’t adopt it for the following reasons …’
“So the people will at least understand it got a fair review,” Dailey says. “With respect to walking the talk, if you ask people for their input, and they give it to you and they see that nothing happens to it, you would have been better off not asking for it in the first place as they will perceive you as just giving lip service.”
You should plan to solicit suggestions from the broadest range possible of employees.
“When people know that their opinion counts, they get much more engaged in the business,” Dailey says. “Along those same lines, if you really want to understand how you can improve your processes, don’t talk to the managers. Talk to the person who does the process. More often than not, if you give them the opportunity, those people are going to have a lot of answers about how to improve your business.”
How to reach: 2Checkout.com Inc., (614) 921-2450 or www.2checkout.com
The Dailey File
Born: Chillicothe, Ohio. After college, I spent about 25 years in Chicago working there, and then I came back and took this opportunity.
Education: The Ohio State University. I studied social and behavioral sciences. I didn’t end up being a therapist. Sometimes people talk to me about, well, did that have any relevance to business? I think so; some behavioral sciences have a lot of things to do with business.
What was your first job?
My very first job was a paper route. It was interesting because back then, the carrier also had to do the collection. So I had to go to all 96 of those people every week and collect the money, then fill out the receipts for the customers, then remit the money balance and reconcile the money. You talk about empowerment ? I was a 13- or 14-year-old kid and was basically doing collections, reconciliations and remittances and so forth. That taught me a lot about responsibility. You are really running a business, and that’s probably what got me interested in business in the first place. It probably improved my social skills, my responsibility and everything else. I wouldn’t trade that experience for anything. I thought it was great.
What’s the best advice you ever received?
Don’t assume you are the smartest person in the room. Somebody I consider a great mentor of mine once told me that, and I have never forgotten it. He was my boss and mentor fairly early in my career who was constantly saying that phrase and advising me not to let my position go to my head. I’ve always tried to live by that, and it always really served me well.
Whom do you admire most in business?
Probably Jack Welch, former chairman and CEO of General Electric. Here’s a guy who has intensively focused on goals and mission and has a fantastic track record of achieving them. I’m a little bit of a Jack Welch disciple.What is your definition of business success?
What's your definition of business success?
If we leave the company each day in a little better shape than it was when we got there that morning, to me that’s success.