Jacob Lipa has a pretty great view from the 44th floor of Psomas’ headquarters in downtown Los Angeles, but that vantage point doesn’t necessarily lead to the best perspective.
So to increase his decision-making savvy, the president of the consulting engineering firm routinely exchanges information with his 800 employees through frequent office visits and open-ended dialogues.
“I keep telling my people here all the time, I really don’t expect them to behave responsibly without information,” Lipa says. “With information, we cannot but behave responsibly.”
The philosophy has been paying dividends at the consulting engineering firm, which specializes in the land development, water and transportation markets and posted 2007 revenue of $130 million.
Smart Business spoke with Lipa about how to share information with your employees while putting things in perspective by stressing the bigger picture.
Divulge information. Give them as much information, other than personal information, about the business as they can take.
When I think that somebody is really not trained enough to understand the information, then I stop and will try and train them to understand the information better. I was going over our entire income statement with the company. I went, ‘Here’s our net revenue. Does anybody know what net revenues are?’
First of all, there are no surprises. Secondly, everybody becomes part of the solution. It’s not only that I feel the responsibility to solve, but now I have 800 people that want to help me solve it. You get a lot of ideas, and one or two of them are better than yours.
Ask for information. We have regular dialogue meetings. We call them dialogues. In those meetings, I come with no agenda whatsoever. This is my opportunity to listen to them tell me what’s going on in their world. It’s really an ongoing dialogue where they provide me with information so that I can make better decisions.
We try to go at least on a monthly basis to each of these offices. When I do dialogues, it’s usually for five to 10 people. Whenever we visit an office just for other reasons — we don’t necessarily go to the office just for that — we just call the office manager and say, ‘How about a dialogue? Would you ask if anybody wants to meet with us for an hour to talk?’
It’s not the formal process, but we try not to miss any opportunity.
What you really hear is what your people really care about. Then you really can do some great stuff because now you know what the people really care about.
Show your vulnerability. (Don’t) worry about being vulnerable. I have no problem telling somebody, ‘I tried it. It didn’t come out right. Let’s find another way.’
Everything that I say and I do isn’t perfect, and, for that matter, not everything that they say or do is perfect. The idea here is to continually learn to do better and obviously not to break the bank and make stupid mistakes.
They are really giving you good ideas and good information and sometimes good critique and sometimes also stuff that you realize that you have not successfully communicated. You say something, and you know that you meant one thing, but a guy says, ‘Jacob, I hear this and this,’ and I say, ‘Wait a minute. I didn’t mean it that way.’
Now you know that many people in the company misunderstood you, and you have an opportunity to go and correct it.
Undergo a 360-degree evaluation. A 360 is a system where you ask people to comment on what you do — people that are above you, below you, who work with you.
We actually don’t force it. We recommend it. The best way is if (me) and my partner ask to have it done on us every year. Then, other people are all of a sudden looking at it and saying, ‘If they’re doing it and it’s helping them, why shouldn’t I try?’ For example, I managed an operation in the company, and I had some very strong feelings about what the operation committee should look like. In the 360, it’s been two or three years in a row that people are saying, ‘Jacob, we don’t think that the operation committee is the best thing for us.’ So I’m getting ready to get in front of the principals, and I said, ‘I heard it once, I heard it twice, I heard it again. Let’s get together and decide how do we change it to make it more beneficial for everybody.’
Focus on the big picture. You really need to believe in a larger vision. Yes, we can measure numbers and everything, but unless we really believe that there is something larger here, bigger here, then it does us no good.
Every time you get in front of your people, that theme needs to be part of the story. If you want to go into a new program, let’s say we want to expand the water market, well, why are we doing it? There are more people dying in the world for lack of water or contaminated water than any other thing around. It is such an important job to be able to deliver water and clean water.
All of a sudden, it’s not just about how efficiently you’re doing in terms of profit. All of a sudden, there is an emotional story about why it is so important that we are doing it well.
HOW TO REACH: Psomas, (213) 223-1400 or www.psomas.com
Mark R. Goldston has written a book and has 13 patents to his name — including one for the original pump-up sneakers.
Why is that worth mentioning? Beyond its general worth at cocktail parties, that background gives Goldston the confidence and sense of humor he needs as chairman, president and CEO of United Online Inc.
And there have been times that he’s needed both. United, a provider of consumer Internet and media services that spawned from the coming together of NetZero Inc. and Juno Online Services Inc., has grown to more than 50 million members across its brands and posted more than $513 million in revenue in 2007.
But there have been some challenges as the company has been built up on bringing companies into the United portfolio. Take the Net Zero-Juno merger in 2001 that originally formed United. The two rival companies were both hurting and a local media outlet made an interesting analogy when it panned Goldston, then the head of NetZero, for the deal.
“They said it’s two skunks trying to breed a mink,” Goldston says, and that’s where he used a bit of that humor. “And, really, that is one of the great comments of all time.”
But Goldston also had confidence that he had done his homework.
“The point was nobody bothered to try to understand what vision had been articulated for the two companies,” he says. “They just focused on the fact that, at that point, these were two money-losing companies that had come together to compete in an industry against a virtual monolith, which was AOL.”
And were those critics a bit off? “So what happened, ironically, since the companies merged, we’ve generated almost $700 million in EBITDA,” Goldston says. “In retrospect, you can decide whether or not they were two skunks, but we definitely bred a mink.”
The results came from Goldston’s basic idea to fully understand the people at a company during the always awkward time after a company is acquired. If the people are right for his company, he can make it work by bringing them together under one rallying cry and get them walking the same path of accountability.
Recently, United acquired floral and related products provider FTD Group Inc., increasing United’s head count to roughly 2,200 employees — and starting the integration process all over again.
Here’s Goldston’s outline for how you bring a new company in and meld it with your people.
Understand the new players
A few months back, Goldston made a personal visit to FTD to make sure he understood what its people were about. While the company was probably more used to getting flowers, Goldston believes a more personal touch is required.
He spent four days in FTD’s Chicago office and took the time to speak in front of every employee. He also met with every single member of the senior management team — all 40 of them. His hands-on approach played to what he thinks is most important when you’re acquiring a company: You have to get to know them.
“Why do so many acquisitions fail? Let’s face it, they’re done by smart companies with smart investment bankers,” he says. “Why do so many of them fail? Because it’s the conquering theory: ‘We’re going to force our culture onto your company’ — that doesn’t work. You have to be able to meld and assess people, assess their skills and make them feel post-deal they’re not part of an us and a them.”
That initial assessment requires the hands-on approach Goldston uses. Instead of sending out his people to figure out if a company can fit with United, he makes sure he does the scouting.
“Most guys that I know that are peers of mine, they send out their advance teams, they do the work, they report back and decisions are made, and the only people the CEO meets are probably the CEO, the CFO and maybe one or two other key players, that’s it,” he says. “You rarely meet a CEO who’s met people 40, 60, 100 deep in an acquired company.”
When Goldston is looking at a company’s people, he is trying to figure out the work ethic and job capabilities of the company.
“Part of it is, is it very clear to me and to them what their jobs are and how they are doing,” he says. “Some of that has to do with the overall corporate fortunes, the other has to do with how does the head of marketing and his or her marketing department perform. What do they do, what’s their work ethic like, what’s the quality of their work product like, and what kind of people do they appear to be?”
If a company doesn’t have the clear makings of what will work with United, Goldston won’t close the deal.
“Buying a great brand name and a company that you perceive to be a great enterprise that doesn’t have great human capital, will not be a great company,” he says. “You see some of these big brand names go bankrupt and you’re like, ‘Wow, how could that company go bankrupt, everybody’s heard of them?’ Yeah, well, what kind of people did they have?”
Prep your team for transition
While you may be persuaded to spend all of your time working on the big deal, Goldston says that internally, you can’t lose focus. When you are working through an acquisition, you have to be clear-cut with your people and lead them through a time full of distraction.
“It’s really important to have a high-level, clear strategic vision that you can articulate [and] use as a rallying cry, No. 1,” he says. “No. 2, you come up with your list of three to five critical things that must get done to do the acquisition or the merger and have everybody focused against that and then, thirdly, articulate to people from a business and personal standpoint what does this acquisition mean to you.
“It’s important for the people in the company that is the acquirer to understand how this fits into the total mix of the company and what it means for them so that they also understand that, as an acquiring company, does this company provide additional career opportunities, does it provide opportunities to leverage all of the things that we’ve built as a team?”
The important thing is to make the acquisition an important focal point that doesn’t completely drive the company in a new direction.
“You don’t want people to become like kids in a candy store,” he says. “It’s very easy to get sidetracked because there’s so many new and different things you’re being presented with; you have to stay focused on those three to five things and have regular, weekly updated meetings as to where you are against those.”
The thing is to set realistic goals about bringing the new company in and assimilating it. You can’t expect everything to run smoothly — in fact, Goldston says you will most certainly hit snags you never dreamed of — but by setting reasonable and measurable goals for the company’s transition period, you will stay on track.
“You can’t constantly ask people to climb Kilimanjaro, not everyone can climb it, and you don’t have to get to the top of Kilimanjaro to be a very big success,” he says. “So it’s important to set aggressive goals but goals you believe that if people work hard and are smart can achieve, because coming up short of a very lofty goal on a constant basis is a major demotivator to workers because they don’t, in retrospect, think they achieved a high level but just didn’t get to the pinnacle, they think they came up short.”
Put the lineup together
When he’s got his mind made up on a company and his internal people ready, Goldston puts the whole puzzle together carefully. He gives the new team members the personal attention they need and reminds them that United isn’t there to swallow them up but instead to help them grow.
“Some people say, ‘This is the XYZ Corporate way, and we’re going to mold you no matter what you were before into that,’” he says. “We don’t want to be the company that comes in as the omniscient acquirer, because if that’s the case, then you’re not buying anything of value; part of the value in what you’re buying is how bright the people are.”
That doesn’t mean that United welcomes the company in and then lets it run amok. Goldston very clearly articulates some non-negotiable items revolving around respect, integrity and ultimate controls.
“Making sure that the business has strong internal controls so there are checks and balances is nonnegotiable, but beyond that I really don’t care what your batting stance looks like,” he says. “Ultimately, if you’re a great hitter and you’ve got a great average, then I’m going to figure out how we’re going to use you in the lineup.”
That means that the onus is on Goldston to meld the new company and United into one team. To do that, he falls back to the three to five goals he gave his internal people and shares those goals with everybody — new and old — for a common starting point.
“Once the deal is closed, the way you create a winning culture is you then walk the walk,” he says. “Common goals that are updated regularly and monitored regularly and progress reported regularly helps to sort of instill a common spirit in the organization, which leads to a shared sense of accomplishment at the end.”
By sharing goals you begin to create a common thread of accountability across the company.
“Basically what you’re doing is saying, look if you’re part of the family, you’re part of the family, and you don’t have separate family rules for different children,” he says. “It’s about the company’s agenda, and your personal advancement and your personal compensation should be predicated on how well you accomplish those goals of maximizing the benefit to the shareholders of the company.”
To get that accountability started, Goldston puts himself out in front of the company and shows them the measurable goals that he is sharing with the public and lets them know specifically what he will be doing.
“If you’re going to ask somebody to do 100 push-ups, don’t do it in your motorized cart eating bonbons,” he says. “Get down on the field and do some push-ups with them; even if you didn’t do all 100 with them, show them that at the end of the practice the coach is sweating, as well.”
Taking that tone from the top creates an accountability level that every employee can understand and melds the entire company together under one scorecard and set of standards.
“The tone at the top of the company a lot of times, most times, will dictate what people choose to emulate,” he says. “So if I deal with my executive staff that way, then they, in turn, will act with their people that way, and it’s a ripple effect.”
In every step that Goldston takes along the way, he puts the effort into making sure people make the adjustment, noting that the companies will come together if you simply define what the merger means for everyone involved and tie it to reasonable and beneficial goals. When they see that, you can start breeding your own mink.
“I do not subscribe to the people are fungible theory,” he says. “People are critically important and who you hire and what you give them to do and how you measure them and how you interact with them is what makes your company a success or a failure, period. And, in order to do that, you have got to create mutual trust where people are willing to go the extra mile for you because they know that you’ve got their best interest at heart.”
HOW TO REACH: United Online Inc., (818) 287-3000 or www.untd.com
When Tiger Bitanga founded The Design People Inc. in 1999, the
CEO assumed he would be providing Web site and Internet marketing services to clients. What he didn’t anticipate was how much of his perspective he would share with clients in the process.
“Especially when it comes to new technology, clients come in with really unrealistic expectations,” he says. “I used to get clients that walked in and said, ‘I want to compete with eBay, and I’ve got a $10,000 budget.’”
Bitanga says managing such client expectations requires patience and diligent listening. By identifying the goals of clients and then working backward to achieve them, he’s grown his firm to 170 people.
Smart Business listened as Bitanga talked about how to become a better communicator by keeping your clients’ successes in mind.
Q. What are the keys to effective communication?
Even though you’ve heard the same thing a thousand times, you still have to remember to listen and to look for those little bits of information that are going to make this client different from previous ones or the next one. Once clients get a sense that you’re being honest and open, then suddenly, you just begin this whole collaborative process.
It’s suddenly not about the sale anymore. It’s about just being an authority and an expert, and them looking to you to provide that great advice. At that point, it’s just so much easier to get that client.
Q. How do you show clients you’re listening to them?
We do surveys all the time. A survey goes out to the client saying, ‘How was your experience?’ It’s a very quick thing that rates a number of areas 1 to 5. From there, after we launch the Web site and also when they call for support, we send out surveys.
It’s via e-mail. Then we also let them know that this is part of the process before they launch. That way, we actually get a good 90 percent of our clients who respond. Those one out of 10 clients who don’t respond, managers call them up.
Q. How do you word surveys so that you elicit such a high response rate?
No. 1, it’s got to be easy. Clients don’t want to fill out something that they can’t fill out in less than 30 seconds.
You should be asking questions that rate a person based on how they’re handled. The most important question is, ‘Did you succeed in what you wanted to do?’ That in itself will tell you whether the person working it did a good job or not. Did they feel there’s a sense of success there?
You can directly translate the comments into new products and services or improvements in processes.
Q. How often should executives communicate with their clients?
All the time. You have to do it all the time. You can’t get caught in this bubble where you’re constantly trying to innovate your products and services based on what you think is best.
That’s probably one of the biggest mistakes you can do. You have to innovate based on not what your competitors are doing or not on what you think needs to be done but on what your clients want.
Q. How can other executives become better communicators?
First off, you have to have the client’s success in mind. You can’t have your company in mind first or whatever thing you’re selling. Once you have the client’s success in mind, you have to talk to the client and figure out what their definition of the final successful result is. Then work backward from there.
The benefit is that suddenly you have raving fans in your clients. For example, we don’t cold call. We get most of our business because ... we get so many client referrals.
Once they feel that they’ve been given something that helps their business or generates leads, No. 1, they come back, and they want to upgrade a package. No. 2 is that they tell everybody around them, ‘Here’s how I became successful. Here’s how I generate more business.’ Suddenly, you get all these calls coming in.
Q. Is there anything else to remember when communicating with clients?
When people do a search for your company in Los Angeles or wherever it may be, they know that your Web site is basically stuff that you control. There are many, many other Web sites out there where customers are talking about your products and your practices and talking about your company and your services. You have to embrace that.
We’re in a new age where there are just so many other tools that people use to look at your company before they even call you. You have to take advantage of those tools.
You have to make an active campaign to get your customers to post testimonials.
HOW TO REACH: The Design People Inc., (800) 850-7707 or www.thedesignpeople.com
Mary Leslie is always amused when someone points to the stagnant economy as an argument against change. If you hit rough waters, she says, you would be foolish not to alter course and steer toward a clear horizon.
As president of the Los Angeles Business Council, Leslie tries to convey as much when advocating for area business leaders on key issues that impact their companies and communities. On the issue of sustainability, for example, she argues that companies that embrace environmentally friendly practices can cut operating costs, attract business and encourage a healthy lifestyle among employees.
But you’re not going to get everyone on board just by laying out the benefits of change. And sometimes, you just have to let employees go, a lesson that Leslie has learned throughout her professional career, which includes positions as deputy mayor of Los Angeles and deputy director of the U.S. Small Business Administration.
Smart Business spoke with the versatile businesswoman about how to reap the benefits of sustainability and how to get resisters to buy in through training.
Embrace sustainability. It’s a competitive advantage now to embrace sustainability as a concept. You can either choose competitively to embrace this phenomena and the reality of limited resources, or you can choose to ignore it, and then it will be forced upon you.
The first thing is always education. We’ve gone to academia the major universities and institutions. We partnered with the companies that were already doing it. Then we went to government. Where are the leaders in government on these issues?
Between academia, your colleagues who have to be knowledgeable and government, you can pretty much find all your answers
Second, you talk to your employees. Figure out if this is of value to your employees.
Then, you start looking at all the things you do all the things you control: procurement practices, transportation issues, telecommuting, work-related issues.
[If you practice sustainability], you have happy employees and potentially healthier employees. A lot of research has shown in sick buildings buildings where there are fumes coming from the carpet that are toxic people who are sensitive and highly allergic get sick.
The second [benefit] is a lot of employees like the feeling of being part of a solution. If you engage in recycling and doing things that are more sustainable to the environment overall, you have civic pride. You feel like you’re bettering your community.
Also, we know now from a marketing promotional standpoint that it has become an important criterion to a lot of consumers and other businesses.
To many major municipalities, you’re viewed as a better citizen if you have a thoughtful policy and commitment to sustainability.
The other reason, if you own buildings, is that you’ll actually be more efficient and reduce your costs. There’s a bottom line to this also; you’ll save money.
Offer training to resisters. The people who don’t want to change resent it, and you get push-back.
Listen to what the perceived issue or problem is. Try to figure out if that’s right or not or if there’s any credibility to the argument.
There might be some legitimacy to it. If there’s legitimacy to it, often you might slow the way you implement something. But in the end, once you make a commitment, you’ve got to do it. You have to accept that you won’t change some people’s minds. You keep some people, you lose others, and you get some new people. It’s the great cycle.
One of the most legitimate reasons for resistance to change within any business is potentially the fear that the person can’t do whatever you’re asking them to do. Nine times out of 10, if you dig down, the reasons somebody’s resisting you is that they have a fear that they don’t think they can do it.
I’m a big believer in training people or retraining people so that you’re not asking them to do something that they can’t do.
Start with the goal. ‘This is the goal. We all agree on the goal.’ If they don’t agree on the goal, then you’ve got a problem. But assuming that we all agree on the goal, you figure out who’s going to have the aptitude toward that, and then you empower them to do it.
If they start getting frustrated and they still can’t do it, then we try to retrain and move people to positions where they can do well. Once you’ve exhausted all of those things, then you help the person move on.
Find like-minded employees. You want to attract people that value the same things that you do. That’s important.
Part of it is the way you present the job. In the interview process, talk about what the goals and objectives of the organization are and see the response you get.
I always ask the question, ‘Why do you want to work here?’ You learn a lot (about) what their long-term objectives are.
If you say one of the qualifications is you have to have some enthusiasm and passion for the purpose of the organization, I think that’s fair. You’re not just hiring a skill. Hiring a skill is important, but you can teach a skill. You need an attitude. That’s got to be a good 50 percent of it or more.
The benefit of that is that you have people who will do what it takes to get things done and work cooperatively in a team.
HOW TO REACH: Los Angeles Business Council, (310) 226-7460 or www.labusinesscouncil.org
David Schmidt has seen constant turmoil since joining SCAN Health Plan.
Don’t get the wrong idea, Schmidt loves his role as CEO at SCAN, a Medicare Advantage HMO.
But when he joined the company in 2002, he had to deal with the final stages of bankruptcy, and just when things had finally started to look bright, he had to deal with a change in California policies that disrupted a major part of the company’s core business providing in-home services for seniors who otherwise would need to live in a nursing home.
The changes in government policy had not come as a surprise, and Schmidt had worked to keep his employees informed every step of the way. This open and honest communication forms the foundation of Schmidt’s leadership style.
“You have to identify what are the critical problems, and I think you have to be explicitly honest, and you have to tell people what you’re going to do,” Schmidt says of the days leading up to the change in government regulations. “And then, do what you say you’re going to do, and hopefully, you make the right choices, and then people start making the right choices, and then it just begins to somewhat snowball.
“We communicated a lot to our employees. We let them know what was going on, we started communicating about (the change) probably 30 months before it occurred that this was a potential issue, and then that it was an issue and so on and so forth.”
And when it finally came time to face the consequences of the loss of funding, the results weren’t pretty.
“We had roughly $40 million in cash and $75 million in unfounded liabilities,” Schmidt says. “So if the business is shut down on that day, not everyone would have gotten paid.”
That HMO specialization was a big portion of SCAN’s business, and while the company could stay healthy, it was forced to lay off more than 200 people when the funding stopped.
“This is a key part of who we are and what we do, and now, all of the sudden, we can’t do that anymore,” he says. “And how do you sustain the mission, how do you keep the people who are left, how do we keep them pulling in the same direction and supporting the same mission?”
The answer became using the troubled times to realign the more than 750 remaining employees behind the company’s vision of quality member care at the not-for-profit provider.
Establish a rapport
The key to pulling out of both the bankruptcy and the systemic change wasn’t just that communication attempts were made but that SCAN found ways to get the situation across to every employee. Instead of tucking away behind closed doors when things are going tough, you need to find outlets to let people know what’s going on in your business especially if you have an inkling of things that will happen a few months down the road.
“We talk about our product, what’s going on in our marketplace, we talk about particular things about the company,” Schmidt says. “With the social HMO transition, we talked about that. I gave them the facts, and we talked very early about the idea that change was going to be part of our lives as soon as I got here because the first change was having to survive the near-death experience.
“We really communicated a lot about changes coming, saying this is what we think is going to happen, that either change can happen to you or you can have a role in its outcome, and wouldn’t you rather be someone who has a role in its outcome to determine your own fate?”
While Schmidt relayed the important facts to everyone, he knew that some of the extremely difficult financial details or long-term plans for the vision didn’t have to be broken down line by line. Instead, he says you can give most employees the CliffsNotes version while giving decision-makers the full novel. The CliffsNotes version at SCAN helped people understand where the company was headed with its updated vision.
“I do really believe it played a role,” he says. “I’m a big believer in kind of the social psychology of the organizations fundamentally, it’s the people. You know the (Bill) Clinton thing, ‘It’s the economy, stupid’? Well, running a business, it’s the people, stupid. That’s the issue. So we made it OK to deal with the problems, we made it so the member comes first, but the enterprise has to do well, and we have to be financially successful, or we won’t be able to serve them.”
The end result was a better understanding from the employees when the layoffs happened.
“Walking 210 people out the door was not fun,” Schmidt says. “But we framed that around the fact that it was something we had to do to continue to be able to serve our members, so that gives you permission to do a lot of things as long as you are consistent.”
The initial role of a leader opening up communications during a turnaround is very simple.
“I can tell them why I think it’s going to work, and because we’ve done the things we’ve said we’re going to do, I think we have some credibility there,” he says. “But I can’t make them believe, I can only give them reason to believe.”
Schmidt first led by example, taking time to walk around and talk to employees and to go out in the field. But beyond that, he found ways for communication to come from the bottom up.
One outlet he created at SCAN was a brown-bag lunch with 10 employees. The employees are nonsenior managers, and Schmidt sits down with them for a free-form lunch where they can ask any questions or give any comments they want about the business. And, though he says it doesn’t make him a great comedian, he tells the same joke every time to help take the edge off.
“I tell them what I expect and what I hope they get out of it,” he says. “And I actually tell the same joke every time, which is that, ‘This meeting is kind of like the ads about Vegas, what goes on in this room stays here. Now, I will make changes, and take action on stuff you tell me, but if you want anonymity, you have anonymity.’ And I give them some examples of things that people generally know that are changes that occurred at the company.
“And I don’t do anything that’s really threatening, but I show them things that really are the result of somebody asking a question in the brown bag.”
Though he can only talk to 10 employees at a time, results from those luncheons go a long way to help push communi-
cations from the bottom of the company. Keeping that anonymity in mind, Schmidt takes what he hears out of the meeting to other senior leaders and tells them to watch out for the problems he’s heard about. The surprising bonus to the luncheons that Schmidt has found is that most employees don’t want to complain about bad bosses or co-workers, they want to talk about systemic issues in their daily jobs. And since most come in as quasi-representatives of their position, hearing and fixing their issues can often balance out a whole segment of the employee population.
Lead the communication
In addition to his efforts to get others in his organization to feel comfortable with speaking their minds, Schmidt says it’s also important for a leader to constantly check to make sure they are communicating and following the vision regularly and honestly.
“It doesn’t happen by accident, obviously,” he says. “It’s not manipulative, but it is intentional. ... It’s one of the things that’s really important for me, for my job, I need to, in fact, exemplify that because if I am less than honest about that, if I’m not consistent, then it’s kind of like scolding your teenage kid on something, and they’re going, ‘Yeah, you’re a hypocrite.’”
To exemplify that type of communication, you have to go beyond letting employees know what’s going on during hard times. You have to truly become a model communicator for your company.
Schmidt leads an annual forum for the organization’s members and staff called “Straight Talks” a sort of “state of the health plan” event. The senior managers use the occasion to communicate the vision of the organization to both members and employees alike.
That kind of effort to get out and communicate the vision has helped SCAN get its employees to believe in communication from the top. In fact, SCAN does an employee survey every two years, and 83 percent of employees say that their manager follows the vision of the company, and nearly 84 percent say senior management does, as well.
“As long as you’re honest with people, and you consistently tell them the truth, you’re doing the right thing,” Schmidt says. “And the right thing doesn’t mean giving somebody everything they want. It means if you can’t give somebody something they want, you do the best of your ability explaining why and empathetically listen to what their concerns are, so that’s what we do.”
As a result of leading communications during the tough times at SCAN, Schmidt has helped the company from the trenches of bankruptcy and governmental hindrances to new success. When he joined the company in 2002, it had roughly 52,000 members and didn’t have enough cash to survive another bump in the road. Today, SCAN has more than 105,000 members, $1.46 billion in 2007 revenue and more than $1 billion in cash to work with. Naturally, there were many motions needed to get the company to such growth from the ashes, but Schmidt says communication in a turnaround really salves wounds.
“I think words are pretty important,” he says. “Would it have to be the exact same words? Of course not, but the communication is really critical to anything that an organization does, that’s one of the things that I believe very strongly, and I think the right words and attitude are important, particularly in a turnaround. You need to be serious, but you also need to be optimistic; you need to believe that you can make it work.”
HOW TO REACH: SCAN Health Plan, (800) 247-5091 or www.scanhealthplan.com
The hardest thing Adam Singer had to do in the early days of his company was to fire employees who were giving 150 percent.
It’s not that the founder, chairman and CEO of IPC The Hospitalist Co. Inc. didn’t appreciate their passion. On the contrary, he admired those employees who wore the brand proudly on their shirts and practically lived at the office. But when it came down to it, no amount of passion could compensate for inadequate skill sets.
Today, when Singer adds to the 800 employees who work at the nation’s leading private practice hospitalist company, he looks for candidates who are overqualified for the position he’s hiring for. By doing so, he never has to let a passionate worker go due to a lack of skills, and he has developed a steady reserve of talent that has helped push the company’s 2007 revenue to $190 million.
Smart Business spoke with Singer about why you should overhire and how to slow down when making decisions in times of chaos.
Overhire. Always look to over-hire. Always look to find someone who you think is overqualified for the job that you’re hiring for. Don’t settle for, ‘Well, I think he can do it if he had this or that. I know he’s missing X, Y and Z, but I think he can get the job done.’ When you get to that kind of decision point, you’re probably making a mistake.
When you’re young and you have a young, entrepreneurial business, you get people who are really passionate, but you end up burning right through them. You want to get someone who can do this in his sleep and then do more. In a growing business, there’ll always be more for them to do, and you want them to expand whatever your idea is into something more.
You end up with a vastly better product or service and a much more exciting place to work. That filters down all the way through the organization.
Make dissenters wear different hats. [When creating a vision], bring an open mind and bring dissent into the room. What sometimes happens is you get frustrated when you get someone who just doesn’t believe your story. It’s frustrating, and it can kind of drag the group down. If you properly manage that naysayer, it can actually stimulate you to have a much better idea at the end.
You can’t allow them to suck all the air out of the room. Many times, what I’ll do in those kinds of scenarios is I’ll change everyone’s hats. I’ll make the dissenter argue for an idea that they might have been against, and I’ll have someone who is for the idea be against it. That becomes a really interesting process in the vision creation. It really changes your mind when you’re forced to argue for something when you’re against it and vice versa.
It really does stop someone from sucking the air out of the room because they’re no longer arguing against it.
Get negative with yes-men. You have to be educated about what the space is that you’re in. If it’s not you as the CEO, then it’s your team. Get unvarnished, nonyes-men feedback about what’s really going on.
[To weed out yes-men,] you could interview for that and reference that before you hire someone, but ultimately, you won’t know for sure until they’re here.
It’s very easy to get satisfied when everyone’s saying you’re right. A CEO should not get comfortable with that.
Just like I did in the meetings to make people switch roles, if I have a yes-man in my midst, I’ll ask them, ‘What part of what I said is wrong?’ That can stop a yes-man in his tracks. If they come back with nothing, then you know you’ve got a problem. You need to stop them from doing that or let them go.
Set aside time to seek feedback. Make sure you have complete domain knowledge. You’re constantly looking to get feedback in whatever form you can, whether it’s direct survey through your customers or whether it’s your people who are out in the field.
We have business development and practice managers throughout the country. Every one of them reports back one observation a week to me every Friday on what they saw in the field. It allows me to get a quick glimpse of everything going on. You can start to see trends that way.
In a very short time, I can get a good feel or anticipation for what is going on. Again, that could be what the customer wants or what my company needs. That’s a technique I use to stay on top of what’s going on.
Slow down. Make decisions a little slower. When you’re younger and you have less experience, you make decisions sometimes when the heat is on and there are emotions attached to it and you may not have all the facts yet. Sometimes when things don’t make sense, you’re better off doing nothing at all.
If I could advise (a younger version of myself), I’d say, ‘That doesn’t make sense. Why don’t you wait another day and think about it again and see if it looks different tomorrow?’
A lot of problems sometimes just go away if you don’t do anything. If you just slow yourself down sometimes, you’re better off.
HOW TO REACH: IPC The Hospitalist Co. Inc., (888) 447-2362 or www.ipcm.com
Born: Cleveland, Ohio
What was your very first job?
Mowing lawns in my neighborhood and scooping ice cream at Baskin-Robbins.
Whom do you admire most in business and why?
Carl N. Karcher (founder of Carl’s Jr. hamburger chain) who passed away (Jan. 11, 2008). He took nothing and turned it into a billion-dollar company with an eighth-grade education. And he did it with native intelligence, hard work and a very strong faith in God and family. He was just a very, very good man, and when he passed, we really lost something of value in the morality and the work ethic of business.
What is the best business advice you’ve ever received?
I was Carl Karcher’s lawyer back in the late ’80s, early ’90s, and I would fly out to California a week every month to represent Carl, and we had this great chicken sandwich at Carl’s Jr., and I would get that every time I visited. Well, one week it was off the menu so I went in to Carl, and I told him, ‘You had this great sandwich on the menu; I loved it, and now it’s gone,’ and he said, ‘So you were the guy buying that.’ Which was his way of saying, you can’t keep a product that doesn’t sell. When you’re dealing with business and dealing with money, you really just have to get through everything else and keep things simple so they are achievable.
If you could be one superhero, who would you be and why?
Superman because that guy can do everything plus I wouldn’t have to do these four- and seven-hour flights all the time. ... I could go to New York for an investor’s conference and spend the night at home.
Edward Mirzabegian may be a perfectionist, but he doesn’t let that slow him down. On the contrary, the CEO of Antelope Valley Hospital was once chastised for going too fast.
Years ago, a former employer had to remind him that he could-n’t expect perfection from those around him if he didn’t take the time to set forth clear expectations in an articulate manner.
Mirzabegian has since adopted a charismatic style of face-to-face communication to get the most out of the health care provider’s 2,100 employees. By sharing the organization’s goals in person, he says, you’re much more likely to get buy-in and shed light on the little things that only like-minded perfectionists may notice at first.
Since Mirzabegian took over as CEO last June, he’s helping Antelope Valley Hospital continue its upward revenue trend, as it posted 2007 revenue of $251 million, up from $243 million the previous year.
Smart Business spoke with Mirzabegian about how to make yourself visible when communicating, even if you’re not physically present.
Articulate your expectations face to face. The first thing you have to do is make sure that people around you have your expectations. You have to let them know your vision and ideas and where you’re coming from. They have to be really given the goals and given the direction. They have to know who you are, how you think and where you’re going.
What works best is [communicating those expectations] face to face. A lot of companies that are very big corporations usually do it with memos and directives and all that. But honestly, in order to really know who you are and understand your direction, face-to-face [communication] is the best. It can be one on one or you and a group of them.
I go around the hospital in a lot of staff meetings, also. Once a month, I go to staff meetings to just let them know where we are going, who I am and what my expectations are from that particular group.
You can get their buy-in more with face-to-face. Why? You can see their body gestures. You can see their facial gestures and animation. That will give you feedback if they’re on the same page with you or no. If they’re not, you can sell them [on your ideas] more. If you sell them by memo, you don’t know when they read the memo what their reactions are.
Make yourself visible. Executives should be visible as much as possible. Visibility improves trust.
If you are an executive or a CEO of a bigger company and you have five branches in different states, you can’t be there all the time, but just being visible [to some extent] helps you to gain trust and understanding and helps things move overall.
Pictures do wonders, also. I do a lot of small flyers where we communicate our goals, and we communicate our accomplishments within the organization. Having a picture there with your message, it improves that letter. They know who you are, and if they see you in the hallway, they know, ‘OK, there’s the guy whose picture is on that particular newsletter.’
So if it’s not totally possible to be visible in person, pictures and videos and all that will help. For instance, if we have a town-hall meeting with a very important message that we want to send, we have meetings at 7 in the morning and 10 a.m. and lunch and 3 o’clock and 8 o’clock. But sometimes, people
who work at night will not see the message. Sometimes, we will video all of these meetings, and we just [set up a television and continue to replay it] in their break room, and people will see and hear the message. Using media is the best way if you can’t be physically visible.
Stir up competition. The status quo is a killer in any organization. I don’t care how successful that organization is. If you just keep it the status quo, that organization, in the long run, will fail.
Competition is a good way to keep people on their toes. Competition is good if everybody competes against the competition, which is outside. That ultimately is going to make or break the organization.
Benchmarking is the best tool. You always have to benchmark yourself with competition, good or bad. You always want to know where you’re standing. Communicating that benchmark, regardless of whether it’s good or bad, is an excellent tool to boost people’s energy and to push them to the right direction.
A lot of people really respond to that. Nobody wants to be a loser. When you show the benchmark, when you look at similar organizations and what they’re doing, that creates a little bit of competition and makes people’s temperatures go higher.
Use incentives to motivate. Stirring up that competition is not the only way. Rewards are very important.
Just like you have to deal with mediocrity, you have to acknowledge the good work, also. You have to acknowledge the people. You have to reward people.
This reward can be a pat on the back or a present or recognition. Sometimes, you just mention somebody’s name in your speeches, in your writing and in your memos. That goes a long way.
When you incentivize people and they reach their goals and you reward them, it always makes the employee happy. The happier they are, the better they work.
If you really emphasize those rewards as a group, it works even better. A group of people can get together as a team and really work for a mutual goal.
HOW TO REACH: Antelope Valley Hospital, (661) 949-5000 or www.avhospital.org
Born: Hudson, N.Y.
Education: B.A., College of New Rochelle; master’s degree in education, Harvard University
What was your very first job?
Behind the counter at a deli and bakery in Kingston, N.Y.; my first job in the industry was as a page at ABC in New York.
Whom do you admire most and why?
My daughter. She’s a senior in high school, and she is really blazing a path for herself that is based on the things that interest her, and she’s actually interested in pursuing neuro-science, and, as much as she’s loved everything I’ve done, she’s focused in on what makes her tick and what she’s interested in, and that’s what I’ve really admired.
What is the best business advice you’ve ever received?
I keep six words on my desk, and I cannot, for the life of me, remember where I got them, but they were six words given to me to always have on your mind as you manage, and they are: courage, strength, humanity, compassion, clarity and communication. You have to do those six things every single day and every single hour of every day when you manage people.
If you could be one superhero, which one would you be and why?
I don’t want to be a superhero. I honestly want to be a human being, and I’d rather be a better version of myself.
When handled properly, debt consolidation can provide significant assistance in avoiding a crushing debt load. By consolidating a number of different loans, interest rates can be reduced. Convenience is another major draw of consolidation loans. Rather than pay numerous creditors who are charging varied interest rates at different times of the month, you can take out one loan and pay off all of your accounts.
Prior to exploring the possibility of securing a consolidated loan, however, it is important to evaluate your financial position with the help of a CPA. “The first and most critical thing is to have clean and accurate financial statements in order to make a rational decision,” says Rodney Fingleson, chairman of Gumbiner Savett Inc.
Smart Business spoke with Fingleson about debt consolidation, the importance of clean financial statements and what type of debt-to-equity ratio lenders want.
How does the debt consolidation process work?
It is generally a transfer of loans from different lending institutions to consolidate into one particular loan. Many of our clients have their charge cards as liabilities on their corporate balance sheets. They use their American Express, Visa or Mastercard; they use every kind of loan possible to finance their operation. This is extremely expensive, so what we try to do is take all of these loans, bundle them up into one package and have a financial institution consolidate the loan at a much lower rate, provided the company is making a profit.
What are the pros and cons of debt consolidation?
The biggest pro is that you can consolidate to a much cheaper rate. For example, many business owners have debt that is responsible for a whole slew of interest charges. Consolidation will generally eliminate those high charges into a much lower amount. Another pro is that a move toward consolidation helps to save bookkeepers time; rather than spending hours and hours each month reconciling every single account, they can get financial statements to the owners much quicker.
The con is that you have to be careful of the promises that are made to you by debt consolidation companies. It is important to find out which ones are the true lenders. Oftentimes, people get caught up with introductory rates to change their debt and find out much later on that they are in a worse position. One has to watch out for these hard money loans and people who promise to take care of everything when, in reality, the situation only becomes worse.
What factors should be considered when evaluating whether or not to consolidate debt?
The most important thing is that you have to have clean financial statements in order to make a decision. If the books and records of a company are not updated, it is very difficult to analyze a full balance sheet. It is crucial to have up-to-date financials in order to make a proper decision as to when to consolidate and when not to consolidate.
How often should financial records be updated and what specific components are lenders most interested in?
Monthly financial statements should be done between two to three weeks after the month ends. Financial institutions are looking at current ratios and debt ratios to see how a company is performing. Their main concern is debt to equity and whether the company is highly leveraged in the debt area.
Generally, banks are looking at a 5-to-1 or less debt-to-equity ratio. When you cross over this ratio, banks get highly nervous. A great company will have approximately a 3-1 ratio. If the leverage becomes higher than 5-to-1, you will have a rea problem especially in today’s lending market to try and consolidate your debt. A company with a ratio greater than 5-to-1 will pay a much higher rate of interest. The risk factor to the lender is much higher so, in order to bring down your interest charge, it is important to reduce your debt-to-equity ratio.
How should one conduct a search for a firm that specializes in debt consolidation?
The most important thing is to ask your CPA to analyze your balance sheet so he or she can provide you with some answers. Accountants should be aware of the potential benefits that can be derived from debt consolidation and let their clients know on a monthly basis if it makes sense for them.
At our firm, we have clients fax us their monthly financial statements so we can review them and see if there is anything that stands out. If we see anything out of the ordinary or out of balance, we call the client. It is very important to be proactive, and the best person to help you do this is your CPA.
RODNEY FINGLESON is chairman of Gumbiner Savett Inc. Reach him at (800) 989-9798 or email@example.com.