At BlueStar Inc., a national business-to-business distributor of point-of-sale and auto-ID products, superior service and added value have been the keys to differentiation. And that differentiation has been the key to sustained growth. “People in business-to-business do not buy electronic equipment simply because they need another gadget,” says Steve Cuntz, president and CEO of BlueStar. “They buy electronic equipment because they’re trying to solve a problem. With the industry we’re in ... we realized that rather than just selling hardware, we had to sell value.”
BlueStar created that value by offering services its competitors didn’t, such as a free marketing program and a simple return policy. And while this differentiation program isn’t without challenges, it has been a smashing success, leading the company to a revenue increase of more than 400 percent over the past four years.
The value of distinction
The process of creating value for BlueStar clients began when the company went national. Since its inception in 1929, BlueStar had operated locally or regionally, but in the early 1990s, Cuntz and a sales manager decided that to remain competitive, they had to expand its reach.
But operating nationally in the days before the Internet was a challenge.
“At the time, Federal Express was not a given, 800 numbers were extremely expensive,” says Cuntz. “But we decided if you could take an idea of electronics distribution and try to create more value than people were accustomed to receiving ... that would be enough of a value-add that people would welcome doing business with you anywhere in the country.”
So BlueStar began to implement value-add services.
“It included everything from offering software that allowed the hardware to work better, it included extended warranties without charge, it included things like unlimited technical support without charge,” says Cuntz. “We even took some retail concepts and said, ‘If you buy something and it doesn’t fit, as long as you have the receipt, you can return it to us.’ That is a huge value-add in the electronics world.” As BlueStar began to attract national customers, Cuntz realized he needed to make another change, a change in philosophy.
“As our success took root and our revenues increased, we became convinced that we had to break the model of what people conceived to be an electronics distributor, and we decided to become a solutions-based distributor,” says Cuntz. “We changed our business model to expand our value-add offers.”
This shift in philosophy, from selling hardware to selling solutions, led to even more changes. When the company was just selling a product, price was the most important element. But when it sold solutions, services and value took precedence. So in addition to its return policy and extended warranties, BlueStar began offering more services. For example, it helps many of its clients drive their businesses by designing logos, gathering sales leads and implementing individual marketing programs.
“Since we’re very value-add focused, more than likely we’ll go out and sit down with the customer and find out what their needs are,” says Cuntz. “And we’ll do all the marketing we’ll produce sales books, we’ll put out mailer cards announcing what their services are, we’ll build Web sites for them, we’ll help them do Web optimization. We try to give them a holistic business experience with us.”
Bumps in the road
While BlueStar’s added value increased sales, it also exposed the company to growing pains. The business has been operating for more than 75 years and remains privately held, and that, says Cuntz, is sometimes viewed as a negative by potential clients.
“As you reach a certain critical mass, if you’re a privately held corporation, sometimes there’s a bit of a challenge in getting acceptance,” Cuntz says. “There seems to be an aura that the caliber of the organization or the people aren’t to be taken seriously, and that can sometimes be a challenge. Employees get very frustrated when they approach a partner on an issue of great importance and (the partners) figure, ‘Gee, if you were a better caliber person, you wouldn’t be where you’re at.’”
BlueStar combats this perception by implementing all of the infrastructure systems and checks that its public peers implement, from using Oracle’s management software to following Sarbanes-Oxley requirements. Cuntz says that it can be expensive, but the investment pays off, not only in terms of peer and client acceptance but also in operating costs. For example, says Cuntz, up-to-date procedures and systems are vital in areas such as accounts payable.
“I have no idea how many times a day in this country invoices are double- and triple-paid,” says Cuntz. “If you don’t have good control and procedures, it’s going to happen. So by spending money on compliance and by making sure that your processes eliminate to the greatest extent any possibility of error or any possibility of redundancy, it just comes back to you many times over.”
Cuntz is also challenged by the task of developing clients into partners. Although all clients are treated equally and offered the same services, the difference is in the way clients think of BlueStar and the way they spend their money.
“People who just simply want to buy something at the best price, while they are a customer, aren’t necessarily a partner,” Cuntz says. “Because if for some reason your price is a little bit higher than somebody else’s, they will take their business somewhere else. A partner generally places a higher value [on the partnership] than [on] a half a percent of a price differential.”
In some buying models, says Cuntz, if a product is a penny cheaper somewhere else, the client goes with the competition. But partners are the clients that stay with BlueStar, even if the distributor’s prices are slightly higher that those of the competition. And that loyalty is rewarded when partners take advantage of BlueStar’s value-add programs, all of which are free.
But the process of developing a partnership can be tedious and time-consuming it takes an investment of time, money and attention. So BlueStar implemented a one-on-one account management system to encourage the development of partnerships. Each client is assigned an account manager when it begins working with BlueStar, and that client works almost exclusively with its assigned manager, building a relationship. However, if a client has an emergency and its account manager is unavailable, it can call BlueStar and speak with someone else.
This one-on-one account management system serves a dual purpose. Clients are more likely to develop a close business relationship with an account manager who knows their story and can provide one-on-one attention, thus turning into a partner.
And those partnerships save the company money.
“It costs somewhere around $12,000 to land us a customer,” says Cuntz. “The least expensive thing in the world in business is customer maintenance, and one way to do that is partnering.”
In addition, because account managers work so closely with clients, they can easily spot trends in the problems their clients are reporting, improving BlueStar’s ability to identify and adapt to client needs.
For example, when clients kept calling late in the day to request that products be delivered ASAP, BlueStar implemented an overnight shipping program.
“Many people get a call at the end of the day from their customer saying, ‘Oh, my God, my printer just broke, what do I do?’” says Cuntz. “Well, we can still get it out that night. We have account reps working late that can make sure that product gets shipped out that same night and can take care of somebody with a day-end problem.”
The importance of people
While the value-add programs and the one-on-one management system have helped spur BlueStar’s growth, that growth has presented the company with another challenge finding and managing new employees. “When your sales are small, your marketing revenues are small,” says Cuntz. “But as your sales expand, it allows you to hire more people, and actually better people.”
The key factor to deciding whether or not someone is right for BlueStar, says Cuntz, is the Platinum Rule.
“What we look for are people who have a sense of being empowered to do the right things,” he says. “It’s the Platinum Rule not only do you want to do unto your customer what you’d have done unto you, you want to do what you think they want done unto them. And so we look for people that can practice the Platinum Rule, who typically will put the concerns of the customer in front of worrying terribly about what effect it may have on their day.”
Beyond that, the hiring manager evaluates the personality and the cultural fit of the prospective employee and asks hypothetical questions to see how that person would react to common situations.
In addition to finding the right new employees, Cuntz also had to develop a way to manage his growing remote sales staff. His solution? Establish clear expectations and a hands-off approach.
“You can’t manage a remote team of salespeople,” says Cuntz. “You don’t have the ability to motivate them they wouldn’t take the job unless they could get up in the morning and do that job themselves anyway. What happens is, you can make it very clear what the expectations are and what you need them to do.
“And then you kind of let them tell you what they need to do that job. And then we provide the support and services that are required administratively to do their job.”
The only real requirement, says Cuntz, is for employees at remote locations to submit a weekly report, detailing what they accomplished, what they liked and didn’t like, what needs improved, etc. Beyond that, they self-manage.
Since 2000, BlueStar has increased its employee base by 300 percent. And thanks to the value-add programs and the one-on-one management system, its revenue has also increased, from $46 million in 2002 to $215 million in 2005.
“Every day that we come into BlueStar, we kind of have an idea of how we add even greater value to a process,” says Cuntz. “It’s really common sense the more you get for the money you spend, the better buying experience you have. And the value of the total experience has really spurred our growth.”
How to reach: BlueStar Inc., www.bluestarinc.com
Education: University of Colorado
First job: EMT on an ambulance
What is the greatest business lesson you’ve learned?
The answer is yes to any reasonable request.
What is the greatest business challenge you’ve faced?
Just trying to set ourselves apart. Trying to be different and trying to have a unique experience for customers and for ourselves.
Abt on customer service: The most important thing is to listen to the customer don’t just talk to them but listen to what they need and do what they need have low prices and have product in stock and come when you say, and if you’re gong to make a mistake, be real upfront about it.
Let a customer know as soon as you can, and then don’t overpromise. Just get the job done and keep communicating. Give people a one-on-one experience make sure calls aren’t transferred to 50 different people. Hopefully they just get one or two people and they get their problem solved.
Abt on surviving: I think the people that had these little stores, they got tired. They really didn’t change. My dad, especially, embraced change, was always trying to do better, and we just kept trying new things.
Our smallness and our changing ability really is what’s kept us going for so long.
In the case of California Pizza Kitchen Inc., the answer isn’t black-and-white. While CPK was founded in 1985 by just two men Rick Rosenfield and Larry Flax there were many more minds that influenced the company’s growth.
That’s because Rosenfield and Flax followed a unique path to building their business rather than go it alone, they turned to big industry players for advice and guidance. The co-founders looked to organizations such as McDonald’s, Starbucks and Baskin-Robbins and studied their philosophies, mistakes and successes to see what worked and what didn’t. And when they needed more in-depth assistance, they partnered with a more-experienced company that knew the ropes.
By learning from other business’s experiences and leveraging that experience through collaboration, Flax and Rosenfield have turned their pizza concept into a multimillion-dollar success.
Rosenfield and Flax weren’t born restaurateurs. Before CPK, they were lawyers successful lawyers, at that. But both had dreamed of opening a restaurant, so when they joined forces to try their hands in a new field, they knew they were at a disadvantage.
How could lawyers compete against experienced restaurant owners? The answer was simple learn from those with the experience. Rosenfield and Flax began by turning to one of the most successful restaurateurs in history: Ray Kroc, the founder of McDonald’s.
“If you go back, the first one we looked to and read everything about was Ray Kroc,” says Rosenfield. “There was a book called “Behind the Golden Arches,” and then Ray Kroc himself had an autobiography, so we sort of read those things cover to cover a lot of times.”
By reading about Kroc’s success, the co-founders discovered four elements that they knew their restaurants had to have.
“Quality, value, service and cleanliness the all-time formula that has never changed to this day and defines every restaurant in its niche,” says Flax. “Whether you’re white tablecloth or fast food or in between, it’s always quality, value, service and cleanliness.”
Those four tenets are the foundation of any food-service business, and while they don’t guarantee success, missing even one is the quickest path to closing a restaurant’s doors forever. So the co-founders established a corporate culture that rewards employees who work with the four tenets in mind.
The culture is called R.O.C.K., which stands for Respect, Opportunity, Communication and Kindness.
Employees receive extensive training on the R.O.C.K. culture when they join CPK and throughout their employment. If they always treat customers and co-workers with respect and kindness, and they engage in honest and open communication with their superiors, they are rewarded with opportunities for growth and advancement.
By establishing and perpetuating this culture, the co-founders developed a way to motivate employees to provide the best service, ensure restaurant order and cleanliness, work toward the highest quality standards and, in the process, create value for the customer.
Once they established the tenets, the co-founders needed a concept for their restaurants. They found it in the kitchens of two other LA-area chefs, Alice Waters of Chez Panisse and Wolfgang Puck. These chefs were making high-end pizzas, using ingredients such as smoked salmon, duck sausage and goat cheese. And while these were inventive and flavorful pizzas, Rosenfield and Flax realized that they weren’t accessible to most Americans, either in price or palate.
“We sort of say (Alice Waters) created it, Puck introduced it sort of through his celebrity connections to a celebrity audience here in Los Angeles, and then we introduced it to the world,” says Rosenfield. “But we redefined it. ... We created flavors that Americans can identify with barbecue chicken pizza, Italian chicken pizza, BLT, it goes on and on, ethnic flavors that Americans were familiar with but hadn’t associated with pizza before.”
By brainstorming off of Waters’ and Puck’s pizza creations, the co-founders came up with a dining concept that proved to be a winner.
CPK’s co-founders looked to others for strong guidance during the start-up phase of their restaurant venture and continued to do so as their company grew. In fact, when it came to branding, many of CPK’s concepts were influenced by other brands.
For example, in 2004, Flax and Rosenfield decided to update the company’s logo to highlight certain elements, such as the color yellow. The idea came from examining the Starbucks logo.
“I’ve often said I want to own yellow like Starbucks owns green,” says Flax. “The Starbucks logo, if you asked somebody to describe it, most people can’t tell you what it really is. [It’s a mermaid.] But you sure know it when you see it, you recognize that green, and you don’t have to read much about it. So we decided that that’s really an important part of the logo.”
CPK made its sunny yellow color more prominent in its logo to create a stronger brand-color association in customers’ minds. It also played up the use of its three letters, C, P, K. While the initials have always been included as part of the logo, they are bolder in the new version. And the co-founders emphasize the use of the brand’s shorthand with employees and with customers.
“We were always looking for the shorthand, for people to become very familiar with it. McDonald’s has Mickey D’s, we have CPK,” says Rosenfield. “That’s been very important to us.”
For nickname ideas, the co-founders looked to Col. Sanders.
“When we were doing our logo, it didn’t escape us that Kentucky Fried Chicken was KFC,” says Flax. “So there was something about our letters that worked in our mind. And now, little kids call it CPK. We’ve given little kids an easy way to identify with us. I wish I could say I thought of that back in 1984 [while planning the first restaurant], but it’s working that way now.”
As CPK has grown, the co-founders have looked at different options for brand expansion, from franchising their CPK/ASAP sites smaller, faster versions of restaurants, located in malls and airports to expanding into the frozen foods case. And it was the combination of these two expansion options that led the co-founders to study Baskin-Robbins.
“We studied Baskin-Robbins’ growth and some of the problems they had,” says Flax. “For instance, (when) we went into all of our franchise agreements, like with the Mirage Hotel, we always made sure we had the right to go into the frozen food case. Baskin-Robbins made the mistake of expanding and franchising before deciding to go into the frozen food case, and they were sort of locked out by their franchisee agreements. That’s what gave Haagen-Dazs the foothold to come in and really grow through the frozen food case.”
Entering into the frozen foods case was a great adventure for Flax and Rosenfield, and it took them into unfamiliar territory. Sure, they’d cornered the market on hot pizzas, but what did they know about frozen pizzas? This time, instead of simply studying what other companies had done, the co-founders decided to enter into a partnership.
In 1997, Kraft Pizza Co., a division of Kraft Foods Inc., approached Rosenfield and Flax and proposed a CPK-branded frozen pizza.
“In studying them and tasting their product and learning about them, we came to see that they had the best technology,” says Rosenfield.
And that was important because, as with all brand-expansion endeavors, Rosenfield and Flax’s greatest concern was for maintaining the brand’s quality.
“We knew that this was going to put our product in a lot of hands and touch people for the first time, so it was critical to us that (Kraft) maintain the product quality,” says Rosenfield.
More than the way the pizza was constructed, the co-founders were concerned about the way the pizzas would be handled.
“You can imagine, if a frozen pizza is allowed to thaw and is stored on its side, what can happen to it. It isn’t pretty,” says Flax.
If the frozen pizzas weren’t made or shipped just right, CPK could lose thousands or millions of potential restaurant customers before ever entering a new market. So the co-founders and Kraft spent several years negotiating and testing, and they came to a win-win agreement.
Kraft produced the pizza, using CPK’s recipes and brand, and agreed to control all of the shipping and handling, ensuring that the pizzas are treated with care. The result is a successful brand expansion strategy for CPK, and Kraft benefits by having a super-premium brand in its product line, one that can be sold at a higher price point than its original premium brand, DiGiorno.
Rosenfield and Flax’s attention to other companies’ trials, successes and failures has paid off. In some cases, the co-founders skipped over trial-and-error because they already knew what could work, and in others, they were able to flat-out avoid mistakes. And all the while, their restaurant chain has grown.
From a single store in Beverly Hills in 1985, the company has expanded to more than 180 locations around the world, drawing in revenue of $479.6 million in 2005 an increase of more than $100 million over 2002. And it is the uncontested leader in the California-style pizza marketplace.
“At this point, we are not only the leader in premium pizza, we are the category killer,” says Rosenfield. “We can’t identify who’s second, because we don’t know of a second. We’re it.”
How to reach: California Pizza Kitchen, www.cpk.com
Education: Master’s degree, electrical engineering, UC Berkeley
First Job: Design engineer, Addressograph-Multigraph Corp.
What has been your greatest business challenge?
The biggest challenge is really how do you continue the top-line growth.
What has been the greatest business lesson you’ve learned?
The most important, what people forget, is the culture of the company, and how do you maintain the culture. We’re a very open culture, we allow employees to participate, we are a very employee-focused company.
Whom do you admire most in business and why?
I admire what Cisco has done. I think Chambers (John T. Chambers, president and CEO, Cisco Systems Inc.) has done a great job. I think maintaining the culture and continuing the growth is what he has done. We’ve modeled many times what Cisco does.
“When you buy these tchotkes, people like to see them and touch them and feel them,” says Callaway. “They want samples and they want a dialogue about them, like what happens when it gets wet, will it hold up, do you have it in triple-X. ... There’s just a lot of questions they have when buying these things. [And so] this sole reliance on the Internet sales model did not work for us in the early years.”
So Callaway and the company changed course. Rather than focus entirely on online sales, the promotional product solutions company would also offer customers access to local sales reps, who could demonstrate products at meetings and offer more personal service.
The new solution appealed to both tech-savvy and hands-on buyers, and eCompany Store’s sales skyrocketed. In 2000, revenue was $5 million; in 2006, it projects revenue will near $40 million.
Smart Business spoke with Callaway about how eCompany Store’s two-pronged sales system has helped it grow.
What was the key to eCompany Store’s rapid growth?
The key is focus. The key is to figure out what your gift is, what your strength is, what market you’re going after. Put a discipline around that and don’t look left, don’t look right, stay focused.
That’s what we had to do. We were going to be a dot-com, and when that didn’t work, we said we’re going after the Fortune 500. By staying true to that second strategy, we’ve been successful.
If there’s something that business owners trying to become larger business owners could do, it’s to develop and have the discipline to remain focused on your strategy. It’s just so easy when you’re small to get distracted and to say we could do this and we could do that, or we could be in this market or that market. It’s about focus.
How has your focus on a dual online and in-person sales strategy helped the company grow?
The technology gave us a competitive advantage. The distributors in our industry have been slow to invest in these technologies, (but) it’s what we were all about.
So when we go and compete against other businesses, trying to win the business of Xerox or Microsoft, we tout our technology, and people have a hard time saying that they can compete with us, because we put so much money into it to begin with. So really we’ve leveraged it. But now we have also created a geographic sales force, so you get both.
How do you keep up with changing technologies?
We’re always implementing new solutions and we’ve found that there usually are some material savings that can come from making the right choices, but the big challenge is cost. And if we can hire somebody in our technology group to be a bulldog, really be a negotiator, to find ways that we can save money, then we can overcome those cost challenges. And that’s what we’ve done, essentially. It’s his job to find ways to lower our technology cost.
What challenges come with the dual-sided operation, and how have you addressed them?We really have had to change the structure of the company so that we have people focused on the geographical selling effort and another team of people focused on selling by using our online catalog, by using more of our technology. We have those broken into two distinct responsibilities, but each one of those responsibilities has the same customer. Xerox buys from the online store, but Xerox also buys from the salesperson.
We’ve had to have those separate positions, and sometimes that can create a little conflict or confusion at the customer level. So we have realigned ourselves so that we’re a single selling team (on each) account. So even though (the sales representatives) have two different ways to get you product, they’re a team on the Xerox account. They both now report to the same person. And that was huge for us.
How has this structure helped eCompany Store grow?
It gives you two great stories to tell. On the human side, we’ve got you covered, and on the technology side, we’ve got you covered. We’re going to scratch both of those itches for you.
We call on corporate America, big Fortune 500 companies, and what they want is personal attention and integration into their systems. We can scratch that itch quite well.
How to reach: eCompany Store www.ecompanystore.com
Born: Covington, Ky., 1949
Education: Civil engineering, University of Cincinnati
First job: I grew up in a little family construction company, so my first job was going to work with my grandpa on a construction project.
Whom do you admire most in business and why?
The person that influenced me the most was a gentleman that started in this company as a water boy and retired as the vice president of operations. His name was Joe Glassmar, and he impressed me the most because Joe taught me the joy of finding success through other people succeeding.
He was the original guy that proved to me that this is not a zero-sum game, that everybody can have more if you support each other. He cared about me when I wasn’t smart enough to particularly care about myself.
What is the most important business lesson you’ve learned?
To let other people do their jobs. Every time I got a promotion, I didn’t know exactly what the new job involved, but I was a crackerjack at doing the job I did before. So I’d go and interfere with the people who were now trying to do it.
And I was blessed when I got this job. I sure didn’t know what a CEO did, but I was a crackerjack vice president, so I went around and interfered with anybody trying to be a vice president. Some other leaders in this company sat me down and explained to me that you’re going to have to find your own job instead of trying to do ours.
And the most powerful belief that I’ve developed is around what truly is the highest leverage in terms of strategic leverage the most powerful advantage you can have in the marketplace can be described in one word: trust.
Trust is to human performance what water is to human health. You get a lot of it every day, you might thrive. [If] you’re deprived of it, it really doesn’t much matter what you’ve written in the business plan.
What has been your biggest business challenge?
I think the biggest challenge any of us faces is the leap from doing to leading. That, especially for folks who have a high-energy budget and some capacity for doing, we tend to want to do things for people, and that’s not a very effective way to lead.
It certainly has been a problem for me to step back and let people take their own path to success over the problems rather than wanting to tell them exactly how to do it.
“It sounds scary,” says Catherine Iconis, forensic associate with accounting and consulting firm Tauber & Balser PC, “but there are a variety of things that companies can do, and that’s what make this less scary you can protect yourself.”
Smart Business spoke with Iconis about how companies can identify, prevent and protect themselves against fraud against their bank accounts.
What kinds of bank account fraud should businesses be aware of?
A variety of fraud can be committed against your bank account, which is usually referred to as types of white collar crimes. First there’s check fraud, where checks are altered, counterfeited or forged.
But it’s not necessarily check fraud. Employees can forge or tamper with company checks or submit false invoices, among other schemes to defraud the company.
Who commits fraud against businesses?
Anyone can commit fraud against your bank account. There have even been instances of bank tellers stealing customer information. It is important to keep your account information under lock and key.
Limit who has access to checks and deposit slips. With employees, the more control they have, the more damage they can do.
What can companies do to recognize and identify fraud committed against their bank accounts?
Reconciling your bank account and looking at the cancelled checks, if available, is one of the most important things to do. Do it on a regular and consistent basis.
The Uniform Commercial Code has been revised so that businesses and individuals have a shared responsibility with their financial institution to detect fraud review your customer or depository agreement to verify the time frame you have to identify fraud before you become personally responsible for losses. Sometimes it’s 30 days from when you get your bank statement, and sometimes it’s going to be less, sometimes it’s going to be more.
If you have a really good relationship with your banker, and know them on a first-name basis, you can call them up and say, ‘There’s this check that doesn’t look right,’ and they might be able to look into it more quickly.
And according to the Association of Certified Fraud Examiners’ 2004 Report to the Nation on Occupational Fraud and Abuse, anonymous tips are the No. 1 way that people find out about fraud. With Sarbanes-Oxley, they’re requiring publicly traded companies to have a confidential reporting mechanism now, such as a hotline or tipline.
While only publicly traded companies are required to have this, I recommend it to everyone. If you can afford having a service like that, have it, and not only have it available to employees, but to customers and vendors and other parties that might be aware of any fraud that’s happening to you, from outsiders or insiders.
How can companies protect themselves from bank account fraud?
Make sure you keep your account information as secure as possible. Limit access to that information, and have select personnel in charge. Try to split up the responsibilities there. A major issue is separation of duties; don’t give one person total control of the banking process. Also, reconcile your accounts consistently and make sure to shred information once you are done with it.
When it comes to people that are looking at that information or are in charge of that information, you want to do background checks on them. I think it’s extremely important for anyone that’s in charge of your bank account information. You’re putting a whole bunch of trust in these people.
Also, Hogan Personality Tests give the employer the candidates’ advantages and disadvantages or risk areas. And as another incentive, it helps reduce turnover costs.
Have your employees bonded with employee dishonesty insurance. This will protect you against a variety of fraud. If an employee steals anything or writes checks that weren’t authorized, you can file a claim and hopefully be reimbursed for that.
The problem with employee dishonesty insurance is that it can be really hard to prove. The best thing to do is to keep records of everything and have as much detail of everything that happened. The best claims are the ones that have an actual affidavit or confession attached to them, where the person says, ‘I did this; this is how I did it.’
Finally, consider the use of Positive Pay. This service allows you to submit a list of authorized checks to your bank so that the bank can verify checks before they are paid.
Catherine Iconis has worked at Tauber & Balser PC since 2002 as an associate on the forensic accounting services team. She is also a member of the real estate niche group. Reach her at (404) 814-4933 or email@example.com.
Education: U.S. Navy; University of Cincinnati, associate of applied business degree; Wilmington College, bachelor of arts degree in business; GE Crotonville Development programs
Employment: U.S. Navy Submarine Group; positions at General Electric, including manager of shop operations and structures, before joining O’Gara-Hess & Eisenhardt as plant manger in 1994
What is the greatest business challenge you’ve faced, and how did you overcome it?
Changing the culture of the team. At O’Gara-Hess & Eisenhardt, it was changing from ‘I can’t’ to ‘This is what I need to do it.’ This took time (years) and is why this plant was successful in going from one M1114 (up-armored Humvee) per day to 30 per day. We never considered ‘I can’t.’ We went right to, ‘What do we need?’
What is the greatest business lesson you’ve learned?
Stay the course, keep things simple and build a strong foundation first. Never forget the basics especially in yourself, no matter how high in the organization you go. Everyone needs to practice blocking and tackling, even the pros.
Whom do you admire most in business and why?
There is not a single individual. I admire leaders who show true passion in what they are doing, so the Jack Welches are at the top, along with successful football coaches Bear Bryant, Woody Hayes, Vince Lombardi.
Education: Bachelor’s degrees in accounting and finance, MBA, The Ohio State University
First job: Working for Ashland in the accounting department
What is the greatest business lesson you’ve learned?
I think the greatest business lesson I’ve learned is never let your competitor get the customer that you don’t want to lose.
As I sat and watched some competitors as they got into trouble, they would analyze the situation, and a lot of times, they blame the customer because they’re too demanding or they just can’t meet their needs or do it at a profit, so they feel it’s necessary to relinquish that customer.
But, what I’ve found is that it’s so difficult to gain customers, the real objective is you need to find a way to run your business to truly meet the customers that you want to serve. That’s not to say you don’t ever lose a customer, because you do. Some of them you got, but they’re really not the customer you want to serve.
But those customers that are truly in your sweet spot, you’ve got to figure out a way to keep them with your business. Change your business to meet the customer demand, and don’t try to get the customer to accept the way you run your business.
What is the greatest business challenge you’ve faced?
Seems like every time I wake up, I get a new one. The one I face today is most important to me.
Whom do you admire most in business?
I admire the people that truly understand their customers and try to serve them, truly understand their people and try to help their people get better and improve the business. They’re not out trying to make a big deal about it. They’re just gutting it out, day-in and day-out, not looking for publicity, not trying to have the spotlight shown on them.
They’re doing it because they like it, love it, and they truly respect everybody around them and truly have a service mentality. There are a lot of people out there that you never read about.
This simple phrase encompasses Swisher’s approach to building and running a business, an approach that has helped United Feeds grow and prosper.
Swisher founded his feed sales company in 1956 with two employees and $25,000, borrowed from family members. Today, United Feeds not only sells hog feed, it also researches, produces and transports hog feed with the help of approximately 450 employees in nine feed mills, eight storage facilities and two research farms throughout the Midwest and Asia.
According to Swisher, he couldn’t have done any of it without his employees.
“I am unbelievably proud of the people we have in this company,” he says. “I really believe that I maybe only have one skill, and that skill has been able to sort of identify and procure and keep these individuals.”
That’s not an easy task. Simply finding the right people can be daunting, something Swisher has learned over the years through trial and error.
“One of the things I learned very quickly is that it is the people that make the difference,” he says. “I cut my teeth on hiring people that were capable of getting the job done and those that weren’t, and it became very obvious to me that I needed to hire the people that were the very best, and for specific tasks.”
Now during interviews, Swisher and his hiring managers look for the right skill sets.
“We have seven Ph.D. swine nutritionists, and this is a long way from where I started,” Swisher says. “I have a degree in agriculture with a major in animal nutrition, so I don’t mean that what they do is absolutely foreign to me, but at the same time, they have skills that I don’t have and are recognized for them. To tell you that we have the very best nutritionalists in the country I believe, is a fair statement.”
But to be successful at United Feeds, employees need more than just the right skills. They also need intangible qualities, things that don’t appear on a resume, such as honesty and integrity.
“And industry,” Swisher adds. “You’ve got to have somebody that’s a self-starter. The person that needs somebody to look over their shoulder to do a job really does not fit in with us, and he does not do well.
“We have been told that we have a flat organization, and it’s not as flat as it once was, but we do not have very many supervisors for the number of people that we have because we really rely on people to do their own jobs and do them without supervisors.”
Swisher understands that while he is interviewing a prospective employee, that person is also interviewing him, evaluating the company to see whether it’s a good fit. So he ensures that there are plenty of perks to attract the best employees, and one of the biggest is just as intangible as integrity and industry.
“In order to attract those people, you have to allow them to do their jobs,” Swisher says. “You have to allow them to be ethical. You cannot have an organization that has any intent of not being ethical. But it’s really that same thing absolutely all the way through the company, that people are proud of the fact that this is an honest, ethical company. I think that is critical. And [that has] led to success, allowing employees to use their skills to the fullest.”
Once it gets employees in the door, the company makes every effort to keep them happy. Swisher offers many of the traditional benefits, such as health insurance and a 401(k) plan, but he also offers less-common benefits.
For example, every employee, from the person running a mixer to the highest manager, reaps the benefits of the company’s success through an Employee Stock Ownership Program. And 170 employees in upper-level positions in management, research and sales have the option to purchase unlimited company stock above and beyond the ESOP.
In the beginning, Swisher says, the ESOP was a way to get people to join his business.
“When I started the company, I had two employees,” he says. “And when you think about it, here’s this guy and he’s got an idea and he’s going to start this company, saying, ‘Come to work for me but I don’t have any money.’ How would you like to put your wife and your child’s future in the hands of this person that has no money, right?
“So I basically said, ‘If you come with this company, I will give you part of the company.’ And I did. And then, as we grew, it just appeared to be a really great thing for anybody that came with us.”
The plan not only benefits employees financially, it motivates them in their jobs.
“To me, it gives people knowledge of the company, what’s going on in the company, everyone gets the financial sheet, everybody knows what we’re doing, how we’re doing it,” Swisher says. “We make great efforts to explain to everybody what our next steps are, what we’re planning on doing, what are our goals, what are our strategies. In their instance, they’re taking a look at this as how they benefit personally out of their stock or out of the ESOP.”
But despite the benefits, there is a drawback to offering an ESOP.
“[It] puts tremendous pressure on the management of this company,” says Swisher. “I’m not just risking my money. To be responsible and risk other people’s money is a whole different thing, and it’s much harder. You’re holding the future, the retirement of these people in your hands. But the other thing is, if you don’t take risks, that stock will not grow. And we need to grow at an average at least of the S&P 500 for this to be a good thing for those employees.”
So when Swisher wants to make a big decision or take a risk, no matter how calculated, he seeks advice from his employees.
“We have a board of directors that is comprised primarily of division heads of the company, and we have four divisions, and so we have those four heads, plus financial, to make up the board. But then in each division, we have people that we’re going to go to when we have to make a decision, particularly when it pertains to that division.”
Giving employees a voice in the company not only entices the right people to join United Feeds, it also encourages them to stay. In upper-level positions, the company’s turnover rate is less than 1 percent.
Swisher’s secret for keeping turnover so low? Just treating employees right.
“I really think just because of the way this company functions how it values the individuals and the people that we have selected, the 401(k), the stock value of the company, the atmosphere that is created in this organization that’s how we keep it down,” he says.
The downside to low turnover is that employees who have been on the job for 10 or 12 years may fall into a rut or become bored. To avoid that, Swisher works at keeping employees engaged and interested in what they’re doing and where the company is going.
“I think that for such a basic kind of an industry and you can’t hardly get any more basic than feeding animals we need to continue to reinvent ourselves,” he says. “I don’t care what industry anyone is involved in, it will continue to evolve. And my contention is that we have in the past and will continue to reinvent ourselves approximately every decade.”
And working toward the latest reinvention, United Feeds has entered into various joint ventures with research labs and universities, studying new enzymes and bacteria and how they may improve the company’s product.
“And with those joint ventures, one of the most interesting things about them is that they extend our intellectual capital,” Swisher says. “This one company [we’re working with] on the bacteria is formed, owned and run by two bacteriologists. And we don’t have any of those on our staff. So all of a sudden, now we have access to their knowledge and information that we did not have before. “This is how we have made this industry interesting to our employees, and I think it is also the fact that we continue to change and grow.”
No matter how the company changes, one thing will remain the same: Swisher will focus on his employees, because “a company is really a shell,” Swisher says, “a hollow shell until you put people in it. So it is the composition of those individuals that really make the company.” How to reach: United Feeds, http://www.unitedfeeds.com or (800) 328-9909