When Mark Laret stepped in as UCSF Medical Center’s new CEO in April 2000, it was just two weeks after the health care system had ended a bad three-year relationship.
The center had merged with Stanford Health Services to become UCSF Stanford Health Care in 1997, and everything seemed so promising. But three years later, a culture war was still raging within the combined organizations, and recognizing that the merger was a major mistake, the two centers separated.
“There were a couple of years of work to bring the organizations together, but when they decided to split, it happened in a matter of months,” Laret says.
The quick break left the organization reeling.
“It was a fairly grim situation on a number of fronts,” he says. “First, and the most obvious thing, was just how distressed the employees were.”
They had been promised certain benefits that weren’t fulfilled, and they were angry that all of this effort had gone on the past few years and hadn’t benefited anybody in any way. They were also mad that management had focused so much on the merger that quality of care had dropped.
Then there were the financial challenges, as the hospital was losing $1.25 million a week. “We were running out of cash, so there was some urgency to act,” he says.
On top of those two issues, operations were a mess. Many functions, such as payroll, were still housed at Stanford, so UCSF had to ask Stanford to do its first payroll checks after the split. Laret also had consultants in pretty much every major role in the hospital.
“There was no chief operating officer, no chief financial officer, no chief anything, no chief information officer, nobody running ambulatory care, so it was a big set of holes here,” he says.
Seeing all of this, he knew the hospital was on life support, but he also thought it could one day breathe on its own again if he could re-engage the employees, build a management team and control the finances — but it all had to be done simultaneously.
“It wasn’t a pleasant set of circumstances, but on the other hand, I knew that the fundamentals here were strong, and that was what we really built on over the next several years.”Re-engage employees
One of the first three things Laret had to attack was rebuilding confidence with his employees.
“First, and I think most important, was to re-engage the work force here and get them focused on what we could do together to develop a positive attitude about the future, to have confidence in a vision of the future,” Laret says.
He started by writing weekly e-mails to the whole staff, telling stories about patients and the great things done at the hospital.
“The first thing I needed to do was remind them of what kind of organization we are,” he says. “We had gone through a trauma, but fundamentally, we were still one of the great medical centers in this country. We needed to get back and focus on those issues related to what we’re really about as an academic medical center and spend less time talking about the trauma.”
He also spent between one-third and one-half of his time talking with employees at brown-bag lunch sessions and departmental meetings and listening to their complaints and problems.
“As much as anything, giving them a sense that management was listening to them probably did more to re-establish confidence,” he says. “ … That is a key ingredient. People need to feel that management is there and is accessible and is respectful.”
He heard many problems, such as the hospital didn’t have linens and that the gases used to power their lasers were no longer being delivered.
“We needed to go back through and sort out where we were on our accounts payable — how do we manage this?” Laret says. “It was dealing with issues one at a time, from the bottom up, but with the idea that you ultimately get there.”
He also had to prioritize these problems, so he first dealt with anything related to patient care.
“That’s more important than the budget and more important than any of the other things we need to deal with,” he says. “That actually provided some clarity to the organization — ‘OK, we’ll take care of patients first and foremost.’”
After patient care, anything that could cripple the business if not solved got precedence, so he cleaned up some audit and other issues. Everything else could wait.
Next, he revisited the hospitals mission and values.
“Historically, they had these statements, but they were in a book, and nobody knew what they were,” he says. “They weren’t really guidelines for daily decision-making or strategic planning or anything else.”
So Laret started rethinking these things. He asked his management team to talk about concepts for a mission. Then he talked to different leaders and department chairs. Out of that came something short and easy to remember — caring, healing, teaching, discovering.
Through that process, he also developed values to lead people in their daily activity — professionalism, respect, integrity, diversity and excellence, or PRIDE. To get people embracing these values, he started by communicating them in every new employee session. He asked employees to give examples of behavior that both exemplified and didn’t exemplify each value. He put it on internal materials to hammer it home and would ask employees about them during luncheons, round-table meetings and any other opportunity he got.
“They all knew I was going to ask about this, so everybody kind of learned it,” he says.
He also started giving out five PRIDE awards a month to employees nominated by their peers as best exemplifying the values. Emphasizing UCSF’s new mission and values helped heal the employees.
“You need to turn all those employees into advocates, allies, supporters, believers, if you will, in the new vision,” Laret says. “ … Get them on board with it, and if you can do that, then I think all these other things, it’s easier to solve them. If you have an employee work force that is not on board with management, it’s going to be very tough.”Build your management team
While employee re-engagement was going on, Laret also had to work to build a team of senior managers to replace the consultants that UCSF had in those jobs. But given the state of the hospital, it wasn’t easy.
“I had a lot of selling to do because people knew this was a place that was in bad circumstances after the de-merger — after the divorce,” he says.
He told candidates that UCSF was going to be great and the potential was fantastic, but he was also honest and said it wasn’t a place for the faint of heart.
“This is not a place where you’re going to be able to phone it in,” he says. “You’re really going to have to be energized by this challenge.”
He also needed people with good values.
“When I looked for all my lead people, I was looking for people who had a track record of success in demonstrating those good values in other organizations,” Laret says. “I needed the right people reporting to me, and then I charged them with making sure they had the right people reporting to them.”
He used search firms to hel p him and says he interviewed scads of people.
“I wish I had some great questions, but as much as anything, I asked people to talk to me about what their greatest accomplishments were and obviously about their failures and circumstances they felt didn’t go well,” Laret says.
He listened about what they had contributed and what they felt to be fundamentals of success or, on the other end, fundamentals that led to setbacks. He also asked about what they learned from those circumstances. This entire process took him close to a year to accomplish.
“I wasn’t interested in people coming in and telling me how great they were and all the fabulous things they had done, and when I asked about problems, it was they worked too hard,” he says. “I was looking for people who had another level of insight into themselves and had a level of confidence in themselves about how to lead in these kinds of circumstances. That would be what I’m still looking for today.”Control finances
While Laret was starting to heal the emotional pains and filling vacancies, he also had to work on healing the financial pains.
“As we started to calm the place down, to move people off the trauma and into the present and thinking about the future, we knew our future was going to depend on getting stronger financially,” he says. “You can’t achieve much if you’re losing money.”
It starts with figuring out where the money was being spent.
“The first thing is, you want to find out who has the checkbook and who has access to your bank account,” Laret says.
In the university setting, departments often submitted recharges against each other, so he implemented actions to control who could submit recharges and in what circumstances they could do so.
He also increased efforts to make sure that the hospital was billing and collecting everything that it was owed to increase the money coming in.
Growth needed to be top of mind, so he started by doing an analysis of where the organization was losing money, where it was making money and what service lines contributed to both of those.
“In a place like this, there are probably 100 different service lines, and you need to look at each one of them and see what’s contributing and what’s not,” Laret says. “Which ones can you grow without too much difficulty? Which ones can you shrink without too much difficulty?”
For example, one of the big problems was the amount of patients coming in on Medicare and Medicaid. Many staffers didn’t realize that the hospital loses a little money on every Medicare patient, a lot of money on every Medicaid patient, and it depends on the commercially insured to make up for those losses.
Laret likens the experience to being Robin Hood in Sherwood Forest, “Because we’re trying to get enough rich people coming through the forest to cover the cost of the poor here, a lot of our leaders didn’t fully understand those economic issues,” he says.
Laret also looked at available benchmarks to see what other hospitals were doing.
“If Stanford Hospital or Cleveland Clinic or New York Presbyterian can provide this service at this cost with these goods and services, why aren’t we doing that?” he says. “ … Benchmarking is obviously important, but customize it to your specific circumstances.”
UCSF is mostly a referral hospital, so it ramped up marketing efforts to increase its referrals by sending staff to educate doctors across the region about its strengths in organ transplants and how it is the leading brain tumor center in the region. He also worked with health plans to make sure that when doctors did refer patients to UCSF, the patient would be covered.
It’s one thing to get more people coming through the doors, but he saw another problem that would affect growth — service.
“You tend to treat people in a fairly consistent way,” Laret says. “And if you tend to treat them in a sloppy way, with mediocre customer service, you’re going to do that for everybody. Maybe you’ll improve for someone really important coming through, but in general, you kind of do things in a consistent way.”
He implemented a patient concierge program to help make the experience more pleasant.
“What has happened, over time, is as we start to treat more and more patients like they’re special, that has become the norm in more areas,” Laret says. “We’re not No. 1 in patient satisfaction in the country, but we’ve come a long way from the bottom quartile to almost the top quartile in patient satisfaction, and that’s really this effort of really focusing on service.”
On top of increases in patient satisfaction, as a result of his efforts, business has grown, as well, and what started as an approximately $60 million loss the year Laret joined became a $70 million gain within five years. Today, the organization is not only breathing on its own, but it’s also running, jumping and enjoying its health as a profitable operation with nearly $1.5 billion in total operating revenue. It’s now also consistently recognized as one of the nation’s top 10 hospitals by U.S. News & World Report — and all of this success is the result of lots of little things adding up to a large change.
“Lo and behold, those things, after awhile, they really start to work,” he says. “Our business in volume has grown over 30 percent in the last nine years. I think it’s fundamentally a result of those kinds of initiatives.”
How to reach: UCSF Medical Center, (415) 476-1000 or www.ucsfhealth.org
Although the urban legends surrounding the Sarbanes-Oxley Act of 2002 paint it as something to be feared, Clark Keeler says that it actually presents an opportunity for business leaders to improve and protect their companies.
For many years preceding SOX, CEOs and CFOs signed certifications in their public financial statements asserting that they maintained effective systems of internal controls. However, those assertions were never audited, so there was no verification of their reliability. Then came the downfall of Enron and WorldCom and the enactment of the Sarbanes-Oxley Act.
“The thing that business leaders primarily objected to about SOX was one section of the legislation, Section 404(b). That section required their auditors to ‘attest to, and report on, the assessment made by management,’” says Keeler, a director at Burr Pilger Mayer. “The act came into effect in July 2002 and required the biggest public companies to be compliant and be audited by the end of 2004. The act also incorporated penalties that effectively said, ‘If you fail, your officers can be fined personally or even go to jail.’”
Smart Business spoke with Keeler about how Sarbanes-Oxley has impacted business and why management should look at the act as a blessing, not a curse.
How should business leaders approach Sarbanes-Oxley?
Sarbanes-Oxley focuses on managing the risks around financial reporting. Instead of embracing the requirements as a means of improving internal communication and credibility with external stakeholders, management, as a whole, resisted the act, treating it as a forced-compliance law of little or no value. They too often abdicated responsibility to their auditors and consultants and said, ‘Get us compliant and keep us out of trouble.’ That often led to lack of focus and attention on details rather than the analysis of significant areas of risk. Management could have avoided much of the frustration the act created by approaching compliance as they would have in any other major project: by focusing on and addressing the significant risks and areas of weakness where their businesses could benefit, but not ‘sweating the small stuff.’
How can having strong internal controls help a business leader?
Strong internal controls are good business basics. Their purpose, in relationship to Sarbanes-Oxley, is to prevent or detect the risks of misreporting important financial information. Good internal controls help ensure reliable information on the areas that matter to the readers of the financial statements.
When management can prevent or detect problems before they mushroom into a crisis, the working environment inevitably becomes calmer. Having good information allows them to run their businesses without worrying about the things they haven’t thought of or checked on and it also reduces surprises. Once you have the information you need, on the things that matter, you can focus on the business model issues that really lead to success.
Sarbanes-Oxley requires management to figure out where the risk areas are that could cause them to make material errors in their financial statements. It then requires them to put the controls in place that would prevent the errors from happening or allow them to be detected and corrected in a timely manner. Reliable financial reporting supports management decision-making and provides credibility to investors and other stakeholders. These are good things.
How do you identify your risks?
All business risk assessment starts with determining what can go wrong in significant business processes and what can be done to prevent or detect the effect of those risks. Evaluating financial reporting risk is a basic process that looks at who has a stake in the company, who reads the financial statements, and determines the areas they care most about. Once management identifies the significant items that their stakeholders evaluate, they need to take steps to ensure that the information relating to those items is materially correct. Obviously, you want your stakeholders to know they can rely on the accuracy of what they are reading.
Evaluating what your key business processes are, what impacts them and how you ensure that the processes operate effectively is actually pretty straightforward once you have identified the areas of sensitivity. If it is something you can prevent from ever happening, you take those actions. If you cannot prevent it, you put monitoring controls in place so you know if it happens and give yourself time to react to it. Once you have the controls in place, you simply have to test them periodically to make sure they are still protecting you.
How can having strong internal controls and knowing the details of financial statements benefit not only public companies but private ones?
Having good internal controls is ultimately about controlling the information around your critical business processes. If you have the information to prevent or detect risks to your business, you can manage proactively. You will have reduced the ‘surprises’ in your operating environment and will have gained a measure of control of your business. For a small company looking to sell, reducing information risk to the buyer is critical. If every time your buyer asks a question you have to say, ‘I’ll get back to you in a couple of days,’ their confidence in how much you know about your business and how much they are willing to pay is reduced. Conversely, if every time they ask a question you can answer confidently, their comfort and interest is reinforced.
More importantly, however, internal controls support your day-to-day efforts to create the most value for your company. They keep you focused on the things that matter and provide the reliable information you need to make your best business decisions every day.
Clark Keeler is a director at Burr Pilger Mayer. Reach him at (415) 288-6280 or firstname.lastname@example.org.
Mike Marcon didn’t want to fail when he launched Equity Risk Partners Inc. over a pizza with his wife back in October 2000. But he wasn’t afraid of disappointment either.
“I said, ‘I’m about to bet the house that I’m going to be able to build this company, and if it doesn’t work, we’re going to lose the house,’” Marcon says. “My wife looked at me and said, ‘That’s not why I married you. I didn’t marry you for the house. If we lose the house, we’ll go live in an apartment, and you’ll go do it all over again. So go do this and don’t worry about it.’ Ever since then, it’s given me the freedom to swing for the fences.”
That freedom gave the founder and CEO the positive energy he needed to make the financial services firm a success. Now with 45 employees, Marcon’s biggest challenge is making sure his people are ready to keep growing.
Smart Business spoke with Marcon about how to help your people keep pace with you and what to do when they no longer can.
Be upfront with people. Being able to continue to grow and develop the firm and attract the talent you need to continue to thrive without abdicating the responsibility you have to the people who were there with you on day one and still making them feel part of the overall success of the enterprise, that’s a significant challenge.
As we grow the firm, we might add a division or add a new practice group, and as those people come into the firm, they are used to being senior leaders where they came from. Are they going to displace the existing senior leader? How do you get them to work together? Obviously, in this type of environment, you need all the oars pulling in the same direction.
One of the things I pulled out of one of Jack Welch’s books was brutal honesty. Be upfront with them, be direct, and that solves a lot of problems. I’ve learned to not tap dance around these issues.
I sit down with my colleagues and I say, ‘Here’s the issue, here’s what we’re dealing with, and here’s why I want to bring this other person in. They’re not better than you or superior to you, but they are bringing this skill set and this business acumen, and we need to find a place for them. In order to do that, this is what I need you to do.’
Explain your plan. In our business in particular, insurance brokerage and insurance agencies, there tends to be a lot of firms that start up only to be sold a short time later and get merged into a larger business when the principals cash out.
It’s hard to get people vested emotionally and intellectually into a long-term business plan if they think the owner is going to cash out in three to five years. One of the things I repeat constantly is, ‘We are eight years into a 100-year history.’ I make it loud and clear to everybody that the firm isn’t going anywhere.
Think before you hire. One of the things I’ve learned is I don’t make decisions right away with personnel. I have an initial meeting and then I have them filter through the senior management team as well as some people below them.
It’s in the follow-up interviews that I do two things. One is I start to focus on potential areas of disconnect. I also really start to hammer on the uniqueness of our business model and how it’s different from where they worked before.
You can’t prevent someone from lying to your face, but I challenge them as best I can. I tell most of the people, ‘It doesn’t matter what you tell me now; everybody has their own alone time when it’s just them with their thoughts. Sometimes it’s when you’re working out. Sometimes it’s when you’re washing the dishes, whatever. When you have your alone time, I want you to think about the environment I just painted for you and whether you truly fit in this environment. I don’t want you to mistake not fitting with being an inferior person. There is just a right fit and a wrong fit for certain individuals. It’s better that we find it out now than we find out six months from now.’
That’s worked pretty well.
Do what you can to help. Sometimes you get the people that see the box above them on the organizational chart and they want it just because it’s above them. It doesn’t matter that they are not going to be happy there. It doesn’t matter that they are not going to perform well there. There are certain people that want the bigger title because that’s next.
In situations like that, it’s very easy for me to go to that person and say, ‘I want to put you over here, and I think this is the best spot for you.’
Those people, I can say, ‘I’m doing this because I’m putting you in a position to succeed. If you take this other opportunity, you are not going to succeed. It’s my responsibility to know the difference. That’s what I get paid to do.’
The other side of the coin is those people who just don’t belong in the organization anymore. The organization has passed them by. With those types of people, the key is to act right away. It’s a tough thing to do, and you don’t want to do it, especially if they have been loyal.
But very early on I got a good piece of advice from one of our board members: Deal with it right away because it’s not a surprise to the other person either. They know most of the time that the organization has moved passed them. They know they don’t fit in like they used to anymore.
Most people are not ignorant of that. So when you have the conversation with them, their usual response is, ‘Yeah, I know.’ Depending on how they have performed in the past, you make their landing as soft as you possibly can. You just deal with it.
How to reach: Equity Risk Partners Inc., (415) 874-7100 or www.equityriskpartners.com
At his previous position at a billion-dollar company, he oversaw more than 18,000 employees and led nine global acquisitions and joint venture operations in two years.
Nandy, who is now CEO of Aricent Inc., a global technology and services company that focuses exclusively on communications, says the key to driving growth is to have a good blend of what you know and ambiguity tolerance — the things you don’t know because you haven’t seen them in the past and others haven’t either.
“In a growth market, it’s always new things that drive growth, and new things mean it’s uncharted territory. So one of the critical things to have is that tolerance in a growth market and having a good understanding of what we know and also knowing what we don’t know,” says Nandy, who is pushing his 8,000 employees at Aricent to work closely with customers, take risks and to move forward in trying new things to take the company to the next level.
Work with customers
It’s so easy to make your customer into nothing more than a data field in your spreadsheet, but to drive growth, see them as people. The mantra that Aricent uses is “co-develop, co-design and co-innovate” so that they’re actually working with the customer to find solutions.
“Most companies have a map … so you know the route to take,” Nandy says. “We say we don’t have a map — we have a compass. We know which is north and south, but we don’t know the route. We’ll work the route together with the customer — that’s co-creation. … If you have a map, you won’t change the game. If you have a compass, you probably can make a new road and change the game.”
If you want to lead with a compass, then you can’t come off as a know-it-all to your customer.
“The compass thing happens in the area when you don’t know and the customer doesn’t know,” he says. “Both of you have an idea, but you have to start working in those areas of, ‘What next? What next year? What for the segment?’ It’s a way of self-discovery with the customer.”
The only way you can figure out which way the compass is pointing is to get in front of your customer and the competition.
“Typically you have to go to your customers and you have to go to your customers’ customer yourself, and then decide, with in-depth interviews and observations of what they’re doing,” he says. “You collect and come back and think them through, and you analyze, and through the analysis, you get your own insights and the implication of what’s true in your market or what’s true in your subsegment and so on.”
For example, by observing customers’ customers, Aricent noticed that people in their 30s and 40s, when asked to push a doorbell, would use their forefinger; however, people in their teens and 20s, who text message more prevalently, tended to use their thumbs.
“Those observations are what make you design things in a different way,” Nandy says. “That comes through observation, and you have to do that kind of thing, and it makes it very important.”
When you meet with people though, it’s important to get in front of the right audience.
“It’s not an issue of what you discuss, but it’s equally important who you start the conversation with,” Nandy says. “When you’re doing a discussion on what new features to add on, which would make your product gain market share, it’s probably with a product management team … but if it’s what new products to launch, what new services to offer, what new end users to address, it is probably a C-level — a CEO or chief marketing officer that you’re addressing.”
By talking to the right people at your customers and competitors, you’ll start to get a picture of what’s needed and the things that can help move your business forward.
“We get insights, insights lead to ideas, ideas lead to very interesting conversations with our customers, [and] customers come up with good ideas,” he says.
But with so many ideas coming in as a result of the conversations and research, how do you know which ones may be viable? Nandy says that you have to go back to your customers and explain what you’re seeing and present possible problems, solutions and ideas to them.
“Say, ‘Have you thought of doing this for your customers, or have you thought about launching this kind of product or service?’” he says. “They sit up, they clear their desk, and they call their team. They say, ‘Here’s some interesting discussion,’ so you stimulate that. If you get that reaction, you know you’re on the right track.”
When it comes to the HIV crisis in South Africa, you wouldn’t think that there’s much to be done aside from educating people about safe sex practices. However, Aricent teamed up with other organizations, and after doing their own analysis, they found that the larger problem was the social stigma that went with simply getting tested for the disease.
They also realized that about 85 percent of the population had wireless phones, so they worked with these other organizations to create a system where a citizen could send a text message to receive information on getting a testing kit. Citizens could then have the kit sent to them, do the test, send it back in and be notified by text again when the results came back. The program launched a year ago, and within the first three months, the number of people being tested for AIDS quadrupled.
“It’s not a money-making proposition, but you know there’s a problem available, people are trying to solve it, and if you have an approach to discuss, sometimes people will say, ‘OK, let’s try it out,’ and it becomes a case about how technology … can really solve a problem,” Nandy says.
This testing system is just one example of how you have to try out ideas when you see problems. Sometimes ideas will be successful, as it was for this case, but sometimes they’ll fail. Either way, you have to be willing to implement new ideas if you want your business to grow.
“There are some times you fail, but that’s the other important thing,” Nandy says. “For a growth industry, you have to be not scared to fail. You have to embrace uncertainty, and you have to be someone who is aggressive in seeking new experiences, and you realize that even if you fail, you have to believe that you have broadened your repertoire, you have enhanced your knowledge base, enhanced your experience base. That’s the approach you have to take.”
The problem is that so many people are opposed to risk, especially in a down economy, as the leader, you have to show them that it’s OK.
“Reward people who have taken good risks and do not penalize people who have taken a risk,” he says. “It takes some building because people are generally risk-averse.”
But Nandy also cautions that you need to balance risk taking.
“It should not be experiment and risk run amok,” he says. “So it’s a nice balance between making people comfortable with taking risks and, at the same time, have a finance team that isn’t really a team of accountants but a team of strategic finance, who understand that it’s a percentage game.”
For example, they should u
nderstand that you may fund 10 projects, and maybe you succeed in three or four, but the success of those three or four will more than pay for the other six or seven that failed. Doing this gives people room to try new things, but it also helps move your company forward because you’re not relying on one home run but instead a series of singles and doubles.
“I think I would be adverse to take one bet of a particular side of $10 million,” Nandy says. “I would rather take 10 bets of $1 million each. Each company needs to choose where its comfort zone lies.”
Once you decide which ideas to move forward with, then you have to act quickly.
“Move on that and make those bets quickly and cut through the process,” Nandy says. “Then, what happens is, you succeed or fail very quickly, right? Then you can build on that quickly. Otherwise, as the whole thing lingers, your success is delayed, and so is your failure, which is sucking in more money from your kitty to do that kind of thing.”
First, create ways to measure your progress so you know if you’re succeeding or failing.
“It is not that you discuss with your customer only at the end, at one point in time,” he says. “You have multiple checkpoints. We intend to go back. There are checkpoints for different things. You define, maybe depending on how long the project is, 10 proof points or five proof points — whatever you define.”
The key to creating proof points is that they should be done before you start working on the project and be there to help show you if you’re on track or not.
“Ask the people who are doing it themselves to say, ‘At what point of time do you think you have failed?’ because you have to ask those questions before the start of the project because once you start the project, you slowly grow and you’re not objective anymore,” he says. “You’re part of the problem, so defining at what point to pull the plug on a project is something that you do before with the team so people are a little more sane and less married to the idea so they can make objective calls at that point in time.”
Some of the proof points may be technology-related, while others may be financial, and some may be related to your customers.
“Whatever assumptions or insights you had before you started the project, are they still valid or has something else come in the meantime to change the market or has something happened where people’s ideas have changed or have some technology come about that makes the whole thing obsolete and changes the whole idea?” Nandy says. “So it’s important to define those proof points and have a set of people who are external who help you assess it.”
It’s also important, as you move forward, to knock down the barriers to success that may exist, which include approving budgets and resources as well as simplifying processes. For example, if getting an approval for a customer takes seven days, find a way to cut it back to three. If it takes 72 days to hire someone and get him or her on board, cut it back to 62. By looking to simplify processes for your people, it increases their creativity and moves everyone forward in growth mode.
“Bureaucracy busting should be a constant exercise because it’s a human thing,” Nandy says. “We build it up trying to allocate work in the right way, so constantly looking at that is a critical component for having a company that’s growing and growing in innovative ways and doing things for customers that customers just love.”
How to reach: Aricent Inc., (650) 391-1088 or www.aricent.com
Kara Goldin is passionate when it comes to spreading the word about Hint Inc., but she knows that no one can feel as strongly about the bottled water her company sells as she does.
“The people that care most about your brand are you and your company,” says the 30-employee company’s founder and CEO. “So you constantly have to be checking to make sure it’s happening. No one else is going to do it for you.”
Goldin’s passion for Hint’s unsweetened, flavored water comes from the heart as she and her husband did everything to make the company run in its early days. But despite the challenge that comes with getting others to feel your passion for your product, Goldin knew the company needed more people to make Hint a successful brand.
Today, Hint is available in more than 2,500 retailers across the United States, Canada and the United Kingdom.
Smart Business spoke with Goldin about how to make the right connections to get your brand out there.
Know your needs. We have had a ton of resumes over the past few years from people that have said they built organizations. I have built brands, and often if they have just worked for one of the big guys like Pepsi or Coke, that does not really say they have been in a start-up and that they can roll up their sleeves and get dirty.
You need a combination of people who have been in small organizations and have watched it grow to a larger organization and who have also managed teams and understand how to manage teams.
It is important to have people who have done this before, but you also need to have people who fit your company culture and live the brand. If our sales guys are out there on the street drinking Red Bull or Vitamin Water that’s filled with calories, it is not believable.
Bring in other people. We have a lot of people in on interviews. If one person is not comfortable with them, then we don’t hire them. It is important that if somebody sees that the person is not going to fit in well, it’s probably best for everybody, including the person looking for the job, not to hire them.
In some cases, we’ve learned that the hard way. I’ve said, ‘Oh, that person will be terrific and great,’ and our COO said, ‘I don’t know; I have concerns about this.’
Look beyond the resume. You want people to be inquisitive. You have to be able to be articulate about the product and ask the right questions and be able to engage in dialogue with these buyers. We always want people who have different experiences than we do and more experience than we do.
Why hire people if you can’t learn from them? That’s what life is about for us. I would much rather surround myself with people who know more than I do in certain areas or are better at tennis than I am so maybe I can learn from them. That’s life.
Work your image. It’s easy to get the first sale. As exciting as it is to get the first sale, you need to watch and see exactly what’s going on in the market and make sure you’re going to get the repeat sale. You do that by getting the consumer to not only recognize the brand but by building loyalty with them.
We have a national distribution with Whole Foods (Market) and we’re in Whole Foods constantly sampling the product. We look for events in a major market to sample the products. I’m a firm believer in charity events. If people go to those charity events for their charity and they see a brand at the events and they sample it and they like it, there is an affinity to that brand.
That brand then has some sort of affiliation to something that you care about whether it’s autism, breast cancer, heart association or diabetes. We’re fairly agnostic about the charities we support because we support a lot of them. That’s a major way that we’re building brand.
Be selective. We get calls every day from distributors that say they want to distribute Hint, tiny towns in Florida. As hard as it is not to take the order from them, we have to figure out internally what stores are there, how many people are there, is it a seasonal town and really what’s the opportunity?
If we’re not going to have our own staff there to support it and watch it, the last thing we want is to have bottles on shelves collecting dust. That doesn’t do anything for the brand.
I care much more about the brand than I do about bad distribution. It’s just understanding: Is it the right partner? Is it the right store? Is it at the right prices? It’s treating it like your child and making decisions for it since it can’t speak. It’s really viewing it that way.
Do plenty of networking. It is just getting out there and networking. I find I learn every day from talking to other brands about what’s worked for them and what hasn’t worked for them. Even if their brand is not in the beverage business, how do they do things? It is a whole different model, but it is always interesting to hear.
It is just like any other social interaction, you just have to somehow let them know what you are doing and see if there is a way to have a mutual dialogue. It is just understanding. Be willing to share what you are doing, too.
How to reach: Hint Inc., (866) 895-4468 or www.drinkhint.com
You’ve probably met with your executive team and members of your staff to devise ways to weather this economic cycle on sound financial footing. But you may have forgotten to invite a key player to the table: your banker.
Whether you’re seeing red or thriving during this volatile time, it’s always helpful to ask for input from an outsider. Now is the time you should be thinking beyond just the products your bank offers and see your banker in the role that he or she aspires to be your trusted adviser.
“In a downturn, a good commercial banker will be kind of a consultant, a sounding board, an adviser and, really more than that, a fount of experience for a customer of a bank,” says Frank Gwynn, senior vice president and manager of middle market banking for Union Bank in Northern California.
Many businesses don’t think to communicate with their bank on a regular basis, which means missing out on a valuable, free resource, according to industry experts. Think of your bank for ideas and solutions for efficiency, especially now when you’re probably looking for answers.
To take advantage of your bank’s true role as a consultant, you must start by forming and maintaining a strong relationship around trust and communication.Introduce yourself and your business
The first step in using your banker as an adviser is allowing time for him or her to get to know you and your business. Even if you’ve been partners for decades, invite your banker to your office or place of operation for a meeting.
While it’s important for the bank to learn about your operations, over time, it’s necessary for you to return the favor. A good relationship banker will introduce you to managers and key decision-makers in the bank, but if the introductions aren’t offered, take the initiative and ask for a meeting. The more people you know at the bank, the more likely your company will become a household name, the more likely you’ll know who makes the decisions and how they’re made and the more likely a smooth transition will occur if your contact leaves or is promoted.
“You don’t want to just know one person at your bank,” Gwynn says. “You want to know maybe that person and his manager and maybe even one level above so that you become institutionalized. How you do that is you invite those folks out for a meeting to review your plan, you play golf, you go to lunch you do things socially together to build a rapport with some people at the bank that can be key to your future.”
Once the initial contacts are made, work to maintain those relationships with open and candid communication. Ask your banker how often he or she wants to hear from you. Is it once a month or once a quarter?
If issues arise in the meantime, don’t be afraid or intimidated to call your banker. One thing all bankers will tell you is that they hate surprises both good and bad. The more they understand your financials, strategic plan and any changes in the company’s overall operations, the better they’ll be able to provide products and solutions to keep you on the right track.
“A strong relationship is key to building a mutual trust and working knowledge of the business, which enhances the bank’s ability to help clients run their business more efficiently and effectively,” says Emily Shanks, senior vice president and commercial banking/marketing executive, Bank of America. “Strong relationships are built on such things as open and frequent communication … regular and timely feedback, and candid and timely disclosures of important information by both parties.”Use your bank for regular counsel
Like your lawyer or accountant, use your banker as a true consultant. Whether you’re trying to stay afloat or even rapidly growing, your bank can help in navigating through this economic downturn and in planning for the future.
Once you’ve established a relationship and your banker understands your business and your industry, ask him or her to review your business plan. It’s one of the best ways to utilize your bank’s resources. And if you don’t have a plan, create one.
Your banker has a true advantage of having a national, regional and industry-specific perspective on economics.
There are a number of questions about your plan that you should be able to bounce off of your banker.
“One is, is my plan consistent with what the bank sees with other industry research,” Shanks says. “Can the bank provide any peer analysis or benchmark comparison as to how my peers are performing?”
Others include: Are the assumptions of your business plan reasonable for the current economic environment? How can the plan be improved? What type of contingency plan should be in place? And finally, what products and solutions can the bank offer to help meet your company’s needs?Take advantage of products and services
At least once a year, you should sit down with your banker to review the products you’re using. Perhaps you’re paying fees for a product you rarely use or technology has advanced and greater efficiency can be had.
A relationship review with your bank can help you tackle ways to save money and save time.
“For example, there are ways we can help companies reach their cash sooner so they can pay their bills sooner or to keep their cash longer,” Shanks says.
Among the popular products for cash flow today is the rapid deposit solution, a desktop scanner that allows you to automatically deposit checks into your account.
“Fraud protection right now is probably one of the biggest things that a company needs to be looking at,” Shanks says. “The current environment has increased that significantly and many companies don’t think about it.”
While you might be thinking short term, ask your banker about options that will help you now and in the future. Interest rates have dropped perhaps you can capitalize on a new loan or refinance. Discuss with your bank how long you’ll need to borrow and how much money you’ll need to borrow to structure a plan and lock in fixed interest rates while they’re low.
“In a down economy, looking ahead two or three years, what we might all see is the fear of inflation and much higher interest rates perhaps coming a couple of years from now,” Gwynn says. “You would want to work with your bank now to structure a plan so you have some visibility for the next several years.”
But once again, banks seek to be an adviser. Some banks offer seminars and informational Web sites as additional resources to finding efficiency. And many banks, if you’ve maintained honest communication with them, will honor your need for them to be flexible and will be committed to providing sound advice.
“(Some companies) maybe for the first time are going through a downturn or maybe the second time in their careers,” Gwynn says. “So the smart ones, the ones that I think are approaching it correctly, will say, ‘Yes, I’d like to get the experience of anybody that can help me think my way through this and give me valuable feedback.’”
A few years ago, when Mark Edmunds took the reins as vice chairman and managing partner for Deloitte LLP’s Northern Pacific region, he stood before all 4,000 of his employees with a single message for what they could expect of him.
“I wanted them to know that every day when I come to work, I’m going to focus on building trust,” Edmunds says. “Trust — when you think about it — it’s easy to say and it’s hard to earn. I told them that trust is the foundation of everything we do at Deloitte. If you build trust with your colleagues, you actually deliver better service to your clients.”
Over the last few years, Edmunds has lived out that mission of establishing trust by leading with a mindset that everyone matters, being straight with people and always listening.
“It’s all about living what you say, and it’s all about the actions that you take,” he says. “It’s providing leadership on it, so I really try to earn my colleagues’ trust every day when I come in.”
Here are some of the things Edmunds has learned about leadership through the years.
Growing up in southern Virginia in the ’60s and ’70s, Edmunds saw that his father, a successful lawyer, treated people differently than others in town. One evening, his father had a cocktail party, and he invited a black couple to the party. When they arrived, he’ll never forget how three couples left the party and how people treated his father after that.
“He always lived that everyone matters,” Edmunds says. “He really instilled that in me, and I’ll never forget how some of the people in town treated him after that — as if he didn’t matter anymore. My whole life — my professional and my personal life — I try to live by this mantra that everyone matters.”
One way to do that is to not discriminate with whom you engage in conversation. For example, Edmunds will talk to the people who park his car in the garage, to the security people at the desk when he comes in and all the way up to the senior managers in the company. But beyond that, it also extends to the various offices he oversees. For example, he has 1,800 people in his San Francisco office. But if he goes down to Fresno, he only has about 30 people there.
“I try to make sure (the people in the Fresno office) understand that they matter as much to me as leader of this region as the partners here in San Francisco that serve the biggest accounts,” Edmunds says.
Edmunds uses a five-minute rule for his meetings to show people that he respects their time.
“Whether there are supposed to be 4,000 people on a call or four, within five minutes of when it’s supposed to start, I start it,” he says. “That doesn’t matter whether my CEO from New York is supposed to be on it and he’s not on it yet, I start it. Within five minutes of starting time, we run. That’s how you show respect to the people who showed up on time.”
All of his employees are well aware of this rule and respect it, just as they do all of the other rules related to this, such as no do-overs.
“So you start the call, and somebody arrives 15 minutes late, you don’t debrief them in front of several hundred people,” he says. “You talk to them later.”
Doing this shows his people that while some people may have higher titles, they’re not more important than anyone.
“I respect their time, and they trust that I’m going to run things on time and run things properly,” he says. “No do-overs. The message that sends is everybody matters. It doesn’t matter if the senior partner shows up late. Everybody is the same.”
Be straight with people
Another lesson Edmunds learned from growing up in a small town is that you can always leave your keys in your car or your front door unlocked. There’s no crime because everybody knows what you’re up to and won’t hesitate to tell you when you’re acting out of line.
“One of the things that’s instilled in you is to talk straight,” he says. “People there didn’t even know what a political agenda was, much less have one. So growing up in something like that, that’s built in to your soul, so when you talk to people and listen to people, you’re straight with them. … Talking straight with people and having no agendas is a really important character and leadership (trait) that all great leaders have.”
You can start with not sugarcoating a situation.
“I have to define reality and say, ‘You know what, it is tough, we’re in a tough market, and that is the reality,’” Edmunds says. “But then you also have to provide hope and a vision as to where it is you’re going to go: Hope that we’re going to be OK as a firm, and a vision to let everyone know that I can actually see around the corner of this recession.”
And while Edmunds strives to be straight with people, he expects the same back from them.
“If I ever ask them to do something that doesn’t help them more effectively mentor and coach and develop their people or more effectively serve their clients, I ask them to push back on me and don’t do it,” Edmunds says.
Nearly every day he’ll get e-mails asking him why the firm wants them to do something. Sometimes he’ll explain why it’s in their best interest to do it, and they’ll understand and buy in, but other times, their questions challenge him to be a better leader.
“There are other times when I will challenge myself or the firm to say, ‘Why are we doing this?’” he says. “When you’re a big organization, sometimes you can become a little too bureaucratic, and sometimes you have to challenge yourself to streamline and do things more effectively.”
The last way to be straight with people is to back their decisions.
“There’s no more powerful a statement you can make to someone around trust than, ‘You have my proxy,’” Edmunds says. “It’s a business term, but it’s really powerful. … Use that word. There’s no more powerful statement from a leader to someone else to say, ‘Wow, he really trusts me and is going to encourage me to make a decision on a really big issue.’”
But this is also not something you just say freely. In order to trust someone to make the right decisions, you have to truly believe in them.
“Building trust takes awhile,” he says. “It’s through several interactions. Trust you’re trying to earn with a client could take months and months and months of doing things that are valuable to that client, and over time, they could trust that you’re not there to sell them something every time you have a conversation. It could be years. It’s the same with your colleagues internally.”
He says you can start with smaller decisions, and once you learn their decision-making capabilities, you can give your proxy on the larger issues.
“There are times when you need to let them fall down a little bit on a decision that might not be as critical, but let them learn from that,” he says. “I guess the bottom line is it just takes a little time to spend with them before you’re comfortable doing it.”
One other way that Edmunds builds trust with his people is by listening to them.
“I think listening skills are the best thing you can have as a leader,” he says. “A lot of times, when you move up in a very senior position, you lose some of that, and there’s a lot of pressure to perform as a leader and to steer the business in a certain direction.”
One way to build your listening skills is to set up venues to hear what people have to say. Edmunds has a series of advisory groups that he’s established to do just that. For example, one is a group of Generation Y employees to give him a fresh perspective from the younger staff. He also has a senior manager group of people that have about eight to 12 years of experience and are one step away from being in the partnership. Then he also has a group made up of young partners in the firms. Each group meets with him quarterly.
“Having different constituency groups giving me input outside the normal chain of leadership is very important,” Edmunds says.
If you want to form your own advisory groups, it’s important to choose wisely who will sit on each.
“You want to look at the top 10 to 20 percent of your folks, because you want them to have the opportunity to have access to me in this informal setting so they can learn more about the firm,” he says. “They’re the future leaders of the firm. Usually, it’s the top performers in each of those categories. You simply look at the evaluations over a period of time, and if they have sustained high performance, I pick from them.”
He said it’s also important to make sure that as you select people, you make each group as diverse as possible, as well.
“I make sure there’s a good balance of men and women and a good balance of diversity, … ” he says. “Whatever we think would create a better team. It’s clear to us that diversity of thought and diversity of background in any kind of meeting or gathering you have helps you reach better answers.”
As you interact with these groups or even in your more regular meetings, it’s important to recognize that you don’t have all the answers.
“People (need to be) willing to check their ego at the door,” Edmunds says. “There are many people that rise in an organization and have a lot of the experiences and believe that they might have the answer before anybody else in the room does. Those are people that need to lean back in the chair and let everyone else talk and listen to them to see if there’s a better answer than what you came in with. … There are times when you want to lean in and times you want to lean out.”
It’s important to recognize when you need to do either of those.
“When you’re with a team and you want the team to get to a good answer for our people and for our client, lean out,” he says. “Let people talk about it, and let the group come to a decision versus leaning in and saying, ‘This is what I think the answer is,’ because then groupthink comes to that (decision) because you’re the most senior person in the room.”
By doing all of these things, you’ll develop a strong trust between you and your team, and that will translate through to all you do.
“There’s a difference between leading and managing,” Edmunds says. “If you’re trying to manage other people, you’re trying to get them to do things because you’re asking them to do it or requiring them to do it.
“But leaders inspire people to go in a different direction. Leadership is about inspirations. You can’t inspire people to do it unless you’re believable, unless you’re trusted, unless you’re straight with them, unless you have good listening skills, unless you convey to them that, in the end, it’s not about me as a leader. It’s about us being successful — successful in our organization, successful serving clients, successful giving back to the community.”
How to reach: Deloitte LLP, (415) 783-4000 or www.deloitte.com
managing partner, Pivot Point PartnersPriya Cherian Huskins
partner and senior vice president, Woodruff-Sawyer & Co.Jon Fisher
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senior vice president and manager, Union Bank of CaliforniaBarbara Kosacz
partner, national head, Life Sciences Practice, Cooley Godward Kronish LLPPatrick Lo
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Andrew Ly has come a long way from war-torn Vietnam in the late 1970s and a stay in a Malaysian refugee camp to running a hugely successful bakery. In 1984, Ly and his four brothers opened their first Sugar Bowl Bakery, an enterprise that has grown from a neighborhood coffee shop into a handcrafter of baked goods.
From the beginning, the mission was to produce and market the highest-quality baked goods and develop a brand name that would inspire trust and quality. And as the president and CEO, it is Ly’s job to make sure its growth is sustainable and to strive for continuous improvement, using advances to enhance sales and marketing efforts.
In 1993, the brothers formed Ly Brothers Corp. as a parent company to Sugar Bowl Bakery, American Bakery and Vitamin Fiber Water. Ly grew Sugar Bowl into a company supplying 90 percent of the hospitals and 60 percent of the hotels in the San Francisco Bay area and several major retailers.
Then last year, the company implemented a new ERP system that helped Ly gain greater visibility on the sales, profits and financial metrics of each line of the company’s business. As a result, management determined that the hotel supply business was a lower volume/lower margin area, and the company has since refocused its energies into higher margin/higher volume areas. That’s resulted in a drop in revenue but a doubling or tripling of its EBITDA.
But it’s not just refocusing that has put the business in a position of strength. Ly believes strongly that his employees have helped him succeed, and he is committed to their education, encouraging ongoing training. He believes that when his employees are happy, they work hard and will create the best possible product because they are proud of their work and of the company.
How to reach: Ly Brothers Corp., dba Sugar Bowl Bakery, (510) 782-2118 or www.sugarbowlbakery.com
When Pankaj Dhingra arrived in America, his first job was with a start-up software company that stopped paying him after three months and failed after six. Stretching the truth, he convinced an executive at another company that he knew the latest networking technology, then spent many sleepless nights learning it, earning a reputation as a local networking expert.
By the time Dhingra arrived at Nanostellar Inc. 25 years later as president and CEO, he was ready to put his experience to the test. The company was a risky, early stage start-up with promising technology, and it was struggling financially.
He spent his first year turning science into practical applications, leading the company in developing diesel emissions control catalysts. To do so, he and his team implemented an innovative methodology for designing high-performance nanomaterials that fundamentally altered traditional materials research, allowing them to develop the catalysts in a fraction of the time. This “Rational Design” has become the cornerstone of the company’s success.
In addition to developing the company’s technology, Dhingra also focused on restructuring its internal operations. The structure of the company was undefined, and over time, he turned it into one that lacks managers and executives, where his employees are team-oriented and come together like a family
Today, Nanostellar uses a unique nanotechnology methodology to develop materials that contain precious metals for use in the automotive and stationary power industries, enabling them to meet stringent diesel emissions control standards. The company delivers nanoengineered catalyst materials that reduce emissions from exhaust and increase the effectiveness of precious metals in catalysts by 25 to 30 percent.
But despite the success, Dhingra still has things to accomplish. Nanostellar will continue to develop and implement innovative methodology for designing high-performance nanomaterials, and Dhingra will continue moving in the only direction he knows forward.
How to reach: Nanostellar Inc., (650) 368-1010 or www.nanostellar.com